Imperial Tobacco Performance Summary

Financial and Operational Highlights
Volumes1
Get more online by visiting
www.imperial-tobacco.com
2010
Change
2009
348.5bn
308.7bn
39.8bn
-2.9%
-4.2%
+8.7%
358.8bn
322.2bn
36.6bn
2010
Change
2009
£7,055m
£936m
£3,067m
£2,467m
178.8p
+3%
-3%
+5%
+10%
+11%
£6,818m
£964m
£2,933m
£2,233m
161.8p
Financial Highlights – reported basis
2010
Change
2009
Revenue
Operating profit
Profit before tax
Basic earnings per share
Diluted earnings per share
Dividend per share
£28,173m
£2,528m
£2,118m
148.5p
148.0p
84.3p
White stick equivalents
Cigarettes
Fine cut tobacco
KPI
KPI
Financial Highlights – adjusted basis2
Tobacco net revenue
Logistics distribution fees
Adjusted operating profit
Adjusted profit before tax
Adjusted earnings per share
KPI
KPI
Growing our business...
1. View the 2010
Annual Report online
2. Access the latest
shareholder information
3. View archive information
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5. Tell us what you think
+6% £26,517m
+8% £2,337m
+124%
£945m
+127%
65.5p
+127%
65.3p
+15%
73.0p
1
White stick equivalents reflects our combined cigarette and fine cut tobacco volumes.
2
Management believes that these non-GAAP measures provide a useful comparison of business performance and reflect the way in which the business is
controlled. Definitions are included in our accounting policies within the notes to the financial statements. Reconciliations between adjusted and reported
measures are also included in the relevant notes.
Delivering Sustainable Shareholder Value
Operating Responsibly
We made gains with our global
strategic cigarette brands Davidoff,
West and Gauloises Blondes.
We have aligned our portfolio to
consumers seeking value, with
particularly strong results from
our regional brand JPS.
We have further developed our unique
total tobacco portfolio, increasing our
fine cut tobacco volumes by 8.7%.
We have made excellent progress in
reducing our adjusted net debt levels,
down by £1.5 billion to £9.3 billion.
We signed a co-operation agreement
with the European Commission and the
Member States of the European Union
to strengthen our joint efforts to combat
the illicit trade of tobacco products.
We have revised our Code of Conduct
in 2010 and are continuing to embed
high standards of conduct and
behaviour across the Group.
Business in the Community’s 2009
Corporate Responsibility Index awarded
us a Gold rating with an improved score
of 93.8%.
Imperial Tobacco Group PLC
Performance Summary 2010
“We delivered strong growth in
earnings and dividends with our
focus on organic sales growth,
cost optimisation and effective
cash utilisation continuing to
create value for our shareholders.”
Iain Napier Chairman
Alison Cooper Chief Executive
Results and Dividends
We grew our tobacco net revenues by 3 per cent and our
adjusted operating profit by 5 per cent to £3.1 billion. Reported
operating profit grew by 8 per cent to £2.5 billion. Our adjusted
earnings per share has risen by 11 per cent to 178.8 pence.
Basic earnings per share was 148.5 pence (2009: 65.5 pence),
as a result of movements on derivative financial instruments
providing commercial hedges with gains of £210 million
compared to losses of £660 million in 2009.
We also made considerable progress in reducing our adjusted
net debt, which was down by £1.5 billion to £9.3 billion
(2009: £10.8 billion).
The Board recommends a final dividend of 60.0 pence per
share, bringing the total dividend for the year to 84.3 pence
per share (2009: 73.0 pence), representing an increase of
15 per cent. This dividend will be paid on 18 February 2011,
with an ex-dividend date of 19 January 2011.
2010 Performance Overview and Achievements
Sustainable Sales Growth
We drive sales growth across all markets with our global
strategic brands complemented by our regional and local
brand portfolio. We balance our market share targets with
sustainable profit growth in mature markets, while our
investment priorities target Eastern Europe, Africa, the Middle
East and Asia to further build our position in emerging markets.
During the last year we have enhanced our focus on sales
growth and aligning our brand and product portfolio to evolving
consumer preferences. Price increases and a number of strong
cigarette and fine cut tobacco performances more than offset
the challenging environment in some markets.
Our 2010 Annual Report
CR Information Online
Reflecting our belief that operating in a
responsible manner is simply part of how we
do business, this year’s report combines our
Corporate Responsibility Review to provide
stakeholders with a comprehensive overview
of our activities and achievements.
More detailed CR information is available
on our website including:
– More details on our CR framework
and performance
– Our views on important issues in the
tobacco industry
– Our progress against our objectives
– Case studies demonstrating our progress
This document is printed by Park Communications. Park is an EMAS certified
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Economic conditions have impacted consumer spending
in Spain, the USA, Russia and Ukraine such that our overall
cigarette volumes were down by 4.2 per cent. However,
we delivered excellent growth in fine cut tobacco increasing
volumes by 8.7 per cent and, when our fine cut tobacco
volumes are combined with our cigarette volumes, our overall
white stick equivalent volumes were down just 2.9 per cent.
Global Strategic Cigarette Brands
Our global strategic brands Davidoff, West and Gauloises Blondes
comprise around 22 per cent of our overall cigarette volumes and
performed well. We delivered 3 per cent volume growth in our
premium brand Davidoff and 2 per cent growth in West. Gauloises
Blondes also made positive progress, with volumes up by 4 per
cent in the second half of the year following temporary supply
disruption in the Middle East earlier in the year.
Davidoff : In Eastern Europe, we have grown volumes
of Davidoff by 20 per cent with particular success in the
growing superslims and kingsize superslims segments. We
continued to grow Davidoff’s market share in many markets
including in Ukraine, Saudi Arabia and Greece.
West : We grew volumes of West in the value cigarette
segment and delivered additional brand innovations with
Chairman and Chief Executive’s Statement continued
We had another excellent performance with snus in
Scandinavia, with volumes up 24 per cent, while in cigars,
despite the challenging environment, we grew sales and
profits with the ongoing recovery of our Habanos business.
Cost Optimisation
We have delivered our Altadis acquisition synergy targets and
have continued to drive efficiency improvements throughout the
business. In 2010, we delivered €110 million incremental synergies
bringing the total to date to €300 million. We remain on track to
deliver our previously announced synergy target of €400 million
cumulative synergies by the end of our 2012 financial year.
Effective Cash Management
We have generated £2.0 billion of free cash flow before
dividend payments of £0.8 billion and made excellent
Dividend per
share growth
Tobacco net
revenue growth
+5%
Adjusted
operating
profit growth
33
%
22%
Total
Tobacco
Australasia
& Duty Free
3%
Key: FY10 cigarette volumes
Mature markets
40%
Emerging markets
60%
W
fine orl
cu d
t
ars
4
%
Delivering sustainable
shareholder returns
Sales
Growth
Cost
Optimisation
Cash
Utilisation
Our key assets
Market
Footprint
N
nd o .1
tu in
be
s
ld
Wo r
No
.
Total
Tobacco
Brand
Equity
We have a broad market footprint with a balance
of mature and emerging markets, creating a strong
operating platform from which to maximise the
potential of our brands and drive sales.
Our comprehensive brand and product portfolio
considerably enhances our growth opportunities. We
have strong local, regional and international brands and
products across all key price segments and product types
within individual markets providing us with the flexibility
to best meet local consumer and customer needs.
Brand Equity
Our People
Our global strategic cigarette brands Davidoff,
Gauloises Blondes and West have benefited from
brand rejuvenations to ensure they remain dynamic
and aligned to consumer preferences.
Our success is as much about our people as it is about
our brands, products and markets. Our priority is to ensure
that our people continue to develop and have the right
skills to support our sustainable sales growth strategy.
People
How we leverage our assets
Consumer
Centric
Our Growth Drivers…
+11% +15% +3%
USA
5%
Rest of
Europe
Growth drivers
Our focus on cost and efficiency continues, as well as
effectively utilising the cash we generate. The combination
of our people, our brands, our market footprint and our
unique total tobacco approach offers us many opportunities
to build long-term sustainable growth across our business.
Performance Highlights
Adjusted
earnings per
share growth
Our Strategy…
Outlook
Driving sustainable sales growth is at the heart of our
shareholder value agenda. We will continue to build sales
across our balanced geographic footprint, ensuring our
versatile brand and product portfolio remains relevant
and appealing to evolving consumer preferences.
Alison Cooper
Chief Executive
33
%
th
eng
str es
l
a ett
r
Asia
Africa &
Middle East
Charles Knott, Non-Executive Director, left the Board in
July and Jean-Dominique Comolli, Deputy Chairman, left
the Board in September. We wish them well for the future
and thank them for their contribution.
Iain Napier
Chairman
Total Tobacco
cig
Other Tobacco Products
We delivered an excellent fine cut tobacco performance in
the year, growing volumes by 8.7 per cent. We made very
good progress in Central Europe, with volumes growing
strongly by 54 per cent across the region and Paramount
up by 67 per cent. Another notable success during the
year was the launch of Ducados Rubio in Spain, the first
expanded make your own tobacco product in the market.
Launched in June, it has since captured 5.8 per cent of
the Spanish fine cut tobacco market.
Market Footprint
rl d a
Wo r s
e
pap
Other notable performances include Fine and Excellence
in Africa and Maxim in Eastern Europe.
Our Key Assets
Western
Europe
We create value for our shareholders by driving
sustainable sales growth, optimising costs and
effectively utilising the cash we generate.
People
Our thanks to our employees for their collective commitment
to delivering high performance. They have embraced our
enhanced sales focus and driven strong results, particularly
given the challenging environment in some markets this year.
Board Changes
Gareth Davis retired from the Board in May and was
succeeded as Chief Executive by Alison Cooper. Under
Gareth’s leadership Imperial Tobacco has become one of
the world’s leading international tobacco companies. He has
made an outstanding contribution to our success and we
wish him a long and happy retirement.
We are a leading international tobacco company with
a balanced market footprint and a unique portfolio that
offers consumers high quality brands and products
across all tobacco categories.
in
Our regional value brand JPS was a particular highlight and we
have grown volumes by 13 per cent and delivered significant
market share growth in a number of our major European
markets including in the UK and Germany and in Australia.
Who We Are…
in
.1 cco
Nooba
t
Regional and Local Cigarette Brands
Complementing our strategic brands is our versatile portfolio
of regional and local cigarette brands with consumer insights
driving our brand and product portfolio choices at a market level.
Logistics
In logistics we delivered another positive result. Our tobacco
logistics business performed robustly, with price increases and
effective cost management key to maintaining our profit levels
both in our tobacco logistics and our other logistics businesses.
…to deliver sustainable shareholder returns
1
Gauloises Blondes : Gauloises Blondes has continued to
consolidate its position, celebrating its centenary in 2010
with a series of limited edition packs and new variants which
were well received by consumers. We have further extended
the brand’s reach, with a particular focus on Eastern Europe
and notable early success in the Balkans.
progress in reducing our adjusted net debt, which was
down £1.5 billion to £9.3 billion (2009: £10.8 billion) as
at 30 September 2010. We maintained the improved
working capital position we delivered last year and our
cash conversion was 97 per cent, towards the top end
of our target range of between 90 and 100 per cent.
Inter
na
in c tion
ig
a
specialised filters and variants adding an extra dimension
for consumers, resulting in particularly impressive growth
in Turkey and Taiwan.
Execution
Excellence
Future
Foundations
We are focused on delivering sustainable sales growth
through the smart leverage of our assets.
At the heart of our strategy is our top line growth
agenda complemented by our focus on optimising our
costs and utilising our substantial cash flows to create
additional value for our shareholders.
Our growth strategy is about maximising value from
our four key assets – our extensive market footprint,
our unique total tobacco product portfolio, our brands
and our people.
Leveraging Our Key Assets
Smart leverage of our key assets drives sales growth.
We have developed three particular areas of focus…
Consumer Centric: Understanding what
drives our consumers
Satisfying consumers and aligning our portfolio to
their evolving preferences is fundamental to our sales
growth strategy.
 View examples of our achievements in 2010 in each of these
areas in our online Annual Report www.imperial-tobacco.com.
Execution Excellence: A fast and flexible
business focused on delivery
We are a responsive business with strong and trusted
customer and industry partnerships, which enhances
our growth potential.
Future Foundations: Building a
sustainable future
Operating responsibly, combined with our proactive
approach to tackling illicit trade and regulatory
engagement, is critical to our long-term success.