Imperial Tobacco Investor Day February 2013
Agenda 09:00 Alison Cooper & Bob Dyrbus - Sustainable Growth; Growing Cash Returns 10:00 Coffee 10:30 Arthur van Benthem - Driving Quality Sales Growth 12:00 Lunch 13:00 Break out sessions (coffee 14:20-14:30) Titus Wouda Kuipers JPS: Driving Growth Through Total Tobacco Fernando Dominguez The Premium Cigar Opportunity Melvin Ruigrok Driving Success in Highly Regulated Markets Neil Southey Davidoff: High Quality Asset, High Quality Growth 15:50 Coffee 16:00 Alison Cooper - closing comments and final Q&A 16:30 Close 2
Disclaimer Certain statements in this presentation constitute forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding the Company s future expectations, operations, financial performance, financial condition and business is a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this presentation. As a result, you are cautioned not to place any reliance on such forward-looking statements. The forwardlooking statements reflect knowledge and information available at the date of announcement of the January 2013 Interim Management Statement and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this presentation should be construed as a profit forecast. This presentation does not constitute an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of the Company nor should it form the basis of or be relied on in connection with any contract or commitment whatsoever. 3
Sustainable Growth; Growing Cash Returns Alison Cooper Chief Executive
Sustainable Growth; Growing Cash Returns Strategic choices delivering quality sales growth Cost optimisation reinforces earnings model; 300m pa by FY18 Sustainable 10%+ pa dividend growth for the medium term 5
Our Strategy Delivering Sustainable Shareholder Returns Cost Sales Optimisation Growth Our Key Assets Cash Utilisation Market Footprint Total Tobacco Brand Equity People Sales Growth Drivers Portfolio Management Pricing Customer Engagement Innovation Consumer Insights Key Enablers Operation & Supply Chain Alignment Shaping Our Environment 6
The Earnings Model; Consistent Delivery Earnings Growth Currency neutral basis 7
Delivering Against the Model 4.1% 12.3% 2.7% 2.8% 7.8% 1.4% 2.0% 5.4% 2010 2011 2012 Tobacco Net Revenue 2010 2011 2012 Impact of Spanish revenue and profit decline All data on a constant currency basis and excludes revenue from peripheral and non-tobacco related products as disclosed in our HY11 results EPS 8
A Significant Transition From M&A growth Brand proliferation Cost cutting Manufacturing led Local autonomy Short term delivery To Sustainable sales growth Maximise brand equity Resource allocation Consumer led Central direction; co - created Sustainable delivery 9
The Strategic Journey 10
A Differentiated Consumer Understanding 11
Driving Quality Sustainable Growth Key Strategic Brands +4% +9% +6% +10% Fine cut tobacco Snus +37% +28% Premium Cigars +3% +5% Rolling paper +4% +3% All percentages are 3 year CAGR to FY12; Top percentage is volume, bottom is revenue 12
Unlocking Further Sustainable Growth Other FMC -6% 0% All percentages are 3 year CAGR to FY12; Top percentage is volume, bottom is revenue 13
Clear Portfolio Priorities Key Strategic Brands Focus Brands Portfolio Brands This space appears blank because we have removed the images that appear in the presentation. This is because we currently do not feature tobacco product brand imagery on our website. International equity Equity in key markets Scale to fuel investment 50% 30% 20% 14
Clear Footprint Priorities Drive Profit Drive Share Drive Scale Footprint strength driving sales and high returns Balanced growth agenda for medium term returns Scale existing presence for long term growth 15
Strategic Focus Enables Cost Optimisation Focused Portfolio and Footprint Optimisation Investments Product Cost Overheads Savings of 300m pa by September 2018 16
Strategic Focus Enables Cost Optimisation Investments Product Cost Overheads Resource allocation Fewer Bigger Better initiatives Complexity reduction Operational excellence Operating model Procurement 17
The Strategic Journey 18
Sustainable Growth; Growing Cash Returns Cost Optimisation 1-2% Sales Growth 2-4% Cash Utilisation 1-2% Focused Portfolio and Footprint Optimisation Investments Product Cost Overheads Sales Tax Interest Sustainable 10%+ pa dividend growth for the medium term 19
Sustainable Growth; Growing Cash Returns Strategic choices delivering quality sales growth Cost optimisation reinforces earnings model; 300m pa by FY18 Sustainable 10%+ pa dividend growth for the medium term 20
Sustainable Growth; Growing Cash Returns Bob Dyrbus Finance Director
HY13: Performance Drivers EU and Russia Investment: continued uplift USA: still in turnaround Adjusted Operating Profit 22
H213: Levers to Deliver Market conditions persist Reduced investment uplift; embedded in H2 FY12 Business delivery Adjusted Operating Profit Pricing: greater benefit in H2 Early cost optimisation benefits 23
Sustainable Growth; Growing Cash Returns High Margin Profits Sales Strong Cash Flow Maximising Shareholder Returns Reinvest Maximising Shareholder Returns 24
Growing Cash Returns: RoIC 15.4% 15.4% 15.0% 2010 2011 2012 RoIC is Adjusted Net Operating Profit After Tax (Adjusted NOPAT)/Invested Capital, where Adjusted NOPAT is Adjusted Operating Profit as disclosed in the Group Financial Statements multiplied by (1 Adjusted Tax Rate) and Invested Capital is Adjusted Equity plus Reported Net Debt, where Adjusted Equity is Reported Equity adjusted by (i) adding back the amortisation of intangibles and (ii) restating the carrying values of the intangibles arising on acquisition to the exchange rates that prevailed at the time acquisitions were made 25
Growing Cash Returns: Cash Conversion 4 97% 88% 71% * 3 Billion 2 1 0 2010 2011 2012 500m working capital outflow Adjusted operating profit Cashflow after capex and before interest and tax * Excluding impact of working capital outflow: 87% 26
Growing Cash Returns: Increasing Pay-out 55 11% 13% 50 15% % 16% 45 40 2009 2010 2011 2012 Payout ratio (LHS) DPS growth 27
Growing Cash Returns Sales High Margin Profits Strong Cash Flow 773m +21% 1,074m +39% 1,511m +41% Reinvest Maximising Shareholder Returns 2010 2011 Share buy-back in year Dividends paid in year 2012 28
Sustainable Growth; Growing Cash Returns Delivering Sustainable Shareholder Returns Cost Optimisation Sales Growth Cash Utilisation c. 2bn Free Cash Flow And Growing 10%+ Dividend Growth Deleverage Buybacks 29
Sustainable Growth; Growing Cash Returns Strategic choices delivering quality sales growth Cost optimisation reinforces earnings model; 300m pa by FY18 Sustainable 10%+ pa dividend growth for the medium term 30
Imperial Tobacco Investor Day February 2013 31