Imperial Brands PLC

Good morning and welcome everyone in the room and joining online or on the phones. Thanks for joining us for our FY25 results. Just a few housekeeping things before we kick off. There are no planned fire alarm tests today, so if the alarm does go off for those in the room, it's a real one. And you can see the fire exits just behind you marked in green. And then finally, just wanted to draw your attention to the usual disclaimer in the presentation we've got for you this morning. So without further ado, I would like to hand over to Lucas. Thank you very much, John.

And good morning and a very warm welcome to all of you here in the room and a very warm welcome to you all who join us online. Today marks another exciting day on the journey of Imperial Brands. I'm very pleased to share with you another year of strong performance and I'm very excited about this being my first time in the role of CEO of the group. A true honor and a true privilege, which I don't take lightly. I'm joined today by Murray McGowan, our newly appointed Chief Financial Officer, and John Cross, our Head of Investors Relations. I'll start off by giving you the highlights of this year 25. Mary will then join us and share more about the financial performance and the outlook for 26. I will then come back, talk a bit more about our operational delivery, our transformation, and also to reconfirm our strategic ambition that we set out in March this year. At the end of that, we look very much forward to all your questions. And with that, let me get down to business and let's start the presentation. What I really would like to do today is highlight three things. First, the quality of our performance during this past fiscal year and how this builds on our growing track record of consistent growth. Second, how our evolved strategy is not just a confident evolution, it is also a step change in our capabilities and a commitment to delivering further significant value to our shareholders. And third, our own personal excitement at the opportunities that lie ahead of us. Since the half-year results in May and the announcement of our new roles, Mary and I have been spending a lot of time with our people across our global businesses. This included face-to-face events in all regions attended by more than 600 of our leaders. We've been discussing our recent achievements, our refreshed strategy, and how we can make an even bigger impact over the next five years. What's been really energizing is the sheer enthusiasm of our colleagues about where we are going next. And it has reinforced my belief that we have the right plan and the right people to make the step change we highlighted at the CMDA in March. We'll come back to those plans later. But first, let's look at our fiscal year 25 dashboard. Once again, all the key metrics are delivering in line with our commitments. You can see here how consistent operational delivery is underpinning improvements in our key financial measures and in turn, driving shareholder returns. In combustibles, we maintain share in our priority markets while also delivering another year of strong pricing. In NGP, we recorded a further year of double-digit revenue growth with share growing in all categories. This progress at an operational level has translated into revenue growth of more than 4% and an improvement of more than 9% in earnings per share. This has also been a year of strong cash flow. All this has supported material increases in both our underlying dividend and our ongoing share buyback. During fiscal year 26, we further intend to make total capital returns in excess of £2.7 billion. These results add to our consistent track record of growth. You can see here how each year of incremental improvement adds up to a powerful cumulative effect over the past five years. A 48 basis points improvement in aggregate market share. NGP revenue up 73%. EPS up one third. And 10 billion pounds in capital returns. That's equivalent. to two-thirds of our market cap when we started our 2021 strategy. So that's what we have delivered. Even more important is how we have delivered. As you have heard us say many times, the unifying theme behind our success is our challenger approach. These things is about three things. Getting really close to our consumers. staying focused on the most important drivers of growth, and investing to become more agile. During the CMD, you've heard us talk in more detail about how we brought to life this challenger idea. For example, investing in new consumer capabilities, prioritizing must-win market battles, developing a high-performance culture, investing in technology, and harnessing our self-help opportunities. It was these investments, these changes, which helped us turn around our tobacco business and build an NGB business where we now have attractive products across all consumer categories. At this point, I would also like to take a moment to thank Stefan Stefan Bomhard for his leadership in the turnaround of Imperial Brands over the past five years. He leaves behind a strong platform for future growth. Looking ahead, you'll see us continue to play our important distinctive role as a challenger business in this sector. And as we said at the Capital Market Day, our purpose remains unchanged. we're still going to be forging a path to a healthier future for moments of relaxation and pleasure. In this way, we will continue to deliver strong performance for shareholders. I will now hand over to Murray, and when I come back, I'll take a closer look into our strategic ambition and how we transform our business to actually achieve them. Murray, over to you. Thank you.

Thank you, Lucas, and good morning, everyone. As many of you know, I joined Imperial Brands just over five years ago, heading up strategy and corporate development. And in that role back in 2021, I led the development of our previous strategy, which we shared January 21. And more recently, I led the work to develop our evolved strategy that we shared in March of this year at our capital markets day. Now, I'm really honoured to have the opportunity to step up to be Chief Financial Officer for Imperial Brands, and I absolutely share Lucas' excitement about the opportunities that we have ahead of us. As I pick up the CFO baton from Lucas, I'm pleased to show you another positive year of financial results and a year of strong delivery. As Lucas said, we've maintained aggregate share in our five priority markets whilst delivering strong pricing. We have again delivered double-digit net revenue growth in NGP. And strong operational performance has enabled us to deliver group-adjusted operating profit in line with guidance up by 4.6%. This, together with the £1.25 billion share buyback, enabled us to deliver high single-digit EPS growth that we committed to. Leverage of two times is in line with the target of being at the lower end of our two to two and a half times range. And this has been driven by cash conversion near the upper end of our 90 to 100% range, delivering robust free cash flow of 2.7 billion pounds. Turning to volume and price mix at the regional and group level. Once again here, we can see the strength of the tobacco value model in action. Our investment in brand equity and improved sales execution enabled strong pricing across our footprint, shown in orange on the chart. PriceMix has more than offset volume declines, shown here in grey, to deliver tobacco net revenue growth of 3.7%, a similar rate to last year. Volume declines in Europe and ACE improved relative to historical rates. and strong pricing in Europe helped to deliver net revenue growth of 4.2% in this region. In the US, we saw strong price mix of 9.9%, more than offsetting volume declines, which were slightly more moderate than the prior year. Moving on to adjusted operating profit. Tobacco performance has been the main contributor to group adjusted operating profit growth, supported by NGP and LAHISTA. In tobacco, the strong pricing I just described has driven higher profit. As usual, we benefit from the operational gearing as we move down the P&L. In NGP, losses remained at a similar level to last year as we increased investment in certain parts of our portfolio, for example, Zoan in the US. We're making good progress towards building a sustainable and profitable NGP business as we continue to build scale. Overall, tobacco and NGP adjusted operating profit grew 4.9%. At La Hista, Performance was behind prior years, with growth from tobacco price increases offset by performance in the long-distance transport sector. So overall, I am pleased with the 4.6% growth in group adjusted operating profit. Now, as CFO, I will always be transparent about items that we classify as adjustments. Today, we are disclosing two charges related to our 2030 strategy. The first is an impairment charge related to a recent announcement that we will cease production at our Langenhagen factory. The second relates to the initial cost of our wider transformation programme. These costs are within the guidance we gave at our Capital Markets Day back in March, and the remaining costs related to our transformation will be adjusting items in future years. Strong adjusted operating profit growth coupled with shared count reduction, has driven the earnings per share growth of 9.1%. The increase in tax reflects a slightly higher adjusted effective tax rate at 23.3%, with higher net finance costs in line with our guidance. There was a small increase in minority interest reflecting the strong performance in Africa. These impacts are more than offset by the benefit of the reduced share count. During the year, we repurchased just over 5% of our share capital, bringing the total repurchase since we began the share buyback programme in 2022 to 15.8%. Turning to cash and capital allocation. Our operating cash conversion was 97%, enabling strong free cash flow generation of £2.7 billion. This means that over the past five years, we generated cumulative cash of 11.6 billion pounds. Now, disciplined capital investment remains a key part of how we create value. And let me assure you that I remain committed to our capital allocation framework as I step into the CFO role. Our first priority is to invest in the business. As a reminder, our approach is primarily organic. We have committed to invest in transformation, but we will also consider bolt-on acquisitions where they support the delivery of our strategy. Second, we maintain a strong and efficient balance sheet. Third, we deliver progressive dividends. And fourth, we're committed to returning surplus capital to our shareholders. As we announced on the 7th of October, we've increased our FY26 share buyback to £1.45 billion. As Lucas said, we've now returned over £10 billion to our shareholders since FY21. This represents two-thirds of our market value when we launched our previous strategy in January 2021. And going forward, we are committed to an evergreen share buyback throughout the next five-year strategic period. Our expectations for the coming year are in line with the medium term guidance that we set out at the Capital Markets Day in March 2025. We will continue to invest to support low single digit tobacco and double digit NGP net revenue growth on a constant currency basis. Given the strong momentum in our NGP business, we'll continue to invest to drive growth. while balancing our objective to build a sustainable and profitable business. Group-adjusted operating profit is expected to grow in the 3% to 5% range, driven primarily by the continued profit growth of our combustible business. In line with previous years, because of the phasing of combustible pricing and investment, performance will be weighted to the second half. Free cash flow generation is expected to be at least 2.2 billion after investments in a transformation. The growth in adjusted operating profit, combined with the ongoing share buyback, is expected to deliver at least high single-digit EPS growth, even after slightly increased tax, finance and minority interest costs. At current rates, we expect foreign exchange translation to be a 2 to 2.5% tailwind to profit. As usual, there is a slide in the appendix with guidance on the specific items. Now, I believe the results we are delivering today demonstrate the strong foundation that we have built that will enable us to continue to deliver over the next five years and generate value for our shareholders. Thank you. I'll now hand back to Lucas.