# Imperial Brands increased overall demand against expectations

- Link: https://www.directorstalkinterviews.com/imperial-brands-increased-overall-demand-against-expectations/412862902
- Published: 2020-10-08T07:23:11+01:00
- Author: Amilia Stone

**[Imperial Brands plc](https://www.directorstalkinterviews.com/ftse-company/imperial-brands-plc/imb.l)**(
LON:IMB) has announced its trading statement.

As well as leading the Group’s strategic review, Stefan has strengthened his Executive
Committee with some external hires to bring in fresh perspectives and ensure we 
have the right skills to take the business forward. Complementing existing Divisional
Directors Dominic Brisby and Joerg Biebernick, Chief Financial Officer Oliver Tant,
and Manufacturing and Supply Chain Director Walter Prinz, Imperial’s senior leadership
team includes the following new appointments:

·      Murray McGowan has been appointed Group Strategy and Transformation Director.
Murray has a strong background in strategy gleaned from his time at McKinsey, Whitbread,
The Restaurant Group and Yum! Brands.

·      Alison Clarke has been appointed Chief People and Culture Officer. Alison
was previously Chief Human Resource Officer at Inchcape, with responsibility for
all aspects of people and culture strategies.

·      Javier Huerta has been appointed Group Manufacturing and Supply Chain Director
and will succeed Walter Prinz when he retires. Javier is currently Executive Vice
President Supply Chain for Foods and Refreshment at Unilever and will join Imperial
in the coming weeks.

As previously announced, the Company is currently searching for a new Chief Financial
Officer, following Oliver Tant’s decision to retire.

**Full Year Trading Update**

The tobacco business has continued to perform well despite an uncertain and disrupted
trading environment. We have experienced some COVID-related changes in consumer 
behaviour with increased overall demand against our expectations, as consumers appear
to have allocated more of their spend to tobacco, as well as some demand shifts 
between different markets and channels. This has resulted in better than expected
volumes, driven by improved volume trends in several key European markets and in
the US. These positive trends have helped to offset relatively weaker market volumes
in the duty free channel and in some traditional summer tourist destinations, where
reduced travel has impacted demand. Overall, we expect tobacco net revenue to increase
by around 1% at constant currency.

The focus in NGP has been on improving performance, returns and capabilities. As
previously announced, we have significantly reduced investment while maintaining
a range of options for future growth. Trading has been disappointing, albeit in 
line with our revised expectations with the level of underlying losses reduced in
the second half as we curtailed expenditure.  NGP net revenue is expected to be 
around 30% lower than last year at constant currencies.

Group net revenue performance is slightly ahead of the guidance provided at our 
half year results, and is expected to be broadly flat on last year at constant currencies.
However, as highlighted in our half year results, we have incurred some additional
manufacturing costs caused by the COVID-related restrictions.  In addition, given
the ongoing COVID-related uncertainties, we have increased our provisions, mainly
in respect of stock and debtor positions. As a result, we expect constant currency
earnings per share will be down by around 6%, in line with current market expectations.

At the year-end closing rates, foreign exchange translation was a c. 1% headwind
to full year earnings per share.

**Cash**

We expect underlying cash conversion will be ahead of our original expectations 
driven by a continued focus on all aspects of cash management, with some additional
upside at Logista due to some COVID-related changes in the timing of excise duty
payments. Cash generation has also benefited from lower capex and restructuring 
charges as a result of some COVID-related delays in certain cost optimisation projects,
which we now expect to complete in FY21. The divestment of the Premium Cigars business
is on track to complete on 29 October with the second non-refundable down payment
of €85.7m having been received in line with our recent announcement.

> **Update from Stefan Bomhard, CEO** **Imperial Brands**
> Imperial has continued to show resilience in adapting to the challenges posed 
> by the COVID-19 pandemic and our priority remains the health, safety and well-
> being of our people across our operations.
> “In my first three months as CEO I have focused on reviewing our strategy, engaging
> with employees, and visiting as many of our key markets as possible. I have been
> struck by the energy and passion of my colleagues, which increases my confidence
> in our ability to deliver a stronger performance in the years ahead. I expect 
> to be able to share some initial observations about the business when we publish
> our preliminary results on 17 November, at which time we will also announce the
> date of a capital markets event to provide a strategic update in the first quarter
> of calendar 2021.”

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