7th May 2014 08:56
LONDON (Alliance News) - Imperial Tobacco Group PLC Wednesday reported lower pretax profit and revenue for the first half of its financial year, as it continues to reduce stock levels to improve supply and cost efficiencies.
For the six months ended March 31, the group reported pretax profit of GBP648 million, down from GBP830 million the prior year, while revenues for the first-half fell 5% to GBP12.71 billion, from GBP13.38 billion a year earlier. Tobacco net revenue for the period was GBP3.13 billion, compared with GBP3.28 billion the prior year, down 5% at actual exchange rates and 2% on a constant exchange rate basis.
The group said that its tobacco-product stock optimisation programme reduced trade inventories in a number of markets, especially Iraq and Russia. It said that while it achieved significant stock reduction, this hit volume, revenue and profit for the period. It also said its cost optimisation programme is on track to deliver incremental savings of GBP60 million for the full year.
Imperial Tobacco said that while its reported results were adversely affected by its stock optimisation programme, the reduction in profits and earnings per share also were caused by increased non-cash amortisation charges and deferred tax charges.
"Our stock optimisation programme has inevitably impacted some of our numbers, but I'm pleased with our underlying performance," said Chief Executive Alison Cooper in a statement.
The group raised its interim dividend by 10% to 38.8 pence, and said that while conditions remain tough in some of its markets, it remains on course to deliver on its full-year targets.
"Building further momentum behind our Growth and Specialist Brands and improving our market share positions are key priorities for the second half," the group said in a statement.
Cooper said the group's managed cost base is releasing funds to invest in those brands, while their development is being further supported by the stock optimisation programme.
The group's Growth Brands and Specialist Brands together account for more than than 50% of its tobacco net revenue. It Specialist Brands include its Golden Virginia fine cut tobacco, its premium cigars Cohiba, Montecristo and Romeo Y Julieta, and its Swedish chewing-tobacco brand Skruf.
Imperial Tobacco said that its Growth Brands - which include Davidoff, Gauloises Blondes, JPS, West, Fine, News, USA Gold, Bastos, Lambert & Butler and Parker & Simpson - accounted for 43% of total volumes in the first-half of the year, and 40% of tobacco net revenue, up on the prior year as those brands continued to grow market share.
It said that it is seeing a good level of underlying momentum, across its growth markets, which include selected markets in the EU, Eastern Europe, Asia, the Middle East and the US, against a backdrop of industry volume declines, which fell 4%.
The group said that weak industry volumes in Russia held back its performance, although its Growth Brands performed well in a broad spread of markets, and its Specialist Brand premium cigars continue to gain ground in a number of territories, it said.
Elsewhere, it said it made good progress in a broad spread of Growth Markets, including Italy, Norway, Sweden, Saudi Arabia, Taiwan, Vietnam and Cambodia.
The group said that trading in its Returns Markets, which include - Australia, the EU, eastern Europe and Africa - remained challenging in a number of these markets in the first-half, particularly in the south, as a result of difficult economic conditions and illicit trade which are leading to industry volume declines.
Last month, the group announced that it will be closing its cigarette factories in Nottingham and Nantes in France, in response to the downturn in cigarette sales in Europe, which it said could result in a loss of around 900 jobs.
It said that with the downturn in European cigarette sales, its Nottingham and Nantes productions sites are now utilising less than half of their manufacturing capacity.
The group also said that it is still reviewing a potential float on its European logistics unit. Its logistics business Logista makes more than 35 million deliveries a year to 300,000 outlets across Spain, France, Italy, Portugal and Poland, the group said.
Imperial Tobacco shares were up 3.00 pence at 2,520.00p Wednesday morning.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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