1st Feb 2005 09:00
Imperial Tobacco Group PLC01 February 2005 Annual General Meeting Trading Statement 2005 2004 was a year of further positive progress for Imperial Tobacco Group and in2005 we continue to focus on profitable growth, taking advantage of our stronginternational coverage and well-balanced product and brand portfolio. Ourongoing commitment to reducing costs and improving efficiencies across thebusiness remains an integral part of our growth strategy. At the time of our preliminary results announcement in November 2004, we saidthat we would not allow our balance sheet to become inefficient and wereactively considering the return of funds to shareholders should suitableacquisitions not be immediately available. To this end, we will shortly becommencing a share buyback programme, with the shares acquired being held intreasury. Gareth Davis, Chief Executive, said: "We will begin a rolling share buyback programme in the next few weeks which, onan ongoing annual basis, could utilise most of our free cash flow - which iscurrently around £450 million per annum. In the financial year to September2005, we intend to buyback shares up to a value of around £200 million. However,as I have said before, we are still interested in further acquisitions and wewill continue to seek value creating deals that meet our strict criteria." "Despite significant tax increases and ongoing legislative and regulatorychallenges, I believe we are well placed to grow the business further in 2005given the strength of our balanced portfolio and our continued focus on reducingcosts." Outlook The overall anticipated performance of the Group for the financial year to30 September 2005 remains in line with our expectations at the time of our 2004preliminary results. The highlights of our trading performance in the first quarter are set outbelow. UK In the UK we made a good start to the year, maintaining our market leadership incigarette and roll your own tobacco. Our annual cigarette market share remainedstable at 44.6 per cent (September 2004: 44.6 per cent) and our annual roll yourown tobacco share increased to 65.9 per cent (September 2004: 65.6 per cent). InDecember we estimated that the annualised UK duty paid cigarette market declinedslightly to 52 billion (September 2004: 53 billion), while the roll your ownmarket held at 2,900 tonnes (September 2004: 2,900 tonnes). In January, weraised our product prices with cigarettes increasing by an average of 7 penceper pack of 20. Germany We delivered improved profits in Germany in the first quarter despite cigarettemarket declines driven by successive high duty increases. We maintained ourannual cigarette share to December at 18.9 per cent (September 2004: 18.9 percent), exiting the quarter at 19.5 per cent. Our annual share of other tobaccoproducts reduced to 26.3 per cent (September 2004: 28.0 per cent) due to ongoingcompetitive pressures in the singles sector. In December we estimated that theannualised duty-paid cigarette market reduced to around 109 billion (September2004: 119 billion) and other tobacco products grew to 40 billion (September2004: 31 billion) cigarette equivalents. On 1 December 2004, duty was increasedby a further 1.2 euro cents per cigarette which will result in further marketdeclines. At the same time, we increased manufacturer's prices averaging 10 percent across the portfolio. Rest of Western Europe Our balanced brand portfolio covering both cigarette and other tobacco productscontinues to provide opportunities in the markets of the Rest of Western Europe.In the first quarter we have made good progress across Southern Europe, butcigarette market volume pressures have continued so far this year in theNorthern markets due to sizeable tax increases during 2004, particularly inFrance, Ireland and The Netherlands. However, our cigarette share progress hasbeen positive particularly in Ireland where our share is up at 25.1 per cent(September 2004: 24.8 per cent), in The Netherlands at 3.7 per cent (September2004: 3.3 per cent) and in Italy at 1.4 per cent (September 2004: 1.1 per cent).In addition, our strong shares in roll your own tobacco have supported growingvolumes in Spain, France and Italy. Rest of World In the Rest of the World, our ongoing focus is on profitable volume development.Volumes increased in Eastern Europe and Africa and the Middle East in the firstquarter, including growth in our international strategic brands. Australia againimproved profits despite a decline in volumes reflecting the decreased market.In Asia, our share in Taiwan grew to 11.4 per cent (September 2004: 11.3 percent) and we continued to perform well in Laos and Vietnam. We are progressingour investments in China and Turkey, with construction of the Turkish factorynow complete and production due to start in the next few weeks. The volumepressures in Central Europe have persisted and our Duty Free business has beenimpacted by the loss of duty free sales relating to the countries which accededto the EU last May. Manufacturing As part of our ongoing commitment to enhance productivity and improveoperational efficiencies, we announced on 18 October 2004 the closure of ourPlattsburgh factory in the United States, which was part of the CTC filter tubesbusiness we acquired in the previous May. In addition, on 9 December 2004 weannounced the closure of our cigarette manufacturing facility in Dublin. Theclosure and transfer of production to our Nottingham factory is due to becompleted by the end of this month. The restructuring charge for the Dublinfactory will be around £12 million, including £6 million of fixed assetwrite-offs. Annual savings are expected to be £4 million from 2006 onwards. Regulation and Litigation UK Smoking in Public Places In November 2004 the UK Government and the Scottish Executive published theirproposals on banning smoking in public places. The Scottish Executive isproposing to introduce a comprehensive ban in Scotland during 2006. The UKGovernment has stated that a ban on smoking in public places, other than in pubsand bars where food is not prepared or served, will be introduced in England,and possibly Wales, by the end of 2008. We continue to hold the view that thebest approach involves applying common sense and courtesy, and introducingpractical solutions such as well-ventilated smoking and no-smoking areas inoffices, restaurants and other public places. UK Point of Sale Advertising Regulations restricting the advertising of tobacco products at the point of salein the UK were introduced on 21 December 2004. Our sales force ensured that allretail outlets with our point of sale branding were compliant by this date. McTear In Scotland, we are awaiting the judgment in the McTear case. ENDS ENQUIRIESAlex Parsons John Nelson-SmithImperial Tobacco Group Imperial Tobacco GroupGroup Media Relations Manager Investor Relations ManagerTel +44 (0)117 933 7241 Tel: +44 (0)117 933 7082 Copies of all our announcements are available on our website: www.imperial-tobacco.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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