31st Jan 2006 09:00
Imperial Tobacco Group PLC31 January 2006 31 January 2006 Annual General Meeting Trading Statement 2006 Ahead of the Annual General Meeting to be held later today, Imperial TobaccoGroup PLC issues the following trading statement. 2005 was another record year and in our financial year 2006 we have continued tomake good progress in most of our markets, whilst maintaining our focus onreducing costs and effective cash management. The overall anticipated trading performance of the Group for the financial yearto 30 September 2006 remains in line with our expectations at the time of our2005 preliminary results. Gareth Davis, Chief Executive, will say: "In our first quarter the encouraging volume trends from the second half of 2005continued with strong performances from Davidoff in Asia and the Middle East,JPS in Western Europe, Paramount, Moon and Golden Gate in Central Europe andMaxim in Russia. "In February 2005 we commenced a rolling share buyback programme, which on anannual basis would utilise most of our free cash flow. In the current financialyear, we have spent £146 million acquiring 8.8 million shares. As part of ourcontinued focus on effective cash management, we now intend to increase thelevel of buyback to an annual rate of around £600m. Since we commenced theprogramme we have purchased shares representing 3.1 per cent of our issuedshare capital." The highlights of our trading performance by region are set out below. UK In the UK we have continued to perform well, maintaining our leadershippositions in both cigarette and fine cut tobacco with annual average marketshares in December of 44.5 per cent and 66.1 per cent respectively (September2005: 44.5 per cent and 66.3 per cent). Based on current market trends weestimate that the annual duty paid cigarette market will decline by around 3 to4 per cent in this financial year. In October, we increased prices, whichresulted in retail prices rising by an average of 6 pence per pack of 20cigarettes. We also strengthened our cigarette portfolio with the recentnational launch of Windsor Blue, an additional value offering. Germany In Germany, market conditions continued to be challenging with further declinesin the cigarette market following the excise tax increase in September 2005. Inour first quarter we estimate that duty paid cigarette market volumes declinedby 16 per cent on the corresponding period last year. This was partly offset bygrowth in other tobacco products, up 21 per cent, but total cigaretteequivalents declined by 6 per cent. Against this background, our cigarette share grew to an annual average of 19.7per cent in December (September 2005: 19.4 per cent) driven by a continued goodperformance from JPS. Our other tobacco products share declined, averaging 23.2per cent in December (September 2005: 24.2 per cent) due to ongoing competitionin the singles sector. Following the ruling by the European Court of Justice on 10 November 2005, theGerman Ministry of Finance announced that all singles products will continue tobe taxed as fine cut tobacco until 31 March 2006, but those produced after thisdate will be taxed as cigarettes. As announced on 18 November 2005, we estimatethat the impact of the singles ruling on our German operating profits in thecurrent financial year could be around £20 million and going forward we intendto mitigate the impact on our performance. Rest of Western Europe During the first quarter, we saw a number of governments maintain minimumpricing, effectively limiting competition, whilst in other markets there wasstrong price competition. Consumer downtrading in cigarette and fine cut tobaccocontinued. Against this background, we have delivered some good performances, particularlyin the Netherlands, France, Spain and Greece, with our cigarette sharesreflecting growth in JPS, West and Davidoff. However, domestic volume progresshas been partly offset by a reduction in travel retail volumes. Our strength infine cut tobacco products has continued across the region. Rest of the World In our Rest of the World region our volume continued to grow with particularlygood performances in Central and Eastern Europe, Africa, the Middle East andAsia. Brand highlights included West in Eastern Europe, Davidoff in the MiddleEast and Asia and a number of successful value brands in Central and EasternEurope. Manufacturing In the first quarter we maintained our focus on business simplification, productquality and costs, whilst successfully completing negotiations with the workscouncils and the unions regarding the restructuring of our European cigaretteand rolling papers operations, announced last year. Both initiatives are due tobe complete by June 2006 and will further improve efficiencies and strengthenour competitive position. Smoking in Public Places We continue to monitor the debates which are taking place in a number of marketsregarding the introduction of restrictions on smoking in public places. Wesupport sensible regulation but believe that outright bans are unnecessary anddisproportionate. In the UK, the Government's Health Bill was published on 27 October 2005, andstated that from the summer of 2007, smoking will be banned in all enclosedpublic places in England and Wales - apart from private members' clubs andlicensed premises that do not serve or prepare food. Members of Parliament willbe given a free vote on the Bill, which could result in amendments. Our view,based on our experience of the smoking ban in Ireland, remains that smokers willcontinue to choose to smoke and although there may be an initial dip inconsumption, this diminishes over time. International Financial Reporting Standards (IFRS) On 24 November 2005 we restated our 2005 preliminary results under InternationalFinancial Reporting Standards ("IFRS") and the restated results for our 2005interims are presented below. PRELIMINARY INFORMATION ON THE IMPLEMENTATION OF INTERNATIONAL FINANCIALREPORTING STANDARDS - 31 MARCH 2005 INTRODUCTION Following the release on 24 November 2005 of the Group's "Preliminaryinformation on the implementation of International Financial ReportingStandards" (IFRSs) (available on our website www.imperial-tobacco.com), thisdocument includes reconciliations of key figures under UK Generally AcceptedAccounting Principles (UK GAAP) for the six months ended 31 March 2005 withunaudited restated IFRS results. These reconciliations should be read inconjunction with the notes on the basis of preparation and explanation ofadjustments included in the "Preliminary information on the implementation ofInternational Financial Reporting Standards" document. This financial information has been prepared in accordance with the accountingpolicies set out in the "Preliminary information on the implementation ofInternational Financial Reporting Standards" document, which are based on theIFRSs which include International Accounting Standards (IASs) and InternationalFinancial Reporting Interpretations Committee (IFRIC) interpretations that havebeen endorsed by the EU and those that are expected to be endorsed by 30September 2006. It is important to note that standards currently in issue are subject to ongoing review and accordingly practice is continuing to evolve. Further standards or interpretations may also be issued that will be applicable for the year ending 30 September 2006, or that are mandatory for later accounting periods but that can be adopted early. The Group may need to review some of the accounting treatments it has used for the purpose of preparing this document as a result of emerging consensus on the practical application of IFRS and further technical opinions that may arise in forthcoming months. This means that the financial information in this document may need modification when the first set of interim financial statements under IFRS is prepared for the six months ending 31 March 2006. RECONCILIATION OF UK GAAP TO IFRS The following reconciliations are included: •Group income statement for the 6 months ended 31 March 2005 •Group balance sheet at 31 March 2005 The balance sheet reconciliation explains the transition in two stages. Thefirst stage shows the restatement of the UK GAAP balance sheet into the IFRSformat, using UK GAAP numbers. The second stage shows the movements caused bychanges in accounting policies between UK GAAP and IFRS. The income statementshows the movements caused by changes in accounting policies only. It is possible that changes may occur in the required format and presentation ofthe primary financial statements as further interpretive guidance is publishedand best practice develops. INCOME STATEMENT FOR THE 6 MONTHS ENDED 31 MARCH 2005 (UNAUDITED)----------------------------------------------------------------- IAS 19 IFRS 3 IAS 10 IFRS 2 Post UK GAAP employment Share-based balance benefits Goodwill Dividends payments Restated £m £m £m £m £m £mRevenue including duty 5,342 5,342Duty (3,878) (3,878)---------------- ------- ------- ------- ------- ------- --------Revenue less duty 1,464 1,464---------------- ------- ------- ------- ------- ------- --------Group operating profit 481 1 99 - - 581---------------- ------- ------- ------- ------- ------- --------Finance costs - net (99) (99)---------------- ------- ------- ------- ------- ------- --------Profit before taxation 382 1 99 - - 482---------------- ------- ------- ------- ------- ------- --------Taxation (130) (130)---------------- ------- ------- ------- ------- ------- --------Profit after taxation 252 1 99 - - 352---------------- ------- ------- ------- ------- ------- --------Equity minority interests (3) (3)---------------- ------- ------- ------- ------- ------- --------Dividends (120) (133) (253)---------------- ------- ------- ------- ------- ------- --------Retained profit for the period 129 1 99 (133) - 96---------------- ------- ------- ------- ------- ------- -------- Earnings per ordinary share for profit attributable to equity shareholders: Basic 34.3p 0.1p 13.7p - - 48.1pDiluted 34.2p 0.1p 13.6p - - 47.9p BALANCE SHEET AT 31 MARCH 2005 - EFFECT OF IAS 1 "PRESENTATION OF FINANCIALSTATEMENTS" (UNAUDITED) UK GAAP balances UK GAAP in UK GAAP Pensions Debtors Provisions balances in format £m £m £m £m £m IFRS format Fixed assets Non-current assets Intangible Intangible assets 3,453 3,453 assets Property,Tangible plant & assets 636 636 equipment OtherInvestments 6 6 investments Retirement benefit - assets Trade & other 2 2 receivables Deferred tax 13 13 assets ------ ------ ------ ------- ------ 4,095 - 15 - 4,110 ------ ------ ------ ------- ------ Current assets Current assets Stocks 1,113 1,113 Inventories Trade & otherTrade debtors 884 (2) 882 receivablesCorporate Current tax taxes - 44 44 assetsOther debtors and Trade & other prepayments 98 98 receivables Cash and cashInvestments 47 47 equivalents Cash and cashCash 268 268 equivalents ------ ------ ------ ------- ------ 2,410 - 42 - 2,452 ------ ------ ------ ------- ------ Creditors: Current amounts falling liabilities due within one year Borrowings (563) (563) BorrowingsTrade Trade & other creditors (97) (97) payablesCorporate Current tax taxes (154) (44) (198) liabilitiesOther taxes, duties and social security Trade & other contributions (1,288) (1,288) payablesDeferred Trade & other consideration (56) (56) payables Other Trade & other creditors (40) (40) payables Accruals and deferred Trade & other income (209) (209) payables Proposed Trade & other dividend (120) (120) payables (27) (27) Provisions ------ ------ ------ ------- ------ (2,527) - (44) (27) (2,598) ------ ------ ------ ------- ------ Creditors: Non-current amounts falling liabilities due after more than one year Borrowings (3,274) (3,274) Borrowings Derivative financial - instrumentsAccruals and deferred Trade & other income (3) (3) payables Deferred tax (63) (63) liabilities Retirement benefit (340) (340) liabilities (43) (43) Provisions ------ ------ ------ ------- ------ (3,277) (340) - (106) (3,723) ------ ------ ------ ------- ------ Provisions for liabilities and charges Reorganisation and rationalisation (44) 44 -Unfunded pension obligations (340) 340 -Deferred taxation (50) (13) 63 -Other (26) 26 - ------ ------ ------ ------- ------ (460) 340 (13) 133 - ------ ------ ------ ------- ------ ------ ------ ------ ------- ------ Net assets 241 - - - 241 Net assets ------ ------ ------ ------- ------ Capital and reserves Called up Share share capital 73 73 capital Share premium Share premium account 964 964 account Profit and loss account (815) (815) Reserves - IFRS reserve ------ ------ ------ ------- ------ Capital and reservesEquity attributable shareholders' to equity funds 222 - - - 222 holders Equity Equity minority minority interests 19 19 interests ------ ------ ------ ------- ------ 241 - - - 241 Total equity ------ ------ ------ ------- ------ BALANCE SHEET AT 31 MARCH 2005 - RECONCILIATION OF UK GAAP TO IFRS (UNAUDITED) IAS 19 IFRS 3 IAS 10 IAS 12 IAS 21 PostUK GAAP employment Financial balances in benefits Goodwill Dividends Income Tax instruments Others IFRS IFRS format £m £m £m £m £m £m £m £m Note 1Non-current assets Intangible assets 3,453 99 10 3,562Property, plant & equipment 636 12 648Other investments 6 6Retirement benefit assets - 153 153Trade & other receivables 2 2Deferred tax assets 13 30 43 ------ ------- ------ ------ ------ ------- ------ ------ 4,110 183 99 - - - 22 4,414 ------ ------- ------ ------ ------ ------- ------ ------ Current assets Inventories 1,113 (22) 1,091Trade & other receivables 980 (10) 970Current tax assets 44 44Cash and cash equivalents 315 315 ------ ------- ------ ------ ------ ------- ------ ------ 2,452 (10) - - - - (22) 2,420 ------ ------- ------ ------ ------ ------- ------ ------ Current liabilities Borrowings (563) (563)Trade & other payables (1,810) 120 (1,690)Current tax liabilities (198) 3 (195)Provisions (27) (10) (37) ------ ------- ------ ------ ------ ------- ------ ------ (2,598) 3 - 120 - - (10) (2,485) ------ ------- ------ ------ ------ ------- ------ ------ Non-current liabilities Borrowings (3,274) 84 (3,190)Derivative financial instruments - (84) (84)Trade & other payables (3) (3)Deferred tax liabilities (63) (46) (13) (122)Retirement benefit liabilities (340) (67) (407)Provisions (43) (43) ------ ------- ------ ------ ------ ------- ------ ------ (3,723) (113) - - (13) - - (3,849) ------ ------- ------ ------ ------ ------- ------ ------ ------ ------- ------ ------ ------ ------- ------ ------Net assets 241 63 99 120 (13) - (10) 500 ------ ------- ------ ------ ------ ------- ------ ------ Share capital 73 73Share premium account 964 964Reserves (815) 30 99 (133) (1) (820)IFRS reserve* - 33 253 (13) (9) 264 ------ ------- ------ ------ ------ ------- ------ ------Capital and reserves attributable to equity holders 222 63 99 120 (13) - (10) 481Equity minority interests 19 19 ------ ------- ------ ------ ------ ------- ------ ------Total equity 241 63 99 120 (13) - (10) 500 ------ ------- ------ ------ ------ ------- ------ ------ * The IFRS reserve is disclosed separately for illustrative purposes only andwill be included within revenue reserves in the interim financial statements. Note 1: This relates to the reclassification of software from tangible fixedassets to intangible assets, holiday pay accrual and reclassification of spareparts from inventories to property, plant and equipment. ENQUIRIES Alex ParsonsImperial Tobacco GroupGroup Media Relations ManagerTel +44 (0)117 933 7241 John Nelson-SmithImperial Tobacco GroupInvestor Relations ManagerTel +44 (0)117 933 7032 Nicola TateImperial Tobacco GroupInvestor Relations ManagerTel +44 (0)117 933 7082 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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