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ANNUAL REPORT AND ACCOUNTS 2021
SET UP FOR
SUCCESS
We are Imperial Brands,
a global consumer
organisation and the fourth
largest international tobacco
company, operating across
120 markets.
OVERVIEW
At a Glance
Our Value Creation Framework
Chair’s Statement
Chief Executive’s Statement
Business Model
Investment Case
Our Operating Environment
Strategy for Success
PERFORMANCE
Key Performance Indicators
Stakeholder Engagement
Our People
ESG Review
Operating Review
Financial Review
Principal Risks and Uncertainties
2
4
14
18
24
26
28
30
GOVERNANCE
Chair’s Introduction
Board Leadership
Board Engagement
The Board and its Committees
Board Statements
Succession and Nominations
Committee
Audit Committee
Remuneration Report
Directors’ Report
FINANCIALS
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes
in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Imperial Brands PLC Balance Sheet
Imperial Brands PLC Statement
of Changes in Equity
Notes to the Financial Statements
of Imperial Brands PLC
SUPPLEMENTARY
INFORMATION
Related Undertakings
Shareholder Information
148
160
160
161
162
163
164
220
220
221
225
235
36
38
46
50
64
71
80
94
96
102
104
106
108
111
120
140
PERFORMANCE MEASURES
USED THROUGHOUT
THE REPORT
Reported (GAAP)
Complies with International
Financial Reporting Standards
and the relevant legislation.
Adjusted (Non-GAAP)
Market share
Non-GAAP measures provide a useful
comparison of performance from one
period to the next. Reconciliations can
be found in notes 3, 6, 8, 10 and 31.
Market share data is presented
as a 12-month moving average
weighted across the markets in
which we operate.
Constant currency basis
Stick equivalent
Removes the effect of exchange rate
movements on the translation of the
results of our overseas operations.
We translate current year results at
prior year foreign exchange rates.
Stick equivalent volumes reflect
our combined cigarette, fine cut
tobacco, cigar and snus volumes.
Imperial Brands is transforming. In January 2021
we announced a new strategy, which is supported
by new ways of working to enhance our culture.
By putting the consumer at the centre of the business,
we seek to strengthen sustainable delivery and unlock
long-term value for all our stakeholders.
For more information
please see
www.imperialbrandsplc.com
W W W . I M P E R I A L B R A N D S P L C . C O M
11
OVERVIEW IMPERIAL BRANDS AT A GLANCE
TRANSFORMING
TO UNLOCK VALUE
Driven by insights and data, we seek
to meet the expectations of adult
smokers by leveraging our international
and local brands to serve their needs.
We are refining our ways of working
and fostering our challenger mindset.
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TRANSFORMING OUR BRANDS
Our portfolio of brands connects with adult
smokers in all the key tobacco and next
generation product (NGP) segments. We
invest in brand innovation to meet evolving
consumer preferences.
4th largest
INTERNATIONAL TOBACCO
BUSINESS
CIGARETTES / FINE CUT
CIGARS
SNUS
NGP
UK
JPS
Golden Virginia
Germany
JPS
West
Lambert & Butler
Gauloises
Carlton
Davidoff
Spain
Ducados
Fortuna
Nobel
West
USA
Winston
Kool
Maverick
Backwoods
Australia
JPS
Champion
Riverstone
Parker & Simpson
TRANSFORMING OUR MARKETS
We are focused on five priority combustible
markets representing around 70% of our
adjusted operating profit. We’re investing
in improved sales execution and brand
building to drive sustainable growth.
120
MARKETS
TRANSFORMING OUR CULTURE
We are changing how we work to focus on
the consumer and to align our resources
with our strategy, supported by a culture
change that is key to our transformation.
27,700
EMPLOYEES*
* Pro-forma number excluding the La Romana disposal. See Note 7 of the financial statements.
W W W . I M P E R I A L B R A N D S P L C . C O M
3
OVERVIEW OUR VALUE CREATION FRAMEWORK
WE ARE
SET UP FOR
SUCCESS
These results reflect the
good progress we are
making in implementing our
new focused strategy to
transform Imperial.
STEFAN BOMHARD
CHIEF EXECUTIVE OFFICER
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OUR PURPOSE
Forging a path to a healthier
future for moments of relaxation and pleasure.
Pages 6-7
OUR VISION
To build a strong challenger business powered
by responsibility, focus and choice.
Pages 8-9
STRATEGIC PILLARS
FOCUSING
ON OUR
PRIORITY
MARKETS
Page 30
DRIVING
VALUE FROM
OUR BROADER
PORTFOLIO
BUILDING
A TARGETED
NGP BUSINESS
Page 32
Page 34
Focus on priority combustible markets
• Target increased investment in our
largest and most appealing profit pools
• Focus on defined key operational levers
to unlock value
Drive value from our broader market
portfolio
• Efficiently manage broader market portfolio
• Create global processes and drive best
practice sharing
• Prepare future growth engines
• Selectively rationalise portfolio
Build a targeted NGP business
• Focus on heated tobacco in Europe as
primary growth engine
• Turn around vapour business with focus
on the US, the UK and France
• Oral nicotine focus on existing markets
CRITICAL ENABLERS
CONSUMER AT THE
CENTRE OF THE BUSINESS
PERFORMANCE-BASED
CULTURE AND CAPABILITIES
SIMPLIFIED AND EFFICIENT
OPERATIONS
Strengthen critical capabilities:
marketing, innovation, digital and
consumer insight
Leverage relevant brand portfolio
to address key consumer needs
Embed fact-based and
collaborative ways of working
Build a challenger mindset
throughout the organisation
Invest in talent and embrace
diversity and inclusivity
Simplify the organisation through
global processes underpinned
by technology
Create and embed a performance
management framework that will
drive agility and accountability
in decision-making
BEHAVIOURS
Start with the consumer, collaborate,
take accountability, be authentic, build our future.
Pages 12-13
W W W . I M P E R I A L B R A N D S P L C . C O M
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PURPOSE
LED
FOR SUCCESS
Our purpose is our guiding light. It defines why
we are here, what we are trying to achieve over
the long term and the growing contribution we
can make to society over time.
FORGING A PATH
This is our
commitment
to finding a long-
term solution for
harm reduction.
We have started
the journey. It will
take time, energy
and creativity
but we are clear
on our direction.
MOMENTS OF
RELAXATION
AND PLEASURE
This recognises
why our consumers
enjoy our products
and our role to
provide genuine
choices in how
experiences
are delivered.
HEALTHIER FUTURE
This is our
commitment
to make a positive
contribution to a
healthier future
for our consumers
and society through
potentially reduced
risk products as well
as our commitments
to operating
responsibly and
minimising our
impact on the planet.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Our purpose is
forging a path to a
healthier future for
moments of
relaxation and
pleasure.
MURRAY MCGOWAN
CHIEF STRATEGY AND
DEVELOPMENT OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
W W W . I M P E R I A L B R A N D S P L C . C O M
7
7
CLEAR
VISION
FOR SUCCESS
Our vision sets out our medium-term aspirations.
It defines our priorities and focus for the next
five years and ultimately underpins the delivery
of our longer-term purpose.
BUILD A
CHALLENGER
BUSINESS
This is about the
mindset we want to
embrace, one that
plays to our historic
strengths as the
smaller player yet
faster, more agile
and confident.
POWERED BY
RESPONSIBILITY
We are committed
to operating
responsibly
in everything we
do, respecting our
communities and
our planet.
FOCUS AND CHOICE
We will be
thoughtful
in where we allocate
resources; these
decisions will be
based on robust
consumer insight
to provide adult
smokers with the
best choices.
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Our vision is to
build a strong
challenger business
powered by
responsibility,
focus and choice.
JAVIER HUERTA
CHIEF SUPPLY CHAIN OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
W W W . I M P E R I A L B R A N D S P L C . C O M
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9
CONSUMER
CENTRIC
FOR SUCCESS
This is about one billion
very different journeys
and in order to truly
understand and support
those individual journeys
we are becoming more
rigorous and data driven,
adopting the best and
newest techniques
from other consumer
goods sectors to deliver
against the needs of
our consumers.
We believe the world’s
one billion adult smokers
should be respected
as active citizens,
informed consumers
and diverse individuals.
We also think it is
important to provide
potentially healthier
choices that better
satisfy the preferences
of the consumer.
At Imperial, we see
a path to a potential
improvement in health
outcomes and delivering
a better experience
for consumers, while
continuing to meet
the needs of the varied
stakeholders who rely
upon us.
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We start with the
consumer, focusing on
consumer insight and
research to ensure we
build a portfolio that
suits them.
ANDY DASGUPTA
CHIEF CONSUMER OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
11
CULTURE
DRIVEN
FOR SUCCESS
We have laid the foundations for a performance-
driven and inclusive culture which supports the
delivery of Imperial’s new strategy.
Underpinning our cultural shift is a set of five clear
behaviours – how we need to think and act in order
to succeed.
START WITH THE
CONSUMER
Everything we do
starts with the
consumer – they
are the reason we
are here.
COLLABORATE
WITH PURPOSE
We work
collaboratively with
others to deliver
better outcomes
for all of us.
BE AUTHENTIC
AND INCLUSIVE
TO ALL
Everyone is
welcome. The more
diverse we are, the
stronger we are.
TAKE
ACCOUNTABILITY
WITH CONFIDENCE
We deliver what
we promise, and
we hold each other
to account.
BUILD OUR FUTURE
We stay one
step ahead,
and challenge
ourselves to be
better every day.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
We launched our five core
behaviours which describe
how we need to think
and act in order to
deliver successfully
on our ambitions.
ALISON CLARKE
CHIEF PEOPLE AND CULTURE OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
W W W . I M P E R I A L B R A N D S P L C . C O M
13
13
THÉRÈSE ESPERDY
CHAIR
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
OVERVIEW CHAIR’S STATEMENT
A CL EAR DIRECTION
FOR SUCCESS
DEAR SHAREHOLDERS
2021 was a year of important progress,
as we set out our new strategy and
began to build the foundations to
strengthen performance.
The Board has continued to
take decisive action to make the
necessary changes with pace. A key
focus for the year has been to develop
our leadership capabilities, while
supporting the executive team in
their strategic review.
We have made significant progress in
enhancing the composition of both the
Board and the Executive Leadership
Team (ELT). I am particularly proud of
the strong and diverse Board we have
now assembled, which is equipped
with a compelling mix of skills and
experience relevant to Imperial and
the challenges and opportunities
it faces.
Our new strategy, vision and purpose are
a comprehensive plan for change, which
we have now begun to implement. I am
pleased to report our operational and
financial performance for the year
has been delivered in line with our
expectations, reflecting the early fruits
of our more focused approach under the
new leadership team.
Strategy update
Our aim is to create a stronger, more
agile, consumer-centric company. At
our Capital Markets Day in January we
set out a clear plan of action that plays
to our strengths as the fourth largest
global tobacco player and nurtures our
strong challenger mindset and culture.
Core to our new approach is to place
consumers at the centre of our
decision-making so we are better
placed to meet evolving consumer
needs. This is key to delivering better
and more consistent results over time.
Stefan has formed his new Executive
Leadership Team and work has started
to restructure the Company aligned
to the new strategy. Stefan has
led this comprehensive review
and delivered significant change
despite the COVID-19 restrictions.
The Board continues to support and
oversee the execution of our strategy
and pays close attention to risk
management, performance metrics,
our ESG agenda and stakeholder
engagement.
Capital allocation
Alongside our strategy, we have
adopted a clear capital allocation
framework to define how we will
prioritise capital deployment over
the next five years. The Board has
carefully evaluated the investment
needs of the business, the appropriate
capital structure and the best way
to maximise returns to shareholders
through a progressive dividend policy
and by returning surplus capital.
Strengthening the balance sheet
remains an important priority so
we can reach our target leverage.
Achieving this target creates
the headroom for a more flexible
approach to return surplus capital to
shareholders through share buybacks
or special dividends, subject to market
conditions at the time.
During the first quarter, we
completed the sale of our Premium
Cigar business, which will raise total
proceeds of €1.225 billion. To date, we
have realised proceeds of €1.15 billion,
which have been used to reduce debt.
These proceeds, together with the
benefit from the decision in 2020 to
rebase the dividend by one-third and
our net cash generation in the year,
and the favourable exchange rate
benefit, mean our net debt has reduced
by more than £1.7 billion in the year.
The Board recognises the importance
of cash returns to investors. In line
with our progressive dividend policy,
and taking into account underlying
business performance, we have
announced a 1.0 per cent increase
for the final dividend this year.
Board engagement
The Board has stepped up its
engagement with key stakeholders
this year. We held four Board listening
events with groups of employees from
around the world. These events were
great opportunities for the Board
to hear feedback directly from
employees, as part of our overall
engagement strategy. The outputs
of these Board sessions are featured
later in the People and Culture section
of this report. These activities build on
the town halls and other activities led
by Stefan and the executive team.
W W W . I M P E R I A L B R A N D S P L C . C O M
15
OVERVIEW CHAIR’S STATEMENT – CONTINUED
With our new strategy clearly
articulated, we have plenty to
achieve in the year ahead.
Board changes
Since becoming Chair, I have been
determined to strengthen the Board’s
capabilities, expertise and diversity.
We have made significant progress
in assembling a high-quality and
diverse team, notwithstanding the
challenges of the global pandemic.
I am delighted we have been able
to further our expertise in several
important areas including finance,
business transformation, government
and regulatory affairs and large
multinational enterprises, as well
as adding relevant sector experience
in consumer goods and retail.
In January, we welcomed Alan
Johnson to the Board as Non-
Executive Director and a member
of the Succession and Nominations
Committee and the Audit Committee.
Alan brings a strong financial
background in consumer goods and
retail, having held a number of senior
finance positions at Unilever during a
30-year career.
In June, Pierre-Jean Sivignon stepped
down from the Board for unforeseen
personal reasons. The Board and I were
deeply saddened to hear of his need
to step down and would like to thank
Pierre-Jean for his contribution to
the Board.
The Board continued an active
dialogue with shareholders and
we have received regular feedback
reports from investors throughout the
year. I have also met with our largest
shareholders to update on progress,
listen to feedback and to discuss any
concerns. I am pleased to report the
actions we have already taken have
resulted in a more positive dialogue
with shareholders, although much
remains to be achieved through our
five-year plan.
I have also supported the new
leadership team in their increased
engagement with all key stakeholders,
including customers, suppliers,
regulators and NGOs, and we look
forward to building on this in the
coming year. The Board believes
this more outward-looking approach
is critical to changing the culture
to create a stronger and more
agile business.
Operating responsibly
Our commitment to our environmental,
social and governance (ESG)
responsibilities is captured in our new
vision, purpose and values and will be
delivered through our strategy.
Since becoming Chair, I have taken
a direct interest in our ESG agenda
and chaired a cross-functional ESG
Steering Committee to maintain
oversight on progress against our
five ESG priorities. However, with the
new ELT in place, it is now appropriate
that Stefan chairs an operational
ESG Steering Committee with
representation from the key functions.
This will make regular reports to the
Board and I will remain fully engaged.
The Board supports greater
transparency, and has agreed
additional publicly available KPIs
for climate and energy, farmer
livelihoods, human rights and waste
to help our stakeholders measure our
performance going forward. We have
also reviewed our progress towards
the requirements of the Task Force on
Climate-related Financial Disclosures
(TCFD) and we are currently on track
to deliver the required disclosures
in 2022. I am pleased we have also
committed to be net zero by 2040.
We recognise the most important ESG
priority for many of our stakeholders
is consumer health and, in order to
realise our harm reduction ambitions,
we need a stronger NGP business
offering potentially reduced risk
products. This is a key pillar of the
new strategy and our market trials in
heated tobacco and vapour are critical
to establish the right foundation
for this business. We will continue
to report progress on these trials,
which will define our metrics for
consumer health.
The diversity of the ELT and the
Board is an important visible sign
of our commitment to diversity and
inclusion and reflects our dedication
to the continual development of
all aspects of our ESG strategy:
environmental, social and governance.
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In September, we announced the
appointment of Ngozi Edozien and
Diane de Saint Victor, who both
joined the Board as Non-Executive
Directors on 15 November. Ngozi
brings to the Board over 30 years’
experience in general management,
finance, consultancy, and business
development gained at multinational
companies in Europe, USA and Africa.
Diane has strong legal, regulatory
and ESG experience relevant for us
in the tobacco industry, having held a
number of General Counsel and other
key roles in an international career
spanning more than three decades.
On the Executive Director side, we
welcomed Lukas Paravicini to the
Board as Chief Financial Officer in
May. Lukas joined from ED&F Man
Holdings where he was CFO and
brings a combination of financial
and operational experience from
consumer goods companies, such
as Nestlé and Fonterra, as well as
experience in driving transformational
change. Lukas succeeds Oliver Tant,
who retired from the business in
July. We wish to thank Oliver for his
contribution to the business during
his seven-year tenure.
Response to COVID-19
The year ahead
The Board has remained fully
engaged in the Group’s response to
the pandemic, with the health and
safety of our people being our first
priority, followed by a focus on
sustaining business performance.
The Group’s response has been an
important agenda item at formal
Board meetings and as part of our
informal engagement.
On behalf of the Board, I would like
to thank our employees for their
dedication and resilience in the face
of the continued COVID-19 pandemic
during the year. Their actions have
enabled our supply chain to operate
smoothly throughout the pandemic.
With our new strategy clearly
articulated, we have plenty to achieve
in the year ahead. The newly formed
executive team will continue to make
the changes required for the next
phase of Imperial’s development
and we will see a new consumer-
centred, performance-focused and
collaborative culture emerge.
The prioritisation of investment
behind our top-five combustible
markets and in our market pilots for
heated tobacco and vapour is creating
a stronger and more focused business
that is better able to deliver consistent
growth over time.
The Board is confident that Imperial
has great potential and we remain
focused on delivering the necessary
changes to strengthen performance
and realise value for our shareholders.
THÉRÈSE ESPERDY
CHAIR
W W W . I M P E R I A L B R A N D S P L C . C O M
17
OVERVIEW CHIEF EXECUTIVE’S STATEMENT
SET UP
FOR SUC CESS
The right strategy, purpose
and mindset
The strategy of Imperial Brands
has three simple priorities. The first
is to create sustained value in the
combustible market through a focus
on our priority markets where we can
leverage our strengths. The second is
to build a distinctive presence in next
generation products (NGP), which, over
time, delivers a material contribution
both to harm reduction, through
offering potentially reduced harm
products to consumers, and investor
returns. The third is to drive value from
our broader global portfolio.
These priorities are mutually
supportive. Scalable success in NGP
requires both consumer focus and
the full mobilisation of Imperial’s core
strengths in marketing, manufacturing
and strong retail partnerships. At the
same time, I believe our responsible,
long-term commitment to improving
the wellbeing of consumers provides
a defining mission that energises the
entire organisation.
Delivering on this strategy requires
us to put the consumer at the centre
of everything we do, to simplify our
operations and to develop a rigorous
performance culture.
As we build the foundations of this
new culture, over the past year we
have conducted a range of listening
exercises with our 27,700 colleagues.
Through this process, we developed a
new statement of purpose: “Forging a
path to a healthier future for moments
of relaxation and pleasure”.
Alongside the new strategy we
have developed a vision statement
which is “To build a strong challenger
business powered by responsibility,
focus and choice”.
Our challenger mindset is an important
and distinctive attribute. Although our
brands have deep heritage, Imperial is,
in important ways, a young company.
This year marks our 25th anniversary
as an independent public company
and the key acquisitions that
completed our global footprint occurred
only in the past decade. In our recent
history, we have been at our best
when we have acted as an ambitious
challenger, providing genuine choice
for our customers and consumers,
and an additional responsible industry
player for regulators and policymakers.
After just over a year as CEO and
having met many hundreds of
colleagues, both virtually and face-to-
face, I can confirm that this business
retains that challenger spirit in
abundance. However, as I said at
the launch of our new strategy in
January 2021, in order to make a
reality of our ambition to put the
consumer at the centre, we need to
supplement our core strengths with
additional capabilities in insights,
innovation and product development.
I’d like to take this opportunity to thank
our colleagues for their significant
contribution, particularly with the
challenges of a global pandemic.
A YEAR OF PROGRESS
Delivered improved results with growth in revenue, profit and cash
New five-year
strategy and
capital allocation
framework announced
Purpose, vision
and behaviours
defined to support
culture change
Focus on priority
markets beginning
to stabilise aggregate
market share declines
See page 5 for
more information
See page 5 for
more information
See page 30 for
more information
NGP pilots underway
in heated tobacco
and vapour
Strengthened
executive team in
place to lead the
transformation
Good progress on
adopting new ways
of working
See page 34 for
more information
See page 22 for
more information
See page 46 for
more information
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STEFAN BOMHARD
CHIEF EXECUTIVE OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
19
OVERVIEW CHIEF EXECUTIVE’S STATEMENT – CONTINUED
Being clear about our purpose and vision
enables us to set in place the building
blocks to develop the right culture to
support our strategic delivery.
Over the past 12 months we have
assembled a diverse, new senior
team and refreshed the way we
work. This approach, bringing together
our traditional strengths and future-
facing capabilities, has led to improved
operational and financial outcomes in
line with our expectations.
The right team
Driving this new culture is the newly
formed Executive Leadership Team
(ELT). During the year, Andy Dasgupta
joined in the newly created role
of Chief Consumer Officer and a
re-organisation of our reporting
regions led to the appointment
of Kim Reed as President and CEO
of our Americas Region and Paola
Pocci as President of Africa, Asia and
Australasia (AAA). This new regional
structure enables a sharper focus
both on our largest market, the United
States, and the portfolio of emerging
markets that have the potential to
become an important future growth
engine. Javier Huerta joined as
Chief Supply Chain Officer and
Lukas Paravicini as Chief Financial
Officer. A strengthened ELT team,
collaborating closely with our
experienced functional and market
leaders, means Imperial now has the
right blend of deep expertise of the
tobacco industry and fresh ideas and
perspectives from blue chip consumer
goods companies, such as Nestlé,
Unilever, P&G and Pepsi.
Placing the consumer at the centre
of all our decisions
As Chief Consumer Officer, Andy
Dasgupta is leading our focus on
the consumer. Under him, we have
adopted a more co-ordinated approach
to how we collect and use consumer
and competitor insights and data,
which is leading to better-informed
and faster decision-making. We are
now building the right marketing,
brand and portfolio management
capabilities to support growth. In
addition, Andy is leading a newly
defined innovation programme that
sits across tobacco and NGP to ensure
we can meet consumer needs for new
products, formats and experiences.
Embedding a high
performance culture
We have taken action to embed a
performance-based culture; one that
holds our teams to account and rewards
teamwork. For our top-five priority
combustible markets this involved
detailed monthly executive reviews of
each market. We have revised incentive
metrics for the Annual Bonus and Long-
Term Incentive Plans (LTIP) to support
our strategic objectives. We also have
defined the new behaviours which
will support the challenger-minded,
consumer-centric and responsible
culture we are creating at Imperial.
In the coming year we will be rolling
out a global programme to help our
colleagues understand and embrace
how they can best play a practical role
in driving our transformation. More
detail on this is given on pages 46 to 49.
Simplifying our operations
To simplify our operations, we are
restructuring the organisation to
reallocate resources to the customer
and consumer-facing areas in our
priority markets while simplifying
other aspects of operations. This
is realising savings to fund our
investment plans. For example, we
have already restructured our sales
and marketing organisation, reducing
the number of market clusters from 13
to 10. In addition, our business services
are implementing modern operating
models, which will embed more
effective ways of working.
The right performance
Our results reflect the actions taken
to focus our investment tightly behind
our priority markets and to drive a
more rigorous approach to managing
performance in tobacco and NGP. In
tobacco, we have begun to stabilise
the long-term aggregate market share
declines in our five priority markets
through a greater focus on performance
management, brand refreshes and
enhancing our sales footprint in select
areas. On a constant currency basis,
Group net revenues grew 1.4 per cent
year-on-year reflecting continued
strong pricing dynamics. Reported
revenue grew 0.7 per cent at actual
exchange rates. As anticipated, we grew
our Group adjusted operating profit by
4.8 per cent in the year on a constant
currency basis driven by a reduction in
our NGP losses and higher Distribution
profit from Logista. Reported operating
profit grew 15.2 per cent at actual
exchange rates. We delivered solid
cash flow performance, generating
£1.5 billion of free cash flow.
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Focus on priority combustible
market portfolio
Deliver value from broader
market portfolio
Aggregate market share in our five
priority combustible markets declined
by just two basis points, compared to a
17 basis point decline last year. Share
gains in the US, UK and Spain partially
offset declines in Germany and Australia.
This relative improvement reflects the
benefit of the changes we are making
to focus greater resource and more
detailed performance management on
these priority markets. We have begun
to increase investment in these markets
behind some clear operational levers,
such as increased sales force and key
account management, areas which
were identified by the local teams. We
are making good progress, although
the main investment increase begins
in the coming year. Further details are
provided in the Operating Review.
Build a targeted NGP business
The NGP category remains relatively
nascent in the majority of markets.
We have an exciting opportunity to
make a meaningful contribution to
harm reduction by building a targeted
and sustainable business in this
market, offering potentially reduced
risk products. Our new approach
offers consumers greater choice in
markets where they already express a
preference for a particular proposition.
In heated tobacco, two trials in the
Czech Republic and Greece with our
Pulze and iD propositions have received
a positive response from our trade
partners and consumers. These are
attractive markets because heated
tobacco is already a well-established
NGP category and we can leverage our
existing route to market for combustible
tobacco products. The valuable
consumer insights we gain from these
pilot initiatives will inform the scale
and pace of further market rollouts.
In the United States we have
also started trials for a revised
proposition for our vapour product, blu,
including more innovative consumer
communication and customer support.
We have chosen to do this in a focused
geographic area to best assess the
impact of our new approach.
Modern oral nicotine continues to
perform well in Norway and Austria,
markets where consumers have a
preference for this type of proposition.
Our detailed strategic review created
a clear role for each of Imperial’s
markets. The structured approach to
market segmentation will drive our
allocation of resources in terms of
management time and investment.
Our more focused approach has
supported market share gains
across the Group with overall
tobacco share up 20 basis points
year-on-year. Highlights include a
strong performance from the African
market cluster, which has grown share,
net revenue and profit.
Environmental, social &
governance (ESG)
Our approach to ESG supports our
new business strategy and defines
our responsibilities as a business. It
is aligned with those UN Sustainable
Development Goals which are most
relevant to our Company strategy,
namely consumer health, climate and
energy, farmer livelihoods and welfare,
human rights, and waste.
Furthermore, we have recently made
a commitment to be net zero by 2040.
We already have targets which are
consistent with reductions required
to limit climate warming to 2°C, which
have been approved by the Science
Based Targets initiative (SBTi). We
intend to re-engage with SBTi to
approve revised and more ambitious
goals consistent with climate warming
of 1.5°C and our net zero ambition.
We have strengthened our ESG team
with the hiring of Tony Dunnage as
global lead on ESG. Tony brings more
than 30 years’ experience in Unilever,
directing end-to-end supply chain
and manufacturing sustainability for
250-plus factories and reports directly
to the ELT.
Capital allocation priorities
We have a clear capital allocation
framework linked to our strategy to
maximise returns for shareholders,
with four clear capital priorities:
• Invest behind the new strategy to
deliver the growth initiatives.
• Deleverage to support a strong and
efficient balance sheet with a target
leverage towards the lower end
of our net debt to EBITDA range
of 2-2.5 times.
• A progressive dividend policy
with dividend growing annually
taking into account underlying
business performance.
• Surplus capital returns to
shareholders to be considered once
target leverage has been achieved.
This year we reduced adjusted net debt
by £1.7 billion, on a constant currency
basis, with net debt to EBITDA gearing
reduced by 0.5 times to 2.2 times, at
constant currency. At actual exchange
rates, reported net debt reduced by
£1.8 billion.
In line with our progressive dividend
policy, the Board has decided to
increase the dividend by 1.0 per cent,
and we remain committed to providing
a reliable, consistent cash return
to shareholders.
Outlook
We remain on track to deliver against
our strategy with our expectations
for the coming year in line with the
guidance we provided at our Capital
Markets Day in January this year. At
constant exchange rates, we expect to
deliver net revenue growth at a similar
rate to the 2021 financial year, while
adjusted operating profit is expected to
grow slightly slower than net revenue,
reflecting the increased investment in
line with our strategic plan.
Our five-year strategy to strengthen
performance and deliver growing
shareholder returns is divided into two
distinct phases. The year ahead will
complete the two-year ‘strengthening’
phase with further investment in our
five priority markets and NGP pilots,
the embedding of new ways of working
and cost-saving initiatives in line with
our plans. This builds the foundations
for the subsequent three-year phase
of our plan, in which we will accelerate
returns and deliver sustainable growth
in shareholder value.
STEFAN BOMHARD
CHIEF EXECUTIVE OFFICER
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21
21
OVERVIEW LEADERSHIP
A STRE NGTHENED TEAM
Our newly assembled
Executive Leadership
Team (ELT) brings
fresh perspectives
and consumer-facing
capabilities to the
business from a
diverse range of
FMCG backgrounds.
This, in combination with the deep
tobacco industry knowledge that exists
across our market leadership teams,
gives us confidence that we have the
right blend of skills and experience to
deliver on our strategy.
Five additions to the ELT this year
include Chief Financial Officer
Lukas Paravicini and two new Region
Presidents, Kim Reed and Paola Pocci.
Andy Dasgupta was appointed to the
newly created role of Chief Consumer
Officer, and Javier Huerta has joined
to lead a new single, connected and
integrated supply chain function.
STEFAN BOMHARD
CHIEF EXECUTIVE OFFICER
Stefan has experience of leading the delivery of
transformational change, having spent five years as
CEO of the international automotive distribution business
Inchcape. His 30 years of business experience also include
senior roles in the consumer goods sector at Unilever,
Procter & Gamble and Cadbury, as well as the challenger
firms Bacardi and Burger King.
LUKAS PARAVICINI
CHIEF FINANCIAL OFFICER
Lukas has a track record of driving transformational
change in financial and operational roles at international
consumer goods organisations. He was previously CFO
at agricultural commodities and brokerage group ED&F
Man Holdings and also held senior positions at Fonterra,
the world’s largest dairy exporter. These roles built on a
22-year career at Nestlé.
JOERG BIEBERNICK
PRESIDENT, EUROPE REGION
Joerg has extensive tobacco industry knowledge from
his four years on the ELT, including a six-month period as
Joint Interim CEO. Prior to joining Imperial he developed
considerable brand marketing and general management
experience from senior roles in the consumer sector at
Kimberly Clark, Georgia Pacific and Procter & Gamble.
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ALISON CLARKE
CHIEF PEOPLE & CULTURE OFFICER
MURRAY MCGOWAN
CHIEF STRATEGY & DEVELOPMENT OFFICER
Alison is a highly experienced global business leader
having held senior positions at Whitbread, Hutchison,
United Utilities and at Inchcape, where she held
responsibility for all aspects of people and culture
strategies. She has led a number of large HR functions,
and teams responsible for business transformation,
communications and ESG.
Murray has a strong background in strategy gleaned from
strategic and operational leadership roles for a number of
high profile businesses including Costa Coffee, Yum! Brands,
Cadbury and The Restaurant Group. He also worked with a
range of leading global FMCG and retail businesses during
his time at McKinsey & Company.
ANINDYA (ANDY) DASGUPTA
CHIEF CONSUMER OFFICER
Andy has held senior executive positions in marketing,
strategy and general management for large global
businesses in multiple markets. He developed extensive
consumer experience working in senior roles in the
consumer healthcare division at GlaxoSmithKline,
the Global Beverages Group at PepsiCo, and at Fonterra,
where he led the global consumer-branded business.
PAOLA POCCI
PRESIDENT, AFRICA, ASIA AND AUSTRALASIA REGION
Paola has a strong understanding of geographically
diverse consumers and of operations management across
traditional and modern retail channels. In her 22 years
at Procter & Gamble she held leadership positions across
developed and developing territories, including Europe,
the Middle East, the US and China, and across multiple
FMCG categories.
JAVIER HUERTA
GLOBAL SUPPLY CHAIN OFFICER
Javier has extensive experience in supply chain, operations
and consumer goods having held a number of senior roles
in an 11-year career at Unilever, most latterly as Executive
Vice President Supply Chain for Foods and Refreshment. His
strong consumer goods background also includes a 14-year
career in various roles at Nestlé.
KIM REED
PRESIDENT AND CEO, AMERICAS REGION
Kim has a wealth of experience in consumer goods and a
track record of more than 30 years in sales and executive
leadership roles. She joined our US business as Executive
Vice President, Sales in 2019 to successfully design and
oversee a comprehensive sales transformation strategy.
Prior to joining ITG Brands, Kim was General Manager of
US Sales at The Kellogg Company.
W W W . I M P E R I A L B R A N D S P L C . C O M
23
OVERVIEW BUSINESS MODEL
UNLO CKIN G
VA LUE
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
OUR ASSETS
OUR PEOPLE
27,700 employees
We have 27,700 committed
and passionate employees
who want to make
a difference
OUR BRANDS
160 brands
Our portfolio of 160 brands
provides enjoyment and
pleasure for millions of
adult consumers every day
OUR RELATIONSHIPS
120 markets
We have solid, trusted
partnerships with stakeholders
including customers and
suppliers across 120 markets
OUR OPERATIONS
31 manufacturing
sites
We have a network of
31 manufacturing sites that
source and process tobacco
raw materials to provide high
quality products at lowest cost
OUR INDUSTRY
KNOWLEDGE
Our deep knowledge of the
tobacco and nicotine industry,
including our scientific and
regulatory understanding,
helps us to operate responsibly
in all our markets
OUR FINANCIAL
STRENGTH
We are able to raise prices
to more than offset volume
declines to deliver high
margins and strong cash flows
to invest and drive return
OUR BUSINESS ACTIVITIES
ADULT CONSUMER INSIGHTS
We start with the consumer – and everything
we do is based around a deep understanding
of adult smokers and nicotine consumers. This
is led by our Chief Consumer Officer and we
unlock value by ensuring we offer the right
product choices to meet consumer needs.
These insights provide competitive advantage
and inform how we communicate with adult
consumers and our product offerings in both
combustible tobacco and NGP.
MARKETING & INNOVATION
Our marketing and innovation teams
add value by using consumer insights
to develop a portfolio of combustible
tobacco and potentially reduced
harm NGP to engage and excite adult
consumers. We use sales and marketing
communications and innovation to
differentiate our brands and meet
evolving consumer needs.
EFFICIENT MANUFACTURING
Our manufacturing teams take the raw materials and
employ the latest production methods, working to the
highest quality and product manufacturing standards.
Our scale and knowledge are competitive strengths
enabling us to supply quality products at lowest cost.
Where appropriate, for example with NGP devices,
we use third-party manufacturers with the technical
expertise to deliver high-quality products. We also
use third-party logistics companies to distribute
our products.
SCIENCE & REGULATION
We use our know-how and smaller size to be
agile in how we respond to regulatory changes.
This is supported by our science and corporate
affairs teams who understand the regulatory
environment in all our markets and ensure we
operate responsibly with high quality products
compliant with local standards.
SUSTAINABLE SOURCING
Our leaf purchasing teams work with a diverse
and complex supply chain from smallholder
farmers to multinational companies to procure
high-quality leaf and nicotine for our products.
Our procurement teams add value by responsibly
meeting all our sourcing needs including leaf,
nicotine and non-tobacco materials such as
papers, filters and packaging, as well as the
power and water we use to run our factories.
STRONG RETAIL PARTNERSHIPS
The sales and marketing teams in our regions
add value through their strong partnerships with
our customers, which is a source of competitive
advantage. We understand their needs and
help them to navigate the changing regulatory
environment. Our goal is to deliver mutually
attractive commercial arrangements that
support growth and value creation for our retailer,
wholesaler and distributor customers. We want
our customers to grow so we grow as well.
W W W . I M P E R I A L B R A N D S P L C . C O M
W W W . I M P E R I A L B R A N D S P L C . C O M
25
OVERVIEW INVESTMENT CASE
AN ATTRACTIVE
INVE S TMEN T PROPOSITIO N
Our new five-
year strategy will
build a better and
stronger business
by leveraging our
assets and capabilities
to unlock value for all
stakeholders. Alongside
our strategy we have
set out a clear capital
allocation framework
to support investment
in the new strategy,
strengthen our
balance sheet and
deliver enhanced
shareholder returns.
REVITALISED
TOBACCO BUSINESS
DRIVING STRONG
CASH RETURNS
The tobacco value creation
model remains resilient with
affordability and strong brand
loyalty supporting sustainable
pricing. By focusing on our top five
combustible markets that generate
c. 70% of operating profit contribution,
with selective investment in brand
equity and sales force, we will stem
market share losses to generate
improving cash returns from
our combustible business.
Our five-year plan will deliver a
stronger financial outlook with
a clear operational and financial
focus over two phases.
NGP BUSINESS
PROVIDING OPTIONS
FOR POTENTIAL
HARM REDUCTION
AND GROWTH
Next generation products have
great growth potential as they are
still a relatively nascent category
in the majority of markets. We have
unified our NGP operations under
a single leadership, incorporating
agile and entrepreneurial ways
of working as a differentiated fast
follower. By revising our category
prioritisation and limiting our
category/market combinations,
taking a relentless consumer focus
and a more disciplined investment
approach, we have a clear plan to
enhance our NGP delivery.
c.70%
OF PROFIT
CONTRIBUTION
COMES FROM TOP
FIVE COMBUSTIBLE
MARKETS
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SELF-HELP
INITIATIVES DELIVER
OPERATIONAL
IMPROVEMENT
AND STRENGTHEN
PERFORMANCE
STRONG
SUSTAINABLE CASH
FLOW GENERATED
FROM A HIGH
QUALITY
PORTFOLIO
PROGRESSIVE
DIVIDEND
SUPPLEMENTED
BY CAPITAL
RETURNS AT THE
APPROPRIATE TIME
Investment and operational
improvements will enhance financial
delivery as we build the right capability
and focus on our enabling functions
to support the new strategy. With the
consumer firmly placed at the centre
of our business, and a challenger
mindset re-established, teamwork
and collaboration are encouraged with
rewards and incentives based mainly
on shared Group objectives.
The business remains highly cash
generative with low capital intensity, a
working capital focus and disciplined
capital expenditure producing cash
conversion of typically between 90%
and 100%. Group expectations are for
flat adjusted operating profit in FY22,
thereafter delivering improving profit
growth with a three-year mid-single
digit compound annual growth rate.
Near-term capital priorities include
targeted investment in operational
levers, a progressive dividend policy
reflecting underlying performance and
a commitment to an investment grade
credit rating. Once target leverage is
achieved, the Board supports surplus
capital returns via a share buyback
and/or special dividend.
Our five-year plan will deliver a stronger financial outlook with a clear operational prioritisation in tobacco
and NGP over two phases:
Phase 1 – Strengthening
FY21 to FY22
Phase 2 – Accelerating returns
FY23 to FY25
Increased investment in operational
growth drivers in tobacco and NGP
Investment and operational
improvements enhance financial delivery
Strategic focus
New ways of working deliver efficiencies
Consolidate investment in tobacco and NGP
Implement operational excellence
improvements
Leveraging efficiency benefits
Net revenue
Gradually improving trajectory with 5-year CAGR of 1-2%
Adjusted operating
profit
FY22 adjusted operating profit margin flat*
on FY21, with no margin reset
Delivering improving profit growth
3-year CAGR of mid-single digits
Cash flow
Dividend
Leverage
Further capital
returns
Operating cash flow conversion typically between 90% to 100%
Progressive dividend policy reflecting underlying performance
Committed to investment grade credit rating (lower end 2.0x to 2.5x Net Debt/EBITDA)
Once target leverage achieved, Board supports surplus capital returns
* excluding non-repeat of net £40m US state litigation settlement charge.
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27
OVERVIEW OUR OPERATING ENVIRONMENT
MANAGING OUR MARKET DRIVERS
The global tobacco market
is valued at US$850 billion,
with cigarettes representing
the largest category with
over 5,200 billion cigarettes
consumed each year. Although
global cigarette consumption is
declining, more than 19 per cent
of the world’s adult population still
choose to smoke. The development
of potentially less harmful next
generation products (NGP),
coupled with social change and
regulation, is resulting in some
smokers choosing alternative
nicotine products such as heated
tobacco, vapour and oral nicotine,
that do not involve the combustion
of tobacco. The industry remains
highly competitive with four global
players as well as local operators.
US$850 bn
THE GLOBAL TOBACCO
MARKET VALUATION
REGULATION AND EXCISE
Tobacco and nicotine regulation continues to
evolve and remains a significant influence on how we
manufacture, advertise and sell our products, and how
our consumers buy and enjoy them. Regulation varies
widely across regions and markets. At a regional level,
the EU has committed to re-examining its Tobacco
Products Directive. Nationally, countries such as New
Zealand have unveiled comprehensive programmes
of new regulation, while the US and Greece have
further developed product-by-product approval
pathways for the marketing of tobacco and nicotine
products. Combustible tobacco is heavily taxed,
contributing globally more than US$200 billion to
governments each year.
Despite these measures, smoking among adults
persists. Many of the world’s one billion adult
smokers choose to use tobacco products in markets
where there are extreme restrictions on tobacco
availability, marketing, and use. Imperial Brands
supports reasonable and rational regulation of
tobacco and nicotine products, in some cases
going beyond requirements established in law.
Most notably, our products are for adult nicotine
consumers only.
We prohibit sales to those under the age of 18
worldwide, even in jurisdictions where this is not
a legal requirement, and where the legal age is higher,
we take that as our limit. We take firm steps to help
prevent retailers from selling to minors and have
robust procedures in place to promote compliance.
On this and other regulatory issues, we work
proactively with governments, legislators and
regulators around the world to help ensure that
our business operates legally and responsibly.
Our products can be controversial, but the way
that we do business is not.
5,200 bn
CIGARETTES CONSUMED
EACH YEAR
19%
OF THE WORLD’S ADULT
POPULATION STILL
CHOOSE TO SMOKE
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HARM REDUCTION
We are reassured that some global regulators have
continued to pursue and promote tobacco harm
reduction policies. These are enlightened public
health strategies that recognise the failure of
traditional, absolutist messages of tobacco control
to achieve their objectives, and propose instead an
approach of reducing the health impacts of nicotine
consumption, rather than seeking to eliminate the
habit itself. Governments that have followed this
approach, such as the United Kingdom and New
Zealand, accept that not all nicotine products are
equally harmful, and that public health benefits can
be realised at a population level if existing smokers
transition to potentially less harmful products,
so long as there is minimal transition in the other
direction, and such products do not attract new
users who would not otherwise have chosen to
consume nicotine.
Jurisdictions that have implemented tobacco harm
reduction policies have seen positive public health
results, yet the approach has not yet captured the
support of all regulators. This is partly attributable
to the refusal of tobacco control activist networks to
acknowledge the weight of science in this area. This
leads to counterproductive and regressive strategies,
such as aggressive tax increases, which limit the
transition to potentially less harmful alternatives
and pose risks to public health targets and fuel the
illicit trade.
There are faint but welcome signs of change. In
the US, the Food and Drug Administration has
two specific pathways open to novel tobacco and
nicotine products that acknowledge that some such
products either offer a modified risk compared to
existing tobacco products, or are “appropriate to
the protection of public health”. The process of
accessing these pathways is rightly rigorous,
if somewhat opaque and burdensome. Yet the
insistence on examining the scientific basis for
the safety of complete products, and considering
their impact at a population level, is a marked
improvement in the quality of the regulatory debate.
ILLICIT TRADE
Unfortunately, the prevalence of the
illicit trade in tobacco products means
that we face competition from a less
scrupulous criminal supply chain. Illicit
tobacco deprives the responsible industry
of revenue, deprives governments of vital
excise, and deprives consumers of the
security of enjoying rigorously tested,
high-quality products. The illicit trade
is a complex phenomenon, driven
by economic, practical, and political
factors. Fighting illicit trade requires
a co-ordinated approach from
government and industry. Imperial
continues to work with enforcement
agencies to reduce this scourge.
MANAGING WIDER
IMPACTS
It is not just dedicated tobacco and
nicotine regulation that affects our
business. Sustainability concerns
have grown in areas such as single-
use plastics and have expanded into
new areas as our portfolio widens
to encompass electronic consumer
devices, batteries and other associated
product types. Meeting the additional
challenges raised by this increased
complexity, and helping our consumers
to navigate both the regulations and
the claims made in this area, are a
priority. Our new sustainability KPIs
will embed this priority at the heart
of our ESG agenda, and will enable
us to demonstrate our progress,
as we engage with national and
regional authorities on issues
ranging from litter to the sourcing
of precious metals.
IMPACT OF COVID-19
Although COVID-19 has had a
significant impact on all our lives, the
impact on the tobacco industry has
been relatively limited with travel
restrictions and lockdowns causing
some changes in consumer buying
patterns in different markets and
channels such as duty free. We
expect these effects will unwind
as the restrictions are lifted.
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29
OVERVIEW STRATEGY FOR SUCCESS
FOCUSING O N
OUR PRIORITY
MA RKE TS
We prioritise investment and resources in
our five most important markets of the USA,
Germany, UK, Australia and Spain,
which represent more than 70 per cent
of our operating profit.
FOCUSING ON OUR
LOCAL JEWELS
BUILDING BACKWOODS
AND MEETING NEEDS
ENHANCING OUR
SALES EXECUTION
In Spain we are leveraging the full
potential of our local jewel brands
by focusing on brand building and
awareness initiatives.
Our Nobel cigarette brand, which already
has strong equity and national coverage,
is benefiting from ongoing investments
in pack and product quality.
Limited edition packs, designed in
collaboration with leading local artists,
are tapping into Nobel’s heritage to
drive market share gains.
In response to positive consumer
feedback, a strong pipeline of further
brand building initiatives is in place
for Nobel.
In the USA the actions we’re taking
to build on the unique equity and
positioning of our leading mass
market cigar brand Backwoods are
continuing to drive strong top and
bottom line growth.
We are extending the brand’s regional
presence in previously under-penetrated
areas of the country and building
on a tried-and-tested programme
of consumer engagement activities.
In addition, the Backwoods range has
been evolved to better meet consumer
expectations through new product
offerings including premium exclusive
editions and smaller pack sizes to
drive consumer trial.
Our strategic review highlighted
the opportunity to enhance our sales
execution in our priority markets and
this year we increased investment in
both the USA and Germany.
For example, we added 200 more sales
people in the USA, while optimising
sales force coverage across the
right outlets. Similarly, in Germany,
we have invested to improve sales
force effectiveness and presence
in under-represented channels
and geographies.
We are investing to equip our
sales people with better tools and
information systems to help them
serve our customers better.
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UWE
SALES
REPRESENTATIVE
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OVERVIEW STRATEGY FOR SUCCESS
DRIVING VALUE
FRO M OUR BROADER
POR TFOLIO
We have identified additional
opportunities to drive growth whilst
realising efficiencies in our broader
market portfolio, with our strategic review
defining a clear role for each market.
STRONG PLATFORM
FOR GROWTH IN
OUR AFRICA REGION
AN ATTRACTIVE
OUTLOOK IN
EASTERN EUROPE
BUILDING ON OUR
NORDICS TRACK
RECORD IN SNUS
In Africa we have leadership positions
in four of our top five markets, thanks
to strong brands and unparalleled
route-to-market capabilities.
We have identified opportunities to
drive growth through multiple levers
in the region, where affordability is
improving as incomes increase.
These levers include better application
of our global brands in more premium
price tiers, leveraging our local
jewel brands and closing our sales
coverage gaps.
Our portfolio of Eastern European
markets has the potential to be a
platform for future growth.
As part of our new strategy, we are
prioritising investment where we see
the best growth prospects for tobacco
or NGP.
In our five largest markets in Eastern
Europe – Poland, Ukraine, Romania,
the Czech Republic and Hungary – our
strategic analysis suggests there is an
attractive value growth opportunity
over the next five years.
Traditional oral nicotine products
have a long history of use in the
Nordics where our strong market
positions make us the clear number
two player in this category.
We’ve achieved steady year-on-year
growth since acquiring the Skruf
business in 2005, building a 20% share
in Sweden, the largest market, and a
40% share in Norway.
We remain well placed in the category
and are confident in our ability to build
on this track record in the years ahead.
32
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RALF
FACTORY OPERATOR
W W W . I M P E R I A L B R A N D S P L C . C O M
33
OVERVIEW STRATEGY FOR SUCCESS
BUILDING
A TARGETED
NG P BUSINESS
Our disciplined approach to building a
successful and sustainable NGP business is
informed by local consumer insights and
detailed market testing.
HEATED TOBACCO
PILOTS UNDERWAY
TESTING A NEW
APPROACH TO BLU
POSITIONS OF PROMISE
IN MODERN OND
Market trials of our Pulze heated
tobacco device and compatible iD heat
sticks have been commenced in the
Czech Republic and in Greece.
In the USA, the world’s largest vapour
market, we have been trialling a
refreshed consumer proposition for
our blu brand.
Products in the modern oral nicotine
delivery category (OND) do not contain
tobacco and are more widely available
than traditional OND products.
Heated tobacco is an established and
quickly growing NGP category in both
countries, territories in which Imperial
already has a strong route to market
for its traditional tobacco products.
The valuable consumer insights
gleaned from these pilot initiatives
will inform the scale and pace of
further market rollouts within Europe.
Supporting the geographically focused
pilot in the city of Charlotte, North
Carolina, is a “Get Unlit” promotional
campaign that resonated strongly
with target consumers in pre-
launch testing.
Enhanced blu product packaging
has been made available across
more than 220 key stores and a
full in-store and digital consumer
engagement programme was rolled
out from October.
The category is expected to grow
rapidly and, through our ZoneX brand,
we have established some promising
share positions in Europe that we can
continue to build over time.
As part of our disciplined and targeted
approach, we will stay focused on
our existing presence within Europe,
and have no plans to expand to other
markets at this stage.
34
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ERIKA
MEDICAL & SCIENTIFIC
AFFAIRS OFFICER
W W W . I M P E R I A L B R A N D S P L C . C O M
35
PERFORMANCE KEY PERFORMANCE INDICATORS
HOW WE MEASURE PERFORMANCE
These key performance indicators are used to assess the progress we are
making in delivering our strategy. We revised the KPIs this year to align
with our new strategy and our remuneration incentives.
AGGREGATE PRIORITY MARKET
SHARE VS PRIOR YEAR (%)
TOBACCO & NGP NET REVENUE
(£BN)
ADJUSTED EARNINGS PER SHARE
(PENCE)
21
20
19
R
-2bps
-17bps
-22bps
21
20
19
£7.6bn
£8.0bn*
£8.0bn
21
20
19
R
246.5p
254.4p*
272.3p**
Performance
Our strategic focus and rigorous
performance management has begun
to arrest the aggregate weighted market
volume share performances in our priority
markets, following several years of decline.
Gains in the USA, UK and Spain were offset
by declines in Australia and Germany.
Definition
Aggregate weighted market volume
share,based on our five priority markets
(USA, Germany, UK, Spain and Australia).
Market volume share is calculated based
on a 12-month moving annual total (MAT)
volume share position from September to
August. The market volume size used in the
weighting calculation is based on a constant
prior year end actual market size.
Performance
Tobacco & NGP net revenue declined
4.7 per cent at actual exchange rates.
Excluding the Premium Cigar Division,
Tobacco & NGP net revenue declined
1.9 per cent at actual exchange rates but
grew 1.4 per cent on a constant currency
basis. Tobacco net revenue increased
by 1.5 per cent excluding the Premium
Cigar Division disposal and NGP
revenue was down by 3.9 per cent
both at constant currency.
Definition
Tobacco & NGP net revenue comprises
tobacco and NGP revenue less duty and
similar items, excluding peripheral products.
Performance
Adjusted earnings per share was up
2.8 per cent on an organic constant
currency basis, excluding a currency
headwind of 3.1 per cent. Reported
earnings per share was up 89.5 per cent.
This is explained in the Financial Review.
Definition
Adjusted earnings per share represents
adjusted profit after tax attributable to the
equity holders of the Company divided by
the weighted average number of shares in
issue during the period, excluding shares
held to satisfy employee share plans and
shares purchased by the Company and held
as treasury shares.
* £7.7bn excluding Premium Cigar
Division disposal.
* 247.2p excluding Premium Cigar Division disposal.
** 2019 EPS restated to exclude other income.
TOBACCO & NGP ADJUSTED
OPERATING MARGIN (%)
DIVIDEND PER SHARE (PENCE)
RETURN ON INVESTED CAPITAL
(%)
21
20
19
43.5%
41.2%*
44.1%
21
20
19
139.1p
137.7p
21
20
19
206.6p
R
16.5%
15.2%
15.9%
Performance
Margins improved primarily due to lower
NGP write-downs and losses.
Definition
Tobacco & NGP operating margin is adjusted
operating profit divided by tobacco & NGP
net revenue expressed as a percentage.
* 42.1% excluding Premium Cigar
Division disposal.
Performance
The dividend grew 1.0 per cent reflecting
our progressive dividend policy. This follows
the Board’s decision in May 2020 to rebase
the dividend by one-third to accelerate
debt repayment.
Definition
Dividend per share represents the total
annual dividends, being the sum of the
paid interim dividend and the proposed
final dividend for the financial year.
Performance
Return on invested capital improved in
the year driven by a reduction in invested
capital as a result of the disposal of the
Premium Cigar Division.
Definition
Return on invested capital measures the
effectiveness of capital allocation and is
calculated by dividing adjusted operating
profit after tax by the annual average
of: intangible assets, property, plant
and equipment, net assets held for sale,
inventories, trade and other receivables
and trade payables and other current
liabilities. The annual average is defined
as the average of the opening and closing
balance sheet values.
R KPIs used as bonus and LTIP
performance criteria for Executive
Directors. See Remuneration Report
on page 124 for more information
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
NON-FINANCIAL KPIs1
ENERGY CONSUMPTION
(GWH)1,2
ABSOLUTE C02
EQUIVALENT EMISSIONS
(TONNES)1,2
WASTE (TONNES)1,2
LOST TIME ACCIDENT
FREQUENCY RATE
(PER 200,000 HOURS)1,3
21
20
19
729
21
95,987
143,990
239,977
773
788
20
99,577
147,039
246,616
19
100,897
158,108
258,589
21
20
19
41,714
40,253
41,366
21
20
19
0.27
0.32
0.4
Performance
Our continued focus on health,
safety and risk management
has resulted in a 16 per cent
decline in our lost time
accident rate compared
to last year.
Definition
A lost time accident is an
”on-the-job” accident that
results in an employee being
unable to return to work for
a minimum of one full day.
Performance
We have seen a 17 per cent
decrease in energy consumption
from our 2017 baseline year.
Our target is to reduce energy
consumption by 25 per cent
by 2030.
Our 2021 relative energy
consumption is 95,740
kWh/£million.
Definition
We measure relative indicators
against “£million” tobacco
and NGP net revenue. Energy
consumption covers the
energy used in our offices,
manufacturing sites and by
our sales fleet vehicles. The
energy we use originates
from a variety of sources
including fossil fuels and
renewable sources.
SCOPE 1
SCOPE 2
TOTAL ABSOLUTE CO2E EMISSIONS
Performance
We have seen a 14 per cent
decrease in total Scope 1 and
2 emissions from our 2017
baseline year. Our target is to
reduce CO2e emissions by 25
per cent by 2030. We have also
set a Scope 3 target to minimise
our carbon impact beyond our
direct operations.
Definition
We report on greenhouse
gas emissions resulting from
the operations that fall within
our consolidated financial
statements, using the
operational control reporting
approach. We report on the
seven main greenhouse gases
and report in terms of tonnes
of CO2 equivalent (CO2e).
Performance
We have seen a 15 per cent
decrease in waste from our
2017 baseline year. However,
we have seen a 4 per cent
increase in waste compared
to last year which is due to an
improvement in the accuracy
of measurements. One of our
sites in Central America has
a new waste management
provider who weighs the
waste on site which provides
more accurate data.
We seek to minimise the waste
and waste to landfill associated
with our production processes
through a combined approach
of reduce, reuse and recycle.
Definition
This includes waste from
manufacturing sites and main
offices, excluding Logista and
Sales and Marketing entities.
It does not include any material
which is re-used.
NET DEBT TO EBITDA (MULTIPLE)
CASH CONVERSION RATE (%)
TOTAL SHAREHOLDER RETURN
21
20
19
2.2x
R
2.7x
2.9x
21
20
19
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Performance
The ratio trajectory continues to improve,
supported by strong cash flows and the use
of divestment proceeds from the sale of the
Premium Cigar Division to pay down debt.
Definition
Adjusted closing net debt divided by
adjusted EBITDA.
Adjusted closing net debt is measured
at balance sheet foreign exchange rates,
with a full reconciliation shown in note 30.
Adjusted EBITDA is calculated as adjusted
operating profit plus amortisation,
depreciation and impairments.
83%
127%
95%
R
300
250
200
150
100
50
0
R
IMPERIAL BRANDS RETURN INDEX
FTSE 100 RETURN INDEX
2011
2012
2013
2014
2015
2016
2018
2017
2019
2020
2021
Performance
2021 cash conversion of 83 per cent reflected
unwind of prior year Logista working capital.
Definition
Cash conversion is calculated as cash
flow from operations pre-restructuring
and before interest and tax payments
less net capital expenditure relating to
property, plant and equipment, software
and intellectual property rights as a
percentage of adjusted operating profit.
Performance
Total shareholder returns rebounded in
the year, growing 25 per cent, as news of
the new strategy stabilised share price
performance and the dividend cut in 2019
was annualised.
Definition
Total shareholder return is the total
investment gain to shareholders resulting
from the movement in the share price
and assuming dividends are immediately
reinvested in shares.
1. 2020 and 2021 data has been independently assured by EY. Our Reporting Criteria Document contains detail on definition and scope of all non-financial KPIs.
See www.imperialbrandsplc.com/sustainability for more information.
2. Our 2021 environmental data follows the reporting period Q4 financial year 2020 to Q3 financial year 2021. This is to allow for data collection, validation and external
assurance. Our reporting scope and definitions are detailed in the Reporting Criteria Document published on our website.
3. Our health and safety data is for the full 2021 financial year. Our reporting scope and definitions are detailed in the Reporting Criteria Document published on
our website.
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37
37
PERFORMANCE STAKEHOLDER ENGAGEMENT
BUILDING TRUST WITH OUR
STAKEHOLDERS
Building and maintaining trust with our stakeholders underpins the success and
reputation of Imperial Brands. Through stakeholder collaboration we aim to develop
the Company, minimise our environmental impact, make a positive social contribution
and uphold high standards of governance.
Stakeholder group
COLLEAGUES
Our colleagues are
Imperial’s most important
asset. It is essential
we create a supportive,
safe and rewarding work
environment to enable
them to deliver our goals
and develop their careers
CONSUMERS
Millions of adults
worldwide choose to
enjoy our tobacco and
NGP products. Meeting
their expectations of
quality and understanding
their evolving requirements
are vital for the long-term
sustainable growth of
our business
CUSTOMERS
We work closely with
distributors, wholesalers
and retailers to ensure
our products are available
to adult consumers in a
diverse range of outlets
worldwide. They play
a crucial role in our
business model
How the Board considers
this stakeholder
• Steven Stanbrook is our
dedicated Workforce Director,
who sits on the Board
• In addition to the management-
led workforce engagement
events, the Board held four
listening events with groups of
our colleagues during the year.
These events included several
Non-Executive Board members,
and gave the Board the
opportunity to hear feedback
directly from our colleagues, as
part of our overall engagement
strategy. This engagement
allowed the Board to
incorporate colleagues’ views
into its decision-making
• Feedback from focus groups
held in different markets
with consumers from diverse
backgrounds was presented
to the Board as part of the
strategic review
• To better understand how
Imperial’s existing NGP
proposition was perceived by
consumers, the Board saw
focus group feedback by
specific NGP proposition
• The Board reviews feedback
from customer visits for each
priority market to monitor
the development of stronger
trade partnerships
• This feedback influenced
the Board’s decision to support
the investment to develop
our sales teams in the
priority markets of the US and
Germany and to enhance their
sales tools and technology
• Our CEO has met with
customers regularly since
joining in 2020
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How we engage across the Company
What matters to this stakeholder
How we monitor the effectiveness of our engagement
• We held listening exercises across all functions and
regions. The feedback gathered helped to develop
our purpose, vision and behaviours and these were
launched at our first ever global all-staff conference
• We hold CEO and leadership town hall meetings
in person, COVID permitting, otherwise virtually
allowing colleagues the opportunity to give
feedback directly to the ELT
• We launched a global diversity and inclusion
diagnostic in early FY21 and, as a result of the
feedback, set up four global employee resource
groups (ERGs) to further understand the issues
raised and to co-create solutions. The ERGs
represent gender, ethnicity, LGBTQ+ and disability
• We use various channels including the Intranet,
IB Weekly and other ad hoc announcements
to ensure regular internal communication
with colleagues
• Consumer round tables and focus groups are
held – virtually where COVID restricts – to
understand their specific requirements and
changing preferences
• Feedback from these focus groups is used in
our decision-making for investments in brand
refreshes and marketing
• The new position of Chief Consumer Officer was
created on the ELT to lead and promote consumer-
listening exercises across the Group
• Our market cluster leadership teams engage with
our customers to understand how to improve the
effectiveness of their sales force
• We have worked closely with our distributors
to understand how we can best manage our
relationships. This has led us to relaunch a
dedicated team to support distributor sales and
build best practice in distributor management
across the Company
• For our largest customers we use key account
management practices to better understand
their needs and to create strong commercial
partnerships to help both our businesses prosper
• Our colleagues want to see continued progress on equality
• Review results of our annual Workforce Engagement
and diversity and for colleagues to feel included. They
“Have Your Say” Survey
want to see that issues of authenticity and inclusion
around disability, ethnicity, LGBTQ+ and gender are taken
seriously throughout the Company
• The ESG Steering Committee, chaired by the CEO,
receives feedback from the ERGs. In addition, as each
ERG is sponsored by a member of the ELT and co-chaired
• They want to see that responsibility and accountability are
by members of the senior management, feedback from
underpinned by a fair assessment of contribution
colleagues on how the Company is progressing in taking
• Colleagues want to see senior management lead the new
behaviours by example to create an environment where
the sponsors
on board inclusivity concerns is given to the ELT via
innovative approaches are encouraged and we learn from
• Feedback obtained during the Board listening sessions
• Health, safety and wellbeing continues to be a priority in
our failures
the workplace
• Our focus groups informed us that adult consumers
• We hold regular consumer focus groups to assess
want a choice of brands and quality products at the
the evolution of the impact of our brand refreshes
right price points
and marketing campaigns on consumers
• Feedback has also shown us that consumer preferences
• We believe market share changes across products,
such as cigarette pack formats, flavours and filters
channels and geographies reflect the effectiveness
as well as the choice of potentially less harmful NGPs
of our engagement
• Our focus groups have shown us that listening to these
needs and remaining relevant underpin consumer loyalty
evolve over time
to brands
• A diverse portfolio of quality products that appeal
• We monitor our performance relative to other FMCG
to consumers
• Consistent communication on launch pipeline and
investment behind relevant brands in region
• Ease of ordering and strong supply chain to maintain
high levels of on-shelf availability
• Support to protect against illicit trade and underage sales
• Support and guidance through industry changes,
e.g. initiatives to help customers manage their business
through regulatory change such as display bans or
plain packaging
• Trade programmes that reward customer business growth
companies through the Advantage Survey and other
benchmarking surveys. Feedback from these surveys
is reviewed and taken into account in our engagement
plans and in setting priorities
• We hold management roundtable events with regional
customers to hear first-hand how Imperial is performing
relative to our peers
• A quarterly pulse report provides performance feedback
which is used to highlight areas for improvement
• We have KPIs to monitor progress against
operational initiatives
Stakeholder group
How we engage across the Company
What matters to this stakeholder
How we monitor the effectiveness of our engagement
This section of the report provides
insight into how stakeholder
engagement is taken into
consideration by the Board and the
Executive Leadership Team (ELT) in
their decision-making process. It goes
on to describe how we monitor the
effectiveness of our engagement.
The Board’s decision-making process
is brought to life in our Section 172
statement on pages 42 to 44 with
reference to specific examples from
the recent strategic review.
Further information on how the
Board has considered stakeholders
when making key decisions is also
given in the Governance Report
on pages 100 to 101.
• Our colleagues want to see continued progress on equality
and diversity and for colleagues to feel included. They
want to see that issues of authenticity and inclusion
around disability, ethnicity, LGBTQ+ and gender are taken
seriously throughout the Company
• They want to see that responsibility and accountability are
underpinned by a fair assessment of contribution
• Colleagues want to see senior management lead the new
behaviours by example to create an environment where
innovative approaches are encouraged and we learn from
our failures
• Health, safety and wellbeing continues to be a priority in
the workplace
• Review results of our annual Workforce Engagement
“Have Your Say” Survey
• The ESG Steering Committee, chaired by the CEO,
receives feedback from the ERGs. In addition, as each
ERG is sponsored by a member of the ELT and co-chaired
by members of the senior management, feedback from
colleagues on how the Company is progressing in taking
on board inclusivity concerns is given to the ELT via
the sponsors
• Feedback obtained during the Board listening sessions
• Our focus groups informed us that adult consumers
want a choice of brands and quality products at the
right price points
• Feedback has also shown us that consumer preferences
such as cigarette pack formats, flavours and filters
as well as the choice of potentially less harmful NGPs
evolve over time
• Our focus groups have shown us that listening to these
needs and remaining relevant underpin consumer loyalty
to brands
• We hold regular consumer focus groups to assess
the evolution of the impact of our brand refreshes
and marketing campaigns on consumers
• We believe market share changes across products,
channels and geographies reflect the effectiveness
of our engagement
• A diverse portfolio of quality products that appeal
to consumers
• Consistent communication on launch pipeline and
investment behind relevant brands in region
• Ease of ordering and strong supply chain to maintain
high levels of on-shelf availability
• Support to protect against illicit trade and underage sales
• Support and guidance through industry changes,
e.g. initiatives to help customers manage their business
through regulatory change such as display bans or
plain packaging
• Trade programmes that reward customer business growth
• We monitor our performance relative to other FMCG
companies through the Advantage Survey and other
benchmarking surveys. Feedback from these surveys
is reviewed and taken into account in our engagement
plans and in setting priorities
• We hold management roundtable events with regional
customers to hear first-hand how Imperial is performing
relative to our peers
• A quarterly pulse report provides performance feedback
which is used to highlight areas for improvement
• We have KPIs to monitor progress against
operational initiatives
W W W . I M P E R I A L B R A N D S P L C . C O M
39
39
COLLEAGUES
Our colleagues are
Imperial’s most important
asset. It is essential
we create a supportive,
safe and rewarding work
environment to enable
them to deliver our goals
and develop their careers
CONSUMERS
Millions of adults
worldwide choose to
enjoy our tobacco and
NGP products. Meeting
their expectations of
quality and understanding
their evolving requirements
are vital for the long-term
sustainable growth of
our business
CUSTOMERS
We work closely with
distributors, wholesalers
and retailers to ensure
our products are available
to adult consumers in a
diverse range of outlets
worldwide. They play
a crucial role in our
business model
How the Board considers
this stakeholder
• Steven Stanbrook is our
• We held listening exercises across all functions and
dedicated Workforce Director,
regions. The feedback gathered helped to develop
who sits on the Board
our purpose, vision and behaviours and these were
• In addition to the management-
launched at our first ever global all-staff conference
led workforce engagement
• We hold CEO and leadership town hall meetings
events, the Board held four
in person, COVID permitting, otherwise virtually
listening events with groups of
allowing colleagues the opportunity to give
our colleagues during the year.
feedback directly to the ELT
These events included several
Non-Executive Board members,
and gave the Board the
opportunity to hear feedback
directly from our colleagues, as
part of our overall engagement
strategy. This engagement
allowed the Board to
incorporate colleagues’ views
into its decision-making
• We launched a global diversity and inclusion
diagnostic in early FY21 and, as a result of the
feedback, set up four global employee resource
groups (ERGs) to further understand the issues
raised and to co-create solutions. The ERGs
represent gender, ethnicity, LGBTQ+ and disability
• We use various channels including the Intranet,
IB Weekly and other ad hoc announcements
to ensure regular internal communication
with colleagues
• Feedback from focus groups
• Consumer round tables and focus groups are
held in different markets
held – virtually where COVID restricts – to
with consumers from diverse
understand their specific requirements and
backgrounds was presented
changing preferences
to the Board as part of the
strategic review
• Feedback from these focus groups is used in
our decision-making for investments in brand
• To better understand how
refreshes and marketing
Imperial’s existing NGP
proposition was perceived by
consumers, the Board saw
focus group feedback by
specific NGP proposition
• The new position of Chief Consumer Officer was
created on the ELT to lead and promote consumer-
listening exercises across the Group
• The Board reviews feedback
• Our market cluster leadership teams engage with
from customer visits for each
our customers to understand how to improve the
priority market to monitor
effectiveness of their sales force
the development of stronger
trade partnerships
• We have worked closely with our distributors
to understand how we can best manage our
• This feedback influenced
relationships. This has led us to relaunch a
the Board’s decision to support
dedicated team to support distributor sales and
the investment to develop
build best practice in distributor management
our sales teams in the
across the Company
priority markets of the US and
Germany and to enhance their
sales tools and technology
• For our largest customers we use key account
management practices to better understand
their needs and to create strong commercial
• Our CEO has met with
partnerships to help both our businesses prosper
customers regularly since
joining in 2020
PERFORMANCE STAKEHOLDER ENGAGEMENT – CONTINUED
Stakeholder group
GOVERNMENTS &
REGULATORS
Government approach to
tobacco legislation varies
significantly across
geographies. Imperial
Brands supports
reasonable and rational
regulation of tobacco
and nicotine products
INVESTORS
Our investors provide
capital to the business and
monitor management’s
allocation of that capital
within the business
SUPPLIERS
We maintain strong
relationships with our
tobacco, non-tobacco
materials (NTM) and NGP
suppliers to help ensure
sustainable supply and
business continuity,
ensuring fair contract
and payment terms
How the Board considers
this stakeholder
• Our new corporate strategy
includes a commitment to
building a next generation
product (NGP) portfolio
of potentially reduced
harm products
• Board approval of Modern
Slavery Statement
• During the year our Chair,
Thérèse Esperdy, met with
US officials to discuss the
US regulatory environment
• Our CEO, CFO and Chair have
regular meetings with our
top shareholders to hear their
views directly and to update
and consult with them
• The Board was involved
in the development and
communication of the new
strategy that was outlined at
the Capital Markets Day in
January. Investor feedback
was collected from the
subsequent roadshow
• The Board receives a report
at every meeting on investor
engagement as well as a
feedback report following
all events
• Our AGM provides an
opportunity for the Board
to meet with investors
• Board approval of Modern
Slavery Statement
• Suppliers within our supply
chain are included as part of
the Board’s ESG considerations
• During the year we reviewed
the risk of COVID-19 to
suppliers, including in
respect of logistics
• Our Chair, Thérèse Esperdy,
visited our US manufacturing
operations to engage on
supply chain
40
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
How we engage across the Company
What matters to this stakeholder
How we monitor the effectiveness of our engagement
• We monitor changing regulations in our
markets and assess the impact on our
existing portfolio and innovations
• We assess regulation impact on pack
design and marketing support around
brand launches
• This monitoring allows the Board to take
relevant legislation and regulation into
account when making its decisions
• Our Annual and Interim results
presentations inform investors how the
business is performing. The subsequent
investor results roadshow enabled Stefan to
provide investors with his first impressions
of the business and update them on
his approach and progress on the
strategic review
• We maintain a programme of active
dialogue with our key financial
stakeholders, including institutional
shareholders, potential investors, holders
of our bonds and sell-side research
analysts. Senior management present
at various industry conferences
• Our Supplier Qualification Programme is
a screening process for all new NTM and
NGP suppliers, requiring a self-assessment
on business conduct, environmental
management, and labour practices such
as discrimination, child and forced labour,
freedom of association, remuneration,
working hours and health and safety
• All our leaf suppliers are expected to
participate in the Sustainable Tobacco
Programme (STP)
• Through our leaf partnership projects we
support communities in tobacco-growing
countries identified as having the most need
• Maintaining meaningful impact during the
COVID-19 pandemic. For example, in the
Philippines, we adapted an after school
programme to be home-based in cases
where children could not attend school
• Tobacco excise revenues and public health spending
• We monitor the approval of the listing of our products in
various markets
• We review proposed new regulation and the Company’s
ability to be involved in the development of reasonable
and rational regulation
on smoking-related health issues
• Assessment of reduced harm from next
generation products
• Compliance with local laws and regulations
• Confidence in our businesses operating legally and
responsibly in that Government or Regulator’s region
• Collaboration with law enforcement agencies countering
illicit trade and preventing youth access to tobacco and
nicotine products
• Confidence in the Board that it has appropriate oversight
• Our CEO, CFO and Chair continue to have active
of the management team
engagement with investors to gather feedback on the
• Trust in the management team to have a strategy and
changes we have made
operational plan to optimise value creation and ensure
• Topics discussed included the actions taken to improve
the long-term sustainability of returns
• The setting of expectations combined with the transparent
performance, progress with Executive and Non-Executive
recruitment, capital allocation considerations and ESG
reporting of performance against KPIs both financial and
• The Board also receives an IR report for every Board
non-financial, including ESG metrics
• Disciplined capital allocation
meeting, which sets out the latest shareholder views,
share register movements and recent market development
• Detailed feedback from investors is collected after each
investor event and roadshow, which is shared with and
discussed by the Board so it has good understanding of
investor views
• Our support with Leaf Partnership projects focusing on
• Vendor rating system for our key NTM suppliers and
having an impact on important issues in the countries
annual business reviews
from which we source our tobacco including Malawi,
Mozambique, Indonesia, India, the Philippines, Dominican
• The STP programme supports the sustainable supply
of quality tobacco leaf. It is a framework to improve
Republic, Honduras and Turkey
• Fair contract and payment terms
labour standards, raise standards of living and address
environmental challenges, by sharing knowledge of good
agricultural practices
• The annual STP assessment is part of our formal supplier
relationship management. It forms part of the suppliers’
ratings that we determine along with quality, cost
and value
• In 2021, we have worked with our suppliers to understand
what is happening within their supply chain and where
there is the opportunity for us to support them and have
the most positive impact
• Online engagement and performance reviews
GOVERNMENTS &
REGULATORS
Government approach to
tobacco legislation varies
significantly across
geographies. Imperial
Brands supports
reasonable and rational
regulation of tobacco
and nicotine products
INVESTORS
Our investors provide
capital to the business and
monitor management’s
allocation of that capital
within the business
How the Board considers
this stakeholder
includes a commitment to
building a next generation
product (NGP) portfolio
of potentially reduced
harm products
• Board approval of Modern
Slavery Statement
Thérèse Esperdy, met with
US officials to discuss the
US regulatory environment
markets and assess the impact on our
existing portfolio and innovations
• We assess regulation impact on pack
design and marketing support around
brand launches
• This monitoring allows the Board to take
relevant legislation and regulation into
• During the year our Chair,
account when making its decisions
• Our CEO, CFO and Chair have
• Our Annual and Interim results
regular meetings with our
presentations inform investors how the
top shareholders to hear their
business is performing. The subsequent
views directly and to update
investor results roadshow enabled Stefan to
and consult with them
provide investors with his first impressions
• The Board was involved
in the development and
communication of the new
of the business and update them on
his approach and progress on the
strategic review
strategy that was outlined at
• We maintain a programme of active
dialogue with our key financial
stakeholders, including institutional
shareholders, potential investors, holders
of our bonds and sell-side research
analysts. Senior management present
at various industry conferences
the Capital Markets Day in
January. Investor feedback
was collected from the
subsequent roadshow
• The Board receives a report
at every meeting on investor
engagement as well as a
feedback report following
all events
• Our AGM provides an
opportunity for the Board
to meet with investors
Slavery Statement
• Suppliers within our supply
chain are included as part of
the Board’s ESG considerations
• During the year we reviewed
the risk of COVID-19 to
suppliers, including in
respect of logistics
• Our Chair, Thérèse Esperdy,
visited our US manufacturing
operations to engage on
supply chain
SUPPLIERS
We maintain strong
relationships with our
tobacco, non-tobacco
materials (NTM) and NGP
suppliers to help ensure
sustainable supply and
business continuity,
ensuring fair contract
and payment terms
• Board approval of Modern
• Our Supplier Qualification Programme is
a screening process for all new NTM and
NGP suppliers, requiring a self-assessment
on business conduct, environmental
management, and labour practices such
as discrimination, child and forced labour,
freedom of association, remuneration,
working hours and health and safety
• All our leaf suppliers are expected to
participate in the Sustainable Tobacco
Programme (STP)
• Through our leaf partnership projects we
support communities in tobacco-growing
countries identified as having the most need
• Maintaining meaningful impact during the
COVID-19 pandemic. For example, in the
Philippines, we adapted an after school
programme to be home-based in cases
where children could not attend school
Stakeholder group
How we engage across the Company
What matters to this stakeholder
How we monitor the effectiveness of our engagement
• Our new corporate strategy
• We monitor changing regulations in our
• Tobacco excise revenues and public health spending
• We monitor the approval of the listing of our products in
on smoking-related health issues
• Assessment of reduced harm from next
generation products
• Compliance with local laws and regulations
• Confidence in our businesses operating legally and
responsibly in that Government or Regulator’s region
• Collaboration with law enforcement agencies countering
illicit trade and preventing youth access to tobacco and
nicotine products
various markets
• We review proposed new regulation and the Company’s
ability to be involved in the development of reasonable
and rational regulation
• Confidence in the Board that it has appropriate oversight
• Our CEO, CFO and Chair continue to have active
of the management team
• Trust in the management team to have a strategy and
operational plan to optimise value creation and ensure
the long-term sustainability of returns
• The setting of expectations combined with the transparent
reporting of performance against KPIs both financial and
non-financial, including ESG metrics
• Disciplined capital allocation
engagement with investors to gather feedback on the
changes we have made
• Topics discussed included the actions taken to improve
performance, progress with Executive and Non-Executive
recruitment, capital allocation considerations and ESG
• The Board also receives an IR report for every Board
meeting, which sets out the latest shareholder views,
share register movements and recent market development
• Detailed feedback from investors is collected after each
investor event and roadshow, which is shared with and
discussed by the Board so it has good understanding of
investor views
• Our support with Leaf Partnership projects focusing on
having an impact on important issues in the countries
from which we source our tobacco including Malawi,
Mozambique, Indonesia, India, the Philippines, Dominican
Republic, Honduras and Turkey
• Fair contract and payment terms
• Vendor rating system for our key NTM suppliers and
annual business reviews
• The STP programme supports the sustainable supply
of quality tobacco leaf. It is a framework to improve
labour standards, raise standards of living and address
environmental challenges, by sharing knowledge of good
agricultural practices
• The annual STP assessment is part of our formal supplier
relationship management. It forms part of the suppliers’
ratings that we determine along with quality, cost
and value
• In 2021, we have worked with our suppliers to understand
what is happening within their supply chain and where
there is the opportunity for us to support them and have
the most positive impact
• Online engagement and performance reviews
W W W . I M P E R I A L B R A N D S P L C . C O M
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41
PERFORMANCE SECTION 172
STATEMENT ON SECTION 172
OF THE COMPANIES ACT 2006
However, it is not always possible
to provide positive outcomes for
all of them. The Board, therefore,
sometimes has to make decisions
based on the competing priorities
of stakeholders, but acts in the best
long-term interests of the Company
and its stakeholders generally.
The principles underpinning s172
are not only considered at Board level;
the differing interests of stakeholders
are taken into consideration by
management when making wider
business decisions. In performing their
duties during the year, the Directors
have had regard to the matters set out
in Section 172(1) of the Companies Act
2006 and throughout this report you
will find information about how the
Board operates and makes decisions
in accordance with its requirements.
The principal decisions taken by the
Board in the year are detailed on pages
100 to 101 of the Governance Report.
Our approach below sets out how
the Board is supported in carefully
considering all the relevant factors
that lead to selecting the best course
of action to ensure the long-term
success of the Company.
The ongoing sustainable success of
Imperial Brands is dependent on its
relationship with a wide range of
stakeholders, including consumers,
colleagues, governments & regulators,
customers, suppliers, and investors.
The Board seeks to consider the
various interests of all relevant
stakeholders when reaching decisions.
Engagement with our stakeholders
was central to the formulation of our
renewed strategy and is critical in
delivering that strategy in order to
achieve long-term sustainable success.
Our engagement enables the Board
to understand what matters to our
stakeholders and consider their
interests when making decisions.
S. 172 FACTORS
a
b
c
d
e
f
The likely
consequences
of any decision
in the long term
The interests
of the
Company’s
employees
The need to
foster business
relationships
with suppliers,
customers
and others
The impact of
the Company’s
operations on
the community
and the
environment
The desirability
of the Company
maintaining a
reputation for
high standards
of business
conduct
The need
to act fairly
as between
members
of the Company
Examples of decisions taken by the Board and how stakeholder views and inputs, as well as s. 172
considerations, have been considered in its decision-making are shown on the following pages.
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CONSIDERING STAKEHOLDERS IN
KEY DECISIONS
FOCUS ON TOP FIVE COMBUSTIBLE MARKETS
S. 172 FACTORS
a
b
c
The Board recognises that decisions
could be enhanced through the
increased use of consumer insights
and data. These insights have guided
the Board in its decision to focus our
investment and resources behind our
five most important markets.
We are, therefore, investing to support
a consistent approach to consumer
insight, including better capabilities
in brand and trade marketing, portfolio
management, innovation and sales
excellence. This transformation
is being supported by the newly
appointed Chief Consumer Officer.
In developing the new strategy,
the Board has also used a fact-
based understanding of our business,
driving a deeper understanding of
consumer perspectives, competitor
insight, market evolution and
category potential.
CONSUMERS
COLLEAGUES
The Board enhanced our consumer-centric
approach by:
The Board considered the capabilities required to
deliver the renewed strategy:
• Appointing a Chief Consumer Officer to inspire
• Appointing new leaders where appropriate and
and support markets
enhancing the talent pipeline
• Placing consumer insights at the heart of
• Embedding a performance-based culture,
decision-making
• Delivering a combustible innovation pipeline
driven by consumer insights
• Helping markets to understand what consumers
want and to manage their product portfolio
supporting teamwork and collaboration throughout
our business to support our focus and performance
in these markets
• Communicating with colleagues to ensure
understanding of renewed strategy and that
the Board is made aware of their feedback
• Investing in and upgrading top talent, both
embracing diversity and driving inclusivity
CUSTOMERS
The Board spent time understanding our customers’
needs to enable them to support our consumers by:
• Helping markets to better develop
customer relationships
• Improving and increasing resource and
the capability for customer engagement
GOVERNMENTS & REGULATORS
The Board enhanced its understanding of
governments’ and regulators’:
• Excise models and their influence on retail
prices and manufacturers’ price increases
• Tobacco control measures and impact on our
operating environment
• Policies and their impacts on downtrading and
illicit trade
INVESTORS
The Board spent time understanding investors’
priorities, including:
• Delivering a stronger and more consistent
performance from our top five markets
• Maintaining a strong and efficient balance sheet
• Development of a detailed five-year plan with clear
strategic priorities with investments targeted to
deliver the greatest opportunities for value creation
• The renewed strategy is supported by a clear
capital allocation framework to optimise returns
for investors
W W W . I M P E R I A L B R A N D S P L C . C O M
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43
PERFORMANCE SECTION 172 – CONTINUED
CONSIDERING STAKEHOLDERS
IN KEY DECISIONS
MORE DISCIPLINED EXECUTION IN NGP
S. 172 FACTORS
a
b
c
d
Informed by consumer insights and
validation, we are resetting our NGP
strategy with a significantly different
approach. This approach aims to
develop a sustainable NGP business
that supports our ESG agenda by
making a meaningful contribution to
harm reduction by offering potentially
reduced risk products.
Clear, fact-based understanding
of our business will drive a deeper
understanding of consumer
perspectives, competitor insight, market
evolution and category potential.
We are focusing our investment
behind heated tobacco opportunities
in Europe, and in selective market
opportunities in vapour, particularly
in the USA. Our oral nicotine business
remains focused on its existing
markets within Europe. Our
investment will be disciplined
and based on detailed market testing.
CONSUMERS
CUSTOMERS
The Board enhanced its consumer-centric
approach by:
The Board spent time understanding our customers’
needs to enable them to support our consumers by:
• Improving insights into market developments,
• Providing customers with differentiated products
outlook and global product innovation
• Further integrating marketing and
manufacturing capability to better support
consumer-led innovation
• Understanding the importance of offering our
consumers a reduced risk proposition
• Providing consumers with differentiated products
developed using consumer insight
that they want to sell
• Ensuring that customers are appropriately supported
• Considering their time needs for preparation for
promotion to consumers
COLLEAGUES
The Board considered the distinct culture and
capabilities required within the NGP business to
deliver the renewed strategy, including:
• Building a consumer-focused, challenger mindset
• Investing in and upgrading top talent, both
embracing diversity and driving inclusion,
recognising that this may require a different
skillset to the Group’s traditional tobacco business
• Bringing NGP operations together to more
effectively leverage capability and resources
GOVERNMENTS & REGULATORS
The Board enhanced its understanding of
governments’ and regulators’ views on NGP including:
• The importance of offering our consumers a
reduced risk proposition
• Their excise policy versus combustible
tobacco products
• Legality of products within the NGP sector
INVESTORS
The Board spent time understanding investors’
priorities including:
• Delivering a stronger and more consistent
performance from our more targeted NGP business
• Maintaining an appropriately resourced
NGP business
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
NON-FINANCIAL INFORMATION
STATEMENT
The following table constitutes our Non-Financial Information Statement in compliance with Sections 414CA and 414CB of the
Companies Act 2006. The information listed is incorporated by cross-reference. Additional Non-Financial Information is also
available on our website www.imperialbrands.com.
Reporting
requirement
Environmental
matters
Policies and standards
which govern our approach1
Information necessary to understand our business
and its impact, policy due diligence and outcomes
• Occupational health, safety
and environmental policy
and framework
Environmental targets
International management systems
• Sustainable Tobacco Programme
Climate and energy
Reducing waste
Sustainable tobacco supply
Diverse and engaged workforce
Workforce Engagement Director
Workplace health and safety
International management systems
Lost time accident (LTA) rate
Diverse and engaged workforce
Workforce Engagement Director
Workplace health and safety
International management systems
Responsible operations and people
Youth access prevention
Charitable and political donations
How we manage risk
Governance, risk management and
internal control
Employees
Respect for
human rights
Social matters
Anti-corruption
and anti-bribery
Description of principal
risks and impact of
business activity
Description of the
business model
Non-financial key
performance indicators
• Code of Conduct
• Group-wide employment policy
• Fairness at work policy
• Occupational health, safety
and environmental policy
and framework
• Human rights policy
• Code of Conduct
• Supplier Code
• Supplier qualification programme
• Modern slavery statement
• Speaking Up policy
International marketing standards
•
• Fontem marketing standards
• Policy on taxation
• Community contributions and
volunteering policy
Information security policy
•
• Code of Conduct
• Fraud risk management policy
• Speaking Up policy
• Finance manual
• Group control matrix
• Supplier Code of Conduct
• Principal risks and uncertainties
• Governance, risk management
and internal control
• Our business model
• Key performance indicators
• Sustainability performance
indicators
1. Not all of our Group policies and standards are publicly available.
37, 52, 53, 54
54, 57
37, 52, 54 to
56, 83
37, 53, 56
53, 57, 58, 60
47, 48, 49
123
37, 57, 58
54, 57
37, 57
47, 48, 49
123
37, 57, 58
54, 57
51, 52, 53
28, 62
142, 143
80
80 to 91
80 to 91
117 to 119
24, 25
36, 37
37, 52 to 57, 61
W W W . I M P E R I A L B R A N D S P L C . C O M
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45
PERFORMANCE OUR PEOPLE AND CULTURE
SETTING OUR PE OPLE UP
FOR SUCCESS
The development of our people and
culture is critical to the future success
of Imperial. When we launched our
new strategy in January 2021,
we described three critical
enablers that would be necessary
for our transformation: putting
the consumer at the centre of our
business; simplified and efficient
operations; and a performance-based
culture and capabilities. We also
explained how these enablers would
be underpinned by new purpose and
vision statements and behaviours,
which would be co-created with our
27,700 colleagues.
XAMSA
FACTORY OPERATOR
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STRATEGIC PILLARS
FOCUSING
ON OUR
PRIORITY
MARKETS
DRIVING
VALUE FROM
OUR BROADER
PORTFOLIO
BUILDING
A TARGETED
NGP BUSINESS
CRITICAL ENABLERS
CONSUMER AT THE
CENTRE OF THE BUSINESS
PERFORMANCE-BASED
CULTURE AND
CAPABILITIES
SIMPLIFIED AND EFFICIENT
OPERATIONS
OUR BEHAVIOURS
START WITH
THE CONSUMER
COLLABORATE
WITH
PURPOSE
TAKE
ACCOUNTABILITY
WITH CONFIDENCE
BE AUTHENTIC
AND INCLUSIVE
TO ALL
BUILD OUR
FUTURE
Everything we
do starts with the
consumer – they
are the reason we
are here.
We work
collaboratively with
others to deliver
better outcomes
for all of us.
We deliver what
we promise, and
we hold each other
to account.
Everyone is
welcome. The more
diverse we are, the
stronger we are.
We stay one
step ahead,
and challenge
ourselves to be
better every day.
W W W . I M P E R I A L B R A N D S P L C . C O M
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47
PERFORMANCE OUR PEOPLE AND CULTURE – CONTINUED
DEVELOPING AND EMBEDDING
NEW BEHAVIOURS
Since January, we have been laying
the foundations of what – taken
together – constitutes a new culture
for Imperial. During 2021, we engaged
in a series of listening exercises across
all functions and regions in order to
develop our purpose and vision (see
pages 6 to 9), and in October these
were launched at Imperial’s first ever
global all-staff conference, entitled
“Connections”. At this highly
interactive event, we also launched
the five behaviours which describe
how we need to think and act in
order to deliver successfully on our
ambitions. In the coming year, we will
develop culture metrics to ensure that
we carefully measure our progress on
this journey.
CREATING NEW CAPABILITIES
The year has seen unprecedented
levels of organisational change, all
with the objective of better aligning
the business with our strategic
objectives. In order to focus
management resources on
our priority markets, we have
reorganised Imperial into three
regions: the Americas, Europe, and
Africa, Asia & Australasia (AAA). The
number of market clusters has been
reduced from 13 to 10, simplifying
design and creating efficiencies.
To help fulfil our ambition to put the
consumer at the centre of everything
we do, we have set up the new
Group Consumer Office, led by Andy
Dasgupta. We have brought on board
new talent in crucial consumer-facing
areas, including insights, portfolio
management and innovation. Alison
Clarke has continued to build the
People & Culture function to support
our transformation and cultural
change agenda. During the year we
completed our refresh of the Executive
Leadership Team (ELT), with the
CREATING A DIVERSE ORGANISATION
OUR BUSINESS
ELT
40%
60%
33.3%
66.6%
Male
Female
60%
40%
Male
Female
66.6%
33.3%
appointments of Lukas Paravicini as
Chief Financial Officer and Paola Pocci
as President of the AAA region. The
new ELT brings experience from
a wide range of global consumer
businesses, including Unilever,
Nestlé and Procter & Gamble. The ELT
is supported by a 75-strong Imperial
Leadership Team, whose members
boast deep knowledge of the industry
and expertise across the value chain.
FOCUSING ON DIVERSITY
AND INCLUSION
A key aspect of our cultural
transformation is our focus on
creating a more diverse and
inclusive organisation.
We launched a global diagnostic
survey in November 2020 to better
understand our people’s feelings about
how inclusive they felt their working
environment to be. There was a high
completion rate with insightful
feedback, and, in response, we created
four global Employee Resource Groups
(ERGs) to further understand the
opportunities to create a more
inclusive organisation. Each of these
is sponsored by an Executive leader,
supported by members of the senior
leadership team, and focuses on
areas colleagues considered most
important: ethnicity, disability,
gender and LGBTQ+.
To build a wider awareness of how
to build a more diverse and inclusive
organisation, we provided bespoke
e-learning courses in 11 languages
to help our global leaders understand
the topics of “unconscious bias” and
“microaggressions” and the impact
these have on our people, especially
those in non-dominant groups. We
have also actively supported global
events such as International Women’s
Day, Pride and Black History Month.
40 per cent of our hires made in
FY21 have been female, resulting in
a positive shift in the ELT, which is
now 33 per cent female.
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ENHANCING OUR SKILLS
& CAPABILITIES
Embedding our new behaviours
requires patient training, mentoring
and dialogue at all levels of the
organisation. Already, ELT members
have each received more than six
hours of one-to-one coaching to help
them understand the challenges our
people face and the critical role they
play in building a more inclusive,
consumer-represented organisation.
The ELT and their direct reports have
committed to completing a further 22
hours of focused training to help them
support our shift in culture and better
understand how our purpose, vision
and behaviours contribute to positive
change. Workshops and other support
designed to embed our behaviours
will be rolled out to the full workforce
during 2022.
SUPPORTING AND ENGAGING
OUR PEOPLE THROUGH COVID
The COVID-19 pandemic has continued
to have a serious impact on our people
in all locations. The pace at which
social-distancing restrictions are being
lifted varies considerably between
markets. Globally, we have maintained
our high tempo of engagement with
colleagues in order to identify any
new or emerging concerns. Our global
all-staff Connections conference
resulted in more than 1,000 separate
pieces of written feedback. Other
activities have included regular
virtual town halls and we will be
launching a new global engagement
survey in November 2021. As well as
our activities looking after the physical
health and safety of our colleagues
(See ESG section pages 50 to 63),
we have maintained our focus on
supporting the mental wellbeing of
our people, with a range of market-
led initiatives.
Where appropriate, we have also
been directly supporting vaccination
efforts. At our factory in the Dominican
Republic we facilitated the vaccination
of more than 3,000 people in a four-day,
on-site programme organised with
the local health ministry. In Laos an
on-site clinic vaccinated 111 employees
and 43 family members.
GROWING RECOGNITION
Our efforts to create a high-performing
and inclusive environment for our
people have resulted in a growing
number of awards.
This year we were recognised as a
‘Top Employer Europe’ for a fourth
successive year. Country-level
certifications have been achieved by a
record 11 of our entities across Europe,
with our Russian business earning Top
Employer status this year for the first
time. Outside Europe, our businesses in
Morocco and the United Arab Emirates
(UAE) have also been recognised as a
Top Employer for the first time, taking
the total number of certified Imperial
Brands entities this year to 13. Top
Employers Institute is the global
authority on recognising excellence
in the conditions that businesses
create for their people. Companies
participating in its certification
programme have the potential to
gain Top Employer status following
a comprehensive analysis of people
development practices.
Separately, Imperial Tobacco Taiwan
Limited (ITTL) has been named by HR
Asia as one of its ‘Best Companies to
Work for in Asia 2021’.
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49
PERFORMANCE ESG REVIEW
MANAG ING OUR
ESG RESPO NS IBILITIE S
Managing our Environmental, Social
and Governance responsibilities remains
a core part of the way we operate at
Imperial Brands. Following the refresh
of the company strategy during 2021, a
process of stakeholder engagement will
be undertaken to confirm our priority
ESG issues, to ensure we align to our
new business strategy and to developing
external expectations.
Building and maintaining trust
with our stakeholders underpins the
success and reputation of our business.
Stakeholder engagement introduces wider
perspectives and enables better decision-
making. It is an ongoing process which
we primarily use to help us understand
key priorities and how we can do
things better.
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OUR SUSTAINABILITY STRATEGY
Our sustainability strategy is central to the long-term success of our business
and underpins our drive to create shared value for our stakeholders. The strategy
focuses on three pillars identified as having the greatest significance to us and our
stakeholders: a sustainable tobacco supply, Next Generation Products (NGP) and
responsible people and operations. The three pillars of our strategy, designed to
enable growth and create value, define the approach we take to addressing
our environmental, social and governance (ESG) responsibilities.
Y
L
B
I
S
N
O
P
G R ES
BEH A V I N
Next generation
products
Developing alternative
products that are
potentially less
harmful to health.
Sustainable tobacco
supply
Maintaining sustainable
agricultural practices
to ensure a consistent,
quality supply of tobacco.
Behaving responsibly
Behaving responsibly at
all times and providing
a safe and rewarding
work environment
for employees.
OVERSEEN BY THE BOARD AND ESG COMMITTEE
The Board has agreed that the ESG Committee will be chaired by the CEO
and will be an executive committee. We have refreshed the ESG Committee
membership and will relaunch in financial year 2022.
Read more in our Governance Report on page 104
W W W . I M P E R I A L B R A N D S P L C . C O M
5151
PERFORMANCE ESG REVIEW – CONTINUED
OUR PRIORITY ESG ISSUES
Our priority ESG issues
Our commitment
How we are achieving this
Our progress in 2021
1
2
CONSUMER HEALTH
We understand society’s concerns
about the health risks of smoking and
recognise our role in helping to reduce
the harm caused by combustible
tobacco products.
CLIMATE AND ENERGY
Given our global reach and influence,
we want to play a role in protecting
the natural environment and
actively work to minimise our
environmental impacts.
We are committed to strengthening our Next
Generation Products (NGP) performance and
in doing so, to making a more meaningful
contribution to harm reduction by offering
adult smokers a range of potentially less
harmful products.
We have reset our NGP strategy in FY21
where we are approaching our NGP
expansion through a consumer insights
led challenger mindset.
Through prioritising geographies where we
would focus, we are building a strong and
high quality NGP pipeline leveraging our
scientific knowhow.
Our commercialisation approach is through
pilot launches to test and optimise our
offerings for consumers – before scaling
up our product availability more widely.
We are committed to reducing our climate
and energy impacts across our value chain,
from crop production to manufacturing
and distribution.
Managing climate-related risks and
opportunities across our business and
value chain.
Reducing our carbon footprint across our
value chain. We have science-based targets
for Scope 1, 2 and 3 approved by the Science
Based Targets initiative.
Better understanding the carbon footprint of
our NGP.
We have launched our Heated Tobacco
offering (Pulze) in Greece and the Czech
Republic. Our vaping product myblu now
benefits from an enhanced route to market
and communication plan in the USA.
We recognise that energy efficiency is the
first step towards carbon reduction and
we have reduced our absolute energy
consumption by 17 per cent from the
2017 base line year.
We have a thriving Oral Nicotine business in
the Nordics with brands like Skruf, and have
launched a cutting edge bamboo fibre based
product under our Zone-X brand.
We have seen a 14 per cent decrease in
total Scope 1 and 2 emissions from our 2017
baseline year and our target is to reduce
them by 25 per cent by 2030.
Our scientific substantiation to date
continues to indicate that myblu, Skruf,
ZoneX and Pulze are all likely to be
substantially less harmful than continued
combustible cigarette smoking and provide
potentially reduced risk alternatives to
combustible products for adult consumers.
We refrain from testing our products on
animals, and use cutting edge in-vitro
technologies to test our products.
See more on our science website.
We have committed to reach net-zero global
emissions by 2040 in line with the aim to
limit global warming to 1.5oC.
We were awarded an A rating by CDP for
our 2020 Climate Change submission for a
second consecutive year.
UN SDGs
We are committed to
tobacco harm reduction.
We are taking action to
combat climate change
and its impacts.
Find out more at www.imperialbrandsplc.com/sustainability/performance
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3
4
FARMER LIVELIHOODS
AND WELFARE
Farmer livelihoods and welfare are of
paramount importance to sustainable
tobacco production and we continue to
engage with our suppliers to help to support
and develop farming communities.
HUMAN RIGHTS –
MODERN SLAVERY
As an international business we
recognise the importance, influence
and role we have in promoting respect
for human rights across our business
and supply chains.
5
WASTE
As part of our role in protecting the
natural environment, we seek to
minimise waste and waste sent
to landfill.
We are committed to helping to support
farmers to diversify income streams in order
to enhance farming community livelihoods
and welfare.
We are committed to raising awareness and
improving processes for identifying modern
slavery in our business and supply chains.
We are committed to minimising the waste
associated with our products, packaging and
production processes.
Strengthening the industry-wide
Sustainable Tobacco Programme (STP) to
measure positive impact.
Maintaining a dialogue with our tobacco leaf
suppliers and supporting them through our
Leaf Partnerships Programme to allocate
funds to continually improve access to
basic needs and diversification of income.
Industry-wide collaboration focused through
the STP.
Engaged with subject matter experts and
local implementing partners to enable us
and our suppliers to better understand the
risks in certain countries. This informs the
projects we support on the ground, ensuring
they have maximum impact for the tobacco
farming communities within which our
suppliers operate.
Established a baseline including two
externally reported farmer livelihoods KPIs.
These highlight how many farmers have
access to initiatives that aim to increase
farm productivity (97%)1 and how many
farmers are diversifying their income by
growing complementary crops (88%)1.
A third KPI highlights the impact of projects
we funded with our suppliers in Africa,
Asia, Europe and South America aimed at
improving livelihoods. In 2021 there were
130,000 direct farmer beneficiaries.
Better understanding modern slavery risk
across our business and supply chains.
Supporting manufacturing sites to
achieve the 2030 targets set for waste.
Further information is set out in our Modern
Slavery Statement.
Innovating waste solutions for
product disposal.
Continuing to educate the business on the
risk of modern slavery and tailoring training
to suit different functions.
Monitoring and responding to EU
legislative changes, including the Single-
Use Plastics Directive.
Introducing a robust approach to protecting
human rights, which includes how we address
modern slavery and the issue of child labour
in tobacco farming using external expertise.
Strengthening our governance and human
rights due diligence processes.
Undertook Supply Chain Impact
Assessments with tobacco leaf suppliers to
better understand important human rights
issues in our global supply chains.
We trialled take back recycling schemes
in Germany and France for myblu pods,
diverting consumer waste away
from landfill.
We are improving packaging recyclability
for our combustible brands by replacing
the aluminium inner liner with paper.
Our Modern Slavery e-learning module is
now available to employees in 15 different
languages. Introduced more tailored and
in-depth training to our managers on
modern slavery.
Further developed our approach to
undertaking due diligence in relation to
human rights issues.
Strengthened the Sustainable Tobacco
Programme (STP) to better respond to and
measure the work our suppliers do as part of
a continual process to manage human rights.
Established a cross-functional Human Rights
Compliance Working Group.
Developed a modern slavery audit module
in collaboration with Slave Free Alliance and
used to conduct a test pilot audit of our UK
facilities management provider.
We are committed
to decent work for
all and sustainable
economic growth.
Ensure access
to water and
sanitation for all.
We are committed
to decent work for
all and sustainable
economic growth.
Responsible
consumption
and production.
1. Data is from strategic suppliers in highest priority countries as outlined by sustainability index compiled using Maplecroft risk indexes.
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PERFORMANCE ESG REVIEW – CONTINUED
2021 PERFORMANCE HIGHLIGHTS
Our key performance indicators reflect our performance against our priority ESG areas,
which are aligned to our new commercial strategy. Below we have presented highlights
from our 2021 ESG performance. We measure our environmental performance by
comparing results with our 2017 baseline year. Our reporting scope and definitions
are detailed in the Reporting Criteria Document published on our website.
E S G
Environmental
CLIMATE AND ENERGY PERFORMANCE
Performance indicator
Operations with ISO
14001 certification
Absolute energy
consumption1
Relative energy
consumption1
Absolute Scope 1
CO2e emissions1
Absolute Scope 2
CO2e location-based
emissions1
Total absolute
Scope 1 and 2 CO2e
emissions1
Relative Scope
1 and 2 CO2e
emissions1
Key suppliers by
spend with science-
based targets
Logista absolute
Scope 1 and 2 CO2e
emissions
Logista absolute
Scope 3 CO2e
emissions
2017
92
2018
91
2019
86
2020
86
%
2021 Commentary
78 Due to the ongoing COVID-19 pandemic, there have
been delays in some sites (particularly those in Africa)
in obtaining re-certification. We will aim to undertake
a review in FY22.
GWh
875
842
788
773
729A We have seen a 17 per cent decrease in energy
KWh/£m
net revenue
112,801
108,926
98,500
96,625
95,740A
consumption from our 2017 baseline year. Our target is
to reduce energy consumption by 25 per cent by 2030.
In compliance with the UK streamlined energy
and carbon reporting (SECR) requirements, our total
UK energy consumption was 13.46 GWh which is
1.84 per cent of the global total (2020: 14.33 GWh and
1.85 per cent).
Tonnes
118,000
110,896
108,241
99,577
95,987A Our Scope 1 emissions arise from stationary fuel
Tonnes
161,573
161,020
158,108
combustion at our sites, refrigerant gases, and mobile
fuel combustion in our fleet of company sales vehicles.
We have seen a 4 per cent decrease in Scope 1 emissions
since last year and a 19 per cent reduction from our 2017
baseline year.
147,039 143,990A Our Scope 2 emissions comprise the indirect emissions
resulting from the use of purchased electricity, heat and
steam at our sites. We have seen a 2 per cent decrease
in Scope 2 emissions since last year and an 11 per cent
reduction from our 2017 baseline year.
Tonnes
279,573
271,916
258,589
246,616 239,977A We have seen a 14 per cent decrease in total Scope 1
Tonnes/£m
net revenue
39.0
35.2
32.4
30.8
31.5A
and 2 emissions from our 2017 baseline year. Our target
is to reduce these emissions by 25 per cent by 2030.
We have also set a Scope 3 target to minimise our
carbon impact beyond our direct operations.
In compliance with the UK SECR requirements, our
total UK Scope 1 and 2 emissions were 2975 tonnes
CO2e emissions, which is 1.24 per cent of the global
total (2020: 3,289 CO2e emissions and 1.33 per cent).
%
–
19
22
38
41 We aim to ensure that 50 per cent of our suppliers by
spend will have science-based targets by 2023.
Tonnes
38,554
38,924
38,906
38,407
– Logista is managed remotely due to commercial
Tonnes
193,611
189,980
201,566
205,240
–
sensitivities and has provided independently assured
data for absolute Scope 1, 2 and 3 emissions. Data for 2021
is still undergoing independent assurance. Logista’s 2020
relative Scope 1 and 2 emissions comprise 38 tonnes
(2019: 38) of CO2e per £million of 2020 distribution fees
(our non-GAAP revenue measure for Logista). Further
information on the scope of Logista’s GHG reporting is
available at www.grupologista.com
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STEADY PROGRESS IN REDUCING
THE KEY ENVIRONMENTAL KPIs
REDUCING OUR EMISSIONS
SCOPE 1
SCOPE 2
OVERALL SCOPE 1
AND SCOPE 2
4% decrease
since 2020
19% decrease
since 2017
2% decrease
since 2020
11% decrease
since 2017
3% decrease
since 2020
14% decrease
since 2017
REDUCING OUR
WATER
CONSUMPTION
REDUCING OUR
ENERGY
CONSUMPTION
7% decrease
since 2020
24% decrease
since 2017
FOR MANUFACTURING SITES,
OFFICES AND FLEET FUEL
6% decrease
since 2020
17% decrease
since 2017
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5555
PERFORMANCE ESG REVIEW – CONTINUED
WASTE AND WATER PERFORMANCE
Performance
indicator
2018
2017
2019
2020
2021 Commentary
Total waste1
Tonnes
49,141
43,388
41,366
40,253
41,714A We have seen a 15 per cent decrease in waste from our
2017 baseline year. However, we have seen an increase of
4 per cent in waste compared to last year which is due to an
improvement in the accuracy of waste measurements from
one of our sites in Central America.
Our target is to reduce waste by 20 per cent by 2030.
Waste to landfill1 Tonnes
6,746
6,769
7,109
6,431
9,411A We are very disappointed to report a 40 per cent increase in
waste sent to landfill from our 2017 baseline year. This increase
is mainly driven by two factors. Firstly, one of our sites in
Central America recorded a doubling of waste to landfill
in comparison to the previous year due to more accurate
measurements by the waste management provider. Secondly,
one of our sites was responsible for safely destroying menthol
cigarettes due to the menthol cigarette ban in the UK, which
subsequently led to an increase in total waste to landfill.
Our target is to reduce waste sent to landfill by 50 per cent
by 2030 which remains a key focus area for us.
Landfill
avoidance rate
Absolute water
consumption1
%
95 This year we have calculated the landfill avoidance rate. This
KPI shows the percentage of our waste diverted from landfill.
m3 1,468,626 1,327,102 1,316,904 1,198,523 1,109,178A We are pleased to report a 24 per cent reduction in water use
from our 2017 baseline year, which exceeds our target to reduce
water consumption by 15 per cent by 2030. We are currently
reviewing our ESG strategy and will set a new water target.
We have also been participating in the
CDP water disclosure for several years
now and are pleased to have scored
an A- for our 2020 submission which
indicates that we are implementing
current best practices in water
management across our operations
and supply chain. We await the results
from CDP for our 2021 submissions.
IMPERIAL NAMED AS A
CLIMATE LEADER BY THE
FINANCIAL TIMES
Imperial has been recognised as a 2021
Climate Leader by the Financial Times
in its first ever ranking of actions
taken by European businesses.
The FT’s listing identifies the 300
companies across the continent that
achieved the highest reduction in core
greenhouse gas emissions between
2014 and 2019. We’re committed to
further reducing our carbon footprint.
FUEL-EFFICIENT TOBACCO
CURING BARNS
We have been working with our leaf
supplier, Alliance One International
(AOI), on a project in Tanzania to
make tobacco curing barns more
fuel-efficient. We source tobacco
from Tanzania and between crop year
2015 and 2017 we invested in a project
which resulted in the conversion of
2021 barns, with an annual saving
of 4244m3 of wood, equating to at
least 355.59 tCO2e saved annually.
In 2021, based on Imperial’s financial
contribution to this project, 2140.41
tCO2e have been reduced. AOI and
Imperial continue to assess barn
efficiency projects.
PREPARING FOR TCFD
In 2021 we reviewed our progress
towards the requirements of the Task
Force on Climate-related Financial
Disclosures (TCFD) and we are on track
to deliver a robust disclosure in 2022.
By then we aim to have updated our
climate scenario analysis for the most
material potential climate impacts
in our value chain. We will also have
incorporated the findings from the
analysis into our risk assessment
process and developed metrics to
track and report on these material
climate impacts.
See page 63 for further details.
SCIENCE BASED TARGETS
INITIATIVE
Our carbon targets for Scope 1, 2 and 3
(supply chain) have been approved and
validated by the Science Based Targets
initiative (SBTi).
We have joined the Business Ambition
for 1.5°C campaign of the SBTi. This
means we are committed to reaching
science-based net-zero emissions
by 2040.
CDP
CDP, the international non-profit
organisation that helps companies
manage their environmental impact,
has awarded us an A rating for
climate change submission in 2020,
for a second consecutive year. We
are also pleased to be recognised as a
Supplier Engagement Leader by CDP
in 2019 and 2020. This recognises the
leadership and actions we are taking
to cut emissions, mitigate climate risks,
contribute to a low-carbon economy
and engage with suppliers to manage
climate risk and reduce Scope 3 carbon
emissions in our supply chain.
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E S G
Social
HEALTH AND SAFETY PERFORMANCE
Performance indicator
Employee fatalities2
Contractor fatalities2
Members of the public
fatalities involving
Imperial Brands
vehicles2
Lost time accidents
(LTA)2,3
LTA rate2,3
Total number of
accidents2,3
Accident rate2,3
2017
2018
2019
2020
2021
Commentary
number
number
number
0
0
1
0
0
4
2
0
1
3
0
0
1 We deeply regret to report a work-related fatality in 2021
following a road accident. A thorough investigation has
been conducted and support provided to the family
and work colleagues of the deceased.
0 Health and safety remains a priority for all our stakeholders.
0 Road safety remains a priority across all of our operations.
number
92
118
101
80
65 There has been an 19 per cent decrease in the number of
0.36
0.46
0.40
0.32
lost time
accidents per
200,000 hours
worked
lost time accidents compared to last year.
0.27A There has been a 16 per cent decline in our lost time
accident rate compared to last year. During FY21 we
increased the use of leading indicators to better manage
risk throughout our operations.
Number
937
931
850
720
573 We have seen a 20 per cent decrease in total accidents
total accidents
per 200,000 hours
worked
3.66
3.61
3.39
2.19
compared to last year.
2.36 We have seen a 8 per cent increase in our accident rate
compared to last year. However, we are pleased to see a
continued reduction in our total number of accidents and
our LTA rate.
Vehicle accident
frequency rate3
accidents per
million kilometres
–
–
5.03
4.19
3.9 There has been a 7 per cent decrease in our vehicle
OHSAS 18001 / ISO
45001 certification
%
87
87
79
79
DIVERSITY PERFORMANCE
Performance indicator
Female employees
2017
2018
2019
2020
2021
Commentary
%
40
41
42
43
Female Executive Leadership
Team (ELT) members
Female Board members
%
%
11
39
13
33
11
40
14
25
accident rate compared to last year. Road safety remains
a key priority for us. We adopt global standards for road
safety and use our Drive Safe campaign to promote
awareness and influence behaviour.
74 Due to the ongoing COVID-19 pandemic, there has been
delays in some sites (particularly those in Africa) in
obtaining re-certification. We aim to undertake a review
in FY22.
40 Female employee numbers have decreased by
7 per cent compared to last year. This is largely
driven by the divestment of parts of our Premium
Cigar Division which employed a larger number of
females compared to males.
33A
We are committed to increasing female representation
in senior management roles to 30 per cent by 2023.
22A
The number of female members of the Board on 30th
September 2021 (end of FY21) was 22 per cent. We
are pleased to report that from the 15th November
2021, this has now increased to 36 per cent following
new appointments.
Employee turnover rate
%
15
15.1
13.2
13.5
10.2 Employee turnover rate has decreased in comparison
to last year. This is the lowest turnover rate in recent years.
FARMER LIVELIHOODS AND WELFARE PERFORMANCE
Performance indicator
Percentage of farmers growing complementary crops1
Percentage of farmers with access to initiatives to improve agricultural productivity2
Farming community members benefitting from Imperial leaf partnership projects
1. As reported by our Strategic Suppliers for highest priority sources.
2. As reported by Strategic Suppliers in high priority countries.
2021
88
97
130,000
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57
PERFORMANCE ESG REVIEW – CONTINUED
HEALTH AND SAFETY
The health, safety and welfare
of our people continues to be of
utmost importance to us. Across
the business we adopt a OHSE
Framework based on the principles
of ‘plan, do, check, act’. Within our
manufacturing sites we go further;
as of 30 September 2021, 74 per cent
of our factories were independently
certified to the international standards
OHSAS 18001 or ISO45001. Lost time
accident frequency rate fell again
during FY21 continuing the long-term
downward trend. Details can be found
on page 37 of the Key Performance
Indicators section. As well as lagging
indicators such as accident rate, we
continue to focus on leading indicators
to ensure a consistent application of
our OHSE Framework and associated
operating standards.
It is with deep regret that we report
a work-related fatality following a
motorcycle accident in Cambodia.
A thorough investigation has been
conducted and support provided to
the family and work colleagues of the
74%
OF OUR MANUFACTURING SITES
WERE INDEPENDENTLY CERTIFIED
TO THE INTERNATIONAL
OCCUPATIONAL HEALTH AND
SAFETY STANDARDS OHSAS 18001 /
ISO 45001
1. As reported by our strategic suppliers for highest priority sources.
2. As reported by strategic suppliers in high priority countries.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
deceased. Road safety remains a
key priority for us. Despite operating
in some challenging regions we
endeavour to ensure the highest
levels of safety are applied across all
the territories in which we operate.
FARMER LIVELIHOODS
AND WELFARE
We recognise that, along with our
direct operations, our supply chain has
the potential for human rights abuses,
and we are committed to working with
our suppliers and business partners to
improve supply chain standards. We
aim to maintain a relationship of trust
and integrity with our suppliers. We
expect our suppliers to conduct their
business in an ethical and responsible
manner and to take direct actions
to address any potential or actual
impacts within their supply chains.
For many tobacco farmers in
developing countries tobacco is the
primary cash crop. For these farmers
to become even more financially
sustainable, we believe that working
with leaf suppliers, other related
industries and local stakeholders,
we have a role to play in having
a positive impact on their lives.
An important piece of this work
is through supporting farmers to
maximise their tobacco productivity
and to diversify their income by
developing sustainable income
streams that are complementary to
their tobacco production. In 2021, 88
per cent of our suppliers’ contracted
farmers are growing complementary
crops1, such as vegetables, corn or fruit
trees, and 97 per cent have access to
initiatives aimed at increasing their
tobacco income2; this includes a wide
range of programmes, from provision
of seeds and expertise to assisting with
access to markets for non-tobacco cash
crops. Some of these are projects directly
supported by suppliers and some are
directly funded by Imperial.
88%
OF OUR SUPPLIERS’ CONTRACTED
FARMERS ARE GROWING
COMPLEMENTARY CROPS
We maintain a dialogue with our
suppliers, and encourage the work
they are doing in their farming
communities. Additionally, our
ongoing support through our Leaf
Partnership programme continued in
FY21 with Imperial providing financial
support to projects in 12 countries.
These projects are benefiting as many
as 130,000 farmers and their families.
There are a wide range of projects,
from increasing access to clean
drinking water to projects aimed
to increase school attendance, and
helping farmers to be more resilient
against the effects of climate change.
In 2021, we widened our stakeholder
engagement for us and our suppliers to
better understand what is happening
on the ground in several tobacco
sourcing countries. This included
engaging international experts
to conduct supply chain impact
assessments and local partners to
work with implementing projects
that have the most positive impact.
CONSUMER HEALTH
We understand society’s concerns
about the health risks associated with
smoking and recognise the role we
have to play in helping reduce the
impact of combustible tobacco on
consumer health.
We substantiate the harm reduction
potential of our NGP through our
multi-stage, multi-year testing and
research programme. This assessment
is done for each NGP type compared
to cigarettes to assess the relative risk.
By the end of financial year 2021,
we had the following assessment
completion rates:
• 75 per cent for our vape device,
myblu (compared to 17 per cent
in 2019)
• 35 per cent for our heated
tobacco device, Pulze
(compared to 12 per cent in 2019)
• 38 per cent for our tobacco-free
oral nicotine pouch product, ZoneX
(compared to 10 per cent in 2019)
CONSUMER HEALTH
CASE STUDIES
Vape (myblu):
New clinical data suggests myblu efficiently delivers satisfying levels of
nicotine to users’ bloodstreams – but, importantly, does not exceed that of
combustible cigarettes. Recent trials also demonstrate adult smokers who
transition either exclusively or partially to myblu experience rapid and
substantial reductions in exposure to harmful chemicals.
Our latest perception and behavioural data suggests while adult smokers
understand that myblu is not risk-free, they also understand it’s likely to be
less harmful than combustible cigarettes.
By the end of fiscal year 2021, our pilot market in North Carolina (USA)
revealed high consumer and trade acceptance of our proposition. Our
conscious strategy to ensure that our advertising only targets existing
adult smokers, has confirmed that the vast majority of myblu users are adult
smokers and that myblu is not a “gateway” to combustible cigarette smoking
(”gateway effect”<0.1%).
Oral nicotine delivery (Skruf):
We currently have a Nordics focused approach on our Oral Nicotine business
where Skruf and ZoneX are performing very well. With a deep consumer
insights-led approach, we have now created differentiated positionings
for our brands targeting different consumer segments. New clinical
data confirms our nicotine pouches efficiently deliver nicotine to users’
bloodstreams and are deemed satisfying alternatives to combustible
cigarettes that reduce the desire to smoke. Nicotine pouches demonstrate
a favourable short-term safety profile, and while users understood correctly
these products are not risk-free, they perceive them to be less harmful than
combustible cigarettes. Perception data suggests product appeal is limited
to adult smokers and traditional tobacco users, with recent and long-term
quitters, never-smokers and youth disinterested in trying (0-4% likely)
or purchasing (0.5-4% likely). Finally our behavioural data suggests the
main intent to purchase stems from a desire to reduce smoking-related
health risks.
Heated tobacco (Pulze):
Pulze is our heat-not-burn device offer for consumers, for which our iD sticks
are available in a range of flavours. We have launched this product in FY21
in Greece and the Czech Republic and are carefully evaluating all our launch
variables with consumers, with a view to continuously optimising the same.
Pulze’s aerosol contains up to 96 per cent fewer harmful chemicals compared
to combustible cigarette smoke. This translates directly to substantially
reduced in-vitro biological responses. The Pulze proposition is appealing
to adult smokers. As part of our optimisation process, Pulze’s scientific
substantiation has now entered the clinical assessment phase.
We have published 25 peer-reviewed Imperial authored papers, presented
40 poster presentations and delivered 23 lectures at conferences over
the last five years. We continue to make our scientific research publicly
available; find out more at our dedicated science website.
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PERFORMANCE ESG REVIEW – CONTINUED
We have developed a human rights
due diligence framework that is used
to monitor compliance with our due
diligence processes and identify areas
for improvement.
The human rights due diligence
process is based on four key pillars of
identifying and prioritising risk, taking
action, monitoring performance and
review and communication.
The framework will support in
strengthening our processes for
identifying, managing and mitigating
human rights risk.
HUMAN RIGHTS DUE
DILIGENCE PROGRAMME
TOBACCO LEAF SUPPLY
As an international business
we recognise the role we have in
promoting respect for human rights.
Our policy and approach are guided
by the international human rights
principles in line with the International
Bill of Human Rights, the International
Labour Organisation’s (ILO) core
conventions and the principles
and guidance contained within the
United Nations Guiding Principles
on Business (UNGP) and Human
Rights and the OECD guidelines for
responsible business. The UNGPs
require that an ongoing management
process is implemented to ensure that
a company meets its responsibility to
respect human rights.
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E S G
Governance
GOVERNANCE PERFORMANCE
Governance education modules are rolled out to employees with online access based on role and location. For employees who
do not have access to the online system, we work with local markets to provide translated PDF versions of courses that can be
used locally to deliver face-to-face training. All employees are required to complete these modules.
E-learning course title
Commentary
Code of Conduct
Code of Conduct Part 2
This course introduces our Code of Conduct, reviews our Company values, why we have a Code and how
we all have a responsibility to follow our Code of Conduct, which is translated into 32 languages.
This course explains the responsibilities each of us has, regardless of our role, seniority or location, to
act in ways that promote a culture of mutual trust and respect.
Competition Law: An Overview
This course provides guidance to employees on how to be aware of, recognise and avoid being involved
in illegal competition as well as providing examples of common violations of competition law.
Give and Get Bribe: An
Antibribery Vignette
Modern Slavery
This course is designed to refresh awareness of laws that make it a crime to bribe foreign government
officials to gain a business advantage.
During the year we translated this e-learning course into a further three languages, This short overview
takes a global look at the human rights abuse of modern slavery and explains how employees can raise
concerns, and is now available in 15 languages.
An exercise carried out in Laos and Madagascar has delivered the course in classrooms to 450 people
that do not have access to computers, including farmers.
Combatting Illicit Trade
This course focuses on combatting illicit trade in two ways, through our collective responsibilities and
by every employee taking personal responsibility. Throughout the course there are opportunities to
check understanding of the illicit trade risk and our efforts to combat it.
Information Security: Phishing
This course focuses on how to protect yourself and data properly and the consequences following a
significant breach or leak.
Share Dealing Code
This course provides information about share dealing and the Market Abuse Regulation across the
European Union (EU).
Data Privacy and Protection: GDPR This course provides an overview of some key requirements of the GDPR, and includes significant
examples of how employees must handle personal data and interact with the individuals whose data
they hold.
Data Protection and Privacy
This course defines personally identifiable information and provides an overview of the responsibilities
and steps required to protect it.
MAINTAINING HIGH
STANDARDS OF GOVERNANCE
Doing business in the right
way, having integrity and not
tolerating poor behaviour, fraud or
bribery ensures we behave responsibly
towards our stakeholders. How we
conduct ourselves and our business
can have wider impacts for society.
Our Code of Conduct is embedded
throughout our Company and drives
our responsible approach. It is aligned
with the policies, internal controls and
risk management processes that
underpin our strategy.
The Code sets out the responsible
behaviours we expect from employees
in their dealings with colleagues,
customers, consumers, suppliers,
agents, intermediaries, advisers,
governments and competitors. All
employees and business partners
are expected to act with integrity
in accordance with the standards
of behaviour set out in the Code.
SUPPLIER CODE OF CONDUCT
We expect our suppliers to conduct
their business in an ethical and
responsible manner and comply with
all applicable laws and regulations.
Our Supplier Code, based on our Code
of Conduct, sets out the behaviours we
expect our suppliers to demonstrate.
Our Supplier Code of Conduct is
embedded into our Procurement Policy
and processes which govern how we
select and contract with our suppliers.
Our Supplier Code of Conduct is
available in 19 languages and was
updated in 2021 to reference our newly
published Anti-Facilitation of Tax
Evasion policy.
SPEAKING UP
This year we launched our new
Speaking Up platform, which is
available both to our employees
and to other stakeholders, including
suppliers and farmers. The new
platform offers a wide range of
reporting routes and supports
anonymous reporting and feedback.
W W W . I M P E R I A L B R A N D S P L C . C O M
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61
PERFORMANCE ESG REVIEW – CONTINUED
Our supporting Speaking Up policy
has been updated to align with the
new process, with the policy being
made available both internally and
on our website. Internal processes,
including procurement and human
resources, have been aligned to the
new Speaking Up process.
Issues raised during the year
included allegations of mistreatment
of employees, claims of unfair
treatment or wrongful termination,
allegations of unprofessional behaviour,
pay concerns, and misuse of company
property. Our HR teams were involved
in dealing with a number of these
issues, whilst others were managed
by the Company Secretary, with
investigation support and advice
provided by members of Finance, Group
Security, Group Legal, HR and Internal
Audit. At all times, the anonymity of the
individual making the complaint was a
key consideration.
RESPONSIBLE MARKETING
AND YOUTH ACCESS
PREVENTION
We are committed to marketing and
advertising our products responsibly
within the laws, codes of practice
and voluntary agreements of those
countries within which we operate.
This year we updated our marketing
standards to reflect developments
in technology and our NGP portfolio.
We created overarching Marketing
Principles for our Combustible and NGP
categories, which are available on our
website. All Imperial Brands companies
and employees, as well as the agencies
who work with us, are expected to
adhere to our standards and local
legislation. Where local legislation
is stricter, this takes precedence, and
where local legislation may be less
stringent, then our own high marketing
standards take precedence. We aim
to roll out an interactive training
programme for employees
and agencies in the next financial
year. All our marketing materials are
reviewed and receive legal sign off.
Tobacco and NGP are for adult smokers
only. We do not want youths to use any
of our products and take youth access
prevention (YAP) very seriously. We
fully support YAP and minimum age
restrictions for the sale or purchase of
our products.
YOUTH ACCESS PREVENTION
IN THE USA
Looking to the USA, where vaping and
YAP remains an important issue, the
latest publicly available National Youth
Tobacco Survey (NYTS) data (2020),
released by the Centers for Disease
Control and Prevention (CDC),
demonstrates the considerable impact
Imperial’s YAP programme has had in
the US. For instance:
• In 2020, only 13 of 14,531 respondents
reported using blu vaping products
at any point in the past 30 days
(0.12 per cent of the population),
down from 111 of 19,018 in the
NYTS 2019 dataset (0.59 per cent
of the population).
• Use of blu vaping products by
tobacco-naïve youth remained very
low in 2020. Among youth reported
to have vaped blu at any point in the
past 30 days, only four respondents
within the NYTS 2020 dataset were
tobacco naïve (0.028 per cent of the
total population).
We believe our YAP efforts in the USA
provide a model for other responsible
manufacturers to follow. More
information is available on our
science website.
INVESTOR BENCHMARKS
Our ESG management and
performance is evaluated by a wide
range of external rating agencies.
We were rated A in June 2021 by
MSCI ESG Ratings. In its December 2020
ESG Rating report, Sustainalytics gave
us a medium risk rating score and
concluded that Imperial is at medium
risk of experiencing financial impacts
from ESG factors due to its medium
exposure and strong management
of material ESG issues. Imperial
was noted for its strong corporate
governance performance, which is
reducing its overall risk. Vigeo Eiris
(part of Moody’s ESG solutions since
2019) gave us an ESG Scorecard of
42/100 and a Company Reporting Rate
of 82 per cent in October 2021.
In 2020, CDP awarded us an A rating
for our Climate Change submission
for a second consecutive year. We
were also awarded an A- for our
2020 CDP Water disclosure indicating
that we are implementing current
best practice in water management
across our operations and supply
chain. We await the results of our
2021 submissions to CDP.
We continue to participate in the
CDP Supply Chain Programme,
which gathers information from
our key suppliers on how they
are managing their climate risks
and opportunities. We are pleased to be
recognised as a Supplier Engagement
Leader by CDP in 2019 and 2020.
We have also completed the
investor-backed Workforce
Disclosure Initiative since 2019.
This benchmark is currently based
on disclosure, and performance scores
have not been allocated.
We believe it is important for rating
agencies to work together with
companies, investors and other
stakeholders to improve consistency
and transparency in producing robust
ESG data and ratings.
INDEPENDENT ASSURANCE
We appointed Ernst & Young LLP to
provide limited independent assurance
over selected sustainability content
within the Annual Report (“the
Report”), as at and for the period
ended 30 September 2021. The
assurance engagement was planned
and performed in accordance with the
International Standard for Assurance
Engagements (ISAE) 3000 Revised,
Assurance Engagements Other
Than Audits or Reviews of Historical
Financial Information.
These procedures were designed
to conclude on the accuracy
and completeness of selected
sustainability indicators, which
are indicated in the Report with an A.
An unqualified opinion was issued and
is available on imperialbrandsplc.com,
along with further details of the scope,
respective responsibilities, work
performed, limitations and conclusions.
Footnotes
A. Select 2021 data has been independently assured by Ernst and Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard.
The Assurance Opinion is available on our website.
1. Our 2021 environmental data follows the reporting period Q4 financial year 2020 to Q3 financial year 2021. This is to allow for data collection, validation
and external assurance. We use the GHG Protocol Standard to inform our reporting of Scope 1 and 2 emissions. Our reporting scope and definitions are
detailed in the Reporting Criteria Document published on our website.
2. Our health and safety data is for the full 2021 financial year. Our reporting scope and definitions are detailed in the Reporting Criteria Document
published on our website.
3. Accidents reported do not include commuting to or from work or third parties such as distributors.
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TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
Imperial Brands is committed to implementing the recommendations of the TCFD and providing transparency to our
stakeholders on progress. We are pleased to provide the below progress update as we prepare for full implementation of
these requirements in our 2022 Annual Report, which supplements the information contained within the Annual Report.
Governance:
We have embedded climate governance across all levels of
the organisation:
1. The Board of Directors is responsible for the ESG performance of the
Company, including climate risk.
2. The cross-functional ESG Steering Committee, chaired by the CEO
of Imperial Brands, is responsible for delivering the ESG strategy and
our climate risk responsibilities.
3. Management-level responsibility has been assigned for specific
climate risks and opportunities.
Scenario analysis:
Risk management:
We have undertaken
an initial qualitative
assessment of
climate risk and
opportunity to
inform both our risk
management and
strategic decisions.
We considered a
“2 degrees” aligned
scenario to test
our value chain
resilience to an
ambitious reduction
in GHG emissions, as
well as considering
physical impacts
across our
priority locations.
Based on the scenario analysis
findings, we have integrated
climate risk management into
our Enterprise Risk Management
framework by considering the
impact of climate change on
each of our principal risks.
This allows us to continue to
manage and monitor climate
risk effectively as part of core
business activities.
Strategy:
Our strategy is built on our
commitment to ESG. We have
identified a number of climate-
related opportunities through
our scenario analysis. We are
now working towards securing
these opportunities as we
deliver on our decarbonisation
commitments and integrate
ESG fully into our Group
business strategy.
Extreme weather events
causing disruption to
operations, supply and
distribution of products
Compliance obligations
from new and existing
climate legislation
Increased costs
of energy and
raw materials
Increased recycling
rates and reuse
of materials to
reduce costs
Shift to renewable
energy to mitigate
potential price increases
Investing in supply
chain resilience to
reduce disruption
s
k
s
i
r
e
t
a
m
i
l
C
s
e
i
t
i
n
u
t
r
o
p
p
o
e
t
a
m
i
l
C
Next steps:
We will continue
to evolve our
approach to
managing
climate risks
and opportunities
during FY22.
Key actions
will include:
Developing a
comprehensive
financially
quantified scenario
analysis to inform
our decisions
across both risk
and strategy
Developing a climate
transition plan to
co-ordinate efforts
across our business
in pursuit of our
decarbonisation
targets
Continuing to
integrate climate-
related information
into our Annual
Report and Accounts
Continuing to
engage with
suppliers on
their carbon
reduction plans
Metrics
and
targets:
We are
delivering
on our
science-
based
targets:
Scope 1
and 2
emissions
reduced
by 25%
by 2030
Scope 3
emissions
reduced
by 20%
by 2030
50% of
suppliers
by spend
having
SBTs
by 2023
Landfill
waste
reduced
by 50%
by 2030
Water use
reduced
by 15%
by 2030
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PERFORMANCE OPERATING REVIEW
EUROPE REGION
JOERG BIEBERNICK
PRESIDENT, EUROPE REGION
Europe delivered gains in regional
market share and a 5.6 per cent
increase in adjusted operating profit.
These results have been achieved
despite COVID-19 restrictions reducing
travel and affecting market and
channel trends, particularly the global
duty free channel. Stronger market
size trends in Northern Europe,
together with share growth in the
UK and Spain and improved NGP
performance, were partly offset
by lower sales in our global
duty free business, despite a
small second-half recovery, and
in traditional holiday destination
markets in Southern Europe.
Share gains in the UK and Spain were
driven by our tobacco portfolio work
and a new strategic focus on local
jewel brands, such as Embassy and
Nobel. In Germany, investments in
enhancing the effectiveness and
coverage of our sales force and
distribution have driven an
encouraging improvement in
market share trend in recent
months. It will take time though for
our brand initiatives and portfolio
investments to rejuvenate our overall
share performance.
Tobacco volumes decreased by 2.6
per cent, driven by relative market size
improvements in the Northern Europe
markets of UK, Germany and Norway
from consumers staying at home.
A gradual recovery from COVID-19
led to a modest increase in travel
numbers in the second half and a small
improvement to our global duty free
sales and southern European markets.
AT A GLANCE
REGIONAL MARKET SHARE
VOLUMES
+10bps
-2.6%
TOBACCO & NGP
NET REVENUE*
+0.2%
TOBACCO NET REVENUE*
-0.6%
NGP NET REVENUE*
TOBACCO & NGP ADJUSTED
OPERATING PROFIT*
+28.8%
+5.6%
* Change at constant currency.
POSITIVES
NEGATIVES
• Germany and UK
continue to deliver
strong financial
performances, with
market size benefiting
from reduced travel
• Local jewel brand focus
benefits market share
gains in Spain and
the UK
• Heated tobacco
market trials
underway and targeted
investment behind
blu holding share
• Reduced travel impacts
sales in global duty
free and traditional
holiday destinations
• German share
still declining
although with an
improving trend
• Travel recovery
continues to remain
difficult to predict
due to varying
COVID-19 restrictions
across Europe
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Tobacco volume
Total net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2021
126.7
3,551
3,425
126
1,670
2020
130.1
3,569
3,471
98
1,582
Actual
-2.6%
-0.5%
-1.3%
28.8%
5.6%
Constant
currency
+0.2%
-0.6%
28.8%
5.6%
Volume trends in Spain, Italy and
Greece were still down relative to
historic levels.
Total net revenue grew 0.2 per cent
at constant currency, with tobacco net
revenue down 0.6 per cent at constant
currency. This reflects a price mix
increase of 2.0 per cent, which is
lower than recent years, as a result
of temporary one-off benefits last
year related to VAT changes in
Germany and UK anti-forestalling
arrangements. Excluding these
temporary changes, price mix would
have been 3.0 per cent, impacted
by lower global duty free and travel
retail sales. NGP revenues were
up 28.8 per cent, with sales growth
across a number of markets.
Our blu share in several markets such
as the UK, France and Italy remains
relatively stable. In heated tobacco we
are on track with our pilot launches
in the Czech Republic and Greece,
although it is too early to draw
conclusions until we review
repurchase rates.
Adjusted operating profit was up
5.6 per cent at constant currency,
benefiting from reduced losses in our
NGP business and lower regulatory
related costs.
PRIORITY MARKETS IN EUROPE
GERMANY
UK
SPAIN
13% of Group net revenue
9% of Group net revenue
4% of Group net revenue
Duty paid sales in Germany continued
to remain strong, with fewer travel and
border restrictions benefiting market size.
We increased investment to improve
sales coverage and strengthen our sales
execution to address the share declines.
We have also begun to implement the
planned brand investments to reposition
certain brands over time. This includes
innovation targeted at meeting consumer
preferences for larger pack formats. In
NGP, blu vapour brand share has been
maintained with increased pricing and
lower levels of investment improving
returns. The modern oral nicotine
category continues to wait for a clear
legal definition, resulting in delays in
category development.
Reduced travel, lower levels of
illicit trade and the absence of
a manufacturing price increase
benefited duty-paid tobacco market
size, with an improved trend against
historic norms. Our tobacco share
performance benefited from an
enhanced regional and key account
focus, with growth driven from the
launch of Embassy Signature. Market
share was partly impacted by pressure
following the characterising flavours
ban in May 2020. Our blu vapour brand
share remains stable, with refinements
in our investment levels supporting
improved profitability.
Reduced tourist numbers as a result
of the global pandemic continue to
negatively impact market size in
Spain. Despite this, our domestic
performance has benefited from
a renewed focus on leveraging the
strong heritage of our local brand
portfolio. Increased investment
behind our local brands, Fortuna and
Nobel, combined with limited edition
formats have supported market
share growth. We also had success
with a super-king variant of our West
brand. blu remains market leader
of the vapour category, with market
share holding up well despite lower
levels of investment.
Combustible share
19.9% (-50 bps)
40.7% (+20 bps)
29.1% (+10 bps)
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65
PERFORMANCE OPERATING REVIEW
AMERICAS REGION
KIM REED
PRESIDENT AND CEO, AMERICAS REGION
We delivered a strong combustible
tobacco performance in the US,
which is our largest single market,
contributing 33 per cent of Group net
revenue. Market fundamentals remain
attractive, with strong cigarette pricing
continuing to offset relatively reduced
rates of tobacco market size decline
as well as further growth in the mass
market cigars segment.
We have increased investment
behind our strategic priorities,
including the recruitment and
training of 200 additional sales
people to enhance our coverage and
distribution. We have also invested
in brand initiatives for Winston, which
we are trialling in Texas.
The investment and additional
focus on performance management
delivered a third consecutive year of
share gains in the US cigarette market,
up 20 basis points, to 9.1 per cent. Share
growth has been driven by Sonoma
and Crowns in the deep discount
segment, while we have maintained
Winston and Kool’s share of their
sub-premium categories and
managed the ongoing decline
in our non-focus brands.
Tobacco volumes were up 1.1 per cent,
driven by strong mass market cigar
growth, which more than offset
the more moderate cigarette
volume declines.
AT A GLANCE
USA PRIORITY MARKET
SHARE
+20bps
VOLUMES
+1.1%
TOBACCO & NGP
NET REVENUE*
+9.6%
TOBACCO NET
REVENUE*
+10.4%
NGP NET REVENUE*
TOBACCO & NGP ADJUSTED
OPERATING PROFIT*
-15.5%
+8.0%
* Change at constant currency.
POSITIVES
NEGATIVES
• Cigarette share growth
up 20 basis points to
9.1 per cent
• Cigarette pricing
remains strong
• Backwoods and Dutch
Masters continue to
perform strongly in
the mass market
cigar segment
• Results affected by
US state litigation
settlement charges
• PMTA outcome still
pending, creating lack
of clarity for vapour
category development
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Tobacco volume
Total net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2021
21.5
2,534
2,478
56
1,037
2020
21.3
2,480
2,409
71
1,032
Actual
1.1%
2.2%
2.9%
-21.2%
0.4%
Constant
currency
9.6%
10.4%
-15.5%
8.0%
Our mass market cigar portfolio
performed well with volumes up
45 per cent and share growth of 500
basis points driven by Backwoods
and the launch of a Dutch Leaf
variant in the value segment. We
are now established as the second
largest manufacturer in the US
market, having been number four
a year ago. Sales in the premium
natural leaf segment have benefited
from increased activations and limited
edition launches of Backwoods. Overall
mass market cigar performance also
benefited from manufacturing and
investments in improved leaf supply.
On a constant currency basis,
tobacco net revenue increased by
10.4 per cent, benefiting from strong
cigarette pricing and the success
of our mass market cigar sales in
a growing category.
Our NGP revenues were down
15.5 per cent on a constant currency
basis, with second half revenues
affected by the increasingly
competitive environment with
greater discounting in the category.
In the second half, we launched
a pilot to test a new consumer
marketing proposition for blu, with
a new packaging and consumer
communication approach.
Adjusted operating profit was
8.0 per cent higher at constant
currency, driven by the strong
growth in mass market cigar sales,
tobacco pricing and lower NGP
write-offs. Profitability was also
impacted by a £52 million charge
for litigation settlement costs
in Minnesota and Texas, which
removes uncertainty at a reasonable
cost. Excluding these settlement
costs, adjusted operating profit grew
by 13.1 per cent at constant currency.
W W W . I M P E R I A L B R A N D S P L C . C O M
67
67
PERFORMANCE OPERATING REVIEW
AFRICA, ASIA AND AUSTRALASIA REGION
AT A GLANCE
REGIONAL MARKET
SHARE
+30bps
VOLUMES
-4.2%
TOBACCO & NGP
NET REVENUE*
-8.2%
TOBACCO NET REVENUE*
-6.8%
NGP NET REVENUE*
TOBACCO & NGP ADJUSTED
OPERATING PROFIT*
-78.3%
-4.7%
* Organic change at constant currency.
POSITIVES
NEGATIVES
• Australia share
performance improved
during the second
half in response
to investment
• Africa market
share and financial
performance benefits
from focus on local
jewel brands
• Financial results
affected by changes to
Australia excise duty
regime (£88m)
• NGP revenues lower
due to strategic exits
in Japan and Russia
PAOLA POCCI
PRESIDENT, AFRICA, ASIA AND
AUSTRALASIA REGION
Our results were affected by two
events: the sale of the Premium Cigar
Division in October 2020 and changes
to the Australian excise regime.
Notwithstanding these impacts,
our Africa, Middle East and Asia
regions reported solid performances
and supported a 30 basis point
improvement in overall regional share.
The results presented here are
on an organic basis, excluding the
contribution from the Premium
Cigar Division in both periods to
aid comparison of performance on a
like-for-like basis. The impact of the
divestment is analysed in notes 3, 6
and 10 of the financial statements
on adjusted performance measures.
Our performance was also affected
by changes in the Australian excise
regime, which resulted in an impact
on net revenue and adjusted operating
profit of £88 million. This has been
driven by the Australian Government’s
decision to step away from the
12.5 per cent annual excise duty
accelerator and the associated
reduction in inventory levels and the
phasing of stock profit. Looking ahead,
there will be a further net headwind
of c. £10 million to net revenue and
adjusted operating profit in the first
half of FY22 as the lower stock profit
is partially offset by favourable
inventory movements.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Organic tobacco volume
Total organic net revenue
Organic tobacco net revenue
NGP net revenue
Organic adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2021
83.7
1,504
1,498
6
598
2020
87.4
1,689
1,657
32
643
Actual
-4.2%
-11.0%
-9.6%
-81.1%
-7.0%
*Organic
constant
currency
-8.2%
-6.8%
-78.3%
-4.7%
* Organic performance excludes the contribution of the Premium Cigar Division from both financial reporting periods following its divestment in October 2020.
The Premium Cigar Division contributed £21m to net revenue in 2021 (2020: £247m) and £3m to adjusted operating profit (2020: £31m). Further details are provided
in notes 3, 6 and 10 of the financial statements.
The Africa region continues to be an
attractive portfolio of markets with
opportunities for further value growth.
Gauloises gained share in Morocco
by leveraging its international brand
equity, while our focus on local jewel
brands delivered share gains in
Burkina Faso and the Côte d’Ivoire.
Our results in the Middle East were
driven primarily by Saudi Arabia,
where travel restrictions benefited
our domestic sales, driving a good
performance of Davidoff and West with
strong demand for fresh seal formats.
In Asia, we delivered a stable
performance in Taiwan driven by
share growth of the Davidoff Absolute
range supported by its strong equity
and by West, which has benefited from
value seeking consumers.
Organic tobacco volumes were
4.2 per cent lower, with volume
declines in Turkey and Australia,
partially offset by market share-driven
volume gains in Morocco, the Côte
d’Ivoire and Saudi Arabia.
Our organic financial results were
affected primarily by the excise duty
changes in Australia. Organic tobacco
price mix of -2.6 per cent contributed
to the tobacco net revenue decline
of 6.8 per cent at constant currency,
primarily reflecting the Australian
excise duty changes. Excluding this
impact, organic tobacco price mix
was up 2.7 per cent and tobacco net
revenue was down 1.5 per cent.
NGP net revenues declined
78.3 per cent at constant currency,
reflecting our strategic decision to
exit the vapour market in Russia and
Japan and the heated tobacco market
in Japan, as we prioritise investment
in other market category combinations
in line with our strategy.
Organic adjusted operating profit
was down 4.7 per cent at constant
currency, primarily reflecting the
excise duty changes in Australia.
PRIORITY MARKET IN AFRICA, ASIA
AND AUSTRALASIA
AUSTRALIA
4% of Group net revenue
Our share performance has been affected by the timing of our price increase
and competitor discounting, particularly in the first half of the year. We
made changes to our sales force execution and enhanced our key account
management, which delivered a much improved share trend in the second
half. Our results were also affected by a market size decline of 9% and
continued downtrading to the ‘fifth price tier’, which now accounts for more
than a third of the market. Our Parker & Simpson brand continues to perform
well within the ‘fifth price tier’.
Combustible
share
31.5%
(-120 bps)
Pack images are internal only
W W W . I M P E R I A L B R A N D S P L C . C O M
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69
PERFORMANCE OPERATING REVIEW – CONTINUED
DISTRIBUTION
Logista has continued to distribute products
to customers with almost all the points of sale,
products and services classified as essential
by governments, even during the periods when
COVID-19 still restricted movements in many of
its end markets.
Net revenue grew 5.8 per cent at constant
currency driven by growth in all markets and
activities except tobacco distribution in France
and Portugal. Pharmaceutical distribution, parcel
transport (Nacex) and the distribution of convenience
products in Spain and Italy recorded double-digit
growth. Adjusted operating profit increased
14.8 per cent at constant currency due to efficiency
improvement initiatives.
The adjusted operating profit contribution to the
Group, after eliminations, increased by 11.3 per cent.
This reflects the positive performance of Logista’s
adjusted operating profit delivery as outlined above,
the benefit of inventory valuations following tax
and price movements in tobacco products and the
recovery from negative COVID-19 impacts last year.
In line with other Imperial-owned entities, we
continue to benefit from an intercompany cash
pooling arrangement with Logista, which further
enhances the Group’s liquidity. On a 12-month basis,
the daily average cash balance loaned to the Group by
Logista was £2.0 billion, with movements in the cash
position during the 12-month period varying from a
high of £4.0 billion to a low of £1.3 billion, primarily
due to the timing of excise duty payments. At
the period end, the loan position was £1.8 billion
compared to £2.4 billion at 30 September 2020.
AT A GLANCE
NET REVENUE*
+5.8%
ADJUSTED OPERATING
PROFIT EXCLUDING
ELIMINATIONS*
+14.8%
ADJUSTED OPERATING
PROFIT MARGIN*
ADJUSTING OPERATING
PROFIT INCLUDING
ELIMINATIONS*
+180bps
+11.3%
* Change at constant currency.
POSITIVES
NEGATIVES
• Unwind of FY20
COVID-19 duty deferral
impacted cash flow in
the year
• Continued distribution
through COVID-19 as
products and services
classified as essential
• Strong performance in
courier and long-distance
transportation businesses
• New contracts in
pharmaceutical
distribution
• Efficiency improvement
initiatives effective
Net revenue
Adjusted operating profit
Adjusted operating profit margin
Eliminations
Adjusted operating profit (inc. eliminations)
Full Year Result
Change
£m
£m
%
£m
£m
2021
1,069
258
24.1
7
265
2020
1,015
226
22.3
13
239
Actual
+5.3%
+14.2%
Constant
Currency
+5.8%
+ 14.8%
+180 bps
+180 bps
-50.3%
+10.7%
-50.0%
+11.3%
70
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
PERFORMANCE GROUP FINANCIAL REVIEW
STRENGTHENING OUR PERFORMANCE
LUKAS PARAVICINI
CHIEF FINANCIAL OFFICER
SUMMARY FINANCIAL INFORMATION
ORGANIC VOLUMES
2.9%
led by organic declines
in market size, offset
by market share gains
ORGANIC ADJUSTED
NET REVENUE
1.4%
driven by robust price
mix & strong cigar sales
REPORTED OPERATING
PROFIT
ORGANIC ADJUSTED
OPERATING PROFIT
15.2%
driven by disposal of the
Premium Cigar Division
4.8%
driven by reduced
NGP losses
REPORTED BASIC
EPS
299.9p
an increase of 89.5%
ORGANIC ADJUSTED
EPS
246.5p
an increase of 2.8% on
a constant currency basis
CASH CONVERSION
83%
2020: 127%
ADJUSTED NET DEBT/
EBITDA
2.2x
2020: 2.7x
Finance is a critical
business partner to the
organisation and we are
investing to create agile
teams that will enable
faster decision-making
and support our
stewardship agenda.
This year’s financial results reflect the
good start we have made in implementing
our new strategy. Excluding the divestment
of our Premium Cigar Division, net revenues
grew 1.4 per cent and organic Group adjusted
operating profit rose 4.8 per cent, both on
an organic constant currency basis.
Reported operating profit rose 15 per cent, mainly due
to a profit of £281 million related to the disposal of the
Premium Cigar Division.
Our business remains cash generative, delivering
£1.5 billion of free cash flow, and this, together
with other actions taken, has enabled us to reduce
reported net debt by £1.8 billion to £9.4 billion.
Capital discipline remains a key focus and our
objective to delever continues, with net debt/EBITDA
reducing from 2.7x in 2020 to 2.2x in 2021. We remain
committed to delivering leverage at the lower end of
2.0x to 2.5x.
In line with our strategic ambition, 2021 was a key
transitional year in our two year strengthening phase
during which we are building the foundations for
future growth, underpinned by investments behind
our operational and strategic levers and significant
organisational and cultural change.
For an explanation of adjusted performance measures, see page 73
W W W . I M P E R I A L B R A N D S P L C . C O M
71
71
PERFORMANCE GROUP FINANCIAL REVIEW – CONTINUED
SUMMARY INCOME STATEMENT
£ million (unless otherwise indicated)
2021
2020
2021
2020
2021
2020
Reported
Adjusted
Organic Adjusted
Operating profit
Total Tobacco & NGP
Distribution
Eliminations
Group operating profit
Net finance costs
Share of profit of investments accounted for using the equity method
Profit before tax
Tax
Profit for the year
Earnings per ordinary share (pence)
Dividend per share (pence)
2,991
2,587
148
7
3,146
81
11
3,238
(331)
2,907
299.9
131
13
2,731
(610)
45
2,166
(608)
1,558
158.3
3,308
258
7
3,573
(417)
11
3,167
(716)
2,451
247.1
139.08
137.71
139.08
3,288
3,305
3,257
226
13
3,527
(429)
45
3,143
(642)
2,501
254.4
137.71
258
7
3,570
(417)
7
3,160
(714)
2,446
246.5
139.08
226
13
3,496
(429)
1
3,068
(635)
2,433
247.2
137.71
SUMMARY CASH FLOW STATEMENT – STATUTORY RECONCILIATION
Reported
Adjusted
£ million (unless otherwise indicated)
Group operating Profit
Depreciation, amortisation and impairments
EBITDA
Profit on disposal of subsidiary
Other non-cash movements
Operating Cash Flows before movement in Working Capital
Working capital
Tax cash flow
Cash Flows from Operating Activities
Net capex
Restructuring
Cash interest
Loan to third parties
MI dividends
Free Cash Flow
Acquisitions / disposals
Shareholder dividends
Net Cash Flow
Cash Flows from Operating Activities (as above)
Tax cash flow
Net capex
Net Cash Flow from Operating Activities post Capital Expenditure pre Interest and Tax
Cash Conversion
2021
3,146
815
3,961
(281)
(29)
3,651
(664)
(820)
2,167
(150)
–
(400)
–
(93)
1,524
845
(1,305)
1,064
2020
2,731
910
3,641
–
(85)
3,556
1,042
(568)
4,030
(274)
–
(420)
(3)
(85)
3,248
(155)
(1,753)
1,340
2021
3,573
269
3,842
–
(79)
3,763
(664)
(820)
2,279
(150)
(112)
(400)
–
(93)
1,524
845
(1,305)
1,064
2,279
820
(150)
2,949
83%
2020
3,527
311
3,838
–
(137)
3,701
1,042
(568)
4,175
(274)
(145)
(420)
(3)
(85)
3,248
(155)
(1,753)
1,340
4,175
568
(274)
4,469
127%
72
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Adjusted performance measures
When managing the performance of our business we focus on non-GAAP measures, which we refer to as adjusted
measures. Management believes that adjusted measures provide an important comparison of business performance and
reflect the way in which the business is controlled. These adjusted measures are supplementary to, and should not be
regarded as a substitute for, GAAP measures, which we refer to as reported measures. The basis of our adjusted measures
is explained in our accounting policies note, which is detailed within our financial statements.
Reconciliations between reported and adjusted measures are included in the appropriate notes to our financial
statements and within this financial review. Percentage growth figures for adjusted results are given on a constant
currency basis, where the effects of exchange rate movements on the translation of the results of our overseas
operations are removed.
This year we also show organic numbers which exclude the disposed operations of our Premium Cigar Division from
both years to show a like-for-like performance; these measures are termed “organic adjusted” and are considered the
relevant headline measures for performance commentary. The impact of these changes can be seen in our adjusted
performance measures note.
GROUP RESULTS – ORGANIC ADJUSTED CONSTANT CURRENCY ANALYSIS
£ million (unless otherwise indicated)
Organic Tobacco & NGP Net Revenue
Europe
Americas
Africa, Asia and Australasia
Total Group
Organic Tobacco & NGP Adjusted Operating Profit
Europe
Americas
Africa, Asia and Australasia
Total Group
Distribution
Net revenue
Adjusted operating profit including eliminations
Group Organic Adjusted Results
Organic adjusted operating profit
Adjusted net finance costs
Organic adjusted EPS (pence)
Full year
ended
30 September
2020
Foreign
exchange
Constant
currency
movement
Full year
ended
30 September
2021
3,569
2,480
1,689
7,738
1,582
1,032
643
3,257
1,015
239
3,496
(429)
247.2
(27)
(184)
(47)
(258)
(1)
(78)
(15)
(94)
(5)
0
(94)
(1)
(7.7)
9
238
(138)
109
89
83
(30)
142
59
26
168
13
7.0
3,551
2,534
1,504
7,589
1,670
1,037
598
3,305
1,069
265
3,570
(417)
246.5
Organic
constant
currency
change
0.2%
9.6%
-8.2%
1.4%
5.6%
8.0%
-4.7%
4.3%
5.8%
11.3%
4.8%
3.1%
2.8%
Change
-0.5%
2.2%
-11.0%
-1.9%
5.6%
0.4%
-7.0%
1.5%
5.3%
10.7%
2.1%
2.7%
-0.3%
Financials are Organic and adjusted for the impact of the Premium Cigar Division disposal, all of which is in the Africa, Asia and Australasia segment.
Net Revenue of £247m has been deducted in 2020 and £21m in 2021. Adjusted Operating Profit of £31m has been deducted in 2020 and £3m in 2021.
VOLUMES BN SE
ORGANIC NET REVENUE
(ACT RATE), £M
ORGANIC OPERATING
PROFIT, £M
126.7
83.7
21.5
1,504
2,534
265
598
3,551
1,670
Europe
Americas
Africa, Asia
and Australasia
126.7
21.5
83.7
Europe
Americas
Africa, Asia
and Australasia
3,551
2,534
1,504
1,037
Europe
Americas
Africa, Asia
and Australasia
Distribution
1,670
1,037
598
265
W W W . I M P E R I A L B R A N D S P L C . C O M
73
73
PERFORMANCE GROUP FINANCIAL REVIEW – CONTINUED
SALES PERFORMANCE (£M)
REPORTED REVENUE
0.7%
ORGANIC ADJUSTED NET
REVENUE
1.4%
• Reported revenue grew 0.7% due to
increases in duty and similar items.
• Organic net revenue grew 1.4% at
constant currency comprising +1.5%
from tobacco and -0.1% from NGP.
• Organic tobacco volumes were
down 2.9%, in line with the market
decline reflecting weaker duty free
and travel retail volumes. This was
partly offset by stronger market
size in domestic markets such as
the UK, Germany and the Nordics.
• Weighted share in our priority
markets declined marginally by
2bps, compared to a 17bps decline
in the prior year.
• Tobacco price mix of 4.4% was
below historic levels, as a result
of changes to the Australian
excise regime. Excluding this impact
price mix was 5.6% driven by pricing
and positive market mix as a result
of significant growth in US mass
market cigars and repatriation of
volumes due to travel restrictions.
• NGP revenue decreased 3.9%
at constant currency as we
exited a number of markets and
refocused the category in line
with the revised strategy.
• Translation FX was adverse due
to sterling strengthening against
the US dollar.
-2.9%
+4.4%
-0.1%
+1.4%
-3.3%
-1.9%
£(247)m
£7,985m
£7,738m
+1.5%
Tobacco net revenue
(3.9)%
NGP net revenue
£7,847m
£7,589m
FY20 Net
Revenue
Premium Cigar
Division
FY20 Net
Revenue excl.
divestment
Tobacco
Volume
Tobacco
Price/Mix
NGP Net
Revenue
FY21 Organic
Constant Currency
Translation
FX
FY21 Organic Net
Revenue
OPERATING PROFIT (£M)
REPORTED OPERATING
PROFIT
15.2%
ORGANIC ADJUSTED
OPERATING PROFIT
4.8%
• Reported Group operating profit
of £3,146 million grew 15.2%,
driven by gains on disposal of
the Premium Cigar Division.
• Organic adjusted Group
operating profit increased
4.8% at constant currency.
• Tobacco and NGP adjusted
operating profit grew £142m
or 4.3% at constant currency.
• Tobacco organic adjusted
operating profit was down
£42 million (-1.2%) at constant
currency. Strong underlying
performance, led by mass market
cigar volumes and pricing, was
more than offset by lower stock
profit in Australia (£88 million) and
a charge to meet US state litigation
(PSS) costs (£52 million)
• NGP losses reduced by £184 million
or 57% as we optimised investment
and as prior year write-downs
(£124 million) were not repeated
to the same extent.
• Distribution profit grew 11.3%
reflecting good performance
in pharmaceutical, parcel and
convenience distribution.
• Translation FX was adverse due to
sterling strengthening against the
US dollar.
+4.8%
£(30)m
£26m
£83m
£3,527m
£(31)m
£3,496m
Tobacco & NGP Adjusted Operating Profit
£89m
£(94)m
£3,664m
£3,570m
FY20 AOP
Premium Cigar
Division
FY20 AOP
excl. divestment
Europe
Americas
Africa, Asia
and Australasia
Distribution AOP
(including
eliminations)
FY21 Organic
AOP Constant
Currency
Translation FX
FY21 Organic
AOP
74
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
EARNINGS PER SHARE
(PENCE)
REPORTED EPS
89.5%
ORGANIC ADJUSTED
EPS
2.8%
• Reported EPS increased 89.5%
• Organic adjusted EPS was
to 299.9 pence driven by marked
to market foreign exchange
accounting gains on financial
instruments caused by a 6.0%
weakening in the euro against
sterling and the year-on-year
impact of the Premium Cigar
Division disposal.
246.5 pence, up 2.8% at constant
currency due to lower NGP losses,
partially offset by an increase in the
effective tax rate to 22.6%.
• Adjusted net finance costs are
impacted by the buyback of
a $1.25 billion US bond, with
corresponding savings expected
in 2022.
+2.8%
1.4p
1.6p
17.8p
10.6p
Operating
Profit
Interest
Minorities
& JV
Tax
Capital expenditure was £0.2 billion,
a reduction of £0.1 billion on the prior
year. The reduction was due to the
suspension of some projects whilst
the strategic review was undertaken
together with COVID-19 related delays
on other projects.
Cash conversion was 83%, in line
with expectations (2020: 127%
headline / 107% underlying) driven
by the previously signalled working
capital outflow.
Active capital discipline remains a
key focus for 2021 and beyond and
this year’s strong cash flows along
with proceeds from the Premium
Cigar Division disposal have
supported our reduction in gearing
to 2.2 times (2020: 2.7 times).
254.4p
7.2p
FY20 Adjusted
EPS
Premium Cigar
Division
247.2p
FY20 Adjusted
EPS excl.
divestment
CASH FLOW (£M)
Cash flows from operating activities
were £2,167 million (2020: £4,030
million), impacted primarily by an
expected working capital outflow
driven by changes to duty payment
dates that we announced in 2020.
This also impacted free cash flow,
with a £1.7 billion movement in
working capital coming largely
from our Logista markets in Western
Europe, where governments changed
the dates of excise collection linked to
the COVID-19 pandemic.
Net cash flow of £1,064 million (2020:
£1,340 million) benefited from the
proceeds from the sale of the
Premium Cigar Division and the
planned rebase of shareholder
dividends that partly offset the
working capital outflow.
254.2p
7.7p
246.5p
Translation FX
FY21 Adjusted
Organic EPS
FY21 Organic
Adjusted
Constant
Currency EPS
CASH CONVERSION (%)
21
20
19
18
127
83
95
97
£ million (unless otherwise indicated)
Reported Cash Flows from Operating Activities
Reported Free Cash Flow
Reported Net Cash Flow
Cash Conversion
2021
2,167
1,524
1,064
83%
2020
4,030
3,248
1,340
127%
W W W . I M P E R I A L B R A N D S P L C . C O M
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75
PERFORMANCE GROUP FINANCIAL REVIEW – CONTINUED
RETURN ON INVESTED
CAPITAL
Return on invested capital (ROIC)
increased by 130 basis points,
driven primarily by a reduction
in annual average capital.
As part of our FY21-23 LTIP we
redefined our return on invested
capital metric to better reflect
management influence which
resulted in a new, tightly defined
and transparent ROIC calculation,
which can be directly calculated from
information contained within the
Annual Report and Accounts.
Based on this new measure, 2021
average annual ROIC was 16.5% (2020:
15.2%, on equivalent basis).
A strong cash focus led to a £1.7 billion
reduction in our annual average capital,
driving an improvement in returns,
with the benefit of increased adjusted
operating profit offset by a higher
effective tax rate of 22.6% (2020: 20.7%).
Our FY21 invested capital was
lower than 2020, benefiting from
the disposal of c. £1.0 billion of
assets held for sale from the
Premium Cigar Division and
a c. £1.5 billion reduction in
intangible assets due to a
combination of the amortisation
of historic acquisitions and
beneficial foreign exchange
movements. This was partly offset
by an increase in working capital.
£m
Reported Operating Profit
Adjusting Items (see note 6)
Adjusted Operating Profit
Implied Tax (at adjusted effective tax rate)
Net Adjusted Operating Profit after tax
Working capital
Intangible assets
Property, plant & equipment
Assets/(Liabilities) held for disposal
Invested Capital
Average Annual Invested Capital
Average Annual ROIC
* 2020 calculated on the same basis as 2021.
ADJUSTED NET DEBT/
EBITDA
Adjusted net debt/EBITDA reduced
to 2.2x in 2021 from 2.7x in 2020.
This was driven by a reduction
in net debt from our cash flow
generation and proceeds from the
Premium Cigar Division disposal.
The Group also benefited from
foreign exchange movements
on our net debt position through
the strengthening of sterling
against the euro and US dollar.
This lowered the Group’s adjusted
net debt based on the year-end
balance sheet FX rates when
compared to the prior year.
£ million
Reported net debt
Accrued interest
Lease liabilities
Fair value of interest rate derivatives
Adjusted net debt
We remain committed to delivering
leverage to the lower end of 2.0x
to 2.5x.
Reported net debt reduced by
£1,768 million to £9,373 million
(2020: £11,141 million). Excluding
accrued interest, lease liabilities and
the fair value of derivative financial
instruments providing commercial
hedges of interest risk, Group adjusted
net debt was £8,615 million (2020:
£10,299 million).
2021
3,146
427
3,573
(807)
2,766
(2,523)
16,674
1,723
(3)
15,871
16,744
16.5%
2020*
2,731
796
3,527
(730)
2,797
(3,467)
18,160
1,899
1,024
17,616
18,421
15.2%
2019
(2,461)
18,596
1,979
1,111
19,225
NET DEBT / EBITDA
21
20
19
18
2.2x
2.7x
2.9x
2.9x
2021
(9,373)
140
251
367
2020
(11,141)
156
299
387
(8,615)
(10,299)
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
RECONCILIATION BETWEEN REPORTED AND ADJUSTED PERFORMANCE MEASURES
Operating profit
Net finance costs
Earnings per share (pence)
£ million unless otherwise indicated
Reported
Acquisition and disposal costs
Amortisation & impairment of acquired intangibles
Excise tax provision
Fair value adjustment of loan receivable
Profit on disposal of subsidiaries
Restructuring costs
Fair value and exchange movements on derivative
financial instruments
Post-employment benefits net financing costs
Tax on disposal of Premium Cigar Division
Previously unrecognised tax credits
Uncertain tax positions
Tax on unrecognised losses
Adjustments above attributable to non-controlling interests
Adjusted
Premium Cigar Divestment impact
Adjusted Organic
2021
3,146
17
450
(1)
(15)
(281)
257
–
–
–
–
–
–
–
2020
2,731
26
523
(20)
62
–
205
–
–
–
–
–
–
3,573
(3)
3,570
3,527
(31)
3,496
2021
81
2020
(610)
–
–
–
–
–
–
(496)
(2)
–
–
–
–
(417)
–
(417)
–
–
–
–
–
–
176
5
–
–
–
–
(429)
–
(429)
2021
299.9
1.8
44.3
(0.1)
(1.6)
(29.7)
19.6
(60.7)
(0.3)
(1.2)
(25.3)
–
5.0
(4.6)
247.1
(0.6)
246.5
2020
158.3
2.8
49.2
(1.7)
6.6
–
18.4
25.3
0.4
2.0
(7.1)
8.2
(4.3)
(3.7)
254.4
(7.2)
247.2
Adjusting items
In the 2020 Annual Report and
Accounts we committed to reviewing
our treatment of restructuring costs
as an adjusted measure by the end
of 2020 in line with the completion
of the Cost Optimisation Programmes,
which were due to conclude that year.
However, as previously announced,
the COVID-19 pandemic meant
some of these programmes’ projects
were delayed into 2021, therefore we
deferred the review of the treatment
of restructuring costs as an adjusted
item until the end of this year.
In January, we announced the
outcome of our initial strategic review,
including an associated and specific
time-bound restructuring programme
to deliver new ways of working and
efficiencies, which we refer to as the
2021 Strategic Review Programme.
This resulted in one-off costs to
reshape the business to support
delivery of the new strategy. The
programme excludes any costs
associated with factory footprint
rationalisation. The restructuring
costs for the 2021 Strategic Review
Programme will be treated as an
adjusting item in 2021 and 2022,
by which time the activities are
expected to have been actioned.
No further costs outside of approved
restructuring programmes will be
charged to restructuring in 2022.
Adjusting items also includes
restructuring costs of £257 million,
with further details available in the
restructuring section below.
Following the announcement of the
completion of the Premium Cigar
Division divestment in September
2020, proceeds of €1,041 million were
received as expected in FY21, with
a further €88 million received in
October 2021.
A further €69 million is expected to
be received in 2022 in relation to the
transfer of the La Romana factory in
the Dominican Republic.
.
A reconciliation of the Group’s
adjusted to reported operating profit
is shown above.
The profit on disposal of £281 million
relates to the profit arising on the
divestment of our Premium Cigar
business that was recognised at half
year 2021.
As part of the strategic review, a
charge of £118 million was made in
relation to the impairment of NGP
intangible assets. Of this, £45 million
was recognised as amortisation &
impairment of acquired intangibles,
these having previously been acquired
as part of the Nerudia acquisition. The
further amount of £73 million relates
to internally generated intangibles and
was recognised as restructuring costs.
The Auxly loan receivable was
revalued as at 30 September 2021,
with a £15 million gain recorded due
to a positive credit risk reassessment.
W W W . I M P E R I A L B R A N D S P L C . C O M
77
77
PERFORMANCE GROUP FINANCIAL REVIEW – CONTINUED
The 2021 charges in relation to these restructuring programmes are shown below.
£m
COP I
COP II
2021 Strategic Review Programme
Other
Total
2021
Income
Statement
7
16
226
8
257
Cash
12
41
48
11
112
An overview of the three programmes’ cumulative charges, cash spend and annualised savings is shown below.
Restructuring charge & cash spend
£m
COP I (2013)
COP II (2018)
2021 Strategic Review Programme
Restructuring
There are three restructuring
programmes reflected in our
2021 results.
Cost Optimisation I Programme (COP I)
announced in 2013 is now complete
with small residual charges around the
factory footprint activity.
Cost Optimisation Programme II (COP
II), announced in 2018, is also now
largely complete but did see a small
carry over from activities scheduled
for 2020 that were delayed due to the
COVID-19 pandemic.
During the course of 2021, the Group
announced a third programme as
an output from the strategic review.
This restructuring programme aims to
reorganise and simplify the business,
unlocking efficiency savings to
enable increased investment in our
core capabilities such as sales and
marketing to support the five-year
strategic plan. The majority of
activity under this programme is
expected in 2022 and will be treated
as an adjusting item.
Since the strategy announcement, we
have been working on detailed plans
across a number of different initiatives.
Following our detailed work we expect
cash costs to be around £275 million,
that will extend into 2023 and beyond
with the associated restructuring costs
expected to be in the range of £375 –
£425 million.
Income Statement Charges
Cash Costs
Cumulative
to date
Anticipated
Total
Cumulative
to date
Anticipated
Total
945
848
226
945
848
375-425
571
548
48
634
650
275
Savings
Annualised
Savings
305
320
100-150
The £257 million restructuring
charge in 2021 comprised £226 million
for the 2021 Strategic Review Programme,
£23 million for COP I and II and £8 million
of other costs that mainly related
to Logista.
Finance costs
Adjusted net finance costs were lower
at £417 million (2020: £429 million),
reflecting lower adjusted net debt
balances during the year. Reported net
finance income was £81 million (2020:
costs of £610 million), incorporating
the impact of net fair value and
exchange gains on financial
instruments of £496 million (2020:
losses of £176 million) and post-
employment benefits net financing
income of £2 million (2020: costs of
£5 million). The gains on financial
instruments primarily stem from
foreign exchange accounting gains
of £445 million as the value of euro
financial instruments increased after
sterling strengthened 6.0 per cent
against the euro during the year.
Our all-in cost of debt increased to
4.0 per cent (2020: 3.4 per cent) as
lower cost debt instruments matured
in the year.
Our interest cover increased to
9.2 times (2020: 8.9 times) reflecting
the lower adjusted finance costs.
Taxation
Our adjusted effective tax rate is
22.6 per cent (2020: 20.7 per cent)
and the reported effective tax rate
is 10.2 per cent (2020: 28.1 per cent).
The increase in the adjusted effective
tax rate was due to a less favourable
profit mix and remeasurement of UK
deferred tax balances. The adjusted
tax rate is higher than the reported rate
due to recognition of tax credits arising
on an internal reorganisation of the
Group’s Spanish business and limited
tax arising on both foreign exchange
gains that arise on consolidation and
on the disposal gain on the Premium
Cigar Division disposal.
During the year a payment of
£101 million was made to HMRC in
respect of an on-going EU State Aid
enquiry. A recoverable of the same
value has also been recorded, as based
on advice, we believe the Group has
not received any State Aid. Further
details are provided in Note 8.
We expect our adjusted effective tax
rate for the year ended 30 September
2022 to be around 24 per cent. The
increase in the rate in 2022 is due
to legislative changes and certain
historic tax losses being fully utilised
in 2021.
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In the year there were £1,305 million
of shareholder dividend payments
(2020: £1,753 million). The 25 per cent
reduction represents the FY21 impact
of the one-third rebasing of the dividend
announced in May 2020 as part of the
revised capital allocation policy to
accelerate debt reduction.
Funding/Liquidity
During the year we repaid three
bonds totalling £2.3 billion equivalent
including the early repayment of a
bond with a maturity date of July 2022.
This was repaid from excess cash, which
has the benefit of reducing gross debt
as well as counterparty exposures.
One bond of €1 billion was issued in the
year with a maturity date in 2033. The
denomination of our closing adjusted
net debt was split approximately
77 per cent euro and 23 per cent US
dollar. As at 30 September 2021, the
Group had committed financing in
place of around £12.7 billion, which
comprised 24 per cent bank facilities
and 76 per cent raised from capital
markets. During the year the maturity
date of our existing revolving credit
facility of €3.5 billion was extended to
September 2024 and bilateral facilities
totalling €1.7 billion were cancelled.
The Group remains fully compliant
with all our banking covenants and
remains committed to retaining our
investment grade ratings.
LUKAS PARAVICINI
CHIEF FINANCIAL OFFICER
The effective tax rate is sensitive to the
geographic mix of profits, reflecting a
combination of higher rates in certain
markets such as the USA and lower
rates in other markets such as the UK.
The rate is also sensitive to future
legislative changes affecting
international businesses such as
changes arising from the OECD’s
(Organisation for Economic Co-
operation and Development) Base
Erosion and Profits Shifting (BEPS)
work. Whilst we seek to mitigate the
impact of these changes, we anticipate
there will be further upward pressure
on the adjusted and reported tax rate
in the medium term.
Our Group Tax Strategy is publicly
available and can be found in
the governance section of our
corporate website.
Exchange rates
Foreign exchange had an adverse
impact on Group adjusted operating
profit and earnings per share at
average exchange rates (2.7 per
cent and 3.1 per cent, respectively)
as sterling strengthened against the
US dollar (7.3 per cent). Other major
currencies remained broadly flat
compared to the prior year.
Dividend payments
The Group paid two interim dividends
of 21.06 pence per share in June and
September 2021.
The Board has approved a further
interim dividend of 48.48 pence per
share and will propose a final dividend
of 48.48 pence per share, bringing
the total dividend for the year to
139.08 pence.
The third interim dividend will be paid
on 31 December 2021 to shareholders
registered on 26 November 2021.
Subject to AGM approval, the
proposed final dividend will be paid
on 31 March 2022 to shareholders
registered on 18 February 2022.
W W W . I M P E R I A L B R A N D S P L C . C O M
79
79
PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING RISK
The principal risks faced by the Group and our risk management
approach are described in the following pages.
Risks represent an articulation of
the variability of outcomes that we
manage in the achievement of the
Group’s strategy. We define a risk
as anything that could disrupt the
achievement of the Group’s strategy
and objectives.
In the development of the Group’s
strategy, the Board and management
have completed a review of the risk
landscape (current and emerging) and
related profiling, with risk mitigations
and impacts assessed in the context of
strategic deliverables.
Many of these risks are external and
cannot be fully mitigated, and whilst
the Group continues to monitor its risk
landscape there can be no guarantee
that additional risks will not arise, or
that other known risks not mentioned
increase in materiality.
The COVID-19 pandemic has
highlighted, above any other
recent event, the value of effective
and proactive approaches to the
identification and management
of risks.
The unprecedented nature of this
event, its duration, and the short-term
flexibility its mitigation has required,
have placed great reliance not only on
the Group’s existing approaches but
also on its ability to respond to new
challenges and identify and manage
the inherent risks to achieve the
Group’s strategic aims.
RISK APPETITE
The Board is responsible for setting
the Group’s risk appetite and has
completed its annual exercise
to ensure this is aligned to, and
supports, the new Group strategy.
The Board risk appetite forms the
basis of the Group’s risk management
approach. It supports the achievement
of objectives and the Board’s wider
responsibility for risk management
through clear communication of the
expected outcomes of key controls
and related monitoring.
RISK MANAGEMENT
AND FRAMEWORK
The framework is designed to best ensure
accountability for the identification,
assessment and mitigation of risks
throughout the business, supported
by appropriate capabilities.
During the year, the Group
strengthened its risk management
framework with the introduction of
a Group Risk Committee, chaired by
the CEO. This further formalises and
embeds accountability throughout
the business and ensures appropriate
focus on risk management through a
clear tone from the top.
The successful implementation of the
risk management approach is reliant
upon the effectiveness of the control
frameworks in place to both manage
risks and seize opportunities that arise.
In designing an approach that enables
the business to achieve its strategic
objectives in alignment with the
Board’s risk appetite, the Company’s
approach to governance, risk
management and internal control has
been aligned to the “three lines model”.
RISK LANDSCAPE
The Group operates in highly
competitive multinational markets
and so faces general commercial risks
associated with a large FMCG business.
We constantly assess and evaluate
the risks posed by the changing
environments in which we operate,
whether geo-political, socio-economic
or technological. The consideration of
the potential impacts and most likely
causes ensures a timely, measured and
appropriate response.
ASSESSMENT AND
EVALUATION OF RISKS
The assessment of risks is aligned
with our business planning cycle
and strategic objectives, and focuses
not only on the identification and
assessment of risks, but also, and most
importantly, on the effectiveness of the
actions in place to mitigate these risks
in line with risk appetite.
This additional focus on the quality
of mitigating actions increases
accountability for the design of
control frameworks by risk owners,
and operational compliance with these
Group requirements. Through this
evaluation of mitigation effectiveness,
we are able to establish a more
effective prioritisation of additional
actions and resource allocation.
In completing these assessments
we adopt a dynamic approach
which facilitates and collates views
from functional risk owners and a
broad spectrum of other relevant
stakeholders, providing cross-
functional, end-to-end insights from a
wider collection of second line experts.
This approach obtains a richer and
more balanced perspective on current
and emerging risks, at operational
and Board level, with greater insight
on the effectiveness of mitigation
design, notably where cross-functional
dependencies exist. This is of value
to the Group given the scale of its
multinational, multi-cultural footprint.
The emergence of risks is considered
on an ongoing basis across the
business, with a general three-year
horizon (though longer where
applicable, e.g. climate risk). This
includes consideration of changes in
the cause of existing risks (e.g. specific
proposed regulatory change) to ensure
the effectiveness of current and future
mitigations are evaluated. Key areas
have been presented to the Board
in the year, including cyber, ESG
(including climate), and regulatory
change, as well as risks as part of the
formulation of the Group strategy, and
risk reporting processes.
High-impact risks identified in
functional assessments are
consolidated for review by senior
management to ensure an effective
“top-down” input from both the ELT
and the Board. This provides both
operational and strategic perspectives
in the assessment of the risks
we face as a business, and ensures
consideration of these risks in
relation to the Group strategy.
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TOP-DOWN
INPUTS
BOTTOM-UP
INPUTS
I
R
S
K
G
O
V
E
R
N
A
N
C
E
I
R
S
K
M
A
N
A
G
E
M
E
N
T
I
R
S
K
O
W
N
E
R
S
H
P
I
BOARD AND SENIOR MANAGEMENT
Board
ELT
Provides its perspectives
on current and emerging
risks (see page 117),
mitigations, and
approves risk assessment
outputs and Annual
Report content.
Provides cross-functional
perspectives and agrees
key risks and related
mitigation effectiveness.
Risk Committee
Provides perspectives
on the risks raised
and the most effective
presentation of risks for
ELT and Board review.
FIRST LINE
Local management owns the management of risks and it is
their responsibility to identify and mitigate these risks.
• Operational risk assessment completed across the business
• Sales and manufacturing perspectives obtained
• Risks, impacts and mitigation effectiveness discussed and
agreed with functional leadership teams
SECOND LINE
Central functions and committees, employing subject matter
experts, develop appropriate policy, process, and control
structures in line with the Board’s risk appetite and provide
support to first line management to best ensure their effective
ongoing application.
• Risk owner/expert assesses impacts, mitigations
and interdependencies
• Validate speed of impact assessments
• Provide additional perspectives on permanency of impacts,
notably reputational impacts
• Investor Relations team provides independent assessment
of investor focus in “sentiment” impacts
THIRD LINE
Our Internal
Audit team
independently
reviews
compliance
with, and the
effectiveness
of, our risk
management
and internal
control system.
Internal Audit
reports the
results of their
work to
the Audit
Committee,
who, in turn,
report relevant
findings to
the Board.
In the year the Group has made
changes in the reporting of its key
(principal) risks. This approach reflects
our simplified Operating Model and
was further supported by Board input
and discussion. The risks reported
remain materially consistent. In line
with the change in Group strategy, we
have introduced a more transparent
and consistent understanding and
reporting of the risks at all levels of the
business, further improving our risk
management culture. In achieving this
we have evolved the categorisation of
risks within our risk register to more
tangibly articulate the risks, as well
as the underlying causes, impact, and
mitigating actions.
In line with the viability statement
and our business planning processes,
we consider the impact of risks to
achieving both the 12-month business
plan and the longer three-year viability
horizon to ensure appropriate actions
can be taken in the short term to
facilitate the appropriate mitigation
of current and future risk impacts.
The mitigation and management of
identified risks is vital to the success
of the Group. The Group’s risk
management and internal control
framework and related reporting
are further discussed in the Audit
Committee Report on page 111.
RISK MANAGEMENT
OVERSIGHT AND SUPPORT
Risks are assigned to a Centre of
Expertise (CoE), predominantly
second line functions, to ensure
appropriate risk management
approaches are defined, and to
provide oversight and support to
operational management in effectively
implementing requirements across our
global footprint.
Our second line plays an active role
in the risk management process in a
“player/coach” relationship with the
first line. Depending on the nature
and size of the risk in question, this
relationship may take either a directive
form, by setting policies and standards,
or a more consultative form to provide
guidance and subject matter expertise.
Operational management is held
accountable for the management
of those risks applicable to it and for
ensuring compliance with our Group
policies and standards.
Our Group Control Matrix (GCM)
consolidates and communicates the
expected minimum controls described
in Group policies and standards that
are required to be performed across the
business. The operating effectiveness
of these GCM controls is assessed on a
regular basis by management, as well
as through Internal Audit activities.
Additionally, operational management
at Group and local level is required to
certify its compliance with the Code of
Conduct and the Group’s policies and
standards at both the half year and
full year.
Results of risk assessments
and internal control operating
effectiveness assessments are
shared with relevant second line
CoEs for expert insights and to help
enhance applicable internal control,
as well as the guidance they provide
to the business. Additionally, the
information is provided to Internal Audit
for reference during both audit testing
and development of audit plans.
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81
81
PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
PRINCIPAL RISKS
In the following section we highlight the principal risks we face and identify the mitigations that we
have in place to manage them. Not all of these principal risks are within our direct control, and the
list cannot be considered to be exhaustive, as other risks and uncertainties may emerge in a changing
business environment. In order to assist the reader we include an illustration of the primary impact
each risk might have on relevant strategy elements and the change in profile of the risk compared
to the previous year. All risks are reported on a mitigated basis.
In the year we have made changes in the presentation of our principal risks. We have added
Cyber and ESG as principal risks, which were previously considered within other risks, and no
longer include Financial Management or Financial Reporting due to a decline in their relative
net impact.
The risks are reported at a consolidated Board level with key underlying risks identified.
Principal risk
Change in year
Impact
Mitigation
Opportunity
FAILURE TO MANAGE THE IMPACTS
OF PRODUCT REGULATORY CHANGE
The risk that regulatory change aimed at further de-
normalising the consumption of tobacco and nicotine
products adversely impacts the Group’s products, markets,
manufacturing processes, customers, and/or consumers.
Risk
profile
Strategic
impact
Drive value from our
broader market portfolio
• Compliance with the implementation of an EU menthol
ban impacted European markets
• Proposed regulatory change in US and Australia
impacting the use of menthol and other characterising
flavours. US Federal ban is most likely to take longer
than the Group’s three-year risk horizon. However, State/
County/City legislation could be implemented in advance
of this
• Roll-out of Track and Trace requirements in product
supply chain has commenced across Africa and the
Middle East
FAILURE TO DEVELOP COMMERCIALLY
SUSTAINABLE NGP CATEGORIES
Failure to develop a portfolio of commercially sustainable,
science based, reduced risk products, that meet consumer
needs, could impact the Group’s ability to seize market
opportunities and deliver its ESG agenda.
• Strategy development identified further opportunity within
heated tobacco, increasing focus on development of portfolio
and product offering
• Recruitment of a Chief Consumer Officer and setting up of
the Global Consumer Office
• US PMTA submission for EVP products subject to ongoing
Risk
profile
Strategic
impact
Build a targeted
NGP business
approval process
• Specific NGP excise structures starting to be implemented
across markets, impacting the excise differential between
combustible and NGP products
• Improved customer engagement strategy implemented,
providing higher quality insights
• Continued competitor activity in the NGP market with
increasing share of wider nicotine market through product
development and marketing initiatives
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• Product regulatory change can
• We engage with authorities to
• While stringent regulation provides
restrict product specification
(e.g., menthol ban), consumer
provide informed input and evidence
a burden on all firms, it provides
of the unintended consequences
the least burden on businesses
interaction, and product supply,
of disproportionate changes in
product regulation, supported
that operate from an existing
high baseline of compliance
and place restrictions on
consumers’ ability to enjoy the
product, potentially impacting
sales volumes and market size
by our Regulatory and Scientific
and responsibility
affairs teams
• Regulation can be of benefit to
• Project teams are in place to manage
consumers and to responsible
• Compliance with increasingly
the impacts of regulatory change,
market players through the
complex regulatory requirements
ensuring required compliance
increases the risk of both additional
is achieved and strategic
cost to the Group and the risk
opportunities identified
removal of less responsible
companies’ ability to operate
freely within the market place
of non-compliance, which could
result in investigation, regulatory
censure, financial penalty and
reputational damage
• Where interpretation of regulation
is required, judgements taken can
lead to dispute or investigation
by regulators and result in
possible related financial costs or
reputational damage even where
no fault is proven
• Group policies, guidance and
• Global regulators are increasingly
processes are aligned to changes
moving towards a policy of
in legislation and requirements
tobacco harm reduction. Such
• Legal action can be taken to defend
against or prevent regulatory change
where this impacts the Group’s
brands or local legal freedoms
policies accept the reduced risk that
non-combustible nicotine products
offer adult smokers in comparison
to cigarettes and other traditional,
combustible products
• Failure to accurately predict or
• Dynamic consumer and market
• Our improved ability to meet
identify current and emerging
analysis to feed product development
consumer needs and robust
consumer trends could result in lost
and go-to market model
opportunities, and lower volumes
should our products have reduced
relevance to consumers
• Failure to align NGP portfolio to
consumer needs and expectations
results in failure to achieve our
NGP ambition
• Failure to develop NGP categories
could impact achievement of key
ESG priorities
consumer validation are key
drivers of commercial success
• Development of consumer-centric
products bringing alive the Group’s
• The Group’s experience in
agile “fast-follower” strategy
• Pilot launches of Pulze heated tobacco
product commenced
• Creation of consolidated NGP category
combustible and NGP provides
it with a strong base to meet
the needs of the wider changing
nicotine market dynamic
management approach enabling
holistic view of opportunities and
informed investment strategy
CLIMATE CHANGE
We recognise the importance of disclosing climate-related risks and opportunities. We have reported on our approach
to managing and mitigating climate related risks for a number of years, both within our Sustainability Reporting and
CDP disclosures.
Whilst we have assessed both the physical (climatic) and transitional (technological) risks that may impact our
business, we do not focus on climate change as a principal risk in itself. Instead we find greater value in ensuring that
the risks and opportunities are assessed by each risk owner. With the support of subject matter experts, risk owners
review the potential cause and likelihood of the risk materialising. For example, how extreme weather events or
increased prices may impact on the supply of raw materials.
By ensuring the assessment of the risks and opportunities on an enterprise-wide basis we have created a framework
which operationalises the mitigation of climate risk and creates accountability across the organisation. Further
information on our ESG approach can be found on page 54.
Principal risk
Change in year
Impact
Mitigation
Opportunity
FAILURE TO MANAGE THE IMPACTS
OF PRODUCT REGULATORY CHANGE
The risk that regulatory change aimed at further de-
normalising the consumption of tobacco and nicotine
products adversely impacts the Group’s products, markets,
manufacturing processes, customers, and/or consumers.
• Compliance with the implementation of an EU menthol
ban impacted European markets
• Proposed regulatory change in US and Australia
impacting the use of menthol and other characterising
flavours. US Federal ban is most likely to take longer
than the Group’s three-year risk horizon. However, State/
County/City legislation could be implemented in advance
• Roll-out of Track and Trace requirements in product
supply chain has commenced across Africa and the
of this
Middle East
FAILURE TO DEVELOP COMMERCIALLY
SUSTAINABLE NGP CATEGORIES
• Strategy development identified further opportunity within
heated tobacco, increasing focus on development of portfolio
Failure to develop a portfolio of commercially sustainable,
science based, reduced risk products, that meet consumer
needs, could impact the Group’s ability to seize market
and product offering
• Recruitment of a Chief Consumer Officer and setting up of
the Global Consumer Office
opportunities and deliver its ESG agenda.
• US PMTA submission for EVP products subject to ongoing
approval process
• Specific NGP excise structures starting to be implemented
across markets, impacting the excise differential between
combustible and NGP products
• Improved customer engagement strategy implemented,
providing higher quality insights
• Continued competitor activity in the NGP market with
increasing share of wider nicotine market through product
development and marketing initiatives
• Product regulatory change can
restrict product specification
(e.g., menthol ban), consumer
interaction, and product supply,
and place restrictions on
consumers’ ability to enjoy the
product, potentially impacting
sales volumes and market size
• Compliance with increasingly
complex regulatory requirements
increases the risk of both additional
cost to the Group and the risk
of non-compliance, which could
result in investigation, regulatory
censure, financial penalty and
reputational damage
• Where interpretation of regulation
is required, judgements taken can
lead to dispute or investigation
by regulators and result in
possible related financial costs or
reputational damage even where
no fault is proven
• We engage with authorities to
provide informed input and evidence
of the unintended consequences
of disproportionate changes in
product regulation, supported
by our Regulatory and Scientific
affairs teams
• Project teams are in place to manage
the impacts of regulatory change,
ensuring required compliance
is achieved and strategic
opportunities identified
• Group policies, guidance and
processes are aligned to changes
in legislation and requirements
• Legal action can be taken to defend
against or prevent regulatory change
where this impacts the Group’s
brands or local legal freedoms
• While stringent regulation provides
a burden on all firms, it provides
the least burden on businesses
that operate from an existing
high baseline of compliance
and responsibility
• Regulation can be of benefit to
consumers and to responsible
market players through the
removal of less responsible
companies’ ability to operate
freely within the market place
• Global regulators are increasingly
moving towards a policy of
tobacco harm reduction. Such
policies accept the reduced risk that
non-combustible nicotine products
offer adult smokers in comparison
to cigarettes and other traditional,
combustible products
• Failure to accurately predict or
identify current and emerging
consumer trends could result in lost
opportunities, and lower volumes
should our products have reduced
relevance to consumers
• Dynamic consumer and market
analysis to feed product development
and go-to market model
• Development of consumer-centric
products bringing alive the Group’s
agile “fast-follower” strategy
• Failure to align NGP portfolio to
• Pilot launches of Pulze heated tobacco
consumer needs and expectations
results in failure to achieve our
NGP ambition
• Failure to develop NGP categories
could impact achievement of key
ESG priorities
product commenced
• Creation of consolidated NGP category
management approach enabling
holistic view of opportunities and
informed investment strategy
• Our improved ability to meet
consumer needs and robust
consumer validation are key
drivers of commercial success
• The Group’s experience in
combustible and NGP provides
it with a strong base to meet
the needs of the wider changing
nicotine market dynamic
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PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
Principal risk
Change in year
Impact
Mitigation
Opportunity
INABILITY TO DEVELOP, EXECUTE
AND COMMUNICATE AN EFFECTIVE ESG
STRATEGY IN LINE WITH EXPECTATIONS
OF RELEVANT STAKEHOLDERS
Failure to align the development, execution and
communication of the Group’s ESG strategy to external
expectations. The pace of change in external requirements
and expectations is significant, with greater focus on
integrity of reporting, and comparison cross-industry
and between sector peers.
Risk
profile
Strategic
impact
Performance-based
culture and capabilities
• Increased focus on ESG related matters from investors and
• Should the Group fail to meet
• ESG strategy, agenda and
• Positive ESG strategies and
external stakeholders
• Increased reporting requirements exist, notably for climate
and environmental-related risks, with the Group committed
to actions to reduce its impact on the environment (e.g., TCFD)
• As with all multinationals the Group manages increasing
climatic impacts across its global footprint
• Strategy to support investment in the NGP business to offer
adult smokers potentially reduced risk products has been
communicated and included within the Group’s ESG agenda
• Recruitment of additional specialist capabilities including
experienced global ESG lead
PRICING, EXCISE OR OTHER PRODUCT TAX
OUTCOMES NOT IN LINE WITH BUSINESS PLAN
ASSUMPTIONS OR EXPECTATIONS
Failure to identify or manage increases, or proposed
increases, in excise or other product-related taxes, or
changes in tax structures, could impact achievement
of objectives.
Risk
profile
Strategic
impact
Drive value from our
broader market portfolio
• Potential for Federal excise increase in the US
• Development of EU excise directive
• Tracking of consumer preferences identified downtrading
across priority markets as consumers exhibit increased
price consciousness
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expectations, or to ensure at least
communications, including ongoing
communications can increase the
parity with industry peers, this may
development and materiality
attractiveness of the organisation
impact its reputation as a sustainable
assessment, aligned to strategic
to new joiners, and increase the
business and adversely affect
goals and targets
engagement of existing employees
stakeholder sentiment
• ESG Committee with executive
• Sustainability is an increasing factor
• Failure to comply with key ESG-related
representation in place to
in customer and consumer choices
regulation, including environmental
provide oversight
across FMCG sectors
and human rights legislation would
result in a material impact to the
Group, including, but not limited to,
financial penalties
• Reputational damage may result from
allegations, even where no wrongdoing
has occurred
• Investor and stakeholder
• Sustainability initiatives can reduce
presentations ensure alignment
long-term financial costs through
with expectations and transparency
greater efficiency and reduced waste
on progress of Group actions
• Investor and wider stakeholder
• TCFD disclosures and related actions
sentiment increase toward companies
facilitate robust reporting and control
with successful and proven ESG
frameworks (TCFD overview page 63)
strategies and initiatives
• Employee engagement may be
• Responsibility and accountability for
adversely affected as a result of any
perception that the Group is acting in
an inappropriate manner
identification of ESG-related risks
understood by the Company and
continue to be embedded across
the business
• Policy, training, guidance and
effective governance provided by
both internal and external subject
matter experts
• Pricing pressures may result from
• Subject matter experts assess
• The development of the Group
increased taxation as consumer
global excise risks, and model price
strategy includes analysis of planned
affordability may be impacted. This
elasticity to best ensure the business
and potential changes in product
could result in downtrading to lower
plan and strategy are developed and
taxation to best identify and ensure
price products/categories, reduced
aligned to consumer insights
investment opportunities across its
consumption, cessation of smoking,
or increase the attractiveness of illicit
product, impacting sales volumes,
revenues, profitability and market size
• We engage with authorities to provide
range of products
informed input and evidence about
• The Group product portfolio is aligned
the unintended consequences of
to potential impacts of change in
disproportionate changes in product
consumer behaviour, with products
• In markets where consumers are
taxation, supported by our Regulatory
at various price points
increasingly price conscious the
and Anti-Illicit Trade teams
• Tailored product portfolio offerings
ability to achieve planned price
increases may be impacted, resulting
in reduced profitability as the Group
protects market share
• Robust internal policy and procedures
at a local level, within and across
exist to best ensure compliance
categories, allow for any relative
within our own supply chain and
commercial advantage from excise
maintain strong standards and
mechanisms to be realised
• Counterfeit and illicit trade thrive in
controls for our business and our
high-excise environments, reducing
first-line customers to prevent
the size of the legitimate tobacco
diversion of our products
market, increasing risks to consumers
• We work alongside and partner with
from non-compliant product, and
financing organised crime
governments and law enforcement
agencies around the world to prevent
• Inferior, unregulated counterfeit
the illicit supply of tobacco products
product could result in damage to
• Our Revenue Growth Management
our brands
function is responsible for the
identification and management of
strategic commercial opportunities
arising from excise change
INABILITY TO DEVELOP, EXECUTE
AND COMMUNICATE AN EFFECTIVE ESG
STRATEGY IN LINE WITH EXPECTATIONS
OF RELEVANT STAKEHOLDERS
Failure to align the development, execution and
external stakeholders
• Increased reporting requirements exist, notably for climate
and environmental-related risks, with the Group committed
to actions to reduce its impact on the environment (e.g., TCFD)
communication of the Group’s ESG strategy to external
• As with all multinationals the Group manages increasing
expectations. The pace of change in external requirements
climatic impacts across its global footprint
and expectations is significant, with greater focus on
• Strategy to support investment in the NGP business to offer
integrity of reporting, and comparison cross-industry
adult smokers potentially reduced risk products has been
and between sector peers.
communicated and included within the Group’s ESG agenda
• Recruitment of additional specialist capabilities including
experienced global ESG lead
PRICING, EXCISE OR OTHER PRODUCT TAX
OUTCOMES NOT IN LINE WITH BUSINESS PLAN
ASSUMPTIONS OR EXPECTATIONS
Failure to identify or manage increases, or proposed
increases, in excise or other product-related taxes, or
changes in tax structures, could impact achievement
of objectives.
• Potential for Federal excise increase in the US
• Development of EU excise directive
• Tracking of consumer preferences identified downtrading
across priority markets as consumers exhibit increased
price consciousness
Principal risk
Change in year
Impact
Mitigation
Opportunity
• Increased focus on ESG related matters from investors and
• Should the Group fail to meet
• ESG strategy, agenda and
• Positive ESG strategies and
expectations, or to ensure at least
parity with industry peers, this may
impact its reputation as a sustainable
business and adversely affect
stakeholder sentiment
• Failure to comply with key ESG-related
regulation, including environmental
and human rights legislation would
result in a material impact to the
Group, including, but not limited to,
financial penalties
• Reputational damage may result from
allegations, even where no wrongdoing
has occurred
• Employee engagement may be
adversely affected as a result of any
perception that the Group is acting in
an inappropriate manner
communications, including ongoing
development and materiality
assessment, aligned to strategic
goals and targets
• ESG Committee with executive
representation in place to
provide oversight
• Investor and stakeholder
presentations ensure alignment
with expectations and transparency
on progress of Group actions
• TCFD disclosures and related actions
facilitate robust reporting and control
frameworks (TCFD overview page 63)
• Responsibility and accountability for
identification of ESG-related risks
understood by the Company and
continue to be embedded across
the business
• Policy, training, guidance and
effective governance provided by
both internal and external subject
matter experts
communications can increase the
attractiveness of the organisation
to new joiners, and increase the
engagement of existing employees
• Sustainability is an increasing factor
in customer and consumer choices
across FMCG sectors
• Sustainability initiatives can reduce
long-term financial costs through
greater efficiency and reduced waste
• Investor and wider stakeholder
sentiment increase toward companies
with successful and proven ESG
strategies and initiatives
• Pricing pressures may result from
increased taxation as consumer
affordability may be impacted. This
could result in downtrading to lower
price products/categories, reduced
consumption, cessation of smoking,
or increase the attractiveness of illicit
product, impacting sales volumes,
revenues, profitability and market size
• In markets where consumers are
increasingly price conscious the
ability to achieve planned price
increases may be impacted, resulting
in reduced profitability as the Group
protects market share
• Counterfeit and illicit trade thrive in
high-excise environments, reducing
the size of the legitimate tobacco
market, increasing risks to consumers
from non-compliant product, and
financing organised crime
• Inferior, unregulated counterfeit
product could result in damage to
our brands
• Subject matter experts assess
• The development of the Group
strategy includes analysis of planned
and potential changes in product
taxation to best identify and ensure
investment opportunities across its
range of products
• The Group product portfolio is aligned
to potential impacts of change in
consumer behaviour, with products
at various price points
• Tailored product portfolio offerings
at a local level, within and across
categories, allow for any relative
commercial advantage from excise
mechanisms to be realised
global excise risks, and model price
elasticity to best ensure the business
plan and strategy are developed and
aligned to consumer insights
• We engage with authorities to provide
informed input and evidence about
the unintended consequences of
disproportionate changes in product
taxation, supported by our Regulatory
and Anti-Illicit Trade teams
• Robust internal policy and procedures
exist to best ensure compliance
within our own supply chain and
maintain strong standards and
controls for our business and our
first-line customers to prevent
diversion of our products
• We work alongside and partner with
governments and law enforcement
agencies around the world to prevent
the illicit supply of tobacco products
• Our Revenue Growth Management
function is responsible for the
identification and management of
strategic commercial opportunities
arising from excise change
W W W . I M P E R I A L B R A N D S P L C . C O M
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85
PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT PORTFOLIO AND/OR
INTERACTION APPROACH NOT
ALIGNED TO CONSUMER PREFERENCES
Product portfolio not aligned to consumer needs or
demands, and/or product development not sufficiently
agile to respond to changes in preferences or market
structure and competitor offerings. Brand strength is
not strong enough to attract or retain customers.
Risk
profile
Strategic
impact
Consumer at the centre
of the business
• Emergence of new low-price tiers across many markets
• Continuation of downtrading trend continues as consumers
become increasingly value driven
• Creation of Global Consumer Office in line with consumer
focus strategy
FAILURE TO ENSURE EXPECTED BENEFITS OF
STRATEGIC TRANSFORMATION PROGRAMME
Failure to deliver effective organisational change
which ensures a sustainable operating model, aligned to
delivery of the Group strategy. Failure to realise expected
benefits of change initiatives or unexpected outcomes,
resulting in short-term inefficiencies and pressure to
achieve objectives.
Risk
profile
Strategic
impact
Simplified and
efficient operations
• Group-wide organisational change initiatives have commenced.
The scale of this change has inherent risks associated with
programmes of this nature
• Change management structures and governance
implemented at both Group and local level to best
support change initiatives
MAJOR INCIDENT RESULTING FROM CYBER OR
SIMILAR TECHNOLOGY RISK
Risk of cyber-attack or other technology incident results
in a major system outage or denial of service. The criticality
of Group systems, notably Track and Trace related, has
significantly increased with key reliance on system
availability both internally and through the supply chain.
• External environment highlights increasing risk of corporate
cyber-attacks including use of “insider” resource to carry out
cyber-attacks, notably ransomware
• Increasing risk to all businesses of attack through extended
supply chain where one company is breached and others to
which it has connections are then also impacted
Risk
profile
Strategic
impact
Simplified and
efficient operations
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• If the Group’s product portfolio
• Chief Consumer Officer and Global
• The development of products and/or
fails to meet consumer preferences,
Consumer Office leadership roles
relevant route to market and pricing
then reduced demand will result in
recruited in year to strengthen
strategies that meet and drive
lower sales volumes and reduced
consumer focus
consumer demand
brand equity
• Failure to ensure effective
implementation of market or
• Brand initiatives and
opportunities identified and
developments completed
retail initiatives could result in lost
opportunities and wasted investments
• Consumer panel approach
updated to provide more
• Speed and quality of innovation
enables the drumbeat of consumer
activations that ensure both
brand relevance and continued
brand loyalty
• Failure to act upon consumer insights
effective feedback processes
• Management of “local hero” brands
prevents opportunities from being
seized and impacts growth
• Brand monitoring, including equity
in market offers ability to realise
tracking updated
local opportunities
• Failure to identify IP constraints in
• Innovation processes are designed
• Failure to meet project timelines
• Robust business case approval
• Successful delivery of key
process in place with wide
organisational change projects
improves the efficiency and
effectiveness of the Group,
better enabling it to achieve
its strategic goals
• Identification of opportunities
in development of strategy and
execution of “must win battles”
in priority markets
the innovation of new products could
impact development and/or launch
limiting the ability to respond to
competitor offerings
to develop consumer products based
upon robust analysis, testing and
scientific support
• IP risks are managed by subject
matter experts within the Group
• The alignment of innovation and
development plans with the Group’s
current NGP ambition
or key milestones can result in
increased implementation cost
and opportunity costs
stakeholder input
• Appropriate steering committee
• Budgeted savings/returns may not
structure and reporting in place,
be achieved in key strategic projects
with cross-functional involvement
• Non-achievement of strategic
• Project benefits realisation verified
objectives could result in loss of
at key project milestones
investor and market confidence
• Reporting of incorrect or
• Resource requirements constantly
reviewed, with specialist project
unsubstantiated benefits realisation
management resource employed
• Failure to consider and effectively
• Local project management teams in
manage localised impacts of strategic
place to support change programme
change could impact short-term
operational performance
• Loss of critical systems could impact
• Cyber risk assessment completed
product supply to markets or retailers
and actions implemented to further
• Failure to protect personal private
protect business
data could result in regulatory breach
• Vulnerability scanning in place to
and related censure, financial penalty
ensure ongoing threat protection
and reputational damage
• External penetration testing
• Cyber breach could result in loss of
completed on an ongoing basis
sensitive corporate data, impacting
achievement of strategy, reputational
damage, significant cost to the Group
or lost competitive advantage
• Workstation security and cloud
services implemented
• Crisis management scenario
planning and response activities
in place and tested
• Additional specialist capabilities
recruited internally to continually
improve approach
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT PORTFOLIO AND/OR
INTERACTION APPROACH NOT
ALIGNED TO CONSUMER PREFERENCES
• Emergence of new low-price tiers across many markets
• Continuation of downtrading trend continues as consumers
become increasingly value driven
Product portfolio not aligned to consumer needs or
• Creation of Global Consumer Office in line with consumer
demands, and/or product development not sufficiently
focus strategy
agile to respond to changes in preferences or market
structure and competitor offerings. Brand strength is
not strong enough to attract or retain customers.
FAILURE TO ENSURE EXPECTED BENEFITS OF
STRATEGIC TRANSFORMATION PROGRAMME
• Group-wide organisational change initiatives have commenced.
The scale of this change has inherent risks associated with
Failure to deliver effective organisational change
which ensures a sustainable operating model, aligned to
delivery of the Group strategy. Failure to realise expected
benefits of change initiatives or unexpected outcomes,
resulting in short-term inefficiencies and pressure to
achieve objectives.
programmes of this nature
• Change management structures and governance
implemented at both Group and local level to best
support change initiatives
MAJOR INCIDENT RESULTING FROM CYBER OR
SIMILAR TECHNOLOGY RISK
• External environment highlights increasing risk of corporate
cyber-attacks including use of “insider” resource to carry out
Risk of cyber-attack or other technology incident results
in a major system outage or denial of service. The criticality
of Group systems, notably Track and Trace related, has
significantly increased with key reliance on system
availability both internally and through the supply chain.
cyber-attacks, notably ransomware
• Increasing risk to all businesses of attack through extended
supply chain where one company is breached and others to
which it has connections are then also impacted
• If the Group’s product portfolio
fails to meet consumer preferences,
then reduced demand will result in
lower sales volumes and reduced
brand equity
• Failure to ensure effective
implementation of market or
retail initiatives could result in lost
opportunities and wasted investments
• Failure to act upon consumer insights
prevents opportunities from being
seized and impacts growth
• Chief Consumer Officer and Global
Consumer Office leadership roles
recruited in year to strengthen
consumer focus
• Brand initiatives and
opportunities identified and
developments completed
• Consumer panel approach
updated to provide more
effective feedback processes
• Brand monitoring, including equity
tracking updated
• Failure to identify IP constraints in
• Innovation processes are designed
• The development of products and/or
relevant route to market and pricing
strategies that meet and drive
consumer demand
• Speed and quality of innovation
enables the drumbeat of consumer
activations that ensure both
brand relevance and continued
brand loyalty
• Management of “local hero” brands
in market offers ability to realise
local opportunities
• Successful delivery of key
organisational change projects
improves the efficiency and
effectiveness of the Group,
better enabling it to achieve
its strategic goals
• Identification of opportunities
in development of strategy and
execution of “must win battles”
in priority markets
the innovation of new products could
impact development and/or launch
limiting the ability to respond to
competitor offerings
• Failure to meet project timelines
or key milestones can result in
increased implementation cost
and opportunity costs
• Budgeted savings/returns may not
be achieved in key strategic projects
• Non-achievement of strategic
objectives could result in loss of
investor and market confidence
• Reporting of incorrect or
unsubstantiated benefits realisation
• Failure to consider and effectively
manage localised impacts of strategic
change could impact short-term
operational performance
to develop consumer products based
upon robust analysis, testing and
scientific support
• IP risks are managed by subject
matter experts within the Group
• The alignment of innovation and
development plans with the Group’s
current NGP ambition
• Robust business case approval
process in place with wide
stakeholder input
• Appropriate steering committee
structure and reporting in place,
with cross-functional involvement
• Project benefits realisation verified
at key project milestones
• Resource requirements constantly
reviewed, with specialist project
management resource employed
• Local project management teams in
place to support change programme
• Loss of critical systems could impact
product supply to markets or retailers
• Failure to protect personal private
• Cyber risk assessment completed
and actions implemented to further
protect business
data could result in regulatory breach
and related censure, financial penalty
and reputational damage
• Cyber breach could result in loss of
sensitive corporate data, impacting
achievement of strategy, reputational
damage, significant cost to the Group
or lost competitive advantage
• Vulnerability scanning in place to
ensure ongoing threat protection
• External penetration testing
completed on an ongoing basis
• Workstation security and cloud
services implemented
• Crisis management scenario
planning and response activities
in place and tested
• Additional specialist capabilities
recruited internally to continually
improve approach
W W W . I M P E R I A L B R A N D S P L C . C O M
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87
PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
Principal risk
Change in year
Impact
Mitigation
Opportunity
FAILURE TO APPROPRIATELY MANAGE
LITIGATION AND INVESTIGATIONS
RESULTS IN ADVERSE JUDGMENTS
AND/OR RELATED COSTS
Similar to other corporates, litigation and other claims
are pending against the Group. The interpretation of law
(including taxation) and the related judgements taken in
relation to these laws can lead to dispute or investigation
and possible financial costs or reputational damage.
Risk
profile
Strategic
impact
Simplified and efficient
operations
• Increase in litigation activity related to the aggressive
marketing previously employed by competitors in the
US EVP market could result in precedents which increase
claims made against responsible manufacturers. Even
where these claims do not result in prosecution there
may be costs associated with defending such matters
MANAGEMENT OF LIQUIDITY AND
FINANCING REQUIREMENTS
Failure to manage liquidity and financing requirements
resulting in going concern or viability concerns.
Risk
profile
Strategic
impact
Simplified and
efficient operations
• Successful long-term funding initiatives completed in-year
• Increased focus of funders on ESG-related matters, and
disclosures, notably in relation to sector
• Further deleveraging of the business has occurred during
the year, and continues to be a key area of focus
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
• Failure to comply with regulations
• We employ internal and external lawyers
could result in investigation and the
specialising in the defence of product
enforcement of financial penalties or
liability claims and other litigation. To
regulatory censure
• Investigation or allegations of
wrongdoing can result in significant
management time being required,
date, no tobacco litigation claim brought
against the Group has been successful
and/or resulted in the recovery of
damages or settlement monies
potentially reducing focus on other
• Advice is provided to prevent causes of
operational matters
• If any claim against the Group was
to be successful, it might result in a
significant liability for damages and
litigation, along with guidance on defence
strategies to direct and manage litigation
risk and monitor potential claims around
the Group
could lead to further claims against us
• The Group’s Code of Conduct and
• Regardless of the outcome, the
costs of defending such claims
can be substantial and may not be
fully recoverable
• A successful claim against a
competitor could result in an
increased likelihood of similar
claims against the Group
core behaviours articulate the way
we expect our people to act, with
compliance certified by management
across the business
• The Group’s policies and standards
mandate that employees must comply
with legislation relevant to both a UK
listed company and local law
• The reputational damage arising
• In the event of an investigation (which
from investigations or allegations of
non-compliance could have a greater
impact with external stakeholders
than the penalties or actions related
to the matter itself
may or may not result in actions against
us), we co-operate fully with the relevant
authority and will continue to do so
• Failure to maintain cash flows
• Funding requirements and near-term
• Maintaining an efficient capital
could impact the Group’s ability to
debt maturities formally evaluated at least
structure allows the Group to
pay down debt, impacting covenants,
semi-annually and signed-off by the Audit
maintain an efficient cost of
credit ratings, bank bonds and
Committee as part of Going Concern and
capital to support and generate
investor confidence
Viability process
• Reduced ability to invest in strategic
• Full review of funding requirements,
additional returns on investments
and capital outlays/expenditure
and commercial business initiatives
current maturities and options available
• The high cash conversion
• A fall in certain of our credit ratings
to the Group
would raise the cost of our existing
• Revolver funding implemented,
committed funding and would
providing the Group with innovative
that the Group has delivered/
delivers, provides the Board/
management with cash flexibility
be likely to raise the cost of future
means of managing cash requirements
and optionality
funding, and affect our ability to
raise debt
• Strong focus on cash generation
supported by Group guidance and
• Failure of a financial counterparty
governance processes
(e.g., when holding cash deposits and/
or derivatives) is likely to result in a
financial and cash impact
• Effective communication of
ESG strategy and initiatives
highlights the Group’s
sustainability agenda and
meets stakeholder expectations
• The Group has investment grade
credit ratings from the main credit
rating agencies, which supports
it in accessing financing in the
global debt capital markets
• Appropriate authority and accountability
in place for investments and capital
expenditure, including achievement
of required return criteria
• Cash flows, financing requirements
and key rating agency metrics are
regularly forecast and updated in line
with performance and expectations
to manage future financing needs
and optimise cost and availability
• The Treasury function operates in
accordance with the terms of reference
and delegated authorities set out by the
Board, with independent oversight from
the Treasury Committee
Principal risk
Change in year
Impact
Mitigation
Opportunity
FAILURE TO APPROPRIATELY MANAGE
LITIGATION AND INVESTIGATIONS
RESULTS IN ADVERSE JUDGMENTS
AND/OR RELATED COSTS
Similar to other corporates, litigation and other claims
are pending against the Group. The interpretation of law
(including taxation) and the related judgements taken in
relation to these laws can lead to dispute or investigation
and possible financial costs or reputational damage.
• Increase in litigation activity related to the aggressive
marketing previously employed by competitors in the
US EVP market could result in precedents which increase
claims made against responsible manufacturers. Even
where these claims do not result in prosecution there
may be costs associated with defending such matters
MANAGEMENT OF LIQUIDITY AND
FINANCING REQUIREMENTS
• Successful long-term funding initiatives completed in-year
• Increased focus of funders on ESG-related matters, and
Failure to manage liquidity and financing requirements
disclosures, notably in relation to sector
resulting in going concern or viability concerns.
• Further deleveraging of the business has occurred during
the year, and continues to be a key area of focus
• Failure to comply with regulations
could result in investigation and the
enforcement of financial penalties or
regulatory censure
• Investigation or allegations of
wrongdoing can result in significant
management time being required,
potentially reducing focus on other
operational matters
• If any claim against the Group was
to be successful, it might result in a
significant liability for damages and
could lead to further claims against us
• Regardless of the outcome, the
costs of defending such claims
can be substantial and may not be
fully recoverable
• A successful claim against a
competitor could result in an
increased likelihood of similar
claims against the Group
• We employ internal and external lawyers
specialising in the defence of product
liability claims and other litigation. To
date, no tobacco litigation claim brought
against the Group has been successful
and/or resulted in the recovery of
damages or settlement monies
• Advice is provided to prevent causes of
litigation, along with guidance on defence
strategies to direct and manage litigation
risk and monitor potential claims around
the Group
• The Group’s Code of Conduct and
core behaviours articulate the way
we expect our people to act, with
compliance certified by management
across the business
• The Group’s policies and standards
mandate that employees must comply
with legislation relevant to both a UK
listed company and local law
• The reputational damage arising
• In the event of an investigation (which
from investigations or allegations of
non-compliance could have a greater
impact with external stakeholders
than the penalties or actions related
to the matter itself
may or may not result in actions against
us), we co-operate fully with the relevant
authority and will continue to do so
• Failure to maintain cash flows
• Funding requirements and near-term
could impact the Group’s ability to
pay down debt, impacting covenants,
credit ratings, bank bonds and
investor confidence
debt maturities formally evaluated at least
semi-annually and signed-off by the Audit
Committee as part of Going Concern and
Viability process
• Reduced ability to invest in strategic
and commercial business initiatives
• A fall in certain of our credit ratings
would raise the cost of our existing
committed funding and would
be likely to raise the cost of future
funding, and affect our ability to
raise debt
• Failure of a financial counterparty
(e.g., when holding cash deposits and/
or derivatives) is likely to result in a
financial and cash impact
• Full review of funding requirements,
current maturities and options available
to the Group
• Revolver funding implemented,
providing the Group with innovative
means of managing cash requirements
• Strong focus on cash generation
supported by Group guidance and
governance processes
• Appropriate authority and accountability
in place for investments and capital
expenditure, including achievement
of required return criteria
• Cash flows, financing requirements
and key rating agency metrics are
regularly forecast and updated in line
with performance and expectations
to manage future financing needs
and optimise cost and availability
• The Treasury function operates in
accordance with the terms of reference
and delegated authorities set out by the
Board, with independent oversight from
the Treasury Committee
• Maintaining an efficient capital
structure allows the Group to
maintain an efficient cost of
capital to support and generate
additional returns on investments
and capital outlays/expenditure
• The high cash conversion
that the Group has delivered/
delivers, provides the Board/
management with cash flexibility
and optionality
• Effective communication of
ESG strategy and initiatives
highlights the Group’s
sustainability agenda and
meets stakeholder expectations
• The Group has investment grade
credit ratings from the main credit
rating agencies, which supports
it in accessing financing in the
global debt capital markets
W W W . I M P E R I A L B R A N D S P L C . C O M
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89
PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT SUPPLY FAILS TO MEET MARKET
DEMANDS (STOCK ISSUES IN MARKET)
Failure to ensure timely supply of products demanded
by markets which meet quality, regulatory and cost
requirements. Availability issues could result in loss
of sales and could result from production, planning or
logistical issues, or failure to be able to produce/develop
formats aligned to consumer needs.
Risk
profile
Strategic
impact
Simplified and
efficient operations
• In common with other multi-nationals the COVID-19
pandemic has placed significant pressures on the Group’s
logistics supply chain. These impacts will continue going
forward but are anticipated to be of lower potential impact
than in the previous 18 months
• Additionally, the pandemic has placed pressure on
raw material suppliers which may result in some future
cost increases
• Track and Trace regulation continues to roll out across
markets, increasing compliance requirements
• Continuing frequency of adverse weather globally due
to climate change potentially impacting supply chains
PEOPLE AND ORGANISATION
Inability to attract, retain and develop required
capabilities to achieve strategic objectives and/or
provide a safe, healthy working environment.
Risk
profile
Strategic
impact
Performance based
culture and capabilities
• Development of new purpose, vision, and behaviour
framework to drive cultural change
• Recruitment and development of a renewed executive
and senior leadership in the year, to ensure achievement
of strategy
• The development of an equality, diversity and inclusion
strategy, senior leadership training and the development
of employee resource groups
• The business continues to focus on the welfare of its
people across the globe as COVID-19 continues to impact;
activities include actions to track in-market changes and
the development of specific communication and support
tools tailored to the needs of each country
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• Loss of manufacturing capacity
• Robust demand planning process and
• Operations continue to supply quality,
could impact the Group’s ability to
supply chain management aligned to
compliant products whilst improving
agility and scalability to cater for
demand shifts and opportunities
to contain underlying costs
meet short-term production demands
changing market environment
• Failure to supply markets could result
• Creation of additional safety
in loss of short-term sales volume,
stocks for non-leaf materials at
with the additional risk of impacts to
the beginning of the pandemic
loss of consumer loyalty potentially
and ongoing management of
impacting longer-term volumes
requirements aligned to sales forecast
• Product quality issues could impact
• Production capacity planning
customer satisfaction, potentially
includes agreed continuity measures
damaging brand equity and
in the event of machine failure or
future sales
site issue
• Failure to achieve expected cost
• Leaf and raw material supply
saving initiatives could result in
reduced margin and profitability
• A lack of availability of raw
materials could impact short-term
supply to markets
• Key ESG-related risks exist in our
raw material and component supply
chains. Failure to manage these risks
appropriately could bring litigation
with financial and reputational
damage to the Group
processes are in place covering both
continuity risks and ESG-related
matters including farmer welfare,
agronomy, and human rights and child
labour issues, including continuous
improvement consideration
• Ongoing supplier reviews undertaken
to best ensure continuity of supply,
with additional review and learnings
from COVID-19 experience to date
incorporated into business processes
• Severe weather episodes could impact
• The Group is firmly committed to
raw material supply, manufacturing
sites and warehousing, potentially
affecting or increasing the cost of
short-term supply to markets
acting in accordance with both legal
requirements and the principles of
being a responsible manufacturer
• Organisational culture and
• Group-wide Diversity and Inclusion
• Increased attractiveness of Imperial
mindset fail to facilitate consumer
focus including survey and resultant
as an employer of choice for both
focus and the requirements of a
action plans to ensure that society is
current and potential employees
business operating in new and fast
fairly represented within our business
through the promotion of a diverse
changing categories
• The Group fails to achieve
• Diversity and Inclusion working
groups formed to manage cultural
operational or strategic objectives
and corporate change to support all
because of a misalignment of skills
our people
and inclusive culture, opportunities
for personal development, and
support for individual and
team wellbeing
and capabilities
• Capability requirements and gaps
• Achievement of Group strategy,
• Failure to ensure safe working
evaluated with actions taken both
practices, appropriate environment
locally and at Group level to address
and culture, and the required personal
short and medium-term requirements
support to ensure the safety and
wellbeing of our people and others
working with the Group
• Health and safety policies, procedures,
training and monitoring in place
• Employee wellbeing support in place
• Loss of life or serious injury/illness
across the business
to employees or other individuals
working with/for Imperial Brands
• Financial penalty, censure or
prosecution for breach of regulations
• COVID-19 related safety measures,
including employees working from
home, social distancing in Group
locations, provision of quality PPE
• Interruption of Group operations
protection, employee testing, safe
(notably manufacturing) resulting
employee transportation, on-site
from significant incident or failure
vaccination, and welfare support
to comply with regulations
measures have been put in place
and development of multi-category
business enhanced by the attraction
and retention of requisite capabilities
and mindset
• Continued promotion of our safety
culture facilitates the associated
benefits of reduced lost working time
and operational effectiveness, and
supports Imperial as an employer
of choice
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT SUPPLY FAILS TO MEET MARKET
DEMANDS (STOCK ISSUES IN MARKET)
Failure to ensure timely supply of products demanded
by markets which meet quality, regulatory and cost
requirements. Availability issues could result in loss
of sales and could result from production, planning or
logistical issues, or failure to be able to produce/develop
formats aligned to consumer needs.
• In common with other multi-nationals the COVID-19
pandemic has placed significant pressures on the Group’s
logistics supply chain. These impacts will continue going
forward but are anticipated to be of lower potential impact
than in the previous 18 months
• Additionally, the pandemic has placed pressure on
raw material suppliers which may result in some future
cost increases
• Track and Trace regulation continues to roll out across
markets, increasing compliance requirements
• Continuing frequency of adverse weather globally due
to climate change potentially impacting supply chains
PEOPLE AND ORGANISATION
Inability to attract, retain and develop required
capabilities to achieve strategic objectives and/or
provide a safe, healthy working environment.
• Development of new purpose, vision, and behaviour
framework to drive cultural change
• Recruitment and development of a renewed executive
and senior leadership in the year, to ensure achievement
of strategy
• The development of an equality, diversity and inclusion
strategy, senior leadership training and the development
of employee resource groups
• The business continues to focus on the welfare of its
people across the globe as COVID-19 continues to impact;
activities include actions to track in-market changes and
the development of specific communication and support
tools tailored to the needs of each country
• Loss of manufacturing capacity
could impact the Group’s ability to
meet short-term production demands
• Failure to supply markets could result
in loss of short-term sales volume,
with the additional risk of impacts to
loss of consumer loyalty potentially
impacting longer-term volumes
• Product quality issues could impact
customer satisfaction, potentially
damaging brand equity and
future sales
• Failure to achieve expected cost
saving initiatives could result in
reduced margin and profitability
• A lack of availability of raw
materials could impact short-term
supply to markets
• Key ESG-related risks exist in our
raw material and component supply
chains. Failure to manage these risks
appropriately could bring litigation
with financial and reputational
damage to the Group
• Severe weather episodes could impact
raw material supply, manufacturing
sites and warehousing, potentially
affecting or increasing the cost of
short-term supply to markets
• Robust demand planning process and
supply chain management aligned to
changing market environment
• Creation of additional safety
stocks for non-leaf materials at
the beginning of the pandemic
and ongoing management of
requirements aligned to sales forecast
• Production capacity planning
includes agreed continuity measures
in the event of machine failure or
site issue
• Leaf and raw material supply
processes are in place covering both
continuity risks and ESG-related
matters including farmer welfare,
agronomy, and human rights and child
labour issues, including continuous
improvement consideration
• Ongoing supplier reviews undertaken
to best ensure continuity of supply,
with additional review and learnings
from COVID-19 experience to date
incorporated into business processes
• The Group is firmly committed to
acting in accordance with both legal
requirements and the principles of
being a responsible manufacturer
• Organisational culture and
• Group-wide Diversity and Inclusion
mindset fail to facilitate consumer
focus and the requirements of a
business operating in new and fast
changing categories
• The Group fails to achieve
operational or strategic objectives
because of a misalignment of skills
and capabilities
• Failure to ensure safe working
practices, appropriate environment
and culture, and the required personal
support to ensure the safety and
wellbeing of our people and others
working with the Group
• Loss of life or serious injury/illness
to employees or other individuals
working with/for Imperial Brands
• Financial penalty, censure or
prosecution for breach of regulations
• Interruption of Group operations
(notably manufacturing) resulting
from significant incident or failure
to comply with regulations
focus including survey and resultant
action plans to ensure that society is
fairly represented within our business
• Diversity and Inclusion working
groups formed to manage cultural
and corporate change to support all
our people
• Capability requirements and gaps
evaluated with actions taken both
locally and at Group level to address
short and medium-term requirements
• Health and safety policies, procedures,
training and monitoring in place
• Employee wellbeing support in place
across the business
• COVID-19 related safety measures,
including employees working from
home, social distancing in Group
locations, provision of quality PPE
protection, employee testing, safe
employee transportation, on-site
vaccination, and welfare support
measures have been put in place
• Operations continue to supply quality,
compliant products whilst improving
agility and scalability to cater for
demand shifts and opportunities
to contain underlying costs
• Increased attractiveness of Imperial
as an employer of choice for both
current and potential employees
through the promotion of a diverse
and inclusive culture, opportunities
for personal development, and
support for individual and
team wellbeing
• Achievement of Group strategy,
and development of multi-category
business enhanced by the attraction
and retention of requisite capabilities
and mindset
• Continued promotion of our safety
culture facilitates the associated
benefits of reduced lost working time
and operational effectiveness, and
supports Imperial as an employer
of choice
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PERFORMANCE PRINCIPAL RISKS AND UNCERTAINTIES – CONTINUED
LIQUIDITY AND GOING
CONCERN STATEMENT
leases, and discussions with lenders
about capital structure.
The Group’s policy is to ensure that we
always have sufficient capital markets
funding and committed bank facilities
in place to meet foreseeable peak
borrowing requirements.
The Directors recognise that
the current environment brings
uncertainty due to the COVID-19
pandemic; however, over the last
18 months, the Group has effectively
managed operations across the world,
and has proved it has an established
mechanism to operate efficiently
despite the uncertainty. The Directors
consider that a one-off discrete event
with immediate cash outflow is of
greater concern to short-term liquidity
than any effect from the on-going
COVID-19 pandemic.
The Directors have assessed the
principal risks of the business,
including stress testing a range of
different scenarios that may affect
the business. These included scenarios
which examined the implications of:
• A one-off discrete event resulting
in immediate cash outflow such as
unexpected duty and tax payments
of c£900m or non-receipt of the
Premium Cigar Division deferred
consideration of c£60m.
• A rapid and lasting deterioration
to the Group’s profitability because
markets become closed to tobacco
products or there are sustained
failures to our tobacco
manufacturing and supply chains.
These assumed a permanent
reduction in profitability of
15 per cent from 1 January 2022.
• The additional impact of potential
bad debt risks arising from a
recession of c£170m.
• The withdrawal of facilities that
provide receivables factoring
of c£670m.
The scenario planning also
considered mitigation actions
including reductions to capital
expenditure and dividend payments.
There are additional actions that
were not modelled but could be taken
including other cost mitigations such
as staff redundancies, retrenchment of
Under the worst-case scenario,
where the largest envisaged
downside scenarios all take place at
the same time, the Group would have
sufficient headroom until February
2022. The Group believes this worst-
case scenario to be highly unlikely
given the relatively small impact on
our trading performance and bad debt
levels during the Covid-19 pandemic.
In addition, the Group has a number
of mitigating actions available,
as described above, that could
be implemented should such a
scenario arise.
Based on its review of future cash
flows covering the period through to
March 2023, and having assessed the
principal risks facing the Group, the
Board is of the opinion that the Group
as a whole and Imperial Brands PLC
have adequate resources to meet their
operational needs from the date of this
Report through to 31 March 2023 and
concludes that it is appropriate to
prepare the financial statements on
a going concern basis.
VIABILITY STATEMENT
The Board has reviewed the long-
term prospects of the Group in order
to assess its viability. This review,
which is based on the business plan
which was completed in July 2021,
incorporated the activities and key
risks of the Group together with the
factors likely to affect the Group’s
future development, performance,
financial position, cash flows, liquidity
position and borrowing facilities as
described in the ‘How we manage risk’
section of this report on pages 80 to 91.
In addition, we describe in notes 20 to
21 the Group’s objectives, policies and
processes for managing its capital, its
financial risk management objectives,
details of its financial instruments and
hedging activities and its exposures to
market, credit and liquidity risk.
Assessment
In order to report on the long-term
viability of the Group, the Board
reviewed the overall funding capacity
and headroom available to withstand
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severe events and carried out a
robust assessment of the principal
risks facing the Group, including
those that would threaten its business
model, future performance, solvency
or liquidity. The assessment assumes
that any bank debt maturing in the
next three years can be re-financed
at commercially acceptable terms or
via our current standby facility. The
Board believes that three years is an
appropriate time horizon given the
current business portfolio and limited
visibility beyond three years. This
assessment also included reviewing
and understanding both the impact
and the mitigation factors in respect
of each of those risks. The viability
assessment has two parts:
First, the Board considered the period
over which they have a reasonable
expectation that the Group will
continue to operate and meet its
liabilities, taking into account current
debt facilities and debt headroom; and
Second, they considered the
potential impact of severe but plausible
scenarios over this period, including:
• Assessing scenarios for each
individual principal risk, for example
commercial issues and the impact of
regulatory challenges; and
• Assessing scenarios that involve
more than one principal risk
including multi-risk scenarios.
Findings
Viability review period
Whilst the Board has no reason to
believe the Group will not be viable
over a longer period, the period over
which the Board considers it possible
to form a reasonable expectation as to
the Group’s longer-term viability, based
on the risk and sensitivity analysis
undertaken, is the three-year period
to September 2024. This reflects the
period used for the Group’s business
plans and has been selected because,
together with the planning process set
out above, it gives management and
the Board sufficient, realistic visibility
on the future in the context of the
industry environment.
The Group’s annual corporate planning
processes include completion of a
strategic review, preparation of a
three-year business plan and a rolling
re-forecast of current year business
performance and prospects. The plans
and projections prepared as part of
these corporate planning processes
consider the Group’s cash flows,
committed funding, forecast future
funding requirements, banking
covenants, and other key financial
ratios, including those relevant to
maintaining our investment grade
ratings. These projections represent
the Directors’ best estimate of the
expected future financial prospects
of the business, based on all currently
available information.
The use of the strategic plan enables a
high level of confidence in assessing
viability, even in extreme adverse
events, due to a number of mitigating
factors such as:
• Flexibility of cash outflow with
respect to the ability to manage
dividend returns to investors,
capital expenditure projects
planned to take place within the
three-year horizon, plus promotional
marketing programmes.
• The Group has mature business
relationships and operates globally
within well established markets.
• The Group’s operations are highly
cash generative and the Group has
access to the external debt markets
to raise further funding.
Risk impact review
For each of our principal risks, plausible risk impact scenarios have been assessed together with a multiple risk scenario.
The following table summarises the key scenarios that were considered, both individually and in aggregate:
Risk scenarios modelled
Level of severity reviewed
Link to principal risk
The consequences of
adverse operating and
commercial pressures,
involving volume
reduction and/or falls
in margin, driven by
unforeseen reductions in
the size of the legitimate
tobacco market or other
changes in the level of
consumer demand for
our products.
The maximum quantifiable impact of
all envisaged business risks, including
the impact of a loss of market size and
share and non-receipt of remaining
Premium Cigar Division proceeds.
The value of these combined risks
totals £1.3 billion over the three-year
period under review.
A further worst-case scenario has
also been considered, modelling 15%
reduction on remaining EBITDA after
consideration of the isolated business
risks. The value of this EBITDA
modelled totals £1.6 billion over the
three-year period under review.
• Failure to manage the impacts of regulatory change.
• Failure to develop commercially sustainable
NGP categories.
• Inability to develop, execute, and communicate an
effective ESG strategy in line with expectations of
relevant stakeholders.
• Pricing, excise or other product tax outcomes not in
line with Business Plan assumptions or expectations.
• Product portfolio and/or interaction approach not
aligned to consumer preferences.
• Major incident resulting from cyber or similar
technology risk.
• Failure to ensure expected benefits of strategic
transformation programme.
• Management of liquidity and financing requirements
(external factors limiting potential access to funds for
Tobacco industry).
• Product supply fails to meet market demands.
The possible costs
associated with legal
and other regulatory
challenges, including
competition enquiries
and tax audits.
Failure to successfully defend existing
and reasonably foreseeable future
legal and regulatory challenges,
at the expected financial exposure.
The value of these combined risks is
c£180 million.
• Failure to appropriately manage litigation results in
adverse judgments and/or related costs.
• Failure to attract or retain required capabilities
and talent.
• Inability to develop, execute, and communicate an
effective ESG strategy in line with expectations of
relevant stakeholders.
None of the scenarios reviewed, either individually or in aggregate, would cause Imperial Brands to cease to be viable.
Climate-related risks have been assessed as causes of a number of our underlying risks which are included within the scenario modelling, including, but not limited to,
the failure to supply product due to weather-related impacts on individual factories, the cost of complying with environmental legislation, and the impact that climate
change has upon the supply of raw materials (notably leaf).
The Group does not consider climate change to be a risk from a viability perspective. The Group holds c12 months of leaf stock; therefore any shortage or incremental cost
caused by a natural event would only impact part of the period under review. Any incremental cost would have an EBITDA impact lower than that modelled as part of the
scenario testing.
CONCLUSION
On the basis of this robust assessment of the principal risks facing the Group, and on the assumption that they are managed or
mitigated in the ways disclosed, the Board’s review of the business plan and other matters considered and reviewed during the
year, and the results of the sensitivity analysis undertaken and described above, the Board has a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period to September 2024.
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93
GOVERNANCE CHAIR’S INTRODUCTION
A YEAR OF PRO GRE SS
AN D CHANGE
Our primary focus, along with that of people all
around the world, was the safety of our people,
their families and our communities during the
COVID-19 pandemic.
DEAR SHAREHOLDER
This Corporate Governance Report
details our approach to governance
and the responsible way we run
our business.
Your Board and Executive
Leadership Team have worked
extremely productively together
throughout the challenges of the
last year. During the continued
COVID-19 pandemic our primary
focus has been the safety of our
people and the communities in
which we operate. We have also
focused on the development and
initial implementation of our new
strategy, underpinned by a renewed
purpose and culture focused on the
consumer and ensuring we deliver
the products they want. These
developments have been supported
by the rigour of our corporate
governance standards, the positive
Board culture we have created and
enhancing the resilience and success
of the business for all its stakeholders.
We have continued to enhance the
skill set, experience and diversity of
the Board to meet these challenges.
We welcomed Lukas Paravicini
as our new Chief Financial Officer
in May; Lukas took on the Chief
Financial Officer role at a significant
point in Imperial’s development
and the Board is confident that
his considerable operational
experience and expertise in driving
transformational change will be key
in delivering the renewed strategy.
In November 2020 we welcomed
Bob Kunze-Concewitz and in
January 2021 Alan Johnson to the
Board as Independent Non-Executive
Directors. We look forward to Ngozi
Edozien and Diane de Saint Victor also
joining as Independent Non-Executive
Directors, in November 2021. Read
about our Board members’ skills and
experience on pages 96, 97 and 105.
Details of the Company’s governance
framework and how it contributes to
the delivery of our strategy are set out
in the following sections.
THÉRÈSE ESPERDY
CHAIR
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STATEMENT OF COMPLIANCE WITH
PROVISIONS AND PRINCIPLES OF THE CODE
The Company has complied with all requirements of the
2018 UK Corporate Governance Code (the Code).
Further detail regarding how we have
complied with the Code is set out
below and included in the individual
Board Committee reports on pages
111 to 119 and pages 120 to 139.
BOARD LEADERSHIP AND PURPOSE
The Directors of the Company are set out on pages 96 and 97
and the Board skills matrix is on page 105.
Purpose and culture
Our purpose and vision is set out on pages 6 to 9 and a summary
of our culture is provided within the People and Culture section on
pages 46 to 49.
Long-term value
Our renewed strategy is set out on pages 30 to 35. Principal risks
and uncertainties and how these are managed are shown on
pages 80 to 93.
Engaging stakeholders
Building and maintaining trust with our stakeholders underpins
the success and reputation of Imperial Brands. Our key stakeholders
and how we engage with them and understand their views are set
out on pages 38 to 41. Our section 172(1) statement, setting out how
the Directors have had regard to stakeholders when undertaking
their duties can be found on page 42.
Significant votes against a resolution
At the Annual General Meeting held on 3 February 2021, all
resolutions were passed. Although Resolution 2, the Directors’
Remuneration Report, was carried, a significant proportion of the
votes cast were against. We continued to engage with investors
during the year and an update is set out within the Remuneration
Report on pages 138 and 139.
DIVISION OF
RESPONSIBILITIES
Role of Directors
Our Chair and Chief Executive
have clearly defined and separate
responsibilities divided between
the leadership and effectiveness of
the Board and the running of the business
respectively. Working with the Board, they
are responsible to our stakeholders for the
successful delivery of our strategy. They
communicate regularly between Board
meetings to ensure a full understanding
of evolving issues and to facilitate
swift decision-making. See Division
of responsibilities on page 104.
Matters reserved
In order to retain control of key
decisions the Board has adopted a
schedule of matters on which it must
make the final decision. During the year
such decisions included Lukas Paravicini’s
appointment as Chief Financial Officer,
the appointments of Alan Johnson, Bob
Kunze-Concewitz, Ngozi Edozien and
Diane de Saint Victor as Non-Executive
Directors, the Group’s financial statements,
its renewed strategy, its business plan,
major capital expenditure, material
investments or disposals, capital
allocation and returns, and material
changes to the Group’s principal policies
(including treasury and tax).
Directors’ independence and
significant external commitments
Our processes for managing potential
conflicts of interest are set out on page 140
and the Directors’ external commitments
are set out within their biographies on
pages 96 and 97.
AUDIT, RISK AND
INTERNAL CONTROL
Our Audit Committee Report can be found
on pages 111 to 119.
Audit
Details of how the Audit Committee has
discharged its responsibilities can be found
on pages 111 to 119. The external auditor’s
report begins on page 148.
Risk and internal control
The Group’s principal risks, together with
our approach to their management, and our
internal control framework are set out on
pages 80 to 93.
Other reporting
Our approach to ensure a fair, balanced
and understandable report is provided on
page 116. Our liquidity and going concern,
and viability statements can be found on
pages 92 and 93. Our statement of Directors’
responsibilities is on page 146.
COMPOSITION, SUCCESSION,
EVALUATION AND
DIVERSITY
Our Succession and Nominations
Committee Report can be found on
pages 108 to 110.
Director appointment and
succession planning
The Succession and Nominations
Committee has responsibility for
ensuring the appropriate balance of skills,
experience and knowledge, and oversees
succession planning. We set out our
Board composition and biographies of
its members on pages 96 and 97 and a
skills matrix of the Board can be found
on page 105.
Board evaluation
The Board, Board Committees and
individual Directors undertake an
evaluation review annually. A description
of the external evaluation carried out in
2021 is provided on pages 141 and 142.
Diversity and inclusion
Details of our Diversity and Inclusion
Policy and key measurements are
contained in the Our People and Culture
section on pages 46 to 49 and in our ESG
report on page 57. The Board’s oversight of
diversity and details of the Board Diversity
and Inclusion Policy are provided in Board
Statements on page 107.
REMUNERATION
Our Remuneration Committee Report can be found on pages 120 to 139.
The current Directors’ Remuneration Policy, which in accordance with Code Provision 36
includes a post-employment shareholding requirement encompassing both unvested and
vested shares, was approved by shareholders at our AGM in February 2021. Details of how
the policy has been applied during 2021 and how the Remuneration Committee has
undertaken its duties can be found in the Directors’ Remuneration Report.
Provision 38 of the Code states that the pension contribution rates for Executive Directors,
or payments in lieu, should be aligned with those available to the workforce. As set out in
the Directors’ Remuneration Report, the pension entitlement for new Executive Directors
has been reduced to be in line with the UK workforce and has been formally included in
our Directors’ Remuneration Policy. Both Stefan Bomhard and Lukas Paravicini were
appointed on this basis. See page 125 for more information.
W W W . I M P E R I A L B R A N D S P L C . C O M
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95
GOVERNANCE BOARD LEADERSHIP AND COMPANY PURPOSE
TAKING DECISIVE ACTION
TO STRENGTHEN OUR
LEADERSHIP CAPABILITIES
1
3
5
7
9
2
4
6
8
10
Committee membership
N
A
Succession and
Nominations Committee
R
Remuneration
Committee
Audit Committee
Committee Chair
W Workforce
Engagement
Director
Board and Committee composition as at 30 September 2021
Find out more at www.imperialbrandsplc.com/about-us/leadership-team
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R
N
1. THÉRÈSE ESPERDY
CHAIR
Appointment
Appointed Chair in January 2020,
having previously served as
Senior Independent Director
since May 2019. Thérèse joined
the Board in July 2016.
Skills and experience
Thérèse has significant
international investment
banking experience having held
a number of roles at JP Morgan
including Global Chair of JP
Morgan’s Financial Institutions
Group, Co-Head of Asia-Pacific
Corporate & Investment Banking,
Global Head of Debt Capital
Markets, and Head of US Debt
Capital Markets. She began her
career at Lehman Brothers and
joined Chase Securities in 1997
prior to the firm’s merger with
JP Morgan in 2000.
External appointments
Non-Executive Director
and Chair of the Finance
Committee of National Grid
Plc1; Non-Executive Director
of Moody’s Corporation1.
R
N
6. ROBERT (BOB)
KUNZE-CONCEWITZ
NON-EXECUTIVE
DIRECTOR
Appointment
Appointed Non-Executive
Director in November 2020.
Skills and experience
Bob is an experienced
marketing professional and
has held a number of senior roles
at leading FMCG companies. He
has been Chief Executive Officer
at Campari Group, a major player
in the global spirits industry,
since May 2007 having joined
the business in 2005 as Group
Marketing Director. Prior to
his time at Campari Group, he
held positions of increasing
responsibility at Procter &
Gamble, including Global
Prestige Products Corporate
Marketing Director.
External appointments
Chief Executive Officer of
Campari Group1 and a Non-
Executive Director of Luigi
Lavazza S.p.A.2
1. Public listed company.
2. Private organisation.
2. STEFAN BOMHARD
CHIEF EXECUTIVE OFFICER
3. LUKAS PARAVICINI
CHIEF FINANCIAL OFFICER
Appointment
Appointed to the Board as Chief
Executive Officer in July 2020.
Skills and experience
Stefan joined Imperial in July
2020 from Inchcape plc, a global
distribution and retail leader in
the premium and luxury automotive
sectors, where he delivered
successful transformational
change during a five-year
tenure as Chief Executive.
Prior to his role at Inchcape,
Stefan was President of Bacardi
Limited’s European region and
was also responsible for Bacardi’s
Global commercial organisation
and Global Travel Retail.
Stefan has a PhD in marketing
and has accrued significant
experience in the consumer and
retail sectors during his career.
Previous roles have included
Chief Commercial Officer
of Cadbury plc and Chief
Operating Officer of Unilever
Food Solutions Europe. This
followed senior management
and sales and marketing
positions at Diageo (Burger
King) and Procter & Gamble.
External appointments
Non-Executive Director of
Compass Group PLC1.
Appointment
Appointed to the Board of
Directors on 1 May 2021 and
appointed Chief Financial Officer
on 19 May 2021.
Skills and experience
Lukas has a proven track record
in international consumer goods
companies. Beyond his finance
credentials, he has considerable
operational experience as
well as expertise in driving
transformational change
including in global shared
services in large international
organisations. Lukas joined
Imperial from agricultural
commodities and brokerage
group ED&F Man Holdings, where
he was Chief Financial Officer.
He has also held senior positions
at Fonterra, a New Zealand and
Australia listed co-operative and
the world’s largest dairy exporter,
with sales in 130 countries. He
was Chief Financial Officer from
2013-2017 and Chief Operating
Officer, Global Consumer and
Foodservice Business from
2017-2018. Prior to that, he spent
22 years with Nestlé in various
senior finance and general
management roles.
External appointments
No external Director
appointments.
A
RN
A
N
4. SUE CLARK
SENIOR INDEPENDENT
DIRECTOR
5. ALAN JOHNSON
NON-EXECUTIVE
DIRECTOR
Appointment
Appointed Non-Executive
Director in January 2021.
Skills and experience
Alan has a strong financial
background in consumer goods
and retail, having held a number
of senior finance positions at
Unilever during a 30-year career,
including Chief Audit Executive
and Chief Financial Officer of
the Global Foods Division. He
was previously Chief Financial
Officer and then a Non-Executive
Director at food retailer Jerónimo
Martins, SGPS, SA until April 2016.
External appointments
President and Chair of the Board
of the International Federation
of Accountants and a member of
the Board and Chair of the Audit
Committee of the International
Valuation Standards Council.
Alan is also a Non-Executive
Director of William Grant &
Sons Ltd2.
Appointment
Appointed Non-Executive
Director in December 2018, Chair
of the Remuneration Committee
in February 2019 and Senior
Independent Director in
January 2020.
Skills and experience
Sue has strong international
business credentials with over 20
years’ Executive Committee and
Board level experience in the
FMCG, regulated transport and
utility sectors. Sue held the role
of Managing Director of SABMiller
Europe and was an Executive
Committee member of SABMiller
plc. She joined SABMiller in 2003
as Corporate Affairs Director and
was part of the executive team
that built the business into a top
five FTSE company.
External appointments
Non-Executive Director and
Chair of the Remuneration
Committee of Britvic plc1; a
Non-Executive Director of
Tulchan Communications LLP2;
and a Non-Executive Director
and member of the Audit,
Nominations and Remuneration
Committees of Mondi plc1.
A
N
R
N
W
A
R
N
7. SIMON LANGELIER
NON-EXECUTIVE
DIRECTOR
Appointment
Appointed Non-Executive
Director in June 2017.
Skills and experience
Simon has significant
international experience within
the tobacco industry. He held a
number of senior commercial
positions during a 30-year career
with Philip Morris International,
including in Latin America, Asia,
Western and Eastern Europe,
Middle East and Africa. In
addition, he was President of
their Next Generation Products &
Adjacent Businesses. Simon was
also Chairman of PharmaCielo
Limited, an international
medicinal cannabis business,
for almost six years.
External appointments
Patron and Honorary Professorial
Fellow at Lancaster University,
and a member of the Dean’s
Council of the University’s
Management School2.
8. STEVEN STANBROOK
NON-EXECUTIVE
DIRECTOR
9. JON STANTON
NON-EXECUTIVE
DIRECTOR
Appointment
Appointed Non-Executive
Director in May 2019 and
Chair of the Audit Committee
in June 2020.
Skills and experience
Jon has a wide range of
international leadership
experience, encompassing
transformation, M&A and all
aspects of finance, principally
in the B2B sector.
In 2016 he was appointed Chief
Executive of The Weir Group
PLC, one of the world’s leading
engineering businesses, having
previously been CFO from 2010.
Prior to that he spent 22 years at
Ernst & Young LLP, the last nine
years of which were as a partner
in its London office.
Jon is a Chartered Accountant
and member of the ICAEW.
External appointments
Chief Executive of The Weir
Group PLC1.
Appointment
Appointed Workforce
Engagement Director in 2019,
having joined the Board as a
Non-Executive Director in
February 2016.
Skills and experience
Steven brings considerable
international executive
experience to the Board,
gained in a number of FMCG
companies. This includes
18 years at SC Johnson & Sons
Inc., most recently as Chief
Operating Officer, where he
was responsible for managing
its international operations.
Steven has also previously
held senior positions at Sara
Lee Corporation, including as
Chief Executive Officer of Sara
Lee Bakery, and at CompuServe
Corp. He is also a former
Non-Executive Director of
Chiquita Brands International
Inc. and Hewitt Associates.
External appointments
Steven is a partner of, private
equity firm, Wind Point Partners2.
He is also a Non-Executive
Director of Primo Water
Corporation1 and Group 1
Automotive Inc1.
10. JOHN DOWNING
COMPANY SECRETARY
Appointment
Appointed Company Secretary
in June 2012.
Skills and experience
John, a qualified solicitor,
joined Imperial in 2005 having
previously worked for the law
firm Linklaters.
He has had a number of
senior legal roles in Imperial
including playing a leading role
in the Altadis acquisition and
becoming Head of Group Legal
in 2010. He has considerable
experience in managing key
corporate projects related to
financing, business development
and other commercial matters. In
addition to his Group Company
Secretary role, John also has
responsibility for the Group’s
governance, Code of Conduct,
security and information security.
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97
GOVERNANCE BOARD LEADERSHIP AND COMPANY PURPOSE – CONTINUED
THE BOARD
FOCUS IN 2021
• The wellbeing of our people
and continuing business
stability during the ongoing
COVID-19 pandemic.
• Strategic review for growth
and sustainability.
• Board succession including
Chief Financial Officer and
Non-Executive Director
recruitment and on-boarding.
• Investment in and delivery
from priority tobacco markets.
• Execution in NGP.
• Delivery against our
sustainability agenda.
LOOKING AHEAD TO 2022
• The wellbeing of our people
and continuing business
stability during the ongoing
COVID-19 pandemic.
• Board succession and diversity.
• Further development and
embedding of our renewed
culture and purpose.
• Delivery against our
renewed strategy.
BOARD AND COMMITTEE MEMBERSHIP
AS AT 30 SEPTEMBER 2021
*Denotes Chair
Non-Executive Directors
Thérèse Esperdy (Chair)
Sue Clark (SID)
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Steven Stanbrook
Jon Stanton
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
Board
Audit
Committee
Remuneration
Committee
Succession and
Nominations
Committee
X
X
X
X*
X
X*
X
X
X
X*
X
X
X
X
X
X
X*
X
X
X
X
X
X
X
X
OVERVIEW
The Board was not able to spend as
much time together physically nor
visiting parts of the business, as we
would have liked, due to the ongoing
pandemic. However, we used MS
Teams to have a wide range of
individuals present to, and engage
with, the Board and a broad range
of our stakeholders.
The Board’s role is to provide
leadership and direction to the
Group. Supported by its Committees,
it maintains a strong governance
framework which, together with our
high ethical standards, supports the
long-term sustainability of the Group.
The Directors played a key role in
setting our renewed strategy. Ensuring
it is implemented responsibly, within
the governance framework and their
legal duties to act in the way they
consider, in good faith, will be most
likely to promote the success of the
Company for its shareholders, whilst
having regard to the interests of all
stakeholders. The Directors also
played a key role in developing our
revised purpose and values which
are being launched early in our 2022
financial year.
As part of the governance framework
the Board has adopted a schedule
of matters on which it must make
the final decision. These include
approving the Group’s strategy,
business plans, dividends and
major financial announcements.
The Board is also responsible for
approving the acquisition or disposal
of assets exceeding defined thresholds.
The Board discharges its
responsibilities through an annual
schedule of meetings. In addition
to these formal scheduled meetings,
the Board convenes as required to
consider matters of a time-sensitive
nature. It also delegates responsibility
for developing and implementing
strategy and for day-to-day
management to our Chief Executive
Officer, Stefan Bomhard, who is
supported by the Chief Financial
Officer and by the Executive
Leadership Team (ELT), which he
chairs. Within clearly defined terms of
reference, the Board delegates certain
matters to its Committees. These
delegations are supported by the
Group Approvals Matrix which
ensures that decisions are made
with the appropriate authority. These
terms of reference have been reviewed
this year against the latest guidance
from the Chartered Governance
Institute and together with other key
governance documents, including our
Code of Conduct, they can be found at
www.imperialbrandsplc.com.
The ELT comprises senior
executives from across the business.
It oversees operational execution and
implementation of our strategic and
financial plans. The ELT and Audit
Committee also ensure that, within
the risk framework set by the Board,
appropriate and effective internal
controls are in place, and effective
risk identification and management
processes, including those discussed
on pages 80 to 91, operate throughout
the Group.
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BOARD PROGRAMME IN 2021
Seven scheduled Board meetings were held during the year. The Board also convened between these meetings to
discuss specific time sensitive matters; for example, the Board met virtually a number of times between November 2020
and February 2021 to develop and approve the renewed strategy and progress the Chief Financial Officer succession.
In the context of COVID-19 the safety of our people was a key theme of meetings and was a priority for Board engagement
outside of formal meetings during the year. Other standard agenda items included strategy development and implementation,
business performance and general corporate housekeeping. In addition to these, the following principal agenda items were
covered in the financial year:
HOW THE BOARD SPENT ITS TIME (%)
Strategy and
business plans
Financial
40%
Operational
10%
20%
• Consideration of business plan.
• Review of regional plans.
• Development of renewed strategy.
• Competitor updates.
• Funding, going concern
and viability.
• Half-year and final results.
• Cash and debt metrics.
• Investor engagement.
• Priority market deep dives.
• Business updates.
• Manufacturing and
supply chain update.
Governance and
risk framework
People
20%
10%
• Health and safety of
our colleagues.
• CFO and ELT succession.
• NED succession.
• People and culture review.
• Workforce engagement.
• Effectiveness of internal controls.
• Risk appetite and risk
management updates.
• Regulatory and legislation
development updates.
• ESG and sustainability.
• Directors’ independence.
• Cyber security review.
• Board evaluation.
ATTENDANCE AT MEETINGS OF THE BOARD, BOARD COMMITTEES AND AGM
Total number of meetings in financial year
Number of meetings attended in financial year
Executive Directors
Stefan Bomhard
Lukas Paravicini1
Oliver Tant2
Non-Executive Directors
Thérèse Esperdy
Sue Clark
Alan Johnson3
Bob Kunze-Concewitz4
Simon Langelier
Pierre-Jean Sivignon5
Steven Stanbrook
Jon Stanton6
Succession and
Nominations
Committee
Audit
Committee
Remuneration
Committee
4
–
–
–
4/4
4/4
3/3
4/4
4/4
2/2
4/4
4/4
4
–
–
–
–
4/4
3/3
–
4/4
3/3
–
4/4
5
–
–
–
5/5
5/5
–
5/5
–
–
5/5
5/5
Board
11
11/11
4/4
7/7
11/11
11/11
7/7
9/10
11/11
8/8
11/11
10/11
Annual
General
Meeting
1
1/1
–
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1. Lukas Paravicini joined the Board on 1 May 2021.
2. Oliver Tant retired from the Board on 18 May 2021.
3. Alan Johnson joined the Board on 1 January 2021.
4. Bob Kunze-Concewitz joined the Board on 1 November 2020.
Unable to attend one ad-hoc meeting due to a family emergency.
5. Pierre-Jean Sivignon stepped down from the Board on 4 June 2021.
6. Jon Stanton was unable to attend one ad-hoc meeting due to attending
the funeral of a close family member.
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99
GOVERNANCE BOARD LEADERSHIP AND COMPANY PURPOSE – CONTINUED
KEY BOARD ACTIVITIES
KEY BOARD ACTIVITIES
The key areas considered by the
Board during the year are set out
below. The Board recognises the
importance of engaging with our
stakeholders in order to understand
their views, for example gained
from our Meet the Board sessions.
In addition stakeholder views are
included within Board papers, where
relevant. Stakeholder views are taken
into account when making decisions,
for example the development of our
renewed strategy. You can read more
in our s.172 statement on pages 42 to
44. A typical Board meeting comprises
reports on operational and financial
performance, including the health
and safety of our colleagues, legal and
governance updates, investor relations
updates and a deep dive into a focus
market. The Chairs of our Committees
also report on the proceedings of their
Committees including any specific
matters that require the attention
of the Board. Details of the Directors’
attendance at the scheduled
meetings during the year can
be found on page 99.
2021 Focus and activities
Focus on top five
combustible markets.
We have focused our investment and
resources behind our five most important
markets. The Board recognised that
decisions in the past have not been
sufficiently informed by consumer
insights and data. We are, therefore,
investing to support a consistent
approach to consumer insight. These
insights have supported the Board’s
decisions, including enhancing
capabilities in brand and trade
marketing, portfolio management,
innovation and sales excellence. This
transformation is being supported by the
newly appointed Chief Consumer Officer.
See page 43 for more information
More disciplined execution
in NGP.
Informed by consumer insights and
validation, we are resetting our NGP
strategy. We are focusing our investment
behind heated tobacco opportunities
in Europe, and in selective market
opportunities in vapour, particularly
in the USA. Our oral nicotine business
remains focused on its existing markets
within Europe. Our investment will
be disciplined and based on detailed
market testing. Our aim is to develop a
sustainable NGP business that supports
our ESG agenda by making a meaningful
contribution to harm reduction by
offering potentially reduced risk products
to adult smokers.
See page 44 for more information
Stakeholders considered
The wellbeing of our people
and continuing business
stability during the ongoing
COVID-19 pandemic.
In addition to its normal health and
safety updates the Board received
regular updates on the impact of
COVID-19 on our colleagues and our
operating environment. These included
the challenges faced by the logistics
industry and ensuring continuity of
supply to our consumers.
The pandemic impacted the Board’s
programme of visits and engagement,
a number of which were postponed due
to lockdowns and our internal protocols
for protecting our colleagues. However,
the Board introduced “Meet the Board”
forums to enable colleagues to meet
virtually with our NEDs.
The Board was kept apprised of our
support to employees which includes
flexible working, tips on coping with
home working, mental wellness and the
provision of “lockdown” learning support
available through our learning portal.
s. 172 factors
a
b
c
a
b
c
d
a
b
c
STAKEHOLDERS:
Colleagues
Consumers
Customers
Governments
& regulators
Investors
Suppliers
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2021 Focus and activities
Strategic review for growth
and sustainability.
Guided by a comprehensive strategic
review which took into account feedback
from a number of our stakeholders, the
Board approved a new strategy and
five-year plan to transform the business.
The strategy focuses on: revitalising our
tobacco business with increased focus
on our top five markets; a disciplined
NGP business committed to harm
reduction by offering potentially
reduced risk products to adult
smokers and providing options for
growth; reshaping our culture and
ways of working to place the consumer
at the centre of our business; delivering a
strong and consistent performance; and
a clear capital allocation framework.
The Board is now overseeing the
implementation of the strategy,
recognising its impact on our
colleagues and ensuring progress
is rapid to minimise the uncertainty
they may be feeling.
Stakeholders considered
Board succession including Chief
Financial Officer and
Non-Executive Director
recruitment and on-boarding.
Following the departure of Alison Cooper
and Karen Witts in our previous financial
year, the Board was mindful that it
did not meet either gender or ethnic
diversity expectations and acknowledged
the feedback it received at the time of
the AGM in February 2021. Taking this
feedback into account, during the year
the Board appointed Alan Johnson
and Lukas Paravicini and is pleased
that Ngozi Edozien and Diane de
Saint Victor will join the Board as
Non-Executive Directors, with effect
from 15 November 2021.
Delivery against our
sustainability agenda.
To ensure our ESG strategy is aligned to
the new commercial strategy and given
the huge impact COVID-19 has had on
both the external environment and on
areas of our business, the new leadership
team agree it is an opportune time to
review the current ESG strategy. Building
upon the strategic work on purpose and
vision, more emphasis is required on
resilience and sustainability based upon
ESG risks for now and in the future to
ensure stakeholder expectations are met
and exceeded.
To underscore this increased emphasis
and ensure the alignment of ESG
priorities to the business strategy, we
have strengthened our ESG team with
the hiring of Tony Dunnage as Head of
ESG. Tony brings more than 30 years’
experience in Unilever, directing end-
to-end supply chain and manufacturing
sustainability for 250-plus factories and
will report directly to the ELT.
s. 172 factors
a
b
c
d
e
a
b
d
e
S. 172 FACTORS
a
b
c
d
e
The likely consequences
of any decision in the
long term
The interests of the
Company’s employees
The need to foster
business relationships
with suppliers,
customers and others
The impact of the
Company’s operations
on the community and
the environment
The desirability of the
Company maintaining
a reputation for
high standards of
business conduct
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101
BOARD ENGAGEMENT IN ACTION
As we began to implement our
new strategy, Thérèse continued
her engagement with investors to
hear their feedback on the changes
we have made and to continue
the dialogue with them she started
in the prior year. Topics discussed
included the actions taken to
improve performance, progress
with Executive and Non-Executive
recruitment and capital allocation
considerations. The Board also
receives an investor relations report
at every Board meeting, which sets
out the latest shareholder views, share
register movements and recent market
developments. In addition, detailed
feedback from investors is collected
after each investor event and
roadshow, which is shared with
and discussed by the Board so it has a
good understanding of investor views.
ENGAGEMENT WITH
INVESTORS
We value the support and engagement
of our shareholder community and
understand the importance of this
to the future success of the business.
Our aim is to provide balanced, clear
and transparent communications
enabling investors to understand how
we see our prospects and the market
environments in which we operate.
In the year, our programme of
shareholder engagement ensured the
Board was fully aware of shareholder
concerns. This programme included
Thérèse Esperdy regularly meeting
investors to hear their views directly
and to update and consult with them
on several areas. We changed our
emphasis this year to give investors
the opportunity to meet our new CEO,
Stefan Bomhard, and to understand
the new strategy. The results roadshow
following our 2020 annual results
enabled Stefan to provide investors
with his first impressions of the
business and update them on his
approach and progress on the
strategic review.
Once the strategic review was
concluded, we held a virtual Capital
Markets Day in January 2021 to outline
the new strategy and to set future
expectations for the business. This
event was attended by c.450 investors
and sell-side analysts and was
followed up by an investor roadshow
to engage with investors on what the
new strategy entails and how it will
be implemented. Subsequently, we
reported our interim results, the first
results under the new strategy, and
again, conducted a virtual investor
roadshow with our major shareholders.
Our AGM provides an opportunity for
the Board to meet with shareholders,
particularly our retail investors. In
addition, we maintain a programme
of active dialogue with our key
financial stakeholders, including
institutional shareholders, potential
investors, holders of our bonds, rating
agencies and sell-side research
analysts. We encourage an open,
two-way engagement with investors
and other stakeholders through
our programme of investor
relations activities.
A full programme of international
engagement is undertaken each year
by our investor relations team, who are
regularly accompanied by one or more
of the Executive Directors. Although
the COVID-19 pandemic continued to
curtail our ability to hold meetings in
person, meetings were successfully
enabled through video and telephone
conferencing. While some virtual
meetings will persist, going forward
we anticipate a number of meetings
and events will return to being held in
person. Over the course of the year, our
teams held around 600 meetings with
investors and research analysts.
As well as our results presentations,
senior management presented
at various industry conferences,
including the Consumer Analyst Group
of New York (CAGNY) Conference in
February 2021 and investment bank
sponsored conferences, including
those held by Credit Suisse in March
and Deutsche Bank in June. In addition,
the investor relations team attended
the Barclays conference in September.
All conferences were held virtually.
Read more on how the Board is considering wider stakeholders
in key decisions in our S172 statement on pages 42 to 44
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These sessions included our
Chair Thérèse meeting one of
our brand managers based in the US
to talk about their role and how the
COVID-19 pandemic has influenced
our marketing strategy. A transcript
of the sessions is widely shared with
colleagues via our intranet. These
sessions provide our Directors with
the opportunity to enhance their
understanding of various aspects
of the business and to bring this
understanding to the Board.
The Board was engaged with the
formulation of the Company’s Purpose,
Vision and Behaviours. This included
individual conversations with Board
members, as well as discussions as
a full Board. These discussions were
informed by background information
and presentations on the listening
exercises undertaken by the business
which helped to understand the
culture of the organisation further by
identifying those areas that need to be
addressed and those that can be built
upon in order to realise the cultural
change elements of the transformation
journey (see page 48 on Developing
and Embedding New Behaviours,
as well as Focusing on Diversity
and Inclusion, which is another area
where the Board has been engaged).
The activities we are undertaking
to enhance skills and capabilities
to embed new behaviours and a
performance-based culture, are
summarised on page 49 . The Board
will continue to monitor progress.
ENGAGEMENT WITH
COLLEAGUES
Despite the challenges of the COVID-19
pandemic, we have continued our
workforce engagement activities.
For example, during the year, we
introduced “Meet the Board” forums
in which a number of employee
representatives, from a diverse
range of areas of the business and
locations, met virtually with our NEDs.
These forums provided the
opportunity for two-way dialogue
around key themes such as NGP
strategy, diversity and inclusion,
broader ESG issues and culture.
The forums also included
discussion in respect of the work
of the Remuneration Committee,
executive remuneration and
the changes to our Long-Term
Incentive Plan.
Feedback from colleagues
attending these forums has been
overwhelmingly positive, with
colleagues appreciating the open
and honest approach and finding such
forums both informative and helpful in
connecting with the strategic direction
of the Group.
Insights gained from these
sessions have given the Board a
better understanding of colleague
sentiment on a broad range of issues,
helping it to better consider colleagues
when making decisions.
We also introduced a series of
”Connections” sessions, which bring
together colleagues from across our
business to learn about their roles and
responsibilities, who they are and what
they do.
Senior Independent Non-Executive Director Sue Clark speaking at a ‘Meet the Board’ event.
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103
GOVERNANCE DIVISION OF RESPONSIBILITIES
THE BOARD AND ITS COMMITTEES
The Board is responsible for
the governance of the Company,
undertaking its duties within a
framework of clear authorities
and governance structures, with
effective controls that enable risk to
be assessed and managed effectively.
The Board sets the tone for
the Group from the top and
delegates responsibilities for
specific tasks to its Committees.
Each of these Committees has
specific written terms of reference
issued by the Board, adopted
by the relevant Committee and
published on our website at www.
imperialbrandsplc.com/about-us/
governance. All Committee Chairs
report on the proceedings of their
Committee at the next meeting of the
Board and make recommendations to
the Board where appropriate. In addition,
minutes of Committee meetings are
circulated to all Board members.
To ensure Directors are kept up to date
on developing issues and to enhance
the overall effectiveness of the Board
and its Committees, the Board Chair
and Committee Chairs communicate
regularly with the Chief Executive
Officer (CEO) and Chief Financial
Officer (CFO). Where appropriate the
Board convenes virtually outside of
scheduled meetings to consider time
sensitive matters.
A summary of key elements of the
roles of the Board Directors and
Company Secretary is set out below.
Supported by its Committees the Board
provides leadership and direction to
the Group. The Directors have a key
role in developing our strategy and
overseeing its implementation within
our strong governance framework and
in a manner that is most likely to
promote the Group’s success for the
benefit of shareholders, having regard
to the interests of other stakeholders.
As part of the governance framework
the Board has adopted a schedule
of matters on which it must make
the final decision. These include
approving the Group’s strategy,
business plans, dividend, major
financial announcements and
acquisitions or disposals exceeding
defined thresholds.
Chair
Leads our Board
and creates an
environment that
ensures there
are strong links
between the Board,
management and
stakeholders.
Chief Executive
Officer
With the CFO,
has day-to-day
management
responsibility
for the Group and
for devising and
implementing the
Group’s strategy.
Chief Financial
Officer
Supports the CEO
in devising and
implementing
our strategy and
overseeing the
finances, operation
and development of
the Group.
Senior Independent
Director
Assists the Chair with
effective shareholder
communications including
if investors have any issues
which have not been resolved
through the normal channels.
Is available to our Directors
should they have any
concerns not appropriate
to raise with the Chair.
Non-Executive
Directors
Evaluate information
provided and challenge
constructively management’s
viewpoints, assumptions and
performance. They bring a
diverse range of business
and financial skills and
experience that complement
and supplement those of our
Executive Directors.
PRINCIPAL BOARD COMMITTEES:
Audit Committee
Assists the Board in fulfilling
its corporate governance
responsibilities. This includes
oversight of the Group’s external
audit, internal control systems, risk
management framework and process
and the Internal Audit department.
The Committee’s responsibilities also
include ensuring the integrity of the
Group’s financial statements and
related announcements.
Executive Leadership Team
Succession and Nominations
Committee
Reviews and evaluates the composition
and succession plans of the Board and its
Committees, to maintain an appropriate
balance of skills, knowledge, experience
and diversity. Retains oversight of the
development plans for ELT members
together with the Company’s wider
organisational structure and talent
management processes.
Remuneration Committee
Sets and implements our
Remuneration Policy aimed at
aligning the interests of Executive
Directors and senior management
with those of our stakeholders,
ensuring our ability to attract and
retain high performing executives
whilst incentivising the delivery of
our strategic objectives and sustained
returns for investors.
As detailed above, the ELT oversees operational execution and delivery of our strategic and financial plans.
OTHER NON-BOARD COMMITTEE:
ESG Steering Committee
During the year the ESG Steering Committee was chaired
by Board Chair Thérèse Esperdy, with a remit to oversee
the management of our priority ESG responsibilities and
to ensure the successful delivery of our sustainability
strategy. The Committee membership included senior
managers from our sustainability team, leaf sustainability,
procurement, legal, HR, manufacturing and supply chain,
finance, science and corporate affairs.
Two meetings were held during the year, focused on
ensuring the business is prepared for the Task Force on
Climate-related Financial Disclosures (TCFD) requirements
which will be mandatory for Imperial to report on in 2022.
In relation to this the Committee discussed the need to
update the previous climate risk and opportunities scenario
analysis conducted in 2018. As outlined on page 51 the ESG
Steering Committee will be reconstituted in the coming
financial year to be chaired by the CEO.
www.imperialbrandsplc.com.
See pages 50 to 63 for details of our ESG work
104
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SKILLS MATRIX
Non-Executive Directors
Executive Directors
Thérèse
Esperdy
(Chair)
Sue Clark
(SID)
Alan
Johnson
Robert
(Bob)
Kunze-
Concewitz
Simon
Langelier
Steven
Stanbrook
Jon
Stanton
Ngozi
Edozien1
Diane
de Saint
Victor1
Stefan
Bomhard
(CEO)
Lukas
Paravicini
(CFO)
NR
NAR
NA
R N
NA
R N
W
NAR
Other current NED
or executive roles
FTSE 100/NYSE
experience
UK corporate
governance background
Financial
qualification
FMCG sector
experience
Marketing
& digital
Product
development
Strategy
International
operations
Change management
/ HR
Government and
Regulatory Affairs
✓
✓
✓
✓
✓
✓
1. Joining the Board 15 November 2021.
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
A Audit Committee
N Succession and Nominations Committee
R
Remuneration Committee
Committee Chair
W Workforce Engagement Director
NEW SKILLS ON THE BOARD
JOINING THE BOARD
15 NOVEMBER 2021
LUKAS PARAVICINI
Lukas joined the Board
on 1 May 2021 and
became Chief Financial
Officer on 19 May 2021
and brings significant
financial experience most
recently at agricultural
commodities and
brokerage group ED&F
Man Holdings where
he was also CFO.
In addition to his
impeccable finance
credentials Lukas brings
considerable operational
experience as well as
expertise in driving
transformational change
in large international
organisations. The Board
sees these qualities as
being invaluable to the
Group as it implements
its new strategy.
BOB KUNZE-
CONCEWITZ
Bob joined the Board on
1 November 2020 and
brings to the Board a
wealth of international
business experience
particularly in
marketing, having
held a number of
senior roles at leading
FMCG companies.
Bob is currently Chief
Executive Officer of
Campari Group and
a former Global Prestige
Products Corporate
Marketing Director
at Procter & Gamble.
ALAN JOHNSON
Alan joined the Board on
1 January 2021 and brings
to the Board a strong
financial background,
having held a number of
senior finance positions
at Unilever and food
retailer Jerónimo
Martins, SGPS, SA. Alan
is currently President
and Chair of the Board
of the International
Federation of
Accountants and a
member of the Board
and Chair of the Audit
Committee of the
International Valuation
Standards Council. Alan
is also a Non-Executive
Director of William Grant
& Sons Ltd.
NGOZI EDOZIEN
Ngozi joins the Board on
15 November 2021 and
brings over 30 years’
experience in general
management, finance,
consultancy, business
development and
transformation gained at
multinational companies,
including in consumer
goods, in Europe, USA
and Africa. Ngozi is a
Non-Executive Director of
Guinness Nigeria, a listed
subsidiary of Diageo,
Stanbic IBTC Holdings
PLC and Barloworld Ltd.
She is also Founder and
Managing Director of
Invivo Partners Limited.
DIANE DE SAINT
VICTOR
Diane also joins the
Board on 15 November
2021 and brings strong
legal, regulatory and ESG
experience, having held
a number of General
Counsel, Company
Secretary and other key
roles in an international
career spanning more
than 30 years. Diane
has experience
of transforming
organisations in sectors
undergoing change, most
notably at ABB where
she was an Executive
Committee member.
Diane is a Non-Executive
Director at Transocean
Ltd and Natixis S.A
and was previously a
Non-Executive Director
at Barclays plc.
W W W . I M P E R I A L B R A N D S P L C . C O M
105
105
GOVERNANCE DIVISION OF RESPONSIBILITIES – CONTINUED
BOARD STATEMENTS
SECTION 172 OF THE
COMPANIES ACT 2006
The Board seeks to consider
the interests of all relevant
stakeholders when making
decisions. The formal statement
is disclosed on pages 42 to 44 and
throughout this Annual Report we
have included information on how
your Board operates and considers
the interests of stakeholders when
making its decisions.
VIABILITY STATEMENT
GOING CONCERN BASIS
On the basis of a robust assessment
of the principal risks facing the
Group, and on the assumption that
they are managed or mitigated in the
ways disclosed on pages 92 and 93,
the Board’s review of the business
plan and other matters considered
and reviewed during the year,
and the results of the sensitivity
analysis undertaken, the Board has
a reasonable expectation that the
Company will be able to continue in
operation and meet its liabilities as
they fall due over the period to
September 2024.
Having assessed the principal
risks facing the Group, including the
current and forecast future impacts
of the ongoing COVID-19 pandemic,
the Board is of the opinion that
the Group as a whole and Imperial
Brands PLC have adequate resources
to meet operational needs from
the date of this Report through
to March 2023 and, therefore,
concludes that it is appropriate to
prepare the financial statements
on a going concern basis.
Read more on
pages 42 and 44
Read more on
pages 92 and 93
Read more on
page 92
PRINCIPAL RISKS AND
UNCERTAINTIES
FAIR, BALANCED AND
UNDERSTANDABLE
MODERN SLAVERY
STATEMENT
The processes and related reporting,
described in the Principal Risks and
Uncertainties section on pages 80
to 93, enables the Audit Committee
to review and monitor the
effectiveness of our risk
management and internal
control systems and confirm
their effectiveness to the
Board in accordance with the
recommendations of the Code.
The Directors confirm that they
consider, taken as a whole, this
Annual Report and Financial
Statements are fair, balanced
and understandable and provide
the information necessary
for shareholders to assess
the Company’s position and
performance, business model
and strategy.
As an international business, we
recognise the importance, influence
and duty we have in promoting
respect for human rights across
our business and supply chains. We
prepare an annual Modern Slavery
statement which is available on
our website. Our e-learning module,
which provides a global overview
of human rights abuse of modern
slavery and explains how employees
can raise concerns, is now available
in 15 languages and rolled out to
employees. This year, the course
was also delivered in person to 450
people who do not have access to
online learning in Madagascar and
Laos, including farmers.
Read more on
pages 80 and 93
Read more on
page 116
Read more on
page 53
www.imperialbrandsplc.com.
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SPEAKING UP
DIVERSITY POLICY
This year we launched our new
Speaking Up platform, which is
available both to our employees
and to other stakeholders, including
suppliers and farmers. The new
platform offers a wide range of
reporting routes and supports
anonymous reporting and feedback.
Our supporting Speaking Up policy
was also updated to align with the
new process, with the policy being
made available both internally and
on our website.
Internal processes, including
procurement and human resources,
have been aligned to the new
Speaking Up process.
During the year we also took
steps to enhance our Speaking Up
investigations process.
We have commenced a programme
to improve communication and
awareness of Speaking Up, with an
emphasis on farming communities.
The Group’s Audit Committee is
routinely provided with updates
on our Speaking Up incidents and
the operation of our Speaking Up
process, which was relaunched on
1 November 2020. If incidents are
material they are also reported to
the Board. Steven Stanbrook, our
Workforce Engagement Director,
has taken a close interest in the
ongoing improvements to our
Speaking Up process.
As a global business, diversity is an
integral part of how we do business.
As set out in our strategy review on
pages 48 and 57, the Board recognises
the value of gender diversity to the
Group and is committed to increasing
the representation of females within
senior management roles to
33 per cent by 2023.
At Board level, women, including
our Chair and Senior Independent
Director, represented 22 per cent of
our Directors as at 30 September 2021.
This will increase to 36 per cent on
15 November 2021 when, as previously
announced, we welcome Ngozi Edozien
and Diane de Saint Victor to the Board.
Searches for Board candidates and
any subsequent appointments are
primarily driven by merit and the
strategic needs of the organisation,
whilst looking to ensure we have
the appropriate balance of skills,
diversity of experience, demographics,
professional and geographic and,
mindful of the Parker Review,
ethnic backgrounds on our Board.
Following the appointment of Ngozi,
in November 2021, 17 per cent of
the Board will be from an ethnic
minority background.
In the wider Imperial organisation
and particularly senior management,
we are committed to ensuring that
all employees have an equal chance
of developing their careers within
the Group.
We are making significant changes
to how we approach diversity and
inclusion and creating initiatives
to raise awareness of processes and
behaviours within the business that
could exclude women and other
marginalised groups.
We have run a global Inclusion
Diagnostic hearing from almost
10,000 colleagues and, as a
result, have initiated a leadership
development programme for our
senior leaders to educate them around
what inclusion is and the role they
play in ensuring all our colleagues
feel able to bring their best selves
to work every day. Additionally, we
have established four global Employee
Resource Groups (ERGs) to deepen our
understanding of the experiences of
those in non-dominant groups and
help address the opportunities to
improve their working lives. The ERGs
are: Ethnicity, Disability, Gender and
LGBTQ+. Regular global engagement
surveys are undertaken and our global
diagnostic survey is championed by
the Workforce Engagement Director.
This is in addition to our Board
members running “Meet The Board”
sessions with colleagues from across
the business to truly understand what
is on their mind and views on how
the business is progressing towards
its renewed strategy.
Targeted learning programmes are
being embedded at all levels to help
us work towards creating an inclusive
culture. We have rolled out Unconscious
Bias and Microaggression e-learning
modules as a starting point in
our learning series of awareness
raising interventions following the
Inclusion Diagnostic.
We have created a new Flexible
Working programme (WORKFLEX) for
our UK business, to encourage a more
diverse range of candidates into the
business and increase flexibility in our
ways of working.
We are reviewing our recruitment
practices, with a view to implementing
initiatives to drive change in our
interview processes and practices,
enhancing our talent pool. We have
also enhanced practices such as
exit interviews so we can better
understand why employees (especially
our female talent) want to leave, and
put processes in place to remedy any
issues identified.
W W W . I M P E R I A L B R A N D S P L C . C O M
107
107
GOVERNANCE COMPOSITION, SUCCESSION AND EVALUATION
SUCCESSION AND NOMINATIONS
COMMITTEE
OVERVIEW
Role of the Committee
The Board has delegated to the
Succession and Nominations
Committee responsibility for reviewing
and evaluating the composition of the
Board and its Committees to maintain
the appropriate balance of skills,
knowledge, experience, independence
and diversity. The Committee aims
to achieve this responsibility using a
merit-based approach within a diverse
and inclusive culture. It leads the
process for appointments through
external search consultants, such
as Heidrick and Struggles1 and Heads
International1, looking for candidates
that enhance the overall effectiveness
of the Board and demonstrate
independence of mind and integrity.
Succession plans for the Chair,
Non-Executive Directors (NEDs),
Executive Directors and the Group’s
senior management, in particular
the ELT, are kept under review.
The Succession and Nominations
Committee also oversees the
development of a diverse and
inclusive pipeline for succession
for ELT members together with the
Company’s wider organisational
structure and talent management
processes. This allows the Committee
to ensure the Company is developing
the right capabilities and has
appropriate succession plans in place
for sustainable delivery of our strategy.
During the year we strengthened
our ELT with the promotion of Kim
Reed and the appointment of Andy
Dasgupta, Javier Huerta and Paola
Pocci; see pages 22 and 23.
The Succession and
Nominations Committee’s
terms of reference
are available on our website
www.imperialbrandsplc.com.
THÉRÈSE ESPERDY
CHAIR OF THE SUCCESSION AND
NOMINATIONS COMMITTEE
Members
Other regular attendees
Thérèse Esperdy (Chair)
Chief Executive Officer
Sue Clark
Alan Johnson
Chief Financial Officer
Chief People and Culture Officer
Bob Kunze-Concewitz
Company Secretary
Simon Langelier
Steven Stanbrook
Jon Stanton
Focus in 2021
• CFO succession.
• Non-Executive Director succession.
• Board diversity.
• Ongoing executive and senior management
succession planning.
• Talent development including enhancing the ELT.
• Further building organisational capability.
Looking ahead to 2022
• Ongoing Non-Executive Director succession.
• Executive and senior management succession planning.
• Board and senior management diversity.
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We have made a number of
Board and senior management
appointments to enhance diversity
and capabilities in key areas.
Election and re-election
of Directors
All Directors are appointed following
a rigorous selection process led by
the Succession and Nominations
Committee, supported by the Group
HR function, which then makes
recommendations to the Board. See
below for details of the appointment
process for our new CFO and NEDs.
In accordance with the Code and with
the Company’s Articles of Association,
all Directors put themselves up for
re-election annually at the AGM;
at our forthcoming AGM Lukas
Paravicini, Ngozi Edozien and Diane
de Saint Victor will be standing for the
first time. The Board recommends the
election or re-election of all Directors
who are standing at our 2022 AGM.
Read more about the skills and
experience of our Board on
pages 96 to 97 and 105 .
Refreshing the Board and
its Committees
During the year the Committee has
overseen the appointment of our
new CFO and three Non-Executive
Directors. We are mindful of our
diversity obligations, including
the Davies, Parker and Hampton-
Alexander Reviews, together with
the continuing FTSE Women Leaders
review and will continue to incorporate
these into our search criteria for Board
members and senior management. We
are pleased that by 15 November 2021,
36 per cent of the Board will be female
and two of our Directors will be from
an ethnic minority background.
Following the announcement in
August 2020 that Oliver Tant would
retire, a key focus for the Committee
was CFO succession. We initiated
an extensive process to identify the
best internal and external candidates.
Heidrick and Struggles1 was selected
to provide the Committee with advice,
assessment and support throughout
this process. Lukas Paravicini was
selected as being the best fit with
our criteria, with the skill set which
will be invaluable to Imperial as we
implement our new strategy.
During the year we welcomed Bob
Kunze-Concewitz and Alan Johnson
as Non-Executive Directors. Bob
is a member of the Remuneration
Committee and Alan a member of the
Audit Committee. Bob and Alan were
selected from a number of candidates
identified by Heads International1 and
Heidrick and Struggles respectively.
The Committee recommended its
preferred candidates to the Board,
all members of which were fully
supportive of the appointments.
The Board was saddened that
Pierre-Jean Sivignon had to step
down for unforeseen personal reasons
and would like to thank him for his
contribution and wish him the very
best for the future.
Following recommendations
from Heidrick and Struggles, on
31 August 2021 we were pleased
to announce that following
recommendations from the
Committee the Board had appointed
Ngozi Edozien and Diane de Saint
Victor as Directors with effect from
15 November 2021. Ngozi will join
the Audit Committee and Diane
the Remuneration Committee.
THÉRÈSE ESPERDY
CHAIR OF THE SUCCESSION AND
NOMINATIONS COMMITTEE
1. Other than recruitment at Board and senior management level they do not have any other connection with the Company or its Directors.
W W W . I M P E R I A L B R A N D S P L C . C O M
109
109
GOVERNANCE COMPOSITION, SUCCESSION AND EVALUATION – CONTINUED
BOARD BALANCE
BOARD GENDER BALANCE
BOARD ETHNICITY
TENURE OF NON-EXECUTIVE
DIRECTORS AT 30 SEPTEMBER 2021
At 30 September
2021
Post 15 November
2021
Male
Female
78%
22%
64%
36%
At 30 September
2021
Post 15 November
2021
90%
83%
10%
17%
Ethnic
majority
background
Ethnic
minority
background
28.5%
28.5%
43%
5-7 Years
3-5 Years
0-3 Years
28.5%
43%
28.5%
INDUCTION PROGRAMME FOR CFO
Following his appointment in May 2021, Lukas held virtual or physical meetings with all 10 of our cluster operations as well
as online town hall sessions with around 675 members of our finance teams around the world.
In addition to meeting with employees, Lukas has also met with shareholders, ratings agencies, our auditors and
remuneration advisers.
Factory and leaf supplier visits will also be scheduled as worldwide travel restrictions continue to ease. These will be held
in tandem with our Chief Supply Chain Officer, Javier Huerta.
COMPOSITION AND ROLES
During the financial year, the Board was composed as follows:
Chair
• Thérèse Esperdy
Chief Executive Officer
• Stefan Bomhard
Chief Financial Officer
• Lukas Paravicini (from 19 May 2021)
• Oliver Tant (until 18 May 2021)
Senior Independent Director
• Sue Clark
• Thérèse leads the Board and creates an environment that ensures there are strong
links between the Board, our stakeholders and management.
• On appointment, Thérèse met the independence criteria of the Code. There have
been no significant changes to her external commitments during the year.
• Supported by the CFO and ELT, Stefan has day-to-day management responsibility
for the Group, and the development of its strategy.
• Stefan and the CFO actively promote the Group’s high standards of conduct and
behaviour, which underpin our reputation and support our renewed strategy.
• Lukas supports Stefan in developing our strategy and overseeing the operations
and development of the entire Group, in addition to specific responsibility for the
Group’s Finance function.
• Sue is responsible for assisting the Chair with effective shareholder communication
and is available to shareholders should they have any concerns which have not
been resolved through the normal channels or if these channels are not appropriate.
• She is available should our NEDs have any concerns which are not appropriate to
raise with the Chair or which have not been satisfactorily resolved by the Chair.
• Sue also acts as a sounding board for the Chair and carries out the Chair’s
performance evaluation.
Independent Non-Executive Directors
• The NEDs evaluate information provided and challenge constructively
management’s viewpoints, assumptions and performance. They bring to the
Board a diverse skill set and range of business, financial and global expertise
which complements and supplements the experience of the Executive Directors.
• Alan Johnson (from 1 January 2021)
• Bob Kunze-Concewitz (from
1 November 2020)
• Simon Langelier
• Pierre-Jean Sivignon (from
1 July 2020 until 4 June 2021)
• Steven Stanbrook
• Jon Stanton
• Ngozi Edozien and Diane de
Saint Victor will join the Board
on 15 November 2021.
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GOVERNANCE AUDIT AND INTERNAL CONTROL
AUDIT COMMITTEE
Members1
Jon Stanton (Chair)2
Sue Clark
Alan Johnson
Simon Langelier
Other regular attendees
Board Chair
Chief Financial Officer
Company Secretary
Deputy Chief Financial Officer
Group Financial Controller
Director of Assurance
and Risk3
Director of Tax
Deputy Company Secretary
Representatives from EY, our
external auditors3
JON STANTON
CHAIR OF THE AUDIT COMMITTEE
Focus in 2021
• Oversight and strengthening of internal control and assurance during the COVID-19 pandemic and a period of
significant change for the Group.
• Supporting the Board in its evaluation of risk, risk appetite and ongoing risk management.
• Evaluating the outcome of the strategic review on critical judgements, estimates and disclosures, in particular on
adjusted performance measures and NGP asset carrying values.
• Review and challenge of interim and annual financial reporting, including appropriate reporting and presentation
of the financial impacts of COVID-19.
• Ensuring reporting and disclosures are fair, balanced and understandable throughout the period of change for the
Group.
• Review of tax strategy to reflect its application to both UK and international taxes and reviewing the
reasonableness of provisions and disclosure on material uncertain tax positions.
• Ensuring transparency of reporting around risk disclosures, adjusting items and performance value drivers.
• Overseeing the embedding of EY as external auditor following completion of first year as auditor in FY20.
Looking ahead to 2022
• Oversight of the continuous improvement agenda of risk management, internal control and assurance taking into
account the outcome of the BEIS proposals.
• Supporting the development of the finance agenda being led by our new CFO to enhance capabilities, prioritise
controls and governance and support the broader culture change being led by our CEO.
• Reviewing and challenging critical judgements, estimates and disclosures, including adjusted performance
measures, particularly as they relate to the ongoing execution of our new strategy, the continuing impact of COVID
and an uncertain macro environment.
• Ensuring reporting and disclosures are fair, balanced and understandable throughout the period of change for the
Group and adequately reflect developments in our ESG commitments and FRC disclosure guidelines.
• Implementing recommendations from the review of the Board and Committee effectiveness conducted in FY21 as
they relate to the performance of the Audit Committee.
• Oversight of the external auditors and implementation of ongoing enhancements to derive value from the external
audit whilst also enhancing audit quality.
1. All members are independent Non-Executive Directors.
2. Jon Stanton meets the Code’s requirement of having recent and relevant financial experience. The Audit Committee and Board are satisfied that he, and the
Audit Committee as a whole, have the appropriate competence relevant to the sector in which the Company operates.
3. At each meeting, both the Director of Assurance and Risk and EY have the opportunity to meet with the Audit Committee without management present.
Other Directors are invited to attend each meeting.
W W W . I M P E R I A L B R A N D S P L C . C O M
111
111
Both external and internal auditors
continue to present feedback on
key financial controls and risks and
provide objective and appropriate
challenge to management in
addressing these areas. Both auditors
took advantage of regular private
meetings with myself and the full
Audit Committee throughout the year.
These processes continue to enable
the Audit Committee to report to
the Board on how it discharged
its responsibilities and to make
recommendations to the Board,
all of which were accepted.
The following pages provide an
insight into the range of activities and
deliberations of the Audit Committee
during the financial year supported
by a fuller list of all key matters
considered by the Audit Committee
set out on pages 113 to 116.
FINANCIAL EXPERT ON THE
AUDIT COMMITTEE
For the purposes of the Code, the Board
has designated me as the financial expert
on the Audit Committee, in view of my
being a Chartered Accountant and my
previous experience as Chief Financial
Officer at Weir Group PLC between
2010 and 2016.
JON STANTON
CHAIR OF THE AUDIT COMMITTEE
GOVERNANCE AUDIT AND INTERNAL CONTROL – CONTINUED
DEAR SHAREHOLDER
I am pleased to present the report to
shareholders of the Audit Committee
for the year ended 30 September 2021,
which sets out how it has discharged
its duties in accordance with the Code
and details the key matters considered
and findings during the year. The
Committee has exercised the authority
delegated to it by the Board to provide
assurance for the integrity of financial
statements, to oversee the Group’s
external and internal audit and to
review the Group’s internal control
and compliance frameworks.
The year has been another of
significant change at Imperial Brands
PLC. In 2021, against a backdrop of
the COVID-19 pandemic, we saw the
smooth succession of Lukas Paravicini
to the CFO role, initial implementation
of the renewed strategy and the
completion of the disposal of the
Premium Cigar business.
As a result, the Committee has closely
scrutinised a number of areas when
assessing critical judgements and
estimates made by management
and in ensuring support for a robust
financial close and that the financial
statements are fair, balanced and
understandable. These included:
• Ongoing evaluation of the
appropriateness of NGP tangible
and intangible asset values in
light of the broader strategic review
and a reduction in estimates for
the category.
• The challenge and review of
management’s judgements
supporting the going concern
and viability statements, including
stress testing additional scenarios
for material uncertainties. For
example, a permanent reduction
in profitability and cash flow, the
impact of the renewed strategy
and the possible effects of
climate change. The unwinding
of the previously identified risks
associated with Brexit but the
increased uncertainty related to
the ongoing COVID-19 pandemic
were also considered.
• Reviewing the effectiveness of the
Group’s internal control framework
and its risk management processes
utilised to mitigate key risk areas
of the business. These reviews
included receiving and reviewing
risk management presentations
from a number of the Group’s key
functions including the Division
Finance Director Europe and the
Finance Director Manufacturing
and Supply Chain.
• Ongoing scrutiny and review of
provisions for uncertain tax positions
linked to tax audits reflecting the
Group’s multi-jurisdictional nature
and an evolving tax regulatory
framework and the approval of
the Group’s tax strategy.
As a Committee, we continue to focus
on ensuring the Annual Report is fair,
balanced and understandable, with
an emphasis on transparency of
underlying performance drivers
and confirming that adjusting items
are in accordance with the agreed
framework and that disclosures are
enhanced where necessary to help
users understand the accounts. This
included ensuring that an appropriate
balance within both the Half-Year
Report and the Annual Report of
reported and adjusted results
was presented.
Reviewing the effectiveness
of EY’s first external audit of
the Group
The transition of the external
audit to EY completed smoothly.
In February 2021 we reviewed EY’s
performance, which indicated a high
level of auditor effectiveness across
the Group. Further details of the quality
review process are set out on page 118.
The role of external auditor remains
under considerable regulatory
scrutiny, a recent example being the
2021 BEIS proposals for audit reform.
As a Committee we are kept updated
on progress and consultations such
that these are reflected in the scope
of our agenda. We have continued to
review the impact of the Audit and
Half-Year Review being conducted
remotely due to COVID-19 to ensure
there had been no adverse impact on
their quality.
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MAIN OBJECTIVE
The main objective of the Audit
Committee is to assist the Board
in fulfilling its corporate governance
responsibilities relating to financial
and narrative reporting and controls.
This includes oversight of the
Group’s internal control systems, risk
management process and framework,
Speaking Up arrangements (see
pages 61 to 62) and the internal
and external audit processes. As
the Group’s risk profile continues to
evolve, the Audit Committee adjusts
its scrutiny of relevant risk areas
and key judgements, including
going concern, viability, working
capital valuations and the valuation
of intangible assets. This oversight
also involves ensuring the integrity of
the Group’s financial statements and
related announcements. During the
year the Audit Committee achieved
this by:
KEY MATTERS CONSIDERED
• maintaining appropriate oversight
over the work and effectiveness
of the Internal Audit department,
including confirming it is
appropriately resourced, reviewing
its audit findings and monitoring
management’s responses;
• monitoring and evaluating the
effectiveness of Imperial’s risk
management and internal control
systems, including obtaining
assurance that controls are
operating effectively and are
evidenced as such through,
for example, the internal self-
certification exercise and
subsequent internal audit testing;
• scrutinising the independence,
approach, objectivity, effectiveness,
compliance and remuneration of
the external auditor;
• assessing the going concern
status and medium-term viability
of the Group;
• assisting the Board in confirming
that, taken as a whole, the
Annual Report is fair, balanced
and understandable, and provides
the information necessary for
shareholders to assess the
Company’s performance,
business model and strategy
(see page 116); and
• reviewing and challenging the
critical management judgements
and estimates which underpin the
financial statements, drawing on
the views of the external auditor in
making an informed assessment,
particularly in relation to each
of the key matters detailed on
pages 113 to 116.
The Audit Committee’s
terms of reference are
available on our website
www.imperialbrandsplc.com.
The Audit Committee considered the appropriateness of the following areas of significant judgement, complexity or estimation
in connection with the financial statements, as set out below:
Focus area
Use of adjusted
measures
Why this area is significant
How we as an Audit Committee addressed this area
Non-GAAP or adjusted
measures provide an
appropriate and useful
assessment of business
performance and reflect
the way the business is
managed. They are also
used in determining
annual and long-
term incentives for
remuneration, and
are widely used by our
investors. There is a risk
that their inappropriate
use could distort
the performance
of the business.
As reported last year, the Board made a commitment to revisit the
continued treatment of restructuring as an adjusting item once the
COP II programme finished on its anticipated date in 2020. Against
a backdrop of the COVID-19 pandemic this impacted the ability of the
Group to conclude its 2020 COP II programme as planned.
In January 2021 an announcement was made relating to a Group
strategic review which initiated a further restructuring programme.
The Audit Committee considered and accepted management’s
recommendation that restructuring costs associated with this strategic
review will continue to be incurred by the Group post FY21 and are
expected to conclude in FY23.
The Audit Committee reviewed these events alongside the continued
guidance from ESMA and previous correspondence with the FRC
regarding the treatment of restructuring and agreed that it was
appropriate that the implementation of the renewed strategy be treated
as a major project restructuring and as an adjusting item until the end
of FY22. It also agreed that the Group’s Adjusted Performance Measures
framework, used for presenting and disclosing the Group results for
FY20, should remain unchanged for FY21 and should continue to apply
during FY22, noting that in FY22 only charges relating to the Group
strategic review would be eligible for restructuring treatment as an
adjusting item.
The Audit Committee has reviewed the use of alternative
performance measures (APMs) in the year including the policies in
relation to determining APMs and seeking to understand the nature
and amount of all adjusting items. Furthermore, for the year ahead,
the Audit Committee will review and approve any changes to APM’s
proposed by management versus those used currently.
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GOVERNANCE AUDIT AND INTERNAL CONTROL – CONTINUED
Focus area
NGP intangible
asset carrying
values
NGP inventory
provisioning
The sale of the
Premium Cigar
Division
Why this area is significant
How we as an Audit Committee addressed this area
The Group capitalises
certain costs in relation
to intellectual property
created in support of NGP
technology advancements.
The ability to continue
to hold these balances
as assets is dependent
on continued plans
for the technology
to be commercialised
and deliver sufficient
cash flows to cover
carrying value.
There has been a
risk that the carrying
value of NGP inventory
was overstated as
the category evolved
and applicable,
relevant regulatory
frameworks changed.
The sale of the Premium
Cigar Division completed
on 29 October 2020.
This was a significant
transaction for the
Group with a high
degree of complexity
from a financial
reporting perspective.
Following the strategic review, an impairment review of NGP intangible
assets was conducted on a project-by-project basis to assess the likely
commercialisation of the intellectual property within each project and
the anticipated cash flows associated with those assets as a basis for
assessing the appropriateness of carrying values.
A further review of the remaining NGP intangible assets was conducted
following the arrival of the new Chief Consumer Officer and Chief
Financial Officer.
The Audit Committee has considered these reviews and a detailed
list of NGP intellectual property held by the Group and has assessed
management’s judgement as to whether these asset valuations remain
reasonable. The Audit Committee has also reviewed and agreed those
assets impaired or deemed at risk of impairment. The Audit Committee
has received feedback from the external auditor as to the level
of rigour and robustness of management’s view and the level of
impairment required.
The Audit Committee reviewed management’s revised judgements
on inventory valuations reflecting the transitional phase of the NGP
category post the strategic review.
These judgements included additional write-down of slow moving
devices and e-vape pods due to a change in shelf-life guidance,
withdrawal from certain markets and cancelled launches in
other markets.
The Audit Committee considered details of the strategic review,
management’s provisioning calculations and the opinion of the
external auditor in forming its view that the level of provisioning
for NGP inventory is sufficient.
The ongoing disposal of the Premium Cigar Division led to the continued
reclassification of certain assets of the business under the categories
“current assets / current liabilities held for disposal” which were
previously disclosed in the Group’s 2020 financial statements. The
completion of the disposal resulted in an impairment of goodwill and
intangibles in relation to the Premium Cigar Division, with the net assets
being written down to the amount of the expected sales proceeds.
On completion of the disposal a reversal of foreign exchange movements
was taken through reserves from the time the original acquisition of
the Premium Cigar Division took place, recognising those historic
gains within the profit and loss account.
The Audit Committee has reviewed the profit recorded on completion of
the disposal, including the amount of foreign exchange gains recycled
from reserves, and is satisfied that any associated judgements are
reasonable and accurately reflected in the accounts, a position supported
by the external auditor.
In addition, the Committee reviewed the mechanism for sale proceeds
being received which included elements of deferred consideration and
was satisfied that these were fully recoverable given a review of both
the short-term tenure and the level of security attached to it. Any
deferred consideration amounts were disclosed as such in the 2021
financial statements.
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Why this area is significant
How we as an Audit Committee addressed this area
Focus area
Goodwill and
intangible asset
impairment
reviews
See note 12 to
the financial
statements
for further
information.
Taxation
See notes 8 and 23
to the financial
statements
for further
information.
Goodwill and intangible assets form a
major part of the Group’s balance sheet
and their current valuations must be
supported by future prospects.
The Group is subject to taxation in a
number of international jurisdictions,
requiring significant management
judgement in relation to effective
tax rates, tax compliance and the
reasonableness of tax provisions
which could materially affect the
Group’s reported results.
The Group is subject to periodic
challenges by local tax authorities
on a range of matters and there are
uncertain tax positions in relation to
three principal matters: transfer pricing
audits in Germany, France and the UK;
a French Tax Authority challenge in
respect of an intra-Group disposal;
and the EU Commission’s challenge
of the UK Controlled Foreign Company
(CFC) regime.
Litigation
matters and
competition
investigations
The Group is exposed to litigation
matters arising from claimants seeking
remedies from the Company or its
subsidiary companies. A small number of
claims alleging smoking-related health
effects remain, as well as NGP-related
product litigation in the US only. One
claim arising from specific US legislation
(Helms-Burton) is ongoing, one element
of the US State Settlement agreements
remains unresolved, and the Group faces
one ESG-related claim, see contingent
liabilities pages 212 to 217. The Group is
in the process of appealing two Decisions
by national Competition Authorities in
the EU and is responding to an ongoing
process in another EU jurisdiction.
The Audit Committee has reviewed cash forecasts for the
Cash Generating Unit Groupings (CGUGs) that are used to
support the Group’s goodwill and intangible assets balances.
Within this review the potential impacts of climate change
were considered. Following these reviews it was concluded
that there is significant headroom from the discounted cash
flows for each CGUG above the valuation of the goodwill
allocated to it.
The Audit Committee also considered detailed reporting
from, and held discussions with, the external auditor. The
Audit Committee concluded that there was no requirement
to impair goodwill and intangibles outside of those NGP
assets previously identified, and that the disclosure of
sensitivities was appropriate and on this basis approved
the note disclosure in the financial statements.
The Audit Committee received a detailed update from
management at each Committee meeting on the status of
ongoing enquiries and tax audits with local authorities; the
Group’s effective tax rate for the current year; and the level
of provision for known and potential liabilities including
the third party counsel received in developing estimates. In
addition, the Audit Committee discussed material positions
with the external auditor in support of developing an
independent perspective on the positions presented.
The Committee continued to receive specific progress
reports on UK CFC, French tax litigation and the status of
the transfer pricing audits and in light of these considered
the reasonableness of provisions and reporting disclosures.
The Committee continued to consider the appropriateness
of items treated as adjusting and concluded that the items
satisfied adjusting item criteria on the basis of materiality
and nature.
The Audit Committee reviewed the status of each material
tax judgement, including a range of possible outcomes,
noted that independent third-party support had been
obtained for each judgement and agreed that the level
of tax provisions and disclosures was appropriate.
UK tax law requires the Group to re-publish its annual Tax
Strategy in relation to UK tax on its website. In May 2021 the
Tax Strategy was updated to reflect the strategy applying to
both UK and international taxes. The Committee reviewed
the Group’s Tax Strategy, noting there were no significant
changes to the content apart from the above mentioned
broadening of scope.
The Audit Committee considered reports from the Group’s
external lawyers which confirmed that the Group continues
to have meritorious defences to a number of actual
and threatened legal proceedings. The Audit Committee
concluded that risks in respect of the material litigation
matters listed above and otherwise covered in this report,
along with any competition authority proceedings, were
appropriately disclosed or provided for in the Group’s Annual
Report and Accounts.
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GOVERNANCE AUDIT AND INTERNAL CONTROL – CONTINUED
Focus area
Going concern
and viability
statement
Revenue
recognition
Fair, balanced and
understandable
Why this area is significant
How we as an Audit Committee addressed this area
The COVID-19 pandemic
continued to have a
material impact on
the global economy.
In the context of
this global economic
uncertainty, and the
Group’s revised strategy,
the Directors are required
to consider whether it is
appropriate to prepare the
financial statements on a
going concern basis and
explain how they have
assessed the prospects
of the Company over a
longer period.
There is a risk that
revenue could be
overstated through the
inclusion of sales which
are not in compliance
with the Group’s
revenue recognition policy.
Additionally, the COVID-19
pandemic continues to
impact the credit risk
profile of a number of
the Group‘s customers,
increasing the risk that
trade debtor balances may
be overstated through
customer default.
The Board is required
to state that the Group’s
external reporting is
fair, balanced and
understandable. The Audit
Committee is requested by
the Board to provide advice
to support the assertion.
Management performed a comprehensive series of stress tests to
confirm that the going concern basis and viability statement remain
appropriate. These tests are described in the going concern statement
on page 92. The tests involved the stress testing of the resilience of the
Group to certain changes in trading conditions that may come about as a
result of the COVID-19 pandemic, as well as realisation of other key risks,
including climate change.
The Audit Committee reviewed these tests on operating cash flows,
the experiences through the first year of the pandemic, the ongoing
resilience of demand and supply and disposal proceeds from the sale
of the Premium Cigar business. In addition, the Committee noted the
Group’s ability to raise euro 1 billion backed senior unsecured notes,
offered by Imperial Brands Finance Netherlands B.V. and unconditionally
and irrevocably guaranteed by Imperial Brands PLC.
Together, these points allowed the Audit Committee to form an opinion
as to the ability of the Group to remain a going concern from the date of
this Report through to 31 March 2023 and make its recommendation to
the Board.
In addition, the Audit Committee also reviewed management’s view
of the Group’s ability to remain viable, for the agreed three-year period,
following the forecast realisation of a number of key risks, including the
possible impacts of climate change, and concluded that it is appropriate
to sign off the Group’s viability statement.
Discussions were held with management and the external auditor
which satisfied the Audit Committee that the Group’s criteria for revenue
recognition continued to be appropriate and that the central monitoring
of trade weight at period ends ensured any material breaches to the
Group’s revenue recognition policy would be both detected and reported
to the Committee and where applicable, disclosed externally. No
breaches were found during the year.
The Audit Committee continued to monitor the impact the COVID-19
pandemic had on certain categories of customer, management’s
process for monitoring credit risk and ensuring the Group could react
and respond appropriately.
The Audit Committee is satisfied that the level of trade debt has been
appropriately valued and that any potential bad debt has been adequately
provided for.
The Audit Committee received a report from management summarising
the processes that had been undertaken to ensure that the Group’s
external reporting is fair, balanced and understandable. This included,
but was not limited to, the following: (i) a full document review by the
Disclosure Committee; (ii) engagement of a cross-functional group of
internal and external subject matter experts and content owners in
the preparation and review of materials, including the ELT, Group
Corporate Communications, Group Finance, Internal Audit, Group Legal,
Investor Relations and Company Secretariat; (iii) input and advice from
appropriate external advisers, including the Company’s brokers and
external audit challenge and scrutiny; (iv) regular research to identify
emerging practice and guidance from relevant regulatory bodies; and
(v) regular meetings involving the key contributors to the document,
during which specific consideration was given to the fair, balanced and
understandable assertion.
After consideration of the Annual Report against these criteria the
Audit Committee recommended to the Board, which accepted the
recommendation that, taken as a whole, the Annual Report is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position and performance,
business model and strategy.
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The Audit Committee reviewed the
effectiveness of IA primarily through
internal surveys and KPI reporting.
The Audit Committee has reviewed the
FY22 IA plan, including its scope and
extent, and confirmed appropriate
resources exist to deliver the plan.
EXTERNAL AUDIT
The Audit Committee is responsible for
oversight of EY as the Group’s external
auditor, agreeing its audit strategy and
related work plan, as well as approving
its fees. At the Committee’s February
2021 meeting, EY set out its external
audit plan for the year, which built
on its experience from its first audit,
EY’s continued focus on audit quality
and the feedback it received
from management, the Board and
the Committee. EY provided the
Committee with an overview of
its evolving audit strategy, tailored
to the Group, including its audit risk
assessment, Group audit materiality
and scope, and the key areas of its
proposed audit approach.
The successful transition of auditor,
including consideration of its feedback
from its first full year audit, including
its management letter, and half-year
review, was a key area of focus for the
Committee. EY also provided feedback
to relevant Group and local management
in a number of debrief sessions.
The Audit Engagement Letter detailing
the provision of statutory audit and
half-year review services was both
considered and approved.
The Committee has had regular
private meetings with EY and is
satisfied that it has been given full
access and complete transparency
by management throughout the year.
GOVERNANCE, RISK
MANAGEMENT AND
INTERNAL CONTROL
Assessing and managing the risks
faced by the Group is fundamental
to achieving our strategic objectives,
safeguarding our shareholders’
interests and protecting the
Group from reputational or legal
challenges. This is reflected in our
risk management framework, which
ensures significant risks are identified,
managed and monitored.
In accordance with the Code, the
Board has overall responsibility
for setting the Group’s risk appetite,
with accountability for maintaining
effective risk management and
internal control systems then being
delegated to the Audit Committee.
The Group’s risk management approach
is described in the Principal Risks and
Uncertainties section on pages 80 to
93 and is designed to manage, rather
than eliminate, the significant risks
the Group may face. Consequently,
our internal controls can only
provide reasonable, and not absolute,
assurance over our principal risks.
During the year the Board
considered the Group’s bottom-up
risk assessment which included
consideration of emerging risks
identified as: failure to successfully
manage regulatory change; failure to
effectively manage tax positions; and
reporting and product supply.
Monitoring the effectiveness
of risk management
The Audit Committee is
responsible for approving the risk
management approach on behalf
of the Board, and for oversight of its
ongoing effectiveness.
The Board and Audit Committee
received regular updates throughout
the year on the continued development
of our risk management and internal
control systems as well as on the results
of risk assessments and internal
control effectiveness assessments.
The Audit Committee has been
informed of, and looked at, all
significant whistleblowing reports
and reported frauds in the year, and
is comfortable that none of these gave
rise to evidence that there have been
instances of non-compliance with
relevant laws and regulations.
Throughout the course of the financial
year, the Audit Committee has invited
first line functions to present on
their respective risk management
approaches to the risks overseen.
This direct dialogue with the Audit
Committee provides further assurance
to the Audit Committee regarding the
effective management of significant
risks to the Group.
Reporting provided to the Audit
Committee enables the review and
monitoring of the effectiveness of our
risk management and internal control
systems. The Audit Committee has
considered and confirmed to the Board
that this is in accordance with the
recommendations of the Code and that
such systems were in place throughout
the year and up to the date of the
approval of the financial statements.
INTERNAL AUDIT
Internal Audit (IA) is responsible for
providing independent and objective
assurance on the adequacy and
effectiveness of the risk management
and internal controls framework.
The Audit Committee reviewed the
IA plan for the year and agreed the
budget and resourcing requirements.
The Audit Committee reviewed reports
from IA at each Audit Committee
meeting to monitor the effectiveness of
the control framework and considered
the effectiveness and results of the
audits undertaken by IA and monitored
management responses to the audit
matters raised. The Audit Committee
also met independently with the
Director of Assurance and Risk to
discuss additional insights.
During the year IA performed a
risk-based audit programme aligned
to the Group’s strategic priorities,
resulting in relevant recommendations
and insights to further strengthen the
Group’s control framework. All audit
work was conducted remotely.
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no pervasive Group-wide concerns
identified. Based on its consideration
of the responses, together with
its own ongoing assessment, for
example through the quality of EY’s
reports to the Audit Committee and
its interaction with the Group Audit
Partner, the Audit Committee remains
satisfied with the efficiency and
effectiveness of the audit.
The Audit Committee noted that the
FRC Audit Quality review team did not
select our FY20 accounts for review.
The Committee also noted that the
FRC rated the majority of audits
carried out by EY as either good or
requiring only limited improvements.
Audit tender
The external audit was last tendered in
2019, with EY being awarded the audit
in February 2019 with a 1 October 2019
start date. The next time the audit will
be tendered will likely be in 2029, as
required by regulation. The Committee
continues to review the independence
and the quality of the external
audit to assess if a tender should
be undertaken in advance of the
regulatory requirement.
The Audit Committee recommended to
the Board that EY should be reappointed
as external auditor at the next AGM.
Audit fees
In the current year audit fees were
£7.5 million (2020: £7.0 million)
(see note 4).
GOVERNANCE AUDIT AND INTERNAL CONTROL – CONTINUED
fees is appropriate in the light of
the above activities and the Audit
Committee does not believe that the
objectivity of the external audit has
been impaired as a result of this
non-audit work.
To ensure compliance with this policy,
during the year the Audit Committee
carried out two auditor independence
reviews, including consideration of the
remuneration received by EY for audit
services, audit-related services and
non-audit work. The Audit Committee
also considered reports by both
management and EY, which did not
raise any concerns in respect of EY’s
independence, and confirmed that
EY maintains appropriate internal
safeguards to ensure its independence
and objectivity. The outcome of these
reviews was that performance of the
relevant non-audit work by EY was
in compliance with the policy and
was the most cost-effective way of
conducting our business. No conflicts
of interest were found to exist between
such audit and non-audit work. The
Audit Committee therefore confirmed
that the Company and Group continue
to receive an independent audit service.
Audit quality
The Board and Audit Committee place
great importance on ensuring that
the Group receives a high-standard
and effective external audit. The key
tool in assessing the performance
of our external auditor is an audit
effectiveness questionnaire. The
questionnaire covers the audit
scope, planning, quality and delivery,
challenge and communication, and
independence, and is completed by
members of the Audit Committee,
Logista’s Audit Committee, senior
managers and finance executives from
across the Group. Responses indicated
that, in its first year, there was a
perception that EY had delivered a
high-quality and effective audit, with
Independence of our
external auditors
As part of the continual requirement
to ensure the independence and
objectivity of EY as our external
auditor, the Audit Committee
maintains and regularly reviews our
Auditor Independence Policy. This
policy provides clear definitions of
services that the external auditors may
and may not provide as determined
by the FRC’s Revised Ethical Standard
published in December 2019, a copy
of which can be found on our website.
Our Auditor Independence Policy
requires that the Group Audit Partner
rotates after a maximum of five
years (seven years for subsidiary
companies). Andrew Walton,
our signing audit partner, has
just completed his second year.
The policy states that EY may only
provide non-audit services where
those services do not conflict with
its independence. It also establishes
a formal authorisation process,
including the tendering for
individual non-audit services
expected to generate fees in excess
of a specified threshold, and prior
approval by the Audit Committee
for allowable non-audit work that EY
may perform. To improve governance
and oversight, during the year the
Committee reviewed this threshold
and reduced it from £500,000
to £100,000. Guidelines for the
recruitment of employees or
former employees of EY, and for the
recruitment of our employees by EY,
are contained in the policy.
During the year EY undertook limited
non-audit work all of which was
assurance or attestation related.
This non-audit work was awarded to
EY due to its prior knowledge of the
Group and it being deemed best placed
to provide effectively the services
required. In the current year, non-audit
fees were 5 per cent (2020: 3 per cent)
of total audit fees (see note 4). EY
did not undertake any advisory or
consultancy work. Following the
auditor independence reviews
during the year, the Audit Committee
concluded that the level of non-audit
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Statement of auditors’
responsibilities
EY is responsible for forming an
independent opinion on the financial
statements of the Group as a whole
and on the financial statements of
Imperial Brands PLC as presented
by the Directors. In addition, it also
reports on other elements of the
Annual Report as required by
legislation or regulation and reports
its opinion to members. Further
details of EY’s opinions start on
page 148.
Auditors and disclosure of
information to auditors
Each of the Directors in office at
the date of approval of this Annual
Report confirms that:
• so far as they are aware, there
is no relevant audit information
(that is, information needed by
EY in connection with preparing
its report) of which EY is
unaware; and
• each has taken all the steps
that they ought to have taken
as a Director in order to make
themselves aware of any relevant
audit information and to establish
EY is aware of that information.
JON STANTON
CHAIR OF THE AUDIT COMMITTEE
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GOVERNANCE REMUNERATION REPORT
ANNUAL STATEMENT FROM
REMUNERATION COMMITTEE CHAIR
DEAR SHAREHOLDER
The last year has been challenging
for businesses across the world.
The pandemic has continued to
disrupt customer and consumer
behaviours and imposed very real
stresses on supply chains around
the globe. The new senior leadership
team, led by Stefan, has responded
with tenacity, speed and agility to
deliver a solid financial performance
while launching a new purpose and
strategy to transform the business
and unlock value.
As discussed throughout the Annual
Report and Accounts, shortly after
Stefan joined as Chief Executive
Officer (CEO) last summer, he began a
comprehensive strategic review of the
Group and unveiled the new business
strategy at our Capital Markets Day in
January 2021. The aim is to transform
the business over the next five years
with consumers at the centre of
everything we do.
The Remuneration Committee
(the Committee) took time to consider
the new strategy to satisfy ourselves
that the new Remuneration Policy
provides the right incentives to drive
outstanding delivery against the
key pillars.
We also worked to support the
new CEO in his efforts to attract the
best global talent to his new senior
leadership team. He has assembled
an outstanding group which blends
consumer expertise with deep
tobacco knowledge.
During the year the Committee also
focused on securing support for, and
implementing, the new remuneration
policy, both listening and responding
to our investors’ concerns.
The first year of our new five-year
strategy “Our Transformation to
Unlock Value”
Strengthening the leadership team
has been a key priority for Stefan,
and during the year the capability and
diversity of the Executive Leadership
Team have been significantly
enhanced. As a direct result of
Stefan’s leadership and experience in
the consumer goods sector, Imperial
Brands has built a new senior
SUE CLARK
CHAIR OF THE REMUNERATION COMMITTEE
MEMBERSHIP AND MEETING ATTENDANCE
Members
Sue Clark (Chair)
Thérèse Esperdy
Bob Kunze-Concewitz
Steven Stanbrook
Jon Stanton
12/11/2020
02/02/2021
11/05/2021
09/09/2021
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
KEY SECTIONS OF THIS REPORT ARE AS FOLLOWS:
Page
Annual Statement
Remuneration at a glance
Directors’ Remuneration Policy (summary)
Pay arrangements for FY22
Annual Report on Remuneration
Remuneration earned for FY21
Determination of 2021 Annual Bonus
Executive share ownership and Directors’ interests
Comparison with employees’ remuneration
CEO pay ratio
Remuneration Committee membership and duties
120
124
125
128
129
129
130
133
134
135
137
Focus in 2021
• Approval of the Directors’ Remuneration Policy.
• Understanding and responding to investors’ concerns about the
new CEO’s pay.
• Ensuring remuneration supports the implementation of the
Company’s revised strategy.
• Attracting the best global talent to the senior leadership team.
Looking ahead to 2022
• Further developing the link between ESG and remuneration.
• Reward strategy for the retention of key talent within
the business in a competitive global market place.
• Reviewing the Remuneration Consultants advising
the Committee.
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MEETINGS HELD IN FY21
In FY21, the Committee met on five occasions and the table below summarises the matters discussed:
November 2020
February 2021
(two meetings)
May 2021
September 2021
X
X
X
X
X
X
X
X
X
X
Review of Executive Directors’ remuneration dashboards
Approval of FY20 Annual Bonus out-turn including discussion
on using discretion to reduce formulaic achievement
Approval of 2018-2020 LTIP out-turn
Approval of FY21 Annual Bonus metrics and weightings
Approval of FY21 LTIP metrics and weightings
Approval of DRR
Review of CEO pay ratio
Approval of vesting of Share Matching Scheme and
Bonus Matching Plan for senior management and FY21 grant
Approval of operation of Discretionary Share Plan and Sharesave for FY21
Approval of share plan rules
Approval of FY21 LTIP targets
Approval of FY21 Annual Bonus ranges
Review of FY21 bonus plan design for Global Grades 1-7
Approval of amendments to share plan rules
Best practice review of DRR
Update on shareholder engagement
Consideration of new CFO remuneration
Discussion on ESG measures and remuneration
Approval of shareholding policy for Executive Leadership Team
Update on corporate governance developments and market trends
Review of forecasted Annual Bonus and LTIP out-turns
Discussion on FY22 Annual Bonus plan and LTIP metrics
Approval of base salaries for Executive Leadership Team and Chair’s fee
Review of the Committee’s terms of reference
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
leadership team, attracting talent from
across the globe, with the appropriate
skills, experience and expertise to
deliver an ambitious transformation
plan. Blending the strong knowledge
and expertise of tobacco that exists
in the business with fresh ideas
from external recruits from outside
tobacco has been particularly
important for strengthening our
focus on the consumer, enhancing
our performance driven culture and
introducing simplified and more
efficient operations.
The Board has been very impressed by
Stefan’s contribution over the course
of the year and the feedback from
our shareholders and other key
stakeholders has also been
extremely positive.
The pandemic continued to affect
aspects of the business in 2021 and our
employees showed extreme dedication
and resilience, including enabling our
supply chain to operate effectively,
thereby maintaining our supply to
customers and consumers. The
Committee, together with the
Board, would like to thank all of our
colleagues who have demonstrated
incredible commitment throughout
another extraordinary year. During
the year no employees were placed on
furlough and the Group did not benefit
from any Government aid.
Remuneration outcomes for FY21
Our results for the year reflect the
progress made to date against this
strategy. Organic adjusted operating
profit at constant currency for the
year was £3,664m. Cash conversion
performance at 83 per cent has been
very strong.
The 2021 annual bonus was based
on stretching financial measures
with 40 per cent based on operating
profit, 20 per cent on cash conversion
and 20 per cent on market share.
Strategic objectives formed the
remaining 20 per cent of the bonus.
Reflecting the strong performance
of the business during the year, the
operating profit and cash conversion
measures targets were exceeded, while
the threshold for market share was
missed. Market share is measured
using externally-verified data and
stretching targets were set at the start
of the year. Aggregate market share
in our five key combustible markets
has in recent years been declining
by double-digit basis points annually
and reversing this long-term trend is a
key focus for the new leadership team.
In FY21, priority market share decline
was cut to just 2bps. However, this
performance, though encouraging and
a significant improvement, fell below
the annual bonus threshold.
The Executive Directors performed
well against their strategic objectives
and, in aggregate, a bonus of between
56.1 and 64.1 per cent of maximum was
earned by each of them. Further detail
is shown on page 130.
W W W . I M P E R I A L B R A N D S P L C . C O M
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GOVERNANCE REMUNERATION REPORT – CONTINUED
The Committee believes this outcome
reflects fairly the performance of
the business during the year and
the strong base for growth Stefan has
created since joining the business last
year. After two consecutive years of
applying downward discretion on the
outcome of the short-term incentive,
no discretion has been applied by the
Committee this year.
The LTIP award due to vest in
February 2022 will vest in part
resulting in 15.92 per cent of the
total award vesting. Neither of the
current Executive Directors was with
the Company when the LTIP award
was granted.
Understanding investors’
views – what we have done
since the 2021 Annual General
Meeting (AGM)
We are very grateful for the strong
support we received for the Directors’
Remuneration Policy (95.28 per cent)
at the 2021 AGM. However, the level
of support for the 2020 DRR was
disappointing. We engaged with
shareholders both before and after
the AGM and reflected on their views
regarding the salary level of the new
CEO and the way it was disclosed in
the DRR, both of which impacted on
the outcome of the vote. Their input
has resulted in a number of actions
taken by the Committee:
• Reduced on a one-off basis the CEO’s
2021 long-term incentive award by
10 per cent to 315 per cent of salary.
• Identified opportunities in the DRR
to enhance the messaging and
transparency, such as an improved
Remuneration at a Glance section.
• Disclosed our new CFO’s
remuneration arrangements on the
announcement of his appointment
and invited investors to give us
their views.
Board changes
Lukas Paravicini joined the business
as Chief Financial Officer in May 2021.
He is an experienced leader with
impeccable finance credentials, with
experience of driving transformational
change and a proven track record in
international consumer companies.
The detail of Lukas’ remuneration
– which is consistent with the
Remuneration Policy – was
disclosed on the announcement of his
appointment in February 2021. Lukas
receives an annual salary of £730,000
and a pension allowance aligned with
the levels of UK employees generally
of 14 per cent of salary. This compares
with his predecessor’s salary of
£750,000 and a pension allowance
supplementing his defined benefit
pension of 26 per cent of salary. Lukas’
salary will not be increased until, at the
earliest, 1 January 2023. In setting his
salary the Committee looked at both
internal relativities and external
benchmarking data as reference
points. It also considered the skills
and experience that Lukas brings
which are required to fulfil the role
as we implement our new strategy in
an environment in the midst of great
change. Lukas’ base salary is between
the median and the upper quartile of
the FTSE 50 and at the median of the
FTSE 30, and his target and maximum
total remuneration are at around the
median of the FTSE 50 and between
the lower quartile and median of the
FTSE 30. When I wrote to our largest
shareholders in May, I explained that
there were no LTIP arrangements to be
bought out, but Imperial Brands agreed
to compensate him for a guaranteed
bonus he would have received from
his previous employer in the amount
of US$750,000. This payment will
be made in December 2021, subject
to continued service, and will be
disclosed in the single total figure
table in next year’s Annual Report. In
line with the Directors’ Remuneration
Policy, Lukas participated in the
Annual Bonus Plan up to a maximum
of 200 per cent of salary (on a pro-rated
basis for 2021) and received an LTIP
award of shares worth up to 250
per cent of salary.
In 2020 we announced that Oliver
Tant would retire once a suitable
successor was found. Following
Lukas’ appointment and a short
period of handover, Oliver stepped
down from the Board on 18 May 2021
and duly retired on 4 August 2021.
His retirement arrangements
were disclosed in our 2020 Annual
Report, made available on the website
and were in line with our Directors’
Remuneration Policy in place at the
time. Oliver remained eligible for a
time pro rated bonus for FY21, details
of which can be found on page 130.
He was not granted an LTIP award
in FY21, and any outstanding awards
will continue to vest on their normal
vesting dates, subject to their original
performance conditions. Awards will
be pro-rated to reflect the period of
service rendered. His outstanding
deferred bonus awards were released
on his retirement and his FY21 bonus
will be paid in cash with no deferral,
in line with the previous Directors’
Remuneration Policy.
Implementation for FY22
The annual salary review is effective
from 1 October 2021. The salary
increases awarded to employees have
ranged from 2 per cent to 13.9 per cent
across the markets we operate in and
most increases have been in the range
of 2 per cent to 3.5 per cent. In setting
the salary for the CEO, the Committee
took into consideration the need to
balance restraint with fair reward
for contribution. The Committee
decided to award a salary increase
of 2.5 per cent to Stefan, in the light of
his strong contribution during the year.
In taking this decision, the Committee
was mindful of the concerns that had
been raised by investors about the
level of his joining salary, but also
wanted to signal its confidence in
a CEO who consistently exceeds
expectations and has received
very positive feedback from all our
stakeholders including shareholders
and employees. His new salary is
£1,300,725. The increase places his
salary at the median of the FTSE 30
and at around the upper quartile of the
FTSE 50. His maximum remuneration
against the FTSE 50 is between the
median and the upper quartile. Against
the FTSE 30 his total maximum pay
is between the lower quartile and
the median.
FY22 is an important year of
investment as we continue to deliver
on our strategy and put in place the
foundations for future growth. The
Committee considered carefully the
annual bonus measures for 2022 and
concluded that the metrics will remain
the same as those for FY21: organic
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adjusted operating profit at constant
currency (40 per cent weighting), cash
conversion (20 per cent weighting),
market share growth (20 per cent
weighting) and individual/strategic
objectives (20 per cent weighting). The
financial targets will be aligned with
the guidance provided at our Capital
Markets Day.
The FY22 LTIP will be granted in
February 2022 and will retain the same
measures as the FY21 award: organic
adjusted EPS growth at constant
currency (40 per cent weighting),
adjusted net debt/EBITDA (20 per cent
weighting), Return on Invested Capital
(20 per cent weighting) and relative
TSR (20 per cent weighting). The
targets are detailed on page 128.
Sustainability/ESG for the future
Our environmental, social and
governance (ESG) priorities reflect
issues which are both important
business challenges and potential
opportunities to make a positive
difference: consumer health, climate
and energy, farmer livelihoods and
welfare, human rights and waste.
During the coming year, the business
will complete a review of our overall
approach to ESG to ensure that this
is fully aligned with our new strategy,
purpose and vision. Informed by
the outcomes of this review, the
Committee will introduce ESG
measures into our incentive plans.
The Committee is mindful of the need
to ensure that these measures both
have stretching targets which are
appropriate for Imperial Brands and
reflect the stage of the business on its
ESG journey. This will be a major focus
for the Committee in the coming year.
Consideration of colleagues’ views
The Committee has been directly
involved in the Board’s work during
the year on workforce engagement
which is described in detail on page
103 and has been led by Steven
Stanbrook who is the Workforce
Engagement Director. Our new
“Meet the Board” sessions are
a valuable way of having open
conversations with colleagues about
a wide range of matters, which have
included the role of the Board in
decision-making, our strategy, ESG
agenda, our purpose, vision and culture
and diversity and inclusion. We have
also explored the topic of reward,
giving participants the opportunity to
learn about how the Committee aligns
executive reward with the wider
workforce and to understand their
views on reward at Imperial Brands.
We also spent time answering their
questions on a range of reward topics.
I have been encouraged by the level of
engagement and interest shown by our
colleagues, and would like to thank
them for their valued contribution.
Conclusion
As Imperial Brands continues to
deliver on its five-year strategy and
to embed its new purpose, vision and
behaviours, we strongly believe that
this business has great potential. In
the coming year, the Committee will
continue to support management in
achieving their ambitious objectives,
while listening closely to all our key
stakeholders and acting thoughtfully
on their evolving expectations.
Should any shareholder wish
to contact me or my Committee
members, please in the first instance
write to John Downing, Company
Secretary at IR@impbrands.com.
We hope to have your support at
the upcoming AGM.
SUE CLARK
CHAIR OF THE REMUNERATION
COMMITTEE
W W W . I M P E R I A L B R A N D S P L C . C O M
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123
GOVERNANCE REMUNERATION REPORT – CONTINUED
REMUNERATION AT A GLANCE
OUR EXECUTIVE PAY PRINCIPLES
OUR APPROACH TO REWARDING
EXECUTIVE DIRECTORS IN 2022
• To attract and retain the very best global talent
• To reward executives well for maximising shareholder
returns sustainably and delivering long-term quality
growth that benefits all our stakeholders
• To motivate executives to consistently perform to
the best of their ability
• To reinforce the behaviours that support our values
• To align executive reward with the experience of our
shareholders through encouraging share ownership
and an “ownership” mindset
• To balance restraint with fair reward for contribution,
in the way we reward executives as we do for the
wider workforce
Our strategic priorities
FOCUSING
ON OUR
PRIORITY
MARKETS
DRIVING
VALUE FROM
OUR BROADER
PORTFOLIO
BUILDING
A TARGETED
NGP BUSINESS
Measuring
performance
Annual Bonus:
Organic adjusted operating
profit growth at constant
currency (40%)
Cash conversion (20%)
Market share growth (20%)
Strategic/individual (20%)
LTIP:
Organic adjusted EPS growth
at constant currency (40%)
Adjusted net debt/
EBITDA (20%)
Return on Invested Capital
(ROIC) (20%)
Relative TSR (20%)
EXECUTIVE DIRECTORS’ VARIABLE REMUNERATION OUTCOMES FOR 2021
Annual
Bonus
Organic adjusted operating profit growth at
constant currency
Cash conversion
Market share growth
Maximum %
of bonus/LTIP
40%
20%
20%
Out-turn
as a % of
maximum
bonus
29.3%
16.8%
0%
Strategic/individual – Stefan Bomhard
20%
18.0%
Strategic/individual – Lukas Paravicini
20%
12.0%
Long-Term
Incentive Plan1
Organic adjusted EPS growth at constant
currency
Organic adjusted Tobacco Net Revenue Growth
at constant currency
Organic adjusted NGP Net Revenue Growth at
constant currency
Relative TSR
40%
20%
20%
20%
0%
15.9%
0%
0%
1. In respect of Oliver Tant only. No serving Director has received an award under this LTIP grant.
% of weighting achieved
73.3%
84.0%
90%
60%
79.6%
0%
0%
0%
0%
TOTAL SINGLE FIGURE IN 2021 (£,000)
Stefan Bomhard
43%
47%
10%
Lukas Paravicini
50%
Oliver Tant
47%
50%
42%
Fixed pay
Annual Bonus
LTIP
Base salary
Benefits and pension
Total fixed pay
Annual Bonus
LTIP
11%
Total remuneration
Total remuneration excluding buyout1
Stefan
Bomhard
Lukas
Paravicini2
1,269
194
1,463
1,627
331
3,421
3,090
304
49
353
353
0
706
N/A
1. Buyout relates to recruitment award as detailed on p131 and is
shown as LTIP in the graph opposite.
2. Reflects the CFO’s remuneration from his date of joining.
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DIRECTORS’ REMUNERATION POLICY
(SUMMARY)
There are no changes proposed to our Directors’ Remuneration Policy approved by shareholders at our AGM held on
3 February 2021, which is intended to be in place for three years, and a summary of which is set out below. It does not
replace or override the full approved policy, which is available on our website within the 2020 Annual Report and Accounts.
Element
Salary
Purpose
Operation
Attract and
retain high-
performing
individuals,
reflecting
market value
of the role and
the Executive
Director’s skills,
experience and
performance.
Reviewed, but not necessarily increased, annually by the
Committee taking into account Company performance as well
as each Executive Director’s performance together with changes
in role and responsibility.
Salary increases, if any, are generally effective from 1 October.
The Committee considers pay data for UK listed companies
closest to the Company by FTSE ranking (and excluding those in
the financial services sector). These comparators serve to define
a “playing field” within which an individual’s reward needs to be
positioned. In determining individual remuneration, the primary
factors taken into account are individual performance, the scale
of the challenges intrinsic to that individual’s role, changes in role,
their ability and experience. The Committee also considers general
increases for the wider workforce, with a focus on increases in the
country in which the Executive Director is based.
Maximum opportunity
Whilst there is no
maximum salary
or maximum
increase in salary,
the Committee
would only set
a salary which
exceeded the top
quartile of salaries
of the comparator
group in
unforeseen
and exceptional
circumstances.
Pension
Provision
of market
competitive
pension aligned
to workforce.
Pension provision for Executive Directors is provided in line with
other employees through the Imperial Tobacco Pension Fund in the
UK (the Fund). Executive Directors are offered membership of the
defined contribution section. Executives have the option to receive
a cash supplement in lieu of membership of the Fund, or in lieu of
accrual on pensionable salary above the Fund’s earnings cap, or in
lieu of future service accrual.
Executive Directors
receive a workforce
aligned pension
rate (currently 14
per cent of salary).
Benefits
Annual
Bonus Plan
The rules of the Fund detail the pension benefits which members
can receive on retirement, death or leaving service.
The Committee may amend the form of any Executive Director’s
pension arrangements in response to changes in pensions
legislation or similar developments, so long as any amendment
does not increase the cost to the Company of an Executive Director’s
pension provision.
Competitive
benefits taking
into account
market value of
role and benefits
across the
workforce.
Benefits include provision of a company car (or cash allowance
in lieu), health insurance, life insurance and income protection
insurance which are provided directly or through the Company’s
pension scheme. Other benefits, including expatriate or relocation
arrangements, may also be provided on the basis that they are also
offered more widely across the Company or are necessary in order
to be competitive locally.
Reasonable business-related expenses will be reimbursed including
any consequential tax arising.
The level of benefit
provision is fixed
although the
value may
vary depending
on the cost of
providing such
provisions.
The annual bonus will be subject to the relevant performance
measures set by the Committee usually at the start of each year
to reflect the Group’s KPIs at that time. The measures may be a
balance of financial and non-financial, but with the expectation
that the majority of the annual bonus will be subject to quantifiable
financial measures.
200 per cent of
base salary or
such lower sum
as determined by
the Committee.
Incentivise
delivery of
Group strategic
objectives
and enhance
performance,
including
against the
indicators we
use to measure
our performance.
W W W . I M P E R I A L B R A N D S P L C . C O M
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GOVERNANCE REMUNERATION REPORT – CONTINUED
Element
Annual
Bonus Plan
– continued
Long-Term
Incentive Plan
All-employee
arrangements
Shareholding
guideline
Purpose
Operation
Maximum opportunity
Performance below the threshold results in zero payment.
Payments rise from zero to 100 per cent of the maximum
opportunity for levels of performance between the threshold
and maximum targets.
Half of any Annual Bonus earned is deferred into an award over
shares which vests after a minimum of three years, with the
other half paid in cash. These awards are forfeitable if the
Executive Director resigns voluntarily or is dismissed for cause.
Dividend roll-up may apply to any element of an annual bonus
deferred into an award over shares. Any such dividend roll-up
may be paid in additional shares (or, exceptionally, cash), and
may assume dividend reinvestment.
Malus and clawback provisions are in place. The deferred
shares are not subject to performance conditions.
Awards have a performance period normally of three financial
years starting at the beginning of the financial year in which
the award is made. Performance measures may include
financial, non-financial or value creation (e.g. TSR) conditions
as determined by the Committee normally before each grant
to align with the strategic priorities of the business at that time.
In normal circumstances, at least 70 per cent of the LTIP award
will be subject to financial and/or value creation measures.
Malus and clawback provisions are in place.
Executive Directors are ordinarily required to retain the
net-of-tax number of vested LTIP award shares for a period
of two years after vesting.
Executive Directors may participate in any all-employee
arrangements established and operated by the Company,
on the same basis as other Group employees.
The Company currently operates a savings-related option
plan for the benefit of its worldwide employees, and in which
Executive Directors are eligible to participate.
Executive Directors are expected to build a holding in the
Company’s shares to a minimum value broadly equivalent
to 300 per cent of gross base salary over a five year period
from date of appointment in role. For Executive Directors
there is an additional requirement to hold shares after cessation
of employment. The requirement is to hold shares to the value
of the shareholding guideline (i.e. 300 per cent of salary or the
existing shareholding if lower at the time) for a period of one
year, with the requirement reducing to half the shareholding
guideline for the second year. Progress towards the shareholding
guideline is monitored on an annual basis and the Committee
will consider any necessary sanctions required for non-compliance.
CEO: 350 per cent
of base salary. Other
Executive Directors:
250 per cent of base
salary or such lower
sum as determined
by the Committee.
LTIP awards
may include
additional shares
(or, exceptionally,
cash) equivalent
to the value of the
dividend roll-up,
and which may
assume dividend
reinvestment.
In accordance with
the limits applicable
to the relevant
all-employee
arrangements.
No maximum
holding but
requirement to build
to a minimum value
broadly equivalent to
300 per cent of gross
base salary.
Incentivise
long-term Group
performance
in line with the
Group’s strategic
objectives,
including against
the indicators we
use to measure
our performance
and long-term
shareholder
returns.
Align Executive
Directors’ interests
with those of
shareholders.
Provision
of market-
competitive
arrangements
aligned to
workforce.
Align Executive
Directors’ interests
with long-term
interests of
shareholders.
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EXECUTIVE DIRECTORS’ SERVICE AGREEMENTS
Executive Directors
Date of contract
Expiry date
Compensation on termination
following a change of control
Stefan Bomhard
Lukas Paravicini
31 January 20201
11 April 20212
Terminable on 12 months’ notice
Terminable on 12 months’ notice
No provisions
No provisions
1. Service agreement dated 31 January 2020 with a start date of 1 July 2020.
2. Service agreement dated 11 April 2021 with a start date of 1 May 2021.
POLICY FOR THE CHAIR AND NON-EXECUTIVE DIRECTORS
Element
Fees
Purpose and
link to strategy
Operation
Attract and retain
high-performing
individuals. Portion
of fees applied to
purchase of shares to
align interests with
those of shareholders.
• Reviewed, but not necessarily increased, annually
by the Board.
• Fee increases, if applicable, are normally effective
from 1 October.
• The Board considers fee data at comparator companies
of similar scale.
• The Senior Independent Director, the chairs of the
Audit and Remuneration Committees and the Workforce
Engagement Director receive additional fees. Additional
fees are paid for Remuneration and Audit Committee
memberships. An allowance is paid when regular
intercontinental travel is required.
• Higher fees may be paid to a Non-Executive Director
should they be required to assume executive duties
on a temporary basis.
• No eligibility for annual bonus, retirement benefits or
to participate in the Group’s employee share plans.
Maximum opportunity
No prescribed maximum
annual increase.
Aggregate annual fees
limited to £2.0 million by
Articles of Association.
Benefits
Reimbursement of
business-related
expenses.
• Travel to the Company’s registered office is recognised
Grossed-up costs.
as a taxable benefit.
• To the extent that any other reasonable business-related
expenses are recognised as a taxable benefit, these
will be reimbursed at cost (including any consequential
tax arising).
• Reasonable benefits may be provided from time to time
on a case-by-case basis.
CHAIR AND NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT
The Chair and Non-Executive Directors do not have service agreements, but the terms of their appointment, including the
time commitment expected, are recorded in letters of appointment which are available for viewing at the Company’s registered
office during normal business hours and both prior to and at the AGM.
In line with the Board’s annual review policy, the Chair’s and Non-Executive Directors’ terms of appointment were
reviewed and confirmed by the Board on 2 February 2021. There are no provisions regarding notice periods in their letters
of appointment, which state that the Chair and Non-Executive Directors will only receive payment until the date their
appointment ends and, therefore, no compensation is payable on termination. Under the terms of the Company’s Articles
of Association, all Non-Executive Directors are subject to annual re-election by shareholders.
W W W . I M P E R I A L B R A N D S P L C . C O M
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127
GOVERNANCE REMUNERATION REPORT – CONTINUED
PAY ARRANGEMENTS FOR 2022
STEFAN BOMHARD
LUKAS PARAVICINI
£’000
12,000
10,000
8,000
6,000
4,000
2,000
0
£10,930
21%
£8,654
53%
42%
£3,939
29%
33%
38%
£1,500
100%
30%
24%
17%
13%
Minimum
Target
Max
Max with growth
£’000
12,000
10,000
8,000
6,000
4,000
2,000
0
£5,047
18%
36%
29%
17%
Max with growth
£4,134
44%
35%
21%
Max
£849
100%
Minimum
£2,035
22%
36%
42%
Target
Total fixed remuneration
Bonus
LTIP
50% Share price growth
The table below summarises how we intend to apply the main areas of our Directors’ Remuneration Policy for FY22.
Element
Salary
Attract and retain high-performing individuals, reflecting
market value of the role and the Executive Director’s skills,
experience and performance.
Annual Bonus
Maximum opportunity is 200% of base salary.
50% deferred into an award of shares for three years, which
is forfeitable if the Executive Director resigns voluntarily or is
dismissed for cause. Malus and clawback provisions will apply.
LTIP
Maximum award size: CEO: 350% of base salary, CFO 250% of
base salary.
Awards have a performance period of three financial years
starting at the beginning of the financial year in which the
award is made. Performance measures may include financial,
non-financial or value creation conditions.
Implementation
The CEO’s salary will increase by 2.5% on 1 October 2021 to
£1,300,725. The CFO’s salary will not be increased from £730,000
before 1 January 2023.
No change to maximum opportunity.
Measures and weightings:
• Organic adjusted operating profit growth at constant currency 40%
20%
• Cash conversion
20%
• Market share growth
20%
• Strategic/individual
Underlying targets are commercially sensitive and will be fully
disclosed in next year’s Annual Report.
No change to maximum opportunity
Measures weightings and targets:
• Organic adjusted EPS growth at constant currency 40%. Cut in 3.7% –
max 5.6%
• Adjusted net debt/EBITDA 20%. Cut in 1.46x – max 1.28x
• Return on Invested Capital (ROIC) 20%. Cut in 18.7% – max 19.5%
• Relative TSR against a group of FMCG companies 20%. Cut in at
Malus and clawback provisions are in place.
median – max upper quartile
Executive Directors are ordinarily required to retain the net-of-
tax number of vested LTIP award shares for a period of two years
after vesting.
Chair and Non-Executive Directors’ Fees
Attract and retain high performing individuals. Portion of
fees applied to purchase of shares to align interests with
those of shareholders.
Shareholding requirement
Align Executive Directors’ interests with long-term interests
of shareholders.
Cut in would deliver a 25% pay out with a straight line pro rata to 100%
payout at maximum.
Should the Company be acquired the performance period would end
on the date of acquisition Any outstanding awards would vest on
a time pro rata basis subject to the achievement of the applicable
performance criteria.
With effect from 1 October 2021:
• Chair’s fee will increase by 2.5 per cent from £605,000 to £620,125
per annum
• NED base fee will increase by approximately 2.5 per cent from
£79,500 to £81,500 per annum
• Senior Independent Director and Chairs of the Remuneration and
Audit Committees’ fees will increase by approximately 2.5 per cent
from £26,500 to £27,000 per annum
Committee membership and Workforce Engagement Lead fees will
remain at £5,500 per annum.
300% of base salary. Requirement to hold shares after cessation of
employment to the value of the shareholding guideline (i.e. 300% or the
existing shareholding if lower at the time) for a period of one year, with
the requirement reducing to half the shareholding guideline for the
second year.
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ANNUAL REPORT ON REMUNERATION
The Annual Report on Remuneration has been split into the following sections.
1. The remuneration earned by our Directors for the financial year ended 30 September 2021
2. Details of share awards granted, share interests held and historical CEO total single figure versus shareholder returns
3. How Directors’ remuneration compares with employee pay including the CEO pay ratio, our relative spend on pay and
current dilution
4. Remuneration Committee membership and work undertaken during the year, details of advice received and
consideration of shareholders’ views
1. REMUNERATION EARNED BY OUR DIRECTORS FOR THE FINANCIAL YEAR ENDED
30 SEPTEMBER 2021
Single Total Figure of Remuneration for each Director (Audited)
Executive Directors
Stefan Bomhard
Lukas Paravicini5
Oliver Tant6
Former Directors7
Total
Total
Year
2021
2020
2021
2020
2021
2020
2020
2021
2020
Salary
£’000
1,269
800
304
–
469
750
1,800
2,042
3,350
Benefits
£’0001
Pension
£’0002
Total fixed
pay
Annual bonus
£’0003&6
LTIP
£’0004
Total
variable pay
Total pay
17
6
6
–
10
17
31
33
54
177
44
43
–
122
195
171
342
410
1,463
1,627
331
1,958
850
353
–
601
962
2,002
2,417
3,814
254
353
–
526
600
598
2,506
1,452
–
–
–
137
171
0
468
171
254
353
–
663
771
598
2,974
1,623
3,421
1,104
706
–
1,264
1,733
2,600
5,391
5,437
Effect of
share price on
value of LTIP
vesting
–
–
–
(133)
(123)
–
Notes
1. Each individual received an annual car allowance of £15,000 and health insurance.
2. Each individual received a cash supplement in lieu of membership of the pension fund. This equated to 14% of salary for Stefan Bomhard and Lukas Paravicini, and
26% of salary for Oliver Tant.
3. Annual bonus for the year ended 30 September 2021. Half of the net value is deferred into shares for three years; no further performance conditions apply.
4. LTIP represents the value of the FY19-21 LTIP awards whose performance period ended 30 September 2021. As these awards do not vest until February 2022 they
are based on a share price of £15.58, being the three-month average to 30 September 2021 and an estimate of dividend roll-up based on announced dividend payable
on 31 December 2021. For Stefan Bomhard, LTIP represents the first tranche of the Recruitment Award which vested on 12 April 2021 and dividend roll-up based on a
share price of £15.535. The 2020 estimated figure has been restated to reflect the actual share price at the date of vesting and the actual dividend roll up. No Sharesave
options were exercised during the year.
5. Lukas Paravicini commenced employment and joined the Board on 1 May 2021.
6. Oliver Tant stepped down from the Board on 18 May 2021. The figures in the above table relate to the period he was a member of the Board. He continued to receive
his salary and benefits in respect of the period up to 4 August 2021 in the usual way (value of £362,920). The bonus relating to his period as Executive Director has been
included in the table above and, in accordance with the applicable Directors’ Remuneration Policy at the time of announcement of his retirement, was paid wholly in
cash. The time pro rated bonus for the full financial year has been disclosed on page 130.
7. Includes Interim Executive Directors.
Non-Executive Directors
Thérèse Esperdy
Sue Clark9
Alan Johnson10
Bob Kunze-Concewitz11
Simon Langelier
Pierre-Jean Sivignon12
Steven Stanbrook13
Jon Stanton14
Former Non-Executive Directors
Total
Fees £’000
2021
605
138
64
78
85
58
103
112
–
2020
485
129
–
–
85
21
103
95
215
1,243
1,133
Taxable benefits8
2021
–
–
–
–
–
–
–
–
–
–
2020
27
1
–
–
3
–
1
1
4
37
Total
2021
605
138
64
78
85
58
103
112
–
2020
512
130
–
–
88
21
104
96
219
1,243
1,170
Notes
8. Benefits in kind for Non-Executive Directors relate to the reimbursement of travelling expenses to meetings held at the Company’s registered office. As a result of
COVID-19 travel restrictions no meetings were held at the registered office in FY21.
9. Includes payments in respect of Senior Independent Director and Chair of the Remuneration Committee fees of £26,500 respectively per annum.
10. Alan Johnson was appointed to the Board on 1 January 2021.
11. Bob Kunze-Concewitz was appointed to the Board on 1 November 2020.
12. Pierre-Jean Sivignon stepped down from the Board on 4 June 2021.
13. Includes payment in respect of Workforce Engagement Director of £5,500 per annum and a non-European travel allowance of £12,000 in recognition of the extra time
commitment required for travel.
14. Includes payment in respect of chair of the Audit Committee fees of £26,500 per annum.
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in lieu
of pensions, annual bonus and LTIP was £6,634k (2020: £ 6,607k).
No Director is eligible to participate in the defined benefit pension fund. Each Director eligible for membership of the defined
contribution pension fund has opted to receive a cash supplement in lieu, therefore, no pension disclosure is required.
W W W . I M P E R I A L B R A N D S P L C . C O M
129
129
GOVERNANCE REMUNERATION REPORT – CONTINUED
Determination of 2021 Annual Bonus (Audited)
The 2021 annual bonus was based on a scorecard of measures. Details of the measures, their weightings, targets and extent of
achievement rate are set out in the table below.
Measure
Organic adjusted operating profit at constant currency
Cash conversion
Weighted market share
Strategic/individual Stefan Bomhard
Strategic/individual Lukas Paravicini
Strategic/individual Oliver Tant
Total bonus Stefan Bomhard
Total bonus Lukas Paravicini
Total bonus Oliver Tant
Weighting
40%
20%
20%
20%
20%
20%
100%
100%
100%
Cut in
3.3%
75%
Target
4.1%
80%
Max
6.2%
85%
Achievement
4.8%
83%
17.84%
17.95%
18.02%
17.82%
–
–
–
–
–
–
–
–
–
90%
60%
50%
Pay-out
29.3%
16.8%
0%
18%
12%
10%
64.1% of max
58.1% of max
56.1% of max
The Committee set the same strategic goals for the Executive Directors. The assessment of performance against the goals
reflects the different roles they each played and, in the cases of Lukas and Oliver, that they served for part of the year only.
Strategic/individual
measures and targets
• Develop new
corporate strategy
and deploy in
business (10%)
Performance assessment highlighting key achievements
New five-year strategic plan and clear capital allocation framework launched in January.
•
• Uniformly positive feedback from investors collected independently via a third party following
Capital Markets Day.
• Key stakeholders including shareholders and employees aligned and supportive of new strategy.
• Greater focus and more rigorous performance management of top five priority markets has
delivered a stabilisation of aggregate market share vs historical declines.
• Pilot market trials underway for heated tobacco and vapour in line with strategy.
• Clearer prioritisation of our broader portfolio is delivering improved results, e.g. share growth
and strong financial results in Africa region.
• Develop and deploy
the new operating
model (10%)
• Strengthened executive team in place, bringing significant blue chip FMCG experience and
a positive step change in diversity (3 women/33%,vs 1 in FY20 3 persons of colour/33% vs 0).
• Chief Consumer Office established to place the consumer at the centre of decision making and
Total payout
as a % of
maximum
bonus
• Stefan Bomhard – 18%
• Lukas Paravicini –
12%
• Oliver Tant – 10%
to unify the NGP organisation under single leadership.
• New consumer team built and organisation reconfigured to reflect strategic priorities.
• Restructuring proposal agreed to prioritise resources in line with the strategy and to realise
savings for reinvestment.
• Culture change articulated through new purpose, vision and behaviours developed with colleagues.
• Stefan Bomhard – the Remuneration Committee judged Stefan’s performance in his first full
year as outstanding and was impressed by the quality of his results and the speed of delivery.
He developed the five-year plan extraordinarily quickly as well as putting in place a highly-
experienced Executive Leadership Team which is already delivering results. The performance
of the share price over the year reinforced our view that an overall score of 90 per cent for this
element of the bonus reflected his strategic achievements during the year.
• Lukas Paravicini – the Committee was mindful that Lukas, as new CFO, contributed to the strategic
targets for five months of the year. His contribution during this time related to deploying and
implementing the new operating model and building a new functional team and his contribution
has been extremely strong. He has also helped to implement the cultural transformation of the
business. Overall the Committee decided on an overall score of 60 per cent.
• Oliver Tant – the outgoing CFO supported the CEO and contributed to the business for almost
eight months of the year. The Committee assessed his performance against the strategic goals
and decided that an assessment of 50 per cent for this element of bonus was fair in the light of
his performance. After he stepped down from the Board Oliver also provided handover support
to Lukas.
Individual Annual Bonus payments:
Executive Directors
Stefan Bomhard
Lukas Paravicini2
Oliver Tant2
Total annual bonus £’000
Maximum
£2,538
£608
£938
Actual1
£1,627
£353
£526
Notes
1. Half of the bonus will be deferred into an award of shares for both Stefan Bomhard and Lukas Paravicini. There will be no deferral into shares for Oliver Tant.
2. Bonus pro-rated to reflect period of service, as a Director rendered during year. Oliver‘s total time pro rated bonus for the year was £631,125.
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Long-Term Incentive Plan awards vesting (Audited)
Performance awards vesting in February 2022 were based on performance measured over the three-year period ended
30 September 2021. Neither of the current Executive Directors participated in this LTIP cycle. Oliver Tant who stepped off
the Board on 18 May 2021 was a beneficiary.
Measure
Organic adjusted EPS growth at constant currency
(average annual growth)
Organic adjusted tobacco net revenue growth at constant
currency (average annual growth)
Organic adjusted NGP net revenue growth at constant currency
(average annual growth)
Relative TSR (return over three financial years)
Achievement
Weighting
Target
(25% vesting)
Maximum
target
(100% vesting)
Actual
performance
Percentage of
award vesting
40%
20%
20%
20%
3%
0%
75%
8%
2%
130%
Median Upper Quartile
(1.54)%
0%
1.46%
15.92%
1.22%
31/37
0%
0%
15.92%
The TSR measure compared the Company’s performance against the following companies: Altria Group, Anheuser Busch
Inbev, Associated British Foods, Astra Zeneca, British American Tobacco, BT Group, Burberry Group, Carlsberg B, Carnival,
Compass Group, Diageo, Experian, GlaxoSmithKline, Heineken, Intercontinental Hotels, International Consolidated Airlines,
ITV, J Sainsbury, Japan Tobacco, Kingfisher, Marks & Spencer Group, Morrison Supermarkets, Next, Pearson, Pernod Ricard,
Philip Morris International, Reckitt, RELX, Smith & Nephew, Tate & Lyle, Tesco, Unilever, Vodafone Group and Whitbread.
Vested awards will be subject to a two-year holding period.
Recruitment Award vesting during the year ended 30 September 2021
In July 2020, Stefan Bomhard was granted a Recruitment Award to facilitate his recruitment as CEO and to replace certain
outstanding awards granted to him by his previous employer, which were forfeited when he joined the Company. Full details
of the Recruitment Award were disclosed in our 2020 DRR, but in summary Stefan was granted 116,921 shares set by reference
to the value of the forfeited awards (£1,793,568). To replicate the terms of the forfeited awards, the Recruitment Award was
split into four tranches, vesting in April 2021 and April 2022. Vesting of each tranche of the Recruitment Award is subject to the
extent to which the original performance conditions applicable to the forfeited awards are met over the original performance
period. The first tranche of the Recruitment Award was capable of vesting on 10 April 2021, and the final vesting outcome was
28.5 per cent. Full details of the vesting of the forfeited award are disclosed in Inchcape Plc’s Annual Report and Accounts 2020.
69,022 shares were granted under the first tranche of the Recruitment Award and the number of shares vesting (including
dividend roll-up) was 21,305 at a value of £330,973.
Payments for loss of office and payments to former Directors (Audited)
Oliver Tant stepped down from the Board on 18 May 2021 and retired on 4 August 2021. He received his base salary and benefits
through to his retirement date totalling £362,920.
In line with the Directors’ Remuneration Policy applying at that time and as previously communicated, he remained eligible for
a time pro rated bonus for FY21, subject to performance criteria set out on page 130 and pro-rated to reflect the period of service
rendered. His outstanding deferred bonus awards were released on retirement in accordance with the applicable Directors’
Remuneration Policy at the time of his announced retirement and he received his FY21 bonus 100 per cent in cash (the new
Policy provides for the deferred part of the bonus to be delivered as conditional shares vesting after three years). He was not
eligible to be granted a LTIP performance award for FY21, but his outstanding LTIP performance awards will continue to vest
on their normal vesting dates and remain subject to their original performance conditions. To the extent the performance
conditions are met, awards will be pro-rated to reflect the period of service rendered. This is consistent with Imperial Brands’
usual approach, which is that employees who retire are treated as ”good leavers”.
Alison Cooper stood down from the Board on 1 February 2020 and remained on the payroll until 8 October 2020. She
received base salary and contractual benefits including pension contributions paid in the normal way up to 8 October 2020
totalling £28,437, a payment of £90,000 in full and final settlement of all claims in relation to her employment, together with a
reimbursement of legal fees of £10,000, and the costs of outplacement support up to a maximum of £60,000 plus VAT. She also
received a repayment of £7,000 cash contributions made by her to the 2018 SAYE Share Save. Her accrued pension at the date
of leaving employment was £301,811 per annum.
Matthew Phillips stood down from the Board on 1 February 2020 and remained on the payroll until 31 January 2021. He received
base salary and contractual benefits including pension contributions paid in the normal way up to the end of January 2021
totalling £226,955, a payment of £90,000 in full and final settlement of all claims in relation to his employment, together with a
reimbursement of legal fees of £1,500, the costs of outplacement support up to a maximum of £60,000 plus VAT and repayment
of £7,500 cash contributions made by him to the 2018 SAYE Share Save. His accrued pension at the date of leaving employment
was £150,790 per annum.
W W W . I M P E R I A L B R A N D S P L C . C O M
131
131
GOVERNANCE REMUNERATION REPORT – CONTINUED
2. DETAILS OF SHARE AWARDS GRANTED, SHARE INTERESTS HELD AND HISTORICAL CEO TOTAL
SINGLE FIGURE VERSUS SHAREHOLDER RETURNS
Performance awards granted during the year (Audited)
When determining Stefan Bomhard’s award, the Committee took into account the prevailing share price performance over
the year and the concerns expressed by a number of shareholders about the level of his salary on appointment as CEO. He
and the Committee agreed that the face value of his 2021 LTIP award should be reduced, on an exceptional one-off basis, from
350 per cent of salary to 315 per cent, a reduction of 10 per cent of the face value of the usual annual award. The number of
shares under award reflects this adjustment.
The award to Lukas Paravicini of 250 per cent of base salary was made in accordance with the terms of his appointment as
announced on 17 February 2021 and ensures Lukas is aligned with the Company’s performance from the time of his appointment.
The performance measures and performance period are identical to those awards granted to Stefan Bomhard in February 2021.
Stefan Bomhard
Lukas Paravicini
15 February 2021
19 May 2021
£14.935
£16.140
267,649
113,073
£3,997,338
£1,824,998
315%
250%
30 September 2023
30 September 2023
Date of grant
Share price1
Number of nil-cost options
Face value
Amount of base salary
End of performance period
1. Valued using the closing share price the trading day prior to grant.
The targets for the above performance awards are as follows:
Measure
Organic adjusted EPS growth at constant currency
Adjusted net debt/EBITDA (for FY23)
Return on Invested Capital (ROIC) (average annual)
Relative TSR
Weight
40%
20%
20%
20%
Target
2%
2.00x
16.6%
Median
Target
4.8% or higher
1.8x or lower
17.5% or higher
Upper quartile
Minimum performance (25% vesting)
Maximum performance (100% vesting)
Adjusted net debt/EBITDA measure – The level of the gearing criterion assumes an additional shareholder distribution will be
made either via share buybacks and/or special dividends during the period in line with the Group’s capital allocation policy.
To the extent the shareholder distribution is increased above the assumed level during the period, there is an agreed formula
to raise the gearing target accordingly so as to incentivise incremental shareholder returns during the period. Similarly, if the
shareholder distribution is reduced, the target gearing will be lowered. This will reinforce alignment of this measure to the
Group’s capital allocation policy and shareholder value creation.
The TSR comparator group will comprise the following companies – Altria Group, Anheuser Busch Inbev, Beiersdorf, British
American Tobacco, Brown-Forman, Carlsberg B, Carnival, Clorox, Constellation Brands, Diageo, Heineken, Henkel, Japan
Tobacco, Kimberly-Clark, Kirin Holdings, L’Oréal, Monster Beverage, Pernod Ricard, PepsiCo, Philip Morris International, Procter
& Gamble, Reckitt, Swedish Match, Uni Charm and Unilever.
Each measure operates independently and is capable of vesting regardless of the Company’s performance in respect of the other
metrics. The Committee retains discretion to adjust up or down including to zero the number of shares that vest taking into account
a number of factors including personal or corporate performance and circumstances that were unforeseen at the date of grant.
SHARE INTERESTS AND INCENTIVES (AUDITED)
Shares held at 30 September 2021
Conditional awards and options held at 30 September 2021
Owned outright
Subject to
a holding period
Awards unvested and subject
to performance conditions
Options unvested and subject
to continued employment
Vested but not
exercised
Executive Directors
Stefan Bomhard
Lukas Paravicini
Oliver Tant1
Non-Executive Directors
Thérèse Esperdy2
Sue Clark
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Pierre-Jean Sivignon
Steven Stanbrook2
Jon Stanton
3,394
–
77,829
36,125
6,121
263
50,338
25,665
48
19,559
2,451
4,265
–
30,525
–
–
–
–
–
–
685,332
113,073
172,607
–
–
–
–
–
–
687
–
515
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. Held at date of leaving employment.
2. Thérèse Esperdy and Steven Stanbrook hold their shares in the form of American Depositary Receipts.
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There have been no changes to the above holdings since the year-end.
Our middle market share price at the close of business on 30 September 2021, being the last trading day of the financial year,
was £15.585 and the range of the middle market price during the year was £12.196 to £16.74.
Full details of the Directors’ share interests are available for inspection in the Register of Directors’ Interests at our
registered office.
EXECUTIVE SHAREHOLDINGS AND DIRECTORS’ INTERESTS (AUDITED)
Shares held at
start of year
Shares held at
end of
year1
Increase in
shares held
during year
Value of shares
held at start of
year2
£’000
Value of shares
held at end of
year3
£’000
Difference in
value £’000
Shareholding
required
(% salary)
Current
shareholding
(% salary/fees)3
Requirement
met3, 4 & 5
Executive Directors
Stefan Bomhard4
Lukas Paravicini5
Oliver Tant6
Non-Executive Directors7
Thérèse Esperdy
Sue Clark
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Pierre-Jean Sivignon
Steven Stanbrook
Jon Stanton
3,200
–
7,659
–
92,368
108,354
34,033
5,692
–
–
25,193
44
19,178
2,034
36,125
6,121
263
50,388
25,665
48
19,559
2,451
4,459
–
15,986
2,092
429
263
50,388
472
4
381
417
44
–
1,263
465
78
–
–
345
1
262
28
119
–
1,689
563
95
4
785
400
1
305
38
75
–
426
98
17
4
785
55
–
43
10
300
300
300
–
–
–
–
–
–
–
–
9
–
225
–
–
–
–
–
–
–
–
Yes
Yes
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1. Or date of leaving if earlier.
2. Based on a share price of £13.675, being the closing price on 30 September 2020, and includes the value of shares owned outright and those vested but subject to a
holding period, being the deferred element of the bonus.
3. Based on a share price of £15.585, being the closing price on 30 September 2021.
4. Stefan Bomhard joined the Board on 1 July 2020 and has five years to build to his shareholding requirement.
5. Lukas Paravicini joined the Board on 1 May 2021 and has five years to build to his shareholding requirement.
6. Oliver Tant retired on 18 May 2021.
7. Non-Executive Directors do not have a shareholding requirement but are required to invest a minimum percentage of their fees in the Company’s shares which they
are required to retain for the duration of their appointment.
REVIEW OF PAST PERFORMANCE
The chart below shows the value of £100 invested in the Company on 1 October 2011 compared with the value of £100 invested
in the FTSE 100 Index for each of our financial year-ends to 30 September 2021. We have chosen the FTSE 100 Index as it
provides the most appropriate and widely recognised index for benchmarking our corporate performance over a 10-year period.
Index value
250
200
150
100
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Imperial Brands
FTSE 100 Return Index
W W W . I M P E R I A L B R A N D S P L C . C O M
133
133
GOVERNANCE REMUNERATION REPORT – CONTINUED
CHANGE IN CHIEF EXECUTIVE OFFICER REMUNERATION
2020
Alison
Cooper
2020
Joerg
Biebernick
2021
Stefan
Bomhard
2020
Stefan
Bomhard
2020
Dominic
Brisby
2019
Alison
Cooper
2018
Alison
Cooper
2017
Alison
Cooper
2016
Alison
Cooper
2015
Alison
Cooper
2014
Alison
Cooper
2013
Alison
Cooper
2012
Alison
Cooper1
Total remuneration
£’000
Annual bonus as
a percentage of
maximum
Shares vesting
as a percentage
of maximum
3,421
1,104
963
943
448
2,137
3,935
4,657
5,404
3,637
2,686
2,011
2,793
64.1
402
402
402
402
313
87
60
72
80
69
34
51.2
30.84
nil
nil
nil
nil
nil
20
44.4
45.7
15.8
5.8
nil
58.0
1. Total remuneration includes value of share plans vesting that were granted prior to appointment as CEO.
2. 48.4% was the formulaic out-turn; however, the Remuneration Committee accepted the CEO’s recommendation and used its discretion to reduce this to 40%.
3. 51% was the formulaic out-turn; however, the Remuneration Committee used its discretion and reduced this to 31%.
4. Vesting of recruitment award based on performance criteria of former employer.
3. HOW DIRECTORS’ REMUNERATION COMPARES WITH EMPLOYEES’ REMUNERATION
There is a strong alignment in how we approach pay for our Executive Directors and the wider workforce with a focus on
performance-related pay and similar performance metrics in our annual bonus and LTIP. Our reward packages are designed
to enable us to attract and retain the best talent, driven by market practice, skills and experience.
Executive Directors
Increase in line with wider workforce
Mix of financial/strategic measures
50% of bonus deferred into award of shares
Performance metrics measured over 3 years
2-year holding period after vesting
14% cash or contributions into Company’s pension fund
£250 per month
3-year savings period
Consideration of colleagues’ views
UK employees
Salary
Average increase for FY22 – between 2.0% to 3.5%
Annual Bonus
Mix of financial/strategic measures
100% paid in cash
LTIP
Pension
Sharesave
Performance metrics measured over 3 years
No holding period
The majority of UK employees receive a contribution
of 14% of salary
£250 per month
3-year savings period
Our colleagues are at the core of our business, and during the year the Board expanded on its listening sessions and
workforce engagement which gave us an opportunity to hear feedback from colleagues on a variety of topics which
included our strategy, ESG, culture and diversity and inclusion. We also explored the topic of remuneration, giving
participants the opportunity to learn about how the Committee is required to align executive reward with the approach to
pay for all employees, and to understand their views on reward at Imperial Brands. The level of engagement was extremely
high with a constructive discussion covering:
• Selection of annual bonus and LTIP metrics, recognising the low out-turns under the LTIP over recent years and expected
outcomes on pay-outs on the annual bonus.
• Consistency on annual bonus measures in recent years.
• Linking ESG targets to remuneration.
• Recognition that pay and benefits are attractive within the Company, with confidence in the leadership’s ability to deliver
the strategy and the results we need.
The Board is committed to continuing to listen to colleagues and we will look to hold further reward sessions in FY22.
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PERCENTAGE CHANGE IN BOARD REMUNERATION
The table below shows the percentage change in the salary, benefits and annual bonus for the Directors, between FY20 and
FY21, as well as the disclosure for FY20.
Executive Director
Stefan Bomhard
Lukas Paravicini
Oliver Tant2
Non-Executive Directors
Thérèse Esperdy3
Sue Clark
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Pierre-Jean Sivignon
Steven Stanbrook
Jon Stanton4
All UK employees
Year-on-year change in pay for Directors compared with UK employees
2021
2020
Salary
Benefits
Annual Bonus
Salary
Benefits
Annual Bonus
58.6%
183.3%
540.6%
Stefan was appointed to the Board on 1 July 2020
Lukas was appointed to the Board on 1 May 20211
(37.5%)
(41.2%)
(12.3%)
1.90%
6.25%
31.49%
24.7%
7.0%
(100%)
(100%)
N/A
N/A
353.27%
55.42%
-41.30%
-50.00%
Alan was appointed to the Board on 1 January 20211
Bob was appointed to the Board on 1 November 20201
0.0%
176.2%
0.0%
17.9%
0.0%
(100%)
N/A
(100%)
(100%)
2.4%
N/A
N/A
N/A
N/A
7.9%
2.41%
-40.00%
Pierre-Jean was appointed to the Board on 1 July 2020
8.42%
187.88%
6.69%
-66.67%
-5.72%
-5.72%
N/A
N/A
32.44%
N/A
N/A
N/A
1. A year-on-year comparison is not possible in these circumstances.
2. Oliver Tant retired from the Board on 18 May 2021.
3. Increase reflects first full year as Chair
4. Increase reflects first full year as Chair of the Audit Committee
CEO PAY RATIO
The table below shows the multiple of our CEO’s pay ratio to median, lower quartile and upper quartile pay in the UK. The
calculations are based on methodology Option A as defined by the regulations and calculating the pay and benefits of all UK
employees on a full-time equivalent basis. Option A was chosen as it is the most robust approach. The CEO pay ratio is based
on comparing the CEO’s pay to that of Imperial Brands’ UK-based employee population, a large proportion of whom are in
sales roles. The Committee anticipates that the ratios are likely to be volatile over time, largely driven by the CEO’s incentive
outcomes which are dependent on Group-wide results. In light of financial performance outcomes being signed off close to
the publication of the Annual Report, the annual bonus outcomes for employees other than the CEO have been calculated at
target performance (60 per cent of maximum bonus opportunity), although some employees may receive a variation of this
in practice. In 2020 total remuneration used to calculate the ratios was £2,585,428; and in respect of base salary only £1,299,875
was used. These were an amalgam of the incumbents who served as CEO during the year.
The pay levels shown for the percentiles show remuneration for the 12 months to 30 September 2021.
Financial year
Calculation methodology
P25 (lower quartile) x:1
P50 (median) x:1
P75 (upper quartile) x:1
2021
2020
2019
Total remuneration
Base salary
A
A
A
57.5
50.2
53.0
45.5
38.7
36.5
29.6
24.4
22.0
Stefan Bomhard
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
£3,421,078
£1,269,000
57.5
32.3
45.5
26.3
29.6
18.6
The Committee is satisfied that the overall picture presented by the 2021 pay ratios is consistent with the reward policies for
our UK employees. The Committee takes into account these ratios when making decisions around the Executive Director pay
packages, and Imperial Brands takes seriously the need to ensure competitive pay packages across the organisation.
The CEO total remuneration pay ratio has increased across all percentiles, due to an increase in CEO total remuneration of
32.3 per cent. The CEO base salary ratio has remained broadly static, confirming that the variance is driven by performance-
related variable pay.
The salary component for FY21 at each quartile is £39,244 (P25), £48,198 (P50) and £68,222 (P75). The equivalent total pay
numbers are £59,479 (P25), £75,153 (P50) and £115,544 (P75).
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135
GOVERNANCE REMUNERATION REPORT – CONTINUED
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the expenditure and percentage change in overall spend on employee remuneration and dividends.
£ million unless otherwise stated
Executive Directors’ total remuneration1,2
Overall expenditure on pay2
Dividend paid in the year3
2021
5
775
1305
2020
5
812
1,753
Percentage
change
(0.8)
(4.6)
(25.6)
1. Executive Directors’ total remuneration is based on the total single figure for all Executive Directors and is included to provide a comparison between Executive
Director and overall employee pay.
2. Excludes employer’s social security costs.
3. There were no share buybacks during either FY20 or FY21.
EMPLOYEE BENEFIT TRUSTS
Our policy remains to satisfy options and awards under our employee share plans either from market purchased ordinary
shares or ordinary shares held in treasury, distributed through our employee benefit trusts: the Imperial Tobacco Group PLC
Employee and Executive Benefit Trust (the Executive Trust) and the Imperial Tobacco Group PLC 2001 Employee Benefit Trust
(the 2001 Trust) (together the Employee Benefit Trusts).
As at 30 September 2021, we held 74,289,137 ordinary shares in treasury which can be used to satisfy options and awards under
our employee share plans either directly or by gifting them to the Employee Benefit Trusts.
Options and awards may also be satisfied by the issue of new ordinary shares.
Details of the ordinary shares held by the Employee Benefit Trusts are as follows:
Executive Trust
2001 Trust
SHARE PLAN FLOW RATES
Balance at
01/10/2020
Acquired
during year
Distributed
during year
Balance at
30/09/2021
Ordinary shares
under award at
30/09/2021
Surplus/
(shortfall)
595,554
1,507,526
0
0
11,184
1,135,693
584,370
371,833
1,868,192
(1,283,822)
7,553,912
(7,182,079)
The rules of each of the Company’s share plans contain provisions limiting the grant of options and awards to shares
representing no more than 10 per cent of issued share capital of the Company over a period of 10 years (or, in the case of
options and awards granted under the LTIP and Deferred Share Bonus Plan, 5 per cent of issued share capital over the same
10-year period). Currently, an aggregate total of 0.9 per cent of the Company’s issued share capital (including shares held in
treasury) is subject to options and awards under our executive and all-employee share plans.
SUMMARY OF OPTIONS AND AWARDS GRANTED
Limit on awards
10% in 10 years
5% in 5 years
5% in 10 years (executive plans)
Cumulative options and awards granted as a percentage of
issued share capital (including those held in treasury)
Options and awards granted during the year as a percentage
of issued share capital (including those held in treasury)
2.4
1.6
1.8
0.4
0.4
0.4
EXTERNAL BOARD DIRECTORSHIPS
The Committee recognises that external non-executive directorships are beneficial for both the Executive Director concerned
and the Company. Each serving Executive Director is restricted to one external non-executive directorship in a listed company
and may not serve as the chair of a FTSE 100 company. At the discretion of the Board, Executive Directors are permitted to
retain fees received in respect of any such non-executive directorship.
Stefan Bomhard is a non-executive director of Compass Group PLC and was permitted to retain the £88,000 fee received from
this position in the financial year.
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4. REMUNERATION COMMITTEE MEMBERSHIP AND DUTIES
The Board is ultimately accountable for executive remuneration, but has delegated this responsibility to the Committee,
at least three of whose members are independent Non-Executive Directors. The Chair, who is a member of the Committee,
was independent on appointment. We consider this independence fundamental in ensuring Executive Directors’ and senior
management’s remuneration is set by those who have no personal financial interest, other than as shareholders, in the
matters discussed.
To reinforce this independence, a standing item at each Committee meeting allows the members to meet without any
Executive Director or other manager being present.
The Committee considers its key responsibility as being to support the Company’s strategy and short and long-term
sustainable success. This is ensured by the adherence to our Executive Pay Principles set out on pages 125 and 126 and the
Directors’ Remuneration Policy which set the right conditions for high calibre executives to deliver and further, to provide
long-term benefits to all stakeholders. It also determines the specific remuneration package, including service agreements and
pension arrangements, for the Chair, each Executive Director and our Executive Leadership Team. When setting the policy for
Executive Director remuneration, the Committee reviews workforce remuneration and related policies to ensure the alignment
of incentives and rewards across the Group.
The Committee’s other responsibilities include:
• maintaining a competitive Remuneration Policy appropriate to the business environment of the countries in which
we operate, thereby ensuring we can attract, retain and motivate high calibre individuals throughout the business;
• aligning Executive Directors’ and senior management’s remuneration with the interests of long-term shareholders
whilst ensuring that remuneration is fair but not excessive and reflects the contribution made;
• setting measures and targets for the performance-related elements of variable pay;
• oversight of our overall policy for employee remuneration, employment conditions and our employee share plans; and
• ensuring appropriate independent advisers are appointed to provide advice and guidance to the Committee.
The Committee’s terms of reference are reviewed annually, and were last reviewed in September 2021. They are available on
our website.
www.imperialbrandsplc.com.
When carrying out its duties the Committee considers the Remuneration Policy and practices in the context of provision 40
of the UK Corporate Governance Code, as follows:
Clarity – The Remuneration Policy sets out clearly each element of remuneration limits in terms of quantum and the
discretions the Committee can apply. The DRR sets out the arrangements clearly and transparently. Questions on the
remuneration arrangements can be raised at the AGM and also through our “Meet the Board” programme.
Simplicity – The remuneration structure for our Executive Directors consists of fixed pay (base salary, pension and benefits),
annual bonus and a Long-Term Incentive Plan. Our remuneration structures throughout the organisation are simple in nature
and understood by employees.
Risk – A number of features within the Remuneration Policy exist to manage different kinds of risks; these include:
• malus and clawback provisions operating across all discretionary incentive plans;
• deferral of remuneration and holding periods;
• Remuneration Committee discretion to override formulaic out-turns to ensure incentive pay-outs reflect underlying
business performance and shareholder experience;
• limits on awards specified within the policy and plan rules; and
• regular interaction with the Audit Committee.
Predictability – The Committee regularly reviews the performance of inflight awards so it understands the likely outcomes.
Proportionality – The Committee is against rewarding poor performance and, therefore, a significant portion of remuneration
is performance-based and dependent on delivering the Company’s strategy. Performance targets are based on a combination
of measures to ensure there is no undue focus on a single measure.
Alignment – There is a clear progression of remuneration throughout the workforce with performance measures supporting
the key performance indicators and the long-term sustainability of the business. The Committee reviews the Remuneration
Policy, taking into account the feedback received from shareholders and the impact on the wider workforce. The Committee
benefits from the membership of Steven Stanbrook as the Workforce Engagement Director and the input he provides in terms
of the wider employee experience.
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137
GOVERNANCE REMUNERATION REPORT – CONTINUED
Remuneration Committee meetings 2020/21
The Remuneration Committee met for four scheduled meetings and one ad hoc meeting during the year although there was
significant work outside the Committee to agree remuneration packages for new members of the senior leadership team.
Details of the main activities are set out in the Chair’s Statement at the beginning of the DRR.
Other regular attendees include the CEO, Company Secretary, Remuneration Committee Secretary, Chief People and Culture
Officer, Group Reward Director and the Committee’s principal adviser. None of the individuals were involved in any decisions
relating to their own remuneration.
The main agenda items and decisions taken in the four meetings included the following:
November 2020
February 2021
May 2021
September 2021
• FY20 Annual Bonus out-turn agreed and downward discretion applied
• FY18 LTIP out-turn
• FY21 Annual Bonus structure
• FY21 LTIP performance measures and award levels
• Directors’ Remuneration Policy finalised
• Approval of FY21 Annual Bonus Plan and FY21-23 LTIP performance targets
• Review of AGM voting and agreement on shareholder outreach to understand further shareholders’ views
• Review of shareholder feedback and consultation and update on actions since the AGM
• Review of Executive Leadership Team shareholding policy
• Executive Director and Executive Leadership Team pay review and Chair’s fee for FY22
• FY22 Annual Bonus structure
• FY22 LTIP structure
• Forecasted out-turns for Annual Bonus and LTIPs
• Committee terms of reference
Advice provided to the Remuneration Committee
The Committee appointed FIT Remuneration Consultants LLP (FIT) as principal adviser with effect from 1 November 2017.
FIT is a member of the Remuneration Consultants’ Group and complies with its Code of Conduct which sets out guidelines
to ensure that its advice is independent and free of undue influence. FIT carried out no other work for Imperial Brands or its
subsidiaries, and the Committee is satisfied that FIT’s advice was objective and independent. Fees paid were £131,868.
Other companies which provided advice to the Remuneration Committee are as follows:
Alithos Limited undertook total shareholder return (TSR) calculations and provided advice on all TSR-related matters. During
the year it was paid £19,500, and provided no other services to the Company. Willis Towers Watson provided market pay data
and was paid £27,600 for these services. Willis Towers Watson also provided actuarial services to the Company. All of these
advisers were appointed by the Committee, which remains satisfied that the provision of those other services in no way
compromises their independence. They are all paid on the basis of actual work performed rather than on a fixed fee basis.
VOTING ON THE REMUNERATION REPORT AT THE 2021 AGM
At the 2021 AGM there were two remuneration-related votes to approve the new Directors’ Remuneration Policy and to approve
the Directors’ Remuneration Report.
Resolution
Votes for
including
discretionary
votes
Percentage
for
Votes
against
Percentage
against
Total votes cast
excluding votes
withheld
Votes
withheld1
Total votes
cast including
votes withheld
Directors’ Remuneration Report
439,578,484
Directors’ Remuneration Policy
706,375,474
59.73
95.28
296,353,504
34,958,557
40.27
4.72
735,931,988
741,334,031
6,776,342
742,708,330
1,374,300
742,708,331
1. Votes withheld are not included in the final figures as they are not recognised as a vote in law.
The strong support received for the Directors’ Remuneration Policy followed extensive engagement with our largest
shareholders during 2020. The input we received from shareholders was extremely helpful. Although the DRR resolution
was carried, we were disappointed with the level of votes that were cast against.
In the run up to the 2021 AGM we engaged with a number of our shareholders to understand their concerns. The principal
point at issue for them, and some of the proxy voting guidance services, was the level of base salary for Stefan Bomhard,
CEO on his appointment.
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Following the AGM, we continued to engage with our largest shareholders and their input has resulted in a number of actions
the Committee has taken as a result of the feedback.
A key lesson learned is the need for the Committee to be clearer in the DRR about why it takes its decisions. The Committee
would, therefore, have liked to highlight two aspects which were important in its considerations of setting Stefan Bomhard’s
remuneration at the time of his appointment. In competitive terms, his base salary is lower than the median of the FTSE 30
(excluding financial services) as is his total target remuneration and this was an important aspect of the Committee’s
consideration. Furthermore, in setting the salary of the CEO, the Committee took into consideration the need to balance
restraint with paying fairly for the significant role being undertaken. These points should have been made more clearly in
last year’s report.
The Committee would also highlight a number of decisions it has taken as a result of the feedback it has received during its
ongoing dialogue with investors:
• As announced on 18 February 2021, on an exceptional basis, the 2021 LTIP award to Stefan Bomhard was reduced from
350 per cent of salary to 315 per cent, a reduction of 10 per cent of the usual annual award. This decision took into account
both share price performance over the year as well as feedback from shareholders about his base salary on appointment.
• As detailed in the Company’s announcement of 17 February 2021 Lukas Paravicini joined the Board as Chief Financial Officer
on 1 May 2021.
• His annual salary is £730,000 (compared with his predecessor’s salary of £750,000) and will not be increased before
January 2023.
• Lukas’ base salary is between the median and the upper quartile of the FTSE 50 and at the median of the FTSE 30.
His maximum total remuneration is at the median of the FTSE 50 and between the lower quartile and median of
the FTSE 30.
• In line with the Remuneration Policy approved by shareholder at our 2021 AGM, his pension allowance is equivalent to a
maximum of 14 per cent of salary (in line with UK employees). His annual bonus is a maximum of 200 per cent of salary
(pro-rated for time served in the first year of appointment), and the long-term incentive award a maximum of 250 per cent
of salary.
• The Committee considered external benchmarking data and internal relativities as reference points. It also considered the
skills and experience that Lukas brings which are required to fulfil the role as the Company implements its new strategy.
• The Committee also considers Lukas’ pay reflects his proven track record in international consumer goods companies,
and his impeccable finance credentials as well as considerable operational experience.
• No LTIP awards were bought out but the Company has agreed to compensate him for a guaranteed bonus award he
would have received from his previous employer ED&F Man in the amount of US$750,000. The payment will be made in
December 2021 and will be forfeited if his employment with the Company is terminated for cause or he has given notice
to terminate his employment on or before the date of payment.
The Committee understands that shareholders have diverse views in respect of remuneration, and therefore continues to engage
with the Company’s largest shareholders to ensure it understands the range of views which exist on remuneration issues.
SUE CLARK
CHAIR OF THE REMUNERATION COMMITTEE
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139
GOVERNANCE DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Directors present their report and audited financial statements for the year ended
30 September 2021. This Directors’ Report forms part of the management report as
required under the Disclosure Guidance and Transparency Rules.
CONFLICTS OF INTEREST
EXTERNAL APPOINTMENTS
INDUCTION AND TRAINING
Our Directors have a statutory duty to
avoid situations where they have, or
could have, a direct or indirect interest
that conflicts, or possibly may conflict,
with the interests of the Company,
and give notice of any such conflict
at the start of any Board meeting. The
Company’s Articles of Association
allow the Board to authorise potential
conflicts of interest that may arise and
to impose such limits or conditions as
it thinks fit. Directors are not allowed
to participate in such considerations or
to vote regarding their own conflicts.
Any potential conflicts of interest
are considered and addressed prior to
any new external Board appointment.
All potential conflicts are submitted
to the Board for consideration and,
as appropriate, authorisation in
accordance with our Articles of
Association and the Companies Act
2006 and entered into our Conflicts
Register. As part of our annual review
process, all situations entered in the
Conflicts Register are reviewed and
reconsidered. The Board is satisfied
that the independence of those
Directors who have external
board appointments has not
been compromised and there are
currently no cross-directorships
between Board members.
The Board confirms that, with the
exception of the Chair, who is not
subject to the Code’s independence
test but met the independence criteria
on appointment, all NEDs remained
independent throughout the year as
defined in the Code.
Details of the Directors’ share
interests are shown in the Directors’
Remuneration Report on page 133.
NEDs, including the Chair, may serve
on a number of other boards provided
that they can demonstrate that any
such appointment will not interfere
with their time commitment to the
Company, nor represent a conflict
of interest.
Mindful of published investor
guidance, the Succession and
Nominations Committee reviews
the extent of the NEDs’ other interests
throughout the year. In accordance
with the provisions of the 2018 Code, all
NEDs are required to obtain approval of
the Board prior to accepting any new
office or employment. The Board
is satisfied that each of the NEDs
commits sufficient time to their
duties in relation to the Company.
The Chair and each of the NEDs has
confirmed they have sufficient time to
fulfil their obligations to the Company.
The Board is supportive of
Executive Directors and members
of the ELT accepting non-executive
directorships of other companies
to widen their experience and
knowledge for the benefit of the
Company. Accordingly, in accordance
with the Code and subject to the
agreement of the Board, Executive
Directors and members of the ELT
are permitted to accept one external
non-executive board appointment
and to retain any fees received from
such appointment. At the time of
publication of this report, Stefan
Bomhard held one non-executive
directorship, and no ELT members
had an external appointment.
Following their appointment to
the Board, new Directors receive a
tailored induction programme which
includes industry-specific training,
meetings with senior management
and site visits to the Group’s
businesses, although during the
financial year these have been
restricted due to the COVID-19
pandemic. New Directors are also
briefed on internal controls at both
head office and business unit level
and provided with information
on relevant Company policies and
governance-related matters. See
page 110 for details of the induction
programme of Lukas Paravicini.
The Company is committed to
the continuing development of its
NEDs in order that they may build
on their expertise and develop
their understanding of our business.
Briefings are given by our advisers
on matters of legislative change and
corporate governance developments
as well as focused Committee topics
such as executive remuneration,
financial reporting requirements
and environmental issues. Periodic
“deep dives” into various areas of the
business are presented to the Board
in the regular meeting schedule.
The Company Secretary is
responsible for advising the Board,
through the Chair, on matters of
corporate governance. In addition,
all Directors have access to the advice
of the Company Secretary and, where
appropriate, the services of other
employees for all governance and
regulatory matters.
Independent professional
advice is available to all Directors,
in appropriate circumstances,
at the Company’s expense.
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BOARD EVALUATION
BACKGROUND
The Code requires that an external
evaluation is carried out every three
years, with an internal evaluation in
the intervening years. However, as
discussed in our 2020 Annual Report,
the Chair considered it appropriate to
defer an externally facilitated Board
evaluation for one year due to the
significant changes to the Board and
to allow time for both herself and the
SID to complete a full year in office
and for our renewed strategic
direction to be established.
An externally facilitated evaluation
was therefore undertaken during
May and June 2021, conducted by
Lisa Thomas at Independent Board
Evaluation (IBE). Neither Lisa nor
IBE has any other link with the
Company or its Directors.
REVIEW PROCESS
BACKGROUND
INSIGHTS
DISCUSSION
OBSERVATION
ONE-TO-ONE INTERVIEWS
BRIEFING & DOCUMENTATION
REVIEW
BOARD OBSERVATION
BOARD MEMBER
INTERVIEWS
BOARD REPORT
COMMITTEE
OBSERVATIONS
KEY NON-BOARD MEMBER
INTERVIEWS
INDIVIDUAL
COMMITTEE
REPORTS
BOARD DISCUSSION
REVIEW PROCESS
The evaluation
process consisted of a
briefing from the Chair
in May 2021, observing
Board and Committee
meetings in May and
June, and interviews
with Board members,
senior management,
the auditors and
remuneration consultants
during June and July.
Following completion
of the interviews, the
findings were collated and
discussed with the Chair
and the CEO separately
in August 2021 and
presented back to the
Board for discussion at
its September meeting,
with Lisa Thomas present.
Feedback on Committees
was presented to each
Committee Chair and
reviewed with the
whole Board.
Feedback on the Chair was
presented to and discussed
with the SID who shared it
with Board colleagues before
discussing it with the Chair,
and feedback on individual
Board member performance
was discussed with the
Chair, with the aim of
forming discussion and
development points for
each Director.
In view of the multiple
changes at Board and
executive level, the review
was mainly forward looking,
to establish ways of working
for a new team, who are
focused now on strategy
execution, overseeing a
culture transformation,
settling in the new
Executive Committee,
as well as developing the
NGP strategy.
INSIGHTS
The broad message from the
review is that the Board is in a
very different place one year on,
under the leadership of the new Chair.
This was confirmed by the feedback
from non-Board colleagues. The Board
has demonstrated a positive outlook
over the last year, showing support
for the CEO and an ability to challenge
and add value, especially through the
strategy process, which received very
positive feedback. Naturally the Board
is in transition and Board relationships
are developing, but the Board is looking
forward to a further strengthening of
Board culture and dynamics through
in-person meetings. The feedback
confirmed that notwithstanding
virtual meetings, this has been an open
boardroom throughout the pandemic,
with free-flowing discussion and an
inclusive approach to new members.
The Board rated several areas of
its performance highly, including
strategy, Board focus, governance
and compliance, accountability to
shareholders, boardroom culture
and decision-making. Areas for
further progress, and which will be
the focus of the Board’s action plan,
were felt to be risk, ESG/stakeholder
engagement, succession planning and
Board papers. At the time of the review,
Board composition also needed some
attention, and this has now been
addressed through the appointment
of Ngozi Edozien and Diane de
Saint Victor.
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141
GOVERNANCE DIRECTORS’ REPORT – CONTINUED
DISCUSSION
Against a backdrop of a number of
recommendations to address the
above, the Board has decided to
focus on the following for 2022:
1. With a significant change
programme in flight, the Board
will agree what its own objectives
are for the next year, separate
from the business objectives,
so that it maintains focus on the
important topics for its agenda
and balances those with its
governance responsibilities.
Whilst the Board focused
well on its agenda through the
pandemic, with the strategy
re-set and the changes to
personnel, it acknowledges
that it needs to bring fewer topics
onto the agenda in order to allow
for deeper discussions. Some
of the themes for the objectives
discussion will be ESG, NGP,
people and talent, consumer
centricity, safety and wellbeing,
and risk, which will all be the
subject of more strategic focus.
The Board plans to establish its
objectives following the year end
and will table a discussion for
this in early 2022. As part of this
focus, the CEO will chair a new
Executive Committee dealing
with ESG, which will report
straight to the Board.
2. This more focused agenda
will be reflected in the
approach to Board materials,
and how items are discussed
at the Board, including
enhancing broader stakeholder
considerations. The Board
will consider developing more
non-financial KPIs to allow
it to have oversight of
strategy execution and
cultural indicators, with the
aim of formulating these into a
dashboard for the Board to have
a regular overview of progress.
3. The Board will establish a plan for
continuing its engagement with the
business and the wider workforce,
so that it can further deepen its
knowledge of the business, and form
relationships with the new senior
team, with the aim of extending the
collaborative approach between the
new Board and the new team and
ensuring continued challenge and
support at all times, whilst also
leveraging Board skills.
4. Expanding the remit of the
Succession and Nominations
Committee to include governance
and repurposing it into the People
and Governance Committee. This
Committee will continue to address
agenda items in line with code
expectations for a Nominations
Committee, and will include
the broader listening strategy
and detailed oversight of the
culture transformation.
CHAIR AND COMMITTEES
Board Colleagues were extremely
positive about the impact the Chair has
made in these early stages of her tenure
as Chair. Amongst her positive attributes
are the ability to focus the board
agenda, take difficult decisions and
to communicate clearly and directly.
The Board Committees were also
reviewed, with the Audit Committee
Chair receiving high praise for
his input, time commitment and
deep technical understanding. The
Committee is well set to make a
further step change with the arrival
of Lukas Paravicini as CFO. The
main areas to focus on for the Audit
Committee are a more simplified
and efficient operational processes
and pushing for a step up in pace
to enhancements to the Group’s
control framework.
The Remuneration Committee
Chair is described as managing
the Remuneration Committee highly
effectively, spending time in advance
with colleagues and advisers and
briefing accordingly. Remuneration
Committee feedback indicates that
the Committee is rigorous and should
benefit from enhanced support from
the refreshed HR team.
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INSURANCE & INDEMNITIES
Our Directors and Officers can face
significant personal liability under
criminal or civil law or the UK
Listing regime, and can face a range of
penalties, including censure, fines and
imprisonment. In order to attract the
best people, the Company considers
that it is in both its and stakeholders’
best interests to protect them from
the consequences of innocent error
or omission. During the year the
Company has, therefore, purchased
and maintained appropriate insurance
cover in respect of directors’ and
officers’ liabilities. Qualifying third-
party indemnity arrangements for
the benefit of Directors, in a form
and scope which comply with the
requirements of the UK Companies
Act 2006 (the Act), were also in force
throughout the year and up to the date
of this Annual Report.
EQUAL OPPORTUNITIES
We regard equality and fairness as
a fundamental right of all our people.
We aim to create a work environment
that allows equal opportunities so
they are employed fairly, safely
and in compliance with applicable
employment laws and regulation.
We respect each person for who
they are and what they can contribute
and provide the same opportunity for
career development and promotion
regardless of disability, physical
or mental health, age, race, origin,
gender, sexual orientation, political
views, religion, marital status or any
other legally protected status.
CHARITABLE & POLITICAL
DONATIONS
As part of our responsible approach,
we continued to support a number
of communities in which we operate
by allocating a central budget. This
budget largely funds our support of the
Eliminating Child Labour in Tobacco
Growing (ECLT) Foundation and our
support of Hope for Justice. Further
information can be found within
the case studies on our website. In
addition, a number of our subsidiaries
donate to charitable and community
endeavours from local budgets.
INFORMATION ON
ACQUISITION OF
OWN SHARES
At its AGM on 3 February 2021,
the Company obtained shareholder
authorisation for the buyback of up
to 94,600,000 shares. No shares were
purchased during the year. During
the previous financial year 5,098,508
shares, representing approximately
0.5 per cent of the Company’s issued
share capital, were purchased at a
cost of £91,606,155.
RESULTS & DIVIDENDS
We include a review of our operational
and financial performance on pages
36 and 37.
The profit attributable to equity holders
of the Company for the financial year
was £2,834 million, as shown in our
Consolidated Income Statement. Note
3 to the financial statements gives an
analysis of revenue and operating profit.
An analysis of net assets is provided
in the Consolidated Balance Sheet
and the related notes to the
financial statements.
We pay quarterly dividends. The first
and second dividends for financial
year 2021 were paid on 30 June 2021
and 30 September 2021 respectively.
The third dividend will be paid on
31 December 2021 and, subject to AGM
approval, the final dividend will be paid
on 31 March 2022 to our shareholders
on the Register of Members at the
close of business on 18 February 2022.
The associated ex-dividend date will
be 17 February 2022.
The ongoing COVID-19 pandemic
has had a profound impact on
all our lives. We are very proud of
the way our business continues to
support local communities during
this time. During the pandemic we
have continued to make donations to
support the communities in which we
operate, including in Poland to support
local hospitals; in Laos to support virus
relief funds and taskforces; and in the
Congo and Mali to support vaccination
programmes as well as local hospitals.
All charitable donations and partnership
investments are subject to the
requirements of our Code of Conduct.
No political donations were made to
EU political parties, organisations or
candidates (2020: Nil). This approach
is aligned with our Group Policy and
Code of Conduct.
OTHER INFORMATION
In accordance with the Act the
following items have been included
in other sections of this Annual Report:
• a fair review of the business, as
required by the Companies Act 2006,
is included in the Strategic Report;
• the information in our Governance
Report is included in this Directors’
Report by reference;
• future developments in the business
are included in the Value Creation
Framework commencing on page 4;
• information relating to our people,
including colleague engagement,
is included in the Our People
and Culture section on pages
46 to 49 and on page 103 in our
Governance Report;
• our principal risks are detailed
on pages 80 to 91;
• information relating to our
sustainability approach that
supports our environmental,
social and governance agenda
is included on pages 50 to 63;
• responsibilities to a broader
stakeholder group, including our
consumers and customers, are
included on pages 42 to 44, and
100 to 103;
• information on our greenhouse gas
emissions is included on pages 52, 54,
56 and 63; and
• the Directors of the Company are
listed on pages 96 and 97.
Our report under the Streamlined
Energy and Carbon Reporting
requirements can be found on page 54.
SHARE CAPITAL & INTEREST
IN VOTING RIGHTS
Details of our share capital are shown
in note 26 to the financial statements.
All shares other than those held
in treasury are freely transferable
and rank pari passu for voting and
dividend rights.
As at 30 September 2021 we held
74,289,137 shares in treasury, which
represented 7.28 per cent of issued
share capital and had an aggregate
nominal value of £7,428,914.
We have not cancelled these shares
but hold them in a treasury shares
reserve within our profit and loss
account reserve and they represent
a deduction from equity
shareholders’ funds.
The Company has been notified of
the following interest in 3 per cent
or more of our shares in accordance
with Section 5.1.2 of the Disclosure
Guidance and Transparency Rules
(DTRs). The Company has been notified
of the following interest since the
year end and up to 15 November 2021
being a date not more than one month
prior to the date of the AGM Notice of
Meeting, in accordance with DTR 5:
Number of
ordinary
shares at
the date of
notification
(millions)
Percentage
of issued
share capital
at the date of
notification
53
47
46
38
5.592
4.982
4.882
4.111
49
5.171
BlackRock Inc
FIL Limited
The Capital Group
Companies, Inc.
Spring Mountain
Investments Ltd
Notifications received
post year end
Spring Mountain
Investments Ltd3
1. Direct holding.
2. Indirect holding.
3. Notified 12 November 2021.
W W W . I M P E R I A L B R A N D S P L C . C O M
143
143
GOVERNANCE DIRECTORS’ REPORT – CONTINUED
Following a review by the Audit
Committee at its meeting in
November 2021, which confirmed
the accounts showed distributable
reserves sufficient to support the
expected third interim and final
dividends and the interim dividends
in financial year 2022, the Directors
have declared and propose dividends
as follows:
Ordinary shares
Interim paid –
June 2021,
21.06p per share
Interim paid –
September 2021,
21.06p per share
Proposed interim –
December 2021,
48.48p per share
Proposed final –
March 2022,
48.48p per share
Total ordinary
dividends,
139.08p per share
(2020: 137.71p)
2021
£ million
2020
£ million
199
197
199
197
458
453
458
454
1,314
1,301
PENSION FUND
The Group has three main pension
arrangements, the largest being the
Imperial Tobacco Pension Fund, which
is not controlled by the Board but by
a trustee company. Its board consists
of five Directors nominated by the
Company, one Director nominated by
employee members and two Directors
nominated by current and deferred
pensioners. This trustee company
is responsible for the assets of
the pension fund, which are held
separately from those of the Group
and are managed by independent
fund managers. The pension
fund assets can only be used in
accordance with the fund’s rules
and for no other purpose.
ARTICLES
The Company’s Articles of Association
do not contain any entrenchment
provisions and, therefore, may be
altered or added to, or completely
new Articles may be adopted, by
special resolution, subject to the
provisions of the Companies Act 2006.
SIGNIFICANT AGREEMENTS
THAT TAKE EFFECT, ALTER
OR TERMINATE ON CHANGE
OF CONTROL
The agreements summarised below
are those which we consider to be
significant to the Group as a whole
and which contain provisions giving
the other party or parties a specific
right to terminate them if we are
subject to a change of control
following a takeover bid.
The Group has a credit facility
agreement that provides that,
unless the lenders (as defined within
each agreement) otherwise agree,
if any person or group of associated
persons and/or any connected
persons acquires the right to exercise
more than 50 per cent of the votes
exercisable at a general meeting of the
Company, the respective borrowers (as
defined within each agreement) must
repay any outstanding utilisation owed
by them under the facility agreement
and the total commitments under that
facility agreement will be cancelled.
The credit agreement is:
• A credit facilities agreement
dated March 2020 under which
certain banks and/or financial
institutions make available to
Imperial Brands Finance PLC and
Imperial Tobacco Germany Finance
GmbH committed credit facilities
of €3,500 million for a period of up
to three years with bi-annual six
month auto-extensions.
In addition, five deeds of counter-
indemnity each dated July 2020 made
on substantially the same terms under
which certain insurance companies
(the Sureties) have made available to
the Company, Imperial Brands Finance
PLC and Imperial Tobacco Limited
a surety bond, in each case issued
on a standalone basis but in aggregate
forming an amount of £225 million,
until January 2026.
If any person or group of associated
persons (as defined within each
agreement) acquires the right to
exercise more than 50 per cent of
the votes exercisable at a general
meeting of the Company, the Sureties
may demand that Imperial Tobacco
Limited, amongst other things, pay a
sum to a cash collateral account equal
to but not exceeding the aggregate
amount outstanding under
each guarantee.
Imperial Brands Finance PLC and
Imperial Brands Finance Netherlands
B.V. have issued bonds under Euro
Medium Term Notes (EMTN) Debt
Issuance Programmes. The Company
acts as guarantor.
The final terms of these series of notes
contain change of control provisions
under which the holder of each note
will, subject to any earlier exercise by
the Issuer, have the option to require
the Issuer to redeem or, at the Issuer’s
option, purchase that note at its nominal
value if: (a) any person, or persons
acting in concert or on behalf of any
such person(s), becomes interested in:
(i) more than 50 per cent of the issued
or allotted ordinary share capital
of the Company; or (ii) such number of
shares in the capital of the Company
carrying more than 50 per cent of the
voting rights normally exercisable at a
general meeting of the Company; and
(b) as a result of the change of control,
there is either: (i) a reduction to
a non-investment grade rating or
withdrawal of the investment grade
rating of the notes which is not raised
again, reinstated to or replaced by an
investment grade rating during the
change of control period specified in
the final terms; or (ii) to the extent that
the notes are not rated at the time of
the change of control, the Issuer fails
to obtain an investment grade credit
rating of the notes within the change
of control period as a result of the
change of control.
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The bonds Imperial Brands Finance
PLC issued in such manner are
as follows:
• 15 September 2008 £600 million 8.125
per cent guaranteed notes due 2024;
• 17 February 2009 £1,000 million 9
per cent guaranteed notes due 2022;
• 26 September 2011 £500 million 5.5
per cent guaranteed notes due 2026;
• 28 February 2014 €650 million 3.375
per cent guaranteed notes due 2026;
• 28 February 2014 £500 million 4.875
per cent guaranteed notes due 2032;
• 27 January 2017 €500 million 1.375
per cent guaranteed notes due 2025;
• 12 February 2019 €750 million
1.125 per cent guaranteed notes
due 2023; and
• 12 February 2019 €750 million 2.125
per cent guaranteed notes due 2027.
The bonds Imperial Brands Finance
Netherlands B.V. issued in such
manner are as follows:
(b) as a result of the change of
control, there is a reduction to a
non-investment grade rating or
withdrawal of the investment grade
rating of the notes which is not raised
again, reinstated to or replaced by an
investment grade rating during the
change of control period specified
in the final terms.
The bonds issued in such manner are
as follows:
• 11 February 2013 $1,000 million 3.5
per cent guaranteed notes due 2023;
• 21 July 2015 $1,500 million 4.25
per cent guaranteed notes due 2025;
• 21 July 2015 $1,250 million 3.75
per cent guaranteed notes due 2022;
• 26 July 2019 $1,000 million 3.125
per cent guaranteed notes due 2024;
• 26 July 2019 $750 million 3.5 per cent
guaranteed notes due 2026; and
• 26 July 2019 $1,000 million 3.875
per cent guaranteed notes due 2029.
• 18 March 2021 €1,000 million 1.750
per cent guaranteed notes due 2033.
OTHER INFORMATION –
LISTING RULES
In respect of LR 9.8.4R (12) and (13) the
trustee of the Imperial Tobacco Group
PLC Employee and Executive Benefit
Trust and the Imperial Tobacco Group
PLC 2001 Employee Benefit Trust
agrees to waive dividends payable
on the Group’s shares it holds
for satisfying awards under various
Imperial Brands PLC share plans.
In accordance with Section 726 of the
Act no dividends can be paid to the
Company in respect of the shares it
holds in treasury.
Post year-end events
On 26 October 2021 deferred
consideration of €88 million was
received in relation to the sale of the
Premium Cigar Division. See note 34.
Annual General Meeting
This year’s AGM will be held at
The Bristol Marriott Hotel City Centre,
2 Lower Castle Street, Old Market,
Bristol, BS1 3AD on Wednesday
2 February 2022 at 2.30 pm.
The Notice of Meeting, instruction for
joining and details of the resolutions
to be put to the meeting are included
in the Circular to all shareholders and
can be found on our website.
www.imperialbrandsplc.com.
2021 AGM vote
At the AGM in 2021, the
Company received strong support
for all its resolutions other than
resolution 2, Directors’ Remuneration
Report. Further detail regarding the
concerns expressed by shareholders
in respect of resolution 2 can be found
under “Consideration of Shareholder
Views” within the Remuneration
Report on pages 138 and 139.
Imperial Brands Finance PLC has
also issued bonds in the United States
of America under the provisions
of Section 144a and Regulation S
respectively of the US Securities Act
(1933). The Company acts as guarantor.
The final terms of this series of notes
contain change of control provisions
under which the holder of each note
will, subject to any earlier exercise by
the Issuer, have the option to require
the Issuer to redeem or, at the Issuer’s
option, purchase that note at 101
per cent of its nominal value if:
(a) (i) any person (as such term is
used in the US Securities Exchange
Act of 1934 (the Exchange Act))
becomes the beneficial owner
of more than 50 per cent of the
Company’s voting stock; or (ii) there
is a transfer (other than by merger,
consolidation, amalgamation or other
combination) of all or substantially all
of the Company’s assets and those of
its subsidiaries to any person (as such
term is used in the Exchange Act); or
(iii) a majority of the members of the
Company’s Board of Directors is not
continuing in such capacity; and
For the purposes of LR 9.8.4R, the information required to be disclosed by LR 9.8.4R
can be found on the pages set out below:
Section
Information
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13
(14)
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Non pre-emptive issue by major subsidiary undertakings
Listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Page
N/A
N/A
124, 126, 128, 129
and 131
N/A
125, 126, and 130.
N/A
N/A
N/A
144 and 145
N/A
See above
See above
N/A
W W W . I M P E R I A L B R A N D S P L C . C O M
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145
• the Group financial statements,
which have been prepared in
accordance with International
Accounting Standards in
conformity with the requirements
of the Companies Act 2006
and IFRSs adopted pursuant to
Regulation (EC) No.1606/2002 as it
applies in the European Union, give
a true and fair view of the assets,
liabilities, financial position
and profit of the Group; and
• the Strategic Report and the
Directors’ Report include a fair
review of the development and
performance of the business
and the position of the Group and
Parent Company, together with a
description of the principal risks
and uncertainties that it faces.
The Directors’ responsibilities
in relation to the disclosure of
information to auditors is disclosed
in the Audit Committee Report on
page 119.
The Strategic Report and the Directors’
Report were approved and signed by
order of the Board.
JOHN DOWNING
COMPANY SECRETARY
15 November 2021
Imperial Brands PLC
Incorporated and domiciled in England and Wales
No: 3236483
GOVERNANCE DIRECTORS’ REPORT – CONTINUED
STATEMENT OF
RESPONSIBILITIES IN RESPECT
OF THE ANNUAL REPORT AND
THE FINANCIAL STATEMENTS
The Directors are responsible for
preparing the Annual Report and
the Group and Parent Company
financial statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare Group and Parent Company
financial statements for each financial
year. Under that law the Directors
are required to prepare the Group
financial statements in accordance
with International Accounting
Standards in conformity with
the requirements of the Companies
Act 2006 and International Financial
Reporting Standards (IFRSs) adopted
pursuant to Regulation (EC) No.1606/2002
as it applies in the European Union
and have elected to prepare the Parent
Company financial statements in
accordance with the Companies
Act 2006 as applicable to Financial
Reporting Standard 101 Reduced
Disclosure Framework (FRS 101),
and applicable accounting standards.
Under company law the Directors must
not approve the financial statements
unless they are satisfied that they
give a true and fair view of the state
of affairs of the Group and Parent
Company and of the profit or loss of
the Group for that period. In preparing
the financial statements, the Directors
are required to:
• select suitable accounting policies
and then apply them consistently;
• for the Group financial statements,
state whether they have been
prepared in accordance with
International Accounting Standards
in conformity with the requirements
of the Companies Act 2006
and IFRSs adopted pursuant to
Regulation (EC) No.1606/2002 as
it applies in the European Union;
• for the Parent Company financial
statements, state whether applicable
United Kingdom Accounting
Standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and Parent Company will
continue in business.
The Directors are also responsible for
safeguarding the assets of the Group
and Parent Company and hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Group and Parent Company’s
transactions and disclose with
reasonable accuracy at any time the
financial position of the Group and
Parent Company and enable them to
ensure that the financial statements
comply with the Companies Act 2006
and, as regards the Group financial
statements, Article 4 of the IAS
Regulation. Under applicable law
and regulations, the Directors are
also responsible for preparing a
Strategic Report, Directors’ Report,
Remuneration Report and Corporate
Governance Statement that complies
with that law and those regulations.
The Directors are responsible for
the maintenance and integrity of the
Parent Company’s website. Legislation
in the United Kingdom governing
the preparation and dissemination of
financial statements may differ from
information included on the legislation
in other jurisdictions.
DIRECTORS’ CONFIRMATIONS
Each of the Directors, whose names
and functions are listed on pages 96
and 97, confirms that, to the best of
their knowledge:
• the Parent Company financial
statements, which have been
prepared in accordance with
Companies Act 2006 as applicable
to Financial Reporting Standard 101
Reduced Disclosure Framework
(FRS 101), and applicable accounting
standards, give a true and fair view
of the assets, liabilities, financial
position and profit of the Company;
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FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
FINANCIALS
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Imperial Brands PLC Balance Sheet
Imperial Brands PLC Statement
of Changes in Equity
Notes to the Financial Statements
of Imperial Brands PLC
148
160
160
161
162
163
164
220
220
221
SUPPLEMENTARY
INFORMATION
Shareholder Information
235
W W W . I M P E R I A L B R A N D S P L C . C O M
147
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC
Opinion
In our opinion:
• Imperial Brands PLC’s consolidated financial statements and parent company financial statements (the “financial statements”)
give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 September 2021 and of the
Group’s profit for the year then ended;
• the consolidated financial statements have been properly prepared in accordance with International Accounting Standards
in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted
pursuant to Regulation (EC) No.1606/2002 as it applies in the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Imperial Brands PLC (the ‘parent company’) and its subsidiaries (the ‘Group’)
for the year ended 30 September 2021 which comprise:
Group
Parent company
Consolidated balance sheet as at 30 September 2021
Balance sheet as at 30 September 2021
Consolidated income statement for the year then ended
Statement of changes in equity for the year then ended
Consolidated statement of comprehensive income for the
year then ended
Related notes I to IX to the financial statements including a
summary of significant accounting policies
Consolidated statement of changes in equity for the year
then ended
Consolidated cash flow statement for the year then ended
Related notes 1 to 35 to the financial statements, including
a summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and International
Accounting Standards in conformity with the requirements of the Companies Act 2006 and , as regards to the group
financial statements, International Financial Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as
it applies in the European Union. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and
we remain independent of the group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and
parent company’s ability to continue to adopt the going concern basis of accounting included:
• confirming our understanding of the directors’ going concern assessment process, including the controls over the review
and approval of the business plan and cash flow forecasts covering the period through to 31 March 2023;
• assessing the appropriateness of the duration of the going concern assessment period to 31 March 2023 and considering
the existence of any significant events or conditions beyond this period based on our procedures on the Group’s business
plan, cash flow forecasts and from knowledge arising from other areas of the audit;
• verifying inputs against the board-approved business plan, cash flow forecasts and debt facility terms, and reconciling the
opening liquidity position to the prior year end and half year going concern assessments;
• reviewing borrowing facilities to confirm both their availability to the Group and the forecast debt repayments through the
going concern assessment period and to validate that there are only two financial covenants in relation to the revolving
credit facility;
• evaluating management’s historical forecasting accuracy and the consistency of the going concern assessment with
information obtained from other areas of the audit, such as our audit procedures on the business plan and cash flow
forecasts which underpin management’s goodwill impairment assessments;
• testing the assessment, including forecast liquidity under base and downside scenarios, for clerical accuracy;
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• assessing whether assumptions made were reasonable and in the case of downside scenarios, appropriately severe,
in light of the Group’s relevant principal risks and uncertainties and our own independent assessment of those risks;
• assessing management’s considerations related to material climate change impacts in the going concern period
• evaluated the amount and timing of identified mitigating actions available to respond to a severe downside scenario,
and whether those actions are feasible and within the Group’s control;
• performing reverse stress testing on management’s base case scenario to understand how severe conditions would
have to be to breach liquidity or financial covenants and whether the reduction in EBITDA has no more than a remote
possibility of occurring;
• performing independent stress testing on management’s assumptions including applying incremental adverse cash
flow sensitivities. Our sensitivities included the impact of certain severe but plausible scenarios, identified in other
areas of our audit, including litigation and tax, materialising within the going concern period; and,
• assessing the appropriateness of the going concern disclosure on page 92.
Our key observations
• The directors’ assessment forecasts that the Group will maintain sufficient liquidity throughout the going concern
assessment period in the base case scenario. Under management’s worst-case scenario, which includes a permanent
reduction in profitability of 30%, an increase in bad debt and loss of factoring facilities, liquidity is eliminated in
February 2022. We have not identified any material climate-related risks that should be incorporated into the
company’s forecasts to 31 March 2023.
• Controllable mitigating actions available to management over the going concern assessment period, including reductions
to non-declared dividend payments, are sufficient to restore liquidity in both management’s plausible downside scenario
and the audit team’s additional downside sensitivities.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going
concern for the period to 31 March 2023.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee
as to the group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of 5 components and audit
procedures on specific balances for a further 19 components.
• The components where we performed full or specific audit procedures accounted for 95%
of Profit before tax, 85% of Revenue and 80% of Total assets.
Key audit matters
• Revenue recognition, including management override of controls
• Reporting performance
• Carrying value of NGP non-current assets
• Uncertain tax positions
• Litigation
Materiality
• Overall Group materiality of £148m represents 5% of profit before tax, adjusted for the one-off gain
on the disposal of subsidiaries.
An overview of the scope of the parent company and group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial
statements. We take into account the level of revenue, assets and profit before tax, risk profile (including country risk, controls
and internal audit findings and the extent of changes in the business environment) and other known factors when assessing
the level of work to be performed at each component.
In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate
quantitative coverage of significant accounts in the financial statements, of the 388 reporting components of the Group,
we selected 24 components.
Of the 24 components selected, we performed an audit of the complete financial information of 5 components (“full scope
components”) which were selected based on their size or risk characteristics. For the remaining 19 components selected
(“specific scope components”), we performed audit procedures on specific accounts within that component that we considered
had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of
these accounts or their risk profile.
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In addition, we conducted specified procedures over a number of account balances relating to 10 reporting units, representing
1% of the Group’s profit before tax, 1% of the Group’s revenue and 2% of the Group’s total assets, in response to the specific risks
associated with these.
Of the remaining 354 components that together represent 4% of the Group’s profit before tax, none are individually greater than
2% of the Group’s profit before tax. For these components, we performed other procedures, including analytical review, testing
of consolidation journals, intercompany eliminations and foreign currency translation recalculations to respond to any
potential risks of material misstatement to the Group financial statements.
The table below illustrates the coverage obtained from the work performed by our audit teams.
Reporting components
Full scope
Specific scope
Specified procedures
Full, specific, and specified procedures coverage
Remaining components
Total reporting components
Changes from the prior year
2021
2020
Number
% of Group
PBT
% of Group
Revenue
% of Group
Assets
Number
% of Group
PBT
% of Group
Revenue
% of Group
Assets
5
19
10
34
354
388
63%
32%
1%
96%
4%
60%
25%
1%
86%
14%
100%
100%
55%
25%
2%
82%
18%
7
21
37
65
312
377
61%
21%
7%
89%
11%
62%
22%
13%
97%
3%
41%
42%
9%
92%
8%
100%
100%
The approach to audit scoping is similar to the prior year audit. Our scoping changes from the prior year due to the change in
either risk assigned to the components or contribution by the component include the following:
• Components in France, Morocco and Spain have been reassessed as Specific scope in the current year (FY20: Full scope)
reflecting lowered audit risk in comparison to the prior year.
• The parent company component entity has been reassessed as full scope (FY20: Specific scope) as the work over this entity
is carried out in full at the same time as the group audit.
• Components in Russia and Poland have been reassessed as Specified procedures scope in the current year (FY20: Specific
scope) reflecting lowered audit risk and reduced contribution by the component respectively in comparison to the prior year.
• Another component in France and one in Ireland have been reassessed to no longer be in scope in the current year
(FY20: Specific scope) reflecting lowered audit risk in comparison to the prior year.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at
each of the components by us, as the primary audit engagement team, or by component auditors from other EY global
network firms operating under our instruction. Of the 5 full scope components, audit procedures were performed on one of
these directly by the Group audit team and four by component audit teams. For the 19 specific scope components, where the
work was performed by component auditors, we determined the appropriate level of involvement to enable us to determine
that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
Imperial has centralised processes and controls in relation to certain accounts managed by its Finance Shared Services (“FSS”)
centres in Manila and Krakow. Members of the Group engagement team provided direct oversight, review, and coordination
of the EY FSS audit teams. The EY FSS audit teams performed centralised testing for certain accounts covered at the Imperial
FSS locations, including revenue and receivables and purchases and payables. In establishing our overall approach to the
Group audit, we determined the type of work that needed to be undertaken at each of the locations by the Group engagement
team or by auditors from local EY teams.
Impact of the COVID-19 pandemic – direction, supervision and review of component teams
Due to travel restrictions imposed by the COVID-19 outbreak, with the exception of UK based component teams, we did not plan
to perform physical visits to component teams but instead carried out virtual meetings.
These virtual meetings involved meeting with our component teams to discuss and direct their audit approach, reviewing key
working papers and understanding the significant audit findings in response to the risk areas including revenue recognition
and uncertain tax positions, holding meetings with local management, obtaining updates on local regulatory matters including
tax, pensions and legal.
The Group audit team interacted regularly with the component teams, where appropriate, during various stages of the
audit, reviewed key working papers and were responsible for the scope and direction of the audit process. This, together
with the additional procedures performed at Group level, gave us appropriate evidence for our opinion on the Group
financial statements.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate
opinion on these matters.
Risk
Our response to the risk
Revenue recognition, including
management override of controls
(2021: £32,791m, 2020: £32,562m)
Tobacco revenue is an area of focus
for stakeholders interested in the
performance of the company against
an industry backdrop of declining
global sales volumes.
Most of the Group’s sales arrangements
require little judgement to be exercised,
with revenue being recognised on the
delivery of goods. However, there is a
risk that management may override
controls to intentionally misstate
revenue transactions by recording
fictitious manual journals to revenue
(e.g. by inappropriate rebate accounting).
Refer to the audit committee report
(page 116); accounting policies (note 1);
accounting estimates and judgements
(note 2); and segmental information
(note 3) of the consolidated
financial statements.
We obtained an understanding of the revenue process and understood how
Imperial’s revenue recognition policies are applied.
We reviewed the Group revenue recognition policies, as documented in
the Group Accounting Manual, for compliance with IFRS 15 ‘Revenue from
contracts with customers’.
We discussed and reviewed key contractual arrangements with management and
obtained relevant documentation, including in respect of rebate arrangements.
Where rebate arrangements exist, on a sample basis, we obtained third-party
confirmations or performed appropriate alternative procedures where confirmations
were requested and not received, including reviewing contracts and recalculating
rebates, validating the inputs of management’s calculations, and tracing rebate
provision amounts to post year-end settlements .
As part of our overall revenue recognition testing, for all components with
revenue in scope we used data analytics techniques. This included testing the
occurrence of revenue by analysing the correlation of 100% of journal entries
posted to revenue with journals posted to accounts receivables and then
subsequently as cash receipts. We validated cash receipt postings by tracing
to bank statements on a sample basis. This provided us with a high level of
assurance over £28.7 billion (85%) of revenue recognised by the Group.
For the eight in-scope components where we did not use data analysis
techniques, we performed appropriate alternative procedures.
Our procedures, applicable to all full and specific scope components included
the following:
• Cut-off testing for a sample of revenue transactions near the period end to
check that they were recognised in the appropriate period;
• Obtaining and reviewing, on a sample basis, direct customer confirmations of
trade terms, as appropriate;
• Targeted manual journal entry testing in response to the risk of fraud; and,
• Review of disclosures against the requirements of IFRS 15
The audit procedures performed to address this risk were performed by
component teams and reviewed by the Group team.
Key observations communicated to the Audit Committee
Based on the procedures performed, including those in respect of manual adjustments to revenue, we did not identify any
evidence of material misstatement in the revenue recognised in the year.
Risk
Reporting performance
Our response to the risk
Measurement and classification of adjusting items
The Annual Report is a complex
document and is a primary source of
information for investors and broader
stakeholders looking to assess the
performance of the business. There
is a risk that disclosures upon which
key stakeholders base decisions are
misstated. We consider that this risk
manifests itself in three principal ways:
We considered the appropriateness of the APM policy implemented
by management, including how this linked to metrics which impact
management remuneration, with reference to FRC guidance and results
of recent thematic reviews.
We assessed the APM policy for alignment with ESMA guidance, specifically:
• clarity of definitions and explanations for use;
• adequacy of reconciliations to GAAP measures;
• equal prominence to GAAP measures; and
• consistency of application, including explanations for any changes.
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Risk
Measurement and classification
of adjusting items
A number of Alternative Performance
Measures (APMs) are used in the annual
report. There is currently heightened
regulatory focus on the use of APMs,
including how these are linked to
executive remuneration. There
is a risk that APMs are perceived
by regulators or investors to lack
appropriate transparency in their
derivation or justification for their use.
Trade loading
The impact of promotional activity
around period ends can have a material
impact on performance in the following
period. This anticipated impact,
if material, should be described in
the front half of the annual report
to provide investors with a fair
and balanced understanding of the
drivers of business performance.
Recognition of NGP net revenue
(2021: £188m, 2020: £201m)
For the purpose of the adjusted
performance measure (APM) of net
revenue an adjustment is made to treat
Logista as an arms length distributor
rather than a related party. There is a
risk that the judgemental inputs used
in calculating this adjustment are too
optimistic, thereby overstating NGP
net revenue.
Our response to the risk
We challenged whether the timing of recognition of one-off costs and the
classification of these costs as adjusting and evaluated the classification of
one-off adjustments for indicators of management bias; in particular, whether
both income and expense items are treated consistently.
We identified restructuring as an item for which operating profit is adjusted
to arrive at adjusted operating profit. We tested the completeness and accuracy
of restructuring costs including verifying that IAS 37 criteria had been correctly
met and also that these costs were appropriately classified between the three
categories disclosed in the annual report. We also verified that the company’s
accounting policy, including the treatment of all restructuring costs as adjusting,
was appropriately approved by the Audit Committee.
We reviewed the annual report disclosure, including Imperial’s management
rationale for inclusion, equal prominence with statutory measures and
transparency of the reconciliation of statutory measures to APM’s.
Trade loading
We performed detailed, disaggregated analytical review to identify unusual trends
and inventory positions at all full and specific scope locations. Our procedures
focused on variances in receivable days and customers rebates/discounts at
period ends, which could represent inventory being ‘pushed’ into the channel.
We reviewed external factors for indicators of trade pull factors with a focus on
full scope and high-risk markets.
We made inquiries outside of finance to identify instances of late or unusual
requests for shipments or extensions of credit terms.
We obtained third party confirmations of trade terms from customers to assess
for indicators of trade loading, such as unusual sales patterns, rebates/discounts
or increased receivable days at period-ends.
We assessed the sufficiency of disclosure, in narrative reporting and investor
presentations, of any impact of trade loading.
NGP net revenue
We understood the methodology applied by management in performing the
calculation of NGP net revenue and walked through the controls over this process.
We performed detailed testing, including consideration of contradictory evidence,
to critically assess the key inputs to the calculation, including:
• analysing the historical accuracy of forecasts to actual results to determine
whether forecast sales are reliable based on experience;
• assessing the appropriateness of the Logista inventory holding period relative
to that which would be used by a distributor on an arms-length terms;
• performing sensitivity analysis and evaluating the likelihood of inputs
varying; and
• reading the ‘Net Revenue’ accounting policy in the Annual Report to assess the
adequacy of disclosure of how the metric is derived and why it is used.
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Key observations communicated to the Audit Committee
We consider that restructuring costs and provisions have been accounted for and disclosed appropriately.
Following our procedures performed over trade loading, we did not identify any matters requiring disclosure.
For NGP net revenue, we consider the accounting policy presented in the Annual Report and Accounts transparently discloses
how the APM is derived and why it is used.
Risk
Carrying value of NGP intangible assets
(Impairment charge – 2021:
£118 million, 2020: £27 million)
The rapid evolution of technology and
changes in consumer preferences in
the NGP category results in a risk that
intangible assets under development
become obsolete before they reach
commercial production.
There is also a risk that anticipated
performance may not be achieved for
assets that are being or are expected to
be used in the NGP category.
These circumstances could lead to an
impairment that has not been recognised
by management.
Our response to the risk
Carrying value of NGP intangibles
We understood the methodology applied in management’s impairment testing
and walked through the controls over the process.
For assets where there were indicators of impairment, such as paused or slowed
development activity, or were not yet being amortised, we critically assessed
management’s assertions and key input assumptions by:
• assessing a sample of assets against the IAS 38 criteria to determine
whether it remains appropriate to continue to hold these assets, focusing
on management’s intention to bring assets into commercial use;
• analysing the historical accuracy of forecasts to actual results to determine
whether forecast cash flows are reliable based on experience;
• in conjunction with our valuation specialists, assessing the discount rate
used by benchmarking it against market data and comparable organisations;
• evaluating the growth rates assumed by comparison to industry forecasts;
• performing sensitivity and reverse stress testing and evaluating the probability
of inputs varying; and,
• assessing the integrity of management’s value-in-use (VIU) model by
independently performing VIU calculations and comparing our outputs to
those prepared by management.
We evaluated the disclosures in the Annual Report for consistency with the
findings of our audit procedures, including signposting the potential impact
of the strategic review.
The audit procedures performed to address this risk were performed by the Group
audit team.
Key observations communicated to the Audit Committee
The change in NGP strategy has been rightly identified by management as an indicator of impairment.
For NGP intangible assets, we consider that the disclosure of the impairment charge in the Annual Report is appropriate.
We are satisfied that the carrying value of NGP intangible assets is materially correct.
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Risk
Uncertain tax positions (Provision for uncertain tax positions
– 2021: £306m, 2020: £273m)
Our response to the risk
We understood:
The global nature of the Group’s operations results in
complexities in the payment of and accounting for tax.
Management applies judgement in assessing tax exposures
in each jurisdiction, many of which require interpretation of
local tax laws.
Given this judgement, there is a risk that tax provisions
are misstated.
• the Group’s process for determining the completeness
and measurement of provisions for tax;
• the methodology for the calculation of the tax
charge; and
• management’s controls over tax reporting.
The Group audit team, including tax specialists,
evaluated the tax positions taken by management in
each significant jurisdiction in the context of local tax
law, correspondence with tax authorities and the status
of any tax audits. Our assessment included consideration
of the past outcome of comparable cases and look-back
analysis on management’s historic rates of successfully
defending tax positions. Our work utilised additional
support from country tax specialists in France, Germany,
Belgium, Spain and the USA.
We assessed the Group’s transfer pricing judgements,
considering the way in which we observed the Group’s
businesses operating and the correspondence and
agreements reached with tax authorities. We developed
our own independent range of potential provisions for
the Group’s transfer pricing tax exposures, based on the
evidence we obtained, and compared management’s
provision to our range.
We assessed whether the Group’s disclosures, detailing
the year-end status of material open tax inquiries,
adequately disclose relevant facts and circumstances
and potential liabilities of the Group.
The audit procedures were designed and led by the
Group audit team, with support from component teams
whose work was reviewed by the Group audit team.
Key observations communicated to the Audit Committee
Based on the procedures performed, we consider the amounts provided are reasonable. We consider the Group’s tax disclosures
are also appropriate.
We conclude that the Group’s approach to judgements for uncertain tax positions is balanced and that the approach in
calculating the transfer pricing provisions is reasonable based on our assessment of the range of potential outcomes and the
latest status of tax audits.
Risk
Litigation
Refer to note 30 of the consolidated financial statements
‘contingent liabilities’.
There are a number of ongoing legal cases in different jurisdictions
relating to competition, product liability, intellectual property and
commercial litigation. Judgements are involved in determining
the likelihood of a probable outflow occurring from legal cases,
together with the estimate of the likely financial cost.
Given this judgement, there is a risk that legal provisions are
misstated or that contingent liabilities are inadequately disclosed.
Specifically, our audit risk relates to legal cases for which
the financial cost to the business could be material, and any
cases which could indicate non-compliance with the legal
and regulatory frameworks with which the Group is required to
comply. The most notable judgments relate to the following cases:
In the US, tobacco-related litigation is managed separately
by the Master Settlement Agreement (“MSA”). The litigation
revolves around whether ITG Brands used “reasonable best
efforts” to join four Previously Settled States (“PSS”) to make
settlement payments on certain US brands acquired in June 2015.
Our response to the risk
We assessed the processes and controls over litigation
operated by management at Group, by walking through
the process from identification of potential litigation
to the evaluation of probability of outcome and
the recording of a provision or disclosure of a
contingent liability.
We inspected Imperial’s litigation log and communications
to the Executive Leadership Team and met with Group
Finance, Group General Legal Counsel and the Group’s
external legal counsel to discuss the developments in
significant cases.
We requested, received and read letters received directly
from the management’s external legal counsel that
evaluated the current status of legal proceedings and
quantified the estimate of any economic outflow arising
from settlement of the litigation. For certain cases we
involved legal specialists or met with external legal
counsel to further our understanding and assess
potential outcomes.
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Risk
Our response to the risk
We evaluated whether any of the fines levied or ongoing
litigation cases gave rise to evidence that there had
been instances of non-compliance with the relevant
laws and regulations.
We assessed whether the Group’s disclosures detailing
contingent liabilities and financial commitments
adequately disclose relevant facts and circumstances
and potential liabilities of the Group.
The audit procedures were designed and led by the Group
audit team, with support from component teams whose
work was reviewed by the Group audit team.
Separately, the Group, and other companies in the tobacco
sector, are facing inquiries by competition authorities in a
number of markets. The Group is receiving legal advice in
relation to these matters. The accounts reflect the probability
of any outflow arising.
In 2020 the Company received a lawsuit under the Helms-Burton
legislation relating to its alleged use of property allegedly
confiscated by the Cuban state in the early 1960s. At the time
the company received the lawsuit, it was subject to the EU law
known as the EU Blocking Statute, which conflicts with the
Helms-Burton legislation and impacted how the company might
respond to the lawsuit. The company therefore obtained a stay of
the lawsuit from the US Court so that it could seek authorisation
from the European Commission to defend against the lawsuit
or, at a minimum, to file and litigate a motion to dismiss. The
UK exited the European Union on 31 December 2020, prior to
any action by the European Commission on the Company’s
application for authorisation. Following the UK’s exit from the
European Union, the Company’s application to the European
Commission became moot, but the EU Blocking Statute formed
part of EU law retained by the UK, giving rise to a continuing
conflict with the Helms-Burton legislation. The Company
therefore applied for and received authorisation from the UK
Department for International Trade in 2021 to allow it to file
and litigate a motion to dismiss the lawsuit. The Company
has subsequently filed its motion to dismiss with the US
Court. Consequently, management determined that an outflow
of resources is possible and therefore disclosed this matter as a
contingent liability.
In the UK, in late 2020 a claim was filed in the UK High Court
against the Company and five subsidiaries by a group of tobacco
farm workers. The claim is unquantified. The Group has not yet
been required to file their defence. However, the Group intends to
defend the claim in full. Consequently, management determined
that an outflow of resources is possible and therefore disclosed
this matter as a contingent liability.
In Morocco, from 2005, a number of legal claims have been
brought against Société Marocaine Des Tabacs (SMT), a subsidiary
of a Group company, disputing a reduction to retirees’ pensions.
These cases have been in the courts for several years. The Group
was notified in the year that 36 cases were reviewed by the Cour
de Cassation (Supreme Court) and were decided against SMT,
and in favour of the retirees. SMT has not received the written
judgment of the Supreme Court following this decision. All cases
decided by the Supreme Court are unquantified. Management
determined that an outflow of resources is possible and therefore
disclosed this matter as a contingent liability.
Refer to the audit committee report (page 115); accounting policies
(note 1); accounting estimates and judgements (note 2) of the
consolidated financial statements.
Key observations communicated to the Audit Committee
Having met with internal Legal Counsel and received responses from external lawyers, we consider that where an economic
outflow is probable management have appropriately booked a provision. For those cases which we consider meet the criteria
of a contingent liability we concluded that sufficient disclosure exists in the annual report to allow users to understand the full
range of exposures facing the company, where that is possible.
In the prior year, our auditor’s report included the following key audit matters, which have not been included as key audit
matters for the current year audit:
• “The impact of COVID-19 on the Group’s going concern assessment”. In the current year, the effects of COVID-19 have not had
a pervasive impact on the financial statements, including the going concern assessment and other key areas of estimation
and judgement.
• “Sale of Premium Cigar division”. This key audit matter related to the application of judgement in determining the
appropriate accounting treatment for assets held for sale. The share sale completed on 29 October 2020.
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Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements
on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to
influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the Group to be £148 million (2020: £111 million), which is 5% (2020: 5%) of profit before tax,
adjusted for one-off gain on disposal of subsidiaries. We consider that this basis provides the most relevant performance
measure to the stakeholders of the Group.
Starting basis
• Profit before tax – £3,238m
Adjustments
• Adjust for profit on disposal of subsidiaries – £281m
Materiality
• Total profit before tax, adjusted for one-off, non recurring items £2,957m
• Materiality of £148m (5% of materiality basis)
We determined materiality for the Parent Company to be £275 million (2020: £123 million), which is 2% (2020: 2%) of net assets.
In performing our procedures, materiality was capped at the Group allocated materiality of £27 million (2020: £25 million).
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 50% (2020: 50%) of our planning materiality, namely £74m (2020: £55m). We have set
performance materiality at this percentage due to the level of adjustments identified in the prior period.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts
is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the range of performance materiality allocated to components was £7m to £39m (2020:
£6m to £30m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £7m
(2020: £5.5m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in
light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 – 146, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information contained
within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
156
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Group and company’s compliance with the provisions of the
UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 106;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the
period is appropriate set out on pages 92 to 93;
• Directors’ statement on fair, balanced and understandable set out on page 106;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 82 to 91;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems
set out on pages 80 to 81; and;
• The section describing the work of the audit committee set out on pages 111 to 119
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 146, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
W W W . I M P E R I A L B R A N D S P L C . C O M
157
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC – CONTINUED
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However,
the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
company and management.
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined
that the most significant are frameworks which are directly relevant to specific assertions in the financial statements are
those that relate to the reporting framework (International Accounting Standards in conformity with the requirements of
the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No.1606/2002
as it applies in the European Union, United Kingdom Generally Accepted Accounting Practice, the Companies Act 2006
and the UK Corporate Governance Code) and the relevant tax laws and regulations in the jurisdictions in which the Group
operates. In addition, we concluded that there are certain significant laws and regulations which may have an effect on
the determination of the amounts and disclosures in the financial statements being the Listing Rules of the UK Listing
Authority, and those laws and regulations relating to health and safety, employee matters and country-specific regulations
on tobacco control.
• We understood how the Group is complying with those frameworks by making enquiries of management, internal audit,
those responsible for legal and compliance procedures and the company secretary. We corroborated our enquiries through
our review of board minutes, papers provided to the Audit Committee and attendance at meetings of the Audit Committee,
as well as consideration of the results of our audit procedures across the Group.
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might
occur by meeting with management from various parts of the business to understand where it considered there was
susceptibility to fraud and assessing whistleblowing incidences for those with a potential financial reporting impact. Where
necessary, our procedures included our forensic investigation specialists. We also considered performance targets and their
influence on efforts made by management to manage earnings or influence the perceptions of analysts. We considered the
programmes and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect
fraud; and how senior management monitors those programs and controls. Where the risk was considered to be higher, we
performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and
were designed to provide reasonable assurance that the financial statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved enquiries of Group management, those charged with governance and legal counsel, as well as
journal entry testing, with a focus on manual consolidation journals and journals indicating significant or unusual transactions
based on our understanding of the business. Through our testing we challenged the assumptions and judgements made
by management in respect of significant one-off transactions in the financial year and significant accounting estimates as
referred to in the key audit matters section above. At a component level, our full and specific scope component audit team’s
procedures included enquiries of component management; journal entry testing; and focused testing, including in respect
of the key audit matter of revenue recognition. We also leveraged our data analytics platform in performing our work on the
order to cash and purchase to pay processes to assist in identifying higher risk transactions for testing.
• Where we identified potential non-compliance with laws and regulations, we developed an appropriate audit response
and communicated directly with components impacted. Our procedures involved: understanding the process and controls
to identify non-compliance, inquiring of internal and external legal counsel, performing an analysis of press reporting on
these matters, understanding the fact patterns in each case and documenting the positions taken by management, and
using specialists to support us in concluding on the matters identified.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
158
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Other matters we are required to address
• Following the recommendation of the Audit Committee, we signed an engagement letter on 15 January 2020. We were
appointed by the shareholders at the AGM on 5 February 2020 to audit the financial statements for the year ending
30 September 2020 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is two years, covering the
years ending 2020 to 2021.
• The audit opinion is consistent with the additional report to the audit committee
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or
for the opinions we have formed.
ANDREW WALTON (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF ERNST & YOUNG LLP, STATUTORY AUDITOR
London
15 November 2021
W W W . I M P E R I A L B R A N D S P L C . C O M
159
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2021
£ million unless otherwise indicated
RReevveennuuee
Duty and similar items
Other cost of sales
Cost of sales
GGrroossss pprrooffiitt
Distribution, advertising and selling costs
Acquisition and disposal costs
Profit on disposal of subsidiaries
Amortisation and impairment of acquired intangibles
Excise tax provision
Fair value adjustment of loan receivable
Restructuring costs
Other expenses
Administrative and other expenses
OOppeerraattiinngg pprrooffiitt
Investment income
Finance costs
Net finance income/(costs)
Share of profit of investments accounted for using the equity method
PPrrooffiitt bbeeffoorree ttaaxx
Tax
PPrrooffiitt ffoorr tthhee yyeeaarr
Attributable to:
Owners of the parent
Non-controlling interests
EEaarrnniinnggss ppeerr oorrddiinnaarryy sshhaarree ((ppeennccee))
– Basic
– Diluted
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2021
£ million
PPrrooffiitt ffoorr tthhee yyeeaarr
OOtthheerr ccoommpprreehheennssiivvee iinnccoommee
Exchange movements
Exchange movements recycled to profit and loss upon disposal of subsidiaries
Current tax on hedge of net investments and quasi-equity loans
Deferred tax on hedge of net investments and quasi-equity loans
Items that may be reclassified to profit and loss
Net actuarial gains on retirement benefits
Current tax relating to net actuarial gains on retirement benefits
Deferred tax relating to net actuarial gains on retirement benefits
Items that will not be reclassified to profit and loss
OOtthheerr ccoommpprreehheennssiivvee ((lloossss))//iinnccoommee ffoorr tthhee yyeeaarr,, nneett ooff ttaaxx
TToottaall ccoommpprreehheennssiivvee iinnccoommee ffoorr tthhee yyeeaarr
Attributable to:
Owners of the parent
Non-controlling interests
TToottaall ccoommpprreehheennssiivvee iinnccoommee ffoorr tthhee yyeeaarr
Notes
3
11
12/15
8
5
4
6
15
4
8
10
10
Notes
11
24
2021
3322,,779911
((1166,,222299))
((1100,,553355))
((2266,,776644))
66,,002277
((22,,111188))
((1177))
228811
((445500))
11
1155
((225577))
((333366))
((776633))
33,,114466
11,,006600
((997799))
8811
1111
33,,223388
((333311))
22,,990077
22,,883344
7733
229999..99
229999..11
2021
22,,990077
((668800))
((333377))
((110055))
((1122))
((11,,113344))
4411
22
((2211))
2222
((11,,111122))
11,,779955
11,,776611
3344
11,,779955
2020
32,562
(15,962)
(10,420)
(26,382)
6,180
(2,329)
(26)
–
(523)
20
(62)
(205)
(324)
(1,120)
2,731
770
(1,380)
(610)
45
2,166
(608)
1,558
1,495
63
158.3
158.1
2020
1,558
151
–
(10)
(80)
61
277
–
(53)
224
285
1,843
1,762
81
1,843
116600
160
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
CONSOLIDATED BALANCE SHEET
at 30 September
£ million
NNoonn--ccuurrrreenntt aasssseettss
Intangible assets
Property, plant and equipment
Right of use assets
Investments accounted for using the equity method
Retirement benefit assets
Trade and other receivables
Derivative financial instruments
Deferred tax assets
State aid tax recoverable
CCuurrrreenntt aasssseettss
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Derivative financial instruments
Current assets held for disposal
TToottaall aasssseettss
CCuurrrreenntt lliiaabbiilliittiieess
Borrowings
Derivative financial instruments
Lease liabilities
Trade and other payables
Current tax liabilities
Provisions
Current liabilities held for disposal
NNoonn--ccuurrrreenntt lliiaabbiilliittiieess
Borrowings
Derivative financial instruments
Lease liabilities
Trade and other payables
Deferred tax liabilities
Retirement benefit liabilities
Provisions
TToottaall lliiaabbiilliittiieess
NNeett aasssseettss
EEqquuiittyy
Share capital
Share premium and capital redemption
Retained earnings
Exchange translation reserve
EEqquuiittyy aattttrriibbuuttaabbllee ttoo oowwnneerrss ooff tthhee ppaarreenntt
Non-controlling interests
TToottaall eeqquuiittyy
Notes
2021
2020
12
13
14
15
24
17
21/22
23
8
16
17
8
18
21/22
11
20
21/22
21
19
8
25
11
20
21/22
20/21
19
23
24
25
26
1166,,667744
11,,771155
224422
8888
11,,004466
6622
339911
556644
110011
18,160
1,899
293
117
940
57
813
381
–
2200,,888833
22,660
33,,883344
22,,774499
223344
11,,228877
6688
3355
88,,220077
2299,,009900
((11,,110077))
((6622))
((5577))
4,065
2,638
206
1,626
53
1,062
9,650
32,310
(1,442)
(41)
(64)
((99,,110066))
(10,170)
((225533))
((118888))
((3355))
(350)
(220)
(38)
((1100,,880088))
(12,325)
((88,,771155))
((998844))
((119944))
((77))
((11,,003377))
((11,,119999))
((220066))
((1122,,334422))
((2233,,115500))
55,,994400
110033
55,,883377
((778888))
220000
55,,335522
558888
55,,994400
(10,210)
(1,641)
(235)
(5)
(924)
(1,256)
(196)
(14,467)
(26,792)
5,518
103
5,837
(2,364)
1,295
4,871
647
5,518
The financial statements on pages 160 to 234 were approved by the Board of Directors on 15 November 2021 and signed on its
behalf by:
THÉRÈSE ESPERDY
CHAIRMAN
LUKAS PARAVICINI
DIRECTOR
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
116611
161
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2021
£ million
AAtt 11 OOccttoobbeerr 22002200
Profit for the year
Exchange movements on retranslation of net assets
Exchange movements on net investment hedges
Exchange movements on quasi-equity loans
Exchange movements recycled to profit and loss
upon disposal of subsidiaries
Current tax on hedge of net investments and
quasi-equity loans
Deferred tax hedge of net investments and
quasi-equity loans
Net actuarial gains on retirement benefits
Current tax relating to net actuarial gains on
retirement benefits
Deferred tax relating to net actuarial gains on
retirement benefits
Other comprehensive income
TToottaall ccoommpprreehheennssiivvee iinnccoommee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Costs of employees‘ services compensated by
share schemes
Dividends paid
AAtt 3300 SSeepptteemmbbeerr 22002211
AAtt 11 OOccttoobbeerr 22001199
Profit for the year
Exchange movements on retranslation of net assets
Exchange movements on net investment hedges
Exchange movements on quasi-equity loans
Current tax on quasi-equity loans
Deferred tax on quasi-equity loans
Net actuarial gains on retirement benefits
Deferred tax relating to net actuarial losses on
retirement benefits
Other comprehensive income
TToottaall ccoommpprreehheennssiivvee iinnccoommee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Costs of employees‘ services compensated by
share schemes
Current tax on share-based payments
Repurchase of shares
Changes in non-controlling interests (note 12)
Dividends paid
AAtt 3300 SSeepptteemmbbeerr 22002200
Share
premium
and capital
redemption
55,,883377
Share
capital
110033
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
––
110033
103
55,,883377
5,837
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103
5,837
Retained
earnings
((22,,336644))
22,,883344
––
––
––
––
––
––
4411
22
((2211))
2222
22,,885566
2255
((11,,330055))
((778888))
(2,255)
1,495
–
–
–
–
–
277
(53)
224
1,719
20
1
(92)
(4)
(1,753)
(2,364)
Exchange
translation
reserve
Equity
attributable
to owners of
the parent
Non-
controlling
interests
11,,229955
––
((11,,003344))
447766
((8833))
((333377))
((110055))
((1122))
––
––
––
((11,,009955))
((11,,009955))
––
––
220000
1,252
–
(130)
12
251
(10)
(80)
–
–
43
43
–
–
–
–
–
1,295
44,,887711
22,,883344
((11,,003344))
447766
((8833))
((333377))
((110055))
((1122))
4411
22
((2211))
((11,,007733))
11,,776611
2255
((11,,330055))
55,,335522
4,937
1,495
(130)
12
251
(10)
(80)
277
(53)
267
1,762
20
1
(92)
(4)
(1,753)
4,871
664477
7733
((3399))
––
––
––
––
––
––
––
––
((3399))
3344
––
((9933))
558888
647
63
18
–
–
–
–
–
–
18
81
–
–
–
4
(85)
647
Total
equity
55,,551188
22,,990077
((11,,007733))
447766
((8833))
((333377))
((110055))
((1122))
4411
22
((2211))
((11,,111122))
11,,779955
2255
((11,,339988))
55,,994400
5,584
1,558
(112)
12
251
(10)
(80)
277
(53)
285
1,843
20
1
(92)
–
(1,838)
5,518
116622
162
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2021
£ million
CCaasshh fflloowwss ffrroomm ooppeerraattiinngg aaccttiivviittiieess
Operating profit
Dividends received from investments accounted for under the equity method
Depreciation, amortisation and impairment
Profit on disposal of non-current assets
Profit on disposal of subsidiary
Post-employment benefits
Costs of employees‘ services compensated by share schemes
Fair value adjustment of loan receivable
Movement in provisions
Operating cash flows before movement in working capital
Decrease in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Movement in working capital
Tax paid
NNeett ccaasshh fflloowwss ggeenneerraatteedd ffrroomm ooppeerraattiinngg aaccttiivviittiieess
CCaasshh fflloowwss ffrroomm iinnvveessttiinngg aaccttiivviittiieess
Interest received
Loan to third parties
Proceeds from the sale of non-current assets
Net proceeds from sale of subsidiaries (note 11)
Deposit received from sale of asset held for sale
Purchase of non-current assets
Purchase of brands and operations (note 12)
NNeett ccaasshh uusseedd iinn iinnvveessttiinngg aaccttiivviittiieess
CCaasshh fflloowwss ffrroomm ffiinnaanncciinngg aaccttiivviittiieess
Interest paid
Lease liabilities paid
Increase in borrowings
Repayment of borrowings
Cash flows relating to derivative financial instruments
Repurchase of shares
Dividends paid to non-controlling interests
Dividends paid to owners of the parent
NNeett ccaasshh uusseedd iinn ffiinnaanncciinngg aaccttiivviittiieess
NNeett ddeeccrreeaassee iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt ssttaarrtt ooff yyeeaarr
Effect of foreign exchange rates on cash and cash equivalents
Transferred to held for disposal (note 11)
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss aatt eenndd ooff yyeeaarr
2021
2020
33,,114466
2,731
44
881155
22
((228811))
((6633))
2255
((1155))
1188
33,,665511
7700
((220011))
((553333))
((666644))
((882200))
22,,116677
1155
––
5500
884455
––
((220000))
––
771100
((441155))
((6699))
885588
((22,,222244))
4411
––
((9933))
((11,,330055))
((33,,220077))
((333300))
11,,662266
((99))
––
11,,228877
43
910
(2)
–
(88)
20
63
(121)
3,556
67
241
734
1,042
(568)
4,030
9
(3)
28
–
83
(302)
(146)
(331)
(429)
(72)
1,240
(3,096)
(23)
(92)
(85)
(1,753)
(4,310)
(611)
2,286
13
(62)
1,626
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
116633
163
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation
(EC) No.1606/2002 as it applies in the European Union.
The financial statements have been prepared under the historical cost convention except where fair value measurement is required
under IFRS as described below in the accounting policies on financial instruments, and on a going concern basis.
BASIS FOR GOING CONCERN
The financial statements have been prepared under the historical cost convention except where fair value measurement is required
under IFRS as described below in the accounting policies on financial instruments, and on a going concern basis. The Group’s policy
is to ensure that we always have sufficient capital markets funding and committed bank facilities in place to meet foreseeable peak
borrowing requirements.
The Directors recognise that the current environment brings uncertainty due to the COVID-19 pandemic; however, over the last
18 months, the Group has effectively managed operations across the world, and has proved it has an established mechanism to
operate efficiently despite the uncertainty. The Directors consider that a one-off discrete event with immediate cash outflow is of
greater concern to short term liquidity than any effect from the on-going COVID-19 pandemic.
The Directors have assessed the principal risks of the business, including stress testing a range of different scenarios that may affect
the business. These included scenarios which examined the implications of:
A one-off discrete event resulting in immediate cash outflow such as accelerated duty and tax payments of circa £900 million
or non-receipt of the Premium Cigar Division (PCD) deferred consideration of circa £60 million.
A rapid and lasting deterioration to the Group’s profitability because markets become closed to tobacco products or there are
sustained failures to our tobacco manufacturing and supply chains. These assumed a permanent reduction in profitability of
15 per cent from 1 January 2022.
The additional impact of potential bad debt risks arising from a recession of circa £170 million.
The withdrawal of facilities that provide receivables factoring of circa £670 million.
The scenario planning also considered mitigating actions including reductions to capital expenditure and dividend payments.
There are additional actions that were not modelled but could be taken including other cost mitigations such as staff redundancies,
retrenchment of leases, and discussions with lenders about capital structure.
Under a worst-case scenario, where the largest envisaged downside scenarios all take place at the same time the Group would
have sufficient headroom until February 2022. The Group believes this worst-case scenario to be highly unlikely given the relatively
small impact on our trading performance and bad debt levels during the COVID-19 pandemic. In addition, the group has a number of
additional mitigating actions available that could be implemented should such a scenario arise.
Based on the review of future cash flows covering the period through to March 2023, and having assessed the principal risks facing
the Group, the Board is of the opinion that the Group as a whole and Imperial Brands PLC have adequate resources to meet their
operational needs from the date of this Report through to 31 March 2023 and concludes that it is appropriate to prepare the financial
statements on a going concern basis.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the period and of assets, liabilities and contingent liabilities at the balance sheet
date. The key estimates and assumptions are set out in note 2 Critical Accounting Estimates and Judgements. Such estimates and
assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances
and constitute management’s best judgement at the date of the financial statements. In the future, actual experience may deviate
from these estimates and judgements. This could affect future financial statements as the original estimates and judgements are
modified, as appropriate, in the year in which the circumstances change.
Imperial Brands PLC (the Company) provides guarantees to a number of subsidiaries under section 479A of the Companies Act 2006,
whereby the subsidiaries, incorporated in the UK and Ireland, are exempt from the requirements of the Act relating to the audit of
individual accounts for the financial year ending 30 September 2021. See note VII Guarantees of the Imperial Brands Plc financial
statements for further details.
The principal accounting policies, which have been applied consistently other than where new policies (detailed below) have been
adopted, are set out below.
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BASIS OF CONSOLIDATION
The consolidated financial statements comprise the results of the Company, a public company limited by shares, incorporated
in England and Wales, and its subsidiary undertakings, together with the Group‘s share of the results of its associates and joint
arrangements. The Company’s registered number is 3236483 and its registered address is 121 Winterstoke Road, Bristol, BS3 2LL.
Subsidiaries are those entities controlled by the Group. Control exists when the Group is exposed to, or has the rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the
policies adopted by the Group.
The acquisition method of accounting is used to account for the purchase of subsidiaries. The excess of the value transferred to the
seller in return for control of the acquired business together with the fair value of any previously held equity interest in that business
over the Group’s share of the fair value of the identifiable net assets is recorded as goodwill.
Intragroup transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated unless costs cannot be recovered.
JOINT VENTURES
The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either
joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed
the nature of its joint arrangements and determined them to be joint ventures. The financial statements of joint ventures are
included in the Group financial statements using the equity accounting method, with the Group’s share of net assets included as
a single line item entitled ‘Investments accounted for using the equity method‘. In the same way, the Group’s share of earnings is
presented in the consolidated income statement below operating profit entitled ‘Share of profit of investments accounted for using
the equity method’.
FOREIGN CURRENCY
Items included in the financial statements of each Group company are measured using the currency of the primary economic
environment in which the company operates (the functional currency).
The income and cash flow statements of Group companies using non-sterling functional currencies are translated to sterling (the
Group’s presentational currency) at average rates of exchange in each period. Assets and liabilities of these companies are translated
at rates of exchange ruling at the balance sheet date. The differences between retained profits and losses translated at average and
closing rates are taken to reserves, as are differences arising on the retranslation of the net assets at the beginning of the year.
Transactions in currencies other than a company’s functional currency are initially recorded at the exchange rate ruling at the date
of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
exchange rates ruling at the balance sheet date of monetary assets and liabilities denominated in foreign currencies are recognised
in the consolidated income statement with exchange differences arising on trading transactions being reported in operating profit,
and those arising on financing transactions being reported in net finance costs unless as a result of net investment hedging they are
reported in other comprehensive income.
The Group designates as net investment hedges certain external borrowings and derivatives up to the value of the net assets of
Group companies that use non-sterling functional currencies after deducting permanent intercompany loans. Gains or losses on
these hedges that are regarded as highly effective are transferred to other comprehensive income, where they offset gains or losses
on translation of the net investments that are recorded in equity, in the exchange translation reserve.
The Group’s financial results are principally exposed to euro and US dollar exchange rates, which are detailed in the table below.
Foreign exchange rate versus GBP
Euro
US Dollar
Closing rate
Average rate
Closing rate
Average rate
2021
2020
11..11662211
11..33445566
11..11445511
11..33669900
1.0960
1.2832
1.1393
1.2753
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REVENUE RECOGNITION
For the Tobacco & Next Generation Products (Tobacco & NGP) business, Revenue comprises the invoiced value for the sale of goods
net of sales taxes, rebates and discounts. Revenue is based on the completion of performance obligations that constitute the delivery
of goods. The performance obligation is recognised as complete at the point in time when a Group company has delivered products
to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured. The
distribution business also recognises revenue associated with logistics services, recognised on the basis of the invoiced value for
the provision of these services net of sales taxes, rebates and discounts. The performance obligations associated with distribution
services, which include fees for distributing certain third party products, are linked to the successful distribution of products
for customers.
The Group recognises income arising from the licensing of intellectual property, occurring in the ordinary course of business, which
is treated as revenue. Licensing revenue will be recognised over the period of the licence. The licences granted are distinct from other
promises in the contract.
For the Distribution business, revenue comprises the invoiced value for the sale of goods and services net of sales taxes, rebates and
discounts when goods have been delivered or distribution services have been provided. The Distribution business only recognises
commission revenue on purchase and sale transactions in which it acts as a commission agent. Distribution and marketing
commissions are included in revenue. Revenue is recognised on products on consignment when these are sold by the consignee.
Payments are made to both direct and indirect customers for rebates, discounts and other promotional activities. Direct
customers are those to which the Group supplies goods or services. Indirect customers are other entities within the supply chain
to the end consumer. Rebates and discounts are deducted from Revenue. Where the contract with customers has an entitlement
to variable consideration due to the existence of retrospective rebates and discounts, revenue is estimated based on the amount of
consideration expected to be received. This estimation is a determination of the most likely amount to be received using all known
factors including historic experience. Typically there is a high degree of certainty over the amount of retrospective rebates/discounts
paid due to relatively low year on year variations in the volume and pattern of product sales. As the provision of distribution services
typically involves product delivery tasks undertaken in a short period of time, revenue and any associated rebates and discounts
relating to these services do not normally span an accounting year end.
Payments for promotional activities will also be deducted from Revenue where the payments relate to goods or service that are
closely related to or indistinct from associated sales of goods or services to that customer. The calculated costs are accrued and
accounted for as incurred and matched as a deduction from the associated revenues (i.e. excluded from revenues reported in the
Group’s consolidated income statement).
DUTY AND SIMILAR ITEMS
Duty and similar items includes duty and levies having the characteristics of duty. In countries where duty is a production tax, duty
is included in Revenue and in Cost of sales in the consolidated income statement. Duty is regarded as a sales tax and excluded from
revenue where:
duty becomes payable to the tax authority when the goods are sold;
there is an obligation to change the sales price when a change in the rate of duty is imposed; and
there is a requirement to identify the duty separately on sales information such as invoices.
Payments made in the USA under the Master Settlement Agreement are recognised in other cost of sales, for further disclosure see
note 30 contingent liabilities.
TAXES
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustments to tax payable in respect of previous years.
Uncertain tax positions are assessed and measured on an issue by issue basis within the jurisdictions that we operate using
management’s estimate of the most likely outcome. Where management determines that a greater than 50% probability exists
that the tax authorities would accept the position taken in the tax return, amounts are recognised in the consolidated financial
statements on that basis. Where the amount of tax payable or recoverable is uncertain, the Group recognises a liability or asset
based on either: management’s judgement of the most likely outcome; or, when there is a wide range of possible outcomes, a
probability weighted average approach. The Group recognises interest on late paid taxes as part of financing costs. The Group
recognises penalties, if applicable, as part of administrative and other expenses.
Deferred tax is provided in full on temporary differences between the carrying amount of assets and liabilities in the financial
statements and the tax base, except if it arises from the initial recognition of an asset or liability in a transaction, other than
a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax
is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against
which the assets can be realised. Deferred tax is determined using the tax rates that have been enacted or substantively enacted
at the balance sheet date, and are expected to apply when the deferred tax liability is settled or the deferred tax asset is realised.
DIVIDENDS
Final dividends are recognised as a liability in the period in which the dividends are approved by shareholders, whereas interim
dividends are recognised in the period in which the dividends are paid.
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INTANGIBLE ASSETS – GOODWILL
Goodwill represents the excess of value transferred to the seller in return for control of the acquired business together with the fair
value of any previously held equity interest in that business over the Group’s share of the fair value of the identifiable net assets.
Goodwill is tested at least annually for impairment and carried at cost less accumulated impairment losses. Any impairment is
recognised immediately in the consolidated income statement and cannot be subsequently reversed. If any negative goodwill
arises this is recognised immediately in the income statement. For the purpose of impairment testing, goodwill is allocated to
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
INTANGIBLE ASSETS – OTHER
Other intangible assets are initially recognised in the consolidated balance sheet at historical cost unless they are acquired as part
of a business combination, in which case they are initially recognised at fair value. They are shown in the balance sheet at historical
cost less accumulated amortisation and impairment. The Group does not operate a revaluation model and therefore assets are not
subject to ongoing revaluations.
These assets consist mainly of acquired trademarks, intellectual property, product development, concessions and rights,
acquired customer relationships and computer software. The Davidoff cigarette trademark and some premium cigar trademarks
are considered by the Directors to have indefinite lives based on the fact that they are established international brands with global
potential. Trademarks with indefinite lives are not amortised but are reviewed annually for impairment. The carrying value of
Davidoff is subject to an annual impairment review under the requirements of IAS 36 as the Group does not currently foresee a limit
to the period over which the asset is expected to generate net cash inflows. The most recent assessment indicates that the carrying
value is not impaired.
Intellectual property (including trademarks), product development, supply agreements (including customer relationships) and
computer software are amortised over their estimated useful lives as follows:
Intellectual property
Supply agreements
Software
Product development
5 – 30 years
3 – 15 years
3 – 10 years
3 – 10 years
PROPERTY, PLANT AND EQUIPMENT
straight line
straight line
straight line
straight line
Property, plant and equipment are recognised in the consolidated balance sheet at historical cost or at their initial fair value where
they are acquired as part of an acquisition, subject to depreciation or impairment. The Group does not operate a revaluation model
and therefore assets are not subject to ongoing revaluations.
Land is not depreciated. Depreciation is provided on other property, plant and equipment so as to write down the initial cost of each
asset to its residual value over its estimated useful life as follows:
Property
Plant and equipment
Fixtures and motor vehicles
up to 50 years
2 – 20 years
2 – 15 years
straight line
straight line/reducing balance
straight line
The assets’ residual values and useful lives are reviewed and, if appropriate, adjusted at each balance sheet date.
FINANCIAL INSTRUMENTS AND HEDGING
Receivables held under a hold to collect business model are stated at amortised cost. Receivables held under a hold to sell business
model, which are expected to be sold via a non-recourse factoring arrangement are separately classified as fair value through profit
or loss, within trade and other receivables.
The calculation of impairment provisions is subject to an expected credit loss model, involving a prediction of future credit losses
based on past loss patterns. The revised approach involves the recognition of provisions relating to potential future impairments,
in addition to impairments that have already occurred. The expected credit loss approach involves modelling of historic loss rates,
and consideration of the level of future credit risk. Expected loss rates are then applied to the gross receivables balance to calculate
the impairment provision.
Cash and cash equivalents include cash in hand and deposits held on call, together with other short-term highly liquid investments.
The Group transacts derivative financial instruments to manage the underlying exposure to foreign exchange and interest rate
risks. The Group does not transact derivative financial instruments for trading purposes. Derivative financial instruments are
initially recorded at fair value plus any directly attributable transaction costs. Derivative financial assets and liabilities are included
in the consolidated balance sheet at fair value, and include accrued interest receivable and payable where relevant. However, as the
Group has decided (as permitted under IFRS 9) not to cash flow or fair value hedge account for its derivative financial instruments,
changes in fair values are recognised in the consolidated income statement in the period in which they arise unless the derivative
qualifies and has been designated as a net investment hedging instrument in which case the changes in fair values, attributable to
foreign exchange, are recognised in other comprehensive income.
Collateral transferred under the terms and conditions of collateral appendix documents in respect of certain derivatives are netted
off the carrying value of those derivatives in the consolidated balance sheet.
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
RIGHT OF USE ASSETS
The Group has lease contracts relating to property and other assets (which predominantly relates to motor vehicles).
The Group recognises right of use assets, at the commencement date of the lease (i.e. the date the underlying asset is available
for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets
are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right of use assets are subject
to impairment.
LEASE LIABILITIES
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be
made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments
which depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Lease payments include the
exercise of purchase options if determined reasonably certain to be exercised and termination payments if the lease term reflects
the exercise of an option to terminate.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate, defined as the rate of interest
that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset
of a similar value to the right of use asset in a similar economic environment, at the lease commencement date if the interest
rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to
reflect the accumulation of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in
the assessment to purchase the underlying asset.
Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight line basis over the lease
term in cost of sales or distribution, advertising and selling costs.
SHORT TERM LEASES, LEASES OF LOW VALUE ASSETS AND PRACTICAL EXPEDIENTS APPLIED
The Group has applied a number of practical expedients permitted by IFRS 16. These include;
the exclusion of leases where the lease term ends within 12 months of the commencement of the lease or date of initial
application; and
the exclusion of leases of low value assets, defined as those of less than US$5,000.
IFRS 16 was applied using the modified retrospective method, to contracts that were previously identified as operating leases in
accordance with IAS 17 and IFRIC 4. The Group has elected to;
apply hindsight in determining the lease term if the contract contains options to extend or terminate the lease;
exclude initial direct costs from the measurement of the right of use asset; and
use a single discount rate to a portfolio of leases with reasonably similar characteristics
These elections were only applied on transition to IFRS 16 and have not been applied to new leases following adoption of
the standard.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in first out (FIFO) method.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business,
less the estimated costs of completion and selling expenses. Inventory is considered for obsolescence or other impairment issues
and an associated provision is booked where necessary.
Leaf tobacco inventory which has an operating cycle that exceeds 12 months is classified as a current asset, consistent with
recognised industry practice.
PROVISIONS
A provision is recognised in the consolidated balance sheet when the Group has a legal or constructive obligation as a result of a
past event, it is more likely than not that an outflow of resources will be required to settle that obligation, and a reliable estimate of
the amount can be made.
A provision for restructuring is recognised when the Group has approved a detailed formal restructuring plan, and the restructuring
has either commenced or has been publicly announced, and it is more likely than not that the plan will be implemented, and the
amount required to settle any obligations arising can be reliably estimated. Future operating losses are not provided for.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
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ASSETS HELD FOR SALE
Assets held for sale arise once a disposal process has advanced sufficiently to meet the requirements of IFRS 5. Assets identified
as held for sale are considered for impairment of their carrying value against expected proceeds. The assets and liabilities are
presented separately on the balance sheet as assets held for disposal and liabilities held for disposal.
CONTINGENT LIABILITIES
Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Group. Contingent
liabilities are not recognised, only disclosed, unless the possibility of a future outflow of resources is considered remote, or where
a disclosure would seriously prejudice the position of the Group.
RETIREMENT BENEFIT SCHEMES
For defined benefit schemes, the amount recognised in the consolidated balance sheet is the difference between the present
value of the defined benefit obligation at the balance sheet date and the fair value of the scheme assets to the extent that they
are demonstrably recoverable either by refund or a reduction in future contributions. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation
is determined by discounting the estimated future cash flows using interest rates of high quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms
of the related pension obligation.
The service cost of providing retirement benefits to employees during the year is charged to operating profit. Past service costs are
recognised immediately in operating profit, unless the changes to the pension plan are conditional on the employees remaining in
service for a specified period of time.
All actuarial gains and losses, including differences between actual and expected returns on assets and differences that arise as a
result of changes in actuarial assumptions, are recognised immediately in full in the statement of comprehensive income for the
period in which they arise. An interest charge is made in the income statement by applying the rate used to discount the defined
benefit obligations to the net defined benefit liability of the schemes.
For defined contribution schemes, contributions are recognised as an employee benefit expense when they are due.
SHARE-BASED PAYMENTS
The Group applies the requirements of IFRS 2 Share-Based Payment Transactions to both equity-settled and cash-settled share-
based employee compensation schemes. The majority of the Group‘s schemes are equity-settled.
Equity-settled share-based payments are measured at fair value at the date of grant and are expensed over the vesting period, based
on the number of instruments that are expected to vest. For plans where vesting conditions are based on total shareholder returns,
the fair value at the date of grant reflects these conditions. Earnings per share and net revenue vesting conditions are reflected
in the estimate of awards that will eventually vest. For cash-settled share-based payments, a liability equal to the portion of the
services received is recognised at its current fair value at each balance sheet date. Where applicable the Group recognises the impact
of revisions to original estimates in the consolidated income statement, with a corresponding adjustment to equity for equity-settled
schemes and current liabilities for cash-settled schemes. Fair values are measured using appropriate valuation models, taking into
account the terms and conditions of the awards.
The Group funds the purchase of shares to satisfy rights to shares arising under share-based employee compensation schemes.
Shares acquired to satisfy those rights are held in Employee Share Ownership Trusts. On consolidation, these shares are accounted
for as a deduction from equity attributable to owners of the parent. When the rights are exercised, equity is increased by the amount
of any proceeds received by the Employee Share Ownership Trusts.
TREASURY SHARES
When the Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted on consolidation from equity attributable to owners of the parent
until the shares are reissued or disposed of. When such shares are subsequently sold or reissued, any consideration received, net of
any directly attributable incremental transaction costs and the related income tax effects, increases equity attributable to owners of
the parent. When such shares are cancelled they are transferred to the capital redemption reserve.
Where the group enters into a contract with a third party that contains an obligation to re-purchase its own shares for cash or
another financial asset; a financial liability is recognised for the present value of the redemption amount. One example is an
obligation under a forward contract to re-purchase shares in Imperial Brands PLC for cash. The financial liability is recognised
initially at the present value of the redemption amount, and is reclassified from equity. Subsequently, the financial liability
is measured in accordance with IFRS 9, and is revalued at subsequent reporting points as appropriate. If the contract expires
without delivery, the carrying amount of the financial liability is reclassified to equity.
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USE OF ADJUSTED PERFORMANCE MEASURES
Management believes that non-GAAP or adjusted performance measures provide an important comparison of business
performance and reflect the way in which the business is controlled. The adjusted performance measures seek to remove the
distorting effects of a number of significant gains or losses arising from transactions which are not directly related to the ongoing
underlying performance of the business and may be non-recurring events or not directly within the control of management.
Accordingly, adjusted performance measures of operating profit, net finance costs, profit before tax, tax, attributable earnings
and earnings per share exclude, where applicable, acquisition and disposal costs, amortisation and impairment of acquired
intangibles, restructuring costs, post-employment benefits net financing cost, fair value and exchange gains and losses on financial
instruments, and related tax effects and tax matters. Reconciliations between adjusted and reported operating profit are included
within note 6 to the financial statements, adjusted and reported net finance costs in note 6, adjusted and reported tax in note 8,
and adjusted and reported earnings per share in note 10. There are also other adjusted reported measures which are defined below.
The adjusted performance measures in this report are not defined terms under IFRS and may not be comparable with similarly titled
measures reported by other companies.
The items excluded from adjusted performance results are those which are one-off in nature or items which arose due to
acquisitions and are not influenced by the day to day operations of the Group, and the movements in the fair value of financial
instruments which are marked to market and not naturally offset. Adjusted net finance costs also excludes all post-employment
benefit net finance cost since pension assets and liabilities and redundancy and social plan provisions do not form part of adjusted
net debt. This allows comparison of the Group‘s cost of debt with adjusted net debt. The adjusted performance measures are used
by management to assess the Group‘s financial performance and aid comparability of results year on year.
ADJUSTED OPERATING PROFIT
Adjusted operating profit is calculated as operating profit amended for a number of adjustments, the principal changes are
detailed below. This measure is separately calculated and disclosed for Tobacco, NGP and Distribution where appropriate.
In addition, adjustments have been made to present this measure on an organic basis to allow year on year comparability
(see organic adjustments below). A reconciliation can be found in note 6.
ACQUISITION AND DISPOSAL COSTS / PROFIT ON DISPOSAL OF SUBSIDIARIES
Adjusted performance measures exclude costs and profits or losses associated with major acquisitions and disposals as they do not
relate to the day to day operational performance of the Group. Acquisition costs and profits or losses on disposal can be significant in
size and are one-off in nature. Exclusion of these items allows a clearer presentation of the day to day underlying income and costs
of the business. Where applicable and not reported separately, this includes changes in contingent or deferred consideration.
AMORTISATION AND IMPAIRMENT OF ACQUIRED INTANGIBLES
Acquired intangibles are amortised over their estimated useful economic lives where these are considered to be finite. Acquired
intangibles considered to have an indefinite life are not amortised. Any negative goodwill arising is recognised immediately in the
income statement. We exclude from our adjusted performance measures the amortisation and impairment of acquired intangibles,
other than software and internally generated intangibles, and the deferred tax associated with amortisation of acquired intangibles.
Gains and losses on the sale of intellectual property are removed from adjusted operating profit.
It is recognised that there may be some correlation between the amortisation charges derived from the acquisition value of acquired
intangibles, and the subsequent future profit streams arising from sales of associated branded products. However, the amortisation
of intangibles is not directly related to the operating performance of the business. Conversely, the level of profitability of branded
products is directly influenced by day to day commercial actions, with variations in the level of profit derived from branded product
sales acting as a clear indicator of performance. Given this, the Group’s view is that amortisation and impairment charges do not
clearly correlate to the ongoing variations in the commercial results of the business and are therefore excluded to allow a clearer
view of the underlying performance of the organisation. The deferred tax is excluded on the basis that it will only crystallise upon
disposal of the intangibles and goodwill. The related current cash tax benefit is retained in the adjusted measure to reflect the
ongoing tax benefit to the Group.
PRESENTATION OF AUXLY CANNABIS GROUP INC.
As the movement in the fair value of loan receivables associated with the Auxly Cannabis Group Inc. investment has the potential
to be significant the Group has disclosed a fair value movement separately on the face of the income statement.
RESTRUCTURING COSTS
Significant one-off costs incurred in integrating acquired businesses and in major rationalisation and optimisation initiatives
together with their related tax effects are excluded from our adjusted earnings measures. These include restructuring costs
incurred as part of fundamental multi-year transformational change projects but do not include costs related to ongoing cost
reduction activity. These costs are all Board approved, and include impairment of property, plant and equipment which are surplus
to requirements due to restructuring activity. These costs are required in order to address structural issues associated with operating
within the Tobacco sector that have required action to both modernise and right-size the organisation, ultimately delivering an
operating model suitable for the future of the business. The Group’s view is that as these costs are both significant and one-off in
nature, excluding them allows a clearer presentation of the underlying costs of the business.
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ADJUSTED NET FINANCE COSTS
Adjusted net finance costs excludes the movements in the fair value of financial instruments which are marked to market and not
naturally offset. This measure also excludes all post-employment benefit net finance costs since pension assets and liabilities and
redundancy and social plan provisions do not form part of adjusted net debt. This allows comparison of the Group‘s cost of debt with
adjusted net debt. A reconciliation can be found in note 6. The detail of these adjustments is given below.
FAIR VALUE GAINS AND LOSSES ON DERIVATIVE FINANCIAL INSTRUMENTS AND EXCHANGE GAINS AND LOSSES
ON BORROWINGS
IFRS 9 requires that all derivative financial instruments are recognised in the consolidated balance sheet at fair value, with changes
in the fair value being recognised in the consolidated income statement unless the instrument satisfies the hedge accounting rules
under IFRS and the Group chooses to designate the derivative financial instrument as a hedge.
The Group hedges underlying exposures in an efficient, commercial and structured manner. However, the strict hedging
requirements of IFRS 9 may lead to some commercially effective hedge positions not qualifying for hedge accounting. As
a result, and as permitted under IFRS 9, the Group has decided not to apply cash flow or fair value hedge accounting for its
derivative financial instruments. However, the Group does apply net investment hedging, designating certain borrowings and
derivatives as hedges of the net investment in the Group’s foreign operations, as permitted by IFRS 9, in order to reduce income
statement volatility.
We exclude fair value gains and losses on derivative financial instruments and exchange gains and losses on borrowings from
adjusted net finance costs. Fair value gains and losses on the interest element of derivative financial instruments are excluded
as there is no direct natural offset between the movements on derivatives and the interest charge on debt in any one period, as the
derivatives and debt instruments may be contracted over different periods, although they will reverse over time or are matched in
future periods by interest charges. The fair value gains on derivatives are excluded as they can introduce volatility in the finance
charge for any given period.
Fair value gains and losses on the currency element of derivative financial instruments and exchange gains and losses on
borrowings are excluded as the relevant foreign exchange gains and losses on the instruments in a net investment hedging
relationship are accumulated as a separate component of other comprehensive income in accordance with the Group’s policy
on foreign currency.
Fair value movements arising from the revaluation of contingent consideration liabilities are adjusted out where they represent
one-off acquisition costs that are not linked to the current period underlying performance of the business. Fair value adjustments
on loans receivable measured at fair value are excluded as they arise due to counterparty credit risk changes that are not directly
related to the underlying commercial performance of the business.
POST-EMPLOYMENT BENEFITS NET FINANCING COST
The net interest on defined benefit assets or liabilities, together with the unwind of discount on redundancy, social plans and other
long-term provisions are reported within net finance costs. These items together with their related tax effects are excluded from our
adjusted earnings measures, as they primarily represent charges associated with historic employee benefit commitments, rather
than the ongoing current period costs of operating the business.
ADJUSTED TAX CHARGE
The adjusted tax charge is calculated by amending the reported tax charge for significant one-off tax charges or credits arising from:
prior period tax items (including re-measurement of deferred tax balances on a change in tax rates); or
a provision for uncertain tax items not arising in the normal course of business; or
newly enacted taxes in the year; or
tax items that are closely related to previously recognised tax matters, and are excluded from our adjusted tax charge to aid
comparability and understanding of the Group’s performance.
The recognition and utilisation of deferred tax assets relating to losses not historically generated in the normal course of business
are excluded on the same basis.
A reconciliation can be found in note 8.
The adjusted tax rate is calculated as the adjusted tax charge divided by the adjusted profit before tax.
ADJUSTED EARNINGS
Adjusted earnings is calculated by amending the reported basic earnings for all of the adjustments recognised in the calculation
of the adjusted operating profit, adjusted finance costs and adjusted tax charge metrics as detailed above. In addition, adjustments
have been made to present this measure on an organic basis to allow year on year comparability (see organic adjustments).
Adjusted earnings per share and organic earnings per share are calculated by providing adjusted earnings and organic earnings
by the weighted average number of shares. A reconciliation is provided in note 10.
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
OTHER NON-GAAP MEASURES USED BY MANAGEMENT
NET REVENUE
Tobacco & Next Generation Products (NGP) net revenue comprises associated revenue less duty and similar items, excluding
peripheral products. Management considers this an important measure in assessing the performance of Tobacco & NGP operations.
The Group recognises revenue on sales to Logista, a Group company, within its reported Tobacco & NGP revenue figure. As the
revenue calculation includes sales made to Logista from other Group companies but excludes Logista‘s external sales, this metric
differs from revenue calculated under IFRS accounting standards. For the purposes of Adjusted Performance Measures on Net
Revenue we treat Logista as an arms length distributor on the basis that contractual rights are in line with other Third Party
suppliers to Logista. Variations in the amount of inventory held by Logista results in a different level of revenue compared to that
which is included within the income statement. For tobacco product sales, inventory level variations are normally not significant.
A reconciliation can be found in note 3.
DISTRIBUTION NET REVENUE
Distribution net revenue comprises the Distribution segment revenue less the cost of distributed products. Management considers
this an important measure in assessing the performance of Distribution operations. The eliminations in note 3 all relate to sales to
Distribution. A reconciliation can be found in note 3.
ADJUSTED OPERATING CASH
Adjusted operating cash conversion is calculated as cash flow from operations pre-restructuring and before interest and tax
payments less net capital expenditure relating to property, plant and equipment, software and intellectual property rights as a
percentage of adjusted operating profit. A reconciliation can be found in the Group Financial Review on page 72.
ADJUSTED NET DEBT
Management monitors the Group‘s borrowing levels using adjusted net debt which excludes interest accruals, lease commitments
and the fair value of derivative financial instruments providing commercial hedges of interest rate risk. The adjusted net debt metric
is used in monitoring performance against various debt management obligations including covenant compliance. A reconciliation
can be found in note 31.
ORGANIC
To aid comparison of performance between years, the Group uses the term ‘organic’ in all years reported to exclude the impact of the
Premium Cigar divestment, which completed on 29 October 2020. The organic performance comparison excludes the contribution of
the Premium Cigar divestment in all years reported.
CASH CONVERSION
The Group uses cash conversion as a key metric for assessing underlying cash performance. Cash Conversion is calculated as cash
flow from operations pre-restructuring and before interest and tax payments, less net capital expenditure relating to property, plant
and equipment, software and intellectual property rights as a percentage of adjusted operating profit. A reconciliation can be found
in note 6.
ADJUSTED OPERATING PROFIT MARGIN
Adjusted operating profit margin is adjusted operating profit divided by net revenue expressed as a percentage. This measure
is separately calculated and disclosed for Tobacco, NGP and Distribution where appropriate. In addition, adjustments have been
made to present this measure on an organic basis to allow year on year comparability (see organic adjustments). A reconciliation
of adjusted operating profit can be found in note 6 and a reconciliation of net revenue can be found in note 3.
FREE CASH FLOW
Free cash flow is adjusted operating profit (as defined above) adjusted for certain cash and non cash items. The principal
adjustments are depreciation, working capital movements, net capex, restructuring cash flows, tax cash flows, cash interest and
minority interest dividends. A reconciliation can be found in the Group Financial Review on page 72.
RETURN ON INVESTED CAPITAL
Return on invested capital measures the effectiveness of capital allocation and is calculated by dividing adjusted operating profit
after tax by the annual average of: intangible assets, property, plant and equipment, net assets held for sale, inventories, trade and
other receivables and trade payables and other current liabilities.
The annual average is defined as the average of the opening and closing balance sheet values. A reconciliation can be found in the
Group Financial Review on page 76.
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NET DEBT TO EBITDA (MULTIPLE)
This is defined as adjusted net debt divided by adjusted EBITDA. Adjusted net debt is measured at balance sheet foreign exchange
rates, with a full reconciliation shown in note 31. Adjusted EBITDA is calculated as adjusted operating profit plus amortisation,
depreciation and impairments. A reconciliation of EBITDA can be found in the Group Financial Review on page 76. A reconciliation
of adjusted net debt can be found in note 31.
ALL IN COST OF DEBT
This is defined as adjusted net finance costs (defined above) divided by the average net debt in the year (note 31). A reconciliation of
adjusted net finance costs can be found in note 6.
CONSTANT CURRENCY
Constant currency removes the effect of exchange rate movements on the translation of the results of our overseas operations.
We translate current year results at prior year foreign exchange rates. A reconciliation of all key metrics can be found in the Group
Financial Review on page 73.
NEW ACCOUNTING STANDARDS
For the year ended 30 September 2021 the Group continued to apply international accounting standards in conformity with the
requirements of the Companies Act 2006 and IFRS, issued by the International Accounting Standards Board (IASB) and adopted
pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union. From 1 October 2021, as a result of the UK leaving
the European Union, the Group will prepare the consolidated financial statements in accordance with applicable international
accounting standards, issued by the IASB or International Financial Reporting Interpretations Committee (IFRIC) and endorsed
for use in the UK, referred to as ‘UK-adopted IFRS’.
The following amendments to the accounting standards, issued by the IASB or IFRIC, have been adopted by the Group from
1 October 2020 with no impact on the group’s consolidated results, financial position or disclosures:
Amendments to References to the Conceptual Framework in IFRS
Amendments to IFRS 3 – Definition of a Business
Amendments to IAS 1 and IAS 8 – Definition of Material
Amendments to IFRS 16 – Covid-19 – Related Rent Concessions
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (phase 1)
Derivatives with a notional value of €3,233 million designated in net investment hedges will be impacted by the impending reforms
to the calculation of the Interbank Offered Rates (IBOR). However, as discussed in Note 21 Financial Risk Management, only the
undiscounted foreign currency spot exposures of these instruments are designated in the hedging relationship and therefore there
will be no change to the effectiveness of the hedges due to the reform. Changes in the fair value of these derivatives attributable to
changes in interest rates and the effect of discounting are recognised directly in profit or loss within the Finance costs line.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET IN ISSUE
The following standard and amendment, issued by the IASB has not been adopted by the Group:
Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform (phase 2) (effective in the year ending
30 September 2022)
Following the announcement of the discontinuation of GBP LIBOR at the end of 2021 and USD LIBOR discontinuation in 2023, the
Company has amended its bank facility agreement to stop referencing GBP and USD LIBOR and instead reference the daily risk free
rates of SONIA and SOFR respectively. All current GBP LIBOR derivatives will be changed to reference SONIA instead of GBP LIBOR
by the end of 2021, then all USD LIBOR derivatives will be changed to reference SOFR instead of USD LIBOR during the remainder of
fiscal year 2022. There are no changes pending for EUR derivatives.
There are also a number of other amendments and clarifications to IFRS, effective in future years. None of which are expected to
significantly impact the group’s consolidated results or financial position.
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and judgements associated with accounting entries which will be affected by future events. Estimates
and judgements are continually evaluated based on historical experience, and other factors, including current information that
helps form a forward-looking view of expected future outcomes.
Estimates involve the determination of the quantum of accounting balances to be recognised. Judgements typically involve
decisions such as whether to recognise an asset or liability.
The actual amounts recognised in the future may deviate from these estimates and judgements. The estimates and judgements
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
DETERMINATION OF USEFUL ECONOMIC LIFE OF INTANGIBLE ASSETS
For non-goodwill intangible assets, there are critical judgements required in determining whether the asset has an indefinite useful
economic life, or not. The Davidoff trademark has a significant market share and positive cash flow growth expectations. There
are no regulatory or contractual restrictions on the use of this trademark, and there are no plans to significantly redirect resources
elsewhere which would reduce the value of this asset. Consequently, in the view of management, the Davidoff trademark does not
have a foreseeable and definite end to its ability to generate future cash flows and hence it is not amortised. The carrying value of
Davidoff is subject to an annual impairment review under the requirements of IAS 36 as Group does not currently foresee a limit to
the period over which the asset is expected to generate net cash inflows. The most recent assessment indicates that the carrying
value is not impaired.
AMORTISATION AND IMPAIRMENT OF INTANGIBLE ASSETS
For non-indefinite life assets, which are amortised, the useful economic life and recoverable amounts are estimated based upon
the expectation of the amount and time period during which an intangible asset will support future cash flows. Due to estimation
uncertainties the useful economic lives and associated amortisation rates have to be reviewed and revised where necessary. In
addition, where there are indications that the current carrying value of an intangible asset is greater than its recoverable amount,
impairment in the carrying value of the asset may be required. Factors considered important that could trigger an impairment
review of intangible assets include the following:
significant underperformance relative to historical or projected future operating results;
significant changes in the manner of the use of the acquired assets or the strategy for the overall business; and
significant negative industry or economic trends.
The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the
application of the Group’s accounting estimates in relation to intangible assets affect the amounts reported in the financial
statements, especially the estimates of the expected useful economic lives and the carrying values of those assets. If business
conditions materially change it is likely that materially different amounts could be reported in the Group’s financial statements.
Indefinite life intangible assets, including goodwill, are subject to annual impairment testing where an assessment of the carrying
value of the asset against its recoverable amount is undertaken. There are long term uncertainties associated with estimating
the valuation of the recoverable amount, particularly with regard to long term cash flow growth rates which are influenced by the
future size and shape of the tobacco sector. While long term growth rates currently used in impairment assessments are based on
current best estimates of future performance, there may be changes in these assumptions when conducting impairment tests in
subsequent years. Details of goodwill and intangible asset impairment assessments are included in note 12.
INCOME TAXES
Judgement is involved in determining whether the Group is subject to a tax liability or not in line with tax law. Where liabilities
exist, estimation is often required to determine the potential future tax payments. The Group is subject to income tax in numerous
jurisdictions and significant judgement is required in determining the provision for tax. There are many transactions and calculations
for which the ultimate tax determination is uncertain. The Group recognises provisions for tax based on estimates of the taxes that
are likely to become due. Where the final tax outcome is different from the amounts that were initially recorded, such differences will
impact the current income tax and deferred tax provisions in the period in which such determination is made. Consideration of the
judgements surrounding certain tax positions are applicable to the Group and consideration of the valuation estimates related to tax
provisions are given in note 8 to these financial statements.
LEGAL PROCEEDINGS AND DISPUTES
The Group reviews outstanding legal cases following developments in the legal proceedings at each balance sheet date, considering
the nature of the litigation, claim or assessment; the legal processes and potential level of damages in the jurisdiction in which
the litigation, claim or assessment has been brought; the progress of the case (including progress after the date of the financial
statements but before those statements are issued); the opinions or views of legal counsel and other advisers; experience of similar
cases; and any decision of the Group’s management as to how it will respond to the litigation, claim or assessment. Judgement
is required as to whether a liability exists. Where a liability is determined there can be a degree of estimation of the potential level
of damages expected. Key areas of judgement include consideration as to whether certain claims associated with the acquisition
of certain brands and the likely outcome of a number of product liability claims. More detail as to the considered position on these
claims is given in both note 30 of the financial statements and within the Directors’ Report – update on Tobacco and e-vapour related
litigation. To the extent that the Group’s assessments at any time do not reflect subsequent developments or the eventual outcome of
any claim, its future financial statements may be materially affected, with a favourable or adverse impact upon the Group’s operating
profit, financial position and liquidity.
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PROVISIONS
Provision accounting involves judgement as to whether a liability should be recognised and requires estimates of the quantum
of any such liability. The Group holds provisions where appropriate in respect of estimated future economic outflows, principally
for restructuring activity and excise tax, which arise due to past events. Estimates are based on management judgement and
information available at the balance sheet date. Actual outflows may not occur as anticipated, and estimates may prove to be
incorrect, leading to further charges or releases of provisions as circumstances dictate. The main area of estimation risk relates to
the estimation of restructuring provisions associated with various plans to transform the business. These include the cost of factory
closures, scaling down of capacity and other structural changes to the business. These programmes are run as discrete projects
with controls over the expected costs and the associated accounting impacts. The calculation of restructuring provisions includes
estimation challenges relating to asset remediation costs, the valuation of disposals and termination costs. More details relating to
the estimates associated with these restructuring programmes can be found in notes 5 and 25.
CONTROL OF LOGISTA
A key judgement relates to whether the Group has effective control of Logista sufficient that the Group can consolidate this
entity within its Group accounts in line with the requirements of IFRS 10 Consolidated Financial Statements. The Group holds
50.01 per cent of the voting shares. The Group has reviewed its control of Logista and that it is appropriate to consolidate this
entity in line with the requirements of IFRS 10 Consolidated Financial Statements. The Group continues to have Director presence
on the Board of Logista, representing 4 out of 10 Directors. The Group has powers to control as set out in the Relationship Framework
Agreement which specifies certain areas of operation reserved for shareholder approval and through these measures the Group is
able to exercise control of Logista. The Group has therefore concluded that it continues to be appropriate to recognise Logista as a
fully consolidated subsidiary.
3. SEGMENT INFORMATION
Imperial Brands comprises two distinct businesses – Tobacco & NGP and Distribution. The Tobacco & NGP business comprises
the manufacture, marketing and sale of Tobacco & NGP and Tobacco & NGP-related products, including sales to (but not by) the
Distribution business. The Distribution business comprises the distribution of Tobacco & NGP products for Tobacco & NGP product
manufacturers, including Imperial Brands, as well as a wide range of non-Tobacco & NGP products and services. The Distribution
business is run on an operationally neutral basis ensuring all customers are treated equally, and consequently transactions between
the Tobacco & NGP and Distribution businesses are undertaken on an arm’s length basis reflecting market prices for comparable
goods and services.
The function of Chief Operating Decision Maker (defined in IFRS 8), which is to review performance and allocate resources, is
performed by the Board and the Chief Executive, who are regularly provided with information on our segments. This information is
used as the basis of the segment revenue and profit disclosures provided below. The main profit measure used by the Board and the
Chief Executive is adjusted operating profit. Segment balance sheet information is not provided to the Board or the Chief Executive.
Our reportable segments are Europe, Americas, Africa, Asia & Australasia (AAA) and Distribution. Operating segments are comprised
of geographical groupings of business markets. The main Tobacco & NGP business markets within the Europe, Americas and AAA
reportable segments are:
Europe – United Kingdom, Germany, Spain, France, Italy, Greece, Sweden, Norway, Belgium, Netherlands, Ukraine and Poland.
Americas – United States.
AAA – Australia, Japan, Russia, Saudi Arabia, Taiwan and our African markets including Algeria and Morocco.
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
TOBACCO & NGP
£ million unless otherwise indicated
Revenue
Net revenue
Operating profit
Adjusted operating profit
Adjusted operating margin %
RECONCILIATION FROM OPERATING PROFIT TO ADJUSTED OPERATING PROFIT
£ million
Adjusted operating profit
Acquisition and disposal costs
Profit on disposal of subsidiaries
Amortisation of acquired intangibles
Excise tax provision
Fair value adjustment of loan receivable
Restructuring costs
Operating profit
DISTRIBUTION
£ million unless otherwise indicated
Revenue
Distribution net revenue
Operating profit
Adjusted operating profit
Adjusted operating margin %
RECONCILIATION FROM OPERATING PROFIT TO ADJUSTED OPERATING PROFIT
£ million
Adjusted operating profit
Acquisition and disposal costs
Amortisation of acquired intangibles
Restructuring costs
Operating profit
REVENUE
£ million
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Eliminations
Total Group
Total
revenue
1144,,772200
33,,339933
55,,775500
2233,,886633
99,,558899
((666611))
3322,,779911
2021
External
revenue
1144,,005599
33,,339933
55,,775500
2233,,220022
99,,558899
––
3322,,779911
RECONCILIATION FROM TOBACCO & NGP REVENUE TO TOBACCO & NGP NET REVENUE
£ million
Revenue
Duty and similar items
Sale of peripheral products
Net Revenue
Tobacco
2233,,666644
((1166,,221188))
((2244))
77,,442222
NGP
119999
((1111))
––
118888
2021
Total
2233,,886633
((1166,,222299))
((2244))
77,,661100
Tobacco
23,757
(15,947)
(26)
7,784
2021
2233,,886633
77,,661100
22,,999911
33,,330088
4433..55
2020
23,973
7,985
2,587
3,288
41.2
2021
33,,330088
––
228811
((336655))
11
1155
((224499))
22,,999911
2021
99,,558899
11,,006699
114488
225588
2244..11
2021
225588
((1177))
((8855))
((88))
114488
Total
revenue
14,395
3,371
6,207
23,973
9,268
(679)
32,562
NGP
216
(15)
–
201
2020
3,288
(26)
–
(438)
20
(62)
(195)
2,587
2020
9,268
1,015
131
226
22.3
2020
226
–
(85)
(10)
131
2020
External
revenue
13,716
3,371
6,207
23,294
9,268
–
32,562
2020
Total
23,973
(15,962)
(26)
7,985
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
TOBACCO & NGP NET REVENUE
£ million
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Tobacco
33,,442255
22,,447788
11,,551199
77,,442222
NGP
112266
5566
66
118888
2021
Total
33,,555511
22,,553344
11,,552255
77,,661100
Tobacco
3,471
2,409
1,904
7,784
PREMIUM CIGAR DIVESTMENT & ORGANIC NET REVENUE
£ million
Organic Net Revenue
Premium Cigar Divestment Net Revenue
Total Tobacco & NGP
RECONCILIATION FROM DISTRIBUTION REVENUE TO DISTRIBUTION NET REVENUE
£ million
Revenue
Cost of sales – Distribution
Distribution Net Revenue
ADJUSTED OPERATING PROFIT AND RECONCILIATION TO PROFIT BEFORE TAX
£ million
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Eliminations
Adjusted operating profit
Acquisition and disposal costs – Tobacco & NGP
Acquisition and disposal costs – Distribution
Profit on disposal of subsidiaries – Tobacco & NGP
Amortisation and impairment of acquired intangibles – Tobacco & NGP
Amortisation of acquired intangibles – Distribution
Excise tax provision – Tobacco & NGP
Fair value adjustment of loan receivable – Tobacco & NGP
Restructuring costs – Tobacco & NGP
Restructuring costs – Distribution
Operating profit
Net finance income/(costs)
Share of profit of investments accounted for using the equity method
Profit before tax
NGP
98
71
32
201
2021
77,,558899
2211
77,,661100
2021
99,,558899
((88,,552200))
11,,006699
2020
Total
3,569
2,480
1,936
7,985
2020
7,738
247
7,985
2020
9,268
(8,253)
1,015
2021
2020
11,,667700
11,,003377
660011
33,,330088
225588
77
33,,557733
––
((1177))
228811
((336655))
((8855))
11
1155
((224499))
((88))
33,,114466
8811
1111
33,,223388
1,582
1,032
674
3,288
226
13
3,527
(26)
–
–
(438)
(85)
20
(62)
(195)
(10)
2,731
(610)
45
2,166
See note 8 for details of the Excise tax. See note 12 for details on amortisation and impairment, note 11 for details of acquisition and
disposal costs, and note 5 for details of restructuring costs.
OTHER INFORMATION
£ million
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Total Group
2021
2020
Additions to
property, plant
and equipment
Depreciation
and software
amortisation
Additions to
property, plant
and equipment
Depreciation
and software
amortisation
8877
2266
2200
113333
3322
116655
9999
2288
2277
115544
4400
119944
77
30
46
153
21
174
101
31
34
166
36
202
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
ADDITIONAL GEOGRAPHIC ANALYSIS
External revenue and non-current assets are presented for the UK and for individually significant countries. The geographical
analysis is based on country of origin. The Group‘s products are sold in over 120 countries.
£ million
UK
Germany
France
USA
Other
Total Group
2021
2020
External
revenue
Non-current
assets
External
revenue
Non-current
assets
44,,555588
44,,556666
33,,553377
33,,440055
1166,,772255
3322,,779911
110022
33,,224466
22,,333366
55,,448866
77,,330077
1188,,447777
4,498
4,637
3,772
3,575
16,080
32,562
104
3,465
2,564
6,143
7,900
20,176
Non-current assets comprise intangible assets, property, plant and equipment and investments accounted for using the equity method.
4. PROFIT BEFORE TAX
Profit before tax is stated after charging/(crediting):
£ million
Raw materials and consumables used
Changes in inventories of finished goods – Tobacco & NGP
Changes in inventories of finished goods – Distribution
Depreciation and impairment of fixed assets
Amortisation and impairment of intangible assets
Acquisition and disposal costs
Expenses relating to short-term leases
Expenses relating to low value asset leases
Depreciation of Right of use assets
Net foreign exchange (gains)/losses
Write down of inventories
Loss/(profit) on disposal of non-current assets
(Write back)/impairment of trade receivables
ANALYSIS OF FEES PAYABLES TO ERNST AND YOUNG LLP AND ITS ASSOCIATES
£ million
Parent Company and consolidated financial statements
The Company‘s subsidiaries
Audit related assurance services
TToottaall aauuddiitt rreellaatteedd ffeeeess
Other assurance services
TToottaall nnoonn--aauuddiitt ffeeeess
TToottaall aauuddiittoorr‘‘ss rreemmuunneerraattiioonn
2021
994477
22,,770000
77,,000099
117700
557755
1177
44
22
6666
((444422))
111177
22
((1100))
2020
947
2,781
6,798
205
628
26
4
2
72
258
126
(2)
44
2021
2020
22..00
55..11
00..44
77..55
00..44
00..44
77..99
1.9
4.7
0.4
7.0
0.2
0.2
7.2
Ernst & Young LLP was appointed the Group‘s auditor for the year ended 30 September 2020.
PwC (the Group’s previous auditor) provided services to Logista relating to preparation of their consolidation financial statements
amounting to £nil (2020: £0.2m).
5. RESTRUCTURING COSTS
£ million
Employment related
Asset impairments
Other charges
Restructuring costs analysed by workstream:
£ million
2021 Strategic review programme
Cost optimisation programmes
Other
2021
2020
114455
9922
2200
225577
2021
222266
2233
88
225577
103
58
44
205
2020
–
187
18
205
The charge for the year of £257 million (2020: £205 million) predominantly relates to our 2021 Strategic review programme and Cost
optimisation programmes.
Restructuring costs are included within administrative and other expenses in the consolidated income statement. All restructuring
costs are treated as adjusting items.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
These projects differ from everyday initiatives that are undertaken to improve the efficiency and effectiveness of the ongoing
operations business. These costs are required in order to address structural issues involved in operating within the Tobacco sector
that require action to both modernise and right-size the organisation, ultimately delivering an operating model suitable for the future
of the business.
2021 STRATEGIC REVIEW PROGRAMME
In January 2021, the Group announced the results of a Strategic Review Programme including an associated and specific time-
bound restructuring programme. The Group expects the majority of the associated restructuring costs to have been incurred by
September 2022. Total restructuring costs in respect of the programme are expected to be in the range of £375 million – £425 million.
Restructuring costs of £226 million (2020: £nil) related to the 2021 Strategic Review Programme have been incurred in the year,
representing £153 million costs in respect of the change programme itself and £73 million of impairments associated with
NGP assets.
2021 Strategic Review Programme cash spend for the year was £48 million (2020 £nil).
COST OPTIMISATION PROGRAMMES
The cost optimisation programmes (Phase I announced in 2013 and Phase II announced in November 2016) was part of the Group
strategy to optimise costs and drive operational efficiencies. The programmes were time bound projects which, given their scale,
were delivered over a number of years. Phase I was concluded at the end of 2018 and Phase II was concluded at the end of 2021.
Whilst both programmes are concluded there remain some ongoing cash costs.
Phase II of the programme focused on reducing product costs and overheads. Phase II cash spend for the year was £41 million
(2020: £107 million), bringing the cumulative cash cost of the programme to £548 million as at September 2021. Phase II is currently
delivering savings of c. £320 million per annum as at September 2021.
Phase I cash spend for the year was £12 million (2020: £16 million), bringing the cumulative cash cost of the programme to
£571 million as at September 2021. Phase I has delivered savings of c. £305 million per annum from September 2018.
Restructuring costs of £23 million (2020: £187 million) related to the Cost optimisation programmes includes £19 million of
impairments associated with tangible assets.
OTHER RESTRUCTURING ACTIVITIES
In the year £8 million (2020: £10 million) of restructuring costs related to Logista.
There are £nil (2020: £8 million) Other restructuring costs that do not relate to Logista.
In the year other restructuring cash spend was £11 million.
6. ALTERNATIVE PERFORMANCE MEASURES
RECONCILIATION FROM OPERATING PROFIT TO ADJUSTED OPERATING PROFIT
£ million
OOppeerraattiinngg pprrooffiitt
Acquisition and disposal costs
Amortisation and impairment of acquired intangibles
Excise tax provision
Fair value adjustment of loan receivable
Profit on disposal of subsidiaries
Restructuring costs
AAddjjuusstteedd ooppeerraattiinngg pprrooffiitt
Organic adjusted operating profit
Premium cigar divestment adjusted operating profit
AAddjjuusstteedd ooppeerraattiinngg pprrooffiitt
Notes
11
12/15
21
5
2021
33,,114466
1177
445500
((11))
((1155))
((228811))
225577
33,,557733
33,,557700
33
33,,557733
2020
2,731
26
523
(20)
62
–
205
3,527
3,496
31
3,527
Amortisation and impairment of acquired intangibles, acquisition and disposal costs and restructuring costs are discussed in further
detail in the above referenced notes.
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W W W . I M P E R I A L B R A N D S P L C . C O M
117799
179
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
RECONCILIATION FROM REPORTED NET FINANCE COSTS TO ADJUSTED NET FINANCE COSTS
£ million
Reported net finance (income)/costs
Fair value gains on derivative financial instruments
Fair value losses on derivative financial instruments
Exchange (gains)/losses on financing activities
Net fair value and exchange losses on financial instruments
Interest income on net defined benefit assets
Interest cost on net defined benefit liabilities
Post-employment benefits net financing cost
Adjusted net finance costs
Comprising
Interest income on bank deposits
Interest cost on lease liabilities
Interest cost on bank and other loans
Adjusted net finance costs
CASH CONVERSION CALCULATION
£ million unless otherwise indicated
Net cash flow from operating activities
Tax
Net capital expenditure
Restructuring spend
Cash flow post capital expenditure pre interest and tax
Adjusted operating profit
Cash Conversion %
7. DIRECTORS AND EMPLOYEES
EMPLOYMENT COSTS
£ million
Wages and salaries
Social security costs
Other pension costs (note 24)
Share-based payments (note 27)
OPERATING EXECUTIVE (EXCLUDING EXECUTIVE DIRECTORS)
£ million
Base salary
Benefits
Pension salary supplement
Bonus
Termination payments
LTIP annual vesting1
SMS annual vesting1
2021
((8811))
550088
((445577))
444455
449966
8899
((8877))
22
441177
((1188))
77
442288
441177
2021
22,,116677
882200
((115500))
111122
22,,994499
33,,557733
8833%%
2020
610
661
(581)
(256)
(176)
99
(104)
(5)
429
(10)
7
432
429
2020
4,030
568
(274)
145
4,469
3,527
127%
2021
2020
777755
117777
7755
2255
812
184
68
20
11,,005522
1,084
2021
33..00
00..77
00..33
22..99
––
00..88
––
77..77
2020
2.0
–
–
1.6
–
–
0.1
3.7
1. Share plans vesting represent the value of SMS and LTIP awards where the performance periods ends in the year. The SMS has no performance conditions and is valued at the
time of vesting being 15 February at a share price of £15.0657.
Note: aggregate remuneration paid to or receivable by Executive directors, Non-Executive Directors and members of the Operating Executive for qualifying services in accordance
with IAS 24, which includes National Insurance and similar charges was £16,439,675 (2020: £9,239,049).
KEY MANAGEMENT COMPENSATION 1
£ million
Short term employee benefits
Post-employment benefits
Other long-term benefits
Termination payments
Share based payments (in accordance with IAS 24)
2021
1122..77
00..55
––
––
00..99
1144..11
2020
9.2
2.0
–
–
0.2
11.4
1. Key management includes Directors, members of the Executive Committee and the Company Secretary
Details of Directors‘ emoluments and interests, and of key management compensation which represent related party transactions
requiring disclosure under IAS 24, are provided within the Directors‘ Remuneration Report. The Directors‘ Remuneration Report, on
pages 129-139 includes details on salary, benefits, pension and share plans. These disclosures form part of the financial statements.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
NUMBER OF PEOPLE EMPLOYED BY THE GROUP DURING THE YEAR
Tobacco & NGP
Distribution
At 30
September
2244,,110000
66,,220000
3300,,330000
NUMBER OF PEOPLE EMPLOYED BY THE GROUP BY LOCATION DURING THE YEAR
UK and European Union
Americas
Rest of the World
At 30
September
1144,,660000
88,,330000
77,,440000
3300,,330000
2021
Average
2244,,000000
66,,220000
3300,,220000
2021
Average
1144,,770000
88,,000000
77,,550000
3300,,220000
At 30
September
26,300
6,200
32,500
At 30
September
14,900
8,900
8,700
32,500
2020
Average
25,900
6,200
32,100
2020
Average
15,100
8,400
8,600
32,100
The average number of employees includes 2,500 La Romana employees that are expected to leave the Group in 2022 as part of the
final part of the Premium Cigar Division disposal. Excluding these employees, the average number of employees was 27,700 on a
pro-forma basis.
8. TAX
The major components of income tax expense for the years ended 30 September 2021 and 2020 are:
£ million
UK Current tax
Current year charged to the consolidated income statement
Current year charged to consolidated other comprehensive income
Total current year UK current tax
Adjustments in respect of prior years charged to the consolidated income statement
Total UK current tax
Overseas current tax
Current year charged to the consolidated income statement
Current year charged to consolidated other comprehensive income
Total current year overseas current tax
Adjustments in respect of prior years charged to the consolidated income statement
Total overseas current tax
Total current tax charged to the consolidated statement of other comprehensive income
£ million
UK Current tax
Current year
Adjustments in respect of prior years
Overseas current tax
Current year
Adjustments in respect of prior years
Total current tax
Deferred tax
Relating to origination and reversal of temporary differences
Total tax charged to the consolidated income statement
2021
2020
2211
110055
112266
((3388))
8888
445588
((22))
445566
4466
550022
559900
97
10
107
26
133
458
–
458
12
470
603
2021
2020
2211
((3388))
445588
4466
448877
((115566))
333311
97
26
458
12
593
15
608
£ million
2021
2020
Tax related to items recognised in consolidated other comprehensive income during the year:
Current tax on hedge of net investment
Current tax on actuarial gains and losses
Total current tax
Deferred tax on hedge of net investment
Deferred tax on actuarial gains and losses
Total deferred tax
Total tax charged to consolidated other comprehensive income
110055
((22))
110033
1122
2211
3333
113366
10
–
10
80
53
133
143
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W W W . I M P E R I A L B R A N D S P L C . C O M
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181
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
RECONCILIATION FROM REPORTED TAX TO ADJUSTED TAX
The table below shows the tax impact of the adjustments made to reported profit before tax in order to arrive at the adjusted measure
of earnings disclosed in note 10.
£ million
Reported tax
Deferred tax on amortisation of acquired intangibles
Current tax on excise tax provision
Tax on net foreign exchange and fair value gains and losses on financial instruments
Tax on post-employment benefits net financing cost
Tax on restructuring costs
Tax on disposal of premium cigar division
Recognition of tax credits
Uncertain tax positions
Tax on unrecognised losses
Adjusted tax charge
2021
333311
3311
––
7788
11
7722
1111
223399
––
((4477))
771166
2020
608
57
(4)
(63)
1
31
(19)
67
(77)
41
642
The use of adjusted performance measures is explained in note 1, Accounting Policies (Use of Adjusted Performance Measures).
FACTORS AFFECTING THE TAX CHARGE FOR THE YEAR
The tax on the Group‘s profit before tax differs from the theoretical amount that would arise using the average UK corporation tax
rate of 19.0 per cent (2020: 19.0 per cent) as follows:
£ million
Profit before tax
Tax at the UK corporation tax rate of 19.0% (2020: 19.0%)
Tax effects of:
Differences in effective tax rates on overseas earnings
Movement in provision for uncertain tax positions
Remeasurement of deferred tax balances arising from changes in tax rates
Recognition of deferred tax assets for tax credits
Remeasurement of previously recognised deferred tax assets
Increase in unrecognised deferred tax assets
Deferred tax on unremitted earnings
Share of profit of investments accounted for using the equity method
Non-deductible expenses/(non-taxable income)
(Non-taxable gains)/non-deductible losses on net foreign exchange on financial instruments
Non-taxable gain on Premium Cigar Division disposal
Adjustments in respect of prior years
Total tax charged to the consolidated income statement
2021
33,,223388
661155
110077
4499
1155
((223399))
((55))
1122
((44))
((22))
3355
((116699))
((8811))
((22))
333311
2020
2,166
411
100
61
9
–
(81)
30
(19)
(8)
(4)
80
–
29
608
Differences in effective tax rates on overseas earnings represents the impact of worldwide profits being taxed at rates different from
19.0 per cent. The effective tax rate benefits from internal financing arrangements between group subsidiaries in different countries
which are subject to differing tax rates and legislation and the application of double taxation treaties.
Recognition of deferred tax assets for credits includes £239 million (2020: £nil) in the Group‘s Spanish business arising from an
internal reorganisation during the year.
Remeasurement of previously recognised deferred tax assets includes £8 million recognition (2020: £18 million) in relation to
deferred tax assets for tax losses in the Group‘s Dutch business, £nil recognition (2020:£15 million) in relation to deferred tax
assets for tax credits and losses in the Group‘s Spanish business and £nil recognition (2020: £45 million) in relation to deferred
tax assets for tax losses in the Group‘s US business. The Group‘s assessment of the recoverability of deferred tax assets is based
on a review of underlying performance of subsidiaries, changes in tax legislation and the interpretation thereof and changes in
the group structure.
The remeasurement of deferred tax balances arising from changes in tax rates for the year is £15 million (2020: £9 million).
During the year the Group has decreased the provision for deferred tax on unremitted earnings by £4 million (2020: £19 million
decrease). The tax will arise on the distribution of profits through the group and on planned group simplification.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
MOVEMENT ON THE CURRENT TAX ACCOUNT
£ million
At 1 October
Charged to the consolidated income statement
(Charged)/credited to other comprehensive income
Credited to equity
Cash paid
Exchange movements
Other movements
At 30 September
2021
((114444))
((448877))
((110033))
––
882200
33
((77))
8822
2020
(118)
(593)
10
1
568
(13)
1
(144)
The cash tax paid in the year is £333 million higher than the current tax charge (2020: £25 million lower). This arises as a result of
timing differences between the accrual of income taxes and the actual payment of cash and the movement in the provision for
uncertain tax positions.
ANALYSIS OF CURRENT TAX ACCOUNT
£ million
State aid tax recoverable
Current tax assets
Current tax liabilities
UNCERTAIN TAX POSITIONS
2021
110011
223344
((225533))
8822
2020
–
206
(350)
(144)
As an international business the Group is exposed to uncertain tax positions and changes in legislation in the jurisdictions in which
it operates. The Group’s uncertain tax positions principally include cross border transfer pricing, interpretation of new or complex tax
legislation and tax arising on the valuation of assets.
Provisions arising from uncertain tax positions taken in the calculation of tax assets and liabilities are included within current tax
liabilities. At 30 September 2021 the total value of these provisions, including foreign exchange movements, was £306 million (2020:
£273 million). The assessment of uncertain tax positions is subjective and significant management judgement is required. This
judgement is based on current interpretation of legislation, management experience and professional advice. Until matters are
finally concluded it is possible that amounts ultimately paid will be different from the amounts provided.
Management have assessed the Group’s provision for uncertain tax positions and have concluded that apart from the matters
referred to below the provisions in place are not material individually or in aggregate, and that a reasonably possible change in
the next financial year would not have a material impact to the results of the Group.
FRENCH TAX LITIGATION
In November 2015 the Group received a challenge from the French tax authorities that could lead to additional tax liabilities of up
to £234 million. The challenge concerns the valuation placed on the shares of Altadis Distribution France (now known as Logista
France) following an intragroup transfer of shares in October 2012 and the tax consequences flowing from a potentially higher
value that is argued for by the tax authorities. In October 2018 the Commission Nationale, an independent adjudication body, whose
decision is advisory only, issued a report supportive of the Group’s arguments for no adjustment. In December 2018 the French tax
authorities issued their final assessments seeking the full amount of additional tax assessed of £234 million (2020: £248 million). In
January 2019 the Group appealed against the assessment. In August 2020, the French tax authorities rejected the Group’s appeal and
the matter will now proceed to litigation. As of September 2021, all submissions have been made to the court and we await a hearing
date. The Group believes it is appropriate to maintain a £41 million (2020: £44 million) provision for uncertain tax positions in respect
of this matter.
STATE AID UK CFC
The Group continues to monitor developments in relation to EU State Aid investigations. On 25 April 2019, the EU Commission’s
final decision regarding its investigation into the UK’s Controlled Foreign Company regime was published. It concludes that the
legislation up until December 2018 does partially represent State Aid. The UK Government has appealed to the European Court
seeking annulment of the EU Commission’s decision. The Group, along with a number of UK corporates, has made a similar
application to the European Court. The UK Government is obliged to collect any State Aid granted pending the outcome of the
European Court process.
Based on advice, the Group’s position remains that no State Aid has been received, but following HMRC guidance an assessment
of potential State Aid was submitted to HMRC in July 2020. In February 2021 a charging notice for £101 million, in line with the
Group’s assessment, was issued to the Group by HMRC and has since been paid. Advice to date is that our appeal and that of the UK
government against the Commission’s decision should ultimately be successful so a current tax receivable of £101 million has been
recognised as a non-current asset.
Based upon current advice the Group does not consider any provision is required in relation to any other EU State Aid investigation.
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W W W . I M P E R I A L B R A N D S P L C . C O M
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183
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
TRANSFER PRICING
The Group has tax audits in progress, relating to transfer pricing matters in a number of jurisdictions, principally UK, France
and Germany. The Group estimates the potential gross level of exposure relating to transfer pricing issues is approximately
£900 million (2020: £800 million). The Group holds a provision of £260 million (2020: £207 million) in respect of these items.
In August 2020 the Group notified HMRC of a potential Diverted Profits Tax (DPT) issue relating to brand rewards. In September 2020,
HMRC issued a preliminary notice under the DPT regime in respect of the year ended 30 September 2016 indicating a potential liability of
c. £6 million. Collaborative discussions on the issue continue and it is the Group’s belief the issue is a transfer pricing one, and will be
resolved as such. In November 2020, HMRC issued a final DPT notice, which has now been paid. In September 2021, further preliminary
DPT notices were received in respect of the year ended 30 September 2017 indicating a potential liability of c. £4 million. Based on
advice, the Group continues to believe this is a transfer pricing matter, but if a settlement is not reached before December 2021 the
c. £4 million DPT notice will be payable. On conclusion of the transfer pricing discussions, an appropriate refund is anticipated for
all DPT payments.
The Group believe the transfer pricing provision held above appropriately provides for this and other transfer pricing issues.
9. DIVIDENDS
DISTRIBUTIONS TO ORDINARY EQUITY HOLDERS
£ million
2021
2020
2019
Paid interim of 42.12 pence per share (2020: 41.70 pence, 2019: 62.56 pence)
– Paid June 2019
– Paid September 2019
– Paid December 2019
– Paid June 2020
– Paid September 2020
– Paid December 2020
– Paid June 2021
– Paid September 2021
Interim dividend paid
Proposed interim of 48.48 pence per share (2020: 48.00 pence, 2019: 72.00 pence)
– To be paid December 2021
Interim dividend proposed
Proposed final of 48.48 pence per share (2020: 48.01 pence, 2019: 72.01 pence)
– Paid March 2020
– Paid March 2021
– To be paid March 2022
Final dividend
Total ordinary share dividends of 139.08 pence per share (2020: 137.71 pence, 2019: 206.57 pence)
––
––
––
––
––
––
119999
119999
339988
445588
445588
––
––
445588
445588
11,,331144
–
–
–
197
197
453
–
–
847
–
–
–
454
–
454
1,301
298
298
679
–
–
–
–
–
1,275
–
–
680
–
–
680
1,955
The third interim dividend for the year ended 30 September 2021 of 48.48 pence per share amounts to a proposed dividend of
£458 million, which will be paid in December 2021.
The proposed final dividend for the year ended 30 September 2021 of 48.48 pence per share amounts to a proposed dividend
payment of £458 million in March 2022 based on the number of shares ranking for dividend at 30 September 2021, and is subject to
shareholder approval. If approved, the total dividend paid in respect of 2021 will be £1,314 million (2020: £1,301 million). The dividend
paid during 2021 is £1,305 million (2020: £1,753 million).
10. EARNINGS PER ORDINARY SHARE
Basic earnings per share is based on the profit for the period attributable to the owners of the parent and the weighted average
number of ordinary shares in issue during the period excluding shares held to satisfy the Group’s employee share schemes and
shares purchased by the Company and held as treasury shares. Diluted earnings per share have been calculated by taking into
account the weighted average number of shares that would be issued if rights held under the employee share schemes were
exercised. No instruments have been excluded from the calculation for any period on the grounds that they are anti-dilutive.
£ million
Earnings: basic and diluted – attributable to owners of the Parent Company
Millions of shares
Weighted average number of shares:
Shares for basic earnings per share
Potentially dilutive share options
Shares for diluted earnings per share
Pence
Basic earnings per share
Diluted earnings per share
2021
22,,883344
2020
1,495
2021
2020
994455..00
22..55
994477..55
2021
229999..99
229999..11
944.4
1.4
945.8
2020
158.3
158.1
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
RECONCILIATION FROM REPORTED TO ADJUSTED EARNINGS AND EARNINGS PER SHARE
2021
2020
£ million unless otherwise indicated
Reported basic
Acquisition and disposal costs
Amortisation and impairment of acquired intangibles
Profit on disposal of subsidiaries
Excise tax provision
Fair value adjustment of loan receivable
Net fair value and exchange movements on financial instruments
Post-employment benefits net financing cost
Restructuring costs
Tax on disposal of premium cigar division
Recognition of tax credits
Uncertain tax positions
Tax on unrecognised losses
Adjustments above attributable to non-controlling interests
Adjusted
Adjusted diluted
Organic adjusted
Premium Cigar divestment adjusted
Adjusted
Organic adjusted diluted
Premium Cigar divestment adjusted diluted
Adjusted diluted
11. DISPOSAL OF SUBSIDIARIES
Earnings
per share
(pence)
229999..99
11..88
4444..33
((2299..77))
((00..11))
((11..66))
((6600..77))
((00..33))
1199..66
((11..22))
((2255..33))
––
55..00
((44..66))
224477..11
224466..44
224466..55
00..66
224477..11
224455..88
00..66
224466..44
Earnings
22,,883344
1177
441199
((228811))
((11))
((1155))
((557744))
((33))
118855
((1111))
((223399))
––
4477
((4433))
22,,333355
22,,333355
22,,333300
55
22,,333355
22,,333300
55
22,,333355
Earnings
per share
(pence)
158.3
2.8
49.2
Earnings
1,495
26
466
–
(1.7)
6.6
25.3
0.4
18.4
2.0
(7.1)
8.2
(4.3)
(3.7)
254.4
254.1
247.2
7.2
254.4
246.9
7.2
254.1
–
(16)
62
239
4
174
19
(67)
77
(41)
(35)
2,403
2,403
2,335
68
2,403
2,335
68
2,403
On 27 April 2020 the Group announced that it had agreed the sale of the Premium Cigar Division (“the Division”). The total cash
receipts expected for the transaction are €1,198 million (including the La Romana disposal – see below). The share sale element of
the sale of the Division completed on 29 October 2020 and to date €1,041 million (£845 million) of consideration has been received.
A further €88 million of deferred consideration relating to the share sale was received on 26 October 2021.
The profit arising on disposal of the Division was £281 million and includes £337 million of foreign exchange gains that had
previously been recognised in the foreign exchange reserve and that were recycled to the income statement on completion of
the transaction.
The sale of the La Romana factory in the Dominican Republic is due to complete during the Group‘s 2022 financial year when it
is expected that €69 million of sales consideration will be received subject to a true up in respect of inventory values. The carrying
value of the net assets of the La Romana factory total $64 million. This sale of the La Romana factory does not meet the recognition
criteria for an asset held for sale as there is ongoing work to separate the factory for disposal.
On 18 June 2021 a letter of intent to sell Supergroup S.A.S. was agreed. At 30 September 2021, the Group has assessed the IFRS 5
criteria for presentation of the business as held for disposal. Given the progress made on the sale the Group considers the IFRS 5
criteria to have been met and therefore it is highly probable that a disposal will be completed. The Group has therefore presented
the net assets of Supergroup S.A.S. as current assets and liabilities held for sale. A fair value adjustment of £3 million and a
reclassification of an associated provision of £9 million has resulted in the non-current assets being written down to nil.
In addition to the above, certain assets within the Distribution business have also been reclassified to assets held for sale due to the
existence of purchase offers from third parties. The value of these assets on 30 September 2021 was £8 million.
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
118855
185
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
The assets and liabilities classified as held for disposal are as follows:
£ million
NNoonn--ccuurrrreenntt aasssseettss
Intangible assets
Property, plant and equipment
Investments accounted for using the equity method
Trade and other receivables
Right of use leased assets
Deferred tax assets
CCuurrrreenntt aasssseettss
Inventories
Trade and other receivables
Cash and cash equivalents
TToottaall aasssseettss
CCuurrrreenntt lliiaabbiilliittiieess
Trade and other payables
Tax liabilities
Provisions
TToottaall lliiaabbiilliittiieess
NNeett aasssseettss
12. INTANGIBLE ASSETS
£ million
Cost
At 1 October 2020
Additions
Disposals
Exchange movements
At 30 September 2021
Amortisation and impairment
At 1 October 2020
Amortisation charge for the year
Impairment
Disposals
Exchange movements
Accumulated amortisation
Accumulated impairment
At 30 September 2021
Net book value
At 30 September 2021
2021
2020
––
88
––
––
––
––
88
99
1188
––
2277
3355
((1133))
((44))
((1188))
((3355))
((3355))
––
101
17
584
35
7
10
754
166
67
75
308
1,062
(35)
–
(3)
(38)
(38)
1,024
2021
Intellectual
property and
product
development
Goodwill
Supply
agreements
Software
Total
1144,,443355
1122,,999944
11,,446633
––
((226600))
((775588))
1133,,441177
99
55
((664499))
1122,,335599
––
((22))
((7744))
11,,338877
11,,889955
77,,666633
11,,334411
––
––
((226600))
((9933))
––
11,,554422
11,,554422
333333
111188
––
((337799))
77,,119966
553399
77,,773355
8855
––
((11))
((7700))
11,,335555
––
11,,335555
446655
2288
((2222))
((2200))
445511
229988
3377
22
((1155))
((1144))
330044
44
330088
2299,,335577
3377
((227799))
((11,,550011))
2277,,661144
1111,,119977
445555
112200
((227766))
((555566))
88,,885555
22,,008855
1100,,994400
1111,,887755
44,,662244
3322
114433
1166,,667744
118866
186
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
£ million
Cost
At 1 October 2019
Additions
Disposals
Reclassifications
Transferred to held for disposal (note 11)
Exchange movements
At 30 September 2020
Amortisation and impairment
At 1 October 2019
Amortisation charge for the year
Impairment
Disposals
Reclassifications
Exchange movements
Accumulated amortisation
Accumulated impairment
At 30 September 2020
Net book value
At 30 September 2020
Intellectual
property and
product
development
Goodwill
Supply
agreements
Software
Total
2020
14,232
13,021
1,423
–
–
(1)
–
74
(1)
–
7
204
14,435
(107)
12,994
1,847
–
12
–
(1)
37
–
1,895
1,895
7,169
466
29
–
–
(1)
7,242
421
7,663
–
–
–
2
38
421
38
(7)
7
–
6
29,097
112
(8)
6
9
141
1,463
465
29,357
1,220
85
–
–
–
36
1,341
–
1,341
265
33
2
(6)
–
4
296
2
298
10,501
584
43
(6)
(1)
76
8,879
2,318
11,197
12,540
5,331
122
167
18,160
Amortisation and impairment of acquired intangibles excluded from adjusted operating profit amounted to £450 million (2020:
£523 million), this comprises amortisation on intellectual property of £320 million (2020: £466 million), impairment on intellectual
property of £45 million (2020: £14 million) and amortisation on supply agreements of £85 million (2020: £85 million).
A further £73 million (2020: £nil) impairment of intellectual property and product development assets has also been recognised in
restructuring costs and therefore excluded from adjusted operating profits.
Intellectual property mainly comprises brands acquired in the USA in 2015 and through the purchases of Altadis in 2008 and
Commonwealth Brands in 2007.
Supply agreements include Distribution customer relationships. All were acquired as part of the Altadis purchase.
Intangible amortisation and impairment are included within administrative and other expenses in the consolidated income statement.
Amortisation and impairment in respect of intangible assets other than software and internally generated intellectual property are
treated as reconciling items between reported operating profit and adjusted operating profit, except to the extent these have been
treated as restructuring costs.
ACQUISITIONS
NERUDIA
On 23 October 2017, the Group acquired 100 per cent of the share capital of Nerudia Limited. As previously disclosed, a portion of the
consideration remained contingent and was tied to certain contractual pre-conditions. The matter is expected to conclude in the
near future.
GOODWILL AND INTANGIBLE ASSET IMPAIRMENT REVIEW
Goodwill is allocated to groups of cash-generating units (CGUs) that are expected to benefit from the business combination in
which the goodwill arose. For the Tobacco & NGP business CGUs are based on the markets where the business operates and are
grouped in line with the divisional structure in operation during the year. The groupings represent the lowest level at which goodwill
is monitored for internal management purposes. A summary of the carrying value of goodwill and intangible assets with indefinite
lives is set out below.
£ million
Europe
Americas
Africa, Asia & Australasia
Tobacco & NGP
Distribution
2021
Intangible
assets with
indefinite lives
333344
––
113322
446666
––
446666
Goodwill
44,,440022
44,,004422
11,,774400
1100,,118844
11,,669911
1111,,887755
2020
Intangible
assets with
indefinite lives
353
–
140
493
–
493
Goodwill
4,645
4,265
1,836
10,746
1,794
12,540
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W W W . I M P E R I A L B R A N D S P L C . C O M
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187
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Goodwill has arisen principally on the acquisitions of Reemtsma in 2002 (all CGU groupings), Commonwealth Brands in 2007 (USA),
Altadis in 2008 (all CGU groupings) and ITG Brands in 2015 (USA). Intangible assets with indefinite lives relate to the tobacco trademark,
Davidoff, which was purchased as part of the acquisition of Reemtsma in 2002.
The Group tests goodwill and intangible assets with indefinite lives for impairment annually, or more frequently if there are any
indications that impairment may have arisen. The value of a Cash Generating Unit Grouping (CGUG) is based on value-in-use
calculations. These calculations use cash flow projections derived from financial plans of our Tobacco business which are based
on detailed bottom-up market-by-market forecasts of projected sales volumes for each product line. These forecasts reflect, on an
individual market basis, numerous assumptions and estimates regarding anticipated changes in market size, prices and duty regimes,
consumer uptrading and downtrading, consumer preferences and other changes in product mix, based on long-term market trends,
market data, anticipated regulatory developments, and management experience and expectations. We consider that pricing, market
size, market shares and cost inflation are the key assumptions used in our plans.
GROWTH RATES AND DISCOUNT RATES USED
The compound annual growth rates implicit in these value-in-use calculations are shown below.
%
Europe
Americas
Africa, Asia & Australasia
Distribution
Pre-tax
discount rate
Initial growth
rate
Long-term
growth rate
Pre-tax discount
rate
Initial growth
rate
Long-term
growth rate
2021
2020
99..99
99..88
1122..11
1111..22
22..77
55..77
11..77
11..55
00..11
11..66
00..33
11..44
9.6
8.8
12.9
13.0
2.6
1.3
0.4
0.8
1.0
1.9
2.1
1.6
Cash flows from the business plan period are used for year one, two and three, then extrapolated out to year five using the implicit
growth rate, shown in the table above as the initial growth rate. In certain markets, the extrapolated growth rate can exceed the long
term growth rate based on the business plan being a better reflection of the anticipated initial growth. Estimated long term weighted
average compound growth rates are used beyond year five.
Long term growth rates are determined as the lower of:
the nominal GDP growth rates for the country of operation; and
the extrapolation of the initial growth rates as estimated by management for years one to five
Long-term growth rates are based on management’s long-term expectations, taking account of industry specific factors such
as the nature of our products, the role of excise in government fiscal policy, and relatively stable and predictable long-term macro
trends in the Tobacco industry. Year on year variations in initial growth rates may result in consequential changes to estimated
long term rates.
Discount rates used are based on the Group’s weighted average cost of capital adjusted for the different risk profiles of the CGUs.
Our impairment projections are prepared under the basis set out in IAS 36 which can differ from our internal plans.
Europe‘s initial growth rate is broadly consistent with the prior year, and the long term growth rate has reduced reflecting the
alignment of outer year rates to reductions in initial growth rates for certain markets.
Americas shows an increased initial growth rate driven by the mass market cigar growth (improved sales and benefits from
manufacturing and investment in leaf supply), reduced one-off costs for NGP & litigation settlements. The reduction in the long
term growth rates is based on changes in the macroeconomic outlook.
Africa, Asia & Australasia (AAA) increases in the initial growth rates are driven by improved medium term forecasts, which
are heavily influenced by changes in the Australian market. The long term growth rate reduction reflects changes in certain
assumptions associated with the extrapolation of the initial growth rate for a number of individual markets.
The Distribution discount rate reflects reductions in the country risk premium driven by macroeconomic factors. The initial growth
rates reflects improved medium term forecasts.
Our impairment testing confirms there are sufficient cash flows to support the current carrying values of the goodwill held
at 30 September 2021. Any reasonable movement in the assumptions used in the impairment tests would not result in an
impairment. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent
in the application of the Group’s accounting estimates in relation to intangible assets affect the amounts reported in the financial
statements, especially the estimates of the expected useful economic lives and the carrying values of those assets. If business
conditions materially change it is likely that materially different amounts could be reported in the Group’s financial statements.
There are uncertainties associated with estimating the valuation of the recoverable amount.
At the present time the recoverable amount is significantly in excess of the carrying value of goodwill and other intangible assets.
However, given the uncertainties mentioned above this could change in the future.
118888
188
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Consideration of the impact of climate change
In terms of the possible impacts of climate change, the two key metrics that could be sensitive to this are the initial and the long-
term growth rate. If climate change has a negative impact on product sales revenues and/or the operating costs of the Group there
could be a potential impact on the discounted cash flow growth rates used within the valuation model. Lower future growth rates
would reduce the level of the discounted cash flow valuation and hence the amount of headroom available to the Group above
an impairment trigger. At present, the material short to medium term risks presented by possible climate change impacts will be
factored into the initial growth rates where they are known and can be quantified. For example, government regulatory changes
which impact operating costs will be recognised where they are known.
However, the current level of headroom for goodwill is substantial for the Group. Using the current growth rate assumptions, on a
CGUG basis, the total value of assets will be recovered via the discounted cash flows within a maximum of 9 years. Therefore, at
present, changes in the long-term growth rates beyond this period due to the impact of climate change would not be expected to
trigger an impairment.
OTHER INTANGIBLE ASSETS
Other intangible assets are considered for impairment risk. The carrying values of brand intangibles are reviewed against expected
future cash flows of associated products. Impairment will only be recognised where there is evidence that the carrying value of the
brand cannot be recovered through those cash flows. No impairments have been recognised for brand intangibles.
Intellectual property and product development intangible assets have also been reviewed to identify potential impairment triggers.
The impact of the 2021 strategic review programme, which was announced in the current financial year, has been identified as an
impairment trigger. The change in commercial plans has resulted in the exit of NGP product offerings in certain markets and the
implementation of a different approach to future product development, which focuses on achieving the best potential for sustainable
growth and is being led by consumer needs. The change in strategy has meant that certain previously acquired intangible assets
and internally generated development assets are now no longer required to support the business. As a result of this, these assets
have been determined to have a nil residual value. This has resulted in an impairment of £118 million relating to NGP intangible
assets (intellectual property and product development) in the year (2020: £29 million). Of this impairment charge £73 million
related to internally generated intangible assets and has been taken as a restructuring cost and the remaining £45 million has been
recognised as an impairment charge within amortisation and impairment of acquired intangible assets, both of which are excluded
from adjusted operating profit. The impairment of £118 million is split between Europe (£96 million) and Americas (£22 million)
operating segments.
A further £2 million (2020: £2 million) impairment charge was incurred in the year relating to software.
13. PROPERTY, PLANT AND EQUIPMENT
£ million
Cost
At 1 October 2020
Additions
Disposals
Reclassifications
Transfer to current assets held for disposal
Exchange movements
At 30 September 2021
Depreciation and impairment
At 1 October 2020
Depreciation charge for the year
Impairment
Disposals
Reclassifications
Exchange movements
At 30 September 2021
Net book value
At 30 September 2021
Property
Plant and
equipment
Fixtures
and motor
vehicles
990055
1133
((7788))
44
((88))
((3399))
779977
118888
2200
22
((4400))
44
((1122))
116622
22,,221166
9999
((111144))
11
––
((111166))
22,,008866
11,,119900
110044
1111
((9933))
((66))
((6600))
11,,114466
443388
5533
((4433))
((44))
((1122))
((2211))
441111
228822
3333
––
((3300))
((22))
((1122))
227711
2021
Total
33,,555599
116655
((223355))
11
((2200))
((117766))
33,,229944
11,,666600
115577
1133
((116633))
((44))
((8844))
11,,557799
663355
994400
114400
11,,771155
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
118899
189
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
£ million
Cost
At 1 October 2019
Additions
Disposals
Reclassifications
Exchange movements
At 30 September 2020
Depreciation and impairment
At 1 October 2019
Depreciation charge for the year
(Impairment write back)/impairment
Disposals
Reclassifications
Exchange movements
At 30 September 2020
Net book value
At 30 September 2020
14. RIGHT OF USE ASSETS AND LEASE LIABILITY
The movements in Right of Use Assets in the year were as follows:
£ million
Net book value
At 1 October 2020
Additions
Terminations & modifications
Depreciation
Exchange movements
At 30 September 2021
The movements in lease liabilities in the year were as follows:
£ million
At 1 October 2020
Cash flow
Accretion of interest
New leases, terminations & modifications
Exchange movements
At 30 September 2021
Property
Plant and
equipment
Fixtures
and motor
vehicles
909
11
(16)
3
(2)
905
181
18
(2)
(6)
(1)
(2)
188
2,193
122
(65)
1
(35)
2,216
1,104
117
38
(49)
(2)
(18)
1,190
440
41
(30)
(13)
–
438
278
34
–
(28)
(2)
–
282
2020
Total
3,542
174
(111)
(9)
(37)
3,559
1,563
169
36
(83)
(5)
(20)
1,660
717
1,026
156
1,899
Property
Plant and
equipment
Fixtures
and motor
vehicles
225544
2299
((2211))
((4499))
((1111))
220022
88
22
((22))
((22))
––
66
3311
2222
((33))
((1155))
((11))
3344
2021
Total
229933
5533
((2266))
((6666))
((1122))
224422
Lease
Liabilities
229999
((6699))
77
2266
((1122))
225511
The maturity profile of the carrying amount of the Group‘s lease liabilities and the contractual cash flows as at 30 September 2021 is
as follows:
£ million
Amounts maturing:
Within one year
Between one and five years
In five years or more
Lease
liabilities
Effect of
discounting
Contractual
cash flows
2021
5577
112244
7700
225511
77
1177
88
3322
6644
114411
7788
228833
119900
190
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Future minimum lease payments liabilities are analysed as below:
Due in less than one year
Due between one and five years
Due in more than five years
Total future minimum lease payments payable
Effect of discounting
Lease liability
The following are the amounts recognised in the Consolidated Income statement:
Property
Plant and
equipment
Fixtures
and motor
vehicles
4477
111166
7788
224411
22
33
––
55
1155
2222
––
3377
2021
Total
6644
114411
7788
228833
((3322))
225511
2021
2020
Expenses relating to short-term leases
Expenses relating to low value asset leases
Depreciation expense of Right of Use Assets
Interest on lease liabilities
44
22
6666
77
The movements in Right of Use Assets in the year ending 30 September 2020 were as follows:
£ million
Net book value
At 1 October 2019
Additions
Terminations & modifications
Depreciation
Exchange movements
At 30 September 2020
Property
Plant and
equipment
Fixtures
and motor
vehicles
279
24
(2)
(52)
5
254
7
4
–
(3)
–
8
41
11
(4)
(17)
–
31
The movements in lease liabilities in the year ending 30 September 2020 were as follows:
£ million
At 1 October 2019
Cash flow
Accretion of interest
New leases, terminations & modifications
Exchange movements
At 30 September 2020
4
2
72
7
2020
Total
327
39
(6)
(72)
5
293
Lease
Liabilities
326
(72)
7
32
6
299
The maturity profile of the carrying amount of the Group‘s lease liabilities and the contractual cash flows as at 30 September 2020 is
as follows:
£ million
Amounts maturing:
Within one year
Between one and five years
In five years or more
Future minimum lease payments liabilities as at 30 September 2020 are analysed as below:
Due in less than one year
Due between one and five years
Due in more than five years
Total future minimum lease payments payable
Effect of discounting
Lease liability
Property
Plant and
equipment
Fixtures and
motor vehicles
53
151
87
291
3
5
–
8
14
19
–
33
Lease
liabilities
Effect of
discounting
Contractual
cash flows
2020
64
160
75
299
6
15
12
33
70
175
87
332
2020
Total
70
175
87
332
(33)
299
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
119911
191
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The principal joint ventures during the year were Corporación Habanos SA, Cuba, Altabana SL, Spain and Global Horizon Ventures
Limited. Corporación Habanos SA, Cuba and Altabana SL, Spain were disposed of on 29 October 2020 as part of the Premium Cigar
Division. Summarised financial information for the Group‘s joint ventures, which are accounted for under the equity method, is
shown below:
£ million
Revenue
Profit after tax
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
£ million
Revenue
Profit after tax
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Corporación
Habanos
Altabana
Global Horizon
Ventures
Others
Total
2021
1155
55
––
––
––
––
––
––
––
3300
55
––
––
––
––
––
––
––
1188
1133
2244
4477
7711
((33))
––
((33))
6688
2277
55
33
4499
5522
((4433))
((99))
((5522))
––
Corporación
Habanos
Altabana
Global Horizon
Ventures
Others
188
43
458
99
557
(147)
(28)
(175)
382
322
52
27
233
260
(40)
(5)
(45)
215
10
1
–
41
41
(2)
–
(2)
39
61
10
11
82
93
(16)
(45)
(61)
32
9900
2288
2277
9966
112233
((4466))
((99))
((5555))
6688
2020
Total
581
106
496
455
951
(205)
(78)
(283)
668
TRANSACTIONS AND BALANCES WITH JOINT VENTURES
£ million
Sales to
Purchases from
Accounts receivable from
Accounts payable to
MOVEMENT ON INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
£ million
At 1 October
Share of profit for the year from joint ventures and associates
Increase in investment in associates
Impairment of investment in joint ventures
Dividends
Classification (to)/from held for disposal and disposals of business
Foreign exchange losses
At 30 September
2021
2020
66
1199
––
((33))
2021
111177
1111
33
––
((99))
((3322))
((22))
8888
163
111
–
(24)
2020
81
45
5
(1)
(27)
50
(36)
117
119922
192
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
16. INVENTORIES
£ million
Raw materials
Work in progress
Finished inventories
Other inventories
2021
883399
5588
22,,776655
117722
33,,883344
2020
1,001
74
2,781
209
4,065
Other inventories mainly comprise duty-paid tax stamps.
Within finished inventories of £2,765 million (2020: £2,781 million) there is excise duty of £1,282 million (2020: £1,312 million).
It is generally recognised industry practice to classify leaf tobacco inventory as a current asset, although part of such inventory,
because of the duration of the processing cycle ordinarily would not be consumed within one year. We estimate that around
£115 million (2020: £179 million) of leaf tobacco held within raw materials will not be utilised within a year of the balance sheet date.
17. TRADE AND OTHER RECEIVABLES
£ million
Trade receivables
Less: loss allowance
Net trade receivables
Other receivables
Prepayments
Trade receivables may be analysed as follows:
£ million
Within credit terms
Past due by less than 3 months
Past due by more than 3 months
Amounts that are impaired
The movements in the total loss allowance for receivables can analysed as follows:
£ million
At 1 October
Net (decrease) / increase in provision
At 30 September
2021
2020
Current
Non-current
Current
Non-current
22,,443311
((6688))
22,,336633
222277
115599
22,,774499
33
((33))
––
5588
44
6622
2,410
(112)
2,298
178
162
2,638
4
(4)
–
48
9
57
2021
2020
Current
Non-current
Current
Non-current
22,,227711
8855
77
6688
22,,443311
––
––
––
33
33
2,138
77
83
112
2,410
–
–
–
4
4
2021
2020
111166
((4455))
7711
77
39
116
Trade receivables are reviewed by their risk profiles and loss patterns to assess credit risk. Historical and forward-looking
information is considered to determine the appropriate expected credit loss allowance. Provision levels are calculated on the
residual credit risk after consideration of any credit protection which is used by the Group. Expected credit losses (ECLs) are applied
to net trade receivables which are measured reflecting lifetime ECLs using the simplified approach. Trade receivables are all repayable
within 12 months and therefore the ECL provision represents all expected losses within this term.
18. CASH AND CASH EQUIVALENTS
£ million
Cash at bank and in hand
Short-term deposits and other liquid assets
2021
667733
661144
11,,228877
2020
791
835
1,626
£152 million (2020: £154 million) of total cash and cash equivalents is held in countries in which prior approval is required to transfer
the funds abroad. Nevertheless, if the Group complies with these requirements, such liquid funds are at its disposition within a
reasonable period of time which in all cases is 3 months or less from the date the transfer is requested.
19. TRADE AND OTHER PAYABLES
£ million
Trade payables
Duties payable
Other taxes and social security contributions
Other payables
Accruals
2021
2020
Current
Non-current
Current
Non-current
11,,001188
55,,550077
11,,339999
444499
773333
99,,110066
––
––
––
––
77
77
1,191
6,129
1,603
464
783
10,170
–
–
–
–
5
5
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193
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
20. BORROWINGS
The Group’s borrowings held at amortised cost, are as follows:
£ million
Current borrowings
Bank loans and overdrafts
Capital market issuance:
€1,000m 2.25% notes due February 2021
€500m 0.5% notes due July 2021
£1,000m 9.0% notes due February 2022
Total current borrowings
Non-current borrowings
Bank loans
Capital market issuance:
£1,000m 9.0% notes due February 2022
$1,250m 3.75% notes due July 2022
$1,000m 3.5% notes due February 2023
€750m 1.25% notes due August 2023
£600m 8.125% notes due March 2024
$1,000m 3.125% notes due July 2024
€500m 1.375% notes due January 2025
$1,500m 4.25% notes due July 2025
€650m 3.375% notes due February 2026
$750m 3.5% notes due July 2026
£500m 5.5% notes due September 2026
€750m 2.125% notes due February 2027
$1,000m 3.875% notes due July 2029
£500m 4.875% notes due June 2032
€1,000m 1.75% notes due March 2033
Total non-current borrowings
Total borrowings
Analysed as:
Capital market issuance
Bank loans and overdrafts
2021
2020
5511
––
––
11,,005566
11,,110077
11
––
––
774466
664466
662266
774455
443344
11,,111199
557700
555599
550000
665533
774455
550055
886666
88,,771155
99,,882222
99,,777700
5522
61
925
456
–
1,442
1
1,056
980
782
684
626
782
460
1,172
604
586
500
692
781
504
–
10,210
11,652
11,590
62
Current and non-current borrowings include interest payable of £56 million (2020: £13 million) and £93 million (2020: £151 million)
respectively as at the balance sheet date.
Interest payable on capital market issuances are at fixed rates of interest and interest payable on bank loans and overdrafts are at
floating rates of interest.
On 30 November 2020, €1,000 million 2.25 per cent notes were repaid. On 18 March 2021, €1,000 million 1.75 per cent notes due
March 2033 were issued. On 27 April 2021, €500 million 0.5 per cent notes were repaid. On 29 September 2021, $1,250 million
3.75 per cent notes were repaid.
All borrowings are unsecured and the Group has not defaulted on any borrowings during the year (2020: no defaults).
NON-CURRENT FINANCIAL LIABILITIES
The maturity profile of the carrying amount of the Group‘s non-current liabilities as at 30 September 2021 (including lease liabilities
detailed in note 14 and net derivative financial instruments detailed in note 22) is as follows:
£ million
Amounts maturing:
Between one and two years
Between two and five years
In five years or more
Borrowings
Lease
liabilities
Net derivative
financial
liabilities/
(assets)
11,,339933
44,,555533
22,,776699
88,,771155
4499
7755
7700
119944
((66))
((99))
660088
559933
2021
Total
11,,443366
44,,661199
33,,444477
99,,550022
119944
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
£ million
Amounts maturing:
Between one and two years
Between two and five years
In five years or more
FAIR VALUE OF BORROWINGS
Borrowings
Lease
liabilities
Net derivative
financial
liabilities/
(assets)
2,037
4,506
3,667
10,210
54
106
75
235
17
(37)
848
828
2020
Total
2,108
4,575
4,590
11,273
The fair value of borrowings as at 30 September 2021 is estimated to be £10,386 million (2020: £12,496 million). £10,334 million (2020:
£12,434 million) relates to capital market issuance and has been determined by reference to market prices as at the balance sheet
date. A comparison of the carrying amount and fair value of capital market issuance by currency is provided below. The fair value
of all other borrowings is considered to equal their carrying amount.
£ million
GBP
EUR
USD
Total capital market issuance
UNDRAWN REVOLVING CREDIT FACILITIES
At 30 September the Group had the following undrawn committed facilities:
£ million
Amounts maturing:
Between one and two years
Between two and five years
2021
Balance sheet
amount
Fair value
Balance sheet
amount
22,,668866
33,,116688
33,,991166
99,,777700
22,,889944
33,,227788
44,,116622
1100,,333344
2,686
3,821
5,083
11,590
2020
Fair value
3,054
3,943
5,437
12,434
2021
2020
––
33,,001122
33,,001122
1,551
3,193
4,744
During the year the maturity date of the Group‘s existing syndicated multicurrency facility for €3,500 million was extended to
30 September 2024.
During the year six bilateral facilities for a total of €1,700 million were cancelled.
21. FINANCIAL RISK FACTORS
FINANCIAL RISK MANAGEMENT
OVERVIEW
In the normal course of business, the Group is exposed to financial risks including, but not limited to, market, credit and liquidity
risk. This note explains the Group‘s exposure to these risks, how they are measured and assessed, and summarises the policies
and processes used to manage them, including those related to the management of capital.
The Group operates a centralised treasury function which is responsible for the management of the financial risks of the Group,
together with its financing and liquidity requirements. Financial risks comprise, but are not limited to, exposures to funding and
liquidity, interest rate, foreign exchange and counterparty credit risk. The treasury function is also responsible for the financial
risk management of the Group’s global defined benefit pension schemes and management of Group wide insurance programs.
The treasury function does not operate as a profit centre, nor does it enter into speculative transactions.
The Group‘s treasury activities are overseen by the Treasury Committee, which meets when required and comprises the Chief
Financial Officer, the Company Secretary, and the Director of Treasury. The Treasury Committee operates in accordance with
the terms of reference set out by the Board and a framework (the Treasury Committee framework) which sets out the expectations
and boundaries to assist in the effective oversight of treasury activities. The Director of Treasury reports on a regular basis to the
Treasury Committee.
The Board reviews and approves all major treasury decisions.
The Group‘s management of financial risks cover the following:
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
(A) MARKET RISK
PRICE RISK
The Group is not exposed to equity securities price risk other than assets held by its pension funds disclosed in note 24 and the
investment in convertible debentures issued by Auxly Cannabis Group Inc. The Group is exposed to commodity price risk in that
there may be fluctuations in the price of tobacco leaf. As with other agricultural commodities, the price of tobacco leaf tends to
be cyclical as supply and demand considerations influence tobacco plantings in those countries where tobacco is grown. Also,
different regions may experience variations in weather patterns that may affect crop quality or supply and so lead to changes in
price. The Group seeks to reduce this price risk by sourcing tobacco leaf from a number of different countries and counterparties
and by varying the levels of tobacco leaf held. Currently, these techniques reduce the expected exposure to this risk over the short
to medium term to levels considered not material and accordingly, no sensitivity analysis has been presented.
FOREIGN EXCHANGE RISK
The Group is exposed to movements in foreign exchange rates due to its commercial trading transactions and profits denominated
in foreign currencies, as well as the translation of cash, borrowings and derivatives held in non-functional currencies.
The Group’s financial results are principally exposed to fluctuations in Euro and US dollar exchange rates. Management of the
Group‘s foreign exchange transaction and translation risk is addressed below.
TRANSACTION RISK
The Group’s material transaction exposures arise on costs denominated in currencies other than the functional currencies of
subsidiaries, including the purchase of tobacco leaf, which is sourced from various countries but purchased principally in US dollars,
and packaging materials which are sourced from various countries and purchased in a number of currencies. The Group is also exposed
to transaction foreign exchange risk on the conversion of foreign subsidiary earnings into sterling to fund the external dividends to
shareholders. This is managed by selling Euros and US dollars monthly throughout the year. Other foreign currency flows are matched
where possible and remaining foreign currency transaction exposures are not hedged.
TRANSLATION RISK
The Group seeks to broadly match the currency of borrowings to the currency of its underlying investments in overseas subsidiaries,
which are primarily Euros and US dollars. The Group issues debt in the most appropriate market or markets at the time of raising
new finance and has a policy of using derivative financial instruments, cross-currency swaps, to change the currency of debt as
required. Borrowings denominated in, or swapped into foreign currencies to match the Group’s investments in overseas subsidiaries
are treated as a hedge against the net investment where appropriate.
FOREIGN EXCHANGE SENSITIVITY ANALYSIS
The Group‘s sensitivity to foreign exchange rate movements, which impacts the translation of monetary items held by subsidiary
companies in currencies other than their functional currencies, is illustrated on an indicative basis below. The sensitivity analysis
has been prepared on the basis that net debt and the proportion of financial instruments in foreign currencies remain constant,
and that there is no change to the net investment hedge designations in place at 30 September 2021. The sensitivity analysis does
not reflect any change to revenue or non-finance costs that may result from changing exchange rates, and ignores any taxation
implications and offsetting effects of movements in the fair value of derivative financial instruments.
£ million
Income statement impact of non-functional currency foreign exchange exposures:
10% appreciation of Sterling against Euro (2020: 10%)
10% appreciation of Sterling against US dollar (2020: 10%)
2021
2020
Increase in
income
Increase in
income
337788
77
544
8
An equivalent depreciation of Sterling against the above currencies would cause a decrease in income of £462 million and £9 million
for Euro and US dollar exchange rates respectively (2020: £665 million and £10 million).
Movements in equity in the table below relate to intercompany loans treated as quasi-equity under IAS 21 and hedging instruments
designated as net investment hedges of the Group‘s Euro and US Dollar denominated assets.
£ million
Equity impact of non-functional currency foreign exchange exposures:
10% appreciation of Sterling against Euro (2020: 10%)
10% appreciation of Sterling against US dollar (2020: 10%)
2021
Change in
equity
2020
Change in
equity
226644
227700
405
(134)
An equivalent depreciation of Sterling against the above currencies would result in a change in equity of £(323) million and
£(330) million for euro and US dollar exchange rates respectively (2020: £(494) million and £163 million).
At 30 September 2021, after the effect of derivative financial instruments, approximately 78 per cent of the Group’s net debt was
denominated in Euro and non US Dollar currencies (2020: 70 per cent), 22 per cent in US dollars (2020: 30 per cent).
119966
196
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
INTEREST RATE RISK
The Group‘s interest rate risk arises from its borrowings net of cash and cash equivalents, with the primary exposures arising
from fluctuations in Euro and US dollar interest rates. Borrowings at variable rates expose the Group to cash flow interest rate risk.
Borrowings at fixed rates expose the Group to fair value interest rate risk.
The Group manages its exposure to interest rate risk on its borrowings by entering into derivative financial instruments, interest rate
swaps, to achieve an appropriate mix of fixed and floating interest rate debt in accordance with the Treasury Committee framework
and Treasury Committee discussions.
As at 30 September 2021, after adjusting for the effect of derivative financial instruments detailed in note 22, approximately 68 per cent
(2020: 71 per cent) of net debt was at fixed rates of interest and 32 per cent (2020: 29 per cent) was at floating rates of interest.
INTEREST RATE SENSITIVITY ANALYSIS
The Group‘s sensitivity to interest rates on its Euro and US dollar monetary items which are primarily external borrowings, cash and
cash equivalents, is illustrated on an indicative basis below. The impact in the Group‘s Income Statement reflects the effect on net
finance costs in respect of the Group‘s net debt and the fixed to floating rate debt ratio prevailing at 30 September 2021, ignoring any
taxation implications and offsetting effects of movements in the fair value of derivative financial instruments.
The sensitivity analysis has been prepared on the basis that net debt and the derivatives portfolio remain constant and that there is
no net impact on other comprehensive income (2020: £nil).
£ million
Income statement impact of interest rate movements:
+/- 1% increase in Euro interest rates (2020: 1%)
+/- 1% increase in US dollar interest rates (2020: 1%)
(B) CREDIT RISK
2021
Change in
income
2020
Change in
income
2288
66
28
8
IFRS 9 requires an expected credit loss (ECL) model to be applied to financial assets. The expected credit loss model requires the
Group to account for expected losses as a result of credit risk on initial recognition of financial assets and to recognise changes in
those expected credit losses at each reporting date. Allowances are measured at an amount equal to the lifetime expected credit
losses where the credit risk on the receivables increases significantly after initial recognition. The Group is primarily exposed to
credit risk arising from the extension of credit to its customers, on cash deposits and derivatives. The maximum aggregate credit
risk to these sources was £4,177 million at 30 September 2021 (2020: £4,902 million).
TRADE AND OTHER RECEIVABLES
Policies are in place to manage the risk associated with the extension of credit to third parties to ensure that commercial intent
is balanced effectively with credit risk management. Subsidiaries have policies in place that require appropriate credit checks on
customers and credit is extended with consideration to financial risk and creditworthiness. If a customer requires credit beyond an
acceptable limit, security may be put in place to minimise the financial impact in the event of a payment default. Instruments that
may typically be used as security include non-recourse receivables factoring and bank guarantees. At 30 September 2021 the level
of trade receivables that were sold to a financial institution under a non-recourse factoring arrangement totalled £627 million (2020:
£686 million). The total value of trade receivables reclassified as fair value was £69 million at 30 September 2021 (2020: £22 million).
There was no valuation difference between amortised cost and fair value. Analysis of trade and other receivables is provided in
note 17.
FINANCIAL INSTRUMENTS
In order to manage its credit risk to any one counterparty, the Group places cash deposits and enters into derivative financial
instruments with a diversified group of financial institutions carrying suitable credit ratings in line with the Treasury Committee
framework. Utilisation of counterparty credit limits is regularly monitored by treasury and ISDA agreements are in place to permit
the net settlement of assets and liabilities in certain circumstances. In connection with one ISDA Credit Support Annex the Group
had placed £37 million as at 30 September 2021 (2020: £47 million) as collateral with a third party in order to manage their counterparty
risk on the Group under derivative financial instruments.
The table below summarises the Group‘s largest exposures to financial counterparties as at 30 September 2021. At the balance sheet
date management does not expect these counterparties to default on their current obligations.
Counterparty exposure
Highest
2nd highest
3rd highest
4th highest
5th highest
2021
Maximum
exposure to
credit risk
£ million
S&P credit
rating
AA++
––
––
––
––
3355
––
––
––
––
2020
Maximum
exposure to
credit risk
£ million
14
11
5
2
–
S&P credit
rating
A+
A
A+
A+
–
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197
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
(C) LIQUIDITY RISK
The Group is exposed to liquidity risk, which represents the risk of having insufficient funds to meet its financing needs in any
particular location when needed. To manage this risk the Group has a policy of actively maintaining a mixture of short, medium
and long-term committed facilities that are structured to ensure that the Group has sufficient available funds to meet the forecast
requirements of the Group over the short to medium term. To prevent over-reliance on individual sources of liquidity, funding is
provided across a range of instruments including debt capital market issuance, bank term loans, bank revolving credit facilities
and European commercial paper.
The Group primarily borrows centrally in order to meet forecast funding requirements, and the treasury function is in regular
dialogue with subsidiary companies to ensure their liquidity needs are met. Subsidiary companies are funded by a combination
of share capital and retained earnings, intercompany loans, and in very limited cases through external local borrowings. Cash
pooling processes are used to centralise surplus cash held by subsidiaries where possible in order to minimise external borrowing
requirements and interest costs. Treasury invests surplus cash in bank deposits and uses foreign exchange contracts to manage
short term liquidity requirements in line with short term cash flow forecasts. As at 30 September 2021, the Group held liquid assets
of £1,287 million (2020: £1,626 million).
The table below summarises the Group’s non derivative financial liabilities by maturity based on their contractual cash flows as at
30 September 2021. The amounts disclosed are undiscounted cash flows calculated using spot rates of exchange prevailing at the
relevant balance sheet date. Contractual cash flows in respect of the Group‘s derivative financial instruments are detailed in note 22.
£ million
Non-derivative financial liabilities:
Bank loans
Capital market issuance
Trade payables
Lease liabilities
Total non-derivative financial liabilities
£ million
Non-derivative financial liabilities:
Bank loans
Capital market issuance
Trade payables
Lease liabilities
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
> 5 years
2021
5522
99,,777700
11,,001188
225511
1111,,009911
5522
1111,,115588
11,,001188
228833
1122,,551111
5511
11,,334411
11,,001188
6644
22,,447744
11
11,,667788
––
5555
11,,773344
––
55,,006688
––
8866
––
33,,007711
––
7788
55,,115544
33,,114499
Balance sheet
amount
Contractual
cash flows
total
Between 1 and 2
years
Between 2 and
5 years
<1 year
> 5 years
2020
62
11,590
1,191
299
62
13,302
1,191
332
61
1,806
1,191
70
3,128
1
2,339
–
65
2,405
–
5,165
–
110
5,275
–
3,992
–
87
4,079
Total non-derivative financial liabilities
13,142
14,887
CAPITAL MANAGEMENT
The Group defines capital as adjusted net debt and equity and manages its capital structure through an appropriate balance of debt
and equity in order to drive an efficient mix for the Group. Besides the minimum capitalisation rules that may apply to subsidiaries
in certain countries, the Group’s only externally imposed capital requirements are interest cover and gearing covenants contained
within its core external bank debt facilities, with which the Group was fully compliant during the current and prior periods and
expects to be so going forward.
The Group continues to manage its capital structure to maintain investment grade credit rating which it monitors by reference
to a number of key financial ratios, including ongoing consideration of the return of capital to shareholders via regular dividend
payments and in on-going discussions with the relevant rating agencies.
As at 30 September 2021 the Group was rated Baa3/stable outlook by Moody’s Investor Service Ltd, BBB/A-2/stable outlook by
Standard and Poor’s Credit Market Services Europe Limited and BBB/F3/stable outlook by Fitch Ratings Limited.
The Group regards its total capital as follows:
£ million
Adjusted net debt (note 31)
Equity attributable to the owners of the parent
Total capital
2021
88,,661155
55,,335522
1133,,996677
2020
10,299
4,871
15,170
119988
198
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
HEDGE ACCOUNTING
The Group has investments in foreign operations which are consolidated in its financial statements and whose functional
currencies are Euros or US dollars. Where it is practicable and cost effective to do so, the foreign exchange rate exposures
arising from these investments are hedged through the use of cross currency swaps and foreign currency denominated debt.
The Group only designates the undiscounted spot element of the cross currency swaps and foreign currency debt as hedging
instruments. Changes in the fair value of the cross currency swaps attributable to changes in interest rates and the effect of
discounting are recognised directly in profit or loss within the “Finance Costs” line – These amounts are, therefore, not included
in the hedge effectiveness assessment.
Net investment gains and losses are reported in exchange movements within other comprehensive income and the hedging
instrument foreign currency gains deferred to the foreign currency revaluation reserve are detailed in the statement of changes
in equity.
The Group establishes the hedging ratio by matching the notional balance of the hedging instruments with an equal notional
balance of the net assets of the foreign operation. Given that only the undiscounted spot element of hedging instruments is
designated in the hedging relationship, no ineffectiveness is expected unless the notional balance of the designated hedging
instruments exceeds the total balance of the foreign operation’s net assets during the reporting period. The foreign currency risk
component is determined as the change in the carrying amount of designated net assets of the foreign operation arising solely
from changes in spot foreign currency exchange rates.
All net investment hedges were fully effective at 30 September 2021.
The following table sets out the maturity profile of the hedging instruments used in the Group‘s net investment hedging strategies:
£ million
Bonds
Cross-currency swaps
£ million
Bonds
Cross-currency swaps
Total notional
balance
((55,,225533))
((22,,778822))
((88,,003355))
Total notional
balance
(6,709)
(2,950)
(9,659)
<1 year
––
((11,,002266))
((11,,002266))
<1 year
(1,369)
–
(1,369)
Between 1 and
2 years
Between 2 and
5 years
((11,,338899))
––
((11,,338899))
((33,,221199))
((11,,221188))
((44,,443377))
Between 1 and 2
years
Between 2 and
5 years
(974)
(1,088)
(2,062)
(3,089)
(704)
(3,793)
2021
Maturity
> 5 years
((664455))
((553388))
((11,,118833))
2020
Maturity
> 5 years
(1,277)
(1,158)
(2,435)
The following table contains details of the hedging instruments and hedged items used in the Group‘s net investment
hedging strategies:
£ million
Hedging instrument:
Bonds
Cross-currency swaps
Hedged item:
Investment in a foreign operation
£ million
Hedging instrument:
Bonds
Cross-currency swaps
Hedged item:
Carrying amount
Notional
balance
55,,225533
22,,778822
Assets
Liabilities
Balance sheet line item
––
––
55,,228866
BBoorrrroowwiinnggss
221144
DDeerriivvaattiivvee ffiinnaanncciiaall
iinnssttrruummeennttss
nn//aa
88,,003355
Carrying amount
Notional balance
Assets
Liabilities
Balance sheet line item
6,709
2,950
–
–
6,755
Borrowings
410
Derivative financial
instruments
Investment in a foreign operation
n/a
9,659
2021
Changes in fair
value used for
calculating
hedge in
effectiveness
330088
116688
447766
2020
Changes in fair
value used for
calculating
hedge in
effectiveness
75
(86)
(11)
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199
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Reconciliation of changes in the value of net investment hedges:
£ million
Derivatives in net investment hedges of foreign operations
Bonds in net investment hedges of foreign operations
Total
£ million
Derivatives in net investment hedges of foreign operations
Bonds in net investment hedges of foreign operations
Total
At the
beginning of
the year
Income
Statement
Other
Comprehensiv
e Income
Repayments/
(Borrowings)
At the end of
the year
2021
((441100))
((66,,775555))
((77,,116655))
2288
1133
4411
116688
330088
447766
––
11,,114488
11,,114488
((221144))
((55,,228866))
((55,,550000))
2020
At the
beginning of
the year
Income
Statement
Other
Comprehensive
Income
Repayments/
(Borrowings)
At the end of
the year
(341)
(8,482)
(8,823)
17
87
104
(86)
17
(69)
–
1,623
1,623
(410)
(6,755)
(7,165)
The Group also treats certain permanent intragroup loans that meet relevant qualifying criteria under IAS 21 as part of its net
investment in foreign operations where appropriate. Intragroup loans with a notional value of €2,506 million (2020 €2,506 million)
and US dollar loans with a notional value of $nil (2020: $5,636 million) were treated as part of the Group’s net investment in foreign
operations at the balance sheet date.
FAIR VALUE ESTIMATION AND HIERARCHY
All financial assets and liabilities are carried on the balance sheet at amortised cost, other than derivative financial instruments
and the investment in Auxly Cannabis Group Inc. which are carried at fair value. Derivative fair values are determined based on
observable market data such as yield curves, foreign exchange rates and credit default swap prices to calculate the present value of
future cash flows associated with each derivative at the balance sheet date (Level 2 classification hierarchy per IFRS 7). Market data
is sourced through Bloomberg and valuations are validated by reference to counterparty valuations where appropriate. Some of
the Group‘s derivative financial instruments contain early termination options and these have been considered when assessing
the element of the fair value related to credit risk. On this basis the reduction in reported net derivative liabilities due to credit risk
is £19 million (2020: £27 million) and would have been a £49 million (2020: £75 million) reduction without considering the early
termination options. There were no changes to the valuation methods or transfers between hierarchies during the year. With
the exception of capital market issuance and the Auxly investment, the fair value of all financial assets and financial liabilities
is considered approximate to their carrying amount as outlined in note 20.
AUXLY CANNABIS GROUP INC.
The Group has invested CAD 123 million into Auxly Cannabis Group Inc. by way of a debenture convertible into 19.9 per cent
ownership at a conversion price of $0.81 per share. Repayment of the debenture was due on 25 September 2022, but on 19 April 2021
the debenture agreement was varied and it is now repayable on 25 September 2024. The debenture is valued as a loan receivable
measured on the basis of discounting future cash flows at a rate of 14 per cent (2020: 14 per cent) plus the application of an expected
credit loss provision. At 30 September 2021 the loan was held at a fair value of £37 million (30 September 2020: £22 million), net of an
expected credit loss provision of £16 million (30 September 2020: £36 million).
NETTING ARRANGEMENTS OF FINANCIAL INSTRUMENTS
The following tables set out the Group‘s financial assets and financial liabilities that are subject to netting and set-off arrangements.
Financial assets and liabilities that are subject to set-off arrangements and disclosed on a net basis in the Group‘s Balance Sheet
primarily relate to collateral in respect of one derivative financial instrument under an ISDA Credit Support Annex.
£ million
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
Gross financial
assets/
liabilities
Gross
collateral
assets/
liabilities
set-off
Net financial
assets/
liabilities per
balance sheet
Related
amounts not
set-off in the
balance sheet
449966
((11,,008833))
((3377))
3377
445599
((443355))
((11,,004466))
443355
((661111))
2021
Net
2244
220000
200
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
£ million
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
Gross financial
assets/ liabilities
Gross collateral
assets/
liabilities
set-off
Net financial
assets/
liabilities per
balance sheet
Related
amounts not
set-off in the
balance sheet
913
(1,729)
(47)
47
866
(858)
(1,682)
858
(824)
2020
Net
8
The table below sets out the Group‘s accounting classification of each class of financial assets and liabilities:
£ million
Trade and other receivables
Cash and cash equivalents
Derivatives
Total financial assets
Borrowings
Trade and other payables
Derivatives
Lease liabilities
Total financial liabilities
Total net financial (liabilities)
£ million
Trade and other receivables
Cash and cash equivalents
Derivatives
Total financial assets
Borrowings
Trade and other payables
Derivatives
Lease liabilities
Total financial liabilities
Total net financial (liabilities)
Fair value
through
income
statement
Fair value
through other
comprehensive
income
Assets and
liabilities at
amortised cost
3377
––
445599
449966
––
––
((883322))
––
((883322))
((333366))
––
––
––
––
––
––
((221144))
––
((221144))
((221144))
22,,661111
11,,228877
––
33,,889988
((99,,882222))
((88,,337733))
––
((225511))
((1188,,444466))
((1144,,554488))
Fair value
through income
statement
Fair value
through other
comprehensive
income
Assets and
liabilities at
amortised cost
22
–
866
888
–
–
(1,272)
–
(1,272)
(384)
–
–
–
–
–
–
(410)
–
(410)
(410)
2,502
1,626
–
4,128
(11,652)
(9,387)
–
(299)
(21,338)
(17,210)
2021
Current
Non-Current
22,,559900
11,,228877
6688
33,,994455
((11,,110077))
((88,,337733))
((6622))
((5577))
((99,,559999))
((55,,665544))
5588
––
339911
444499
((88,,771155))
––
((998844))
((119944))
((99,,889933))
((99,,444444))
2020
Current
Non-Current
2,476
1,626
53
4,155
(1,442)
(9,387)
(41)
(64)
(10,934)
(6,779)
48
–
813
861
(10,210)
–
(1,641)
(235)
(12,086)
(11,225)
Total
22,,664488
11,,228877
445599
44,,339944
((99,,882222))
((88,,337733))
((11,,004466))
((225511))
((1199,,449922))
((1155,,009988))
Total
2,524
1,626
866
5,016
(11,652)
(9,387)
(1,682)
(299)
(23,020)
(18,004)
Derivatives classified as fair value through other comprehensive income relate to cross currency swaps designated as hedges
of foreign currency denominated net investments. The Group only designates the undiscounted foreign exchange spot element
of the cross currency swaps and the changes in fair value related to this element are posted to other comprehensive income.
Changes in the fair value of the cross currency swaps attributable to changes in interest rates and the effect of discounting are
recognised in the income statement. The Group also designates certain bonds as hedges of foreign currency denominated net
investments and the foreign exchange revaluation of those bonds is recognised in other comprehensive income. The carrying
value at 30 September 2021 of those bonds included in the above table is £5,286 million (2020: £6,755 million). All of the Group‘s net
investment hedges remain effective.
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
220011
201
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
22. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative financial instruments held at fair value, are as follows:
£ million
Current derivative financial instruments
Interest rate swaps
Foreign exchange contracts
Cross-currency swaps
Total current derivatives
Collateral¹
Non-current derivative financial instruments
Interest rate swaps
Cross-currency swaps
Total non-current derivatives
Collateral¹
Total carrying value of derivative financial instruments
Analysed as:
Interest rate swaps
Foreign exchange contracts
Cross-currency swaps
Collateral¹
Assets
Liabilities Net Fair Value
Assets
Liabilities Net Fair Value
2021
2020
6600
44
44
6688
––
6688
339911
––
339911
––
339911
445599
445511
44
44
––
((3333))
((44))
((2255))
((6622))
––
((6622))
((778800))
((224411))
((11,,002211))
3377
((998844))
((11,,004466))
((881133))
((44))
((226666))
3377
2277
––
((2211))
66
––
66
((338899))
((224411))
((663300))
3377
((559933))
((558877))
((336622))
––
((226622))
3377
((558877))
41
9
3
53
–
53
813
–
813
–
813
866
854
9
3
–
866
(31)
(10)
–
(41)
–
(41)
(1,204)
(484)
(1,688)
47
(1,641)
(1,682)
(1,235)
(10)
(484)
47
(1,682)
10
(1)
3
12
–
12
(391)
(484)
(875)
47
(828)
(816)
(381)
(1)
(481)
47
(816)
Total carrying value of derivative financial instruments
445599
((11,,004466))
1. Collateral deposited against derivative financial liabilities under the terms and conditions of collateral appendices.
Fair values are determined based on observable market data such as yield curves, foreign exchange rates and credit default swap
prices to calculate the present value of future cash flows associated with each derivative at the balance sheet date. Market data is
sourced from a well known financial data company and valuations are validated by reference to counterparty valuations where
appropriate. Some of the Group‘s derivative financial instruments contain early termination options and these have been considered
when assessing the element of the fair value related to credit risk. On this basis the reduction in reported net derivative liabilities due
to credit risk is £19 million (2020: £27 million) and would have been a £49 million (2020: £75 million) reduction without considering
the early termination options. The classification of these derivative assets and liabilities under the IFRS 7 fair value hierarchy is
provided in note 21.
MATURITY OF OBLIGATIONS UNDER DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments have been classified in the balance sheet as current or non-current on an undiscounted contractual
basis based on spot rates as at the balance sheet date. For the purposes of the above and following analysis, maturity dates have
been based on the likelihood of any early termination options being exercised with consideration to counterparty expectations and
market conditions prevailing as at 30 September 2021. Any collateral transferred to counterparties in respect of derivative financial
liabilities has been classified consistently with the related underlying derivative.
The table below summarises the Group‘s derivative financial instruments by maturity based on their remaining contractual cash
flows as at 30 September 2021. The amounts disclosed are the undiscounted cash flows calculated using spot rates of exchange
prevailing at the relevant balance sheet date. Contractual cash flows in respect of the Group‘s non derivative financial instruments
are detailed in note 21.
£ million
Net settled derivatives
Gross settled derivatives
– receipts
– payments
£ million
Net settled derivatives
Gross settled derivatives
– receipts
– payments
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
>5 years
2021
((332255))
((226622))
––
––
((558877))
((448800))
––
55,,666677
((55,,881188))
((663311))
Balance sheet
amount
Contractual
cash flows
total
(335)
(481)
–
–
(816)
(479)
–
6,530
(6,858)
(807)
1166
––
22,,551166
((22,,552211))
1111
<1 year
62
–
2,240
(2,221)
81
((11))
––
6666
((4488))
1177
((115577))
––
22,,552222
((22,,666611))
((229966))
Between 1 and
2 years
Between 2 and
5 years
19
–
1,084
(1,153)
(50)
(104)
–
1,528
(1,633)
(209)
((333388))
––
556633
((558888))
((336633))
2020
>5 years
(456)
–
1,678
(1,851)
(629)
220022
202
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
DERIVATIVES AS HEDGING INSTRUMENTS
As outlined in note 21, the Group hedges its underlying interest rate exposure and foreign currency translation exposures
in an efficient, commercial and structured manner, primarily using interest rate swaps and cross currency swaps. Foreign
exchange contracts are used to manage the Group’s short term liquidity requirements in line with short term cash flow
forecasts as appropriate.
The Group does not apply cash flow or fair value hedge accounting, as permitted under IFRS9, which results in fair value gains and
losses attributable to derivative financial instruments being recognised in net finance costs unless they are designated as hedges
of a net investment in foreign operations, in which case they are recognised in other comprehensive income.
The group has considered the impending requirements to re-base LIBOR based interest rates to new risk-free based rates. The group
is currently undertaking an exercise to re-base to risk-free rates all its affected interest rate derivative contracts that mature after the
end of September 2021. GBP LIBOR contracts will be rebased to SONIA in the last quarter of the 2021 calendar year with USD LIBOR
contracts to be rebased later in the 2022 fiscal year. At present, it is not anticipated that these changes will impact the Group‘s
commercial hedging strategy, nor should they have a material financial impact.
INTEREST RATE SWAPS
To manage interest rate risk on its borrowings, the Group issues debt in the market or markets that are most appropriate at the time
of raising new finance with regard to currency, interest denomination or duration, and then uses interest rate swaps to re-base the
debt into the appropriate proportions of fixed and floating interest rates. Interest rate swaps are also transacted to manage and re-
profile the Group‘s interest rate risk over the short, medium and long term in accordance with the Treasury Committee framework
and Treasury Committee discussions. Fair value movements are recognised in net finance costs in the relevant reporting period.
As at 30 September 2021, the notional amount of interest rate swaps outstanding that were entered into to convert fixed rate
borrowings into floating rates of interest at the time of raising new finance were £10,775 million equivalent (2020: £11,656 million
equivalent) with a fair value of £425 million asset (2020: £854 million asset). The fixed interest rates vary from 1.1 per cent to
8.7 per cent (2020: 0.5 per cent to 8.7 per cent), and the floating rates are EURIBOR, GBP LIBOR and USD LIBOR.
As at 30 September 2021, the notional amount of interest rate swaps outstanding that were entered into to convert the Group‘s debt
into the appropriate proportion of fixed and floating rates to manage and re-profile the Group‘s interest rate risk were £8,806 million
equivalent (2020: £10,311 million equivalent) with a fair value of £750 million liability (2020: £1,189 million liability). The fixed interest
rates vary from 0.5 per cent to 4.4 per cent (2020: 0.5 per cent to 4.4 per cent), and the floating rates are EURIBOR, GBP LIBOR and
USD LIBOR. This includes forward starting interest rate swaps with a total notional amount of £1,531 million equivalent (2020:
£2,519 million equivalent) with tenors between 3.5 and 6 years, starting between May 2022 and October 2024.
All of the Group‘s GBP and USD interest rate swaps will be impacted by the changes to the use of LIBOR interest rates. However, the
impact of the changes is not expected to be material.
CROSS-CURRENCY SWAPS
The Group enters into cross currency swaps to convert the currency of debt into the appropriate currency with consideration to the
underlying assets of the Group as appropriate. Fair value movements are recognised in net finance costs in the relevant reporting
period unless the swaps are designated as hedges of a net investment in foreign operations, in which case the fair value movement
attributable to changes in foreign exchange rates are recognised in other comprehensive income.
As at 30 September 2021, the notional amount of cross currency swaps entered into to convert floating rate sterling debt into
the desired currency at floating rates of interest was £2,600 million (2020: £2,600 million) and the fair value of these swaps was
£214 million net liability (2020: £409 million net liability); the notional amount of cross currency swaps entered into to convert
floating rate US dollar debt into the desired currency at floating rates of interest was $1,750 million (2020: $1,750 million) and the
fair value of these swaps was £48 million net liability (2020: £71 million net liability).
HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS
As at 30 September 2021, cross currency swaps with a notional amount of €3,233 million (2020: €3,233 million) were designated as
hedges of net investments in foreign operations. During the year, foreign exchange translation gains amounting to £168 million
(2020: £87 million losses) were recognised within exchange movements in other comprehensive income in respect of cross
currency swaps that had been designated as hedges of a net investment in foreign operations. No hedging ineffectiveness
occurred during the year (2020: £nil).
The movements in Other Comprehensive Income due to net investment hedging in the period were as follows:
£ million
Foreign exchange gains/(losses) on borrowings
Foreign exchange gains on derivative financial instruments
Reclassification to the Income Statement
2021
2020
330088
116688
111177
559933
(75)
87
–
12
All of the Group‘s cross currency swaps will be impacted by the changes to the use of LIBOR interest rates. However, this will not
impact the effectiveness of the contracts in their net investment hedge relationship and the calculation of the amounts recognised
in other comprehensive income will be unaffected.
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W W W . I M P E R I A L B R A N D S P L C . C O M
220033
203
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
FOREIGN EXCHANGE CONTRACTS
The Group enters into foreign exchange contracts to manage short term liquidity requirements in line with cash flow forecasts. As at
30 September 2021, the notional amount of these contracts was £1,430 million equivalent (2020: £2,126 million equivalent) and the fair
value of these contracts was a net liability of £0.6 million (2020: £0.7 million net liability).
23. DEFERRED TAX ASSETS AND LIABILITIES
DEFERRED TAX ASSETS
£ million
Accelerated depreciation and amortisation
Retirement benefits
Other temporary differences
Deferred tax expense
Net deferred tax liabilities
REFLECTED IN THE CONSOLIDATED BALANCE SHEET AS FOLLOWS
£ million
Deferred tax assets
Deferred tax liabilities
RECONCILIATION OF NET DEFERRED TAX LIABILITIES
£ million
As at 1 October
Charged to the income statement
(Charged)/credited to other comprehensive income
Transferred to held for disposal
Exchange movements
Other movements
As at 30 September
Consolidated
income
statement
2021
Consolidated
income
statement
2020
Consolidated
balance sheet
2021
Consolidated
balance sheet
2020
((77))
((3388))
220011
115566
34
(17)
(32)
(15)
((886644))
((2233))
441144
(871)
88
240
((447733))
(543)
2021
556644
((11,,003377))
((447733))
2021
((554433))
115566
((3333))
––
((5555))
22
2020
381
(924)
(543)
2020
(561)
(15)
27
1
10
(5)
((447733))
(543)
Included within net deferred tax liabilities are deferred tax assets recognised of £267million (2020: £42 million) for tax credits arising
in the Group‘s Spanish business. The majority (£239 million) of these tax credits were recognised in the current year following an
internal reorganisation of the Spanish business. These tax credits have no time expiry. Utilisation of these tax credits is restricted
to 50% of the Spanish business‘ taxable profits arising in any given year; those tax law restrictions extend the period over which
the deferred tax assets would otherwise be recovered. The Group considers there to be forecast future taxable profits which support
the recognition of these long term deferred tax assets. The period over which these deferred tax assets are utilised is sensitive to
forecasting assumptions about future growth rates (which may be influenced by the future effects of climate change) and regulatory
changes. Any material effects of climate change in the long term could extend the period over which the deferred tax asset will be
recovered but as the tax credits do not expire, the Group considers there is positive evidence that sufficient future taxable profits
would still be available. Based on a range of forecast scenarios modelling sensitivities these deferred tax assets are expected to be
utilised over a period of 20-25 years. Deferred tax assets of £57 million (2020: £63 million) for tax credits have not been recognised
due to the potential uncertainty of the utilisation of the credits. Of these unrecognised deferred tax assets £57 million (2020:
£63 million) are expected to expire between 2022 and 2027.
Included within net deferred tax liabilities are deferred tax assets recognised for retirement benefits of £157 million (2020:
£176 million) arising in the Group‘s German business. These deferred tax assets are expected to be recovered both by way of
utilisation against the reversal of deferred tax liabilities of £33 million (2020: £7 million) arising in the Group‘s German business
and by way of utilisation against future taxable profits. The Group considers there to be forecast future taxable profits which
support the recognition of these long term deferred tax assets. These deferred tax assets are expected to be recovered over a
period of 20-40 years corresponding to the life of the pension scheme.
Within Other temporary differences, deferred tax assets of £25 million (2020: £84 million) are recognised for tax losses carried
forward to the extent that the realisation of the related tax benefit through future taxable profits is probable.
As at the balance sheet date, deferred tax assets of £130 million (2020: £152 million) for tax losses, and £13 million (2020: £17 million)
for other temporary differences, have not been recognised due to the potential uncertainty of the utilisation of the tax losses and other
temporary differences in certain jurisdictions. Of these unrecognised deferred tax assets for tax losses £1 million (2020: £30 million) are
expected to expire within 1 year and £8 million (2020: £9 million) are expected to expire within 5 years and the remaining £121 million
(2020: £113 million) has no time expiry. The deferred tax assets for other temporary differences of £13 million (2020: £17 million) have
no time expiry.
We have reviewed the recoverability of deferred tax assets in overseas territories in the light of forecast business performance. In
2021 we recognised deferred tax assets of £8 million that were previously unrecognised (2020: derecognised deferred tax assets of
£51 million that were previously recognised) on the basis that it is more likely than not that these are recoverable (2020: irrecoverable).
A deferred tax liability of £101 million (2020: £111 million) is recognised in respect of taxation expected to arise on the future
distribution of unremitted earnings totalling £5 billion (2020: £7 billion).
220044
204
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
The temporary differences associated with investments in the Group’s subsidiaries, associates and joint ventures for which a
deferred tax liability has not been recognised in the periods presented, aggregate to £29 million (2020: £16 million). No liability has
been recognised because the Group is in a position to control the timing of the reversal of those temporary differences and it is
probable that such differences will not reverse in the foreseeable future.
The UK government announced in its budget on 3 March 2021 that it would increase the main rate of corporation tax by 6% to 25%
with effect from 1 April 2023. This change was substantively enacted on 24 May 2021 and, as a result, the effect has been reflected
in the closing deferred tax position included in these financial statements.
24. RETIREMENT BENEFIT SCHEMES
The Group operates a number of retirement benefit schemes for its employees, including both defined benefit and defined
contribution schemes. The Group’s three principal schemes are defined benefit schemes and are operated by Imperial Tobacco
Limited (ITL) in the UK, Reemtsma Cigarettenfabriken GmbH in Germany and ITG Brands in the USA; these schemes represent
64 per cent, 14 per cent and 8 per cent of the Group’s total defined benefit obligations and 35 per cent, 33 per cent and 7 per cent of
the current service cost respectively.
IMPERIAL TOBACCO PENSION FUND
The UK scheme, the Imperial Tobacco Pension Fund (or ‘ITPF’ or ‘Fund’), is a voluntary final salary pension scheme with a normal
retirement age of 60 for most members. The ITPF was offered to employees who joined the company before 1 October 2010 and has
a weighted average maturity of 17 years. Effective from 1 September 2017, members’ pensionable pay was capped at the higher of
£75,000 or their pensionable pay at 1 September 2017. By number, the population as at the most recent funding valuation comprises
72 per cent in respect of pensioners and dependants, 26 per cent in respect of deferred members and 2 per cent in respect of current
employees. New employees in the UK are now offered a defined contribution scheme. In certain circumstances, surplus funds in the
defined benefit section, may be used to finance defined contribution section contributions on ITL’s behalf with company
contributions reduced accordingly.
The ITPF operates under trust law and is managed and administered by the Trustees on behalf of the members in accordance with
the terms of the Trust Deed and Rules and relevant legislation. The ITPF’s assets are held by the trust.
The main risk for the Group in respect of the ITPF is that additional contributions are required if the assets are not expected to be
sufficient to pay for the benefits. The investment portfolio is subject to a range of risks typical of the asset classes held, such as
credit risk on bonds, and exposure to the property market.
Annual increases in benefits in payment are dependent on inflation so the main uncertainties affecting the level of benefits payable
under the ITPF are future inflation levels (including the impact of inflation on future salary increases below the pensionable pay cap)
and the actual longevity of the membership.
The contributions paid to the ITPF are set by the ITPF Scheme Actuary every three years. The Scheme Actuary is an external
consultant, appointed by the Trustees. Principal factors that the Scheme Actuary will have regard to include the covenant offered by
the Group, the level of risk in the ITPF, the expected returns on the ITPF’s assets, the results of the funding assessment on an ongoing
basis and the expected cost of securing benefits if the Fund were to be wound up.
The latest valuation of the ITPF was carried out as at 31 March 2019 when the market value of the invested assets was £4,137 million.
Based on the ongoing funding target the total assets were sufficient to cover 110 per cent of the benefits that had accrued to members
for past service, after allowing for expected future pay increases. The total assets were sufficient to cover 106 per cent of the total
benefits that had accrued to members for past service and future service benefits for current members. In compliance with the
Pensions Act 2004, ITL and the Trustee agreed a scheme-specific funding target, a statement of funding principles and a schedule
of contributions accordingly.
Following the valuation, a dynamic contribution schedule has been agreed such that ITL’s annual contributions will reduce or
increase depending on the Fund’s valuation going forward. The level of the ITL’s annual contribution to the Fund is £65 million per
year for the year to 31 March 2022. Further contributions were agreed to be paid by ITL in the event of a downgrade of the Group’s
credit rating to non-investment grade by either Standard & Poor’s or Moody’s. In addition, surety guarantees that were provided with
a total value of £600 million have been reduced to £225 million following the latest valuation and a parental guarantee from Imperial
Brands PLC remains in place.
The IAS 19 liability measurement of the defined benefit obligation (DBO) and the current service cost are sensitive to the assumptions
made about future inflation and salary growth levels, as well as the assumptions made about life expectancy. They are also sensitive
to the discount rate, which depends on market yields on sterling denominated AA corporate bonds. The main differences between
the funding and IAS 19 assumptions are a more prudent longevity assumption for funding and a different approach to setting the
discount rate. A consequence of the ITPF’s investment strategy, with a proportion of the assets invested in return-seeking assets,
is that the difference between the market value of the assets and the IAS 19 liabilities may be relatively volatile.
The ITPF has a pension surplus on the IAS 19 measure, in line with IFRIC 14, recognition of the net asset on the fund is only appropriate
where it can be recovered. The ITPF trust deed gives the Group an ability to receive a refund of surplus assets assuming the full
settlement of plan liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights
to unilaterally wind up the Fund or otherwise augment the benefits due to the Fund’s members. Based on these circumstances, any
net surplus in this scheme is recognised in full.
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W W W . I M P E R I A L B R A N D S P L C . C O M
220055
205
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
THE REEMTSMA CIGARETTENFABRIKEN PENSION PLAN
The German scheme, the Reemtsma Cigarettenfabriken Pension Plan (RCPP), is primarily a career average pension plan, though a
small group of members has final salary benefits. It has a weighted average maturity of 19 years. The scheme population comprises
51 per cent in respect of pensioners, 19 per cent in respect of deferred members and 30 per cent in respect of current employees. It
was closed to new members from 1 January 2020, but existing active members at that date continue to accrue benefits in the plan.
The plan is unfunded and the company pays benefits as they arise. The plan’s obligations arise under a works council agreement
and are subject to standard German legal requirements around such matters as the benefits to be provided to employees who leave
service, and pension increases in payment. Over the next year Reemtsma Cigarettenfabriken GmbH expects to pay £23 million in
respect of benefits.
Annual increases in benefits in payment are dependent on inflation so the main uncertainties affecting the level of benefits payable
under the plan are future inflation levels and the actual longevity of the membership.
The IAS 19 liability measurement of the DBO and the current service cost are sensitive to the assumptions made about the above
variables, as well as the discount rate, which depends on market yields on euro denominated AA corporate bonds.
ITG SCHEME
The main USA pension scheme, held by ITG Brands is the ITG Scheme, a defined benefit pension plan that is closed to new entrants.
It has a weighted average maturity of 11 years. The population comprises 77 per cent in respect of pensioners, 10 per cent in respect
of deferred members and 13 per cent in respect of current employees.
The plan is funded and benefits are paid from the plan assets. Contributions to the plan are determined based on US regulatory
requirements and ITG Brands is not expected to make any contributions in the next year.
Annual benefits in payment are assumed not to increase from current levels. The main uncertainty affecting the level of benefits
payable under the plan is the actual longevity of the membership. Other key uncertainties impacting the plan include investment
risk and potential past service benefit changes from future negotiations.
The IAS 19 liability measurement of the DBO and the service cost are sensitive to the assumptions made about the above variables,
as well as the discount rate, which depends on market yields on US dollar denominated AA corporate bonds.
OTHER PLANS
Other plans of the Group include various pension plans, other post-employment and long-term employee benefit plans in several
countries of operation. Many of the plans are funded, with assets backing the obligations held in separate legal vehicles such as
trusts, others are operated on an unfunded basis. The benefits provided, the approach to funding and the legal basis of the plans
reflect their local territories. IAS 19 requires that the discount rate for calculating the DBO and service cost is set according to the
level of relevant market yields on corporate bonds where the market is considered “deep”, or government bonds where it is not.
For the year ended 30 September 2021 the group included four new schemes associated with operations in the Dominican Republic,
Poland and Australia in the IAS19 position following a review of the pension schemes in the group.
The results of the most recent available actuarial valuations for the various plans have been updated to 30 September 2021 in order to
determine the amounts to be included in the Group’s consolidated financial statements. The aggregate IAS 19 position is as follows:
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
DEFINED BENEFIT PLANS
£ million
At 1 October
Consolidated income statement expense
Current service cost
Settlements gains/(losses)
Past service costs
Cost of termination benefits
Net interest (expense)/income on net defined benefit
(liability)/asset
Administration costs paid from plan assets
Cost recognised in the income statement
Remeasurements
Actuarial gain due to liability experience
Actuarial (loss)/gain due to financial assumption changes
Actuarial gain/(loss) due to demographic assumption changes
Return on plan assets excluding amounts included in net
interest income/(expense) above
Remeasurement effects recognised in other comprehensive
income
Cash
Employer contributions
Employee contributions
Benefits paid directly by the company
Net cash
Schemes brought into scope of IAS19
Exchange movements
Total other
At 30 September
DBO
((55,,449988))
Assets
55,,118822
((4477))
1133
99
((1188))
((8877))
––
6644
((111144))
44
––
––
((11))
226644
((1133))
110055
––
((1133))
––
––
8899
((55))
––
––
––
8877
112266
11
((226644))
––
((3377))
((55,,331199))
55,,116666
2021
Total
((331166))
((4477))
––
99
((1188))
22
((55))
((5599))
6644
((111144))
44
8877
4411
112266
––
––
112266
((1133))
6688
5555
((115533))
DBO
(5,877)
Assets
5,223
(49)
–
–
(2)
(104)
–
36
22
228
–
–
(1)
266
–
(17)
–
–
–
–
99
(6)
–
–
–
(9)
145
1
(266)
–
(5)
(5,498)
5,182
2020
Total
(654)
(49)
–
–
(2)
(5)
(6)
(62)
36
22
228
(9)
277
145
–
–
145
–
(22)
(22)
(316)
The cost of termination benefits in the year ended 30 September 2021 and 30 September 2020 mainly relate to restructuring activity
in Germany.
RETIREMENT BENEFIT SCHEME COSTS CHARGED TO OPERATING PROFIT
£ million
Defined benefit expense in operating profit
Defined contribution expense in operating profit
Total retirement benefit scheme cost in operating profit
Split as follows in the consolidated income statement:
£ million
Cost of sales
Distribution, advertising and selling costs
Administrative and other expenses
Total retirement benefit scheme costs in operating profit
ASSETS AND LIABILITIES RECOGNISED IN THE CONSOLIDATED BALANCE SHEET
£ million
Retirement benefit assets
Retirement benefit liabilities
Net retirement benefit liability
KEY FIGURES AND ASSUMPTIONS USED FOR MAJOR PLANS
£ million unless otherwise indicated
Defined benefit obligation (DBO)
Fair value of scheme assets
Net defined benefit (asset)/liability
Current service cost
Employer contributions
Principal actuarial assumptions used (% per annum)
Discount rate
Future salary increases
Future pension increases
Inflation
ITPF
33,,440044
((44,,338866))
((998822))
1177
6655
22..11
33..44
33..44
33..44
RCPP
776655
––
776655
1155
––
11..11
33..11
22..00
22..00
2021
ITGBH
440033
((339966))
77
33
––
22..77
nn//aa
nn//aa
22..33
ITPF
3,516
(4,395)
(879)
18
85
1.7
2.9
2.9
2.9
2021
2020
6611
1199
8800
57
17
74
2021
2020
2266
3333
2211
8800
2021
11,,004466
((11,,119999))
((115533))
RCPP
764
–
764
16
–
0.9
2.4
1.3
1.3
24
31
19
74
2020
940
(1,256)
(316)
2020
ITGBH
434
(398)
36
4
–
2.8
n/a
n/a
2.5
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Life expectancy at age 65 years:
Member currently aged 65
Member currently aged 50
Life expectancy at age 65 years:
Member currently aged 65
Member currently aged 50
Male
2211..11
2222..11
Male
21.1
22.0
ITPF
Female
2222..77
2233..99
ITPF
Female
22.7
23.8
Male
2200..55
2222..66
Male
20.3
22.4
RCPP
Female
2233..99
2255..66
RCPP
Female
23.8
25.5
2021
ITGBH
Female
2211..77
2222..99
2020
ITGBH
Female
21.7
22.9
Male
1199..77
2200..99
Male
19.7
20.9
Assumptions regarding future mortality experience are set based on advice that uses published statistics and experience in
each territory. In particular for the ITPF, SAPS S3 (2020: SAPS S3) tables are used with various adjustments for different groups of
members, reflecting observed experience. The largest group of members uses the SAPS S3 All Pensioner Male Amounts table with a
101 per cent multiplier. An allowance for improvements in longevity is made using the 2018 (2020: 2018) CMI improvement rates with
a long-term trend of 1.25 per cent per annum.
SENSITIVITY ANALYSIS FOR KEY ASSUMPTIONS AT THE END OF THE YEAR
Sensitivity analysis is illustrative only and is provided to demonstrate the degree of sensitivity of results to key assumptions.
Generally, estimates are made by re-performing calculations with one assumption modified and all others held constant.
% increase in DBO
Discount rate: 0.5% decrease
Rate of inflation: 0.5% decrease
One year increase in longevity for a member currently age 65,
corresponding changes at other ages
ITPF
88..66
66..99
55..11
RCPP
1100..88
77..00
55..11
2021
ITGBH
55..88
nn//aa
55..11
ITPF
8.7
7.0
4.9
RCPP
10.3
6.7
4.8
2020
ITGBH
6.0
n/a
5.0
The sensitivity to the inflation assumption change includes corresponding changes to the future salary increases and future
pension increases assumptions, but is assumed to be independent of any change to discount rate.
We estimate that a 0.5 per cent decrease in the discount rate at the start of the year would have increased the consolidated income
statement pension expense by approximately £14 million.
An approximate split of the major categories of ITPF scheme assets is as follows:
£ million unless otherwise indicated
Equities
Bonds – index linked government
Bonds – corporate and other
Property
Absolute return
Other – including derivatives, commodities and cash
2021
Percentage of
ITPF scheme
assets
Fair value
2020
Percentage of
ITPF scheme
assets
–
53
16
12
18
1
100
Fair value
1
2,344
693
533
809
15
––
4488
1199
1144
1199
––
110000
4,395
––
22,,111155
881155
559922
884499
1155
44,,338866
The primary investment objective is to invest the ITPF’s assets in an appropriate and secure manner such that members’ benefit
entitlements can be paid as they fall due. Specifically the ITPF targets an expected return in excess of the growth in the liabilities,
which in conjunction with the contributions paid is consistent to achieve and maintain an ongoing funding level of at least
100 per cent on a buy-out basis by 2028.
The majority of the assets are quoted. The ITPF holds £nil of self-invested assets (2020: £nil). As in previous years, the value of ground
leases have been allocated to the property asset class.
An approximate split of the major categories of ITGBH scheme assets is as follows:
£ million unless otherwise indicated
Investment funds
Bonds – fixed government
Bonds – corporate and other
Other – including derivatives, commodities and cash
The majority of the assets are non-quoted.
2021
Percentage of
ITGBH scheme
assets
Fair value
227799
2200
6633
3344
339966
7700
55
1166
99
110000
2020
Percentage of
ITGBH scheme
assets
56
11
31
2
100
Fair value
224
45
121
8
398
220088
208
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
25. PROVISIONS
£ million
At 1 October 2020
Additional provisions charged to the consolidated income statement
Amounts used
Unused amounts reversed
Exchange movements
At 30 September 2021
Analysed as:
£ million
Current
Non-current
Restructuring
Other
225533
114411
((6633))
((6666))
((1144))
225511
116633
5500
((3399))
((2244))
((77))
114433
2021
118888
220066
339944
2021
Total
441166
119911
((110022))
((9900))
((2211))
339944
2020
220
196
416
Restructuring provisions relate mainly to our 2021 Strategic Review Programme and Cost optimisation programmes (see note 5).
The restructuring provision is split between 2021 Strategic Review Programme of £86 million, Cost Optimisation Programmes of
£155 million and other programmes of £10 million.
Within the Cost optimisation programme provisions there is £73 million related to costs of consolidating the manufacturing capacity
within the Group. It is expected that the Cost optimisation programmes restructuring provisions will be predominantly utilised over
the next 2 years.
Other provisions include £41 million relating to local employment requirements including holiday pay, £58 million relating to various
local tax or duty requirements and £23 million of employment and duty provisions associated with distribution. The provisions are
spread throughout the Group and payment will be dependent on local statutory requirements.
26. SHARE CAPITAL
£ million
Authorised, issued and fully paid
1,020,697,238 ordinary shares of 10p each (2020: 1,020,697,238)
2021
2020
110033
103
During the year nil shares (2020: 5,098,508 shares) were repurchased and immediately cancelled, increasing the Capital
Redemption reserve.
On 6 March 2014, 31,942,881 shares held in Treasury were cancelled creating the Capital Redemption reserve, and between
September 2017 and December 2017, 4,973,916 shares were cancelled increasing this reserve.
27. SHARE SCHEMES
The Group operates four types of share-based incentive programmes, designed to incentivise staff and to encourage them to build
a stake in the Group.
SHARE MATCHING SCHEME
Awards are made to eligible employees who are invited to invest a proportion of their eligible bonus in shares for a period of three
years, after which matching shares are awarded on a 1:1 ratio, plus dividend equivalents.
LONG TERM INCENTIVE PLAN (LTIP)
Awards of shares under the LTIP are made to the Executive Directors and senior executives at the discretion of the Remuneration
Committee. They vest three years after grant and are subject to performance criteria. Dividend equivalents accrue on vested shares.
SHARESAVE PLAN
Options are granted to eligible employees who participate in a designated savings scheme for a three year period. Historically they
were also granted for a five year period.
DISCRETIONARY SHARE AWARDS PLAN (DSAP)
Under the DSAP, one-off conditional awards are made to individuals to recognise exceptional contributions within the business.
Awards, which are not subject to performance conditions and under which vested shares do not attract dividend roll-up, will
normally vest on the third anniversary of the date of grant subject to the participant’s continued employment. The limit of an award
under the DSAP is capped at 25 per cent of the participant’s salary at the date of grant. Shares used to settle awards under the DSAP
will be market purchased.
Further details of the schemes including additional criteria applying to Directors and some senior executives are set out in the
Directors’ Remuneration Report.
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W W W . I M P E R I A L B R A N D S P L C . C O M
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209
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
ANALYSIS OF CHARGE TO THE CONSOLIDATED INCOME STATEMENT
£ million
Share Matching Scheme
Long Term Incentive Plan
Sharesave Plan
Discretionary Share Awards Plan
2021
2020
33
2200
11
11
2255
4
13
2
1
20
The awards are predominantly equity settled. The balance sheet liability in respect of cash settled schemes at 30 September 2021
was £1.8 million (2020 £1.2 million).
RECONCILIATION OF MOVEMENTS IN AWARDS/OPTIONS
Thousands of shares unless otherwise indicated
Outstanding at 1 October 2020
Granted
Lapsed/cancelled
Exercised
Outstanding at 30 September 2021
Exercisable at 30 September 2021
Thousands of shares unless otherwise indicated
Outstanding at 1 October 2019
Granted
Lapsed/cancelled
Exercised
Outstanding at 30 September 2020
Exercisable at 30 September 2020
Share
matching
scheme
awards
446611
225533
((2255))
((220077))
448822
––
LTIP
awards
66,,559955
33,,776633
((22,,000033))
((994433))
77,,441122
––
Sharesave
options DSAP awards
22,,000066
337711
((332233))
((11))
22,,005533
117700
7700
1177
((33))
((2244))
6600
––
Share matching
scheme awards
LTIP
awards
Sharesave
options
DSAP awards
2021
Sharesave
weighted
average
exercise price
£
1155..3311
1133..0099
2211..7744
55..4455
1133..8899
2222..2244
2020
Sharesave
weighted
average exercise
price £
783
297
(19)
(600)
461
–
4,313
3,187
(782)
(123)
6,595
–
1,559
1,386
(939)
–
2,006
147
94
2
(5)
(21)
70
–
21.21
12.39
20.81
25.01
15.31
29.62
The weighted average Imperial Brands PLC share price at the date of exercise of awards and options was £14.96 (2020: £19.34).
The weighted average fair value of Sharesave options granted during the year was £2.35 (2020: £2.37).
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
SUMMARY OF AWARDS/OPTIONS OUTSTANDING AT 30 SEPTEMBER 2021
Thousands of shares unless otherwise indicated
Share Matching Scheme
2019
2020
2021
Total awards outstanding
Long Term Incentive Plan
2019
2020
2021
Total awards outstanding
Sharesave Plan
2018
2019
2020
2021
Total options outstanding
Discretionary Share Awards Plan
2018
2019
2020
2021
Total options outstanding
Number of
awards/
options
outstanding
Vesting period
remaining in
months
Exercise price
of options
outstanding £
111144
115566
221122
448822
11,,551122
22,,552266
33,,337744
77,,441122
117700
223311
11,,227799
337733
22,,005533
––
4422
––
1188
6600
55
1177
2299
55
1188
3300
––
1111
2233
3355
––
55
––
2299
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
nn//aa
2222..2244
1177..4455
1122..3377
1133..0099
nn//aa
nn//aa
nn//aa
nn//aa
The vesting period is the period between the grant of awards or options and the earliest date on which they are exercisable. The
vesting period remaining and the exercise price of options outstanding are weighted averages. Participants in the Sharesave Plan
have six months from the maturity date to exercise their option. Participants in the LTIP generally have seven years from the end
of the vesting period to exercise their option. The exercise price of the options is fixed over the life of each option.
PRICING
For the purposes of valuing options to calculate the share-based payment charge, the Black-Scholes option pricing model has been
used for the Share Matching Scheme, Sharesave Plan, Discretionary Shares Awards Plan and one Long Term Incentive Plan with no
market conditions. A summary of the assumptions used in the Black-Scholes model for 2021 and 2020 is as follows:
Risk-free interest rate %
Volatility (based on 3 or 5 year history) %
Expected lives of options granted years
Dividend yield %
Fair value £
Share price used to determine exercise price £
Exercise price £
Risk-free interest rate %
Volatility (based on 3 or 5 year history) %
Expected lives of options granted years
Dividend yield %
Fair value £
Share price used to determine exercise price £
Exercise price £
Share
matching
Sharesave
DSAP
2021
00..77
3366..00
33..0000
88..8855
1122..3377
1166..0000
nn//aa
00..22--((00..44))
3333..99--3333..99
33..0000
88..8866
22..3311--22..5566
1166
1133..0099
Share
matching
0.7
29.0
3.00
8.85
14.00
18.25
n/a
00..77
2266..33
33..0000
66..77
1122..8866
1155..2277
nn//aa
2020
Sharesave
0.2-(0.4)
33.8-33.9
3.00
8.84
2.39-2.45
15.20-15.26
12.37
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211
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Market conditions were incorporated into the Monte Carlo method used in determining the fair value of LTIP awards at grant date.
Assumptions in 2021 and 2020 are given in the following table:
%
Future Imperial Brands share price volatility
Future Imperial Brands dividend yield
Share price volatility of the tobacco and alcohol comparator group
Correlation between Imperial Tobacco and the alcohol and tobacco comparator group
EMPLOYEE SHARE OWNERSHIP TRUSTS
2021
3311..22
––
2020
20.0
–
1177..44--4400..99
14.7-28.3
2266..77
22.1
The Imperial Tobacco Group PLC Employee and Executive Benefit Trust and the Imperial Tobacco Group PLC 2001 Employee Benefit
Trust (the Trusts) have been established to acquire ordinary shares in the Company to satisfy rights to shares arising on the exercise
and vesting of options and awards. The purchase of shares by the Trusts has been financed by a gift of £19.2 million and an interest
free loan of £147.5 million. In addition the Group has gifted treasury shares to the Trusts. None of the Trusts’ shares has been allocated to
employees or Executive Directors as at 30 September 2021. All finance costs and administration expenses connected with the Trusts
are charged to the consolidated income statement as they accrue. The Trusts have waived their rights to dividends and the shares
held by the Trusts are excluded from the calculation of basic earnings per share.
SHARES HELD BY EMPLOYEE SHARE OWNERSHIP TRUSTS
Millions of shares
At 1 October
Gift of shares from Treasury
Distribution of shares held by Employee Share Ownership Trusts
At 30 September
2021
2020
22..11
––
((11..22))
00..99
2.8
–
(0.7)
2.1
The shares in the Trusts are accounted for on a first in first out basis and comprise nil shares acquired in the open market
(2020: nil) and 0.9 million (2020: 2.1 million) treasury shares gifted to the Trusts by the Group. There were nil (2020: nil) shares
gifted in the financial year 2021.
28. TREASURY SHARES
Shares purchased under the Group’s buyback programme represent a deduction from equity shareholders’ funds, and are only
cancelled if the number of treasury shares approaches 10 percent of issued share capital. During the year the Group purchased nil
shares at a cost of £nil million (2020: 5,098,508 shares at a cost of £92 million) which were immediately cancelled. Shares held in
treasury do not qualify for dividends.
£ million unless otherwise indicated
At 1 October
Purchase of shares
Cancellation of shares
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
29. COMMITMENTS
CAPITAL COMMITMENTS
£ million
Contracted but not provided for:
Property, plant and equipment and software
30. CONTINGENT LIABILITIES
Millions of
shares
(number)
7744..33
––
––
––
7744..33
77..33
2021
Value
22,,118833
––
––
––
22,,118833
nn//aa
Millions of
shares
(number)
74.3
5.1
(5.1)
–
74.3
7.3
2020
Value
2,183
92
(92)
–
2,183
n/a
2021
2020
8866
187
Where contingent liabilities are disclosed and not quantified this is because it is not practicable to do so.
USA STATE SETTLEMENT AGREEMENTS
In November 1998, the major US cigarette manufacturers, including Reynolds and Philip Morris, entered into the Master Settlement
Agreement (MSA) with 52 US states and territories and possessions. These cigarette manufacturers previously settled four other
cases, brought by Mississippi, Florida, Texas and Minnesota, by separate agreements with each state (collectively with the MSA,
the State Settlement Agreements). These State Settlement Agreements settled all health care cost recovery actions brought by, or
on behalf of, the settling jurisdictions against the defendants (the major US cigarette manufacturers); released the defendants from
various additional present and potential future claims; imposed future payment obligations based on market share in the US; and
significantly restricted their ability to market and sell cigarettes.
ITG Brands (ITGB) and its affiliates were not defendants in the litigations that led to the State Settlement Agreements. However,
the MSA contained a provision allowing manufacturers that were not defendants to become parties. Under that provision ITGB and
certain affiliates (including its US affiliate Commonwealth Brands, Inc.) became parties to the MSA. They make substantial annual
221122
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
MSA payments based on market share in the US and other factors, and are subject to the MSA’s restrictions on their ability to market
and sell cigarettes.
On 12 June 2015, ITGB acquired four cigarette brands (Winston, Salem, Kool and Maverick, referred to as the Acquired Brands) from
Reynolds and Lorillard Tobacco, in connection with Reynolds’ parent’s acquisition of the stock of Lorillard Tobacco’s parent. Because
the MSA requires a purchaser of a brand to assume settlement liability, the Asset Purchase Agreement (APA) between Reynolds
and ITGB required ITGB to assume MSA settlement payments on the Acquired Brands. There is no similar mechanism permitting
companies that were not defendants to join the settlements with the four states that are not parties to the MSA (Florida, Minnesota,
Mississippi, and Texas, collectively called the Previously Settled States or PSS). For those settlements, the APA required ITGB to use
reasonable best efforts, with the assistance and cooperation of Reynolds and Lorillard Tobacco, to reach agreement with the PSS to
make settlement payments on the Acquired Brands on certain terms and conditions.
Effective 12 June 2015, the date of closing of the transaction, ITGB became a party to the Mississippi settlement as to the Acquired
Brands. ITGB had not become a party to the settlements with Florida, Minnesota, or Texas by the date of closing. Two of those states,
Minnesota, and Texas, have statutes imposing fees on distributors’ sales of products manufactured by companies that are not parties
to the settlements, and post-closing fees were paid on sales of ITGB and affiliates’ products in those states under those statutes from
and after 12 June 2015.
Claims have been made against ITGB in connection with the acquisition of the Acquired Brands:
FLORIDA
On 18 January 2017 Florida and Philip Morris filed motions with the Florida court with jurisdiction over the settlement claiming that
Reynolds and/or ITGB must make payments on the Acquired Brands under the Florida settlement. Florida and Philip Morris alleged
that ITGB was a “successor” or “assign” to Reynolds’ settlement obligations. On 27 December 2017 the court ruled that Reynolds was
liable for settlement payments on the Acquired Brands, but ITGB was not because it was not a “successor” or “assign” to Reynolds. On
29 July 2020 the intermediate Florida appellate court affirmed. Reynolds asked that court for reconsideration and for permission to
appeal to the Florida Supreme Court. On 18 September 2020, the intermediate appellate court denied that motion. On 18 October 2020,
Reynolds asked the Florida Supreme Court directly to permit it to appeal. On 18 December 2020, the Florida Supreme Court denied
Reynolds’ petition for a further appeal.
Florida sought settlement payments on the Acquired Brands of approximately $127 million plus interest, plus future annual
payments based on market share of approximately $26 million. The Florida court’s decision that Reynolds, not ITGB, must make
these settlement payments to Florida is now final and unappealable and Reynolds is making the payments. Reynolds has asked
the Delaware court to order the Group to indemnify it for those obligations, in the proceeding described below .
MINNESOTA
On 23 March 2018 Minnesota filed a complaint and motion and Philip Morris filed a motion with the Minnesota state court with
jurisdiction over the settlement claiming that Reynolds and/or ITGB must make payments on the Acquired Brands under the
Minnesota settlement. Minnesota and Philip Morris alleged that ITGB was a “successor” or “assign” to Reynolds’ settlement
obligations. On 24 September 2019 the court ruled that Reynolds was liable for settlement payments on the Acquired Brands.
The court held that whether ITGB was a “successor” or “assign” under the Minnesota settlement would be determined by whether
ITGB had breached its duty under the APA with Reynolds to use reasonable best efforts to reach agreement with Minnesota to
join that settlement. On 19 February 2020 the Minnesota court denied ITGB’s motion seeking an immediate interlocutory appeal.
The Minnesota court held a trial on whether ITG used its reasonable best efforts to reach agreement with Minnesota to join the
settlement on 31 August and 1-2 and 9 September 2020. Post-trial briefing and proposed findings of fact and conclusions of law
were submitted on 13 November 2020, but the case was resolved before any decision was entered.
The parties have resolved the litigation in Minnesota, with the Court ordering dismissal of the claims with prejudice on 17 March 2021.
Minnesota sought settlement payments on the Acquired Brands of approximately $58 million plus interest from 12 June 2015 forward,
plus future annual payments of approximately $13 million, and Philip Morris sought additional amounts related to a portion of the
payment calculation affecting Philip Morris. In the settlement, ITG paid $28 million (£22 million) with respect to the claims from
12 June 2015 forward, and Reynolds paid $52 million. ITG will pay an estimated $13 million on 31 December 2021 and each year thereafter.
TEXAS
On 28 January 2019 Texas and Philip Morris filed motions with the Texas court with jurisdiction over the settlement claiming that
Reynolds and/or ITGB must make payments with respect to the Acquired Brands under the Texas settlement. Texas and Philip
Morris alleged that ITGB was a “successor” or “assign” to Reynolds’ obligations under the settlement. On 25 February 2020 the court
determined that Reynolds was liable for settlement payments on the Acquired Brands. The court held that ITGB was as “assign”
under the settlement but was not directly liable for settlement payments as a successor or assign, and referred further questions
regarding ITGB’s liability to Reynolds or Texas to the Delaware litigation described below.
On 5 May 2020, the court entered a judgment. The judgment further held that Reynolds’ settlement payments on the Acquired
Brands would be reduced by an offset for statutory fees under TEX. HEALTH & SAFETY CODE § 161.601, et seq. paid by or for ITGB.
The statutory fee had been collected from ITGB’s distributors since June 2015 when ITGB acquired the Brands, with ITGB reimbursing
distributors for most of the fees paid. Effective 1 April 2019, Texas increased the fee amount from the lower rate paid for brands sold
by Subsequent Participating Manufacturers to the MSA to the higher rate paid on other brands. Texas further demanded payment
of the fee at the higher rate for the period between June 2015 and April 2019 plus penalties and interest, in the total amount of
$173 million.
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Both Texas and ITGB asked the court to remove the portion of its judgment reducing Reynolds’ settlement payments by the statutory
payments. The court denied those motions on 14 August 2020. The court further held that the judgment regarding Reynolds was final
and appealable, but that the holding regarding ITGB’s liability was not yet final until further actions from the Delaware and/or Texas
courts. Reynolds appealed the judgment against it. ITGB and Texas both also appealed, noting disagreement with the offset for
statutory fees. On 5 October 2020, Reynolds moved to dismiss ITGB’s appeal (but not Texas’) on the basis that the judgment is not
final as to ITGB and does not injure it. ITGB opposed the motion on 15 October 2020. On 22 December 2020, the Court ordered the
motion “carried with the case” to be decided along with the merits. Initial briefs on the merits were filed on 2 November 2020.
The Texas case was resolved in May 2021 and the state and Philip Morris’ claims have been dismissed, while a separate claim
brought by ITGB regarding the equity tax rate is awaiting dismissal. Texas sought settlement payments on the Acquired Brands from
and after 12 June 2015 of approximately $167 million plus interest, plus future annual payments based on market share of approximately
$36 million, and alternatively sought approximately $173 million (including penalties and interest) in statutory fees. In the settlement,
ITG paid $13.5m in settlement payments (net of amounts accrued and statutory fees already paid) for 12 June 2015 and thereafter
and Reynolds paid $190m, and ITG will pay about $3m in addition to amounts already accrued on 31 December 2021 and each
year thereafter.
DELAWARE
ITGB and Reynolds are also engaged in litigation in the Delaware court with respect to whether ITGB has satisfied its obligations to
use “reasonable best efforts” to join the settlements with Florida, Minnesota and Texas under the APA through which ITGB purchased
the Acquired Brands and whether ITGB is required to indemnify Reynolds for amounts other courts may require Reynolds to pay. On
30 November 2017, on cross-motions by Reynolds and ITGB, the Delaware court held that the “reasonable best efforts” provision did
not automatically terminate due to the transaction closing, but determined further that the duty of reasonable best efforts was not
perpetual and that whether ITGB complied with that obligation is a question of fact that the court has not decided. On 23 September
2019, the Delaware court denied a motion by Reynolds to hold ITGB liable under other indemnity provisions of the APA for Reynolds’
liability under the Florida decision irrespective of whether ITGB breached a duty of reasonable best efforts, finding a fact question on
that argument, and granted Reynolds’ motion that one of the conditions to reaching agreement on joinder related to equity taxes did
not apply in Florida. On 31 October 2019, the trial court denied ITGB’s motion for immediate appeal, with the Delaware Supreme Court
denying the same motion on 7 November 2019. At present the parties are engaged in discovery. On 1 October 2021, Reynolds filed a
motion to set a case schedule. On 15 October 2021, ITGB opposed the motion and proposed an alternative schedule. No schedule has
yet been entered.
Reynolds originally sought indemnification for all amounts it might be required to pay in settlement for the Acquired Brands in the
Florida, Minnesota, and Texas litigations, described above. The portions of the Delaware dispute that related to Minnesota and Texas
have been settled and dismissed, however, so Reynolds’ claim for indemnification in Delaware is now limited to the amounts it has
been required to pay under the Florida determination described above, plus interest and attorney’s fees. ITGB denies that indemnity
is appropriate, and further contends that if Reynolds were to be granted indemnity, any amounts due to it should be substantially
reduced by the amount by which Reynolds’ settlement payments have been reduced through operation of the “profit adjustment”
by reason of ITG not becoming a party to the Florida settlement.
MISSISSIPPI
Effective 12 June 2015, ITGB joined the Mississippi settlement with respect to the Acquired Brands. On 18 June 2015, the Mississippi
court administering the settlement approved the joinder. On 2 July 2015, Philip Morris filed a motion to vacate the joinder, but the
trial court denied that motion on 4 December 2015. Philip Morris appealed, but then dismissed its appeal under a settlement with
Mississippi on 2 June 2017. On 26 December 2018, Philip Morris filed a new motion in Mississippi, challenging the basis on which
Reynolds and ITGB had allocated the “base year” profit for the Acquired Brands between them on the basis that it adversely affects
Philip Morris. The base year affects a calculation for a downward “profit adjustment” to payments under the Mississippi (and other)
State Settlements. Philip Morris claims that adjustment of the base year should lower its payments under the profit adjustment and
increase Reynolds’ payments. A trial was set for 3-6 May 2021. ITGB is indemnified by Reynolds for profit adjustment payments
to the extent that its annual profits do not exceed a specified amount. In June 2021, the parties resolved the Mississippi litigation
with an agreement to set the base year amount at $860 million (plus inflation), and the Court dismissed Philip Morris’ motion on
11 June 2021. ITG also received agreed-upon attorney’s fees from Reynolds as part of the settlement.
MSA PREVIOUSLY SETTLED STATES REDUCTION
The MSA contains a downward adjustment, called the Previously Settled States Reduction, which reduces aggregate payments
made by Philip Morris, Reynolds, and ITGB by a specified percentage each year. The State of California, later joined by the remainder of
the MSA states and by Philip Morris, challenged the application of that Reduction to ITGB for every year from 2016 forward, claiming
that it cannot apply to ITGB since it is not making settlement payments to Florida, Minnesota, or Texas under their settlements. The
Independent Auditor to the MSA, which initially addresses disputes related to payments, has rejected that challenge every year. It
is possible that one of the parties making the challenge may seek to arbitrate the claim under the MSA. The PSS Reduction provides
annual MSA payment reductions of about $65 million.
The parties have resolved Philip Morris’ related claim under the MSA, challenging ITG’s right to receive a “Previously Settled States
Reduction” worth about $65 million a year, as such claim relates to Minnesota and Texas.
OVERALL SUMMARY OF LIABILITY POSITION ASSOCIATED WITH USA STATE SETTLEMENT AGREEMENTS
The Group’s legal advice is that it has a strong position on pending claims related to the Acquired Brands and the Group therefore
considers that no provision is required for these matters.
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
PRODUCT LIABILITY INVESTIGATIONS
The Group is currently involved in a number of legal cases in which claimants are seeking damages for alleged smoking and health
related effects. In the opinion of the Group’s lawyers, the Group has meritorious defences to these actions, all of which are being
vigorously contested. Although it is not possible to predict the outcome of the pending litigation, the Directors believe that the
pending actions will not have a material adverse effect upon the results of the operations, cash flow or financial condition of
the Group. This assessment of the probability of economic outflows at the year-end is a judgement which has been taken by
management. Consequently, the Group has not provided for any amounts in respect of these cases in the financial statements.
Details of these cases are given below.
ARGENTINA
Our subsidiary, Société Nationale d’Exploitation Industrielle des Tabacs et Allumettes SAS (SEITA), has been notified of a claim filed
in the Court of Buenos Aires against Nobleza Piccardo, a subsidiary of British American Tobacco (BAT) by an individual smoker. SEITA
is not a party to the court claim. BAT has denied liability. Historically, BAT manufactured and distributed two brands of cigarettes owned
by SEITA in Argentina under the terms of a Licence Agreement. BAT has sought to invoke an indemnity contained in the Licence
Agreement, pursuant to which SEITA is responsible for any product liability to third parties. The amount claimed is AR$8,980,200.
An adverse first instance judgment was received in December 2020. Both parties appealed the first instance judgment and the Court
of Appeal decision is currently pending.
FRANCE
On 16 January 2018, the French National Committee against Tobacco (the CNCT) filed a criminal complaint against the four main
tobacco manufacturers, including a French subsidiary of the Company named Imperial Brand Finance France (the Subsidiary), on
grounds of ‘reckless life endangerment’. Neither the Subsidiary nor any of its employees or managers have been charged or placed
under formal investigation in any ongoing proceedings, as a result of such a complaint. The Group strongly denies the allegations
made by the CNCT and is monitoring developments.
UNITED STATES
ITG Brands
A number of smoking and health-related claims have been brought against ITGB in the state courts of Massachusetts. ITGB has the
benefit of an indemnity from another manufacturer in respect of each of these claims. As a result, ITGB either has been dismissed,
or is expected to be dismissed, without prejudice from each of the claims. To date, no action has been successful or settled in favour
of any individual claimant in any tobacco-related litigation against the Company or any of its subsidiaries.
Fontem US
Fontem US is named as a defendant in a case filed in the Superior Court of the State of California for the County of Los Angeles,
Central District. The original and amended complaints in this case name 17 defendants, in addition to Fontem US. The claimants
seek recovery of money damages, including punitive damages, against all defendants based on the claim that the principal claimant
developed a lung condition as a result of her use of e-cigarette and other vaping devices, including those manufactured by Fontem
US. The original complaint asserted claims against all defendants styled as eight causes of action as follows: (1) negligence; (2) strict
liability—failure to warn; (3) strict liability—design defect; (4) fraudulent concealment; (5) intentional misrepresentation; (6) negligent
misrepresentation; (7) breach of implied warranties; and (8) loss of consortium (asserted on behalf of the claimants spouse).
Fontem US has agreed to provide representation and indemnity to defendant Costco Wholesale Corporation (“Costco”), the retailer
from which the claimant allegedly purchased blu products. Costco has also filed an answer to the second amended complaint. The
Court set a trial date of 1 November 2021.
A mediation took place on 7 December, 2020 but did not resolve the matter. Since the mediation, Fontem US and other defendants
continued to conduct fact discovery in anticipation of trial, while also continuing to negotiate with the claimants to resolve the
matter prior to trial. In August, these continued negotiations resulted in an agreement by Fontem US and the claimants to settle
this matter (which will include dismissal of the claims against Costco). The terms of the settlement agreement will be confidential.
At a status conference before the Court on 15 October 2021 the claimants informed the Court that all remaining defendants have
settled and later that day filed a conditional Notice of Settlement of Entire Case contingent upon the final execution of the pending
settlement documents.
COMPETITION AUTHORITY INVESTIGATIONS
BELGIUM
On 29 May 2017, the National Competition Authority in Belgium (the BCA) conducted raids at the premises of several manufacturers
and wholesalers of tobacco products. On 1 October 2021 the BCA announced that it had issued a Proposal for Decision which alleges
the existence of anticompetitive practices in the tobacco industry that lasted for several years and consisted in repeated indirect
exchanges of information on manufacturers’ prices through wholesalers. The BCA states that such conduct may be contrary to
Article IV.1 CEL and Article 101 TFEU. This case will now be examined by the Competition College, before which the parties will
have the opportunity to defend themselves against these allegations. The parties will be able to submit written comments to the
Competition College and will be heard at a hearing. The Competition College will either state that there exists an infringement of
competition or make a finding of no infringement.
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
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NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
SPAIN
On 12 April 2019 the Spanish National Commission on Markets and Competition (CNMC) announced penalties against Philip Morris
Spain, Altadis, JT International Iberia and Logista. Altadis and Logista received fines of €11.4 million and €20.9 million, respectively,
from the CNMC. According to the decision, Altadis and Logista are alleged to have infringed competition law by participating in
an exchange of sales volume data between 2008 and February 2017. CNMC considers that this conduct had the effect of restricting
competition in the Spanish tobacco market. Both companies believe that the arguments made by CNMC that define this conduct
as anti-competitive are flawed. In June 2019, both Altadis and Logista commenced appeals to the CNMC’s Decision and the fines
imposed in the Spanish High Court where they believe they will be successful, a decision supported by external legal counsel.
In September 2019 Altadis and, separately, Logista arranged bank guarantees for the full amount of the fines with the result that
payment of the fines had been suspended pending the outcome of the appeals. Therefore, provision for these amounts is not
considered appropriate. In the Altadis appeal, both parties have concluded their submissions to the Court and a judgment is
awaited. A judgment is unlikely to be received before the end of 2021.
In the Logista appeal, Logista submitted their pleadings before the High Spanish Court in February 2021. A judgment is also unlikely
to be received before the end of 2021.
OTHER LITIGATION
US HELMS-BURTON LITIGATION
Imperial has been named as a defendant in a civil action in federal court in Miami, Florida under Title III of the Cuban Liberty and
Democratic Solidarity Act of 1996 (“Helms-Burton”) filed on 6 August 2020. Title III provides US nationals with a cause of action and
a claim for treble damages against persons who have “trafficked” in property expropriated by the Cuban government. Title III is
largely untested because it did not come into effect until May 2019. Treble damages are automatically available under Helms Burton.
Although the filed claim is for unquantified damages, we understand the claim could potentially reach approximately $365 million,
based on the claimants’ claim to own 90% of the property, which they value at $135 million (and then treble). The claim is based on
allegations that Imperial, through Corporación Habanos S.A. (a joint venture between one of Imperial’s now former subsidiaries and
the Cuban government), has “trafficked” in a factory in Havana, Cuba that the Cuban government confiscated from the claimants’
ancestor in the early 1960s, by using the factory to manufacture, market, sell, and distribute Habanos cigars.
At the time the claim was filed against Imperial and up until the conclusion of the Brexit “transition period” on 31 December 2020,
Imperial was subject to an EU law known as the EU Blocking Statute (Regulation (EC) No. 2271/96), which conflicts with Helms-
Burton, protected Imperial against the impact of Title III, and impacted how Imperial might respond to the threatened litigation.
On 23 September 2020 the US court granted Imperial’s motion for a stay of the action until 9 February 2021 or until further order of
the court, while Imperial awaited the European Commission’s response to its request for authorisation to defend the action or, at a
minimum, to file and litigate a motion to dismiss the action.
On 31 December 2020, the Brexit “transition period” concluded without action from the European Commission on Imperial’s request
for authorization. As of 1 January 2021, the EU Blocking Statute has been transposed into domestic law with only minimal changes.
Accordingly, on 10 January 2021, Imperial submitted an application to the UK Department for International Trade for authorisation
from the Secretary of State for International Trade to defend the action or, at a minimum, to file and litigate a motion to dismiss
the action. On 8 February 2021, the UK Secretary of State for International Trade authorized Imperial to file and litigate a motion to
dismiss the action.
On 26 February 2021, Imperial filed a motion to dismiss the action. In response, on 22 March 2021, the claimants amended their
claim. On 28 April 2021, Imperial filed a motion to dismiss the amended action. Briefing on the motion to dismiss was completed on
20 July 2021. In August 2021, the parties filed supplemental briefs addressing the impact of a decision in another Helms-Burton case.
A hearing on the motion to dismiss is scheduled for 15 December 2021.
Separately, two other groups of prospective claimants have indicated that they intend to file a lawsuit against Imperial in federal
court in Miami, Florida. Neither claim has been filed. The threatened claims relate to other properties in Cuba, which the prospective
claimants claim were confiscated from their ancestors by the Cuban government in the 1960s and which they claim are now
used by Corporación Habanos S.A for commercial activities. The prospective claimants claim to be entitled to treble damages
from Imperial.
No provision has been made for potential liabilities related to Helms-Burton claims.
UK
In June 2020, the Group responded to a claimant law firm’s allegations of human rights issues in the Malawian tobacco supply
chain, which included allegations relating to child and forced labour. In December 2020, a claim was filed in the UK High Court
against Imperial Brands plc, Imperial Tobacco Limited and four of its subsidiaries (the Imperial Defendants) and two entities in the
BAT group by a group of tobacco farm workers. The Imperial Defendants have acknowledged service and confirmed to the claimants
that they intend to defend the claim in full. The Imperial Defendants have not yet been required to file their Defence. A procedural
hearing has been scheduled for November/December 2021. The claim is unquantified, and given the early stage of the litigation a
provision would not be appropriate.
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
MOROCCO
A number of cases have been raised against Société Marocaine des Tabacs SA (SMT) disputing a reduction to retirees’ pensions.
These cases have been in the courts for several years and SMT has successfully defended many of them in the lower courts. During
the year 36 cases have been reviewed by the Cour de Cassation (Supreme Court) in Morocco, and it is understood that they have
been decided against SMT and in favour of retirees.
The written reasoned judgment of the Cour de Cassation has not been received by SMT at the time of signing these accounts.
Furthermore, the judgments in favour of the retirees reportedly relate to unquantified claims. Because of this, it is not possible to
assess the impact of the decided cases on the remaining cases within the Moroccan courts. SMT continues to rigorously defend
its position.
The Company has reassessed its previously disclosed estimate of exposure to the potential liability following improved clarity of the
legal position. Considering the number of cases currently filed by retirees, and allowing for the uncertainty in the calculation of the
amount of any future payment, it now considers any outflow, if required, to be significantly lower than that previously disclosed.
31. NET DEBT
The movements in cash and cash equivalents, borrowings, and derivative financial instruments in the year were as follows:
£ million
At 1 October 2020
Reallocation of current borrowings from
non-current borrowings
Cash flow
Accretion of interest
Change in fair values
New leases, terminations & modifications
Exchange movements
At 30 September 2021
£ million
At 1 October 2019
Reallocation of current borrowings from
non-current borrowings
Cash flow
Accretion of interest
Change in fair values
New leases, terminations & modifications
Exchange movements
Transferred to held for disposal (note 11)
Current
borrowings
Lease
liabilities
Non-current
borrowings
Derivative
financial
instruments
Liabilities from
financing
activities
Cash and cash
equivalents
Total
((11,,444422))
((229999))
((1100,,221100))
((881166))
((1122,,776677))
11,,662266
((1111,,114411))
((11,,005555))
11,,229944
1133
––
––
8833
((11,,110077))
––
6699
((77))
––
((2266))
1122
((225511))
11,,005555
7722
11
––
––
336677
((88,,771155))
––
((4411))
11
5511
––
221188
((558877))
––
11,,339944
88
5511
((2266))
668800
––
((333300))
––
––
––
((99))
––
11,,006644
88
5511
((2266))
667711
((1100,,666600))
11,,228877
((99,,337733))
Current
borrowings
Lease
liabilities
Non-current
borrowings
Derivative
financial
instruments
Liabilities
from
financing
activities
Cash and
cash equivalents
(1,937)
(326)
(11,697)
(622)
(14,582)
2,286
(1,340)
1,857
32
–
–
(54)
–
–
72
(7)
–
(32)
(6)
–
1,340
(1)
–
–
–
148
–
At 30 September 2020
(1,442)
(299)
(10,210)
ANALYSIS BY DENOMINATION CURRENCY
£ million
Cash and cash equivalents
Total borrowings
Effect of cross currency swaps
Lease liabilities
Derivative financial instruments
Net debt
GBP
119900
((22,,669966))
((22,,550066))
22,,558800
7744
((3377))
–
23
(28)
80
–
(269)
–
(816)
EUR
118888
((33,,117799))
((22,,999911))
((44,,114477))
((77,,113388))
((115533))
–
1,951
(3)
80
(32)
(181)
–
(12,767)
USD
550055
((33,,991177))
((33,,441122))
11,,330055
((22,,110077))
((2233))
–
(611)
–
–
–
13
(62)
1,626
Other
440044
((3300))
337744
––
337744
((3388))
Total
(12,296)
–
1,340
(3)
80
(32)
(168)
(62)
(11,141)
2021
Total
11,,228877
((99,,882222))
((88,,553355))
((226622))
((88,,779977))
((225511))
((332255))
((99,,337733))
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
221177
217
NOTES TO THE FINANCIAL STATEMENTS – CONTINUED
Average reported net debt during the year was £11,148 million (2020: £13,564 million).
£ million
Cash and cash equivalents
Total borrowings
Effect of cross currency swaps
Lease liabilities
Derivative financial instruments
Net debt
ADJUSTED NET DEBT
GBP
412
(2,694)
(2,282)
2,666
384
(39)
EUR
556
(3,852)
(3,296)
(4,515)
(7,811)
(190)
USD
407
(5,083)
(4,676)
1,368
(3,308)
(27)
Other
251
(23)
228
–
228
(43)
2020
Total
1,626
(11,652)
(10,026)
(481)
(10,507)
(299)
(335)
(11,141)
Management monitors the Group’s borrowing levels using adjusted net debt which excludes interest accruals, the fair value of
derivative financial instruments providing commercial cash flow hedges and lease liabilities.
£ million
Reported net debt
Accrued interest
Lease liabilities
Fair value of interest rate derivatives
Adjusted net debt
Average adjusted net debt during the year was £10,361 million (2020: £12,765 million).
32. RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT
£ million
Decrease in cash and cash equivalents
Cash flows relating to derivative financial instruments
Repayment of lease liabilities
Increase in borrowings
Repayment of borrowings
Change in net debt resulting from cash flows
Other non-cash movements including revaluation of derivative financial instruments
Transferred to held for disposal (note 11)
Lease liabilities
Exchange movements
Movement in net debt during the year
Opening net debt
Closing net debt
2021
((99,,337733))
114400
225511
336677
2020
(11,141)
156
299
387
((88,,661155))
(10,299)
2021
((333300))
((4411))
6699
((885588))
22,,222244
11,,006644
5599
––
((2266))
667711
11,,776688
((1111,,114411))
((99,,337733))
2020
(611)
23
72
(1,240)
3,096
1,340
77
(62)
(358)
(168)
829
(11,970)
(11,141)
The increase in borrowings and repayment of borrowings reflect the cash flow movements relating to borrowings outstanding at the
start and at the end of each financial year; cash flows relating to short term borrowings drawn down and repaid within the year are
not included in this analysis.
33. NON-CONTROLLING INTERESTS
MATERIAL NON-CONTROLLING INTERESTS
Detailed below is the summarised financial information of Logista, being a subsidiary where the non-controlling interest of
49.99 per cent is considered material to the Group.
SUMMARISED BALANCE SHEET
at 30 September
Euro million
Current assets
Current liabilities
CCuurrrreenntt nneett aasssseettss
Non-current assets
Non-current liabilities
NNoonn--ccuurrrreenntt nneett aasssseettss
NNeett aasssseettss
2021
55,,995588
((66,,668877))
((772299))
11,,663300
((337766))
11,,225544
552255
2020
6,106
(6,909)
(803)
1,740
(421)
1,319
516
221188
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September
Euro million
RReevveennuuee
Profit for the year
Other comprehensive income
TToottaall ccoommpprreehheennssiivvee iinnccoommee
SUMMARISED CASH FLOW STATEMENT
for the year ended 30 September
Euro million
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
NNeett iinnccrreeaassee iinn ccaasshh aanndd ccaasshh eeqquuiivvaalleennttss
34. POST BALANCE SHEET EVENTS
SALE OF THE PREMIUM CIGAR DIVISION
2021
1100,,881177
117744
––
117744
2021
((330022))
550055
((119944))
99
2020
10,559
157
1
158
2020
830
(640)
(188)
2
On 26 October 2021 deferred consideration of €88 million was received in relation to the sale of the Premium Cigar Division.
35. RELATED UNDERTAKINGS
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, and joint ventures,
the principal activity, the full registered address and the effective percentage of equity owned by the Imperial Brands PLC, as at
30 September 2021, are provided in the entity financial statements of Imperial Brands PLC. There are no material related parties
other than Group companies.
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
221199
219
IMPERIAL BRANDS PLC BALANCE SHEET
at 30 September
£ million
FFiixxeedd aasssseettss
Investments
CCuurrrreenntt AAsssseettss
Debtors
CCrreeddiittoorrss:: aammoouunnttss ffaalllliinngg dduuee wwiitthhiinn oonnee yyeeaarr
NNeett ccuurrrreenntt aasssseettss
NNeett aasssseettss
CCaappiittaall aanndd rreesseerrvveess
Called up share capital
Capital redemption reserve
Share premium account
Profit and loss account – brought forward
Profit and loss account – profit for the year
Profit and loss account – other movements for year
TToottaall sshhaarreehhoollddeerrss’’ ffuunnddss
Notes
2021
2020
iii
iv
v
vi
77,,996688
7,968
33,,005566
4,364
((3377))
33,,001199
1100,,998877
110033
44
55,,883333
66,,334488
44
((11,,330055))
1100,,998877
(44)
4,320
12,288
103
4
5,833
8,158
35
(1,845)
12,288
As permitted by section 408(3) of the Companies Act 2006, the profit and loss account of the Company is not presented.
The financial statements on pages 220 to 234 were approved by the Board of Directors on 15 November 2021 and signed on its
behalf by:
THÉRÈSE ESPERDY
CHAIRMAN
LUKAS PARAVICINI
DIRECTOR
IMPERIAL BRANDS PLC STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2021
Share
premium and
capital
redemption
Share capital
Retained
Earnings
Total Equity
110033
55,,883377
66,,334488
1122,,228888
––
––
––
––
110033
103
–
–
–
–
––
––
––
––
55,,883377
44
44
––
44
44
––
((11,,330055))
55,,004477
((11,,330055))
1100,,998877
5,837
8,158
14,098
–
–
–
–
35
35
(92)
(1,753)
6,348
35
35
(92)
(1,753)
12,288
103
5,837
£ million
AAtt 11 OOccttoobbeerr 22002200
Profit for the year
TToottaall ccoommpprreehheennssiivvee iinnccoommee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Repurchase of shares
Dividends paid
AAtt 3300 SSeepptteemmbbeerr 22002211
AAtt 11 OOccttoobbeerr 22001199
Profit for the year
TToottaall ccoommpprreehheennssiivvee iinnccoommee
TTrraannssaaccttiioonnss wwiitthh oowwnneerrss
Repurchase of shares
Dividends paid
AAtt 3300 SSeepptteemmbbeerr 22002200
Total distributable reserves were £5,033 million (2020 £6,339 million).
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC
I. ACCOUNTING POLICIES
BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE WITH FRS 101
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities are discussed in note 2 of the Group financial statements for the year ended 30 September 2021.
Imperial Brands PLC (the Company) is the ultimate parent company within the Imperial Brands group (the Group). The Company is
a public company limited by shares, incorporated in the England and Wales and its principal activity continued to be that of holding
investments. The Company’s registered number is 3236483 and its registered address is 121 Winterstoke Road, Bristol, BS3 2LL.
The Company does not have any employees. The Directors of the Group manage the Group’s risks at a Group level, rather than
at an individual entity level. These risks are detailed in note 2 of the Group’s Annual Report (see pages 174-175).
These financial statements were prepared in accordance with the Companies Act 2006 as applicable to Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101), and applicable accounting standards.
The financial statements have been prepared on the historical cost basis, and as a going concern. Historical cost is generally based
on the fair value of the consideration given in exchange for the assets.
As permitted by section 408(3) of the Companies Act 2006, no separate profit and loss account has been presented for the Company.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available in the preparation of the
financial statements, as detailed below:
paragraph 79(a)(iv) of IAS 1 ;
Paragraph 38 of IAS 1 ‘Presentation of financial statements’ – comparative information requirements in respect of:
(i)
The following paragraphs of IAS 1 ‘Presentation of financial statements’:
(i)
(ii)
10(d) statement of cash flows;
10(f) – a statement of financial position as at the beginning of the preceding period when an entity applied an accounting
policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items
in its financial statements;
(iii) 16 – statement of compliance with all IFRS;
(iv) 38A – requirement for minimum of two primary statements, including cash flow statements;
(v) 38B-D – additional comparative information;
(vi) 40A-D – requirements for a third statement of financial position;
(vii) 111 – cash flow information; and
(viii) 134-136 – capital management disclosures;
IAS 7 ‘Statement of cash flows’;
Paragraph 30 and 31 of IAS 8 ‘Accounting Policies, changes in accounting estimates and errors’ – requirement for the disclosure of
information when an entity has not applied a new IFRS that has been issued but is not yet effective;
Paragraph 17 of IAS 24 ‘Related party disclosures’ – key management compensation;
The requirements in IAS 24 ‘Related party disclosures’ to disclose related party transactions entered into between two or more
members of a group;
The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payments;
IFRS 7 ‘Financial Instruments: Disclosures’; and
Paragraphs 91 to 99 of IFRS 13 ‘Fair value measurement’ – disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities.
The principal accounting policies, which have been applied consistently are set out below. The Directors do not consider there
to be any critical accounting estimates or judgements in respect of the Company, see note 2 Critical Accounting Estimates and
Judgements of the consolidated financial statements for further detail.
INVESTMENTS
Investments held as fixed assets comprise the Company’s investment in subsidiaries and are shown at historic purchase cost
less any provision for impairment. An annual review of Investments is performed for indicators of impairment. If indicators of
impairment are identified investments are tested for impairment to ensure that the carrying value of the investment is supported
by their recoverable amount.
DIVIDENDS
Final dividends are recognised as a liability in the period in which the dividends are approved by shareholders, whereas interim
dividends are recognised in the period in which the dividends are paid. Dividends receivable are recognised as an asset when they
are approved.
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NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC – CONTINUED
FINANCIAL INSTRUMENTS
Receivables held under a hold to collect business model are stated at amortised cost.
The calculation of impairment provisions is subject to an expected credit loss model, involving a prediction of future credit losses
based on past loss patterns. The revised approach involves the recognition of provisions relating to potential future impairments, in
addition to impairments that have already occurred. The expected credit loss approach involves modelling of historic loss rates, and
consideration of the level of future credit risk. Expected loss rates are then applied to the gross receivables balance to calculate the
impairment provision.
Cash and cash equivalents include cash in hand and deposits held on call, together with other short-term highly liquid investments.
TREASURY SHARES
When the Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from equity until the shares are reissued or disposed of. When such shares
are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and
the related income tax effects, increases shareholders’ funds. When such shares are cancelled they are transferred to the capital
redemption reserve.
INCOME TAXES
Judgement is involved in determining whether the Company is subject to a tax liability or not in line with tax law. Where liabilities
exist, estimation is often required to determine the potential future tax payments. The Company recognises provisions for tax based
on estimates of the taxes that are likely to become due. Where the final tax outcome is different from the amounts that were initially
recorded, such differences will impact the current income tax and deferred tax provisions in the period in which such determination
is made.
II. DIVIDENDS
DISTRIBUTIONS TO ORDINARY EQUITY HOLDERS
£ million
2021
2020
2019
Paid interim of 42.12 pence per share (2020: 41.70 pence, 2019: 62.56 pence)
– Paid June 2019
– Paid September 2019
– Paid December 2019
– Paid June 2020
– Paid September 2020
– Paid December 2020
– Paid June 2021
– Paid September 2021
Interim dividend paid
Proposed interim of 48.48 pence per share (2020: 48.00 pence, 2019: 72.00 pence)
– To be paid December 2021
Interim dividend proposed
Proposed final of 48.48 pence per share (2020: 48.01 pence, 2019: 72.01 pence)
– Paid March 2020
– Paid March 2021
– To be paid March 2022
Final dividend
Total ordinary share dividends of 139.08 pence per share (2020: 137.71 pence, 2019: 206.57 pence)
––
––
––
––
––
––
119999
119999
339988
445588
445588
––
––
445588
445588
11,,331144
–
–
–
197
197
453
–
–
847
–
–
–
454
–
454
1,301
298
298
679
–
–
–
–
–
1,275
–
–
680
–
–
680
1,955
The third interim dividend for the year ended 30 September 2021 of 48.48 pence per share amounts to a proposed dividend of
£458 million, which will be paid in December 2021.
The proposed final dividend for the year ended 30 September 2021 of 48.48 pence per share amounts to a proposed dividend
payment of £458 million in March 2022 based on the number of shares ranking for dividend at 30 September 2021, and is subject to
shareholder approval. If approved, the total dividend paid in respect of 2021 will be £1,314 million (2020: £1,301 million). The dividend
paid during 2021 is £1,305 million (2020: £1,753 million).
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
III. INVESTMENTS
COST OF SHARES IN IMPERIAL TOBACCO HOLDINGS (2007) LIMITED
£ million
At 1 October
At 30 September
The Directors confirm that the carrying value of the investments is supported by their underlying net assets.
A list of the subsidiaries of the Company is shown on pages 225-234.
IV. DEBTORS
£ million
Amounts owed from Group undertakings
2021
77,,996688
77,,996688
2020
7,968
7,968
2021
33,,005566
2020
4,364
Amounts owed from Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable
on demand.
V. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
£ million
Amounts owed by Group undertakings
Cash at bank and in hand
Other creditors
2021
2020
3355
22
––
3377
35
2
7
44
Amounts owed by Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable
on demand.
VI. CALLED UP SHARE CAPITAL
£ million
Authorised, issued and fully paid
1,020,697,238 ordinary shares of 10p each (2020: 1,020,697,238)
2021
2020
110033
103
During the year nil shares (2020: 5,098,508 shares) were repurchased and immediately cancelled, increasing the Capital
Redemption reserve.
On 6 March 2014, 31,942,881 shares held in Treasury were cancelled creating the Capital Redemption reserve, and between
September 2017 and December 2017, 4,973,916 shares were cancelled increasing this reserve.
VII. RESERVES
As permitted by section 408(3) of the Companies Act 2006, the profit and loss account of the Company is not presented. The
profit attributable to shareholders, dealt with in the financial statements of the Company, is £4 million (2020: £35 million).
TREASURY SHARES
Shares purchased under the Group’s buyback programme represent a deduction from equity shareholders’ funds, and are only
cancelled if the number of treasury shares approaches 10 percent of issued share capital. During the year the Group purchased nil
shares at a cost of £nil million (2020: 5,098,508 shares at a cost of £92 million) which were immediately cancelled. Shares held in
treasury do not qualify for dividends.
£ million unless otherwise indicated
At 1 October
Purchase of shares
Cancellation of shares
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
Millions of
shares
(number)
7744..33
––
––
––
7744..33
77..33
2021
Value
22,,118833
––
––
––
22,,118833
nn//aa
Millions of
shares
(number)
74.3
5.1
(5.1)
–
74.3
7.3
2020
Value
2,183
92
(92)
–
2,183
n/a
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NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC – CONTINUED
VIII. GUARANTEES
The Company provides guarantees to the following subsidiaries under section 479A of the Companies Act 2006, whereby the
subsidiaries, incorporated in the UK and Ireland, are exempt from the requirements of the Act relating to the audit of individual
accounts for the financial year ending 30 September 2021:
Imperial Tobacco Holdings (2007) Limited
Sinclair Collis Limited
Imperial Tobacco Ventures Limited
Rizla UK Limited
Imperial Tobacco Overseas (Polska) Limited
La Flor de Copan UK Limited
Tabacalera de Garcia UK Limited
Imperial Brands Ventures Limited
Nerudia Consulting Limited
Nerudia Compliance Limited
The Company has guaranteed various committed and uncommitted borrowings facilities and liabilities of certain UK and overseas
undertakings, including Dutch and Irish subsidiaries. As at 30 September 2021, the amount guaranteed is £14,708 million (2020:
£18,620 million).
The guarantees include the Dutch subsidiaries, all of which are included in the consolidated financial statements as at 30 September 2021
and which, in accordance with Book 2, Article 403 of The Netherlands Civil Code, do not file separate financial statements with the
Chamber of Commerce. Under the same article, the Company has issued declarations to assume any and all liabilities for any and
all debts of the Dutch subsidiaries.
Many of the committed revolving credit facilities remain undrawn as at 30 September 2021 but the maximum potential exposure
under each facility has been included due to the ongoing commitment, only drawn utilised balances have been included for facilities
that are uncommitted in nature.
The guarantees also cover the Irish subsidiaries, all of which are included in the consolidated financial statements as at 30 September 2021.
The Irish companies, namely John Player & Sons Limited, have therefore availed themselves of the exemption provided by section 17 of
the Irish Companies (Amendment) Act 1986 in respect of documents required to be attached to the annual returns for such companies.
The Company has also provided a parent guarantee to the Imperial Tobacco Pension Trustees Ltd, the main UK pension scheme.
The Directors have assessed the fair value of the above guarantees and do not consider them to be material. They have therefore not
been recognised on the balance sheet.
IX. RELATED PARTY DISCLOSURES
Details of Directors’ emoluments and interests are provided within the Directors’ Remuneration Report. The Directors Remuneration Report,
on pages 129-139 includes details on salary, benefits, pension and share plans. These disclosures form part of the financial statements.
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I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
RELATED UNDERTAKINGS
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, and joint ventures, the
principal activity, the country of incorporation and the effective percentage of equity owned, as at 30 September 2021 are disclosed
below. With the exception of Imperial Tobacco Holdings (2007) Limited, which is wholly owned by the Company, none of the shares
in the subsidiaries is held directly by the Company.
SUBSIDIARIES: REGISTERED IN ENGLAND AND WALES, WHOLLY OWNED
Name
Altadis Newco Limited
Attendfriend Limited
British Tobacco Company Limited
Congar International UK Limited
Hypofill Limited
Imperial Brands Enterprise Finance Limited
Imperial Brands Finance PLC
Imperial Brands Ventures Finance Limited (v)
Imperial Brands Ventures Holdings Limited
Imperial Brands Ventures Holdings (1) Limited
Imperial Brands Ventures Holdings (2) Limited (xi)
Imperial Brands Ventures Limited
Imperial Investments Limited
Imperial Tobacco Altadis Limited
Imperial Tobacco Capital Assets (1)
Imperial Tobacco Capital Assets (2)
Imperial Tobacco Capital Assets (3)
Imperial Tobacco Capital Assets (4)
Imperial Tobacco Group Limited
Imperial Tobacco Holdings (1) Limited (iv)
Imperial Tobacco Holdings (2007) Limited (iv)
Imperial Tobacco Holdings Limited
Imperial Tobacco Initiatives
Imperial Tobacco Lacroix Limited
Imperial Tobacco Limited
Imperial Tobacco Overseas (Polska) Limited
Imperial Tobacco Overseas Holdings (1) Limited
Imperial Tobacco Overseas Holdings (2) Limited
Imperial Tobacco Overseas Holdings (3) Limited
Imperial Tobacco Overseas Holdings (4) Limited
Imperial Tobacco Overseas Holdings Limited
Imperial Tobacco Overseas Limited (x)
Imperial Tobacco Pension Trustees (Burlington House) Limited
Principal activity and registered address
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Provision of treasury services to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Provision of treasury services to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Provision of finance to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Provision of finance to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Marketing and sale of tobacco products in the UK
121 Winterstoke Road, Bristol BS3 2LL England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
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RELATED UNDERTAKINGS – CONTINUED
Name
Imperial Tobacco Pension Trustees Limited (iv)
Imperial Tobacco Ventures Limited
ITG Brands Limited
Joseph & Henry Wilson Limited
La Flor de Copan UK Limited
Nerudia Limited (v)
Nerudia Trading Limited
Nerudia Consulting Limited
Nerudia Compliance Limited
Park Lane Tobacco Company Limited
Rizla UK Limited
Sensus Investments Limited
Sinclair Collis Limited (iv)
Tabacalera de Garcia UK Limited
Principal activity and registered address
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Licensing rights for the manufacture and sale of tobacco products
121 Winterstoke Road, Bristol BS3 2LL England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Research and development of e-vapour products
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
In Liquidation
The offices of BDO LLP, Two Snowhill Birmingham, B4 6GA, England
Research and development of e-vapour products
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
In Liquidation
The offices of BDO LLP, 5 Temple Square, Temple Street, Liverpool, L2 5RH, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Entity ceased trading
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
In Liquidation
The offices of BDO LLP, Two Snowhill Birmingham, B4 6GA, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
SUBSIDIARIES: INCORPORATED OVERSEAS, WHOLLY OWNED
Name
1213509 B.C. Limited (i)
Altadis Canarias S.A.U. (ii)
Country of incorporation
Principal activity and registered address
Canada
Spain
Holding investments in subsidiary companies
Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC. V6C 2X8, Canada
Marketing and sale of tobacco products in the Canary Islands
C/Comandante Azcarraga 5, Madrid, 28016, Spain
Altadis Holdings USA Inc
United States of America
Altadis Management Services Corporation
United States of America
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
Trademark service company
714 Green Valley Road Greensboro, NC27408 USA
Altadis Middle East FZCO
United Arab Emirates
Sales and marketing of tobacco products in the Middle East
P.O. Box. No. 261718, Jebel Ali Free Zone, Dubai, 261718, United Arab Emirates
Altadis Ocean Indien S.A.S.
France (La Reunion Island)
Altadis Retail Corporation
United States of America
Altadis S.A.U.
Spain
Altadis Shade Company LLC
United States of America
Athena IP Vermogensverwaltungs GmbH
Germany
Cacique, SA – Comércio, Importaçao e Exportaçao Brazil
CBHC Inc
United States of America
Commonwealth-Altadis, Inc
United States of America
Commonwealth Brands Inc
United States of America
Sales and distribution of tobacco products in La Reunion Island
ZI n° 2 – BP 256 – 97457 Saint Pierre Cedex, La Reunion
Trademark owner
300 Delaware Avenue, Ste. 1230, Wilmington, DE, 19801, USA
Manufacture, sales and distribution of tobacco products in Spain
C/Comandante Azcarraga 5, Madrid 28016, Spain
Manufacture and sale of tobacco products in the USA
217 Shaker Road, Somers, CT, 06071, USA
Davidoff cigarette trademark owner
Max-Born-Straße 4, Hamburg, 22761, Germany
Dormant
Rua Marechal Deodoro, 690 – Centro Arapiraca, Alagoas, Brazil
Dormant
714 Green Valley Road Greensboro, NC27408 USA
Sales and distribution of tobacco products in the USA
714 Green Valley Road Greensboro, NC27408 USA
Manufacture and sale of tobacco products in the USA
714 Green Valley Road Greensboro, NC27408 USA
Congar International Corp (Delaware)
United States of America
Manufacturing and distribution of mass market cigars
Road 14, Km. 72.2, Ave. Antonio R. Barcelo, Cayey, DE, PR 00736, USA
Connecticut Shade Corporation
United States of America
Consolidated Cigar Holdings Inc (vii)
United States of America
Coralma International S.A.S.
France
Direct Products Inc (Inactive)
United States of America
Dunkerquoise des Blends S.A.S.
Ets L Lacroix Fils NV/SA
France
Belgium
Fontem (Beijing) Technology Solutions Limited (i)
People’s Republic of China
Fontem Canada Limited
Canada
Fontem Holdings 1 B.V.
The Netherlands
Fontem Holdings 2 B.V.
The Netherlands
Fontem Holdings 3 B.V.
The Netherlands
Fontem Holdings 4 B.V.
The Netherlands
Fontem Holdings B.V.
The Netherlands
Fontem US, LLC.
United States of America
Fontem Ventures B.V.
The Netherlands
Huotraco International Limited
Cambodia
Imperial Brands Colombia S.A.S.
Colombia
Imperial Brands Finance France S.A.S.
France
Imperial Brands Finance Netherlands B.V.
The Netherlands
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
Holding investments in subsidiary companies
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
Tobacco processing
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Manufacture and sale of tobacco products in Belgium
Sint-Bavostraat 66, 2610 Wilrijk, Belgium
Research and development
Room 201, Floor 2, Building 6, Yuan Dong science and technology park,
6 Hepingli North Street, Dong Cheng District, Beijing, 100013, China
Non-trading
C/O BDO Canada LLP, Suite 120, 230 Brownlow Avenue, Dartmouth,
Nova Scotia B3B 0G5, Canada
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Sales and marketing of tobacco products in the US
714 Green Valley Road Greensboro, NC27408 USA
Holding investments in subsidiary companies
Radarweg 60, Amsterdam, 1043 NT, The Netherlands
Production and marketing of tobacco products
No 299, Preah Ang Duong Street, Sangkat Wat Phnom, Khan Daunh Penh,
Phnom Penh, Cambodia
In Liquidation
TV21 No.98 05, Bogota D.C. Colombia
Provision of finance to other Group companies
143 bd Romain Rolland, Cedex 14, Paris, 75685, France
Provision of finance to other Group companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
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RELATED UNDERTAKINGS – CONTINUED
Name
Country of incorporation
Principal activity and registered address
Imperial Brands Finland Oy
Finland
Imperial Brands Global Duty Free & Export S.L.
Spain
Imperial Brands Holdings International B.V.
The Netherlands
Imperial Brands Japan Kabushiki Kaisha (v)
Japan
Imperial Brands Luxembourg sarl
Luxembourg
Imperial Brands Malta Limited
Malta
Imperial Brands Ventures LLC
United States of America
Imperial Finance Ireland Limited
Imperial Finance Malta Limited
Ireland
Malta
Imperial Nominees Limited (ii)
New Zealand
Imperial Tobacco (Asia) Pte. Ltd.
Singapore
Imperial Tobacco Australia Limited
Australia
Imperial Tobacco Austria Marketing Service GmbH Austria
Imperial Tobacco BH doo (i)
Bosnia-Herzegovina
Imperial Tobacco Bulgaria EOOD (i)
Bulgaria
Imperial Tobacco CR s.r.o.
Czech Republic
Imperial Tobacco Distribution EOOD (i)
Bulgaria
Imperial Tobacco Distribution Romania srl (i)
Romania
Imperial Tobacco EFKA Management GmbH
Germany
Imperial Tobacco España, S.L.U.
Imperial Tobacco Estonia OÜ
Spain
Estonia
Imperial Tobacco Germany Finance GmbH
Germany
Imperial Tobacco Hellas S.A.
Greece
Imperial Tobacco Holdings (Netherlands) B.V.
The Netherlands
Imperial Tobacco Holdings International B.V.
The Netherlands
Imperial Tobacco Intellectual Property Limited
Ireland
Imperial Tobacco International GmbH
Germany
Imperial Tobacco Ireland Unlimited Company (v)
Ireland
Imperial Tobacco Italia S.r.l.
Imperial Tobacco Italy S.r.l.,
Italy
Italy
Imperial Tobacco Kyrgyzstan LLC (i)
Kyrgyzstan
Sales and marketing of tobacco products in Finland
Poikluomantie 1-3, Piispanristi, 20760, Finland
Sale and export of duty-free tobacco products
C/Comandante Azcarraga 5, Madrid 28016, Spain
Provision of finance to other Group companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Sales and marketing of tobacco products in Japan
The Okura Prestige Tower, 10th Floor, 2-10-4 Toranoomon, Minato-ku, Tokyo 105-0001, Japan
Sale of tobacco products in Luxembourg
56 Rue Charles Martel, L-2134, Luxembourg
Provision of finance to other Group companies
Aragon House Business Centre, St. George’s Park, St. Julians, Malta STJ3140
Holding investments in subsidiary companies
251 Little Falls Drive, Wilmington, DE 19808 USA
Provision of finance to other Group companies
21 Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Provision of finance to other Group companies
Aragon House Business Centre, St. George’s Park, St. Julians, Malta STJ3140
Trustee Company
Level 24, 157 Lambton Quay, Wellington Central, Wellington 6011, New Zealand
Trading of tobacco related products
80 Robinson Road, #02-00, 068898, Singapore
Sales and marketing of tobacco products in Australia
John Player Special House, Level 4, 4-8 Inglewood Place, Norwest, NSW 2153, Australia
Marketing of tobacco products in Austria
Zieglergasse 6, A-1070 Vienna, Austria
Marketing and distribution of tobacco products in Bosnia
Adema Buce, Sarajevo, 71000, Bosnia & Herzegovina
Manufacture and sale of tobacco products in Bulgaria
15 Henrih Ibsen str, Floor 4, Office 4, Sofia, 1407, Bulgaria
Sales and marketing of tobacco products in the Czech Republic
Radlicka 14, Prague 5, 150 00, Czech Republic
Marketing and distribution of tobacco products in Bulgaria
15 Henrih Ibsen str, Floor 4, Office 4, Sofia, 1407, Bulgaria
Marketing and distribution of tobacco products in Romania
Nicolae Canea Street no. 140-160, EOS Business Park, 1st Floor North, 2nd District,
Bucharest, Romania
Manufacture of tobacco products in Germany
Max-Born-Straße 4, Hamburg, 22761, Germany
Holding investments in subsidiary companies
C/Comandante Azcarraga 5, Madrid 28016, Spain
Dormant
Valge 13, 11145 Tallinn, Estonia
Holding investments in subsidiary companies
Max-Born-Straße 4, Hamburg, 22761, Germany
Sales and marketing of tobacco products in Greece
300 Klisthenous Str, 15344 Gerakas, Attikis, Athens, Greece
Provision of finance to other Group companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Provision of finance to other Group companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Ownership of trademarks
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Export and marketing of tobacco products
Max-Born-Straße 4, Hamburg, 22761, Germany
Dormant
6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
Sales and marketing of tobacco products in Italy
Via Luca Passi 22, Roma, 00166, Italy
Holding investments in subsidiary companies
Via Luca Passi 22, Roma, 00166, Italy
Marketing and distribution of tobacco products in Kyrgyzstan
115, Ibraimov Street, 10th Floor, Business Center ‘Asyl-Tash’, Bishkek, 720021, Kyrgyzstan
Imperial Tobacco Magyarország
Dohányforgalmázo Kft
(Imperial Tobacco Hungary)
Hungary
Sales and marketing of tobacco products in Hungary
Váci út 141, 1138, Budapest, Hungary
Imperial Tobacco Management Luxembourg sarl
Luxembourg
Imperial Tobacco Marketing Sdn Bhd
Malaysia
Imperial Tobacco New Zealand Limited
New Zealand
Holding investments in subsidiary companies
56 Rue Charles Martel, L-2134, Luxembourg
Trading of tobacco products
12th Floor Menara Symphony, No 5 Jalan Prof, Khoo Kay Kim, Seksyey,
46200 Petaling Jaya, Selangor, Malaysia
Manufacture and sale of tobacco products in New Zealand
Level 24, 157 Lambton Quay, Wellington Central, Wellington 6011, New Zealand
222288
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
Name
Country of incorporation
Principal activity and registered address
Imperial Tobacco Norway A.S.
Norway
Imperial Tobacco Polska Manufacturing S.A.
Poland
Imperial Tobacco Polska S.A.
Imperial Tobacco Portugal SSPLC
Poland
Portugal
Imperial Tobacco Production Ukraine (i)
Ukraine
Imperial Tobacco Sales & Marketing LLC (i)
Russia
Imperial Tobacco SCG doo Beograd (i)
Imperial Tobacco Sigara ve Tutunculuck
Sanayi Ve Ticaret A.S.
Serbia
Turkey
Imperial Tobacco Slovakia a.s.
Slovak Republic
Imperial Tobacco Taiwan Co Limited
Imperial Tobacco Taiwan Manufacturing Company
Limited
Imperial Tobacco Tutun Urunleri Satis Ve
Pazarlama A.S.
Imperial Tobacco Ukraine (i)
Taiwan
Taiwan
Turkey
Ukraine
Imperial Tobacco US Holdings BV
The Netherlands
Imperial Tobacco Volga LLC (i)
Russia
Imperial Tobacco West Africa S.A.S. (i)
Cote D’Ivoire
Imperial Tobacco Zagreb doo (i)
Imperial Ventures Malta Limited
Croatia
Malta
IMPTOB South Africa (Pty) Limited
South Africa
Sales and marketing of tobacco products in Norway
Ryensvingen 2-4, 0680, Oslo, Norway
Manufacture of tobacco products in Poland
Ul. Tytoniowa 2/6, Radom, 26-600, Poland
Manufacture and sale of tobacco products in Poland
Jankowice, ul. Przemyslowa 1, Pl-62-080, Tarnowo-Podgome, Poland
Advertising and support management
144, 7 DT, Avenida da Liberdade, Lisbon, Portugal
Manufacture of tobacco products in Ukraine
ul. Akademika Zabolotnogo, 35, 03026, Kiev, Ukraine
Sales and marketing of tobacco products in Russia
Degtjarnyi pereulok 4-1, 125009 Moskau, Russian Federation
Marketing and distribution of tobacco products in Serbia
Milutina Milankovica 11a, Novi Beograd, Serbia
Manufacture of tobacco products in Turkey
Kecilikoy OSB, Mah Ahmet Tutuncuoglu Cad. No.11, 45030 Yunusemre, Manisa, Turkey
Sales and marketing of tobacco products in the Slovak Republic
7A Galvaniho, 824 53 Bratislava, Slovakia
Sales and marketing of tobacco products in Taiwan
6F1-2 No.2 Sec. 3, Minsheng E road, Zhongshen District, Taipei, Taiwan, Province of China
Manufacture of tobacco products in Taiwan
No 8 Cyunyi Road, Jhunan, MiaoLi County 350, Taiwan Province of China
Sales and marketing of tobacco products in Turkey
Kecilikoy OSB, Mah Ahmet Tutuncuoglu Cad. No.11, 45030 Yunusemre, Manisa, Turkey
Sales and marketing of tobacco products in Ukraine
ul. Akademika Zabolotnogo, 35, 03026, Kiev, Ukraine
Holding investments in subsidiary companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Manufacture of tobacco products in Russia
ul.Tomskaja 7, 400048 Volgograd, Russian Federation
Holding investments in subsidiary companies
Cocody-Nord, Quartier Gendarmerie, TF 5937, 01 B.P. 724 Abidjan
Dormant
Gradi anska 30, Zagreb, HR-10000, Croatia
Provision of finance to other Group companies
Aragon House Business Centre, St. George’s Park, St. Julians, Malta STJ3140
Provision of services to other Group companies
Suite 107, Beacon Rock, 21 Lighthouse Road, Umhlanga 4319, South Africa
International Marketing Promotional
Services Limited
Nigeria
ITG Brands Holdco LLC
United States of America
ITG Brands, LLC
ITG Cigars Inc
United States of America
United States of America
ITG Holdings USA Inc (iv)
United States of America
Sales and marketing and of tobacco products in Nigeria
13 A, Dapo Solanke Close – Lekki Phase 1, Lagos, Nigeria
Holding investments in subsidiary companies
714, Green Valley Road, Greensboro, NC 27408, USA
Marketing and distribution of tobacco products in the USA
714, Green Valley Road, Greensboro, NC 27408, USA
Manufacture and sale of cigars in the USA
2601 Tampa East Blvd, Tampa Florida FL33619-8306, USA
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
ITL Pacific (HK) Limited
Hong Kong
Manufacture and sale of tobacco and tobacco related products
Room 3907-08, 39th Floor, Hopewell Centre, 183 Queens Road East, Wanchai, Hong Kong
JAW-Invest Oy
John Player & Sons Limited
John Player Ireland Pension Trustee Limited
JSNM SARL
MYBLU Spain S.L.
Max Rohr, Inc
Finland
Ireland
Ireland
France
Spain
Trademark owner
Poikluomantie 1-3, Piispanristi, 20760, Finland
Sales and marketing of tobacco products in the Republic of Ireland
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Trustee Company
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Trademark owner
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Marketing and sale of e-vapour products in Spain
CR. Robledo de Chavela, S/N. San Lorenzo del Escorial, Madrid, 28200, Spain
United States of America
Trademark owner
300 Delaware Avenue, Ste. 1267, Wilmington, DE,19801, USA
Meccarillos France, S.A.
Luxembourg
Meccarillos International, S.A.
Luxembourg
Meccarillos Suisse, S.A.
Luxembourg
Millennium Tobacco Unlimited Company
Ireland
Newglade International Unlimited Company
Ireland
Holding investments in subsidiary companies
Route Des Trois Cantons 9, 8399 Windhof, Luxembourg
Holding investments in subsidiary companies
Route Des Trois Cantons 9, 8399 Windhof, Luxembourg
Holding investments in subsidiary companies
Route Des Trois Cantons 9, 8399 Windhof, Luxembourg
Provision of finance to other Group companies
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Dormant
6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
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W W W . I M P E R I A L B R A N D S P L C . C O M
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RELATED UNDERTAKINGS – CONTINUED
Name
Country of incorporation
Principal activity and registered address
Philippine Bobbin Corporation
Philippines
Real Club de Golf la Herrería S.A.
Spain
Reemtsma Cigarettenfabriken GmbH
Germany
Robert Burton Associates Limited
United States of America
Skruf Snus AB
Sweden
Société Centrafricaine de Cigarettes S.A. (i)
Central African Republic
Société Centrafricaine de Distribution Sarl (i)
Central African Republic
Manufacture of tobacco related products
Cavite Economic Zone, Phase II, Rosario, Cavite, Philippines
Management of golf course
CR. Robledo de Chavela, S/N. San Lorenzo del Escorial, Madrid, 28200, Spain
Manufacture and sale of tobacco products in Germany
Max-Born-Straße 4, Hamburg, 22761, Germany
In dissolution
5900 North Andrews Avenue, Ste. 1100, Fort Lauderdale, Florida, FL 33309, USA
Manufacture, marketing, sales of tobacco products in Sweden
PO Box 3068, Stockholm, SE-103 61, Sweden
Manufacture and distribution of cigarettes in Central African Republic
Rue David Dacko, BP 1446, Bangui, Central African Republic
Dormant
Avenue Boganda Pk4, Bangui, Central African Republic
Société du Mont Nimba Sarl (i)
Guinee Conakry
In Liquidation
BP 3391, Conakry, Guinea
Société Nationale d’Exploitation Industrielle des
Tabacs et Allumettes S.A.S. (SEITA)
Société pour le Développement du Tabac en Afrique
S.A.S .
France
France
System Designed to Africa Sarl
Morocco
Tabacalera Brands Inc
United States of America
Tabacalera de Garcia Limited
Tabacalera de Garcia S.A.S.
Bermuda
France
Tabacalera de Garcia S.A.S.
Dominican Republic
Manufacture and sale of tobacco products in France, and export of tobacco products
143 bd Romain Rolland, Cedex 14, Paris, 75685, France
Purchasing company
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Distribution of tobacco products
Km 17, Route national de Rabat, Ain Harrouda, Morocco
Trademark owner
103 Foulk Road, Suite 253, Wilmington, Delaware, 19803, USA
Holding investments in subsidiary companies
Claredon House, 2 Church Street, Hamilton, Bermuda
Manufacturing and commercial activities related to tobacco
320, Rue Saint-Honore, Paris, 75001, France
Dormant
Industrial Free Zone #1, La Romana, Dominican Republic
Tahiti Tabacs SASU
France, Papeete (Tahiti)
Importation, distribution and selling of tobacco products in Tahiti (French Polynesia)
PK 4, 300 Côté mer, 98701 Arue, BP 20692 Papeete, French Polynesia
Tobaccor S.A.S. (v)
France
Toba na 3DVA, trgovsko podjetje, d.o.o.
Slovenia
Toba na Grosist d.o.o.
Toba na Ljubljana d.o.o.
Slovenia
Slovenia
Van Nelle Tabak Nederland B.V.
The Netherlands
Van Nelle Tobacco International Holdings B.V.
The Netherlands
Von Erl. GmbH (i)
Austria
Holding investments in subsidiary companies
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Retail of products in Slovenia
Cesta 24., junija 90, SI 1231 Ljubljana – Ĉrnu e, Slovenia
Marketing and distribution in Slovenia
Cesta 24., junija 90, SI 1231 Ljubljana – Ĉrnu e, Slovenia
Sales and marketing tobacco products in Slovenia
Cesta 24., junija 90, SI 1231 Ljubljana – Ĉrnu e, Slovenia
Manufacture and sale of tobacco products in the Netherlands
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Sale of tobacco and tobacco related products
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Sale of e-vapour products in the US and Europe
Hegelgasse 13/26, 1010 Vienna, Austria
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| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
SUBSIDIARIES: INCORPORATED OVERSEAS, PARTLY OWNED
Name
Country of incorporation Principal activity and registered address
Be To Be Pharma, S.L.U.
Spain
CDIL Companhia de Distribuçao Integral
Logista Portugal, S.A.
Portugal
Compagnie Agricole et Industrielle des
Tabacs Africains S.A.S.
France
Distribution of pharmaceuticals
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo 3,
Alcorcor, Madrid, 28922, Spain
Marketing and sale of tobacco and other products , and payment services in Portugal.
Edifico Logista, Rua do Vale da Fonte Coberta, 153 E 167, 2890-182 Alcochete, Portugal
Management company
143 bd Romain Rolland, Cedex 14, Paris, 75685, France
Compagnie Réunionnaise des Tabacs
S.A.S.
France, St Pierre
(La Reunion Island)
Manufacture of cigarettes
ZI n° 2 – BP 256 – 97457 Saint Pierre Cedex, La Reunion
Compañía de Distribución Integral de
Publicaciones Logista S.L.U. (iv)
Spain
Compañía de Distribución Integral
Logista Holdings, S.A. (iii)
Compañía de Distribución Integral
Logista Polska, sp. Z o.o. (SL)
Compañía de Distribución Integral
Logista S.A.U.
Cyberpoint, S.L.U.
Spain
Poland
Spain
Spain
Distribuidora de las Rias S.A.U.
Spain
Distribuidora del Este S.A.U.
Spain
Distribuidora del Noroeste S.L.
Spain
Dronas 2002, S.L.U.
Spain
Imperial Tobacco TKS a.d. (i)
Macedonia
Imperial Tobacco TKS a.d. – Dege Kosove Republic of Kosovo
Imprimerie Industrielle Ivoirienne SA (i)
Cote D’Ivoire
La Mancha 2000, S.A.U.
Spain
Lao Tobacco Limited (i)
Laos
Logesta Deutschland GmbH
Germany
Logesta France SARL
France
Logesta Gestión de Transporte S.A.U.
Spain
Logesta Italia, S.R.L.,
Italy
Logesta Lusa L.D.A. (i)
Portugal
Logesta Polska Sp Zoo
Poland
Logista France Holding S.A.
France
Logista France S.A.S.
Logista Italia Spa
Logista Payments, S.L.U.
France
Italy
Spain
Logista Pharma Canarias, S.A.U.
Spain
Logista Pharma S.A.U.
Spain
Logista Promotion et Transport S.A.S.
France
Distribution of published materials and other products
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo 3,
Alcorcor, Madrid, 28922, Spain
Holding investments in subsidiary companies
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Distribution of tobacco products in Poland
Avenida Jerozolimskie 133/131, 02-304 Varsaw, Poland
Distribution of tobacco products in Spain
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Distribution of POS software
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo 3,
Alcorcor, Madrid, 28922, Spain
Distribution of published materials and other products in Spain
Avda. Cerezos, Parcela D-28, Polígono Industrial PO.CO.MA.CO , 15190 Mesoiro,
La Coruña, Spain
Distribution of published materials and other products in Spain
Felix Rodriguez de la Fuente, 11, Parque Epresarial de Elche, Alicante, Elche, 03203, Spain
Distribution of published materials and other products in Spain
C/ Gandarón, 34, interior, Vigo, Pontevedra, 36214, Spain
Industrial parcel and express delivery service
Energía, 25-29; Polígono Industrial Nordeste, Sant Andreu de la Barca,
Barcelona, 08740, Spain
Manufacture, marketing and distribution of tobacco products in Macedonia
ul 11, Oktomvri 125, P O Box 37, 1000 Skopje, Macedonia
Manufacture, marketing and distribution of tobacco products in Kosovo
Rrafshi i Kosoves, Nr. 80 (Magjistralja M2: Prishtine-Shkup, km i 2-te Vetermik) Prishtine,
Republic of Kosovo
Printing company
Zone Industrielle du Banco, Lots No 147-149-150, 01 BP 4124, Yopougon/Abdjan,
Cote d’Ivoire
Distribution services
Av. de la Veguilla, 12-Nave A- Parcela S-120, Cabanillas del Campo,
Guadalajara, 19171, Spain
Manufacture and distribution of cigarettes in Laos
KM 8, Thadeua Road, P O Box 181, Vientiane, Lao People’s Democratic Republic
Long haul transportation in Germany
Pilotystrasse, 4, 80538 München, Germany
Long haul transportation in France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
Long haul transportation services in Spain
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Long haul transportation in Italy
Via Valadier, 37 – 00193 Roma, Italy
Long haul transportation in Portugal
Expanso da Area Industrial do Passil, Edificio Logista, Lote 1A, Palhava,
Alcochete, Portugal
Long haul transportation in Poland
Aleje Jerozolimskie 133/32, 02/304 Varsovia, Poland
Holding investments in subsidiary companies
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
Holding investments in subsidiary companies
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
Long haul transportation in Italy
Via Valadier, 37 – 00193 Roma, Italy
Provision of financial services
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Pharmaceutical products logistics in Canary Islands
C/ Entreríos Nave 3; Las Palmas de Gran Canaria, 35600, Spain
Distribution of pharmaceuticals
Felix Rodriguez de la Fuente, 11, Parque Epresarial de Elche, Alicante, Elche, 03203, Spain
Marketing and distribution of tobacco products in France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
Percentage
owned
50.0
50.0
99.9
98.9
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
99.1
99.1
78.7
50.0
53.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
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RELATED UNDERTAKINGS – CONTINUED
Name
Country of incorporation Principal activity and registered address
Percentage
owned
Logista Regional de Publicaciones, S.A.U. Spain
Logista, Transportes, Transitários e
Pharma, Lda., Sociedad Unipersonal
Portugal
Logista-Dis S.A.U.
Spain
MABUCIG Industries S.A. (i)
Burkina Faso
MABUCIG (Manufacture Burkinabe
de Cigarette) S.A. (i)
Burkina Faso
Marketing, distribution and sale to points of sale in Spain.
Poligono Industrial Polvoranca, Calle Trigo 39, Leganes, Madrid, Spain
Industrial parcel delivery and pharmaceutical distribution in Portugal
Expanso da Area Industrial do Passil, Edificio Logista, Lote 1A, Palhava,
Alcochete, Portugal
Sale of tobacco products in Spain
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Manufacture of cigarettes in Burkina Faso
No 55, Rue 19.14, , B.P. 94, Kodeni, – Bobo Dioulasso, Burkina Faso
Manufacture of cigarettes in Burkina Faso
Zone Industrielle de Bobo-Dioulasso, Secteur No 19,
Rue 19.14 No adressage 55, B.P. 94 – Bobo Dioulasso, Burkina Faso
France, Bastia
Manufacture and sales of cigarettes
Route Nationale 193, Furiani, 20600, France
Macotab S.A.S. (Manufacture Corse
des Tabacs)
Manufacture de Cigarettes du Tchad
S.A. (i)
Midsid – Sociedade Portuguesa de
Distribução, S.A.U.
MTOA S.A. (i)
NITAF Limited, IL (i)
Tchad
Portugal
Senegal
Nigeria
Promotora Vascongada de Distribuciones
S.A.U.
Spain
Publicaciones y Libros S.A.U.
Spain
Reemtsma Kyrgyzstan OJSC (i)
Kyrgyzstan
S3T Pte Ltd (i)
SACIMEM S.A. (i)
Singapore
Madagascar
SITAB Industries S.A. (i)
Cote D’Ivoire
Manufacture and distribution of cigarettes in Chad
0502 rue 1039, Arrondissement 1, N’DJamena, Chad
Wholesale of tobacco and other products
Expanso da Area Industrial do Passil, Edificio Logista, Lote 1A, Palhava,
Alcochete, Portugal
Manufacture and sales of cigarettes in Senegal
Km 2-5 Bld du Centenaire de la commune de Dakar, Dakar, Senegal
In liquidation
28, Ground Floor, Ajasa Street, Off King George V Road, Onikan, Lagos, Nigeria
Distribution of published materials and other products in Biscay and Santander
C/ Guipúzcoa, 5, Polígono Industrial Lezama Leguizamón, 48450 Echevarri,
Vizcaya, Spain
Publishing company
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo 3,
Alcorcor, Madrid, 28922, Spain
In liquidation
249 Ibraimov Street, Bishkek, Kyrghyz Republic, 720011, Kyrgyzstan
Holding investments in subsidiary companies
80 Robinson Road, #02-00, 068898, Singapore
Manufacture of cigarettes in Madagascar
110 Antsirabe – Madagascar, Route d’Ambositra, BP 128, Madagascar
Manufacture of cigarettes in Cote D’Ivoire
Rue de I’Industrie – Lot No 19, 01 – BP 607, Bouake, Cote d’Ivoire
SITAR Holding S.A.S.
France (La Reunion Island) Holding investments in subsidiary companies
Société Africaine d’Impression
Industrielle S.A. (i)
Senegal
Société Allumettiere Française S.A.S.
France
Société des Cigarettes Gabonaises S.A. (i)
Gabon
Société Industrielle et Agricole du Tabac
Tropical S.A. (i)
Congo
Société Ivoirienne des Tabacs S.A. (i) (iii)
Cote D’Ivoire
Société Marocaine des Tabacs S.A.
Morocco
SOCTAM S.A. (i)
Madagascar
SOTCHADIS S.A.S. (i)
Supergroup S.A.S.
Terzia S.P.A.
Chad
France
Italy
Z.I n2, B.P. 256, 97457 Saint Pierre, IIe de la Reunion, France
Manufacture and distribution of cigarettes in Senegal
route de Bel Air – Km 2200, Dakar, Senegal
Manufacture and distribution of cigarettes
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
In liquidation
2381 bld Léon MBA, BP 2175, Libreville, Gabon
Manufacture and distribution of cigarettes in Congo
Avenue de la Pointe Hollandaise, Mpila, BP 50, Brazzaville, Congo
Manufacture and distribution of cigarettes in Côte D'Ivoire
Cocody-Nord, Quartier Gendarmerie, TF 5937, 01 B.P. 724 Abidjan
Manufacture and distribution of cigarettes in Morocco
87 Rue Hamed El Figuigui , Casablanca, 20500, Morocco
Manufacture and distribution of cigarettes in Madagascar
15 Rue Geoges V, Mahajanga, Madagascar
Non-trading
502 Rue 1039, BP 852, N’Djamena, Chad
Wholesale of tobacco products
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
Wholesale to tobacconists in Italy
Via Valadier, 37 – 00193 Roma, Italy
223322
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2021
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
50.0
50.0
50.0
72.7
72.7
99.9
95.0
50.0
98.3
50.0
50.0
50.0
99.7
51.0
65.4
75.8
99.0
99.8
50.0
87.8
89.7
74.8
99.9
50.5
95.0
50.0
50.0
ASSOCIATES: INCORPORATED OVERSEAS
Name
Alcome S.A.S.
Country of incorporation
Principal activity and registered address
France
Waste management
88 avenue des Ternes, Paris, 75017, France
Azur Finances S.A.
Cameroon
Holding investments in subsidiary companies
Compañia Española de Tabaco en Rama
SA (Cetarsa) (i)
Spain
B.P 1105, Douala, Cameroon
Production and sale of raw tobacco
Avenida de las Angustias, 20, 10300 Navalmoral de la Mata, Cáceres, Spain
Distribuidora de Ediciones SADE, S.A.
Spain
Distribution of published materials and other products in Spain
Calle B, esquina calle 4, s/n. Sector B, Polígono Industrial Zona Franca,
08040 Barcelona, Spain
Distribuidora de Publicaciones del Sur, S.A. Spain
Distribution of published materials and other products
Distribución de Publicaciones Siglo XXI,
Guadalajara
Spain
Carretera de la Esclusa, S/N – Pariela 2, Modulo 4, Sevilla, 41011, Spain
Distribution of published materials and other products in Spain
Francisco Medina y Mendoza, 2, 19171 Cabanillas del Campo, Guadalajara, Spain
Distribuidora Valenciana de Ediciones S.A. Spain
Distribution of published materials and other products in Valencia
Pedrapiquers 5, Poligono Industrial Vara de Quart, Valencia, 46014, Spain
Entreprises des Tabacs en Guinée (i)
Guinée Conakry
Dormant
Logista Libros S.L.
Spain
B.P 3391, Conakry, Guinea
Distribution of books
Promotion et Distribution a Madagascar (i) Madagascar
Distribution of cigarettes in Madagascar
Tour ZITAL Ankorondrano, Antananarivo, Madagascar
SITABAC S.A.
Cameroon
Manufacture and distribution of tobacco products in Cameroon
Avda. Castilla La Mancha, 2 – Naves 3-4 del Polígono Industrial La Quinta,
Cabanillas del Campo, Guadalajara, Spain
Société Internationale des Tabacs
Malgaches (i)
Société Nationale des Tabacs et Allumettes
du Mali S.A. (i)
Mali
Madagascar
Leaf processing
113 Rue Kitchener, 1067 Bonanjo, Douala, Cameroon
BP 270, 401 Mahajanga, Madagascar
Manufacture and distribution of cigarettes in Mali
Route Sotuba – Z.I., BP 59, Bamako, Mali
Percentage
owned
24.0
20.0
20.8
35.0
25.0
40.0
25.0
34.0
25.0
33.4
34.5
47.9
28.0
JOINT VENTURES: INCORPORATED OVERSEAS
Name
Country of incorporation
Principal activity and registered address
Compañía de Distribución Integral Logista
S.A.U. y GTECH Global Lottery, S.L.U., U.T.E.
Spain
Global Horizon Ventures Limited
Hong Kong
Intertab S.A. (i)
Switzerland
West Tobacco Pte Ltd (i)
Singapore
In Liquidation
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Sales and marketing of cigarettes in Asia
Room 3907-08, 39th Floor, Hopewell Centre, 183 Queens Road East,
Wanchai, Hong Kong
Holding investments in subsidiary companies
Société Fiduciaire Suisse-Coopers & Lybrand S.A., Route de la Glâne 107,
Villars-sur-Glâne, 1752, Switzerland
Dormant
50 Raffles Place #32-01, Singapore Land Tower, 048623, Singapore
Percentage
owned
25.0
50.0
50.0
50.0
WWW.IMPERIALBR ANDSPLC.COM
W W W . I M P E R I A L B R A N D S P L C . C O M
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RELATED UNDERTAKINGS – CONTINUED
PARTNERSHIPS
The Group also owns the following partnerships:
Name
Fabrica de Tabacos La Flor de Copan S de R.L.
de C.V.
Country
Honduras
Principal activity, registered address and principal place of business
Holding investments in subsidiary companies
Registered address and principal place of business: Apartado Postal 209,
Colonia Mejia-García, Santa Rosa de Copán, Honduras
Imperial Tobacco (Efka) GmbH & Co. KG
Germany
Manufacture of tubes in Germany
Imperial Tobacco Kazakhstan LLP (i)
Kazakhstan
Marketing and distribution of tobacco products in Kazakhstan
Registered address and principal place of business: Max-Born-Straße 4,
Hamburg, 22761, Germany
Registered address and principal place of business: 3rd Floor,
Prime Business Park, 100/2 Nursultan Nazarbayev Avenue,
Medeuskiy District, Almaty, 050000, Kazakhstan
ITG Brands Holdpartner LP
United States of America
Marketing and sale of tobacco products in United States of America
Registered address and principal place of business: 714 Green Valley Road,
Greensboro, NC27408, United States of America
The subsidiaries listed were held throughout the year and the consolidated Group financial statements include all the subsidiary
undertakings identified. All dormant UK entities have taken the exemption available to not have an audit of their financial statements.
Unless otherwise stated the entities are unlisted, have 1 type of ordinary share capital and a reporting period ending on 30 September
each year.
(i) December year end
(ii) March year end
(iii) Listed entity
(iv) Holding of one type of ordinary share only (where more than one type of share is authorised / in issue).
(v) Holding of two or more types of ordinary share (where more than one type of ordinary share is authorised / in issue).
Only applicable to 100% owned subsidiaries.
(vi) Holding of preference shares only
(vii) Holding of ordinary and preference shares
(viii) Holding of ordinary and redeemable shares
(ix) Holding of ordinary and deferred shares
(x) Holding of two types of ordinary share and redeemable shares
(xi) Holding of shares limited by guarantee.
The percentage of issued share capital held by the immediate parent and the effective voting rights of the Group are the same except
for Imperial Tobacco Italia Srl where the entire share capital, and therefore 100 per cent of the voting rights, are held by a number of
Group companies.
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| ANNUAL REPORT AND ACCOUNTS 2021
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SUPPLEMENTARY INFORMATION SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION
WEBSITE
Information on Imperial Brands
PLC is available on our website:
www.imperialbrandsplc.com
Equiniti also offers a range of
shareholder information online.
You can access information on your
holdings, indicative share prices and
dividend details and find practical help
on transferring shares or updating
your details at www.shareview.co.uk
FINANCIAL CALENDAR
AND DIVIDENDS
INDIVIDUAL SAVINGS
ACCOUNT
Half-year results are expected to
be announced in May 2022 and the
full-year’s results in November 2022.
The Annual General Meeting of the
Company will be held on Wednesday
2 February 2022 at the Bristol Marriott
Hotel, City Centre. The Notice of
Meeting and explanatory notes
about the resolutions to be proposed
are set out in the circular enclosed
with this Report.
Dividends are generally paid at
the end of March, June, September
and December. Payment of the 2021
final dividend, if approved, will be
on 31 March 2022 to shareholders on
the Register of Members at the close
of business on 18 February 2022. The
associated ex-dividend date will be
17 February 2022.
SHARE DEALING SERVICE
Our Registrars offer Shareview
Dealing, a service which allows you
to buy or sell Imperial Brands PLC
ordinary shares if you are a UK
resident. You can deal on the
internet or by phone. Log on to
www.shareview.co.uk/dealing or
call them on 03456 037 037 between
8.00am and 4.30pm Monday to
Friday for more information
about this service. If you wish to sell
your Imperial Brands PLC ordinary
shares, you will need your shareholder
reference number, which you can find
on your share certificate.
Investors in Imperial Brands PLC
ordinary shares may take advantage of
a low-cost Individual Savings Account
(ISA) and Investment Account where
they can hold their Imperial Brands
PLC ordinary shares electronically.
The ISA and Investment Account
are operated by Equiniti Financial
Services Limited. Commission starts
from £12.50 and £1.75 respectively for
the sale and purchase of shares.
For a brochure or to apply for an ISA
or Investment Account go online to
www.shareview.co.uk/dealing or call
Equiniti on 0345 0700 720.
DIVIDEND REINVESTMENT
PLAN
Imperial Brands PLC has set up a
dividend reinvestment plan (DRIP)
to enable shareholders to use their
cash dividend to buy further Imperial
Brands PLC ordinary shares in the
market. Further information can
be obtained from Equiniti on
0371 384 2037 (+44 371 384 2037
if calling from outside the UK) or
online at www.shareview.co.uk
AMERICAN DEPOSITARY
RECEIPT FACILITY
Imperial Brands PLC ordinary shares
are traded on the OTCQX International
Premier platform in the form of
American Depositary Shares (ADSs)
using the symbol ‘IMBBY’. The ADS
facility is administered by J.P. Morgan
Chase, N.A. and enquiries should
be directed to them at the address
shown opposite.
W W W . I M P E R I A L B R A N D S P L C . C O M
235
SUPPLEMENTARY INFORMATION SHAREHOLDER INFORMATION – CONTINUED
REGISTERED OFFICE
121 Winterstoke Road
Bristol BS3 2LL
+44 (0)117 963 6636
Incorporated and domiciled in England and Wales No: 3236483
REGISTRARS
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
0371 384 2037*
+44 (0)121 415 7009
0371 384 2255* text phone for shareholders with hearing difficulties
* Lines are open 8.30am to 5.30pm, Monday to Friday excluding public holidays in England and Wales.
AMERICAN DEPOSITARY RECEIPT FACILITY
EQ Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504
Toll-free number inside USA: +1-800-990-1135*
From outside the USA: +1 651-453-2128*
Online: Visit www.shareowneronline.com, then scroll down to ‘Contact Us’ information.
* Lines are open Monday to Friday 7am to 7pm (Central Time US).
CORPORATE BROKERS
Credit Suisse International
One Cabot Square
Canary Wharf
London E14 4QJ
+44 (0)20 7888 8000
Barclays Bank PLC
5 The North Colonnade
Canary Wharf
London E14 4BB
+44 (0)20 7623 2323
AUDITORS
Ernst & Young LLP
1 More London Place
London
SE1 2AF
236
I M P E R I A L B R A N D S | A N N U A L R E P O R T A N D A C C O U N T S 2 0 2 1
A digital version of this Annual Report is available online
Visit www.imperialbrandsplc.com
Printed by Park Communications on FSC® certified paper.
Park works to the EMAS standard and its Environmental Management System
is certified to ISO 14001.
This publication has been manufactured using 100% offshore wind electricity
sourced from UK wind.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled
for further use and, on average 99% of any waste associated with this production
will be recycled and the remaining 1% used to generate energy.
This document is printed on Heaven 42 and Inaset Offset, both papers are made
of material from well-managed, FSC®-certified forests and other controlled
sources. The pulp used in this product is bleached using an elemental chlorine
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Designed and produced by Black Sun plc.
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Registered Office
Imperial Brands PLC
121 Winterstoke Road
Bristol BS3 2LL
UK
www.imperialbrandsplc.com