A C H A L L E N G E R
M IN D S E T
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 2
CONTENTS
STRATEGIC REPORT
At a Glance
Chair’s Statement
Chief Executive’s Statement
Our Distinct Approach
Transformation in Action
Our Investment Case
KPIs
Stakeholder Engagement
Non-Financial
Information Statement
ESG Review
TCFD
Operating Review
Financial Review
Principal Risks
and Uncertainties
GOVERNANCE
Chair’s Introduction
Board Leadership
Section 172
Board Statements
People and
Governance Committee
Audit Committee
Remuneration Report
Directors’ Report
2
4
6
10
12
26
28
30
35
36
59
66
73
82
94
96
108
112
113
119
130
149
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 Consolidated
Financial Statements
156
166
166
167
168
169
170
SUPPLEMENTARY
INFORMATION
Adjusted Performance Measures 221
Glossary
IMPERIAL BRANDS PLC
FINANCIALS
Imperial Brands PLC
Balance Sheet
Imperial Brands PLC Statement
of Changes in Equity
Notes to the Financial Statements
of Imperial Brands PLC
229
230
230
231
SHAREHOLDER
INFORMATION
Shareholder Information
245
For more information please see
www.imperialbrandsplc.com
MEET OUR PEOPLE
Anna
Executive Assistant, Ivory Coast
Maite and Álvaro
Supply Chain Manager
and Finance Controller, Spain
Shradha
ESG Executive, UK
Oleksandr
Production Mechanic, Ukraine
Juan José
Quality Specialist, Spain
Maria
Brand Manager, Spain
Elara
Retail Representative, UK
Debbie
Marketing Services Manager, US
Marie-Louise
People & Culture Business Partner,
Ivory Coast
Cover
1
1
3
11
12
15
15
16
Sandhya
Consumer Experience Manager, UAE
María
Sales Representative, Spain
Raúl
Production Mechanic, Spain
Grzegorz
Learning & Development Coordinator,
Poland
Matthew
QC Analyst, UK
Katrina and Mohamad
Manufacturing Excellence Manager
and Production Operator, Sweden
Andrea
Trade Marketing Analyst, Spain
Oleksii
Production Operator, Ukraine
Jodi
Laboratory Manager, UK
17
18
21
21
22
24
25
27
38
Jenny
Production Engineer, Sweden
Daniel
Trade Marketing Manager, Sweden
Ralf
Factory Operator, Germany
Fernando
Human Rights Manager, UK
Adam
Process Engineer Specialist, UK
Joshua
Data Scientist, Poland
Alona
Retail Development Representative, UK
43
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50
51
53
56
58
T R A N S F O R M IN G
W E A R E
B y beco m in g a stro n g c h alle n ger,
w e are b uildin g a b usin ess m ore
cap able of gro w th year in, year o ut.
www.imperialbrandsplc.com
1
IMPERIAL BRANDS AT A GLANCE
DELIVERING ON
OUR STRATEGY
The five-year strategy we launched in January
2021 was the roadmap for our transformation.
Since then we have been building the
foundations for future success – and we are now
on track to move to the next phase of delivery.
WE HAVE A CLEAR STRATEGY TO
BECOME A STRONG CHALLENGER…
WHICH WE ARE ROLLING
OUT WITH DISCIPLINE…
STRATEGIC PILLARS
Pages 14-19
PHASE 1: BUILDING
FOUNDATIONS
D R I V ING VALUE
F R O M O UR BROADER
P O RTFOLIO
T
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SING O N
RIORIT Y
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SIM PLIFIE
A N D EFFICIE
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PERFORM A N C E
-BASED CUL T U R E
AND CAPABI L I T I E S
CRITICAL ENABLERS
Pages 20-25
Five-year
strategy
launched
NGP
trials
begin
Top five
aggregate
market share
stabilised
Jan 2021
Sept 2021
Efficiency
programme
begins
Purpose,
vision and
behaviours
launched
Exit of
Russia
completed
New Global
Consumer Office
established
New
management
team in place
Refresh
of ESG
strategy
OUR FINANCIAL
PERFORMANCE
Tobacco &
NGP net revenue
£7.8 bn
+1.5%*
Adjusted EPS
265.2p
+4.9%*
Reported EPS
165.9p
-44.7%
Dividend per share
141.17p
+1.5%*
* Movement on a constant currency basis.
2
Imperial Brands | Annual Report and Accounts 2022
Performance measures
used throughout
the report
Reported (GAAP)
Complies with International
Financial Reporting Standards
and the relevant legislation.
Adjusted (Non-GAAP)
Non-GAAP measures provide
a useful comparison of
performance from one period
to the next. The basis of our
adjusted measures is
explained in the accounting
policies accompanying our
financial statements and the
APM section within
Supplementary Information.
Constant currency basis
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. See page
75 for more details.
Market share
Market share data is presented
as a 12-month moving average
weighted across the markets
in which we operate.
Stick equivalent
Stick equivalent volumes reflect
our combined cigarette,
fine cut tobacco, cigar and
snus volumes.
Our purpose remains:
Forging a path to a healthier future for
moments of relaxation and pleasure.
For more information
please see www.imperialbrandsplc.com
STRENGTHENING OUR
INVESTMENT CASE…
AND DELIVERING FOR
ALL STAKEHOLDERS
PHASE 2: IMPROVING
RETURNS
• Revitalised tobacco business
driving strong cash returns
• NGP business providing
options for potential harm
reduction and growth
• Strong, sustainable cash
flow generated from
a high-quality portfolio
NGP trials
validate
further
roll-outs
Further
NGP
market
launches
Top five
aggregate
market
share
growth
Sept 2022
2023 – 2025
Operational
efficiencies drive
improvements
• New capabilities and more
efficient structures delivering
operational improvement and
strengthening performance
• Progressive dividend
supplemented by surplus
capital returns via
a share buyback
Behaviours
embedded in
performance-
based culture
Our consumers
Millions of adults worldwide choose
to enjoy our tobacco and NGP. Meeting their
expectations of quality and understanding
their evolving requirements are vital for the
long-term sustainable growth of our business.
Our colleagues
Our colleagues are our 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.
Our 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.
Governments & regulators
Approaches to legislation vary significantly
across geographies. We support reasonable
regulation of tobacco and nicotine products
and look to have constructive engagement
with policy makers and regulators.
Our investors
Our investors provide capital to the business
and monitor management’s allocation of that
capital within the business.
Our suppliers
We maintain strong relationships with our
tobacco, non-tobacco materials (NTM) and
NGP suppliers to help ensure sustainable
supply and business continuity, underpinned
by fair contract and payment terms.
OUR BRANDS
Our portfolio of brands connects
with adult consumers in all the
key tobacco and next generation
product segments. We invest in
innovation to meet evolving
consumer preferences.
c.120
markets
Cigarettes
Other tobacco
products & accessories
Vapour
Heated tobacco
Modern oral
www.imperialbrandsplc.com
3
CHAIR’S STATEMENT
F O U N D A TIO N S F O R L O N G-T E R M
S U C C E S S
DEAR SHAREHOLDERS
This has been a year of significant
progress for Imperial against
a backdrop of unexpected and
challenging conditions.
We have strengthened our core
combustible business and reshaped
our next generation product
(NGP) operations.
We have reduced debt to our target
range and begun a £1 billion
share buyback.
At the same time, we have further
upskilled and diversified our Board
and executive team, progressed our
broader cultural change agenda,
introduced new consumer capabilities,
and continued to build a simpler and
more efficient organisation.
All this has been achieved against the
headwinds of the war in Ukraine and
the exit from our Russian business,
global supply chain disruptions,
high inflation and a squeeze on
household incomes.
The team remained focused on the
methodical roll-out of our strategy
and we are emerging as a strong
challenger business – our natural role
as the smallest of the four global
tobacco companies.
On behalf of the Board, I would like
to say a big “thank you” to the entire
Imperial workforce for their
commitment and the way they
continue to embrace change
with enthusiasm.
A purpose-led approach to ESG
During 2021 alongside our new
strategy we began articulating a new
purpose: “forging a path to a healthier
future for moments of relaxation and
pleasure” as well as a clear vision
“to build a strong challenger business
powered by responsibility, focus and
choice”. In the past year we have
evolved these high-level aspirations
into granular objectives for our most
material environmental, social and
governance (ESG) priorities, and the
Board has been engaged in the
development of this fresh approach.
For more on our People and Planet
agenda see pages 36 to 58.
Our most important area of focus will
continue to be consumer health.
Smoking is a cause of serious diseases
and, despite these health risks, many
people choose to continue to smoke.
That is why it is important we are
successful in offering attractive,
4
Imperial Brands | Annual Report and Accounts 2022
F O U N D A TIO N S F O R L O N G-T E R M
S U C C E S S
Prioritising capital allocation
The Board believes capital allocation is
a key value lever alongside the
delivery of the Group’s strategy.
Our strategic review in 2021 defined
our capital allocation priorities and the
Board regularly evaluates progress
against these priorities, starting with
the investment needs of the business,
followed by the appropriate capital
structure and the best way to
maximise returns to shareholders
through a progressive dividend policy
and by returning surplus capital.
The business now has the strategy
to deliver sustainable growth in cash
flows, and the balance sheet flexibility
to deliver meaningful and ongoing
returns to shareholders. Having
reached our target leverage at the end
of September 2022, the Board approved
the launch of an ongoing buyback
programme with a commitment to
initially repurchase shares to the value
of £1 billion during our 2023 financial
year. We are also recommending
a 1.5% increase for the final dividend
this year, bringing total dividends for
the year to £1.3 billion.
Towards a healthier future
While Imperial is not immune to cost
inflation and the squeeze on consumer
incomes, the strong foundations we
have built over the past two years
mean we are now more resilient in the
face of short-term pressures and better
able to deliver sustainable returns for
shareholders. Looking to the longer
term, we see a shift towards
potentially healthier ways of enjoying
moments of relaxation and pleasure
– and Imperial is increasingly well
placed to support consumers on
this journey.
Thérèse Esperdy
Chair
managing international businesses,
change management, finance and
regulatory affairs. Steven Stanbrook
retired from the Board following our
Annual General Meeting in February 2022.
I would like to thank Steven for his
valuable service to the Board over the
past six years.
No new appointments to the Board were
announced during the past year. Our
focus therefore has been on deepening
our knowledge of the business and
enhancing our engagement with
stakeholders, particularly consumers
and employees, to enable us to provide
more insightful challenge and improve
decision making.
Broadening
stakeholder engagement
I have continued to have regular
dialogue with our major investors
and we recently undertook an investor
perception study. Encouragingly,
the survey suggests investors are
supportive of the new strategy and
management, and of the changes we
are making to strengthen the business.
During the year, we held Board
meetings in London, Bristol, Madrid
and Greensboro, North Carolina, giving
us many opportunities to meet and
have active dialogues with employees,
customers, consumers and suppliers.
In August, accompanied by Stefan,
I visited Malawi to develop a greater
understanding of our evolving approach
to improving farmer livelihoods and
agricultural sustainability.
A clear example of how the Board
carefully considers the needs of
different stakeholders in its decision
making is our successful exit from
Russia. Our approach had to balance
the need to ensure the personal
security of our Russian team, with the
clear expectations of shareholders,
our global workforce and wider civil
society. While we have now completed
the transfer of our Russian business,
we continue to support our
600 Ukraine staff, including through
a hardship fund which has been used
to finance the reconstruction of
war-damaged homes.
potentially less harmful alternatives
to adult smokers. Our NGP operations
over the past two years have become
more consumer-centric and innovative,
and in this year the Board was pleased
to authorise an ambitious but
disciplined expansion of our footprint.
Another area where we can support a
healthier future is by delivering on our
goal to become a Net Zero company
by 2040. This year, for the first time,
we are publishing a full report detailing
our strategy for climate change in line
with the requirements of the Task
Force on Climate-related Financial
Disclosures (see pages 59 to 65).
Building a more diverse and inclusive
business – at all levels – is another
important priority. During the year,
we brought in new talent from outside
the organisation to develop this
agenda. I have also been encouraged
by the way this team, working closely
with our four Employee Resource
Groups focusing on gender, disability,
sexual orientation and ethnicity,
are identifying the key structural
issues and developing focused plans.
Underlining our commitment to
delivering on our ESG priorities,
for FY23 we have introduced metrics
on consumer health and climate
change for Executive Directors’ bonuses
(see Directors’ Remuneration Report,
from page 130). And we will reflect on
how ESG can be incorporated into our
triennial review of remuneration policy
in the coming year.
Upskilling and diversifying
the Board
Over the past two financial years,
the Board has been substantially
strengthened, with two new Executive
Directors and four new Non-Executive
Directors. These changes have brought
a depth of knowledge and capabilities
from consumer-facing businesses
as well as expertise in strategy,
www.imperialbrandsplc.com
5
CHIEF EXECUTIVE’S
STATEMENT
D E LIV E RIN G
O N O U R S T R A T E G Y
We are now two years
into our strategy and I am
pleased with our progress
so far.
The foundations have been built and
we are moving to the next phase
of the plan: improved, more consistent
performance and enhanced returns
for investors.
Since the launch of our strategy
in January 2021, every action we
have taken has been in support
of a single overarching goal – the
creation of a strong and sustainable
challenger business.
As the smallest of the four major
global players in our industry,
we know that we can only
out-compete our rivals by getting
closer to consumers, spotting value
that others overlook and then
implementing at pace and at scale.
The foundational elements in our
strategy, which we call the critical
enablers, are the capabilities,
structures and culture needed to help
us to act more successfully and
consistently as a challenger.
These firm foundations are already
helping us deliver tangible operational
and financial outcomes.
Over the past two years we have
revitalised our five largest combustible
markets, which account for around
70% of our operating profit. We’ve
grown our aggregate share across
these five markets by 35 basis points
in the last 12 months, while
maintaining pricing discipline. As
we’ve previously said, we’re unlikely
to see growth in all five markets in any
given year, but what is important is
the aggregate gain (see pages 14-15 for
more information).
We have refreshed our next generation
products (NGP) business with new
propositions across all three
categories. One year after launch,
our heated tobacco proposition
– Pulze and iD – is now available in
five European markets including Italy,
which is Europe’s largest heated
tobacco market. Following
a successful pilot in France, we have
launched our all-new blu 2.0
pod-based vape device in the UK,
and added a disposable offering to the
blu family of products. In modern oral,
we have successfully launched Zone X
in Norway. At the same time, we have
reduced overall NGP losses and
delivered an acceleration in net
revenue growth of around 11%
(see pages 18-19).
We have also refocused our
broader market portfolio, investing
management time and expertise in
our most promising opportunities.
During the year we exited Japan and
delivered on our commitment to exit
the Russian market, while continuing
to support our 600 colleagues in
Ukraine (see page 17).
IMPROVED PERFORMANCE
The success with which we are
delivering our strategy is translating
into improved operational and
financial performance, with growth in
net revenue of 1.5% and in adjusted
operating profit of 1.8% at constant
currency in this financial year.
Reported revenue was down 0.7%
driven by adverse foreign exchange
translation and operating profit
declined 14.7% driven primarily by
charges related to our exit from Russia
and associated markets and non-
6
Imperial Brands | Annual Report and Accounts 2022
D E LIV E RIN G
O N O U R S T R A T E G Y
recurrence of gains on disposal of the
Premium Cigar Division. Strong cash
performance delivered almost
£2.6 billion of free cash flow, which
has further strengthened the balance
sheet, and enabled us to step up
returns to shareholders.
These achievements have been
delivered against a backdrop of
inflationary pressures and a squeeze
on consumer purchasing power.
As expected, our tobacco price mix
strengthened in the second half to
10.7%, bringing overall price mix up
to 6.0% for the year.
We are a more resilient business than
we were two years ago, and this gives
us confidence that we can continue to
successfully navigate these short-term
headwinds and deliver on our strategy.
It has also reinforced our view that the
business can commit to an ongoing,
multi-year shareholder returns
strategy through a progressive
dividend and share buyback.
FOUNDATIONS FOR
A STRONG CHALLENGER
Successful challenger businesses put
consumers at the heart of everything
they do. Over the past two years we
have taken a structured series of steps
to improve our consumer insights and
our ability to act effectively on them.
The investments we have made in
building our consumer-centric
capabilities are beginning to bear fruit.
The way we are now able to innovate
more rapidly can be seen in the
successful launch this year of
our blu 2.0 vape device. We have
also introduced a more structured
approach to brand building, which is
evidenced in our refresh of Winston
in the US. This initiative, which
combined careful consumer research,
imaginative pack design, distribution
initiatives, and innovative digital
partnerships, is already leading to
encouraging market share progress
(see pages 20-21)
We have implemented further changes
to make our structures simpler and
more efficient, better enabling us to
become a strong challenger. In 2021,
we reorganised the Executive
Leadership Team and made changes
to our regional and cluster structure;
for example, by creating a new
AAA region to focus on market
opportunities beyond Europe and the
US. Over the past year, we have also
been building new functional centres
of excellence, which will enable the
corporate functions to better support
the growth agenda of our consumer-
and market-facing teams and this
work will continue into 2023. These
new ways of working will be further
enhanced by a multi-year digital
transformation programme to upgrade
our Enterprise Resource Planning
processes, which is now underway.
At the same time, I can also confirm
that actions already taken will deliver
£120 million of annual savings in FY23
(see pages 24-25).
We continue to embed a high-
performance culture, integrating our
purpose, vision and new behaviours,
which we call Connections. All of us at
Imperial – the Executive Leadership
Team, managers and front-line
colleagues – have invested
considerable time over the past year
understanding how to use our
behaviours in our every-day working
lives. For 1,100 of our senior leaders,
this has meant spending 20 hours on
immersive training sessions focusing
on developing both individual
behaviours and team dynamics.
In addition, each function and region
has gone through a detailed process,
known as Leading Sustainable Change,
to align its goals with our purpose,
vision and Group strategy.
During 2023, we will fully integrate
our behaviours into how we manage
the performance of our people and
continue to develop the skills of our
leaders. For us, cultural change is
much more than putting slogans on
office walls. This is a highly structured
multi-year programme which plays an
essential role in our strategy to build a
company capable of long-term growth.
(see pages 22-23).
We have further strengthened our
leadership team, to create a distinctive
blend of deep tobacco knowledge
and diverse experience from the
consumer-packaged goods sector and
beyond. During the year, Sean Roberts
joined us as Chief Legal and Corporate
Affairs Officer. This is a new position
in our Executive Leadership Team,
UNDERSTANDING
CONSUMER DYNAMICS
COVID-19 unwind
Lifting of restrictions is
causing changes to consumer
buying patterns.
Impact: Ongoing
Inflationary pressures
Inflation likely to affect
purchasing power
of some consumers.
Impact: Not material in 2022
Potentially reduced harm
Consumers continue to seek
reduced harm alternatives.
Impact: Long-term
For more information,
please see page 10.
which underlines our commitment
to acting with responsibility. Sean has
30 years’ experience in legal and
regulatory roles, most recently
as General Counsel of GSK
Consumer Healthcare.
I would also like to thank Joerg
Biebernick, who decided to step down
as President of our Europe region in
October 2022. I am grateful to Joerg
for his support to me on the Executive
Leadership Team and his contribution
to Imperial over the past five years.
We wish him all the best for the future.
Joerg has been succeeded by
Aleš Struminský who, during his
20-year career with Imperial, has held
a range of senior positions including
most recently General Manager for the
UK&I cluster.
PURPOSE, PEOPLE AND PLANET
Alongside our new strategy, in 2021
we communicated an updated purpose,
“forging a path to a healthier future for
moments of relaxation and pleasure”
and vision, “to build a strong challenger
business powered by responsibility,
focus and choice”. Over the past year,
informed by our strategy, purpose and
vision, we have refreshed our
environmental, social and governance
(ESG) priorities, which internally we
call our People and Planet agenda.
We have upgraded our governance,
creating a new ESG executive
committee, which I chair and we
ensure there are regular opportunities
for the Board to scrutinise our progress.
A comprehensive ESG materiality
assessment has helped us zero in on
www.imperialbrandsplc.com
7
CHIEF EXECUTIVE’S STATEMENT continued
the priorities across our value chain
that matter most to our stakeholders
(see pages 36-58).
We recognise that there are health
risks associated with smoking and,
of course, our most material ESG
priority remains consumer health.
This Company’s duty is therefore
two-fold: to responsibly serve the
needs of those adults who have made
an informed choice to smoke; and to
develop and scale up potentially less
harmful choices which are attractive
to existing consumers of nicotine
products. Focusing on markets where
we have established routes to market,
we believe we can play a distinctive
role in NGP by creating exciting
choices for consumers, driving
innovation across the industry, and
accelerating potential harm reduction.
We continue to make progress
towards our ambitious Net Zero
targets, reducing our Scope 1 and
Scope 2 carbon emissions by 19% since
our baseline year of 2017. Following
a detailed scenario analysis we are
this year publishing our first report
articulating our approach to climate
strategy and risk, in line with the
requirements of the Task Force on
Climate-related Financial Disclosures
(see pages 59-63).
ALLOCATING CAPITAL
WITH DISCIPLINE
Focus and discipline are key elements
that underpin our five-year strategy.
They are also important principles
behind our capital allocation priorities.
I am pleased to report we are
delivering against our four priorities
exactly in line with what we set out in
our strategic review in January 2021.
Our strategy is supported by 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 once our target
leverage has been achieved.
Having now strengthened our
balance sheet and reached our target
leverage, I am delighted that, since
October 2022, we have begun returning
surplus capital to shareholders via
an ongoing share buyback. We have
committed to an initial buyback of
£1 billion for the first year, which will
be concluded by September 2023.
Taking our dividends and buyback
together, we expect our capital returns
to shareholders will exceed £2.3 billion
in the coming fiscal year.
Our improving performance and our
confidence in our ability to continue
to generate strong cash flows in the
coming years supports growing
shareholder returns through a
progressive dividend and an ongoing
buyback programme to meaningfully
reduce the capital base over time.
STRENGTHENING DELIVERY
As COVID-19 restrictions have eased,
I have spent time face to face with our
consumers, people, customers and
partners in every continent where we
operate. Tobacco farmers in Malawi,
factory workers in Poland,
convenience store clerks in North
Carolina and a panel of consumers
convened in a Sydney pub are among
the many stakeholders I have had the
pleasure of meeting.
These conversations have reinforced
my initial analysis that Imperial
benefits from hard-to-replicate
competitive advantages, including
effective supply chain management,
deep scientific skills, powerful retail
relationships, great brands and
strong market positions in some
of the world’s largest and most
attractive markets.
Through these visits I am seeing
more and more examples of how our
transformation to become a challenger
business is driving operational
success. Stronger consumer insights,
more effective structures and
a single global performance culture
are enabling us to deliver more
consistent, sustainable operational
and financial outcomes.
OUTLOOK
We remain on track to deliver against
our five-year plan. The additional
investment and the actions we have
taken during the initial two-year
strengthening phase have built strong
foundations for the next three-year
phase of our plan to deliver
improving returns.
As we move into that phase,
we continue to expect low single-digit
constant currency net revenue growth
with constant currency adjusted
operating profit growth accelerating to
deliver mid-single digit CAGR over the
next three years.
We are confident our investments
and initiatives will continue to gain
traction and we therefore expect the
growth rate of our adjusted operating
profit to improve within this mid-
single digit range over the three years.
In FY23, the acceleration will be driven
by pricing and operational gearing,
improved geographic mix from our
priority market focus and cost savings,
partially offset by cost inflation and
increased NGP investment.
Performance will be weighted to the
second half of the year, due to the
phasing of NGP investment, the
impact of our exit from Russia in
April 2022 and the continued unwind
of COVID-19 that will all affect the
first half. As a result, the first half
adjusted operating profit is expected
to be at a similar level to last year,
at constant currency.
At current rates, foreign exchange
translation is expected to be
a 5-6% tailwind to net revenue,
adjusted operating profit and
earnings per share.
We remain confident in our plans in
the face of current macro-economic
challenges with potential pressure on
consumer spending and high inflation.
And as we align our business more
closely with the secular consumer
trend towards healthier moments of
relaxation and pleasure, we believe we
are well placed to generate long-term
value for shareholders and all
our stakeholders.
Stefan Bomhard
Chief Executive Officer
8
Imperial Brands | Annual Report and Accounts 2022
LEADERSHIP
4
5
8
1. Stefan Bomhard
Chief Executive Officer
2. Lukas Paravicini
Chief Financial Officer
3. Alison Clarke
Chief People
and Culture Officer
4. Anindya (Andy) Dasgupta
Chief Consumer Officer
5. Javier Huerta
Chief Supply Chain Officer
6. Murray McGowan
Chief Strategy and
Development Officer
7. Paola Pocci
President, Africa,
Asia and Australasia Region
8. Kim Reed
President and CEO,
Americas Region
9. Sean Roberts
Chief Legal and Corporate
Affairs Officer
10. Aleš Struminský
President, Europe Region
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For more information
please visit
www.imperialbrandsplc.com
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www.imperialbrandsplc.com
9
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OUR DISTINCT APPROACH
RESPONDING TO
MARKET DRIVERS
As the global tobacco industry transforms
to satisfy changing consumer needs,
Imperial is responding by adopting
a challenger mindset.
OUR MARKET
OUR ASSETS
Our colleagues
Our colleagues are our most
important asset. We have 26,000
committed and passionate
employees who want to make
a difference.
Our brands
Our portfolio of 160 brands provides
enjoyment and pleasure for millions
of adult consumers every day.
Our relationships
We have solid, trusted partnerships
with stakeholders, including
customers and suppliers across
c.120 markets.
Our operations
We have a network of 30
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
consumer insights, 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 returns.
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. The market is heavily
regulated and highly consolidated. It is
also an industry in transformation as
consumers transition to potentially
reduced harm products.
Despite the well-known health risks of
smoking, more than 19% of the world’s
adult population still choose to smoke
and many of our consumers tell us they
value our products for the moments of
relaxation and pleasure they provide.
Our role, therefore, is to responsibly
serve the needs of those adults who
have made an informed choice to
smoke by offering them a portfolio of
high-quality tobacco products across a
range of price points.
We also have a role to meet the needs of
those adult smokers who are
increasingly looking for potentially less
harmful alternatives to cigarettes. Our
strategy is to understand the needs of
these adult consumers and to provide
potentially less harmful next generation
products (NGP).
This year we started to see a return to
pre-COVID consumer buying patterns
as international travel recovered and,
looking ahead, we anticipate
inflationary pressures are likely to affect
purchasing power of some consumers.
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 is 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.
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. More
information on our measures to prevent
underage access can be found on
pages 38-40.
Harm reduction
Across regions and markets regulators
have adopted different approaches to
promote tobacco harm reduction
policies. Some governments 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.
While jurisdictions that have
implemented tobacco harm reduction
policies have seen positive public health
results, the approach has not yet
captured the support of all regulators.
However, where policies have been
adopted to limit the transition to
potentially less harmful alternatives,
such as aggressive excise duty or
complete bans, there is a greater
risk that this will fuel the growth in
illicit trade.
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.
10
Imperial Brands | Annual Report and Accounts 2022
ADULT CONSUMER INSIGHTS
We start with the consumer – and
everything we do is based around a
deep understanding of adult smokers
and nicotine consumers. Our insight is
led by our Global Consumer Office and
we unlock value by ensuring we offer
our customers the right product
choices to meet consumer needs.
These insights provide competitive
advantage, and inform our product
offerings in both combustible tobacco
and NGP and how we communicate
with adult consumers.
STRONG RETAIL
PARTNERSHIPS
We sell our products to our customers.
Our sales and marketing teams have
built strong partnerships with them
through sales force coverage, retailer
incentivisation and point of sale
advertising, where appropriate. 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.
EFFICIENT MANUFACTURING
Our manufacturing teams 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.
H
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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 and
provide high-quality products
compliant with local standards.
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.
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. Their decisions are guided by
our ESG commitments.
STAKEHOLDER VALUE
Our consumers
Millions of adults worldwide choose to
enjoy our tobacco and next generation
products. Meeting their expectations
of quality and understanding
their evolving requirements are vital
for the long-term sustainable growth
of our business.
Our colleagues
It is essential we create a supportive,
safe and rewarding work environment
to enable them to deliver our goals and
develop their careers.
Our 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.
Governments and regulators
Approaches to legislation vary
significantly across geographies. We
support reasonable regulation of
tobacco and nicotine products and
look to have constructive engagement
with policy makers and regulators.
Our investors
Our investors provide capital to the
business and monitor management’s
allocation of that capital within the
business.
Our suppliers
We maintain strong relationships with
our tobacco, non-tobacco materials
(NTM) and NGP suppliers to help
ensure sustainable supply and
business continuity, underpinned by
fair contract and payment terms.
www.imperialbrandsplc.com
11
TRANSFORMATION IN ACTION
A TIO N
IN A C TIO N
O ur c h oices are g uided by o ur strategy,
refresh ed ap proac h to e n viro n m e ntal,
social a n d govern a n ce (E S G) priorities.
p urp ose a n d visio n as w ell as o ur
O U R T R A N SF O R M
12
Imperial Brands | Annual Report and Accounts 2022
IN A C TIO N
OUR PURPOSE
OUR VISION
Forging a path to a healthier future for moments of
relaxation and pleasure.
To build a strong challenger business powered
by responsibility, focus and choice.
STRATEGIC PILLARS
Pages 14-19
CRITICAL ENABLERS
Pages 20-25
OUR BEHAVIOURS
Page 23
HOW WE MEASURE
OUR PERFORMANCE
Pages 28-29
BUILDING A
TARGETED N
BUSINESS
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RIVIN G V
M O U R B
R T F O
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D C ULT
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• Start with the Consumer
• Collaborate with Purpose
• Take Accountability with Confidence
• Be Authentic, Inclusive to all
• Build our Future
To measure our performance we have ten financial and four non-financial key
performance indicators – see pages 28 and 29. We measure the performance
of several other indicators. Financial performance is reported on pages 73 to
81, and non-financial performance is reported on pages 36 to 65.
OUR APPROACH TO ESG
Pages 36-58
HEALTHIER FUTURES
Consumer
health
Climate
change
Packaging
and waste
POSITIVE CONTRIBUTION TO SOCIETY
Farmer
livelihoods
& welfare
Sustainable
& responsible
sourcing
SAFE & INCLUSIVE WORKPLACE
Employee
health, safety
& wellbeing
Diversity, equity
& inclusion
Human
rights
www.imperialbrandsplc.com
13
S T R A T E GIC PIL L A R S
TRANSFORMATION IN ACTION continued
F O C U SIN G O N
P RIO RIT Y
A R K E T S
M B U S TIB LE M
W e’re gro w in g m arket sh are
across o ur to p fi ve m arkets.
C O
The first pillar of our strategy is
a renewed focus on priority
combustible markets. Five markets
– the US, Germany, UK, Spain and
Australia – make up around 70% of our
operating profit. In each of these
markets, Imperial enjoys a top-three
market share position, with
established brands and strong
customer relationships.
Our two most significant markets are
the US and Germany, which together
account for around 50% of our net
revenue. In both markets, cigarettes
remain relatively affordable, providing
headroom for future revenue growth
through pricing. In Spain, tobacco is
also relatively affordable and we have
a leading position with a spread of
‘local jewel’ and global brands. In the
UK, Imperial’s historic home, we have
a strong position in fine cut tobacco in
northern England and Scotland. Even
in Australia, a market heavily
restricted by regulation, we have
opportunities to optimise value
creation and capitalise on our status
as the second largest player.
In the past, however, there was an
insufficient focus on these top five
markets, and in aggregate Imperial
had been the leading donor of market
share. At the heart of our new strategy
was a recognition that for Imperial to
become a business capable of
sustainable growth, the long-term
share declines in these markets
needed to be reversed.
Our strategy defined six operational
levers to improve combustible
performance and, two years on, we
have made significant progress on
each front:
1. Increase participation in premium:
In the US, a new pack design for
Winston and a more targeted
marketing approach have driven
increased share after a long-term
period of decline. And in Germany,
our investment behind our
Gauloises brand has led to brand
growth for the first time in years.
2. Rejuvenate local jewels: In Spain, we
have successfully relaunched Nobel,
with the brand gaining 15bps over
the past two years. In the UK, we
have revived the Embassy brand in
southern England where we have
historically been under-represented.
3. Optimise the value segment: In the
US, we capitalised on the exit of
KT&G from the market, capturing
additional share of around 25bps by
expanding our value offering. In
Australia, we launched Lambert &
Butler as an entirely new value
offering to the market, and the
brand has grown to around 2%
market share in just 11 months.
4. Maximise the potential of fine cut
tobacco: We have been
strengthening our offerings to
consumers in markets where the
category is relevant, such as
Riverstone in the UK and Paramount
in Germany.
5. Drive performance in under-
penetrated channels: Investment in
our sales teams is an important
lever – particularly in markets
where we had failed to keep pace
with where consumers typically
make their purchases. As a result,
we have reshaped our sales forces in
the US and Germany so that they are
more closely aligned to our best
growth opportunities by channel
and geography.
6. Maximise value creation through
key accounts: We have introduced a
key account team in the US, where
previously this was a gap in our
capabilities, and we are refining our
approach in other markets,
including Germany.
Our success in these six areas has led
to growth in aggregate market share
for these five priority markets of 35bps
over the past year – while at the same
time we have maintained strong
pricing discipline. During 2022 we saw
our US operations increase share by
90bps, Australia by 20bps, UK by 85bps
and Spain by 5bps, with declines of
85bps in Germany.
Of course, market share is only one
measure of success and we will
always take a balanced approach to
optimise our operational and financial
delivery. What matters strategically is
the long-term aggregate strength of
our brand franchises in these
priority markets.
14
Imperial Brands | Annual Report and Accounts 2022
PRIORITY MARKET SHARES
12 month share
USA
+90bps
Germany
-85bps
UK
+85bps
Spain
+5bps
Australia
+20bps
In each of these markets
Imperial enjoys a top-three
market position,
with established
brands and strong
customer relationships
Growth in aggregate
market share
+35 bps
www.imperialbrandsplc.com
15
TRANSFORMATION IN ACTION continued
A R K E T P O R T F O LIO
D RIVIN G V A L U E
M O U R B R O A D E R M
W e’ve ide ntified a clear role for
eac h of o ur diverse m arkets.
S T R A T E GIC PIL L A R S
F R O
16
Imperial Brands | Annual Report and Accounts 2022
Russia and Ukraine
In the wake of Russia’s invasion of
Ukraine, we took decisive action
to exit the Russian market and
completed the transfer of our
entire operation there as a going
concern to local investors in May.
We suspended our operations in
Ukraine at the outset of the
invasion to prioritise the safety of
our 600 employees. Following a
careful review, many of our
activities in Ukraine have been
recommenced and we continue to
support our people, including with
resettlement assistance.
Managing these smaller
markets is about agility and
being able to spot trends
and capitalise on emerging
growth opportunities
portfolio strategy to leverage key
international brands in targeted
markets, such as Gauloises in the
Francophone markets, while
leveraging the strength of our local
brands in key markets. This has
delivered further market share gains
in the region, for example in Morocco
and the Ivory Coast, as well as
continued growth in revenue
and profit.
Similarly, a clear focus on our Central
& Eastern Europe cluster has delivered
an improved performance despite the
challenges arising in Ukraine. We
grew revenue and profit from our
combustibles portfolio, as well as
delivering successful NGP trials.
Managing these smaller markets is
also about agility and being able to
spot trends and capitalise on emerging
growth opportunities. As the
restrictions from the pandemic have
gradually lifted in the majority of
markets, international travel has
resumed, and we have ensured our
duty free and travel retail channel
operations are ready to meet this shift
in demand. Our duty free volumes
grew by more than 100% this year and
traditional holiday destination
markets such as Spain also benefited.
Market prioritisation is also about
acknowledging when it is right to exit
markets. Having entered Japan in
2013, the business remained relatively
small and unprofitable, in spite of
ongoing investment and huge efforts
by our local teams. After a careful
review, we concluded that it was
unsustainable for us to continue
trading in Japan and we exited during
the year.
The Russian conflict with Ukraine and
the associated international sanctions
created a highly challenging
environment in Russia with severe
disruption to supply chains. We
decided to exit Russia this year, swiftly
transferring the business as a going
concern to local investors.
www.imperialbrandsplc.com
17
While our main combustible focus is
on our five priority markets, we have a
clear view on how we can drive value
from the breadth of our full market
portfolio. Our smaller markets
typically have attractive margins and
are potential platforms for future
growth. And they are markets which
are used to operating successfully
with more limited resources and
leveraging our global capabilities in
manufacturing, distribution and
brand building.
Our strategy launched in January 2021
proposed a more rigorous approach to
getting the most from this diverse set
of markets. First, we strengthened our
regional and cluster structures,
creating a new AAA division under
Paola Pocci to give our smaller
markets the focus they need. Paola
has brought experience and a skill set
from working in developing markets
for much of her career.
Second, we have evaluated each of our
markets and prioritised how we
allocate investment behind the best
opportunities for responsible growth.
Third, we have identified a clear role
for all our markets. As a result, we
deploy a variety of operating models
across these markets – from wholly
owned sales and marketing operations
in our larger markets, to distributor
partnerships that leverage their local
scale and expertise in many of our
smaller markets.
We manage many of them in regional
clusters, which can represent sizeable
profit pools with potential for future
growth. For example, our Africa cluster
represents almost 10% of our Group
tobacco profit and we have strong
market positions in several markets
such as Morocco, Algeria and the Ivory
Coast. We have adopted a clear brand
TRANSFORMATION IN ACTION continued
S T R A T E GIC PIL L A R S
T hroug h a co nsu m er-focused ap proach w e ai m to
m ake a m ea nin gful co ntributio n to h ar m red uctio n.
T A R G E T E D
B UIL DIN G A
N G P B U SIN E S S
18
Imperial Brands | Annual Report and Accounts 2022
Our statement of purpose recognises a
real opportunity to make a positive
difference to society by “forging a path
to a healthier future for moments of
relaxation and pleasure”. We believe
we have a role to help adult smokers to
make informed choices about the
products they consume – whether
these are combustible tobacco or next
generation products (NGP).
We recognise that smoking is a cause
of serious diseases in smokers, and we
are committed to making a
meaningful contribution to harm
reduction by offering adult smokers
potentially reduced risk products. This
ambition is captured in our strategic
pillar to build a targeted NGP business.
As part of our strategy launched in
January 2021 we overhauled our
approach to NGP. The plan we are now
rolling out plays to our strengths; it
recognises our position as the smallest
of the four global tobacco players, and
is based on three clear principles:
• Consumer led: We start by
understanding consumers and their
needs. This informs our choice of
markets, choice of NGP category for
each market – vapour, heated
tobacco or modern oral – and how
we differentiate our propositions.
• Focused: Our role is not to provide a
full offering in all markets. Instead
we prioritise markets where there is
an established category presence
and where we have an existing
route to market through our
tobacco business.
• Collaborative: Our in-house team
works in close partnership with
third-party innovation houses to
harness their expertise and combine
this with our knowledge and our
insights from adult consumers.
Taken together, this is an approach
designed to maximise our contribution
to harm reduction and build a
sustainable, growing operation, while
maintaining a tight focus on costs.
In 2021 we validated this new approach
through a series of consumer trials for
each of our NGP categories.
For heated tobacco, we ran successful
trials for our device, Pulze, and iD sticks
in Greece and the Czech Republic.
These markets were chosen because
heated tobacco already represented at
least 10% of nicotine consumption,
Imperial had good distribution reach,
and the markets were of a size that
supported a nationwide launch. We
received a positive response from
consumers and the trade, and in just 12
months we built a 2.8% heated tobacco
share in Greece and a 4.2% share in the
Czech Republic. These results
confirmed that we had a differentiated
product offer with consumer appeal
and validated our market investment
approach. Building on our learnings, in
2022 we launched in a further three
markets – Italy, Portugal and Hungary
– and we intend to expand our offering
to further European markets in 2023.
In vapour, our enhanced partnership
approach to innovation also delivered a
first new product in blu 2.0, which we
have successfully trialled in four cities
in France. As a result, we will now be
expanding blu 2.0 nationally in France
and into the UK, as well as other
markets in the coming year. Our sales
in the US of blu declined due to
uncertainties caused by the Marketing
Denial Order from the FDA which we
continue to seek to overturn.
In modern oral, we have launched Zone
X into Norway and expanded our
flavour offering across other key
European markets.
The plan we are rolling out
plays to our strengths and
recognises our position as
the smallest of the four
global tobacco players
NGP net revenue growth
10.8%
on a constant currency basis
New NGP
strategy
launched
Enhanced
our insights
capabilities
Pulze and iD
launched in
Greece and the
Czech Republic
blu 2.0
launched
in France
Jan 2021
Sep 2021
Sep 2022
NGP teams
brought together
under new Global
Consumer Office
NGP investment
optimised with
market exits
completed
Zone X
launched in
several new
markets
Further market
and product
launches planned
throughout Europe
www.imperialbrandsplc.com
19
TRANSFORMATION IN ACTION
continued
A T T H E C E N T R E O F T H E B U SIN E S S
P U T TIN G T H E
M E R
C O N S U
W e’re in vestin g to su p p ort
a rigoro us ap proac h
to co n su m er in sig ht.
C RITIC A L E N A B L E R S
A critical enabler for our strategy is to
place the consumer at the centre of
the business. This means investing in
capabilities, data and insights to
ensure the voice of the consumer
shapes and influences our decision
making and becomes part of the fabric
of our culture.
Our first step was to appoint a Chief
Consumer Officer, Andy Dasgupta, to
bring the voice of the consumer
consistently to the Executive
Leadership Team and to the broader
business. Since joining in April 2021
Andy has built a connected multi-
disciplinary team to drive these
changes through the organisation. We
have successfully attracted talent
from a range of blue-chip consumer
goods firms who are bringing best
practice and combining it with our
existing deep knowledge and
experience of the tobacco sector.
The Global Consumer Office led by
Andy has focused on four priorities in
the past year:
• To embed consumer centricity into
the organisation;
• To rebuild consumer-preferred
brands to stem the share
losses across the priority
combustible markets;
• To undertake market trials to
validate our approach to NGP;
• To build our innovation
capabilities by leveraging
third-party partnerships.
Embedding consumer centricity
This starts with the consumer, and
having strong consumer insights as
the foundation to all decision making.
This has involved multiple
workstreams to enhance our existing
consumer insight capabilities,
changing how we purchase consumer
research and, importantly, how we
consistently handle data and use it
across the organisation. Our objective
is to put in place a framework that
offers global and local insights and is
accessible to all markets to carry
out diagnostics directly linked to
their consumers.
TRANSFORMATION IN ACTION
May 2021
Sept 2021
2021-22
2022
New Global
Consumer Office
established
Consumer
leadership
team
completed
New approach
drives market
share increase
for flagship
US brands
Innovation
accelerated
with launch of
new NGP
20
Imperial Brands | Annual Report and Accounts 2022
We have also significantly increased
the number of face-to-face consumer
focus groups, initially with our five
priority markets and then expanding
to other key markets and into NGP
categories. We have held these for
multiple internal stakeholder groups,
including the Board, the Executive
Leadership Team, and market and
category teams. This has brought
the voice of the consumer directly
into discussions throughout
the organisation.
We have invested in enhancing our
revenue growth management
capabilities to bring a more rigorous
and consistent approach to our
portfolio pricing decisions and sales
channels’ trade investment. In an
external environment of rising costs,
inflationary pressures and consequent
changes to consumer behaviour, these
additional capabilities have a key
role to play in supporting market
managers to respond quickly to
market dynamics.
Rebuilding brands to stem share
losses across our priority markets
The Global Consumer Office is working
in conjunction with our five priority
markets to refine their investment
plans and initiatives by leveraging our
improved consumer insights and
capabilities. Each market has
developed a detailed bottom-up
portfolio strategy for their focus
brands. This work has included
We start with the consumer,
focusing on consumer insight
and research to ensure
we build a portfolio that
suits them
Undertaking market trials to
validate our approach to NGP
Our ongoing validation of product,
brand positioning and consumer
experience continues at pace. The
proximity of the entire NGP team to
our insights, innovation and
marketing teams has enabled us to
leverage the same consumer insights
and data used by combustible tobacco
teams, and in turn offers a holistic
view of consumer behaviour and
preferences – all of which continues
to inform our approach to testing NGP
in prioritised geographies. Consumer
feedback from our NGP trials has
given us actionable suggestions on
how we can improve our propositions.
In the Czech Republic, for example,
heated tobacco consumers indicated a
demand for a wider range of heat stick
flavours. We launched two new
flavours in response, and consumer
reaction has been positive.
Building our
innovation capabilities
We are reorienting our innovation
capabilities to provide consistent and
coherent consumer experiences
across combustibles and NGP. We are
doing this by exploring and integrating
the latest ways of working and we
have reorganised to work in more agile
ways. We are also embracing external
partnerships so that we are
unencumbered by ownership of an
entire value chain in a world where
technologies and products are
evolving quickly. We have created a
partner ecosystem, and these partners
are working with us on our innovation
agenda across flavour, device, digital,
sensory and packaging. This gives us
the ability to test and learn from
consumers as we innovate.
www.imperialbrandsplc.com
21
redefining brand equity positioning,
and working closely with digital,
category and market teams to find
new ways to engage consumers.
This is already delivering an
improvement in aggregate market
share across these markets. We have
delivered market share gains in the US
with Winston and Kool in the cigarette
segment, and through a continued
strong performance from Backwoods
in the cigar segment. Another key
shift in the strategy is to celebrate the
heritage of our local brand portfolio in
markets such as the UK and Spain.
This local brand focus plays to our
strengths and recognises consumer
affection for these assets.
TRANSFORMATION IN ACTION continued
‘Connections’ will be an
integral part of the way we set
performance expectations and
how we lead, recognise and
reward people
O U R C U L T U R E
T R A N S F O R M IN G
W e’re e m bed din g a perfor m a n ce-
based culture across th e b usin ess.
C RITIC A L E N A B L E R S
22
Imperial Brands | Annual Report and Accounts 2022
This has been supported by leadership
events featuring case studies
demonstrating how our businesses
and functions are applying the five
behaviours to create positive
operational and financial outcomes.
Events in 2022 featured inspiring
stories from markets as diverse as the
US, Romania, Ivory Coast, Saudi Arabia
and global travel retail. These
activities have been underpinned by
an internal communications
campaign which has included online
resources and new Connections
branding across offices and factories.
A recent pulse survey across our top
500 senior leadership population has
shown that 93% understand our
behaviours and what they mean for
them in their role.
The next phase of our cultural
transformation is to embed
Connections into our performance
management framework for our 2023
financial year. Connections will be an
integral part of the way we set
performance expectations and how we
lead, recognise and reward people.
The bonus plan for all 1,200 of our
senior leaders will measure and
reward “how individuals deliver”,
through the demonstration of our
behaviours, as well as “what they
deliver”. A further 5,000 of our people
will be aligned to the new performance
framework in the coming year.
Development planning will be a
separate conversation to objective
setting, with dedicated focused time
given to this important activity.
This approach will require our
managers to further develop how they
set both performance and behavioural
objectives and how they coach,
develop and support their teams to
optimise performance and unlock
potential. During the next 12 months
we will invest in focused leadership
development to deepen these skills
with the aim of ensuring
regular and meaningful
performance conversations.
In addition, functions and regions
have gone through a detailed process,
known as Leading Sustainable Change,
to align their goals with our purpose,
vision and strategy.
While the development of a global
performance-based culture will take
time to accomplish, we have a clear
plan and commitment at all levels of
the Company to deliver on it.
We will utilise regular employee
experience surveys and targeted
leadership pulse surveys in order to
measure and report on our progress,
with key performance indicators to be
developed in 2023.
HOW OUR IMMERSIVE
CONNECTIONS SESSIONS WERE
RECEIVED BY OUR COLLEAGUES
“This is the best training
I’ve ever had.”
“The workshops have been
enlightening… I have enjoyed
the meaningful interaction
with colleagues around
the business.”
“A lot of useful learning
tools and tips…
to transform behaviour
and work collaboratively.”
“I was extremely sceptical of
the invite… on reflection, every
second was well spent.”
“Excellent tools… after 25 years
in Imperial this was new
for me.”
Our new strategy launched in January
2021 identified the development of a
performance-based culture and
capabilities as a key enabler to
successfully delivering our strategy.
This reflects the importance of
harnessing the skills, the performance,
and the potential of every colleague in
pursuit of our strategic goals.
In October 2021, following extensive
consultation with colleagues across all
markets and functions, we launched
‘Connections’, our new purpose,
vision and behaviours, to all 26,000
of our employees through our first
global conference.
Our five behaviours are: Start with the
Consumer; Collaborate with Purpose;
Take Accountability with Confidence;
Be Authentic and Inclusive to all; and
Build our Future.
We are now rolling out a highly
structured, multi-year programme,
where all of our colleagues are
expected to invest considerable time
immersed in thinking about our
behaviours and improving their
broader capabilities.
By the end of December 2022, every
one of our employees around the
world will have experienced
development to gain an understanding
of these behaviours, and what they
mean for them in their role.
TRANSFORMATION IN ACTION
Jan 2021
Spring/Summer 2021
Oct 2021
Nov 2021
Strategy launch
sets out case for
culture change
Consultation with
colleagues to develop
purpose and vision
New purpose, vision &
behaviours unveiled at
first-ever all-colleague
conference
Immersive
Connections
sessions
start
Feb 2022
Spring 2022
Sep 2022
First top 500
leadership event
showcases new
behaviours in action
Global office and
factory rebranding
Connected
Leadership
coaching launched
www.imperialbrandsplc.com
23
W e are desig nin g global
processes a n d digital
strategies.
C RITIC A L E N A B L E R S
TRANSFORMATION IN ACTION continued
SIM P LIFIE D A N D
E FFICIE N T
O P E R A TIO N S
24
Imperial Brands | Annual Report and Accounts 2022
Imperial emerged as the world’s
number four tobacco business through
bold acquisitions over the past two
decades. These transactions have
given the Company significant
positions in some of the world’s most
attractive markets and a stable of
strong brands. Our new strategy
identified a need to go further in
integrating this portfolio of businesses
to create simpler, more efficient
operations, enabling us to better
capture future opportunities. Two years
on, our transformation is well
underway with significant structural
changes, the introduction of new
capabilities, and investment in digital.
We have restructured our sales and
marketing operations to remove
complexity, support faster decision
making, and enable resources to be
focused on the biggest opportunities.
We have restructured our regions to
allow a greater focus on our largest
market, the United States, and develop
our AAA region as a centre of expertise
for emerging markets. We have also
rationalised the number of clusters and
defined clear operating models for our
large, medium-sized and small
markets. These changes have been
supported by a rigorous new system of
monthly performance management.
We have also been introducing new
capabilities, enabling us to catch up
with best practice across the wider
consumer packaged goods sector. A
major focus has been the development
and embedding of our new Global
Consumer Office, which seeks to
strengthen our marketing capabilities
by joining up resources across markets,
improving innovation capability and
focusing our next generation product
(NGP) agenda. Our drive towards
greater consumer centricity is covered
in more detail on pages 20-21.
Work is now underway to streamline
our global processes and systems to
ensure that our resources are better
allocated towards the customer and
consumer-facing areas of the business
– with a particular focus on our five
priority markets.
In Global Supply Chain, we are
integrating our ways of working so that
we are able to respond to changes in
consumer demand with greater agility.
We are working towards enhanced
end-to-end oversight, visibility and
budget ownership from forecasting
demand to fulfilling customer orders.
In our business partnering functions –
including Finance, Procurement,
IT and People & Culture – we are
changing to provide more strategic
support to our sales, marketing, and
manufacturing teams.
These changes are all being supported
by significant digital improvements.
These include our five-year, £300
million investment in an all-new
Enterprise Resource Planning (ERP)
system, which will replace 60 local
legacy systems. This is a once-in-a-
generation opportunity to enhance the
speed, integrity and availability of
business information, improving our
decision making and agility.
The actions we have taken to date will
deliver annualised cost savings of
around £120 million, and we are on
track to realise annual savings of £150
million on completion of our
programme at the end of our 2023
financial year. As outlined in our
strategy, these savings are being
re-invested in the new capabilities that
will support sustainable growth.
Our continued programme of initiatives
and investments to create a simplified
and efficient organisation will bring
agility and resilience, and support the
development of a performance-based
culture, covered in more detail on
pages 22-23.
TRANSFORMATION IN ACTION
Two years on, our
transformation is well
underway with significant
structural changes, the
introduction of new
capabilities, and
investment in digital
Investment in new ERP system
£300m
2021
2022
New performance
management
approach
introduced
Market clusters
reduced from
13 to 10
Changes to
business
support
functions
Investment in
new ERP system
announced
www.imperialbrandsplc.com
25
OUR INVESTMENT CASE
H Y IN V E S T
W e h ave e n h a n ced o ur in vestor pro p ositio n by b uildin g a stro n ger
a n d m ore co n su m er-focused b usin ess as w ell as thro u g h o ur clear
capital allocatio n fra m e w ork, w hic h su p p orts in vest m e nt in o ur
n e w strategy, m aintain s a stro n g a n d efficie nt bala n ce sh eet a n d
delivers e n h a n ced sh are h older return s. O ur in vest m e nt case rests
IN IM P E RIA L ?
o n fi ve pillars.
Continued investment and operational
improvements will enhance financial
performance as we focus on making
our enabling functions more efficient.
We are placing the consumer at the
centre of our business and our
decision-making. We are adopting a
challenger mindset and embedding
behaviours to support a performance-
based culture.
3. SELF-HELP INITIATIVES
DELIVERING OPERATIONAL
IMPROVEMENT AND
STRENGTHENING PERFORMANCE
W
1. 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, and with selective
investment in brand equity and our
sales force, we are starting to stem
market share losses. This, together
with strong performance from our
broader portfolio and the exit from
select markets, underpins the
generation of improving cash returns
from our combustible business.
c.70%
of profit contribution comes from
top five combustible markets
26
Imperial Brands | Annual Report and Accounts 2022
2. NGP BUSINESS PROVIDING
OPTIONS FOR POTENTIAL HARM
REDUCTION AND GROWTH
Next generation products have growth
potential as they are still a relatively
nascent category in the majority of
markets. We seek to build a
sustainable NGP business through a
relentless consumer focus, focusing
on offering consumers a choice where
they have already expressed an NGP
preference and where we can leverage
our existing customer relationships.
4. GENERATING STRONG
SUSTAINABLE CASH FLOW FROM
A HIGH-QUALITY PORTFOLIO
The business remains highly cash-
generative with low capital intensity, a
working capital focus and disciplined
capital expenditure producing
adjusted operating cash conversion of
typically 90% to 100%. With the
foundations for growth in place,
expectations are to deliver a three-
year mid-single-digit compound
annual growth rate in adjusted
operating profit.
PHASE 2 OF OUR
FIVE-YEAR PLAN
Our five-year plan is delivering a
stronger financial outlook. Having
completed the initial two-year
strengthening phase of our strategy,
we are now focused on delivering
improved performance over the
remaining three years of our plan.
TRANSFORMATION IN ACTION
A TIO N
IN A C TIO N
IN A C TIO N
O ur c h oices are g uided by o ur strategy,
refresh ed ap proac h to e n viro n m e ntal,
social a n d govern a n ce (E S G) priorities.
p urp ose a n d visio n as w ell as o ur
O U R T R A N SF O R M
OUR PURPOSE
OUR VISION
Forging a path to a healthier future for moments of
relaxation and pleasure.
To build a strong challenger business powered
by responsibility, focus and choice.
STRATEGIC PILLARS
Pages 14-19
CRITICAL ENABLERS
Pages 20-25
OUR BEHAVIOURS
Page 23
HOW WE MEASURE
OUR PERFORMANCE
Pages 28-29
S
T
E
K
R
I
L
P
M
I
S
N
O
G
N
Y
T
I
R
O
I
R
I
S
U
C
P
A
R
M
O
U
F
O
C
O
T
NSUMER AT
HE CENTRE OF
HE BUSINESS
T
P
R
B
E
-
O
S
N
F
A
A
D
E
I
C
O
I
T
E
I
F
I
F
F
E
D
N
A
A
R
E
P
O
E
C
N
E
R
U
S
R M A
P A BILITIE
D C ULT
E
D C
A
• Start with the Consumer
• Collaborate with Purpose
• Take Accountability with Confidence
• Be Authentic, Inclusive to all
• Build our Future
To measure our performance we have ten financial and four non-financial key
performance indicators – see pages 28 and 29. We measure the performance
of several other indicators. Financial performance is reported on pages 73 to
81, and non-financial performance is reported on pages 36 to 65.
OUR APPROACH TO ESG
Pages 36-58
HEALTHIER FUTURES
Consumer
health
Climate
change
Packaging
and waste
POSITIVE CONTRIBUTION TO SOCIETY
Farmer
livelihoods
& welfare
Sustainable
& responsible
sourcing
SAFE & INCLUSIVE WORKPLACE
Employee
health, safety
& wellbeing
Diversity, equity
& inclusion
Human
rights
12
Imperial Brands | Annual Report and Accounts 2022
www.imperialbrandsplc.com
13
Further information on our strategy
can be found on pages 12 to 25.
5. ENHANCING CAPITAL
RETURNS THROUGH
PROGRESSIVE DIVIDEND AND
SHARE BUYBACK
We have clear capital allocation
priorities: (1) targeted investment to
support our strategy, (2) a strong and
efficient balance sheet with an
investment grade credit rating, (3) a
progressive dividend policy reflecting
underlying performance, and (4) to
return surplus capital to investors via
a share buyback.
Net revenue
Adjusted operating
profit
Adjusted cash flow
Leverage
Enhanced capital
returns
BUILDING A
TARGETED N
BUSINESS
G
P
E R
E
D
A
L I O
T
S
N
N
Dividend
U
L
A
O
R
RIVIN G V
M O U R B
R T F O
D
O
P
O
R
F
Improving returns FY23 to FY25
Gradually improving trajectory with compound annual
growth rate of 1-2%
Delivering improving profit growth through operational
leverage, better geographic mix from continued
stabilisation of priority market shares, reducing losses
from our investment in NGP and restructuring
cost savings
Compound annual growth rate in mid-single-digits
Adjusted operating cash flow conversion typically
between 90% and 100%
Progressive dividend policy reflecting
underlying performance
Committed to investment grade credit rating, with
leverage at the lower end of the 2.0x to 2.5x net debt/
EBITDA range
An ongoing share buyback programme to return surplus
capital, with up to £1 billion committed in FY23
www.imperialbrandsplc.com
27
KPIS
HOW WE ARE
PERFORMING
We use key performance indicators to
assess the progress we are making in
delivering our purpose, vision and strategy.
FINANCIAL KPIs1
Aggregate priority market
share vs prior year (%) R
NGP net revenue (£m)
Tobacco & NGP
net revenue (£bn)
22
21
20
-2bps
-17bps
35bps
22
21
20
£208m
£188m
£201m
22
21
20
£7.8bn
£7.6bn
£8.0bn*
Performance
Our “focus on our priority markets” has led
to encouraging progress with an increase in
aggregate priority market share vs prior
year, following several years of decline.
Gains in the US, UK, Spain and Australia
offset a decline in Germany.
Performance
NGP revenue grew by 10.8% on a constant
currency basis in the year. This growth in
our NGP revenue reflects our strategic
priority to “build a targeted NGP business”.
This metric will be used as a bonus
performance criterion for Executive
Directors from FY23.
Performance
Tobacco & NGP net revenue grew by 2.7% at
actual exchange rates and increased by 1.5%
on a constant currency basis. Tobacco net
revenue was up 1.3% at constant currency,
reflecting progress made in the two
combustible strategic priorities of: “focus on
our priority markets” and “driving value
from our broader portfolio”.
* £7.7bn excluding
Premium Cigar Division disposal.
Tobacco & NGP adjusted
operating margin (%)
Adjusted earnings
per share (pence) R
Dividend per share (pence)
22
21
20
44.2%
43.5%
41.2%*
22
21
20
265.2p
246.5p
254.4p*
22
21
20
141.17p
139.1p
137.7p
Performance
Margins improved primarily due to lower
NGP losses reflecting our strategic priority
to “build a targeted NGP business”. We also
benefited from our focus to “drive value
from our broader portfolio” as we exited the
lower profitability markets of Japan and
Russia during the period.
* 42.1% excluding
Premium Cigar Division disposal.
Performance
Adjusted earnings per share was up 4.9% on
a constant currency basis, excluding a
currency tailwind of 2.5%. Reported
earnings per share declined 42.8%.
This movement is explained in the Group
Financial Review.
Performance
The dividend grew 1.5% 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, which we
have achieved.
* 247.2p excluding
Premium Cigar Division disposal.
Adjusted operating cash
conversion rate (%) R
Net debt to EBITDA
(multiple) R
22
21
20
102%
83%
127%
22
21
20
BUILDING A
TARGETED N
BUSINESS
G
P
E R
E
D
A
L I O
T
S
N
N
U
L
A
O
R
RIVIN G V
M O U R B
R T F O
D
O
P
O
R
F
2.0x
2.2x
N
O
G
N
S
T
E
K
R
I
L
P
M
I
S
Y
T
I
R
O
I
R
D
E
I
C
O
I
T
E
I
F
I
F
F
E
D
N
A
A
R
E
P
O
2.7x
O
U
F
O
I
S
U
C
P
A
R
M
E
C
N
E
R
U
S
R M A
P A BILITIE
D C ULT
E
D C
A
C
O
T
NSUMER AT
HE CENTRE OF
HE BUSINESS
T
P
R
B
E
-
O
S
N
F
A
A
Performance
2022 adjusted operating cash conversion of
102% reflected neutral working capital in the
year compared to a working capital outflow
in FY21.
Performance
In line with our strategy to reduce leverage,
net debt to EBITDA was 2.0x and is now in
our target range. The improvement in the
ratio was mainly a result of strong cash
flow generation.
1. Definitions for financial KPI’s can be found in Supplementary Information.
28
Imperial Brands | Annual Report and Accounts 2022
R
KPIs used as bonus and LTIP
performance criteria for Executive
Directors. See Remuneration
Report on pages 130 to 148 for
more information
NON-FINANCIAL KPIs1
More non-financial performance indicators can be found in the ESG Review on
pages 40, 42, 43, 45, 47, 54 and 55 and in our Reporting Criteria document available
on our website.
Return on invested capital
(%) R
Energy consumption (GWh)
Absolute C02 equivalent emissions
(tonnes)
22
21
20
17.7%
16.5%
15.2%
22
21
20
712
729
773
22
21
20
91,007
131,236
Total: 222,243
92,900
133,292
Total: 226,192
105,242
131,463
Total: 236,887
Performance
Return on invested capital improved in
the year by 120bps to 17.7% driven by the
increase in adjusted operating profit and the
reduction in annual average capital.
Performance
We have seen a 19% decrease in energy
consumption from our baseline year. Our
target is to reduce energy consumption by
25% by 2030. We remain on track to achieve
that target.
Our 2022 relative energy consumption is
91,364 KWh/£m net revenue.
Scope 1
Scope 2
Total value is total Scope 1 and Scope 2
absolute CO2e emissions
Performance
We have seen a 19% decrease in our total
Scope 1 and 2 emissions from our 2017
baseline. Our target is to be at Net Zero in
our direct operations by 2030. We have also
set a Scope 3 target, to be Net Zero by 2040.
Total shareholder
return R
Waste (tonnes)
Lost time accident frequency rate
(per 200,000 hours)
Imperial Brands total return
FTSE 100 index total return
Performance
Total shareholder returns continued to
rebound in the year, growing 31%, as our
results were in line with our guidance and
market participants gained confidence in
our new management team and our strategy
delivery. Over the prior ten years, Imperial
Brand’s total return remains below that for
the FTSE 100 index.
22
21
20
41,969
41,714
40,253
22
21
20
0.24
0.27
0.32
Performance
We have seen a 15% decrease in waste from
our 2017 baseline year. The slight increase
in waste of 0.6% we have seen compared to
last year is due to increased production
volumes at our McAdoo site. Our target is to
reduce waste by 20% by 2030.
Performance
We have seen a 11% reduction in the LTA
rate compared to last year and a 40%
reduction compared to the 2019 baseline
year. Our target is to achieve a 75%
reduction in LTA rate from the baseline year
by 2030.
We are utilising targeted leadership pulse surveys to measure and report on
the progress of our cultural change programme and will develop KPIs to track
this in 2023.
1. Definitions for non-financial KPI’s can be found in the ESG Review on pages 35 to 58 and in the Reporting
Criteria Report available on our website.
2. 2020, 2021 and 2022 non-financial information data has been independently assured by EY. Our Reporting
Criteria Document contains detail on definition and scope of all non-financial KPIs.
3. See www.imperialbrandsplc.com/sustainability for more information.
4. Our 2022 environmental data follows the reporting period Q4 financial year 2021 to Q3 financial year 2022.
This is to allow for data collection, validation and external assurance. In FY22, we reset our baseline and
subsequent years’ data for Scope 1 and 2 GHG emissions to make it consistent with the latest guidance
from the Greenhouse Gas Protocol and CDP. Our reporting scope and definitions are detailed in the
Reporting Criteria Document published on our website.
5. Our health and safety data is for the full 2022 financial year. Our reporting scope and definitions are
detailed in the Reporting Criteria Document published on our website.
www.imperialbrandsplc.com
29
050100150200250300202220202018201620142012 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.
This section of the Annual Report
provides insight into how stakeholder
engagement is taken into
consideration by the Board and the
Executive Leadership Team (ELT) in
their decision-making processes. It
goes on to describe how we monitor
the effectiveness of our engagement.
CONSUMERS
Our strategy starts with our
consumers. Millions of adults
worldwide choose to enjoy our tobacco
and next generation products. The
better we understand the preferences
of our consumers, the better we are
able to serve them. This helps us grow
our business, and it helps us identify
and capitalise on opportunities as a
challenger business.
How the Board considers
this stakeholder
• The Board participated in a number
of consumer immersion events over
the course of the year, in the UK,
Spain and the US. These afforded
Board members the opportunity to
get closer to the consumer by
hearing directly from them about
their habits, likes and dislikes. Board
members were also able to discuss
matters important to both
combustible and nicotine product
consumers, including the dynamic
between local and international
brands. The Board was also updated
on the impact of the cost of living
crisis on consumers.
• A tour of our Greensboro factory
during the Board visit to the US also
helped Board members understand
the full life-cycle of the products our
consumers enjoy.
The Board’s decision-making process
is brought to life in our Section 172
statement on pages 108 to 112 which
references specific recent examples.
Further information on how the
Board has considered stakeholders
when making key decisions is also
given on the following pages and
in the Governance Report on pages
108 to 112.
How we monitor the effectiveness of
our engagement
• We hold regular consumer focus
groups to assess 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 with consumers.
• Regular data-led updates from the
Global Consumer Office provide the
Board with evidence and an
opportunity to challenge
assumptions when making
decisions related to our
product portfolio.
How we engage with
this stakeholder
• Consumer roundtables and focus
groups are held – virtually where
COVID-19 restricted face-to-face
meetings – to understand
consumers’ specific requirements
and changing preferences.
• Feedback from these focus groups is
used in our decision-making for
investments in brand refreshes
and marketing.
• The Global Consumer Office, headed
by the Chief Consumer Officer, leads
consumer-listening initiatives
across the Group.
What matters to this stakeholder
• 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 NGP,
evolve over time.
• Our focus groups have shown us
that listening to these needs and
remaining relevant underpin
consumer loyalty to brands.
30
Imperial Brands | Annual Report and Accounts 2022
COLLEAGUES
Our colleagues are Imperial’s most
important asset and are critical to the
success of the business. It is essential
we create a supportive, safe and
rewarding work environment to
enable them to deliver our goals and
develop their careers. We believe that
a diverse and engaged workforce is
imperative for business success.
How the Board considers
this stakeholder
• Collective responsibility for
workforce engagement has been
embedded into the Board’s
governance framework in the remit
of the redefined People and
Governance Committee.
• The Board held four Meet the Board
events with groups of colleagues
during the year. These events gave
the Board the opportunity to hear
colleagues’ perspectives as part of
our overall engagement strategy.
This engagement allows the Board
to incorporate colleagues’ views into
its decision making.
• The Board also engages with a broad
cross-section of employees by way
of dinners with teams, informal
drinks and site visits.
• The Board receives regular feedback
from our employees through
updates at the People and
Governance Committee. These
include the results of our pulse
surveys which gather the views of
colleagues on particular topics, for
example the progress of our
“Connections” workshops and the
work of our Employee Resource
Groups (ERGs).
• The Board met to consider the
implications of the Russian invasion
of Ukraine. Its prompt action
allowed the Company to safeguard
the interests of our Russian
colleagues by transfering the
business as a going concern. The
long-term interests of our colleagues
in Ukraine were a key factor in
this decision.
How we engage with
this stakeholder
• During the year, following extensive
consultation we launched
“Connections”, our new purpose,
vision and behaviours through our
global all-staff conference. All
colleagues have experienced
training to enhance their
understanding of these behaviours,
and what they mean for them in
their role.
• We continued to hold CEO and
leadership town hall meetings,
in person and virtually, providing
opportunities for colleagues to give
feedback directly to the ELT.
• Feedback from our four ERGs,
focusing on gender, ethnicity,
LGBTQ+ and disability, has helped
us to understand how better to
co-create strategies and policies for
including underrepresented groups.
• We use various channels including
our intranet and IB News to ensure
regular internal communication
with colleagues.
What matters to this stakeholder
• Our colleagues want to see
continued progress on equality and
diversity and to feel included. They
want to see that issues of
authenticity and inclusion around
gender, ethnicity, LGBTQ+ and
disability 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
continue to be a priority in
the workplace.
How we monitor the effectiveness of
our engagement
• We review the results of our annual
workforce engagement “Have Your
Say” survey.
• We review the results of our interim
pulse surveys.
• The ESG 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
senior management, feedback from
colleagues on how the Company is
progressing in relation to inclusivity
concerns is given to the ELT via
these sponsors.
• Feedback is obtained during the
Board listening sessions.
• We collate feedback from exit
interviews to find out why
employees choose to leave us.
www.imperialbrandsplc.com
31
STAKEHOLDER ENGAGEMENT continued
CUSTOMERS
Where it is difficult to engage directly
with consumers, engaging with
retailers provides useful insights into
our consumers’ behaviour and
preferences. This helps us grow our
business, even where there are
regulatory headwinds, and identify
opportunities to be a successful
challenger. We work closely with
distributors, wholesalers and retailers
to ensure our products are available to
adult consumers in a diverse range of
outlets. These stakeholders play
a crucial role in our business model.
How the Board considers
this stakeholder
• The Board has participated in store
visits in the UK, Spain and the US
over the last year. These visits
provide the opportunity to talk
directly to retailers.
• Our CEO meets with customers
regularly throughout the year.
How we engage with this
stakeholder
• Our market cluster leadership teams
engage with our customers to
understand how to improve the
effectiveness of their sales forces.
• We work closely with our
distributors to understand how we
can best manage our relationships,
and have a dedicated team to
support distributor sales and build
best practice in distributor
management across the Company.
• We use key account management
practices to engage with our largest
customers to better understand
their needs and to create strong
commercial partnerships to help our
businesses create value together.
What matters to this stakeholder
• A diverse portfolio of quality
products that appeal to consumers.
• Consistent communication on the
launch pipeline and investment
behind relevant brands in
their region.
• Ease of ordering and a 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.
How we monitor the effectiveness of
our engagement
• 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 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.
GOVERNMENTS AND REGULATORS
Approaches to legislation vary
significantly across geographies. We
support reasonable regulation of
tobacco and nicotine products and
look to have constructive engagement
with policy makers and regulators.
How the Board considers
this stakeholder
• Our corporate strategy includes a
commitment to building an NGP
portfolio of potentially reduced
harm products.
• The Board approves our Modern
Slavery Statement annually.
• Regular updates on regulatory
matters are provided to the Board.
• Following his appointment, our
Chief Legal & Corporate Affairs
Officer has presented to the Board
both on the US regulatory
environment, during the Board’s
visit to our US business, and on the
Group’s key regulatory risks and our
corporate affairs strategy to manage
these risks.
How we engage with this
stakeholder
• Whilst management is primarily
responsible for understanding and
ensuring compliance with
applicable laws and regulations, the
Board also looks to encourage direct
constructive engagement.
• We monitor changing regulations
in our markets and assess the
impact on our existing portfolio
and innovations.
• We assess regulatory 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.
What matters to this stakeholder
• Tobacco excise revenues and public
health spending on smoking-related
health issues.
• Assessment of reduced harm
from NGP.
• Compliance with local laws
and regulations.
• Confidence that our business is
operating legally and responsibly
in each government or
regulator’s region.
• Collaboration with law enforcement
agencies countering illicit trade and
preventing youth access to tobacco
and nicotine products.
How we monitor the effectiveness
of our engagement
• 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.
• We monitor feedback and
complaints from regulators.
32
Imperial Brands | Annual Report and Accounts 2022
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
• Our CEO, CFO and Chair have
regular meetings with our major
investors to update them on our
performance, hear their views
directly and consult with them.
• The Board receives a report at every
meeting on investor engagement, as
well as a feedback report following
all investor events.
• During the year, the Board
commissioned an investor
perception study to gather feedback
on our strategy, performance and
communications.
• Our AGM provides an opportunity
for the Board to meet with investors.
• Sue Clark, Chair of our
Remuneration Committee, wrote to
investors in July 2022 about ESG
metrics and, together with the
Global Reward Director, hosted
follow-on investor calls where
requested. Further details of the ESG
metrics can be found in the
Directors’ Remuneration Report on
page 132.
How we engage with
this stakeholder
• Our Annual and Interim results
presentations inform investors how
the business is performing.
• The setting of realistic expectations
combined with transparent
reporting of performance against
KPIs, both financial and non-
financial, including ESG metrics.
• We maintain a programme of active
• Disciplined capital allocation.
dialogue with our key financial
stakeholders, including institutional
shareholders, potential investors,
holders of our bonds and sell-side
research analysts.
• Our CEO hosted two webinars
during the year for investors and
analysts. In March, the US
management team presented on
how Imperial Brands’ consumer-
centric strategy is gaining traction
in the US market. In September, the
Global ESG Director together with
senior management outlined how
we have refreshed our approach to
our ESG agenda to further support
our strategy.
• Senior management supported a
new bond issue in July 2022,
including an investor roadshow to
market the bond.
• Senior management present
at various industry conferences.
What matters to this stakeholder
• Confidence in the Board that it has
appropriate oversight 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.
How we monitor the effectiveness of
our engagement
• Our CEO, CFO and Chair engage
with investors to gather feedback on
how we are performing against
our strategy.
• Topics discussed during the year
included the actions taken to
improve performance, progress with
executive and non-executive
recruitment, capital allocation
considerations and ESG.
• The Board receives an investor
relations update at every Board
meeting, which sets out the latest
investor views, share register
movements and recent
market developments.
• 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.
• Key findings from the investor
perception study included
widespread support for Imperial’s
strategy, capital allocation policy,
management team and operational
progress to date. Shareholders
would like to see progress in NGP
and signs of the overall financial
performance of the Group improving
into the next three-year phase of
the plan.
www.imperialbrandsplc.com
33
STAKEHOLDER ENGAGEMENT continued
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. We are
conscious of the key dependencies in
our supplier relationships, especially
those partners we are relying on to
support delivery against our strategic
objectives. We are working to increase
the resilience of these relationships,
including by building out our business
continuity capability at Group level,
and deepening our understanding of
critical dependencies.
Working in partnership with our
suppliers ensures we have the right
resources in place to respond with
agility to global challenges, and
supports our growth.
How the Board considers
this stakeholder
• The Board approves our Modern
Slavery Statement annually.
• Suppliers within our supply chain
are included as part of the Board’s
ESG considerations.
• During the year we reviewed the risk
posed to suppliers, including in
respect of logistics arising from
COVID-19, as well as other economic
and geopolitical influences.
• Factory and site visits help the
Board understand the complexities
of our global supply chain.
• Our Chair and CEO visited Africa
during the year, where they met
with the CEOs of our two largest
tobacco leaf suppliers.
• Supplier considerations were
intrinsic to our response to the
Ukraine crisis, in particular the
Board decision to exit Russia.
How we engage with this
stakeholder
• Our Supplier Qualification
Programme is a screening process
for all new NTM and NGP suppliers,
requiring completion of 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.
• Our Supplier Code of Conduct helps
ensure we engage suppliers that
offer resilience in our supply
chain and security in our
technology platforms.
What matters to this stakeholder
• 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.
• We set and abide by fair contract
and payment terms.
How we monitor the effectiveness of
our engagement
• We operate a vendor rating system
for our key NTM suppliers, and carry
out annual business reviews.
• The STP 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 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.
• We carry out online engagement
and performance reviews.
34
Imperial Brands | Annual Report and Accounts 2022
NON-FINANCIAL INFORMATION STATEMENT
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.
Reporting
requirement
Environmental
matters
Employees
Respect for
human rights
Policies and standards
which govern our approach1
Information necessary to understand our business
and its impact, policy due diligence and outcomes
Environmental targets
29, 41, 44,
62, 64
International management systems
42, 59 to 65
• Occupational health, safety
and environmental policy
and framework
• Sustainable
Tobacco Programme
• 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
Climate and energy
Reducing waste
Sustainable tobacco supply
Diverse and engaged workforce
Workplace health and safety
International management systems
Lost time accident (LTA) rate
Diverse and engaged workforce
Workplace health and safety
Human rights
International management systems
Social matters
• International marketing
Human rights
Youth access prevention
Farmer livelihoods and welfare
Charitable and political donations
How we manage risk
Governance, risk management and
internal control
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
Anti-corruption
and anti-bribery
Description of principal risks
and impact of
business activity
Description of the
business model
Non-financial key
performance indicators
1. Not all of our Group policies and standards are publicly available.
29, 41 to 43,
59 to 65
29, 44, 45
37, 46 to 49
55 to 57
29, 52 to 54
54
29
55 to 57
29. 52 to 54
50, 51
54
50 and 51
39
46, 47
149
82
82 to 93
82 to 93
128, 129
10 and 11
29
42, 45, 48,
54, 55
www.imperialbrandsplc.com
35
ESG REVIEW
b usin ess strategy h as bee n a refresh of
O U R P E O P L E A N D P L A N E T
o ur ap proac h to e n viro n m e ntal, social
fo u n datio n-b uildin g p h ase of o ur
a n d govern a n ce (E S G) resp o n sibilities.
A n i m p orta nt ele m e nt of th e
A G E N D A
Working with our employees, we also
created five core behaviours that
articulate what success looks like in our
new culture, and these too are linked
directly to our ESG commitments.
Following the launch of our strategy,
purpose, vision and behaviours, we
completed an ESG materiality
assessment, listening to the views of
consumers, customers, employees,
investors and shareholders. This survey
identified eight focus areas, which we
have grouped into three broad
categories: Healthier Futures, Positive
Contribution to Society, and Safe &
Inclusive Workplace. Each of our eight
focus areas is also aligned to at least
one of the United Nations’ Sustainable
Development Goals (UN SDGs).
Alongside this work, we introduced a
new ESG governance framework to
ensure rigour in the way in which we
set objectives and deliver on our
commitments. See page 56 for further
details. Our focus areas and the linked
metrics and targets have been endorsed
by the Board.
Executive Leadership Team sponsors
have been appointed for each of our
eight ESG priorities. This is intended to
inspire engagement throughout the
business. We believe this executive-
level sponsorship puts us in a stronger
position to deliver against our goals.
We have made external hires and
promoted internal subject matter
experts in order to build a strong
team capable of delivering on our
ambitious objectives.
For each of the eight priority issues,
we are at varying levels of maturity,
but we are committed to delivering our
ambitions on all of them.
In January 2021, we outlined our new
five-year strategy to transform
Imperial into a business better able to
deliver sustainable growth year in,
year out. Later that year, we launched
a new Company purpose and vision,
defining why we are here and what
we are trying to achieve. Our
commitment to environmental, social
and governance (ESG) issues is
enshrined in these two statements.
Our purpose expresses our ambition
to build a “healthier future” and this
applies not only to our consumers but
also to our communities and planet.
Our vision states that our pursuit of
commercial success will be “powered
by responsibility”.
Purpose: Forging a path to a
healthier future for moments of
relaxation and pleasure.
Vision: To build a strong
challenger business powered by
responsibility, focus and choice.
Tony Dunnage
Global ESG Director
TRANSFORMATION IN ACTION
Jan 2021
New
strategy
launched
Purpose,
vision and
behaviours
unveiled
ESG
materiality
study
completed
ESG Board
and
executive
governance
agreed
New ESG
strategy
developed
ESG strategy
signed off by
ESG Committee
and Board
Internal
“People
and
Planet”
agenda
launched
Sept 2022
ESG priorities
integrated into
executive
remuneration
metrics.
(introduced for
FY23)
36
Imperial Brands | Annual Report and Accounts 2022
We refer to ESG internally as our
“People and Planet” agenda and our
new approach was introduced to our
top 500 senior leadership population in
July 2022, through a series of
webinars. This was followed by a roll
out to all colleagues using digital and
face-to-face channels.
In September 2022, we introduced our
new ESG approach to some of our
investors in a webinar. This focused
on three of the eight priority areas:
consumer health, climate change, and
farmer livelihoods and welfare. We
also highlighted the importance of the
culture change programme. We have
integrated ESG metrics for consumer
health and climate into our executive
remuneration for FY23. Please see
page 132 for further details.
Further information on our People
and Planet agenda is available on
our website in our ESG Strategy
document and our 2022 ESG:
People and Planet
Performance Summary.
Our Reporting Criteria document
provides further information on
ESG-related KPIs. To note: Logista
remains out of scope for all
ESG-related KPIs.
We report ESG-related
information in accordance with
the core options of the Global
Reporting Initiative (GRI)
Standards and against the
Sustainable Accounting
Standards Board (SASB)
framework for tobacco. Details
can be found in our 2022 GRI and
SASB Index.
HEALTHIER FUTURES
CONSUMER HEALTH
CLIMATE CHANGE
We are committed to
strengthening our next
generation products (NGP) and
making a more meaningful
contribution to harm reduction
by offering adult smokers a
range of potentially less
harmful products.
POSITIVE CONTRIBUTION TO SOCIETY
FARMER LIVELIHOODS
& WELFARE
We are committed to
engaging with our suppliers
to support and develop
farming communities
and promote
sustainable agriculture.
SAFE & INCLUSIVE WORKPLACE
EMPLOYEE HEALTH,
SAFETY & WELLBEING
We are committed to
achieving world-class
occupational health,
safety and wellbeing for
all our employees.
We are committed to
reducing our impact on the
climate throughout our value
chain. Focusing on both
mitigation and adaptation.
SUSTAINABLE &
RESPONSIBLE SOURCING
We are committed to sourcing
products and services in a
compliant, sustainable and
socially conscious manner.
We will work with our
suppliers to ensure
continuous improvements.
DIVERSITY, EQUITY
& INCLUSION
We are committed to creating a
truly diverse and inclusive
organisation renowned for
celebrating difference,
enabling our people to feel that
they belong and be their
authentic selves.
We will respect, recognise and
value the diversity of our
consumers and reflect the
communities in which
we operate.
TRANSFORMATION IN ACTION
A TIO N
IN A C TIO N
IN A C TIO N
O ur c h oices are g uided by o ur strategy,
refresh ed ap proac h to e n viro n m e ntal,
social a n d govern a n ce (E S G) priorities.
p urp ose a n d visio n as w ell as o ur
O U R T R A N SF O R M
OUR PURPOSE
OUR VISION
Forging a path to a healthier future for moments of
relaxation and pleasure.
To build a strong challenger business powered
by responsibility, focus and choice.
STRATEGIC PILLARS
Pages 14-19
CRITICAL ENABLERS
Pages 20-25
OUR BEHAVIOURS
Page 23
HOW WE MEASURE
OUR PERFORMANCE
Pages 28-29
BUILDING A
TARGETED N
BUSINESS
G
P
E R
E
D
A
L I O
T
S
N
N
U
L
A
O
R
RIVIN G V
M O U R B
R T F O
D
O
P
O
R
F
S
T
E
K
R
I
L
P
M
I
S
N
O
G
N
Y
T
I
R
O
I
R
I
S
U
C
P
A
R
M
O
U
F
O
C
O
T
NSUMER AT
HE CENTRE OF
HE BUSINESS
T
P
R
B
E
-
O
S
N
F
A
A
D
E
I
C
O
I
T
E
I
F
I
F
F
E
D
N
A
A
R
E
P
O
E
C
N
E
R
U
S
R M A
P A BILITIE
D C ULT
E
D C
A
• Start with the Consumer
• Collaborate with Purpose
• Take Accountability with Confidence
• Be Authentic, Inclusive to all
• Build our Future
To measure our performance we have ten financial and four non-financial key
performance indicators – see pages 28 and 29. We measure the performance
of several other indicators. Financial performance is reported on pages 73 to
81, and non-financial performance is reported on pages 36 to 65.
OUR APPROACH TO ESG
Pages 36-58
HEALTHIER FUTURES
Consumer
health
Climate
change
Packaging
and waste
POSITIVE CONTRIBUTION TO SOCIETY
Farmer
livelihoods
& welfare
Sustainable
& responsible
sourcing
SAFE & INCLUSIVE WORKPLACE
Employee
health, safety
& wellbeing
Diversity, equity
& inclusion
Human
rights
12
Imperial Brands | Annual Report and Accounts 2022
www.imperialbrandsplc.com
13
Further information in the Healthier
Futures section of our website
PACKAGING AND WASTE
We are committed to
minimising waste associated
with our products, packaging
and production processes.
Our ESG strategy remains
aligned with the United Nations
Sustainable Development Goals.
HUMAN RIGHTS
We are committed to raising
awareness and improving
processes in our supply
chains recognising the
importance, influence and
role we have in promoting
and protecting human rights.
www.imperialbrandsplc.com
37
ESG REVIEW continued
HEALTHIER FUTURES
CONSUMER
HEALTH
We are committed to strengthening our next generation
products (NGP) to make a more meaningful contribution
to harm reduction, by offering adult smokers a range of
potentially less harmful products.
Consumer-led harm reduction strategy
We start with our consumers, focusing on consumer insight and research to
ensure we build a portfolio that suits them. The only way we can make a
material contribution to harm reduction is by getting ever closer to our
consumers, understanding their needs and behaviours, and then innovating at
pace and creating new compelling propositions.
Tobacco Harm
Reduction (THR)
Potentially Less
Harmful Product
Consumer
Acceptance
As illustrated in the above equation, NGP have the potential to be less harmful to
consumer health than tobacco. However, in order to do so, these new products
must be accepted by consumers as alternatives to cigarettes.
This is why we believe harm reduction starts with the consumer.
Behaviours
Link to SDGs
We are committed to
tobacco harm reduction
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.
Our ambition is to make a meaningful
contribution to tobacco harm
reduction. This ambition is also
directly linked to target 3.4 of the UN
SDG 3, which is “to reduce mortality
from non-communicable diseases and
promote mental health”.
Tobacco harm reduction starts with
the consumer. This means developing
a deep understanding of the diverse
lives of the world’s one billion adult
smokers, and the individual occasions
when they choose to smoke. Smoking
is deeply rooted in our cultures. People
derive pleasure from smoking and
many are reluctant to compromise on
that pleasure. So, when we provide
adult smokers with an alternative to
combustible tobacco products, it is
important to ensure their experience
is as close to the experience of
smoking as possible. Our products
are focused solely on existing
adult smokers.
Clearly, the best health-related
outcome is for adult smokers to stop
smoking. However, the next best
option is to offer potentially harm
reduced alternative products to those
consumers who are uninterested or
unwilling to stop smoking. We have
found these consumers fall into two
distinct categories and are likely to be
attracted to different product types:
1. Willing to try new products but
wanting an experience as close to
smoking as possible.
2. A more health-conscious smoker,
looking to find something
potentially less harmful and likely to
compromise somewhat on the
experience but not fully.
By increasing NGP choice and
improving the experience, tobacco
companies can increase the number of
adult smokers who choose potentially
harm-reduced alternatives.
38
Imperial Brands | Annual Report and Accounts 2022
Our new NGP strategy is focused on
driving consumer choice. We have
defined an approach which plays to
our strengths and is centred on
meeting consumer needs. As the
smallest of the global players, it is not
our role to create categories in
markets. At this stage, we are focused
on markets where an NGP category is
already well established and where we
can leverage our existing combustible
routes to market.
Once we have identified which
markets are attractive to us, we seek to
understand what our target consumers
value most about their smoking
experience. Having clearly understood
the consumer dynamics, our role in
these markets is then to provide
greater consumer choice with a
differentiated product offering that
meets an untapped consumer need.
NGP have the potential to make a
significant contribution to harm
reduction. Products in other nicotine
categories, whilst not risk free, differ
from cigarettes in their risk profiles, as
illustrated on the chart above. Current
scientific evidence suggests NGP have
the potential to significantly reduce
harm, relative to continuing to smoke
cigarettes. While each category of NGP
has a differing risk profile, no NGP
involve the burning of tobacco and so
do not produce the smoke which
is the primary cause of smoking-
related disease.
Persuading consumers to choose
potentially reduced risk products
requires innovation across the entire
value chain. For an adult smoker to
choose a potentially reduced risk
product, we need to ensure their
journey is as frictionless as possible.
This requires innovation across our
supply chain, superior distribution
networks, focused consumer insights
and novel marketing models. We seek
to substantiate the reduced harm
potential through our scientific
research in the laboratory, the clinic
and once products are in market.
Our products target existing adult
smokers. Our focus is on driving
consumer acceptance, while
recognising that not all consumers
and markets are the same. There are
different preferences and regulations
across different markets, which is why
we are taking a portfolio approach
with our range of NGP.
Our heated tobacco product, for
instance, is targeted at consumers
who prefer multiple sessions between
charging. We also know that some
consumers prefer a compact heated
tobacco device. This is why we have
focused on these two key attributes for
our first launches in heated tobacco
with our Pulze product.
In vaping, feedback on our all-new blu
2.0 product launched in France
suggests consumers find it among the
best vaping experiences. It has a
longer battery life and enhanced
ergonomics, so it feels more
comfortable to use. The new pods
address the previous industry
concerns over leakage, and the
pods now dock neatly with
a magnetic “click”.
In modern oral, we are focused on
improving taste and smell to better
satisfy our target consumers – while
delivering the nicotine that they want.
Under-age people should never use
our products. Regulators have
expressed concern that NGP could
become a gateway to cigarette
smoking for consumers who do not
already smoke.
It is vital that any NGP use by “never-
smokers”, including youth, is
minimised or eliminated altogether.
NGP are for adult smokers and adult
nicotine users only.
Our entire NGP philosophy reflects a
no-tolerance approach to youth access
through every stage of our products’
life. This applies from conception,
development and manufacturing
through to perception and behavioural
science, marketing and post-market
surveillance. We maintain a strict
responsible marketing protocol.
To reinforce our commitment to youth
access prevention, we seek to
ensure that regulatory requirements
are implemented, adhered to
and enforced.
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.
Our commitment to responsible
marketing and sale of our NGP and
combustible tobacco products is
summarised by our Marketing
Principles detailed in the blue box
overleaf. By collectively committing to
responsible marketing and high
product standards across the board,
we can create a united front against
youth access to tobacco and nicotine
products. We are also developing a
framework to assess, understand and
act to mitigate the risk of underage1
use. We intend to expand on this
framework in 2023.
www.imperialbrandsplc.com
39
The relative risk scaleAn illustrative representation of the current scientific evidence: Total Cessation CombustionCombustionCombustible Tobacco productsNon-combustible Tobacco productsNon-combustible Nicotine productsSnusHeatedTobacco Combustible Cigarettes Oral NicotinePouchesVapeNicotine ReplacementTherapyHigher riskmore toxicantsLower riskmore toxicants ESG REVIEW continued
We seek to substantiate the reduced
harm potential of NGP through our
rigorous scientific research in the
laboratory, the clinic and once
products are in market. We firmly
believe in starting with the consumer,
and this is reflected in our
commitment to improving the way we
substantiate and communicate the
tobacco harm reduction (THR)
potential of our NGP to adult smokers
in FY23 and beyond. We have refined
our scientific assessment framework
(SAF), which is a multi-stage, multi-
year testing and research programme
designed to evaluate the harm
reduction potential of each of our NGP
relative to combustible cigarettes. Our
comprehensive consumer product
safety programme ensures we are
rigorously validating NGP safety
profiles throughout their lifecycles.
Simultaneously, we are scientifically
assessing the THR potential and
relative risks of our NGP compared to
cigarettes, focusing on both
individuals and wider populations. We
believe the SAF is crucial in
generating the necessary scientific
proof points and evidence to build and
maintain trust in NGP with consumers,
regulators, public health and the
media. We also think the
comprehensive scientific assessment
of these relative risks should form the
basis of risk-proportionate, evidence-
based regulation. Our SAF is therefore
aligned with guidelines provided by
leading global public health authorities
and regulators.
We believe that the totality of the
research generated by the SAF,
alongside in-market consumer data on
adult smoker switching/retention
rates and the broader scientific
literature, will ultimately confirm that
our NGP contribute to improved
consumer health outcomes compared
to continuing to smoke, thus
demonstrating our meaningful
contribution to THR.
We continue to make our scientific
research publicly available: find out
more on our dedicated science
website. We have published 30
peer-reviewed Imperial-authored
papers, and delivered 25 presentations
at conferences over the last five years.
MARKETING PRINCIPLES
1. We only engage with adult
consumers of tobacco and
nicotine products.
2. Our marketing is honest
and transparent.
3. We give our consumers the
information they need to
make informed choices.
4. We will never encourage
people to start smoking or
non-smokers to use
recreational nicotine
products, and never
discourage consumers of our
products from quitting.
5. We comply with the local
laws, codes of practice and
voluntary agreements which
govern the advertising,
promotion and sale of
our products.
By the end of FY22, our commercially available NGP had achieved the following SAF completion2 rates to demonstrate harm
reduction potential:
PROGRESS OF TESTING HARM REDUCTION POTENTIAL OF OUR NGP AGAINST THE SCIENTIFIC
ASSESSMENT FRAMEWORK
NGP type
Vape device
myblu
blu 2.0
Heated tobacco
Pulze and iD
Tobacco-free oral
nicotine pouch
Zone X
%
%
%
%
SAF
progress
Scientific highlights
Analysis of behavioural data from a 12-month longitudinal study shows 23.1% of smokers
quit smoking with myblu after 3 months, 35.9% after 6 months, and 46.2% after 12 months.
For smokers who did not quit, they reduced the number of cigarettes smoked per day on
average by 51%. For blu 2.0 we have completed safety testing and assessment for launch,
and SAF assessment continues.
Our first clinical study3 on Pulze and iD, with adult smokers with no intention to quit
smoking, demonstrated a good safety profile and that the product reduces their desire
to smoke.
We have now completed two clinical studies4 on a range of Zone X nicotine strengths.
They demonstrate the product has a good short-term safety profile, offers a satisfying
alternative to combustible cigarettes and snus, and reduces the users’ urge to
use nicotine.
97
28
62
47
1. Underage is defined as consumers under the age of 18 or a higher legal age for purchase.
2. Please note 100% SAF completion is not required for market product launch.
3. Study not yet published in the scientific literature.
4. Only one of these studies is currently published in the scientific literature.
40
Imperial Brands | Annual Report and Accounts 2022
As identified in our materiality
assessment, climate change is a priority
for us. We know that climate change
represents a potential long-term risk
across the whole of our value chain and
to society in general. Disruption in
climate and energy has the potential to
impact our business from challenges as
diverse as crop failure, asset destruction
and interruption in distribution.
In line with the recommendations of the
Task Force on Climate-related Financial
Disclosures (TCFD), we have explored
the impact that climate change is likely
to have on our value chain. Please see
page 59 for details.
We monitor climate-related risks and
put in place intervention or mitigation
measures where necessary. Our targets
on climate change also represent
potential business opportunities. We
expect to see cost and environmental
benefits flow from our energy-saving
and efficiency programmes.
We are focused both on curbing our use
of energy and changing the mix of the
energy we continue to use. Our
ambitions are aligned to UN SDG 7:
affordable and clean energy, specifically
targeting points 7.2 and 7.3, which are
to “increase the global percentage of
renewable energy” and “double the
improvement in energy efficiency”.
Our first renewable energy site (for
definition see our Reporting Criteria
document), the Skruf plant in Savsjo,
Sweden, is now acting as an exemplar
for our other facilities as they work to
further prove their energy efficiency.
We are currently evaluating options for
our Scope 1 fuel transition and are
engaging with external partners. We
will be looking both at technology
change and fuel transition, for example,
through a switch to biogenic fuels.
HEALTHIER FUTURES
CLIMATE CHANGE
We are committed to reducing our impact on the climate
throughout our value chain, focusing on both mitigation
and adaptation.
Strong track record of performance
From our 2017 baseline year we have:
• Reduced our absolute Scope 1 and 2 carbon emissions ( CO2e tonnes) by 19%
• Reduced our absolute energy consumption (GWh) by 19%
• Reduced our absolute water consumption in our operations (m3) by 28%
Our plan
(from a 2017 baseline year)
2025
• 100% of our purchased grid electricity will come from traceable
renewable sources
• Reduce absolute Scope 1 and 2 GHG emissions by more than 50%
2030
• 100% of energy sourced for our operations will be from renewable sources
• Be net zero in our direct operations (Scope 1 and 2 GHG emissions)
• Reduce our total carbon footprint (absolute Scope 1, 2 and 3 GHG emissions)
by 30%
• Reduce absolute Scope 3 emissions by 20%
• Reduce energy consumption by 25%
• Reduce water consumption across our operations by 30%
2040
• Our value chain will be Net Zero emissions (absolute Scope 1, 2 and
3 GHG emissions)
Behaviours
Link to SDGs
We are taking action to combat
climate change and its impacts.
www.imperialbrandsplc.com
41
ESG REVIEW continued
Our Scope 3 emissions are those that
we accrue from our value chain and
we are working with our suppliers and
other partners to better understand
these emissions. We do this largely
through the internationally recognised
CDP Supply Chain Programme.
Although we do not have water-
intensive manufacturing processes,
we maintain a strong track record of
managing water use effectively,
having reduced consumption by 28%
since our 2017 baseline year.
NET ZERO BY 2040
We have a strong track record of
reducing our environmental impact
through energy efficiency and carbon
emissions management. Since 2019,
we have had Scope 1, 2 and 3 targets,
consistent with reductions required to
limit climate warming to 2°C, approved
by the Science Based Targets initiative
(SBTi). However, in FY21 we set our
sights higher and joined the Business
Ambition for 1.5°C Race to Zero
initiative, a campaign led by the SBTi.
This means we are now committed to
reaching science-based Net Zero
emissions by 2040. To achieve this, we
have reset our science-based targets
for carbon, increasing our ambition in
line with 1.5°C global warming limits.
These are detailed in “Our plan” which
we will submit to the SBTi for their
approval in FY23.
We have also set new energy targets
which support our Net Zero emissions
ambition. For example, during FY22 we
took a Company decision to accelerate
our transition to renewable electricity.
At the end of FY22, 52% of our purchased
grid electricity was supplied by traceable
renewable source
We will also continue to work towards
validating our Scope 3 data.
We have mapped a five-step approach
towards Net Zero:
1. Undertake energy
efficiency initiatives.
2. Switch to 100% renewable grid
electricity.
3. Transition all other energy types to
renewable sources.
4. Achieve Net Zero in our operations.
5. Become climate positive, which
means removing additional carbon
dioxide from the atmosphere.
42
Imperial Brands | Annual Report and Accounts 2022
CLIMATE CHANGE PERFORMANCEPerformance indicator Unit2017 (base year)202020212022CommentaryOperations with ISO 14001 certification%92867883Travel restrictions resulting from the COVID-19 pandemic adversely impacted recertifications in 2020 and 2021, but these are now increasing. We aim to continue increasing certification levels in FY23.Absolute energy consumption1GWh875773729712AWithin our Net Zero ambition, one of the targets is to reduce energy consumption by 25% by 2030 versus a 2017 baseline. In FY22, energy consumption had reduced by 19% compared to 2017 and therefore we are on track to achieve this target.Relative energy consumption1KWh/£m net revenue112,80196,62595,74091,364AIn compliance with the UK streamlined energy and carbon reporting (SECR) requirements, our total UK energy consumption was 12.42 GWh which is 1.74% of the global total (2021: 13.46 GWh and 1.84%).Electricity from purchased renewable sources1%85652AWe purchase Renewable Energy Certificates (RECs) from within the same market boundary as electricity is being consumed, where possible, as defined by CDP. In markets where the means to purchase renewable electricity is less developed, we purchase from a nearby geographical location, but keep this under constant review with an intention to purchase from within the same market boundary once a source becomes available.Absolute Scope 1 CO2e emissions1Tonnes114,270105,24292,90091,007AOur Scope 1 emissions arise from stationary fuel combustion at our sites, refrigerant gases, and mobile fuel combustion in our fleet of Company sales vehicles. We have seen a 2% decrease in Scope 1 emissions since last year and a 20% reduction from our 2017 baseline year.Absolute Scope 2 CO2e location-based emissions1Tonnes161,360131,463133,292131,236AOur Scope 2 emissions comprise the indirect emissions resulting from the use of purchased electricity, heat and steam at our sites. We have seen a 1.5% decrease in Scope 2 location-based emissions since last year and a 19% reduction from our 2017 baseline year.Absolute Scope 2 CO2e market-based emissions1Tonnes173,902––84,759AWe report Scope 2 location-based and market-based emissions according to the GHG Protocol Scope 2 Guidance (2015) and CDP guidance. We have seen a 51% reduction in emissions compared to the 2017 baseline year.Total absolute Scope 1 and 2 location-based CO2e emissions1Tonnes275,630236,887226,192222,243AWe have seen a 19% decrease in our total Scope 1 and 2 emissions from our 2017 baseline. Our target is to be at Net Zero in our direct operations by 2030. We have also set a Scope 3 target to be Net Zero by 2040. Performance indicator
Unit
2017 (base year)
2020
2021
2022
Commentary
35.5
29.6
29.7
28.5A
_
1,837
5,901A
Relative Scope 1
and 2 location-
based CO2e
emissions1
Tonnes/£m
net revenue
Scope 3 CO2e
emissions:
business travel1
Tonnes
Key suppliers
by spend with
science-based
targets
Logista absolute
Scope 1 and 2
CO2e emissions
_
–
%
38
41
Tonnes
38,554
38,407
45,557
34
–
Logista absolute
Scope 3 CO2e
emissions
Absolute water
consumption1
Tonnes
193,611
205,240
194,634
–
m3
1,468,626
1,198,523
1,109,178 1,056,982A
Relative water
consumption
m3/£m net
revenue
189
150
146
136A
In compliance with the UK SECR
requirements, our total UK Scope 1
and 2 emissions were 2655 tonnes
CO2e emissions, which is 1.19% of the global
total (2021: 2975 CO2e emissions and 1.24%).
Business travel is travel undertaken for
work or business purposes. Increased
emissions from business travel in FY22
reflect the easing of COVID-19 restrictions
enabling increased business travel.
We aim to ensure that 50% of our suppliers
by spend will have set science-based
targets by 2024. In 2022 we more than
doubled the number of suppliers in scope
to 104 (2021: 51) and of these 34% had set
science-based targets.
Logista is managed remotely due to
commercial sensitivities and has provided
independently assured data for absolute
Scope 1, 2 and 3 emissions. Data for 2022 is
still undergoing independent assurance.
In 2021 Logista significantly increased
transport activity under their operational
control which resulted in an increase in
their Scope 1 emissions. Logista’s 2021
relative Scope 1 and 2 emissions comprise
43 tonnes (2020: 38) of CO2e per £million
of 2021 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.
Having already achieved the original target
of 15% reduction in water consumption by
2030, we have set a new target of 30% by
2030 versus a 2017 baseline. In FY22, we
saw a 28% reduction in water consumption
compared to the 2017 baseline year.
A. Select 2022 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000
standard. EY Assurance Opinion is available on our website. Our reporting scope and definitions are detailed in the Reporting Criteria
document published on our website.
1. Our 2022 environmental data covers the reporting period Q4 2021 to Q3 2022. This is to allow for data collection, validation and external
assurance. We use the industry leading GHG Protocol standard to inform our reporting of Scope 1 and 2 emissions. In FY22 we reset our
baseline and subsequent years’ data for Scope 1 and 2 GHG emissions to make it consistent with the latest guidance from the
Greenhouse Gas Protocol and CDP, particularly relating to Scope 2 market-based emissions reporting.
We are proud to have been
been recognised for a
second consecutive year as
a Climate Leader by the
Financial Times in its
ranking of actions taken by
European businesses.
Our actions to cut emissions
and mitigate climate risks
have earned us a position on
the CDP’s “A List” for climate
change for a third consecutive
year. Our 2021 CDP scorecard
is available on our website.
www.imperialbrandsplc.com
43
ESG REVIEW continued
HEALTHIER FUTURES
PACKAGING
AND WASTE
We are committed to minimising waste associated with
our products, packaging and production processes.
Consumer research
Our consumer research provides insights into what consumers value most.
While they do not want to see compromise on the quality of the product,
they do:
• Value waste reduction. They would like more information on how to recycle
products, and they would like to see brands reduce the amount of packaging
used and remove unnecessary plastic.
• Seek clarity on how we source materials which go into our products as well as
the proportions sourced from recycled materials.
• Value human rights and expect us to commit to ethical work practices. Please
see page 50 for our approach to human rights.
Our plan
(from a 2017 base year)
2025
• Our operations will send zero waste to landfill
• 100% of our packaging will be reusable, recyclable or compostable in the EU
and UK
2030
• We aim to reduce waste generated within our operations by 20%
Behaviours
Link to SDGs
We aim to ensure sustainable
consumption and production
patterns.
44
Imperial Brands | Annual Report and Accounts 2022
Given our global reach we want to play
a role in protecting the natural
environment and we actively work to
minimise our environmental impacts.
We also recognise that certain
resources are finite and, as such, this
presents us opportunities to explore
solutions that support our business
sustainably and protect the
environment. We are committed to
compliance with environmental
legislation. Reducing our
environmental impact also supports
efficiency and cost optimisation.
As part of our role in protecting the
natural environment, we seek to
minimise overall waste, eliminate
waste to landfill and make all our
packaging in the EU and UK reusable,
recyclable or compostable.
In April 2022, we launched our zero
waste to landfill project across our
manufacturing sites, and since last
year, we have seen a 20% decrease
in waste to landfill. We have
established a global knowledge
hub on waste management to share
best practice across sites and to
encourage collaboration.
We have conducted recycling
assessments on our packaging for
products sold in the EU. These
assessments have been conducted by
a third party and have allowed us to
identify non-recyclable packaging on
which to focus our improvement
efforts. To date, 86% of packaging
formats that we have assessed in the
EU are recyclable.
We acknowledge that as our NGP
business grows, we are faced with
additional waste and recyclability
issues. We continue to look at how we
can improve the sustainability of NGP
materials and packaging.
We will continue to implement a
consumer-led, regulatory compliant
packaging strategy in FY23 and we are
aiming to provide further details
during this year.
We have reviewed and updated our
waste and packaging-related targets,
and these are detailed in “Our plan”.
As we target zero waste to landfill,
we amended our definitions for waste
to account for local regulations which
require hazardous waste to be
landfilled. For this reason we
have restated our waste to landfill
baseline and subsequent years’ data.
Our waste performance is shown in
the table below.
WASTE PERFORMANCE
Performance indicator
Unit
2017 (base year)
Absolute waste1
Tonnes
49,141
2020
40,253
2021
41,714
2022
Commentary
41,969A Our target is to reduce waste by 20%
Relative waste1
All waste sent
to landfill1
Tonnes/£m
net revenue
6.34
5.03
5.48
5.39A
Tonnes
7,200
6,646
10,619
8,544A
Relative waste
to landfill1
Tonnes/£m
net revenue
0.93
0.83
1.40
1.10A
Landfill
avoidance rate1
%
88
88
83
85A
by 2030. We have seen a 15% decrease
in waste from our 2017 baseline year.
We have seen a slight increase of 0.6%
in waste compared to last year which
is mainly due to increased production
volumes at our McAdoo site.
Our target is to achieve zero non-
hazardous waste sent to landfill by 2025.
This year we have redefined waste to
landfill to include waste incinerated
without energy recovery and have
therefore restated our data. Compared to
last year, we have seen a 20% decrease in
waste sent to landfill.
A key element of our environmental
approach is to minimise the waste sent to
landfill. Some factories have reduced the
amount of waste they send to landfill by
reusing waste, recycling, composting and
incineration (with energy recovery).
A. Select 2022 data has been independently assured by Ernst & Young LLP (EY) under the limited
assurance requirements of the ISAE 3000 standard. EY Assurance Opinion is available on
our website.
Our reporting scope and definitions are detailed in the Reporting Criteria document published
on our website.
1. Our 2022 environmental data covers the reporting period Q4 2021 to Q3 2022. This is to allow
for data collection, validation and external assurance.
To note: Absolute waste does not include reused waste.
www.imperialbrandsplc.com
45
ESG REVIEW continued
POSITIVE CONTRIBUTION TO SOCIETY
FARMER
LIVELIHOODS
AND WELFARE
We are committed to engaging with our suppliers to
support and develop farming communities and promote
sustainable agriculture.
Aims
Purchasing from leaf suppliers who are committed to supporting their farmers
to access a decent standard of living.
We aim to purchase from and engage leaf suppliers who support their farmers
to achieve a decent standard of living by:
• Continuing to enhance due diligence in our leaf supply chain, co-ordinated
through our leaf Compliance and Reporting e-tool (CARE) programme.
• Continuing to set high expectations for suppliers who contract with farmers.
• Increasing our support for projects that have a direct impact within the
tobacco communities in our supply chain.
Our plan
2025
• Support suppliers to provide access to 100% sustainable wood use
2030
• Support suppliers to improve access to basic needs for 180,000 farmers and
their families
S U P PLIERS
I N D USTRY
I M PERIAL
Sustainable
Tobacco
Programme
AF C
E
L
E
M
M
A
A R E PROG
R
A
M
M
E
L
E
AF C
R
ARE PROG
Behaviours
Link to SDGs
46
Imperial Brands | Annual Report and Accounts 2022
We aspire to have a positive impact on
the planet, and the farming
communities in which our suppliers
operate. We do this by continuing to
support our suppliers to help their
contracted farmers increase access to
basic needs, diversify their income
and farm sustainably. This supports
our efforts to build a more responsible
supply chain that is sustainable for
the future.
We are working to enhance standards
in our leaf supply chain both directly
with our suppliers and through
partnerships, such as those created
through the Sustainable Tobacco
Programme (STP). The STP aims to
have a positive impact in tobacco-
growing communities, and all tobacco
leaf suppliers are expected to
participate. This is an independently
managed framework that provides us
with visibility over our supply chain in
two ways: first, by empowering our
suppliers to report on the actions they
are taking to address any risks
identified, and how they are having a
positive impact on the ground; and
second, by verifying these actions both
remotely and in the field. This informs
our strategy to support our suppliers in
taking effective action.
In 2022 (based on the tobacco leaf crop
year 2021), 96% of our suppliers
reported on their due diligence to
the STP.
Our suppliers provide training on
sustainable practices, human rights,
and modern slavery to their farmers,
especially prior to peak growing
periods. In addition, they use posters,
handbooks, storytelling and kits to help
convey key messages in their tobacco-
growing communities.
Within the last year we participated in
four independent Supply Chain Impact
Assessments (SCIA). These
assessments help focus our suppliers
to prioritise topics and develop or
enhance action plans to have a
meaningful impact on the ground.
Where collaboration is beneficial to
achieving impact, we jointly
commission these assessments with
other manufacturers or suppliers. A
recent example of industry
collaboration is the Türkiye 2021 SCIA.
A total of 560 stakeholders’
perspectives on social conditions in
the Turkish Tobacco Leaf supply chain
were secured during field research in
tobacco growing communities during
the harvest period. The third party also
worked with each of the six
participating suppliers in establishing
individual action plans that address
the findings, and an outcome was the
establishment of an industry-wide
body to collectively address areas of
common focus. We have closely
followed the development of these
action plans and working groups over
the last year, and will continue to stay
informed through dialogue with our
suppliers on their progress.
Through Leaf Partnerships we work
directly with suppliers to fund specific
projects that complement the work
they are already doing and thereby
amplify their impact in tobacco-
growing communities. These projects
range from enhancing farmers’
businesses to supporting communities
increase access to basic needs, such as
education and clean drinking water. In
FY22, Imperial provided financial
support to projects in 11 countries.
These projects are benefiting at least
84,000 farmers and their families.
We are committed to
purchasing tobacco from
socially and environmentally
responsible suppliers
FORESTRY
Many of our suppliers’ contracted
farmers use wood in tobacco
production, either as a fuel in the
curing of tobacco or for constructing
barns required for the curing
of tobacco.
In support of our ESG strategy, Imperial
has committed to supporting suppliers
and their farmers to access
sustainable wood by 2025. There are
various tobacco leaf curing methods,
including air-curing, sun-curing, and
flue-curing. The type of curing method
is dependent on the tobacco variety.
Flue-cured tobacco requires wood for
curing, since the tobacco leaf is dried,
in curing barns, by means of heated
air. As such, to be wood sustainable,
the wood used for curing should not
contribute towards deforestation or
should utilise renewable energy
curing methods.
In 2023, Imperial will continue to
create partnerships in those
remaining countries that are working
towards wood sustainability and will
directly fund commercial forestry
programmes. This builds on the
forestry programme Imperial directly
funded with suppliers in Africa
between 2015 and 2019.
Through our Leaf Partnership
programme since 2012, we have
funded the construction of over 5,000
energy-efficient tobacco-curing barns.
These barns can use up to 20% less
wood fuel compared to standard
curing barns.
5,000 energy-efficient curing
barns constructed with
suppliers between 2012
and 2018
Through the tobacco leaf we purchase,
Imperial also financially supports
national forestry programmes, such as
the Tobacco Afforestation Programme
in Tanzania. Planting trees decreases
the pressures on the indigenous
woodland that is being harvested for
use in tobacco production. There are
also economic benefits for farmers in
labour saving, reduced cost of wood
and transport. In Madagascar, since
2017 we have planted 1300 hectares of
commercial forestry, delivering 80%
wood sustainability to date (2022), with
100% wood sustainability expected to
be achieved by 2025. Please see our
Madagascar video on our website for
more details.
1,300 hectares of commercial
forestry planted in our own
operations in Madagascar
Chief Executive
Stefan Bomhard
during a visit
to a tobacco farm
in 2022
ADDRESSING CHILD
LABOUR
1. The Sustainable Tobacco
Programme (STP)
The Human and Labour
Rights section of the STP is
informed by the relevant
International Labour
Organization (ILO) core
conventions and the
principles and guidance
contained within the UN
Guiding Principles on
Business and Human Rights.
2. Our Leaf Partnership Projects
We are working directly with
our suppliers to fund projects
to help tackle some of the root
causes of child labour.
Eliminating Child Labour in
Tobacco Growing (ECLT)
Foundation
3. We actively support the ECLT
and its aims to tackle the root
causes of child labour.
FARMER LIVELIHOODS AND WELFARE PERFORMANCE
Performance indicator
2022 Commentary
2021
Percentage of suppliers’
directly contracted
farmers growing
complementary crops1
Percentage of suppliers’
directly contracted
farmers with access to
initiatives to improve
agricultural productivity1
88
94
97
98
Tobacco farming community
members benefiting
from new Imperial Leaf
Partnership projects
130,000
84,000
Complementary crops are grown alongside or in rotation with tobacco.
These crops are grown for household consumption, sale, or as rotational
crops to enrich and conserve the soil. These efforts have resulted in an
increase of 7% in this metric over the last reporting year.
Suppliers aim to provide all their directly contracted farmers with access
to initiatives to improve agricultural productivity, including technical
support, improved efficiencies, and improved infrastructure. These
efforts have resulted in an increase of 1% for suppliers’ directly contracted
farmers with access to initiatives to improve agricultural activity over the
last reporting year.
Imperial continues to fund projects aimed at addressing key livelihood
and welfare issues in tobacco communities. This number represents the
number of new beneficiaries from 2022 projects.
Imperial currently supports 230,000 farmers and their families through
ongoing projects.
1. Data is from strategic suppliers in prioritised countries in most need of support, as outlined by a sustainability index compiled using Maplecroft risk indexes.
www.imperialbrandsplc.com
47
ESG REVIEW continued
BIODIVERSITY
The responsible husbandry and
restoration of natural habitats, soils,
and water are integral to sustainable
agriculture. Our suppliers are
encouraged to protect and enhance
biodiversity in their growing areas.
This includes topic areas covered by
STP, such as: the mapping of sensitive
areas, responsible soil management
and integrated pest management
(IPM) to reduce the use of pesticides
and increase micro-flora. We also
support and engage with suppliers in
the planting of indigenous trees to
encourage and grow local biodiversity
by supporting insect and bird life.
We intend to publish a full biodiversity
policy in FY23.
WATER
In FY22 Imperial committed to
supporting suppliers to improve
access to basic needs for 180,000
farmers and their families by 2030.
This includes access to clean water,
sanitation, and hygiene (WASH).
Up to 136,000 farmers and their
families benefiting from water,
sanitation, and hygiene projects
we have funded
Encouraging a water stewardship
approach to managing water in our
suppliers’ catchment areas and
directly supporting their projects
through our Leaf Partnership are key
areas of importance for Imperial.
Between 2021 and 2022 our investment
in water, sanitation, and hygiene
projects in countries of most need,
including Mozambique, India, the
Dominican Republic, Guatemala,
Brazil, and Honduras equates to
around US$ 1.8m.
CHILD LABOUR
Like other agricultural industries, the
risk of child labour is highest in the
cultivation part of our supply chain. In
addition to working directly with our
suppliers, we recognise that child
labour is a multi-stakeholder issue,
which no single entity can address in
isolation. In collaboration with key
stakeholders including the industry,
suppliers and others operating in
these communities, we seek to
address child labour through three
main avenues detailed in the green
box on page 47.
POSITIVE CONTRIBUTION TO SOCIETY
SUSTAINABLE
AND RESPONSIBLE
SOURCING
We are committed to sourcing products and services in
a compliant, sustainable and socially conscious manner.
We will work with our suppliers to ensure
continuous improvements.
Procurement strategy
Our updated procurement strategy covers all third-party spend
among all five of our supply chain categories:
1. Tobacco leaf
2. Non-tobacco materials (NTM)
3. Next generation products (NGP)
4. Indirect goods and services
5. Logistics
While suppliers may be managed globally, regionally, or locally, the ambition is
that all suppliers meet the same standard to enable Imperial to meet its
commitments to stakeholders, employers, and communities.
Our plan
To source products and services from a diverse supply base that matches our
ESG values and ambitions.
Delivered in 2022
• Refreshed our Supplier Code of Conduct
• Further developed our risk assessment framework
2023
• Launch refreshed Supplier Code of Conduct
• Update risk assessment of our supply base according to our refreshed
Supplier Code of Conduct
2024
• 50% of our suppliers, by spend will have science-based targets by 2024.
Behaviours
Link to SDGs
We aim to ensure
sustainable consumption
and production patterns.
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Imperial Brands | Annual Report and Accounts 2022
2022 PERFORMANCE
HIGHLIGHTS
In 2022, 34% of our suppliers by
spend had set science-based
targets. This supports our Scope
3 reduction activities.
We have refreshed our Supplier
Code of Conduct, dividing topics
into three sections for clarity:
Business Integrity, Human Rights,
and Environment. This will be
launched externally in 2023.
Ensuring continuity in our supply
chain has a direct impact on our
business today, as well as the potential
to impact business sustainability in
the future. It is important that the
standards we expect in terms of
quality, labour practices, human rights
and environmental concern are
adhered to by our suppliers.
Assurance Audit team undertake a
phased cycle of onsite supplier
validation audits using a risk-based
approach, following a detailed
Supplier Audit Risk and Control
Matrix which includes the supplier
providing evidence for their
management of ESG issues which are
listed in the green box below.
In FY22 we engaged with relevant
internal stakeholders from across the
business to review and update our
Supplier Code of Conduct, and agreed
to include more detail on
environmental and human rights
aspects. The updated Supplier Code of
Conduct will be rolled out in FY23.
We have also developed our risk
assessment framework to include the
five major categories within our
supply chain and this will also be
rolled out to the business in FY23.
We have been recognised as a
Supplier Engagement Leader by CDP
for a third successive year. All
companies making climate change
disclosures to CDP receive a Supplier
Engagement Rating (SER), in addition
to their climate change score, rating
them on how effectively they engage
their suppliers on climate issues.
We establish a relationship of trust
and integrity with our suppliers. We
expect them to conduct their business
in an ethical and responsible manner
and comply with all applicable laws
and regulations.
We only select and do business with
suppliers who can demonstrate that
they operate in a manner consistent
with our standards and Supplier Code
of Conduct.
Sustainability strategies are integrated
into the management of our supply
chains, via supplier management
programmes and standards.
Supply Chain Due Diligence
Tobacco leaf supply due diligence is
covered in the Farmer Livelihoods and
Welfare section on page 46.
Our existing Supplier Qualification
Programme is the first screening
process for all new non-tobacco
material (NTM) and NGP suppliers.
Once on board, our Supplier Quality
THE SUPPLIER
QUALIFICATION
PROGRAMME
Self-assessment questionnaire
completed by suppliers and
includes questions on
• Business conduct
• Environmental management
• Labour practices including
discrimination
• Child and forced labour
• Freedom of association
• Wages and working hours
• Health and safety
www.imperialbrandsplc.com
49
Human rights abuses are unacceptable.
We have established due diligence
programmes to respond to and mitigate
the risk of human rights abuses in our
direct operations and supply chain
through appropriate processes and
procedures. As part of this, our internal
escalation channels, including the
Human Rights Compliance Working
Group and Leaf Compliance Working
Group, ensure potential and actual risks
are reported and responded to
appropriately within the business.
Human Rights within our value chain are
covered in the Farmer Livelihoods &
Welfare (page 46) and Sustainable &
Responsible Sourcing (page 49) topics.
Where non-conformance is identified in
our direct operations, we prioritise,
respond, measure and report on actions
taken to implement corrective and
preventative actions.
We have created a Modern Slavery
Working Group to step up our alignment
and response to potential human rights
violations as and when required.
ESG REVIEW continued
HEALTHIER FUTURES
HUMAN RIGHTS
We are committed to raising awareness and
improving processes in our supply chains, and we
recognise the importance, influence, and role
we have in promoting and protecting human rights.
We take allegations relating to human rights extremely seriously and
are committed to investigating any potential human rights issues within
our supply chain and direct operations.
We have identified the following key human rights issues that are
particularly relevant to our direct operations:
• The potential for modern slavery – which includes forced labour, slavery,
servitude, and human trafficking.
• Ongoing commitment towards fair wages and decent work, gender equity,
non-discrimination and non-harassment, freedom of association, and
collective bargaining.
Human rights topics within our value chain are covered in the Farmer
Livelihoods & Welfare and Sustainable & Responsible Sourcing sections.
Our plan
Strengthen our due diligence process in alignment with international
frameworks, including the United Nations Guiding Principles on Business and
Human Rights, and legislation to ensure we are equipped to identify, prevent,
and mitigate potential human rights risks. We have a duty of care to protect and
support our employees.
We aim to avoid disruptions, create a thriving workplace, and consolidate
best practices.
Continue to strengthen
• Employee access to Speaking Up channels and a remediation process.
• Monitoring of human rights leading indicators in our operations and report
on the number of audits completed.
• The audit process of our facilities management supplier across its Europe
sites, using our anti-modern slavery internal audit module.
• Modern slavery training needs to ensure effective understanding globally.
2023
• Assess priority locations for salient human rights issues, to inform and test
the robustness of our due diligence processes.
Behaviours
Link to SDGs
We are committed to decent
work for all and to sustainable
economic growth.
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Imperial Brands | Annual Report and Accounts 2022
Raising awareness and broadening our
knowledge about human rights are crucial
factors in delivering our strategic
objectives. Throughout the year we run
several communication campaigns
focused on human rights, modern slavery,
and the use of our independently operated
Speaking Up tool. Through our Slave-Free
Alliance membership, we commemorated
UK Anti-Slavery Week, which was an
opportunity to raise the profile of our work
to minimise our exposure to modern
slavery and human trafficking.
In 2022 we created an ESG digital learning
programme and its Human Rights module
pays special attention to modern slavery,
its most prominent indicators and how to
report perceived or real concerns. This
digital learning programme is mandatory
and will be available both online and
offline to our employees across the
business with roll-out planned for FY23.
Having a training programme that covers
the needs and specificity of a wide range
of our working locations will help to apply
our knowledge most effectively.
Our Human Rights Policy has been
updated to align with our refreshed ESG
Strategy. We included feedback from
several external agencies, as well as our
internal stakeholders. The result is a Policy
in line with our current progress and
understanding, which lays the foundation
for future improvements. We aim to review
the Policy annually to ensure it captures
new developments and renews its
ambitions regarding respecting and
promoting human rights.
Our Human Rights Policy is informed by
the International Bill of Human Rights, the
International Labour Organization (ILO)
Declaration on Fundamental Principles
and Rights at Work and the ILO’s core
conventions, as well as the principles
contained within the United Nations
Guiding Principles (UNGP) on Business
and Human Rights, OECD Guidelines for
Responsible Business and the UN
Sustainable Development Goals.
In 2022, we also carried out an internal
analysis to update our list of salient human
rights issues. They are: child labour, modern
slavery, occupational health, safety and
wellbeing, fair wages and decent work,
gender equity, non-discrimination and
non-harassment, and freedom of association
and collective bargaining. Having a clearer
picture of the type of risks our business and
operations might be exposed to will help us
take the most informed course of action to
prevent and mitigate negative impacts. By
focusing our efforts on these new salient
human rights issues, Imperial Brands
additionally contributes to UN SDGs 1, 3, 4, 5,
8, 10, and 16, which aligns with our new ESG
Strategy and Human Rights Policy.
We are proud to be a founding member of
the Slave-Free Alliance (SFA) and we
continue to support the international charity
Hope for Justice, in their pursuit of a
slave-free world.
2022 PERFORMANCE
HIGHLIGHTS
• Strengthened our due
diligence framework and
embedded human rights
awareness across the
business through designing
an anti-modern slavery
internal audit module,
reinforcing human rights
-focused internal structures,
and creating a dedicated new
mandatory ESG digital
learning programme which
includes a focus on human
rights and modern slavery.
• Improved governance through
the appointment of a new
Human Rights Manager and
reinstated a refreshed
cross-functional Human
Rights Compliance Working
Group to drive and steer
actions related to the human
rights ambitions of our
ESG strategy.
• Updated our Human Rights
Policy to ensure better
alignment to evolving
international best practice
guidelines and principles.
• Continued to monitor
human rights leading
indicators in our operations
and updated modern slavery
internal audits of our
manufacturing sites.
• Conducted an anti-modern
slavery audit with our Europe
facilities management
provider in Germany, and an
internal review of our
manufacturing sites in Poland
and the Philippines.
• Updated our list of salient
human rights issues for our
priority locations.
www.imperialbrandsplc.com
51
ESG REVIEW continued
SAFE & INCLUSIVE WORKPLACE
EMPLOYEE HEALTH,
SAFETY & WELLBEING
We are committed to achieving world-class occupational
health, safety & wellbeing for all our employees.
Commitment
The health, safety & wellbeing of our employees continues to be of the utmost
importance to us. We want to continue to create a working environment where
wellbeing and safety are absolute priorities.
Our plan
(from a 2019 base year)
2023
• Obtain employee feedback on wellbeing and safety via our global employee
experience survey.
• Design and launch a global wellbeing strategy based on employee feedback.
• Establish wellbeing KPIs.
• Launch zero injury aspiration programme.
2025
• 75% of fleet vehicles fitted with an in-vehicle monitoring system (IVMS).
• 60% reduction in fleet collision rate.
• 100% compliance with the OHSE Framework.
2030
• 75% reduction in lost time accident rate (LTA).
Behaviours
Link to SDGs
We aim to promote healthy lives and
wellbeing for all.
We want to continue to create a
working environment where the
wellbeing and safety of our employees
are absolute priorities. As part of this
commitment, we have health, safety &
wellbeing as one of the core focus
areas of our refreshed ESG strategy.
This includes setting new, long-term
targets as well as launching a “zero
injury” aspiration. But we can only
achieve this if all colleagues take
personal responsibility. Therefore,
our health, safety and wellbeing
key message to colleagues is:
“I Own Safety”.
To help achieve our vision we have
adopted an Occupational Health,
Safety and Environmental (OHSE)
framework based on a “Plan Do Check
Act” model. This is applied throughout
the business, with a focus on the
consistent integration of our health
and safety standards as well as
adopting robust governance and
reporting processes.
To support continuous improvement
we have developed a range of leading
indicators to help us measure
compliance and identify improvement
opportunities. We use these leading
indicators to manage our key health
and safety risks – such as working at
height, operating machinery, and
driving – and to measure compliance
against our framework. This approach
ensures we focus resources in the right
areas and can effectively manage risk
across all our factories, warehouses,
offices, and sales forces.
We have global procedures to help
maintain consistent standards across
the entire business, covering areas
such as hazard identification, risk
assessment, road risk and incident
investigation. These are applicable to
all locations and are audited as part
of our internal and external
audit programmes.
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Imperial Brands | Annual Report and Accounts 2022
Wellbeing
The wellbeing of our employees is of
paramount importance to us and has
been confirmed as an ESG priority,
following the refresh of our ESG
strategy and the outcome of a
materiality assessment. The COVID-19
pandemic has had a significant impact
on this topic, further increasing the
need to do more. We are working to
improve our management of and
approach to this issue.
The personal support we give
employees is focused on three
key areas: mental, physical,
and social wellbeing.
Currently, our employee wellbeing
support is managed locally and
includes resilience training, employee
assistance programmes, health checks
and awareness programmes, flexible
working, family-friendly policies and
facilities, and workplace celebrations
and social events.
We also provide occupational
healthcare services to support the
needs of our employees. Some of our
larger sites have in-house
occupational health professionals,
whereas other sites use third-party
healthcare service providers. In
addition a number of sites also have
wellness rooms for employees to use.
We advocate flexible working and
have encouraged our people to find a
routine that works best for them and
their families. We communicate
regularly with employees and have
initiated several surveys to check-in
on their wellbeing.
We also encourage volunteering as a
positive way for our people to engage
with local communities, broaden
their perspectives and support
work-life balance.
We aim to demonstrate our
commitment to the mental health and
wellbeing of employees, contractors
and visitors in its broadest, holistic
sense, with our new Wellbeing Plan
detailed in the purple box.
In October 2021 we celebrated World
Mental Health Day with a new
campaign called “The Importance of
Belonging”. The campaign’s purpose
was to encourage awareness of mental
health and create opportunities for us
to promote positive mental health and
wellbeing. We provided resources for
employees to access on our internal
Safe & Well hub.
In May 2022 we also supported Mental
Health Awareness Week in the UK.
The official theme was “loneliness”
and, across the week, we encouraged
people to build meaningful
connections with their friends, family,
colleagues, and communities. As part
of this, we launched two optional
training courses on Workday, our HR
platform: Stress Awareness and
Managing Anxiety.
In the UK we also involved our Mental
Health Champions in another
initiative during this campaign, where
we offered three ‘wellbeing tickets”
(vouchers for free coffees) to
Our Wellbeing Plan:
• Launch our refreshed wellbeing
strategy during our 2023
financial year.
• Include wellbeing responsibilities
into our policies.
• Assemble a Wellbeing Working
Group responsible for over-
seeing and maintaining
effective governance of
wellbeing activities within
Imperial’s operations.
• Benchmark the range of
support available in our priority
locations for the maintenance
of mental health.
• Develop a Wellbeing Framework
with key leading indicators.
• Measure our performance
moving forward.
• Foster a mentally healthy culture
by incorporating these principles
into People Leader training.
• Run regular initiatives to raise
awareness of mental health
issues at work.
encourage them to promote themselves
as wellbeing ambassadors and hold
meaningful conversations with three of
their colleagues. In addition, we
launched two new sessions: face to face
“Tea & Talk” sessions and online
“Spotlight on Wellbeing” guest speaker
sessions, during this campaign.
We have reviewed and updated our
targets related to health and safety and
these are detailed in “Our Plan”.
Performance against these targets is
provided in the Health and Safety
Performance table.
www.imperialbrandsplc.com
53
ESG REVIEW continued
HEALTH AND SAFETY PERFORMANCE
2019 (base year)
Performance indicator
2020
2021
2022
Commentary
Employee
fatalities1
Contractor
fatalities1
Members of the
public fatalities
involving
Imperial Brands
vehicles1
Number
Number
Number
Lost time
accidents (LTAs)1,2 Number
LTAs per
200,000
hours
worked
Number
Total
accidents
per 200,000
hours
worked
LTA rate1,2
Total number
of accidents1,2
Accident rate1,2
2
0
1
3
0
0
1
0
0
0
0
0
101
80
65
57
0.40
850
0.32
720
0.27
573
0.24A
522
3.39
2.19
2.36
2.24
Fleet
collision rate
Accidents
per million
kilometres
5.03
4.19
3.95
2.8
Fleet vehicles
fitted with an
IVM system
Compliance
with the OHSE
Framework
(Manufacturing)
Compliance
with the OHSE
Framework
(Sales)
%
%
%
OHSAS 18001/ISO
45001 certification %
–
–
–
–
–
–
–
–
–
79
79
74
Health and safety remains a priority for all
our employees.
Health and safety remains a priority for all
our stakeholders.
Road safety remains a priority across all
our operations.
There has been a 12% decrease in the
number of lost time accidents compared
to last year.
We have seen an 11% decrease in our lost
time accident rate compared to last year.
During FY22 we continued to increase the
use of leading indicators to better manage
risk throughout our operations.
We have seen a 9% decrease in total
accidents compared to last year.
We have seen a 5% decrease in our
accident rate compared to last year. We
are pleased to see a continued reduction
in our total number of accidents and our
LTA rate.
There has been a 29% decrease in our
vehicle 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.
Evidence shows that in vehicle
monitoring systems (IVM) typically lead
to fuel reduction and improved safety
performance – we will continue to test
and extend coverage.
57.3
We aim to be at 100% compliance with our
framework standards by 2025.
87
We aim to be at 100% compliance with our
framework standards by 2025.
Re-certification of some sites (particularly
in Africa) continues to be a challenge
since the Covid-19 pandemic.
93
71
A. Select 2022 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY Assurance
Opinion is available on our website. Our reporting scope and definitions are detailed in the Reporting Criteria document published on our website.
1. Our health and safety data is for the full 2022 financial year.
2. Accidents reported do not include commuting to or from work, or those sustained by third parties such as distributors.
54
Imperial Brands | Annual Report and Accounts 2022
SAFE & INCLUSIVE WORKPLACE
DIVERSITY, EQUITY
& INCLUSION
We are committed to creating a truly diverse and
inclusive organisation renowned for celebrating
difference, enabling our people to feel that they
belong and be their authentic selves.
We will respect, recognise and value the diversity
of our consumers and reflect the communities in
which we operate.
We have developed our approach to diversity, equity and inclusion in close
collaboration with our employees. At the centre of our efforts have been four
new Employee Resource Groups (ERGs). The 500 members of these groups have
been instrumental in helping us to develop an end-to-end five-year strategy
which will be launched in FY23.
Global Employee Resource Groups
• Gender ERG
• Ethnicity ERG
• LGBTQ+ ERG
• Disability ERG
Our four ERGs have continued to grow their memberships and raise awareness
across the organisation on key diversity topics.
The ERGs have also begun to partner with DEI Centre of Expertise (CoE) on
priority programmes of work, including increasing diversity data disclosure
throughout the business and creating a community of global allies to support
our DEI ambitions.
Behaviours
Link to SDGs
We aim to achieve gender equality
and a more inclusive organisation.
Diversity, equity and inclusion (DEI) is
critical for our business, for our culture
change programme and for our ESG
ambitions. We are developing a
performance-driven and inclusive culture
which supports the delivery of Imperial’s
strategy. Underpinning our cultural shift
is a set of five clear behaviours, which
demonstrate how we need to think and
act to succeed. To “be authentic and
inclusive to all” is one of our core
behaviours and aligned to our
commitment to DEI.
A key aspect of our cultural
transformation is our focus on creating a
more diverse and inclusive organisation.
We strongly believe that diversity across
our organisation not only makes it a better
place to work but also helps us realise our
commercial strategy.
We define diversity as everything that
makes us unique; equity as giving fair
treatment, access, opportunity, and
advancement for everyone; and inclusion
as involving and accepting every
individual and valuing their difference.
Promoting a diverse and inclusive culture
also results in the increased
attractiveness of Imperial as an employer
for both current and potential employees.
We are committed to treating employees
with respect and we support equal
opportunities, as outlined in our Fairness
at Work Policy and Code of Conduct. We
want a culture that is vibrant and where
our employees can be themselves at work.
In FY22 we formed a new Global Diversity,
Equity, and Inclusion Centre of Expertise
(CoE). The CoE is developing our new
global DEI ambition and strategy which
will inform our activities across the
business in pursuit of becoming a truly
diverse and inclusive organisation.
www.imperialbrandsplc.com
55
ESG REVIEW continued
DIVERSITY, EQUITY AND INCLUSION PERFORMANCE1
2020
Performance indicator
2021 2022 Commentary
Female employees
in the workforce
Female senior
management2
Female Executive
Leadership Team
(ELT) members
Female PLC
Board members
Ethnic background
on our Board
Employee
turnover rate3
%
%
%
%
%
%
43
40
40A
–
– 29A
Female employee numbers remain the same as last year, even though there has
been a significant increase in the employee turnover rate.
We are committed to increasing representation of women in senior management
(Global Grades 3, 4, 5) and clear KPIs will be set as part of our strategy.
14
33
30A
25
22
40A
–
10
20
14
10
30
Female representation on the ELT as at 30 September 2022 (end of FY22)
was 30%.
We made a commitment to increase female representation in senior
management roles to 30% by 2023. We are pleased to report that on 30 September
2022 (end of FY22) female representation on the Board was 40% and includes the
Chair of Imperial Brands.
At 30 September 2022 (end of FY22), 20% of the Board members identified as
being from an ethnic minority background.
There has been a significant increase in involuntary turnover for employees with
permanent contracts due to workforce reduction and divestiture.
A. Select 2022 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY Assurance
Opinion is available on our website.
Our reporting scope and definitions are detailed in the Reporting Criteria document published on our website.
1. We recognise the need to gain more comprehensive employee demographic data in order to understand the diversity of our employee base and drive inclusion.
This will form a key part of our new DEI strategy and will help us measure (where appropriate) ethnic minority, disability, LGBTQ+ and other key DEI dimensions.
2. The proportion of senior management employees (Global Grade 5 and above) recorded as female across Imperial Brands Group excluding Logista.
3. This reflects all employees excluding those employed by ITG Brands and Logista
We promote diversity within the
business through awareness
campaigns, career talks, unconscious
bias training and diversity
celebrations. We have provided
bespoke e-learning courses in 11
languages to help our people leaders
understand the issues of unconscious
bias and microaggressions.
Throughout FY22 we continued to
celebrate globally important cultural
events, including International Day of
Persons with Disabilities, International
Women’s Day, World Day for Cultural
Diversity for Dialogue and
Development, and Pride. Members of
our Executive Leadership Team
globally sponsor our ERGs and actively
steer and support their work. Our new
global DEI strategy is expected to be
finalised in the first quarter of FY23
and this will set out our diversity and
inclusion approach for the next
five years. In FY23 we intend to focus
on three areas: One, improving our
employee data. We know we need a
more solid baseline to measure future
progress. Two, creating a community
of allies, which is a bedrock for a
sustainable approach to DEI. And
three, reviewing how we attract,
recruit and retain talent, and how we
manage career advancement. We will
continue to raise awareness of DEI
through learning modules in inclusion
and allyship and embedding DEI into
everything we do. We are pleased with
the progress we have made to date but
we know we have more to do.
56
Imperial Brands | Annual Report and Accounts 2022
POWERED BY
RESPONSIBILITY
ESG Governance structure
Board of Directors
Opportunity
ESG Committee
Risk
Group Risk Committee
Environmental
Strategy Group
Social Strategy
Group
Group ESG
Function
Other relevant
Functions
Leadership and governance
We are committed to operating
responsibly in everything we do,
respecting our people, our
communities, and our planet. We
discharge our ESG responsibilities
through a framework of governance.
To ensure the Board has full oversight
of all relevant ESG issues, we have
established a cross-functional ESG
Committee, chaired by the CEO of
Imperial Brands. The Committee
meets at least three times per year.
Permanent members of the Committee
include all of the Executive Leadership
Team (ELT), making it an executive
committee to oversee the
management of our material ESG
issues and ensure the successful
delivery of our ESG strategy. Senior
managers representing functions
including Investor Relations, Group
Legal, Governance, Corporate Affairs,
Supply Chain and Procurement,
Communications and ESG attend
meetings as required.
We have a comprehensive governance
structure, ensuring appropriate levels
of focus, cross-collaboration, risk
management and escalation pathways
covering every ESG area of focus. The
Board reviews our ESG performance
on a quarterly basis. The ESG
Committee reports to the Board for
ESG-related opportunities, and to the
Group Risk Committee for potential
material ESG-related risks.
The cross-functional Environmental
and Social Strategy groups report to
the ESG Committee and are in turn fed
into by a range of ESG topic-specific
working groups. This strengthened
governance approach enables
cross-functional collaboration and
avoids duplication of efforts.
Further information on our approach
to risk and opportunity management
is available on page 82.
We have a broad range of policies to
support our approach to risk
management and good governance.
Our Code of Conduct, translated into
32 languages, is embedded throughout
Imperial Brands and drives our
responsible approach. It is aligned
with the policies, internal controls and
risk management processes that
underpin our strategy. The Code of
Conduct 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 and
in accordance with the standards
of behaviour set out in the Code. We
expect our suppliers to conduct their
business in an ethical and responsible
manner and to comply with all
applicable laws and regulations. Our
Supplier Code of Conduct, based on our
employee Code of Conduct, sets out
the behaviours we expect our suppliers
to demonstrate. The 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.
Governance education training
for employees
Mandatory governance education
modules on a variety of topics are
rolled out to employees with online
access, based on role and location.
For employees who do not have access
to our online systems, 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 who are assigned
courses are required to complete these
modules. One of our key e-learning
courses is on our Code of Conduct. Part
1 of this course introduces our Code of
Conduct, reviews our Company values,
explains why we have a Code and
emphasises how we all have a
responsibility to follow the Code. Part 2
of the Code of Conduct 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. We
also have an e-learning course on
www.imperialbrandsplc.com
57
INDEPENDENT ASSURANCE
We appointed Ernst & Young LLP to
provide limited independent
assurance over selected ESG content
within the Annual Report for the
period ended 30 September 2022. 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 ESG
indicators, which are indicated in the
Report with an A.
An unqualified opinion was issued and
is available on our website along with
further details of the scope, respective
responsibilities, work performed,
limitations and conclusions.
ESG REVIEW continued
modern slavery, now available in 15
languages. This course provides a short
overview of modern slavery and
explains how employees can
raise concerns.
Speaking Up
Our Speaking Up platform is available
both to our employees and to other
stakeholders, including suppliers and
farmers. The platform offers a wide
range of reporting routes and supports
anonymous reporting and feedback.
The Speaking Up policy is made
available both internally and on the
Group website.
Issues raised included allegations of
mistreatment of employees, claims of
unfair treatment or wrongful
termination, allegations of
unprofessional behaviour, pay
concerns and protection of personal
data. Claims of conflict of interest,
breach of control environment, and
bribery and corruption were also
raised. These claims were investigated
and found to be without merit. Our
People and Culture teams were
involved in dealing with a number of
these issues, while others were
managed by the Company Secretary,
with investigation support and advice
provided by members of our Finance,
Group Security, Group Legal, HR and
Internal Audit functions. At all times,
the anonymity of the individual
making the complaint was
a key consideration.
INVESTOR BENCHMARKS
Our ESG management and
performance is evaluated by a wide
range of external rating agencies.
We maintained our A rating from MSCI
ESG Ratings in their last report
updated in October 2022. In its June
2022 update, Sustainalytics gave us a
medium risk rating score of 27.9 and
concluded that “the company is at
medium risk of experiencing material
financial impacts from ESG factors,
due to its medium exposure and
strong management of material ESG
issues. The company is 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 overall ESG score of 42/100
and a Company Reporting Rate of 82%
in their last update in October 2021.
In 2021, CDP awarded us an A rating
for our Climate Change submission
for a third consecutive year. We await
the results of our 2022 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 were pleased to
be recognised as a Supplier
Engagement Leader by CDP in 2021 for
a third consecutive year. We have also
participated in the investor-backed
Workforce Disclosure Initiative (WDI)
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.
58
Imperial Brands | Annual Report and Accounts 2022
TCFD
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
We continue to align and improve our climate-related disclosures because we recognise the benefit the guidelines bring
to our stakeholders as well as our business itself. In accordance with its four primary components: governance, strategy,
risk management, and metrics and targets, the TCFD mandates the sharing of both qualitative and quantitative
information. It also seeks to enhance the transparency of climate-related risks and opportunities and give stakeholders
the knowledge they need to conduct thorough and consistent analysis of the possible financial effects of climate change.
For more information on our climate change strategy, please refer to page 41.
COMPLIANCE STATEMENT
In accordance with LSE Listing Rule 9.8.6(8) R we present our 2022 TCFD compliance index. We confirm that in this report
we have made climate-related financial disclosures for the financial year ended 30 September 2022 (FY22).
In the table below, we include cross-references to disclosures made elsewhere within the Annual Report and explain the
reasons for only partially complying with certain of the TCFD recommendations and recommended disclosures. We are set
to expand on the partially compliant disclosures in FY23.
In assessing compliance with LSE Listing Rules 9.8.6(8) R, we took into consideration the documents referred to in the
guidance notes to the Listing Rules, as well as considering on a voluntary basis the updated guidance on Implementing the
Recommendations of the Task Force on Climate-Related Financial Disclosures published in October 2021.
TCFD elements
TCFD recommended disclosures
Cross-reference
or explanation for
non-compliance
Compliance Statement
Next steps and other comments
Governance
a. Board oversight
Page
Compliant
Will be evolved to reflect status as it develops.
b. Management’s role
Strategy
a. Climate-related risks
and opportunities
Page
Page
Compliant
Will be evolved to reflect status as it develops.
Compliant
Will be evolved to include comment on specific risk
areas, particularly in regard to mitigations in place.
b. Impact on the
Page
Compliant
organisation’s strategy
Will continue to evolve in line with our strategy,
including mitigation and transition plans.
c. Resilience of the
Page
organisation’s strategy
Partially
compliant
a. Risk identification and
assessment process
Page
Partially
compliant
Risk
management
b. Risk
Page
Compliant
management process
Existing mitigation analysis and further localised action
plans will be put in place in 2023. Financial materiality
assessment will also be considered.
Will continue to evolve in line with our strategy,
including mitigation and transition plans.
Existing mitigation analysis and further localised action
plans will by put in place in 2023. Financial materiality
assessment will also be considered.
Will be evolved to include comment on specific risk
areas, particularly in regard to mitigations in place.
Our risk management for climate is integrated
into our company wide risk management, and will
evolve accordingly.
c. Integration into overall
Page
Compliant
risk management
Will continue to evolve in line with our
risk management.
Metrics
and targets
a. Climate-related
Page
metrics in line with
strategy and risk
management process
Partially
compliant
We are developing our understanding of how to link our
analysis to specific actions within our strategy.
Will continue to develop, in line with our strategy.
b. Scope 1, 2, (and 3)
Page
Compliant
We report in accordance to the GHG protocol, and have
integrated our principle risks into this reporting.
GHG metrics and the
related risk
c. Climate-related targets
Page
and performance
against targets
Partially
compliant
We are developing our understanding of how to link our
analysis to specific actions within our strategy.
Will continue to develop, in line with our strategy and
performance against it
www.imperialbrandsplc.com
59
TCFD continued
GOVERNANCE
We have integrated ESG oversight and
management, including climate
change, at all levels of the business.
The Board’s role
The Board of Directors has regard to
climate-related matters through our
ESG strategy and performance, which
includes management of climate risk.
The Board has endorsed all climate-
related targets. To ensure the Board
has appropriate regard to climate-
related issues, the Board endorsed
the formation of a cross-functional
ESG Committee which is chaired by
the CEO.
The ESG Committee reports to the
Board. In FY22 the Board of Directors
were updated on climate-change
related matters quarterly, following the
ESG Committee meetings in November
2021, February 2022, May 2022 and
September 2022. In November 2021, the
Board endorsed new climate change
metrics and targets, which included
the activities ongoing for this TCFD
disclosure, and in all other meetings
the Board has been updated on
performance against our climate
change targets. The Board is also
informed on the detail of our climate
transition plan, which includes
financial risk and opportunity.
It is through reporting from the ESG
Committee, as well as Board-level
consideration and approval of (i)
enterprise risk appetite, assessment,
and management; (ii) longer-term
strategy; and (iii) the annual budget
plan that the Board has regard to
business plans, including expenditure
for climate-related matters.
Tony Dunnage, Global ESG Director,
conducted an additional ESG training
to the Board in May 2022 to ensure the
Board has appropriate regard to
material environmental topics.
We also have two Non-Executive
Directors (NEDS) with specific
experience in climate-related matters.
Diane de Saint Victor, appointed to the
Board in November 2021, has been
associated with a variety of companies
playing a major role in addressing
climate change. This includes serving
as an executive committee member at
one of the world leaders in technology
solutions that help industries in
reducing their energy consumption.
Alan Johnson, another of our NEDs,
appointed in January 2021 is also the
president and chair of the Board at the
International Federation of
Accountants. This organisation
campaigned successfully to establish
the International Sustainability
Standards Board (ISSB), which was
established at COP26 in November
2021. The Federation is now
supporting the new ISSB and
working with regulators across the
world on the assurance of climate-
related disclosures.
Management’s role
We have integrated climate
governance across our functions,
which enables us to bring together
experts and decision-makers across
the organisation.
Climate change is a central topic of the
ESG strategy and is fully covered by
the ESG Committee. The Committee is
informed about the performance and
progress of the strategy on a quarterly
basis by the ESG team, and other
internal subject matter experts.
The ESG team is led by the Global ESG
Director, who reports to the Chief
People and Culture Officer, and is the
secretariat of the ESG Committee. The
Senior Planning Manager in Group
Finance is responsible for the
long-term financial planning and
alignment of climate-related risks
and opportunities.
Risk factors are overseen by the Group
Risk Committee. The Group’s formal
approach to risk management
includes an update to the Board on a
half-yearly basis on the enterprise-
wide risk management framework
(EWRMF), which contains all the
Group risks and their associated
control measures. This fully
incorporates climate-related risks and
opportunities and links them to our
principal risks. The Group Risk
Committee meets at least three times
per year and works closely with the
ESG Committee. Please see page 57 for
the governance structure.
Both the ESG Committee and Group
Risk Committee are informed by a
matrix of supporting functions
including the Group ESG function. The
Environmental and Social Strategy
Groups consist of experts from across
the business, providing coverage of
our eight material ESG topics
including climate change. The groups
meet on a regular basis and directly
influence the Company’s detailed ESG
strategy. Climate-related issues in the
business are assessed and managed
through the Environmental Strategy
Group. These Groups are chaired by
the Global ESG Director and provide
oversight of ESG risks and
opportunities across the business.
60
Imperial Brands | Annual Report and Accounts 2022
The MVAR calculation does not
include inflation, nor does it take into
account the impacts of government
policies, or any mitigating action
already taken. To qualify the MVAR
values, an expected impact has been
added to reflect the position once
mitigation or adaptation associated
with our strategy is applied – such as
the Imperial Brands Net Zero 2040
ambition. Risks and opportunities
have been prioritised based on the
findings of the scenario analyses.
Scope
The scenario analysis covers both
physical and transition risk for
Imperial Brands PLC, inclusive of
Fontem Ventures and ITG Brands , but
not Logista2, who voluntarily make a
TCFD disclosure separately (see
Logista’s 2021 Annual Report, page 83).
We have assessed the impact of
climate change on Logista and have
found nothing to represent a material
risk at Group level.
STRATEGY
In an ESG materiality assessment
conducted in November 2021, climate-
related issues were ranked as second
most important ESG topic for our
Company, after consumer health.
This mandate, combined with the
requirements of the listing rule
formed our strategy to approach
this TCFD disclosure.
Our Approach
In 2022 we conducted a quantified
climate scenario analysis with a 4°C
and 1.5°C pathways (RCP 2.6 and RCP
8.5), aligned with the
recommendations of TCFD and the
Paris Agreement utilising a third party
supplier for modelling, and with a
cross functional group including
members from Group ESG, Group
Finance and Group Governance.
The scenario analysis takes into
consideration climate-related physical
and transition risks as well as
opportunities in the short, medium
and long term – the period from
2022-2050. Imperial Brands financial
planning period covers three years
and is thus included in the short-term
period. Imperial Brand’s risk time
horizon covers 10 years, as
recommended by CDP1 and is
presented in the table on page 62.
However, in line with requirements
the analyses have considered a longer
time frame of at least until 2050.
The climate scenario analysis covers
key owned and third-party sites.
Overall, 44 operational sites and 9 leaf
sourcing regions, covering 31
countries, were identified for a “deep
dive” risk assessment. Sites and
sourcing regions included were
chosen due to their strategic
and financial importance
to Imperial Brands.
This structured approach was taken to
define a short-list of the potentially
most significant climate risks and
opportunities within the portfolio. The
short-list is the result of a thorough
data and document analysis and a
quantitative financial value chain
analysis. The short-list was then
carried forward for further analysis for
financial impact. For the scenario
analysis KPMG’s Climate IQ tool was
used. This tool combines climate
science, macro-economics and
financial information.
The table on page 62 sets out the
different types of risks aligned to
Imperial Brands risk framework, and
the associated maximum value at risk
(MVAR). MVAR is defined as the
accumulated maximum risk quantum
over 10 years between the 1.5°C and
4°C scenarios. The MVAR relates to the
gross risk and assumes no mitigation
or adaptation activities by Imperial.
The dots represent the degree of
significance of the risk in each of the
1.5°C and 4°C scenarios comparing to
the total of the Company asset base.
1. A not-for-profit charity previously known as the Carbon Disclosure Project https://www.cdp.net/en
2. Logista is not a FTSE listed company and therefore is not under mandatory TCFD disclosure rules.
www.imperialbrandsplc.com
61
TCFD continued
TCFD continued
Climate-related risks and opportunities
Maximum
value at risk
calculated
over time
frame (£m)
Type of
Risk4
Timeframe
Scenario
Short
(0-2y)
Medium
(3-5y)
Long
(6-10y)
1.5°C
4°C
Net Zero
by 2040 Mitigation through Strategy
Physical risks associated with climate change
Chronic
Acute
Impact of physical hazards
(e.g. riverine flooding) on
key assets could lead to
a decrease in revenues
due to supply chain
disruption and its effect on
production capacity
Chronic drought risk2
could lead to a decrease
in revenues due to
supply chain disruption
and its effects on
production capacity
Changes in tobacco crop
yield2 resulting from
climate change could lead
to decrease in revenues due
to agricultural supply chain
disruption and its effects on
production capacity
Increased frequency and
severity of extreme weather
events could lead to a
decrease in revenues due
to supply chain disruption
and its effects on
production capacity
More severe hurricane risk2
could lead to a decrease
in revenues due to supply
chain disruption
and its effects on
production capacity
Product
supply
10
Product
supply
nq
Product
supply
nq
Product
supply
2
Product
supply
nq
Transition risks associated with transitioning to a low-carbon economy
Emerging
regulation
Market
Increased costs could result
from emerging regulations
such as carbon taxation1
and the carbon pricing
mechanism, predicted
to begin in 2024.
Materials costs in NTM and
Leaf could increase due to
increases in the operating
costs of suppliers and
raw materials. This could
reduce access to capital.
Key impact is excepted to
be from the introduction of
carbon taxation through our
supply chain, predicted to
begin in 2024.
ESG
Delivery
20
ESG
Delivery
360
Climate-related opportunities
Energy
sourcing
Energy supply costs3
could decrease due to
resource efficiency and
the use of zero emission
sources of energy in our
direct operations
ESG
Delivery
11
Footnotes
1. Assuming no decarbonisation measures are taken by Imperial Brands
2. Impact has been quantified non-financially
3. Cost avoidance from energy transition
4. In accordance with Imperial Brands risk assessment
5. % of asset value
The group takes out
insurance for the
coverage of this risk
within direct operations,
and maintains business
contingency plans.
The group takes out
insurance for the
coverage of this risk
within direct operations,
and maintains business
contingency plans.
Expected to be partially
offset by an increase
in land suitable for the
growing of tobacco, and
the flexibility of the leaf
sourcing supply chain,
allowing for location
selection on a yearly basis.
The group maintains
supply chain contingency
plans and insurance cover
for the coverage of this risk
within the supply chain.
The group maintains
supply chain contingency
plans and insurance cover
for the coverage of this risk
within the supply chain.
It is expected that we will
mitigate this through our
net zero strategy, aiming
to be net zero in our direct
operations by 2030.
It is expected that
mitigation will be possible
through partnership
with key suppliers to
drive change in supply
chain before financial
impact occurs.
The Group is prioritising
early action to limit costs
and mitigate impact,
reflected in the step
change in renewable
electricity reporting in our
performance summary.
Mild Change5 <0.2%
Moderate Change5 0.2%-1%
Significant Change5 >1%
Nq= not quantifiable. These risks have not been quantified due to the complexity in calculating financial impact and lack of tool capability. Further assessment is
required in these areas to develop a link to financial impact, including an assessment of materiality when taking into account mitigation and action plans in place. .
62
Imperial Brands | Annual Report and Accounts 2022
Physical risk
Scenario analysis has considered the
physical risk from coastal inundation,
soil subsidence, surface water
flooding, riverine flooding, extreme
wind, forest fire and water stress to
our direct operations, and our tobacco
purchasing regions. Of particular note,
the analysis considered the impact of
storm damage, which to date has been
the most prevalent impact of climate
change on the business. The analysis
predicts that storms are likely to
increase resulting in an increase of
costs at a rate of 5% but despite this it
is not likely to result in a significant
impact at Group level. As shown in the
table on page 62, the work completed
demonstrates that the business is
relatively unaffected in both climate
scenarios in the short term for
physical risk, both chronic and acute.
In the 4°C scenario, the probability of
physical risks in the medium and long
term increases compared to the aimed
1.5°C scenario, but financial impact
can still be considered not significant
overall. When viewed by location and
based on the third party model, Spain
is most affected by physical risks. The
Spanish factory is located close to a
river, and as such it is considered to
have the highest risk of riverine
flooding as well as a risk of drought in
a 4°C scenario. When considered at
Group level, this impact is immaterial.
Physical risks in other locations were
also considered immaterial.
Other physical climate risks, though
not considered material at Group level,
continue to be monitored locally as
part of business continuity planning.
This confirms that our current
approach, where climate risks are
integrated into local business plans,
and do not form a material risk at
Group level, will continue to serve us.
Transition risk
Our scenario analysis indicates the
most significant climate-related
impacts for Imperial Brands are the
transition risks common to FMCG
organisations operating in the same
markets. Imperial’s greatest exposure
is to the impact of changing materials
costs and emerging climate-related
regulation, such as carbon pricing. As
indicated in the table, materials cost
represents the biggest absolute risk as
a result of climate change, however
the accumulated value over the next
10 years is still likely to be less than
1% of our spend if mitigating action is
not taken.
This result confirms that our suppliers’
cost base is also likely to increase if
they are not already taking steps
towards becoming net zero. The
analysis indicates that the increase in
material costs are mostly represented
by ‘non tobacco materials’ (NTM)
and leaf.
Our climate ambitions include targets
for reduction of Scope 3 emissions,
and we are working with key suppliers
to reduce these. For more information,
please refer to the section on Metrics
and Targets on page 65. We anticipate
that material costs can be significantly
reduced by meeting our long-term
ESG strategy, particularly as we
begin to collaborate with partners
on Scope 3 emissions.
Impact of risks
in financial reporting
Imperial Brands’ long-term financial
planning covers a 3 year period.
Based on the outcomes of this report,
increased physical risks and transition
risks associated with climate change
are not significant over this time
period, and as such are not included in
long term financial planning. In the
coming year we do not expect the risk
associated with climate change to be
material to the Group, with the largest
expected not to exceed 13m GBP (and
56m GBP over the 3-year period).
For other financial statement areas
that cover a period beyond the
financial planning of 3 years and
beyond the Imperial Brand’s risk time
horizon of 10 years, we have
considered the MVAR of the material
climate-related risks for the relevant
period of those specific areas. For
example: assessing goodwill and
intangible assets impairment
assessment (note 11) and
recoverability of deferred tax assets
(note 22). We also challenged the
Directors’ considerations of climate
change in their assessment of going
concern (note 1) and viability and
associated disclosures.
Climate-related opportunities
Proactive ESG management
represents our biggest climate
opportunity. We have committed to a
series of targets, and outline our Net
Zero strategy further in the Metrics
and Targets section on page 65. By
successfully implementing this Net
Zero strategy, we can maximise the
benefits of the green energy transition
and avoid carbon costs across the
period in the 1.5°C climate scenario.
We have a glide path and transition
plan to achieve Net Zero which we
expand on in Metrics and Targets on
page 65 and in our ESG Review on
page 41.
Our analysis shows us that in either
scenario, our strategic approach
should have a positive effect in
managing costs. However, we will
continue to monitor the impact that
carbon prices could have on our cost
base and consider the business’ ability
to manage or pass through some or all
the costs. If new climate-related risks
are identified, we are committed to
aligning our strategy accordingly and
integrating the respective costs into
our profit and loss.
Assumptions
This analysis assumes that no action
is taken to decarbonise in the supply
chain, or within our operations. The
work also does not take into account
inflation, consider the impacts of
government policies or subsidies, or
currently existing mitigation. Material
costs stated in the analysis include the
costs of physical risk materialising in
the supply chain.
During FY23 we will build on the
scenario analyses conducted in 2022
Our ESG Strategy can turn risk into opportunity
‘000 GBP
3500
3000
2500
2000
1500
1000
500
0
2024
2025
2026
2027
2028
2029
Excluding Net Zero strategy
Net Zero milestones and targets
Figure: Potential Carbon Cost of Scope 1 for 1.5°C Scenario
www.imperialbrandsplc.com
63
TCFD continued
to gain a more detailed longer term
understanding of the financial
materiality of the climate risks and
opportunities identified.
RISK MANAGEMENT
For a number of years, we have
included information on managing
and mitigating climate-related risks in
both our ESG reporting and CDP
disclosures. We are aligned to CDP’s
definition of risk terminology.
In 2021 our ESG materiality
assessment placed climate change as
our second most material issue, and as
such it is included in both our ESG
strategy, and focused on separately as
part of our risk management process.
We integrate climate-related risks and
opportunities in our business strategy
and financial planning. 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 any
risk materialising. As a business we
are accustomed to managing risk
across a variety of topic areas,
including emerging regulatory
requirements related to climate
change, and we apply the same
process for all risk areas. For further
information on how we manage risk,
please refer to the risk section on
page 82.
The Board is responsible for setting
the Group’s risk appetite and is
ultimately accountable for managing
the Group’s risks and opportunities. It
delegates responsibility for managing
the Group risks and opportunities to
the Audit Committee. The Audit
Committee is responsible for
approving the risk management
approach and for oversight of its
ongoing effectiveness. The Group’s
formal approach to risk management
includes an update to the Board on a
twice-yearly basis on the Group’s
risk register documents, including
our EWRMF.
Our EWRMF specifies accountability
for the identification, assessment and
mitigation of risks throughout the
business and is based on the “three
lines of defence” model. The first line
of defence is our people in operational
roles, who identify potential risks and
opportunities at an operational level.
The ESG team, led by the Global ESG
Director, are subject matter experts
and are part of the second line of
defence. They develop appropriate
policy, process, control structures and
analyse the impacts of the risks upon
the business in line with the Board’s
risk appetite. Therefore, the second
line of defence provides support to the
first line of defence.
The ESG team is informed about
climate-related risks and opportunities
that occur at a local and global level
related to the achievement of our
climate targets.
Our third line of defence consists of
our Internal Audit Team who
independently review compliance
with, and the effectiveness of, our risk
management and internal control
system. On an intermittent basis, we
also commission a third party to
perform its own analyses to validate
risks identified by the business.
Due to the long term nature of climate
related risks, and in order to make this
disclosure, a cross functional project
team considered actions relating to
these analyses covering and beyond
the standard risk time-frame we
typically consider for risk and
financial planning. In accordance with
the listing rule, we have taken into
account the period 2022-2050.
Transition Risk Management
The transition risks identified in our
climate scenario analysis are
embedded in the risk framework and
are communicated with the effected
sites and functions; action plans are
being implemented accordingly,
particularly for the primary risks:
carbon taxation and materials costs.
Physical and transition risk within our
supply chain and direct operations
related to climate change are
considered on each of our principal
risks. This helps us manage and
monitor climate risks for core
business decisions.
Please also view our 2022 risk matrix
on page 82 where we demonstrate
climate related and regulatory risk to
be of high importance to the Company.
We integrate our management of these
into our responsible business
functions. In the future, Imperial
Brands aims to conduct climate
scenario analysis on a regular basis.
64
Imperial Brands | Annual Report and Accounts 2022
METRICS AND TARGETS
We monitor the risks identified and
put in place intervention or mitigation
measures where necessary. However,
our targets on climate change
represent multiple business
opportunities: there are cost and
environmental benefits to energy
savings, and to efficiency programs.
Since 2019, we have had Scope 1, 2 and
3 targets, consistent with reductions
required to limit climate warming to
2°C, approved by the Science Based
Targets initiative (SBTi). However, in
FY21 we set our sights higher and
joined the Business Ambition for 1.5°C
Race to Zero initiative, a campaign led
by the SBTi. For more details on how
this commitment impacts our climate
change strategy, please see ‘Our plan’
on page 64.
To drive business focus in FY23, for
the first time, we will have
remuneration relating to performance
against our climate change objectives.
We have carefully considered the
outcome of the analysis, and aligned
our climate change metrics and
targets with our most material risks:
Carbon Pricing and Material Costs.
Carbon pricing
Our carbon pricing risk relates to the
likely increase of carbon taxation on
emissions within our operations. To
drive our emissions down, we have
joined Business Ambition for 1.5°C, a
campaign led by the SBTi. This means
we are committed to reaching science-
based net-zero emissions by 2040. To
achieve this, we will reset our
science-based targets for carbon,
increasing our ambition in line with
1.5ºC global warming limits and
submit them for approval by the SBTi.
Further, in order to support our Net
Zero strategy, we also aim to explore
an internal carbon pricing mechanism.
For more on our FY22 performance
and future plans to decarbonise our
operations, please see page 41.
Carbon transition plan for our operations
Materials costs
The materials cost relates to the likely
impact of carbon taxation on
emissions, and the impact of physical
risks within our value chain. To drive
down emissions within our value
chain, we have an SBTi approved
supplier engagement target: 50% of our
suppliers by spend will set science-
based targets by 2024. This target
helps us reduce our Scope 3 emissions
and thus is fully aligned with our 2040
Net Zero ambition. In our ESG Review
we report that 34% of suppliers by
spend had already achieved this
target. As part of our submission to
SBTi, we are also working towards
validating our Scope 3 data1.
Our target to achieve Net Zero in our
entire value chain by 2040 is also
supported by an emission reduction
target of Scope 3 of 20% by 2030. In
FY23 we will expand on how we will
partner to collectively drive emissions
down within our supply chain.
Our methodology for calculating Scope
1, 2 and 3 emissions is compliant with
the GHG Protocol and we disclose our
environmental performance in CDP.
The scope of targets set includes
companies, entities or groups over
which we have operational control.
For more information on our 2022
performance, and further information
on our current ambitions related to
climate and ESG, please refer to our
company website and our ESG: People
and Performance Summary 2022.
Our plan (from a 2017 baseline year)
2025
2030
2040
100%
of our purchased grid electricity
will come from traceable
renewable sources
Reduce absolute scope 1 and 2 GHG
emissions by more than
50%
Our value chain will be
Net zero
emissions
(absolute scope 1,2
and 3 GHG emissions)
100%
of the energy sourced for our
operations from renewable sources
Be net zero
In our direct operations (scope 1 and 2
GHG emissions)
Reduce:
• Our total carbon footprint (absolute
scope 1,2 and 3 GHG emissions)
by 30%
• Absolute scope 3 emissions by 20%
• Energy consumption by 25%
1. Our Scope 3 emissions include the following categories: Purchased Goods and Services, Capital goods, Fuel and energy related activities, Upstream transportation
and distribution, Waste generated in operations, Business travel, Employee commuting, Downstream transportation and distribution, Use of sold products, End of
life treatment of sold products, Investments.
www.imperialbrandsplc.com
65
Tonnes CO2e20102020201520252030Scope 2Scope 2 ForecastScope 1Scope 1 Forecast050000100000150000200000 OPERATING REVIEW
EUROPE REGION
AT A GLANCE
Tobacco volume
-4.1%
Tobacco & NGP net revenue*
+0.2%
Tobacco net revenue*
-1.0%
NGP net revenue*
+34.2%
Tobacco & NGP adjusted
operating profit*
-5.2%
* Change at constant currency.
HEADLINES
• Market share growth in UK and
Spain driven by local jewel brands
strategy; share declines in Germany
• Industry volumes affected by
increased travel, with consumer
buying patterns reverting to
historical channels and markets
• Price mix improved in the second
half, driven by price phasing
• Strong NGP performance with
growth across heated tobacco,
vapour and modern oral
• Successful Pulze and iD trials
in heated tobacco supported
further launches in Italy,
Portugal and Hungary
• Successful trial of all-new vapour
device blu 2.0 in France validates
roll-out into UK
• Adjusted operating profit decline
also reflects increased investment
behind strategic initiatives
66
Imperial Brands | Annual Report and Accounts 2022
Aleš Struminský
President, Europe Region
Our results in Europe should be viewed
against a strong comparator year,
which benefited from COVID-related
travel restrictions and changes in
consumer buying patterns. The lifting
of restrictions and increased travel
have led to volumes reverting to
pre-COVID channels and markets.
Strong market share growth in the UK
was driven by investment behind our
strategic initiatives, with local jewel
brand, Embassy, making gains in
under-penetrated regions of the
country, and share gains in fine cut. As
expected, our initiatives to rejuvenate
our brands in Germany are taking
time, with activations on our largest
brand JPS, focused on appealing to a
wider demographic of adult smokers.
Our initiatives with Gauloises, West
and Davidoff have begun to gain some
traction in Germany. In Spain, we grew
market share driven by our brand
portfolio approach, offering consumers
choice across the price ladder and
leveraging local heritage brands.
Tobacco volume
Total net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2022
121.5
3,472
3,306
166
1,562
2021
126.7
3,551
3,425
126
1,670
Actual
-4.1%
-2.2%
-3.5%
+31.4%
-6.5%
Constant
currency
+0.2%
-1.0%
+34.2%
-5.2%
Volumes for the region declined 4.1%,
as expected, with sales increasingly
reverting to pre-COVID channels and
markets during the year. This has
resulted in increased volume declines
in higher margin northern European
markets such as UK, Germany and
Scandinavia, partially offset by
increased volumes in lower margin
southern European holiday
destinations such as Spain and strong
growth in the duty free channel.
Tobacco net revenue was down 1.0% at
constant currency, reflecting the
volume declines and price mix of 3.1%.
Price mix was effected by the timing
of price increases and the adverse
geographic mix effects as COVID-19
restrictions were lifted. Price increases
taken in Germany and the UK in the
latter part of the first half of the year
led to improved tobacco price mix in
the second half of 6.0%, compared to
price mix of -0.2% in the first half
of the year.
Our priority in Ukraine remains the
safety and wellbeing of our 600
Ukrainian colleagues and families. In
the second half we were able to restart
production at our factory in Kyiv,
including some contract
manufacturing. This remains a
fast-moving situation, which we
continue to monitor closely.
Our NGP portfolio has performed well
with net revenue up 34.2% at constant
currency, and with growth across all
three categories. A positive response
from both consumers and the trade to
our launches of Pulze and iD in the
Czech Republic and Greece has
supported further share gains during
the second half. These market
learnings have reinforced our
confidence in the recent launches of
Pulze and iD in Portugal and Hungary
as well as in Italy, Europe’s largest
heated tobacco market. In vapour, the
successful trial of a new pod-based
vapour proposition, blu 2.0, in four
selected cities in France has led us to
roll out the product to the UK market
in November 2022. This is the first
product to be delivered from our
refocused innovation pipeline. This
consumer-led and partnership-based
approach to innovation has also
supported the launch in the UK of blu
bar, a new disposable vapour device, to
meet the rapidly growing demand in
this category. In modern oral nicotine,
we are continuing to evolve our
offerings to meet consumer
preferences and have achieved
strong growth in Sweden,
Norway and Austria.
Adjusted operating profit for the year
declined 5.2% at constant currency
against a strong comparator year,
which benefited from consumers
buying in higher margin northern
European domestic markets. The profit
performance also reflects increased
investment behind our strategic
initiatives in both the combustible and
NGP opportunities in Europe.
PRIORITY MARKET
PERFORMANCE
Tobacco share
Germany
• 19.0% (-85 bps)
• 12% of Group net revenue
UK
• 41.6% (+85 bps)
• 7% of Group net revenue
Spain
• 28.3% (+5 bps)
• 4% of Group net revenue
Market size declined 4.1% in the year against a strong prior-year comparator, which
benefited from COVID-19 travel restrictions. Our market share declined despite increased
investment behind our strategy, though we have started to see stabilisation in Gauloises
and West following brand equity investment. Our brand portfolio is well positioned across
price segments, after we took action to tier Gauloises variants within premium and
repositioned portfolio heritage brands within the lower-tier value segment to offer
consumers choice in both cigarettes and fine cut tobacco. We continue to invest behind
JPS to rejuvenate brand equity, with a pack redesign and targeted point-of-sale
marketing campaigns coupled with retailer advocacy programmes driving increased
consumer awareness.
Market size declined 11% in the year as COVID-19-related travel restrictions unwound in
the second half of the year and there was growth in illicit trade as borders reopened. Our
strong market share gains reflected investment in our portfolio, particularly behind the
local jewel brand, Embassy, and in fine cut tobacco with our Players Easy Rolling and
Riverstone brands. We also invested in new sales effectiveness initiatives to enhance
on-shelf availability with retailers. Price increases taken towards the end of the first half,
the first increases in two years, led to improved price mix in the second half.
Tobacco market volumes grew 4.8% following two years of decline due to COVID-19-
related restrictions. In the first half of the year, we achieved price increases across key
product lines for the first time in five years. This led to temporary share declines in the
first half, which we have been able to recover in the second half. We continued to invest
behind our local jewel brands and captured downtrading through a super-king variant of
our West brand. Our increased focus and investment in these brands has helped us to
record three consecutive years of share gains.
www.imperialbrandsplc.com
67
OPERATING REVIEW continued
AMERICAS REGION
AT A GLANCE
Tobacco volume
+2.0%
Tobacco & NGP net revenue*
+4.4%
Tobacco net revenue*
+5.2%
NGP net revenue*
-29.7%
Tobacco & NGP adjusted
operating profit*
+5.8%
* Change at constant currency.
HEADLINES
• Cigarette share growth up 90 basis
points to 10.1% with gains across all
three of our focus price segments
• Investment in strategic
initiatives continue to drive
operational improvements
• Revenue growth reflects strong
cigarette pricing offset by adverse
product mix
• NGP net revenue declined as we
did not participate in the category
price discounting and some
uncertainty linked to the FDA’s
Marketing Denial Orders for some
of our myblu products
• Adjusted operating profit growth
reflects lower litigation costs and
higher investment
68
Imperial Brands | Annual Report and Accounts 2022
Kim Reed
President and CEO,
Americas Region
We delivered a strong combustible
tobacco performance in the US,
which is our largest single market,
contributing around 36% of Group
net revenue.
Tobacco volumes have grown by 2.0%
against an industry volume decline of
7.9%. This out-performance reflects
the improvement in our US cigarette
market share of 90 basis points to
10.1%, the fourth consecutive year of
market share growth. Our volumes
also reflect an increase in customer
inventories of around 180 million
sticks at the period end as orders were
pulled forward ahead of the expected
landfall of Hurricane Ian and
anticipated price increases. Excluding
this inventory movement, our volumes
were up around 1.0% year on year.
Our share growth benefited from our
increased investment in sales
execution and our brands, leading to
share gains in three of the four price
segments in which we operate.
Additionally, we retained the share
captured in the deep discount segment
by our Sonoma and Crowns brands as
a result of our agile response to KT&G’s
Full year result
Change
bn SE
£m
£m
£m
£m
2022
21.9
2,826
2,784
42
1,179
2021
21.5
2,534
2,478
56
1,037
Actual
+2.0%
+11.5%
+12.3%
-25.1%
+13.8%
Constant
currency
+4.4%
+5.2%
-29.7%
+5.8%
pack redesign launched in March has
been rolled out nationally and has
been supported by a new reward
programme to drive participation
together with multi-pack offers. With
an increased sales force, we continue
to invest to improve our sales
execution through training and by
adopting best practices such as route
optimisation and better information
systems. We are also achieving
improved traction following the
expansion of our key account team.
Our mass market cigar portfolio grew
market share, driven by strong
performances by Backwoods and
Dutch Leaf, and we retain our position
as the second largest manufacturer in
the US. Our share gains partially offset
the overall market decline in mass
market cigars as we cycled against an
exceptionally strong comparator
period. As consumers return to work,
they found fewer opportunities to
enjoy mass market cigars and buying
patterns are returning to pre-COVID
levels. However, we remain well
positioned to capture consumer
demand in this category with our
portfolio of iconic heritage brands.
Our NGP revenues were down 29.7% on
a constant currency basis, reflecting
the continued competitive
environment with greater discounting
in the category and some uncertainty
linked to the FDA’s Marketing Denial
Orders (MDOs) for some of our myblu
products issued in early April. We were
disappointed with the FDA’s decision
to issue the MDOs and are seeking to
overturn the decision through the
administrative appeals process. Our
products remain in the market during
the appeals process. Following
validation of our refreshed consumer
marketing proposition for blu in trials
in Charlotte, North Carolina, we have
begun a roll-out into new territories.
Adjusted operating profit was 5.8%
higher at constant currency driven by
a stronger tobacco performance and
lower NGP losses. Increased
investment in strategic priorities and
higher Master Settlement Agreement
inflation-indexed costs were offset by
the non-repeat of the litigation
settlement cost in Minnesota and
Texas in the prior period.
Tobacco volume
Total net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
exit from the US market in the first
half of the financial year. We estimate
our underlying share growth,
excluding the KT&G-related share
gains, was over 65 basis points.
Industry volume declines of 7.9% are
against a strong comparator year that
benefited from COVID-19-related
changes to consumer buying patterns
as a result of lockdowns and fiscal
stimulus payments. Volumes also
reflect some increased pressure on
consumer spending leading to
downtrading, although our brand
portfolio is well-placed across key
price segments.
On a constant currency basis, tobacco
net revenue increased by 4.4%,
benefiting from four price increases in
the premium and traditional discount
segments in the year. Two price
increases were taken in the deep
discount cigarette segment. However,
over the period, this strong cigarette
pricing was offset by adverse product
mix with robust growth in the deep
discount cigarette segment, resulting
in +3.2% price mix for the year.
We continue to invest in our strategic
priorities to build brand equity and
strengthen sales force execution
across our portfolio. For example, in
the premium segment our Winston
www.imperialbrandsplc.com
69
OPERATING REVIEW continued
AFRICA, ASIA
AND AUSTRALASIA
REGION
AT A GLANCE
Tobacco volume
-7.5%
Tobacco & NGP net revenue*
-0.5%
Tobacco net revenue*
NGP net revenue*
-0.1%
Exit
Tobacco & NGP adjusted
operating profit*
+15.6%
* Change at constant currency.
HEADLINES
• Performance affected by the decision
to exit Russia; successful transfer of
business as going concern
• Market share and financial
performance gains in Africa
driven by clear portfolio focus
• Excluding Russia: volumes +3.2%;
• NGP net revenue decline
tobacco net revenue +3.9%
• Strong regional financial delivery
driven by Australia, Africa and
Middle East
• Australia market share
gains supported by launch of
Lambert & Butler and better key
account execution
reflects market exits from
Russia and Japan
• Operating profit delivery
supported by more focused
approach to investment
Pack image is internal only.
70
Imperial Brands | Annual Report and Accounts 2022
Paola Pocci
President, Africa, Asia
and Australasia Region
Our volume and tobacco revenue
performance in the Africa, Asia and
Australasia region was affected by our
decision to initially suspend
operations in Russia and then
subsequently exit the market. We were
able to successfully transfer the
business as a going concern to local
investors in Russia in April. Excluding
the impact of Russia, regional volumes
were up 3.2% and net revenue
increased 3.9% at constant currency.
There was an immaterial impact
on profit.
Our Africa, Asia and Australasia
regional performance benefited from
a more focused approach under
the new regional structure and
leadership team. The strong financial
performance, excluding the impact of
the Russian market exit, was driven by
focused investment behind sales
execution and marketing in line with
our strategy to drive value from our
broader market portfolio.
Tobacco volume
Total net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2022
77.5
1,495
1,495
0
700
*2021
83.7
1,504
1,498
6
598
Actual
-7.5%
-0.6%
-0.2%
-100.0%
+17.1%
Constant
currency
-0.5%
-0.1%
-100.0%
+15.6%
* The 2021 net revenue and adjusted operating profit metrics exclude the contribution of the Premium Cigar Division from that financial reporting period following
its divestment in October 2020. The Premium Cigar Division contributed £21 million to net revenue and £3 million to adjusted operating profit in 2021.
Adjusted operating profit was up 15.6%
at constant currency, driven by strong
performance in Australia, Africa and
the Middle East and lower NGP
investment compared to last year,
following our decision to exit Japan
and Russia.
Excluding Russia, regional volumes
had a strong recovery in the Middle
East following prior year COVID-
related disruptions and market-share-
related volume gains in the Ivory
Coast, Morocco and Taiwan.
share performance benefited from
consumer activation and increased
distribution of Fine. Trade promotions
and activation activities behind
Gauloises resulted in market share
growth in Morocco.
Our Australia market share and
financial performance benefited from
the move to establish a clear brand
offering at each of the key price points.
This led to the launch of Lambert &
Butler in the fifth price tier, which
delivered incremental share gains.
Our performance also benefited
from improved supply chain delivery
and investment in key account
sales execution.
Our African markets continue to
perform strongly, driven by our
targeted brand approach. By taking
selective local jewel and key
international brands we have focused
brand portfolios for each country to
meet the differing adult consumer
demands. In the Ivory Coast, positive
Tobacco net revenue was down 0.1% at
constant currency, reflecting the
decision to exit Russia. Volume
declines of 7.5% were offset by price
mix of 7.4%. This price mix benefited
from the exit from Russia, which has
high volumes and low pricing.
Excluding this, price mix was up 0.7%
due to the growth in lower margin
volume in the Middle East, as sales
patterns returned to pre-COVID levels,
and positive net pricing in our
African portfolio.
NGP net revenue performance
declined to zero, reflecting our
decision to withdraw our NGP
offerings from Russia and Japan in the
prior financial year.
PRIORITY MARKET
PERFORMANCE
Tobacco share
Australia
• 31.8% (+20 bps)
• 4% of Group net revenue
Investment in our total brand portfolio strategy and establishing a clear offering at each of
the key price points helped us grow market share. The launch of Lambert & Butler in the
fifth price tier enabled a clear differentiation between Parker & Simpson and JPS in the
higher price tier. The performance of JPS roll your own was supported by our launch of
new pack size variants. Market dynamics have stabilised following changes to the excise
regime, although the market remains highly competitive, with illicit trade also at
historically high levels.
www.imperialbrandsplc.com
71
OPERATING REVIEW continued
DISTRIBUTION
AT A GLANCE
Net revenue*
+0.8%
Adjusted operating profit margin*
+26 bps
* Change at constant currency.
Our Distribution is made up of our
50.01% stake in Logista. Volumes
reflected the lifting of COVID-19-
related travel restrictions. While
inflation has been exacerbated by the
Russian invasion of Ukraine and
transport union strikes have impacted
economic growth in Spain, the
business has been able to mitigate
these pressures.
Net revenues at £1,046 million were
0.8% higher on a constant currency
basis as good performance in Iberia
and Italy offset the continued weak
performance in France.
In Iberia net revenue growth was
driven by:
• tobacco and related products which
benefited from an increase in
tobacco volumes and growth in
convenience products
• transport services with strong
demand for Logista Freight
(long-distance), increased B2B
activity at parcel delivery business
(Nacex) and Logista Parcel
Adjusted operating profit
excluding eliminations*
+1.8%
Adjusting operating profit
including eliminations*
-1.2%
• pharmaceutical distribution
expansion of customer base and
product offering
In Italy, net revenues were
supported by good tobacco and
NGP volumes together with growth
in convenience products.
In France, the removal of COVID-
related travel restrictions led to weak
tobacco volumes somewhat offset by
the positive performance in
convenience product distribution.
The adjusted operating profit margin
increased by 26bps at constant
currency as the focus on cost control,
and contracts that allow cost changes
to be passed through, mitigated
inflationary pressures. After
eliminations, the adjusted operating
profit contribution to the Group
reduced 1.2% on a constant currency
basis, as the costs of restructuring at
Logista were expensed in adjusted
operating profit. This is in line with the
reporting policy set out in our FY21
Results which outlined that no further
restructuring costs outside of the 2021
Strategic Review Programme would be
recognised in 2022.
In line with Logista’s strategy to
accelerate growth in European
non-tobacco, the company announced
a number of acquisitions during the
period. Together these acquisitions
total €175 million, and, with the
exception of Speedlink, which
completed in FY22, are expected to
complete in FY23. The acquisition of
60% of Transportes El Mosca, a
Spanish international transportation
company, announced in June, will
place Logista as the second largest
temperature controlled transportation
company in Spain once fully
consolidated, and brings both
maritime and road transportation
assets to the Group. Earlier in the year,
Logista announced the acquisition of
70% of Speedlink Worldwide Express
B.V, a Dutch express courier company
and in September it announced the
acquisition of 100% of Carbó
Collbatallé, a Spanish company
specialising in cold transportation in
the food sector. In February 2022,
Logista disposed of Supergroup S.A.S.,
a subsidiary in France, that had
already been classified as held for sale
at the end of the prior financial year.
In line with other Imperial-owned
entities, we continue to benefit from
an inter-company 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 £1.9 billion, with
movements in the cash position
during the 12-month period varying
from a high of £2.2 billion to a low of
£1.3 billion, primarily due to the timing
of excise duty payments. At 30
September 2022, the loan position was
£2.1 billion compared to £1.8 billion at
30 September 2021.
Net revenue
Adjusted operating profit
Adjusted operating profit margin
Eliminations
Adjusted operating profit (inc. eliminations)
Full year result
Change
£m
£m
%
£m
£m
2022
1,046
254
24.3
(1)
253
2021
1,069
258
24.1
7
265
Actual
-2.1%
-1.7%
+14bps
-118.7%
-4.5%
Constant
currency
+0.8%
+1.8%
+26bps
-119.2%
-1.2%
72
Imperial Brands | Annual Report and Accounts 2022
GROUP FINANCIAL REVIEW
STRENGTHENING OUR
PERFORMANCE
SUMMARY FINANCIAL INFORMATION
Volumes
Net revenue
-4.7%
led by declines in market size and exit
from Russia, offset by market share gains
+1.5 %
driven by robust price mix
Reported operating profit
Adjusted operating profit
-14.7%
driven by exit from Russia and
non-repeat of gains on disposal
+1.8%
driven by reduced NGP losses
Reported basic EPS
Adjusted EPS
165.9p
a decrease of 44.7%
Adjusted operating cash
conversion
102%
2021: 83%
265.2p
an increase of 4.9% on a constant
currency basis
Adjusted net debt/EBITDA
2.0x
2021: 2.2x
“Our strong cash performance
has enabled us to strengthen
our balance sheet and
accelerate shareholder
returns. We remain focused on
transforming the business.”
This year’s financial results reflect our
continued progress against our
five-year strategy. In the period, Group
net revenues grew 1.5% and Group
adjusted operating profit rose 1.8%,
both on a constant currency basis.
Reported revenue declined 0.7% driven
by adverse translation FX. Reported
operating profit reduced 14.7%, mainly
due to exit charges related to the
Russian asset disposal (£399 million)
and the non-recurrence of gains on
Lukas Paravicini
Chief Financial Officer
disposal of the Premium Cigar Division
(£281 million) in the comparator period.
Cash generation remains a key focus
and has supported the delivery of £2.6
billion of free cash flow, with 102%
adjusted operating cash conversion.
The strong cash generation enabled us
to reduce reported net debt by £0.9
billion to £8.5 billion and delivered
adjusted net debt/EBITDA in line with
expectations, reducing by 0.2x to 2.0x
in FY22.
As recently announced, the
strengthened balance sheet and
achievement of our leverage target has
enabled us to begin an ongoing,
multi-year share buyback programme,
where we will initially repurchase up
to £1.0 billion of shares during FY23.
This year represented the final year of
the strengthening phase of our five
year plan as previously announced.
Next year leads us into our growth
phase, positioning the business
to capitalise on the gains and
investments made over the last
two years.
www.imperialbrandsplc.com
73
GROUP FINANCIAL REVIEW continued
SUMMARY INCOME STATEMENT
£ million (unless otherwise indicated)
Revenue/net revenue*
Tobacco & NGP revenue/net revenue
Distribution revenue/net revenue
Operating profit
Total Tobacco & NGP
Distribution
Eliminations
Group operating profit
Net finance costs
Share of profit/(losses) 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)
Reported
Adjusted
2022
2021
2022
**2021
22,795
9,756
23,202
9,589
7,793
1,046
7,589
1,069
2,472
212
(1)
2,683
(117)
(15)
2,551
(886)
1,665
165.9
141.17
2,991
148
7
3,146
81
11
3,238
(331)
2,907
299.9
139.08
3,441
254
(1)
3,694
(326)
9
3,377
(755)
2,622
265.2
141.17
3,305
258
7
3,570
(417)
7
3,160
(714)
2,446
246.5
139.08
* Reported revenue includes duty, similar items, distribution and sale of peripheral products, which are excluded from net revenue; net revenue compromises
reported revenue less duty and similar items, excluding sale of peripheral products and distribution revenue.
** The 2021 net revenue and adjusted operating profit metrics exclude the contribution of the Premium Cigar Division from that financial reporting period following
its divestment in October 2020. The Premium Cigar Division contributed £21 million to net revenue, £3 million to adjusted operating profit, £4 million to adjusted
share of (loss)/profit accounted for using the equity method and £(2) million to adjusted tax in 2021.
SUMMARY CASH FLOW STATEMENT
£ million (unless otherwise indicated)
Group operating profit
Depreciation, amortisation and impairments
EBITDA
Loss/(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
Minority interest dividends
Free cash flow
Acquisitions/disposals
Shareholder dividends
Purchase of ESOT shares
Net cash flow
Reported
Adjusted
2022
2021
2022
2021
2,683
660
3,343
428
56
3,827
40
(681)
3,186
(177)
–
(358)
(89)
2,562
14
(1,320)
(1)
1,255
3,146
815
3,961
(281)
(29)
3,651
(664)
(820)
2,167
(150)
–
(400)
(93)
1,524
845
(1,305)
–
1,064
3,694
244
3,938
–
(20)
3,918
40
(681)
3,277
(177)
(91)
(358)
(89)
2,562
14
(1,320)
(1)
1,255
3,573
269
3,842
–
(79)
3,763
(664)
(820)
2,279
(150)
(112)
(400)
(93)
1,524
845
(1,305)
–
1,064
74
Imperial Brands | Annual Report and Accounts 2022
Adjusted performance measures
When managing the performance of
our business we focus on non-GAAP
measures, which we refer to as
adjusted measures. We believe they
provide a useful comparison of
underlying performance from one
period to the next, as GAAP measures
can include one-off, non-recurring
items and recurring items that relate
to earlier acquisitions. 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
the accounting policies accompanying
our financial statements and the
APM section within the
supplementary information.
Reconciliations between reported and
adjusted measures are included in the
appropriate notes to our financial
statements. 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.
While we believe that adjusted
performance measures can provide
helpful information which
supplements reported measures, we
are also aware of the need to ensure
that an appropriate balance is
maintained between the two sets of
reporting metrics, with adjusted
disclosures not being given greater
prominence than GAAP measures.
In line with this, we have reduced the
number of adjusted performance
measures used this year.
GROUP RESULTS – ADJUSTED CONSTANT CURRENCY ANALYSIS
£ million
(unless otherwise indicated)
Tobacco & NGP net revenue
Europe
Americas
Africa, Asia and Australasia
Total Group
Tobacco & NGP adjusted operating profit
Europe
Americas
Africa, Asia and Australasia
Total Group
Distribution
Net revenue
Adjusted operating profit including eliminations
Group adjusted results
Adjusted operating profit
Adjusted net finance costs
Adjusted eps (pence)
Full year
ended 30
September
2021*
Foreign
exchange
Constant
currency
movement
Full year
ended
30
September
2022
Constant
currency
change
0.2%
4.4%
**-0.5%
1.5%
-5.2%
5.8%
15.6%
2.0%
0.8%
-1.2%
Change
-2.2%
11.5%
-0.6%
2.7%
-6.5%
13.8%
17.1%
4.1%
-2.1%
-4.5%
9
111
(7)
113
(86)
59
93
66
9
(4)
3,472
2,826
1,495
7,793
1,562
1,179
700
3,441
1,046
253
62
81
12.2
3,694
(326)
265.2
3.5%
-21.9%
7.6%
1.8%
-19.6%
4.9%
3,551
2,534
1,504
7,589
1,670
1,037
598
3,305
1,069
265
3,570
(417)
246.5
(88)
181
(2)
91
(22)
83
9
70
(32)
(8)
62
10
6.5
* The 2021 net revenue and adjusted operating profit metrics exclude the contribution of the Premium Cigar Division from that financial reporting period following
its divestment in October 2020. The Premium Cigar Division contributed £21 million to net revenue and £3 million to adjusted operating profit in 2021.
** Africa, Asia and Australasia performance has been impacted by our exit from Russia; excluding Russia tobacco & NGP net revenue grew 3.9% at constant currency.
Volumes, bn SE
Net revenue (actual FX rate), £m
Adjusted operating profit (actual
FX rate), £m
253
700
3,472
1,562
121.5
77.5
21.9
Europe
Americas
Africa, Asia and Australasia
121.5
21.9
77.5
1,495
2,826
Europe
Americas
Africa, Asia and Australasia
1,179
Europe
Americas
Africa, Asia and Australasia
Distribution
3,472
2,826
1,495
1,562
1,179
700
253
www.imperialbrandsplc.com
75
GROUP FINANCIAL REVIEW continued
SALES PERFORMANCE (£M)
Reported revenue
-0.7%
Net revenue
+1.5%
• Reported revenue declined -0.7%
driven by adverse translation FX
from a weaker euro and higher euro
exposure than net revenue due to
excise duty and Logista.
• Net revenue grew 1.5% at constant
currency comprising +1.3% from
tobacco and +0.2% from NGP.
• Tobacco volume was down -4.7%,
reflecting the exit from Russia and
volume declines in Europe as
COVID-19 restrictions unwind, partly
offset by a strong volume
performance in the Americas
and the Africa, Asia and
Australasia regions.
• Strong aggregate market share
growth in our top-five priority
markets of +35bps (FY21: -2bps).
• Tobacco price mix rose by 6.0% due
to positive pricing and market mix
from the Russian market exit.
Excluding Russia, price mix was
3.4%, showing a recovery back to
historic levels in the second half of
the year (5.7%).
• NGP net revenue increased +10.8% at
constant currency, led by growth in
Europe more than offsetting
declines in the USA.
• Translation FX was favourable due
to sterling weakening against the
dollar but partially offset by
strengthening against the euro.
+1.3% Tobacco net revenue
+6.0%
+1.5%
+10.8%
NGP net revenue
+0.2%
+1.2%
£7,702m
£7,793m
£7,589m
-4.7%
FY21
net revenue
Tobacco
volume
Tobacco
price/mix
NGP
net revenue
FY22
constant
currency
Translation
FX
FY22
net revenue
The net revenue of £7,589m for 2021 excludes a £21m contribution from the Premium Cigar Division following its divestment in September 2020.
-0.8%
+3.4%
-0.2%
+2.4%
Exc.
Russia
OPERATING PROFIT (£M)
Reported operating profit
-14.7%
Adjusted operating profit
+1.8%
• Reported Group operating profit of
£2,683m declined 14.7%, primarily
driven by exit charges related to the
Russian asset disposal (£399m) and
the non-recurrence of gains on
disposal of the Premium Cigar
Division (£281m).
• Adjusted Group operating profit
increased 1.8% at constant currency
driven by tobacco & NGP growth.
• Tobacco adjusted operating profit
increased marginally (+0.3%)
reflecting increased investment in
our strategy and the non-recurrence
of US state litigation costs in FY21.
• NGP losses reduced as we re-
prioritised investment and exited
loss making markets.
• Translation FX reflects sterling
weakening against the dollar,
partially offset by strengthening
against the euro.
+1.8%
Tobacco AOP £11m/+0.3%
+39.1%
-1.2%
+1.7%
+3.5%
£3,570m
£40m
(£105m)
£76m
£55m
(£4m)
£3,632m
£62m
£3,694m
FY21
AOP
FY21 state
litigation charge
FY22 strategic
investments
Underlying
Tobacco
performance
NGP
reduced costs
Distribution
& Eliminations
FY22
constant
currency
FX
FY22
AOP
The adjusted operating profit figure of £3,570m for 2021 excludes a £3m contribution for the Premium Cigar Division following its divestment in September 2020.
76
Imperial Brands | Annual Report and Accounts 2022
EARNINGS PER SHARE (PENCE)
• Reported EPS declined 44.7% to 165.9
pence driven by the lower reported
operating profit, an increase in tax
charge and lower net finance
income as we reduced our exposure
to the marked to market foreign
exchange accounting gains on
unhedged financial instruments.
• Adjusted EPS was 265.2 pence, up
4.9% at constant currency due to
increased adjusted operating profit,
supported by lower adjusted interest
costs due to a reduction in net debt
as high coupon bonds matured or
were repaid early in FY21.
Reported EPS
-44.7%
Adjusted EPS
+4.9%
6.6p
246.5p
FY21
adjusted EPS
Operating
profit
+4.9%
+2.5%
+7.6%
8.6p
0.1p
2.8p
0.3p
6.5p
258.7p
265.2p
Interest
Minorities & JV
Tax
No. of shares
FY22 adjusted
EPS at constant
currency
Translation FX
FY22
adjusted EPS
The adjusted earnings per share figure of 246.5p for 2021 excludes a 0.6p contribution from the Premium Cigar Division following its divestment in September 2020.
impacted by lower disposal proceeds
compared to the prior year which
benefited from the sale of the
Premium Cigar Division. Disposal
proceeds in 2022 were related to the La
Romana factory sale, which was
finalised in the second half of 2022.
Shareholder dividend payments of
£1,320 million are marginally higher
than last year (2021: £1,305 million)
driven by our progressive
dividend policy.
Capital expenditure of £177 million
was higher than the prior year (2021:
£150 million) and is anticipated to
increase in 2023 to within an expected
range of £300 million to £350 million.
The increased capital expenditure
will support projects to drive
simplified and efficient operations
in line with our strategic plan.
Adjusted operating cash
conversion was 102% (2021: 83%)
driven by neutral working capital
in the year and temporary sales
phasing in Logista driving a higher
duty payable. Adjusted operating
cash conversion in the prior year
was impacted by increased duty
payments in Logista which were
deferred from 2020, leading to a
significant working capital outflow.
CASH FLOW
Cash flows from operating
activities were £3,186 million
(2021: £2,167 million).
The year-on-year improvement in free
cash flow to £2,562 million (2021: £1,524
million) was driven by a lower working
capital outflow, as duty payment dates
at Logista return to normal following
changes to duty payment dates in
preceding years, and a lower cash tax
payment after a one-off payment in
2021 of £101m for Controlled Foreign
Company (CFC) state aid in the UK.
While the net cash inflow of £1,255
million (2021: £1,064 million) improved
year-on-year, the improvement was
£ million (unless otherwise indicated)
Cash flow from operating activities
Free cash flow
Net cash flow
Adjusted operating profit
Cash flow post capital expenditure pre interest and tax
Adjusted operating cash conversion
2022
3,186
2,562
1,255
3,694
3,781
102%
2021
2,167
1,524
1,064
3,573
2,949
83%
www.imperialbrandsplc.com
77
GROUP FINANCIAL REVIEW continued
RETURN ON INVESTED CAPITAL
Return on invested capital (ROIC)
increased by 120 basis points, driven
by an increase in net adjusted
operating profit and a reduction in
annual average capital. Average
annual ROIC was 17.7% (2021: 16.5%).
Average annual capital reduced by
£0.5 billion, driving an improvement in
returns, with the benefit of increased
adjusted operating profit.
Our FY22 invested capital has
increased compared to the prior year
due to beneficial foreign exchange
movements in intangible assets.
Despite this increase the average
annual invested capital remains
lower than 2021, benefiting from the
disposal of assets held for sale from
the Premium Cigar Division and a
reduction in intangible assets in 2021.
£ million
Reported operating profit
Adjusting items (APM section within supplementary information)
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
* 2021 figures calculated on the same basis as 2022.
ADJUSTED NET DEBT/EBITDA
Adjusted net debt reduced by £0.6
billion (2021: £1.2 billion) in the year,
driven by continued strong cash
generation. Adjusted net debt/EBITDA
reduced to 2.0x from 2.2x, in line with
previous guidance.
Reported net debt reduced by £881
million to £8,492 million (2021: £9,373
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 £8,054 million (2021: £8,615 million).
£ million
Reported net debt
Accrued interest
Lease liabilities
Fair value of interest rate derivatives
Adjusted net debt
2022
2,683
1,011
3,694
(827)
2,867
(2,823)
17,777
1,659
–
16,613
16,240
17.7%
2021*
3,146
427
3,573
(807)
2,766
(2,523)
16,674
1,715
–
15,866
16,741
16.5%
2022
(8,492)
105
248
85
(8,054)
2021
(9,373)
140
251
367
(8,615)
78
Imperial Brands | Annual Report and Accounts 2022
RECONCILIATION BETWEEN REPORTED AND ADJUSTED PERFORMANCE MEASURES
£ million unless otherwise indicated
Reported
Russian and associated markets exit
Acquisition and disposal costs
Amortisation & impairment of acquired intangibles
Excise tax provision
Fair value adjustment of loan receivable
Loss/(profit) on disposal of subsidiaries
Restructuring costs
Fair value and exchange movements on derivative
financial instruments
Post-employment benefits net financing costs
Buy out liabilities on Irish Pension Scheme
Tax on disposal of premium cigar division
Previously unrecognised tax credits
Brand impairment in equity accounted joint venture
Provision for state aid recoverable
Uncertain tax positions
Deferred tax on unremitted earnings
Tax on unrecognised losses
Adjustments above attributable to non-controlling interests
Adjusted
Operating profit Net finance (costs)/income Earnings per share (pence)
2022
2,683
399
5
349
(9)
37
29
197
–
–
4
–
–
–
–
–
–
–
–
3,694
2021
3,146
–
17
450
(1)
(15)
(281)
257
–
–
–
–
–
–
–
–
–
–
–
3,573
2022
(117)
–
–
–
–
–
–
–
(201)
(8)
–
–
–
–
–
–
–
–
–
(326)
2021
81
–
–
–
–
–
–
–
(496)
(2)
–
–
–
–
–
–
–
–
–
(417)
2022
165.9
42.2
0.5
35.4
(1.0)
3.9
2.2
15.6
(1.9)
(0.8)
0.4
–
–
2.5
10.7
(6.7)
(2.7)
0.8
(1.8)
265.2
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
ADJUSTING ITEMS
A reconciliation of the Group’s
adjusted to reported operating profit is
shown above.
The Group announced in April it had
completed its exit and sale of its
Russian business and associated
markets with net charges totalling
£399 million. These are outlined below:
• An impairment charge against the
Russian assets of £166 million was
recognised as at 31 March 2022
when the assets were classified as
an asset held for sale.
• A further net loss of £198 million
arose on completion including
recycled foreign exchange losses of
£190 million.
• The planned exit from a limited
number of associated markets has
resulted in the recognition of asset
impairment provisions and exit costs
currently estimated at £35 million.
In addition, the sale of the Russian
business has triggered an impairment
to the intangible asset for the Jadé
brand which is sold in Russia through
the venture between Global Horizons
and China Tobacco. This has led to a
charge to the Group of £23.5 million
and impacts adjusted EPS by 2.5 pence.
The financial asset investments (Auxly
and Oxford Cannabinoid Technologies)
were revalued as at 30 September 2022,
with a £37 million loss recorded due to
credit risk provision adjustments and
marking the value of equity
investments to market prices.
The loss on disposal of subsidiaries
totalled £29 million and comprised:
• The sale of the La Romana factory in
the Dominican Republic which
completed in August 2022. We
received a sales consideration of
£46 million and recognised a loss of
£13 million on completion.
• The Group’s subsidiary Logista sold
its interest in Supergroup S.A.S for a
consideration of £nil and recognised
a loss on disposal of £16 million.
Restructuring costs of £197 million
relating to the 2021 Strategic Review
Programme were recognised in the
year as shown in the table overleaf.
Further details on our restructuring
programmes are given in the
restructuring section below.
www.imperialbrandsplc.com
79
GROUP FINANCIAL REVIEW continued
The 2022 charges in relation to restructuring programmes are shown below.
£m
Cost Optimisation Programme I
Cost Optimisation Programme II
2021 Strategic Review Programme
Other
Total
2022
Income Statement
Cash
–
–
197
–
197
11
19
56
5
91
An overview of the restructuring programmes’ cumulative charges, cash spend and annualised savings is shown below.
RESTRUCTURING CHARGE & CASH SPEND
£m
Cost Optimisation Programme I (2013)
Cost Optimisation Programme II (2018)
2021 Strategic Review Programme
Income Statement Charges
Cumulative
to date
Anticipated
Total
Cumulative
to date
Cash Costs
Anticipated
Total
Savings
Annualised
Savings
945
848
423
945
848
423
582
562
104
634
650
274
305
320
150
RESTRUCTURING
Following our detailed work:
As previously confirmed and approved
by the Audit Committee, only costs
related to the operating model
changes required as part of the
strategic review announced in
January 2021, together with its
implementation costs and associated
non-cash charges, are eligible for
classification as adjusted costs in the
income statement in FY22.
Therefore, there have been no further
restructuring charges made during the
period in respect of any other
previously approved restructuring
programmes (COP I, COP II). Any
further charges in respect of any
restructuring programmes will
not be adjusted.
The programme announced during the
course of 2021, which was an output
from the strategic review, was a
restructuring programme aiming to
reorganise and simplify the business,
unlocking efficiency savings and
enabling increased investment in our
core capabilities such as sales and
marketing to support the five-year
strategic plan. At that time, total
restructuring costs in respect of the
programme were anticipated to
be in the range of £375 million
to £425 million.
Since the strategy announcement, we
developed detailed plans across a
number of different initiatives and are
now deploying a new operating model
that will support the strategic delivery.
• we expect cash costs to be £274
million, that will extend into 2023
and beyond, and the associated
restructuring charges have been
fully provided for across both
FY21 (£153 million) and FY22
(£121 million).
• associated non-cash restructuring
charges incurred in FY22 totalled
£76 million, bringing the total
non-cash charges to £149 million.
Hence the overall restructuring charge
across both FY21 and FY22 periods, in
respect of both cash and non-cash
items is £423 million, which is at the
higher end of our initial guidance of
£375 million to £425 million. We are
currently forecasting that the
programme will deliver annualised
savings at the higher end of the range
of our initial guidance of £100 million
to £150 million.
Cash spend for all three restructuring
programmes is expected to continue
into FY23 and beyond.
Finance costs
Adjusted net finance costs were lower
at £326 million (2021: £417 million),
reflecting lower adjusted net debt
balances during the year. Reported
net finance cost was £117 million (2021:
income of £81 million), incorporating
the impact of net fair value and foreign
exchange gains on financial
instruments of £201 million (2021:
gains of £496 million) and post-
employment benefits net financing
income of £8 million (2021: income of
£2 million). The gains on financial
instruments are primarily due to fair
value gains of £270 million resulting
from positive valuation movements of
the Group’s interest rate derivatives
reflecting increasing market interest
rate expectations in the year.
Our all-in cost of debt decreased to
3.5% (2021: 4.0%) due to the early
repayment of a bond in FY21 and
associated charges taken in that year
combined with the natural maturity of
higher cost debt during 2022, partially
offset by rising interest rates.
Our interest cover increased to 12.1x
(2021: 9.2x) reflecting the lower
adjusted finance costs.
Given the rising interest environment,
we expect upward pressure on finance
cost going forward although we have
hedging in place for 85% of our
expected debt in FY23.
Taxation
Our adjusted effective tax rate is 22.4%
(2021: 22.6%) and the reported effective
tax rate is 34.7% (2021: 10.2%). The
slight reduction in the adjusted
effective tax rate reflects both a
significantly lower year-on-year
provision build for uncertain tax
positions arising from the settlement
of several tax audits, largely offset by a
greater proportion of the Group’s
profits being earned in jurisdictions
with higher tax rates. The adjusted tax
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Imperial Brands | Annual Report and Accounts 2022
The annual dividend represents a
payout ratio of 53.2% with respect to
basic earnings per share.
The third interim dividend will be paid
on 30 December 2022 to shareholders
registered on 25 November 2022.
Subject to AGM approval, the proposed
final dividend will be paid on 31 March
2023 to shareholders registered on 17
February 2023.
Funding/Liquidity
During the year we repaid one bond of
£1 billion and made a partial
repayment of US$ 646 million from our
February 2023 US$ 1 billion bond. We
issued a $1 billion bond in the year
with a coupon of 6.125%, maturing in
July 2027. The denomination of our
closing adjusted net debt was split
approximately 80% euro and 20% US
dollar. As at 30 September 2022, the
Group had committed financing in
place of around £13.0 billion, which
comprised 24% bank facilities and 76%
raised from capital markets. During
the year the maturity date of €3,316
million of the Group’s existing
syndicated multicurrency facility was
extended to 30 September 2025, with
the exception of one tranche of €184
million, which remains at the 31 March
2025 maturity date.
The Group remains fully compliant
with all our banking covenants and
remains committed to retaining our
investment grade ratings.
Lukas Paravicini
Chief Financial Officer
rate is lower than the reported rate due
to no tax relief arising on the Russian
market exit costs and limited tax relief
arising on foreign exchange losses
that arise on consolidation, and the
recognition of a full provision against
the previously recognised receivable
for state aid tax.
We expect our adjusted effective tax
rate for the year ended 30 September
2023 to be around 22%.
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 a positive
impact on Group adjusted operating
profit and earnings per share at
average exchange rates (1.7% and 2.4%,
respectively). Sterling weakened
against the US dollar (6.4%) and
strengthened against the euro (3.1%).
Other major currencies remained
broadly flat compared to the prior year.
Dividend payments
The Group paid two interim dividends
of 21.27 pence per share in June and
September 2022.
The Board has approved a further
interim dividend of 49.31 pence per
share and will propose a final dividend
of 49.32 pence per share bringing the
total dividend for the year to 141.17
pence. This represents a 1.5% increase
to the amount of 139.08 pence per
share paid in the prior year and is in
line with the Group’s progressive
dividend policy.
www.imperialbrandsplc.com
81
PRINCIPAL RISKS AND UNCERTAINTIES
MANAGING RISK
The principal risks faced by the Group and
Imperial’s risk management approach are
described in the following pages.
Risks represent the various potential
outcomes that are managed whilst
implementing the Group’s strategy.
Imperial defines a risk as anything
that could disrupt the achievement of
the Group’s strategy and objectives.
In developing the Group’s strategy, the
Board and management reviewed the
risk landscape (current and emerging)
and related profiling, with risk
mitigations and impacts assessed.
RISK ASSESSMENT
PRINCIPLES
• Risk assessments are aligned
with the business planning
cycle and strategic objectives,
focusing not only on the
identification and assessment
of risks, but most importantly
on the effectiveness of the
mitigations in place
• Imperial adopts a dynamic
approach which facilitates
and collates views from
functional risk owners and a
broad spectrum of other
relevant stakeholders,
providing end-to-end insights
from a wide collection of
second line experts – enabling
a richer, more balanced
perspective on current and
emerging risks
• Current and emerging risks
are considered on an ongoing
basis across the business,
with a general three-year
horizon (though longer where
applicable, e.g. climate risk).
This horizon ensures
appropriate focus and
includes consideration of
changes in the causes of
existing risks (e.g. specific
proposed regulatory change)
ensuring timely evaluation of
the effectiveness of current
and future mitigations
• Specific risk topics are
presented to the Board, Audit
Committee, and ELT during
the year. These discussions
provide further detail from
first and second line
management on their risk
management responsibilities
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.
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 resultant risk management
approach 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 LANDSCAPE
The Group operates in highly
competitive multinational markets
and faces general commercial
risks associated with a large
FMCG business.
Imperial constantly assesses and
evaluates the risks posed by the
changing environments in which the
Group operates, whether geopolitical,
socioeconomic or technological. The
consideration of potential impacts and
most likely causes ensures a timely,
measured and appropriate response.
The Group, along with all other
businesses, has continued to be
impacted by the pressures which
COVID-19 has placed on global supply
chains. Further to this the Russian
invasion of Ukraine required the Group
to act to prioritise the safety of its
people, and to manage the impacts on
the business. The Group is impacted
by the resultant increase in
commodity and energy prices,
notably within its European
manufacturing sites.
RISK MANAGEMENT
FRAMEWORK
The framework is designed to ensure
accountability for the identification,
assessment and mitigation of risks
throughout the business, supported by
appropriate capabilities.
The success of the risk management
approach relies upon the effectiveness
of the control frameworks in place to
manage risks and seize opportunities
that arise. Imperial’s approach to
governance, risk management and
internal control follows the “three lines
model”, which enables the business to
achieve its strategic objectives whilst
remaining aligned to the Board’s
risk appetite.
As a Group we face a number of current and emerging issues which we treat as causes
of current risks rather than evaluating them as risks in themselves. By adopting this
approach we ensure consideration of impacts and required mitigations across the business,
and increase the effectiveness and accountability for assessments on a “bottom-up” basis,
enabling local and Group initiatives to be developed to optimise our responses.
Climate risk
The impacts of climate
risk on the business
have been evaluated
as part of both Group
and local (functional)
risk assessments.
Key impacts exist within
our manufacturing
footprint and wider
supply chain, with short-
and long-term
consideration of
possible vulnerabilities
and required mitigations
to ensure resilience.
Inflation
The impact of
inflationary pressures
on both the business
and consumers has
been assessed as part of
risk assessments.
This creates a more
dynamic feedback
between “bottom-up”,
“top-down” and
cross-functional
perspectives, ensuring
the broadest
consideration of impacts
and mitigations.
Geopolitical risk
The identification and
effective mitigation of
geopolitical risks has
become an increasingly
important factor within
the Group’s operational
continuity planning for
our internal resilience
and the resilience
of our wider supply
chain, key customers,
and service providers.
This consistent and
complete assessment
better informs
Group actions.
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Imperial Brands | Annual Report and Accounts 2022
WHAT
activities are completed?
Assessment and evaluation of risks
WHEN
are they
completed?
HOW
do we confirm risks
are managed?
WHO
is involved?
First
Line
”
p
u
-
m
o
t
t
o
B
“
Second
Line
Risk
Committee
ELT
”
n
w
o
d
-
p
o
T
“
• Local ownership and accountability
for completion and continued
update of risk register
• Local Leadership Team input to
review and formally agree risk
assessment outcomes
• Approach includes requirement to
assess effectiveness of related risk
mitigations on an ongoing basis
• Completion of key control
compliance self-assessment across
the business – Group Controls
Matrix (GCM) communicates key
requirements and required testing
• Functional risk registers evaluate
both the risks subject matter
experts are employed to manage,
and the risks to achieving
objectives in line with Board
risk appetite
• Reviewed and agreed by functional
leadership teams
• Formal completion of legal
and regulatory certifications
(e.g. ESG-related, TCFD,
Human Rights, Group Science
regulatory certifications)
• Provides “top-down” insights to risk
assessment process
• Considers emerging risks and
themes identified in risk
assessment process
• Reviews results of GCM internal
control self-assessments
• Provides input into development of
risk management activities
• High-impact risks identified in
“bottom-up” assessments are
consolidated for review by ELT
• Considers emerging risks and
themes identified in risk
assessment process
Ongoing
throughout year
but with minimum
six-monthly
formal update
• Leadership accountability
for risk assessment and
mitigation effectiveness
• Regional leadership team
oversight and input
Monthly GCM
compliance self
assessment
completion
Ongoing
throughout year
but with minimum
six-monthly
formal update
• Dedicated operational control
positions responsible for
facilitating operational risk and
compliance activities
• Management certification of
compliance with Group policies
and Code of Conduct on
six-monthly basis
• Internal Audit and other
independent assurance reviews
performed across the business
• Define and implement policy
and risk management activities
aligned to risk appetite
• Provide support to business in
design and implementation of
local mitigations
• Monitor effectiveness of
mitigations through KRIs/KPIs
and assurance activities
• Review results of GCM self-
assessment and identify
common themes
• Review results of assurance
activities to ensure effective
closure of observations raised
Minimum three
times per year
• Oversee risk management
approach and reporting
• Review results of assurance
activities to ensure
effective closure of any
observations raised
Quarterly update
• Oversee risk management
approach and reporting
• Review results of assurance
activities to ensure
effective closure of any
observations raised
• Oversee risk management
approach and reporting
• Review results
of assurance activities
• Oversee risk management
approach and reporting
• Review results
of risk assessment
Audit
Committee
Board
• Oversight of the Group’s internal
control systems, risk management
process and framework
• Obtain and review scope, quality
and results of assurance provided
by internal and external audit
Update at each AC
meeting, including
risk deep dives
with first- and
second-line
risk owners
• Provides operational and strategic
risk perspectives, ensuring these
are considered in Group strategy
Twice per year:
formal risk
assessment review
• Sets the Group’s risk appetite
• Considers emerging risks and
themes identified in risk
assessment process
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 119.
www.imperialbrandsplc.com
83
PRINCIPAL RISKS AND UNCERTAINTIES continued
The following section
highlights the principal
risks the Group faces and
identifies the mitigations
that are in place to manage
them, with all risks reported
on a mitigated basis.
Not all of these principal risks are
within Imperial’s direct control, and
the list cannot be considered to be
exhaustive, as other risks and
uncertainties may emerge in a
changing business environment.
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 is included.
Changes have been made in the
presentation of the principal risks.
The risks reported are those currently
considered by the Board to have the
most likely impact on achievement
of the Group’s objectives, with the
exception of the People risk, which is
included to reflect the importance
of our people in delivery of the
Group’s strategy.
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRICING, EXCISE OR OTHER PRODUCT TAX
OUTCOMES NOT IN LINE WITH BUSINESS PLAN
ASSUMPTIONS OR EXPECTATIONS
Risk profile:
Strategic impact:
Driving value from our broader portfolio
Failure to achieve planned pricing strategy could impact
achievement of objectives and targets. 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
• Pricing pressures resulting from inflationary impact on
consumer spend, triggered by unprecedented increases in
prices for fuel, food and other commodities
• Additional expertise employed within the Revenue Growth
Management function, and additional tools developed to
better model and predict impacts of excise, inflation, and
other consumer pressures
• Continued development of EU Excise Directive
FAILURE TO MANAGE THE IMPACTS OF PRODUCT
REGULATORY CHANGE
Risk profile:
Strategic impact:
Driving value from our broader portfolio
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
• FDA formally proposed regulatory change in the US,
impacting the use of menthol and other characterising
flavours. This US Federal ban is most likely to take longer
than the Group’s three-year risk horizon to come into effect,
however, legislation at state or county level could be
implemented in advance of this
• Regulatory change in New Zealand creates an environment
which eventually bans the sale of tobacco through
increasing the age at which tobacco can be purchased year
on year, over a 50-year period
• Roll-out of Track-and-Trace requirements in product supply
chain continues across Africa
• Increasing maturity and complexity within NGP categories
as regulation develops with market growth, including
proposals for changes in ability to sell flavoured product.
• Wider alignment between Tobacco and NGP categories could
arise under EUTPD3 and, in general, the developing EU
regulatory landscape
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Imperial Brands | Annual Report and Accounts 2022
• In markets where consumers are
• Subject matter experts assess global
• The development of the Group
increasingly price-conscious the ability
excise risks, and model price elasticity
strategy includes analysis of
to achieve planned price increases may
to ensure the business plan and
planned and potential
strategy are developed and aligned
changes in product taxation to
be impacted, resulting in reduced
profitability as the Group protects
market share
to consumer insights
• The Group’s Revenue Growth
identify and ensure
investment opportunities
across our range of products
• Pricing pressures may result from
Management function is responsible for
significant pressures on consumer
disposable income. Fuel, food and
the identification and management of
• The Group product portfolio is
strategic commercial opportunities
resilient to potential impacts
commodity prices have increased at
arising from excise change
significant rates in priority markets,
reducing consumer purchasing power.
Additionally, increases in taxation
further increase product price potentially
impacting affordability. This could result
in down-trading to lower price products/
categories, reduced consumption,
cessation of smoking, or an increase in
the attractiveness of illicit product,
impacting sales volumes, revenues,
profitability and market size
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 brands
• Counterfeit and illicit trade thrive in
of products
• Engagement with authorities providing
informed input and evidence about the
from changes in consumer
behaviour, with products at
various price points
unintended consequences of
• Tailored product portfolio
disproportionate changes in product
offerings at a local level,
taxation, supported by the Group’s
within and across categories,
Regulatory and Anti-Illicit Trade teams
allow for any relative
commercial advantage
from excise mechanisms
to be realised
• Robust internal policy and procedures
ensure compliance within the supply
chain, maintaining strong standards and
controls for the business and first-line
customers to prevent diversion
• Working alongside and partnering with
governments and law enforcement
agencies around the world to prevent the
illicit supply of tobacco products
• Product regulatory change can restrict
• Engagement with authorities to provide
• While stringent regulation
product specification (e.g., menthol or
informed input and evidence of the
proves a burden on all firms,
similar flavour ban), consumer
unintended consequences of
interaction, and product supply, and
disproportionate changes in product
place restrictions on consumers’ ability
regulation, supported by the Group’s
the burden is less on
businesses that operate from
an existing high baseline of
Regulatory and Scientific Affairs teams
compliance and responsibility
to enjoy the product, potentially
impacting sales volumes and
market size
• Subject matter experts
employed to assess the impacts
• Compliance with increasingly complex
of proposed regulatory change and
regulatory requirements increases the
Group-wide impacts
risk of both additional cost to the Group
and inadvertent non-compliance, which
could result in investigation, regulatory
censure, financial penalty and
reputational damage
• Where interpretation of regulation is
required, judgements made can lead to
dispute or investigation by regulators
and result in possible related financial
costs or reputational damage even where
no fault is proven
• Project teams in place to manage the
impacts of regulatory change, ensuring
required compliance is achieved and
• Global regulators are
strategic opportunities identified
increasingly moving towards
• Group policies, guidance and processes
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
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
• Regulation can be of benefit to
consumers and to responsible
market players through
preventing less responsible
companies from operating
freely within the marketplace
Principal risk
Change in year
Impact
Mitigation
Opportunity
In the year the previously reported
Organisational change, and
Availability of liquidity risks have
reduced relative to our wider risk
landscape. These have been replaced
in the following section by Failure to
identify or respond to changes in
consumer behaviour and/or market
environment and Failure to manage
direct/indirect tax positions/reporting.
• In markets where consumers are
• Subject matter experts assess global
increasingly price-conscious the ability
to achieve planned price increases may
be impacted, resulting in reduced
profitability as the Group protects
market share
• Pricing pressures may result from
significant pressures on consumer
disposable income. Fuel, food and
commodity prices have increased at
significant rates in priority markets,
reducing consumer purchasing power.
Additionally, increases in taxation
further increase product price potentially
impacting affordability. This could result
in down-trading to lower price products/
categories, reduced consumption,
cessation of smoking, or an increase in
the attractiveness of illicit product,
impacting sales volumes, revenues,
profitability and market size
• 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 brands
• Product regulatory change can restrict
product specification (e.g., menthol or
similar flavour 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 inadvertent non-compliance, which
could result in investigation, regulatory
censure, financial penalty and
reputational damage
• Where interpretation of regulation is
required, judgements made can lead to
dispute or investigation by regulators
and result in possible related financial
costs or reputational damage even where
no fault is proven
• The development of the Group
strategy includes analysis of
planned and potential
changes in product taxation to
identify and ensure
investment opportunities
across our range of products
• The Group product portfolio is
resilient to potential impacts
from changes 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
excise risks, and model price elasticity
to ensure the business plan and
strategy are developed and aligned
to consumer insights
• The Group’s Revenue Growth
Management function is responsible for
the identification and management of
strategic commercial opportunities
arising from excise change
• Engagement with authorities providing
informed input and evidence about the
unintended consequences of
disproportionate changes in product
taxation, supported by the Group’s
Regulatory and Anti-Illicit Trade teams
• Robust internal policy and procedures
ensure compliance within the supply
chain, maintaining strong standards and
controls for the business and first-line
customers to prevent diversion
of products
• Working alongside and partnering with
governments and law enforcement
agencies around the world to prevent the
illicit supply of tobacco products
• Engagement with authorities to provide
informed input and evidence of the
unintended consequences of
disproportionate changes in product
regulation, supported by the Group’s
Regulatory and Scientific Affairs teams
• Subject matter experts
employed to assess the impacts
of proposed regulatory change and
Group-wide impacts
• Project teams in place to manage the
impacts of regulatory change, ensuring
required compliance is achieved and
strategic opportunities identified
• Group policies, guidance and processes
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
proves a burden on all firms,
the burden is less 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
preventing less responsible
companies from operating
freely within the marketplace
• 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
www.imperialbrandsplc.com
85
PRICING, EXCISE OR OTHER PRODUCT TAX
OUTCOMES NOT IN LINE WITH BUSINESS PLAN
ASSUMPTIONS OR EXPECTATIONS
Risk profile:
Strategic impact:
Failure to achieve planned pricing strategy could impact
achievement of objectives and targets. 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
Driving value from our broader portfolio
other consumer pressures
• Pricing pressures resulting from inflationary impact on
consumer spend, triggered by unprecedented increases in
prices for fuel, food and other commodities
• Additional expertise employed within the Revenue Growth
Management function, and additional tools developed to
better model and predict impacts of excise, inflation, and
• Continued development of EU Excise Directive
FAILURE TO MANAGE THE IMPACTS OF PRODUCT
• FDA formally proposed regulatory change in the US,
REGULATORY CHANGE
Risk profile:
Strategic impact:
impacting the use of menthol and other characterising
flavours. This US Federal ban is most likely to take longer
than the Group’s three-year risk horizon to come into effect,
however, legislation at state or county level could be
Driving value from our broader portfolio
implemented in advance of this
Regulatory change aimed at further de-normalising the
which eventually bans the sale of tobacco through
consumption of tobacco and nicotine products adversely
increasing the age at which tobacco can be purchased year
impacts the Group’s products, markets, manufacturing
on year, over a 50-year period
processes, customers, and/or consumers
• Roll-out of Track-and-Trace requirements in product supply
• Regulatory change in New Zealand creates an environment
chain continues across Africa
• Increasing maturity and complexity within NGP categories
as regulation develops with market growth, including
proposals for changes in ability to sell flavoured product.
• Wider alignment between Tobacco and NGP categories could
arise under EUTPD3 and, in general, the developing EU
regulatory landscape
PRINCIPAL RISKS AND UNCERTAINTIES continued
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT SUPPLY FAILS TO MEET MARKET
DEMANDS (STOCK ISSUES IN MARKET)
Risk profile:
Strategic impact:
Simplified and efficient operations
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 be caused by production, planning or
logistical issues, or failure to be able to produce/develop
formats aligned to consumer needs
• The Russian invasion of Ukraine impacted the Group’s
supply chain strategy. Loss of the Kyiv manufacturing site
for a prolonged period in the year resulted in the need to
switch that production capacity to alternative sites
• Significant global cost inflation, notably in non-tobacco
materials and energy, has impacted, and will continue to
impact, the cost of goods sold
• The potential for energy scarcity across Europe resulting
from disruption to, or availability of, gas supplies could
impact EU manufacturers
• Significant pressures on the Group’s logistics supply chain
have continued as a result of the impact of COVID-19 on
shipping, along with continued disruption from regional
lockdowns in China
• Continuing frequency of adverse weather globally due to
climate change potentially impacting supply chains, notably
cigar operations in our Caribbean factories and Philippines
• Track-and-Trace regulation continues to roll out across
markets, increasing compliance requirements
MAJOR INCIDENT RESULTING FROM CYBER OR
SIMILAR TECHNOLOGY RISK
Risk profile:
Strategic impact:
Simplified and efficient operations
• External environment highlights increasing risk of corporate
cyber-attacks including use of “insider” resource to carry
them out, 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.
Cyber-attack or other technology incident results in a
major system outage or denial of service. The criticality of
Group systems, notably those which are Track-and-Trace
related, has significantly increased, with key reliance on
system availability both internally and through the
supply chain
FAILURE TO IDENTIFY OR RESPOND TO CHANGES
IN CONSUMER BEHAVIOUR AND/OR
MARKET ENVIRONMENT
Risk profile:
Strategic impact:
Focusing on our priority markets
Failure to obtain or effectively respond to commercial
insights and learnings, resulting in loss of market share or
inability to capitalise on commercial opportunities
• Increased economic pressure on consumers due to
inflationary pressures and economic uncertainty across our
market footprint
• Growth in illicit trade due to widening gap between
duty-paid and non-duty-paid prices as a result of excise
impacts, notably in Europe and Australia where excise levels
are very high
• Further development of consumer insights strategy,
including investment in capabilities and tools
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Imperial Brands | Annual Report and Accounts 2022
• Loss of key manufacturing site or
• Robust demand planning process and
• Operations continue
capacity could impact the Group’s ability
supply chain management aligned to
to supply quality,
to meet short-term production demands
changing market environment
compliant products whilst
improving agility and
scalability, catering for
demand shifts and
opportunities to contain
underlying costs whilst
maintaining standards
and actions of a responsible
manufacturer
• Failure to supply markets could result in
• Material stocks (leaf and non-tobacco)
loss of short-term sales volume, with
maintained in line with assessed supply
potential loss of consumer loyalty
continuity risks, and aligned to sales
possibly impacting longer-term volumes
forecast requirements
• Failure to manage cost inflation could
• Production capacity planning includes
result in reduced margin and profitability
agreed continuity measures in the event
• Severe weather episodes could impact
of machine failure or site issue
raw material supply, manufacturing sites
• Supplier agreements, standards, and
and warehousing, potentially affecting or
practices include requirement to comply
increasing the cost of short-term supply
with Group policies and Code of Conduct
to markets
• Ongoing supplier reviews include quality,
• A lack of availability of raw materials
ESG, and continuity-related scope
could impact short-term supply
to markets
• Product quality issues could impact
• Learnings from Ukraine and COVID-19
experience to date incorporated into
strategic and operational processes
customer satisfaction, potentially
and plans
damaging brand equity and future sales
• Group has a firm commitment to act in
• Key ESG-related risks exist in raw
accordance with legal requirements
material and component supply chains.
and the principles of being
Failure to manage these risks
a responsible manufacturer
appropriately could bring litigation with
financial and reputational damage to
the Group
• 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 data could
protect business
result in regulatory breach and related
• Vulnerability scanning in place to ensure
censure, financial penalty and
ongoing threat protection
reputational damage
• External penetration testing completed
• Cyber breach could result in loss of
on an ongoing basis
sensitive corporate data, impacting
achievement of strategy, reputational
damage, significant cost to the Group or
lost competitive advantage
• Failure to respond to changes in
• Development and formalisation
• Provides opportunity to align
consumer trends could result in the
of insights approach, driving
Group’s portfolio not being aligned to
greater consistency
• 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
• Increasing capabilities and
implementation of systems and tools
• Consumer Insights for all categories
report to central team – reducing
disparity in approach and outcomes
• Data sources controlled to ensure
consistency and robustness of
information and insights
• Market impacts analysed as part of
market size calculations
• Pack collection reporting completed to
provide trend analysis of illicit impacts
• Excise and price monitoring provides
insights into possible changes in illicit
impacts through widening disparity
between the price of legitimate
and illicit product
• Industry trade groups and joint
operations with enforcement agencies
Group portfolio and product
developments, to consumer
trends and changing
market environments
• Robust data analysis
increases confidence in
achievability of expected
outcomes and optimisation
of investment choices
• Monitoring of illicit impacts,
and product flows provides
opportunity for engagement
with, and support to,
regulators to reduce the illegal
trade in tobacco products
consumer needs or demands. This could
make the Group’s products less attractive
to consumers, resulting in reduced sales
• Failure to identify changes in consumer
trends could result in lost opportunities,
notably in our NGP categories where
innovations are more prevalent
• Economic pressure on consumers could
result in reduced spend on tobacco
products and alternatives, reducing
market size
• Increases in illicit trade impact
the size of the legitimate market,
impacting sales volumes
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT SUPPLY FAILS TO MEET MARKET
DEMANDS (STOCK ISSUES IN MARKET)
Risk profile:
Strategic impact:
Simplified and efficient operations
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 be caused by production, planning or
logistical issues, or failure to be able to produce/develop
formats aligned to consumer needs
• The Russian invasion of Ukraine impacted the Group’s
supply chain strategy. Loss of the Kyiv manufacturing site
for a prolonged period in the year resulted in the need to
switch that production capacity to alternative sites
• Significant global cost inflation, notably in non-tobacco
materials and energy, has impacted, and will continue to
impact, the cost of goods sold
• The potential for energy scarcity across Europe resulting
from disruption to, or availability of, gas supplies could
impact EU manufacturers
• Significant pressures on the Group’s logistics supply chain
have continued as a result of the impact of COVID-19 on
shipping, along with continued disruption from regional
lockdowns in China
• Continuing frequency of adverse weather globally due to
climate change potentially impacting supply chains, notably
cigar operations in our Caribbean factories and Philippines
• Track-and-Trace regulation continues to roll out across
markets, increasing compliance requirements
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
Risk profile:
Strategic impact:
Simplified and efficient operations
them out, 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.
Cyber-attack or other technology incident results in a
major system outage or denial of service. The criticality of
Group systems, notably those which are Track-and-Trace
related, has significantly increased, with key reliance on
system availability both internally and through the
supply chain
FAILURE TO IDENTIFY OR RESPOND TO CHANGES
IN CONSUMER BEHAVIOUR AND/OR
MARKET ENVIRONMENT
Risk profile:
Strategic impact:
Focusing on our priority markets
are very high
• Increased economic pressure on consumers due to
inflationary pressures and economic uncertainty across our
market footprint
• Growth in illicit trade due to widening gap between
duty-paid and non-duty-paid prices as a result of excise
impacts, notably in Europe and Australia where excise levels
• Further development of consumer insights strategy,
including investment in capabilities and tools
Failure to obtain or effectively respond to commercial
insights and learnings, resulting in loss of market share or
inability to capitalise on commercial opportunities
• Loss of key manufacturing site or
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
potential loss of consumer loyalty
possibly impacting longer-term volumes
• Robust demand planning process and
supply chain management aligned to
changing market environment
• Material stocks (leaf and non-tobacco)
maintained in line with assessed supply
continuity risks, and aligned to sales
forecast requirements
• Failure to manage cost inflation could
• Production capacity planning includes
result in reduced margin and profitability
• Severe weather episodes could impact
agreed continuity measures in the event
of machine failure or site issue
raw material supply, manufacturing sites
and warehousing, potentially affecting or
increasing the cost of short-term supply
to markets
• Supplier agreements, standards, and
practices include requirement to comply
with Group policies and Code of Conduct
• Ongoing supplier reviews include quality,
• A lack of availability of raw materials
ESG, and continuity-related scope
• Operations continue
to supply quality,
compliant products whilst
improving agility and
scalability, catering for
demand shifts and
opportunities to contain
underlying costs whilst
maintaining standards
and actions of a responsible
manufacturer
could impact short-term supply
to markets
• Product quality issues could impact
customer satisfaction, potentially
damaging brand equity and future sales
• Key ESG-related risks exist in raw
material and component supply chains.
Failure to manage these risks
appropriately could bring litigation with
financial and reputational damage to
the Group
• Loss of critical systems could impact
product supply to markets or retailers
• Failure to protect personal 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
• Failure to respond to changes in
consumer trends could result in the
Group’s portfolio not being aligned to
consumer needs or demands. This could
make the Group’s products less attractive
to consumers, resulting in reduced sales
• Failure to identify changes in consumer
trends could result in lost opportunities,
notably in our NGP categories where
innovations are more prevalent
• Economic pressure on consumers could
result in reduced spend on tobacco
products and alternatives, reducing
market size
• Increases in illicit trade impact
the size of the legitimate market,
impacting sales volumes
• Learnings from Ukraine and COVID-19
experience to date incorporated into
strategic and operational processes
and plans
• Group has a firm commitment to act in
accordance with legal requirements
and the principles of being
a responsible manufacturer
• Cyber risk assessment completed
and actions implemented to further
protect business
• 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
• Development and formalisation
of insights approach, driving
greater consistency
• Increasing capabilities and
implementation of systems and tools
• Consumer Insights for all categories
report to central team – reducing
disparity in approach and outcomes
• Data sources controlled to ensure
consistency and robustness of
information and insights
• Market impacts analysed as part of
market size calculations
• Pack collection reporting completed to
provide trend analysis of illicit impacts
• Excise and price monitoring provides
insights into possible changes in illicit
impacts through widening disparity
between the price of legitimate
and illicit product
• Industry trade groups and joint
operations with enforcement agencies
• Provides opportunity to align
Group portfolio and product
developments, to consumer
trends and changing
market environments
• Robust data analysis
increases confidence in
achievability of expected
outcomes and optimisation
of investment choices
• Monitoring of illicit impacts,
and product flows provides
opportunity for engagement
with, and support to,
regulators to reduce the illegal
trade in tobacco products
www.imperialbrandsplc.com
87
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
Risk profile:
Strategic impact:
Performance-based culture and capabilities
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 remains significant, with
greater focus on integrity and assurance of reporting, and
comparison cross-industry and between sector peers
• Continued focus on ESG-related matters from investors and
external stakeholders
• Increasing 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 reporting)
• Recruitment of specialist human rights capabilities to
further improve the Group’s approach, and ensure proactive
readiness for changes in regulatory requirements
• As with all multinationals, the Group faces increasing
climatic impacts across its global footprint
• Investments in the NGP business to offer adult smokers
potentially reduced harm products continue and have been
communicated and included within the Group’s ESG agenda
FAILURE TO DEVELOP COMMERCIALLY
SUSTAINABLE NGP CATEGORIES
Risk profile:
Strategic impact:
Building a targeted NGP business
Failure to develop a portfolio of commercially sustainable,
science-based, reduced harm products, that meet
consumer needs, could impact the Group’s ability to seize
market opportunities and deliver its ESG agenda.
• Successful completion of Pulze heated tobacco pilot
launches and development of accelerated launch strategy
• Continued focus on development of the heated tobacco
portfolio and product offering
• Successful launch of updated vape product in pilot market
• Continued competitor activity in the NGP market with
growth in category size through product development and
marketing initiatives
• Failure to achieve PMTA approval in US impacted sale of
myblu product; this is currently being appealed
• Continued emergence and growth of new low-price tiers
across many markets
• Continuation of down-trading trend in which consumers
become increasingly value-driven due to inflationary
pressures on disposable income
PRODUCT PORTFOLIO AND/OR CONSUMER
INTERACTION APPROACH NOT ALIGNED TO
CONSUMER PREFERENCES
Risk profile:
Strategic impact:
Consumer at the centre of the business
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
sufficient to attract or retain customers.
88
Imperial Brands | Annual Report and Accounts 2022
• Failure to meet expectations, or to ensure
• ESG strategy, agenda and
• Positive ESG strategies and
at least parity with industry peers, may
communications, including ongoing
communications can increase
impact the Group’s reputation as a
sustainable business and adversely
affect stakeholder sentiment
and targets
development and materiality
the attractiveness of the
assessment, aligned to strategic goals
organisation to new joiners,
• Failure to comply with key ESG-related
• ESG Committee with
regulation, including environmental and
executive representation in
human rights legislation, would result in
place to provide oversight
a material impact to the Group, including,
but not limited to, financial penalties
• Investor and stakeholder presentations
ensure alignment with expectations
and increase the engagement
of existing employees
• Sustainability is a growing
factor in customer and
consumer choices across
FMCG sectors
• Reputational damage may result from
and transparency on progress
• Sustainability initiatives can
allegations, even where no wrongdoing
of Group actions
has occurred
• TCFD disclosures and related
• Employee engagement or attractiveness
actions facilitate robust reporting
reduce long-term financial
costs through greater
efficiency and reduced waste
of the Group as an employer may be
and control frameworks
• Investor and wider
adversely affected as a result of any
perception that the Group is acting in an
inappropriate manner
• Responsibility and accountability for
identification and mitigation of
ESG-related risks understood and
continues to be embedded across
the business
• Policy, training, guidance and effective
governance provided by both internal
and external subject matter experts
stakeholder sentiment is
more positive toward
companies with successful
and proven ESG strategies
and initiatives
• Failure to accurately predict or identify
• Pilot market approach implemented to
• Improved ability to meet
current and emerging consumer trends
ensure feedback and learnings captured
consumer needs and robust
could result in lost opportunities, and
and responded to in development and
consumer validation are key
lower volumes should products have
execution of heated tobacco strategy
drivers of commercial success
reduced relevance to consumers
• Dynamic consumer and market analysis
• The Group’s experience in
• Failure to align NGP portfolio to
integral to product development and
combustibles and NGP
consumer needs and expectations could
go-to-market model
result in failure to achieve NGP ambition
• Development of consumer centric
• Failure to develop NGP categories
products bringing alive the Group’s agile
could impact achievement of key
“fast-follower” strategy
ESG priorities
• Consolidated NGP category management
provides it with a strong base
to meet the needs of the
wider changing nicotine
market dynamic
approach enabling holistic view
of opportunities and informed
investment strategy
• If the Group’s product portfolio fails to
• Global Consumer Office in place with
• Facilitates the development of
meet consumer preferences, then
accountability for product/brand strategy
products and/or relevant route
reduced demand will result in lower
and initiatives
sales volumes and reduced brand equity
• Brand initiatives and
• Failure to ensure effective
opportunities continually assessed,
implementation of market or retail
and developments completed
initiatives could result in lost
opportunities, wasted investments,
and potential loss of share
• Consumer panel approach in place to
provide robust and independent
feedback processes
• Failure to act upon consumer insights
could prevent opportunities from being
• Brand monitoring, including
equity tracking
seized and impact growth
• Failure to identify intellectual property
(IP) constraints in the innovation of new
products could impact development and/
or launch, limiting the ability to respond
to competitor offerings
• Innovation processes designed to
develop consumer products based upon
robust analysis, testing and scientific
support, with cross-functional expertise
utilised in approach
• IP risks managed by subject matter
experts within the Group and external
legal support
to market and pricing
strategies that meet and drive
consumer demand
• Speed and quality of
innovation enables the
drumbeat of consumer
activation that ensures both
brand relevance and
continued brand loyalty
• Management of “local hero”
brands in markets offers
ability to realise local
opportunities and strengthen
consumer loyalties
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
Risk profile:
Strategic impact:
Performance-based culture and capabilities
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 remains significant, with
greater focus on integrity and assurance of reporting, and
comparison cross-industry and between sector peers
• Continued focus on ESG-related matters from investors and
external stakeholders
• Increasing 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 reporting)
• Recruitment of specialist human rights capabilities to
further improve the Group’s approach, and ensure proactive
readiness for changes in regulatory requirements
• As with all multinationals, the Group faces increasing
climatic impacts across its global footprint
• Investments in the NGP business to offer adult smokers
potentially reduced harm products continue and have been
communicated and included within the Group’s ESG agenda
FAILURE TO DEVELOP COMMERCIALLY
SUSTAINABLE NGP CATEGORIES
Risk profile:
Strategic impact:
Building a targeted NGP business
Failure to develop a portfolio of commercially sustainable,
science-based, reduced harm products, that meet
consumer needs, could impact the Group’s ability to seize
market opportunities and deliver its ESG agenda.
• Successful completion of Pulze heated tobacco pilot
launches and development of accelerated launch strategy
• Continued focus on development of the heated tobacco
portfolio and product offering
• Successful launch of updated vape product in pilot market
• Continued competitor activity in the NGP market with
growth in category size through product development and
marketing initiatives
• Failure to achieve PMTA approval in US impacted sale of
myblu product; this is currently being appealed
• Continued emergence and growth of new low-price tiers
across many markets
• Continuation of down-trading trend in which consumers
become increasingly value-driven due to inflationary
pressures on disposable income
PRODUCT PORTFOLIO AND/OR CONSUMER
INTERACTION APPROACH NOT ALIGNED TO
CONSUMER PREFERENCES
Risk profile:
Strategic impact:
Consumer at the centre of the business
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
sufficient to attract or retain customers.
• ESG strategy, agenda and
• Positive ESG strategies and
• Failure to meet expectations, or to ensure
at least parity with industry peers, may
impact the Group’s reputation as a
sustainable business and adversely
affect stakeholder sentiment
communications, including ongoing
development and materiality
assessment, aligned to strategic goals
and targets
• Failure to comply with key ESG-related
• ESG Committee with
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 or attractiveness
of the Group as an employer may be
adversely affected as a result of any
perception that the Group is acting in an
inappropriate manner
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
• Responsibility and accountability for
identification and mitigation of
ESG-related risks understood and
continues 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 a growing
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 is
more positive toward
companies with successful
and proven ESG strategies
and initiatives
• Failure to accurately predict or identify
current and emerging consumer trends
could result in lost opportunities, and
lower volumes should products have
reduced relevance to consumers
• Failure to align NGP portfolio to
consumer needs and expectations could
result in failure to achieve NGP ambition
• Failure to develop NGP categories
could impact achievement of key
ESG priorities
• 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, wasted investments,
and potential loss of share
• Failure to act upon consumer insights
could prevent opportunities from being
seized and impact growth
• Failure to identify intellectual property
(IP) constraints in the innovation of new
products could impact development and/
or launch, limiting the ability to respond
to competitor offerings
• Pilot market approach implemented to
• Improved ability to meet
ensure feedback and learnings captured
and responded to in development and
execution of heated tobacco strategy
• Dynamic consumer and market analysis
integral to product development and
go-to-market model
• Development of consumer centric
products bringing alive the Group’s agile
“fast-follower” strategy
• Consolidated NGP category management
approach enabling holistic view
of opportunities and informed
investment strategy
• Global Consumer Office in place with
accountability for product/brand strategy
and initiatives
• Brand initiatives and
opportunities continually assessed,
and developments completed
• Consumer panel approach in place to
provide robust and independent
feedback processes
• Brand monitoring, including
equity tracking
• Innovation processes designed to
develop consumer products based upon
robust analysis, testing and scientific
support, with cross-functional expertise
utilised in approach
• IP risks managed by subject matter
experts within the Group and external
legal support
consumer needs and robust
consumer validation are key
drivers of commercial success
• The Group’s experience in
combustibles and NGP
provides it with a strong base
to meet the needs of the
wider changing nicotine
market dynamic
• Facilitates 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
activation that ensures both
brand relevance and
continued brand loyalty
• Management of “local hero”
brands in markets offers
ability to realise local
opportunities and strengthen
consumer loyalties
www.imperialbrandsplc.com
89
PRINCIPAL RISKS AND UNCERTAINTIES continued
Principal risk
Change in year
Impact
Mitigation
Opportunity
• Consolidation of Legal, Corporate Affairs, and Governance
and Security functions facilitates consistent approach
across key engagement activities
• Recruitment of a new Chief Legal and Corporate Affairs
Officer as well as a dedicated Human Rights Manager
FAILURE TO APPROPRIATELY MANAGE
LITIGATION AND INVESTIGATIONS RESULTS IN
ADVERSE JUDGEMENTS AND/OR RELATED COSTS
Risk profile:
Strategic impact:
Simplified and efficient operations
As with other corporates, litigation and other claims are
pending against the Group. The interpretation of the law
and the related judgements made in relation to these laws
can lead to dispute or investigation and possible financial
costs or reputational damage
FAILURE TO MANAGE DIRECT/INDIRECT TAX
POSITIONS/REPORTING
Risk profile:
Strategic impact:
Focusing on our priority markets
Risk of changing tax legislation, or interpretation thereof,
resulting in higher effective tax rate, tax disputes and
related financial loss
• G7 proposal to enforce minimum levels of tax payable in the
country in which profits are generated. This is intended to
protect developing nations and potentially reduces
effectiveness of current tax planning strategies
• Increased regulatory enforcement across major markets
• Uncertain Tax Positions (UTP’s) have decreased as we have
concluded a number of tax audits
PEOPLE AND ORGANISATION
Risk profile:
Strategic impact:
Performance-based culture and capabilities
Inability to attract, retain and develop required capabilities
to achieve strategic objectives and/or provide a safe,
healthy working environment
• The Russian invasion of Ukraine has and continues to have
an impact on the welfare of our Ukraine based employees
and their families, with both Group and employee-led
initiatives having been delivered
• We have been able to continue to attract skilled and
experienced candidates into senior and key roles in an
increasingly supply-constrained job market
90
Imperial Brands | Annual Report and Accounts 2022
• Failure to comply with regulations could
• Internal and external lawyers employed,
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 mitigate the causes
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
• 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
• The reputational damage arising 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
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 employees
are expected 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
• In the event of an investigation (which
may or may not result in actions), the
Group co-operates fully with the relevant
authority and will continue to do so
wrongdoing can result in significant
management time being required,
potentially reducing focus on other
operational matters
• The reputational damage arising 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
• Local tax managers in position in
key markets
• Clear communication of delegated
authorities for tax planning purposes
• Key risk areas identified including
transfer pricing
• Matters-to-be-Reported framework in
place to best ensure appropriate
oversight of issues arising
to facilitate consumer focus and the
out across our global footprint
requirements of a business operating in
new and fast-changing categories
• Group-wide diversity, and inclusion
focus including survey and resultant
• Failure to achieve operational or
strategic objectives because of a
misalignment of skills and capabilities
action plans
• Diversity, Equity and Inclusion working
groups in place to facilitate cultural and
• Failure to ensure safe working practices,
corporate change
appropriate environment and culture,
and the required personal support to
ensure the safety and well-being of
employees and others working with
the Group
• Capability requirements evaluated on an
ongoing basis, with required actions
developed and actioned locally and at
Group level to address short- and
medium-term requirements
• Loss of life or serious injury/illness to
employees or other individuals working
• Health and safety policies, procedures,
training and monitoring in place
• Employee wellbeing support
mechanisms in place
with/for Imperial Brands
• Financial penalty, censure or
prosecution for breach of regulations
• Interruption of Group operations (notably
manufacturing) resulting from
significant incident, failure to comply
with regulations, or failure to manage
employee relations
• Failure to comply with regulations could
• Tax control framework in place and
• Optimisation of Group tax
result in investigation and the
subject to update and development
enforcement of financial penalties or
regulatory censure
• Subject matter experts employed
to develop processes and manage
• Investigation or allegations of
issues arising
liabilities in line with Group
risk appetite, supporting
compliance with
local regulations
• Organisational culture and mindset fail
• Group “Connections” programme rolled
• Increased attractiveness of
Imperial as an employer 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
well-being
• People and skills are a key
facilitator of strategy delivery,
with success enhanced by the
attraction and retention
of requisite capabilities
and mindset
• Continued promotion of safety
culture facilitating reduced
lost working time and
operational effectiveness
confirming Imperial as an
employer of choice
Principal risk
Change in year
Impact
Mitigation
Opportunity
FAILURE TO APPROPRIATELY MANAGE
LITIGATION AND INVESTIGATIONS RESULTS IN
• Consolidation of Legal, Corporate Affairs, and Governance
and Security functions facilitates consistent approach
ADVERSE JUDGEMENTS AND/OR RELATED COSTS
across key engagement activities
• Recruitment of a new Chief Legal and Corporate Affairs
Officer as well as a dedicated Human Rights Manager
Risk profile:
Strategic impact:
Simplified and efficient operations
As with other corporates, litigation and other claims are
pending against the Group. The interpretation of the law
and the related judgements made in relation to these laws
can lead to dispute or investigation and possible financial
costs or reputational damage
FAILURE TO MANAGE DIRECT/INDIRECT TAX
POSITIONS/REPORTING
Risk profile:
Strategic impact:
Focusing on our priority markets
Risk of changing tax legislation, or interpretation thereof,
resulting in higher effective tax rate, tax disputes and
related financial loss
• G7 proposal to enforce minimum levels of tax payable in the
country in which profits are generated. This is intended to
protect developing nations and potentially reduces
effectiveness of current tax planning strategies
• Increased regulatory enforcement across major markets
• Uncertain Tax Positions (UTP’s) have decreased as we have
concluded a number of tax audits
PEOPLE AND ORGANISATION
Risk profile:
Strategic impact:
Performance-based culture and capabilities
• The Russian invasion of Ukraine has and continues to have
an impact on the welfare of our Ukraine based employees
and their families, with both Group and employee-led
initiatives having been delivered
• We have been able to continue to attract skilled and
experienced candidates into senior and key roles in an
Inability to attract, retain and develop required capabilities
increasingly supply-constrained job market
to achieve strategic objectives and/or provide a safe,
healthy working environment
• Internal and external lawyers employed,
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 mitigate the 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 employees
are expected 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
• In the event of an investigation (which
may or may not result in actions), the
Group co-operates fully with the relevant
authority and will continue to do so
• Tax control framework in place and
subject to update and development
• Subject matter experts employed
to develop processes and manage
issues arising
• Local tax managers in position in
key markets
• Clear communication of delegated
authorities for tax planning purposes
• Key risk areas identified including
transfer pricing
• Matters-to-be-Reported framework in
place to best ensure appropriate
oversight of issues arising
• Group “Connections” programme rolled
out across our global footprint
• Group-wide diversity, and inclusion
focus including survey and resultant
action plans
• Diversity, Equity and Inclusion working
groups in place to facilitate cultural and
corporate change
• Capability requirements evaluated on an
ongoing basis, with required actions
developed and actioned 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
mechanisms in place
• 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
• 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
• The reputational damage arising 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
• 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
• The reputational damage arising 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
• Organisational culture and mindset fail
to facilitate consumer focus and the
requirements of a business operating in
new and fast-changing categories
• Failure 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 well-being of
employees 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, failure to comply
with regulations, or failure to manage
employee relations
• Optimisation of Group tax
liabilities in line with Group
risk appetite, supporting
compliance with
local regulations
• Increased attractiveness of
Imperial as an employer 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
well-being
• People and skills are a key
facilitator of strategy delivery,
with success enhanced by the
attraction and retention
of requisite capabilities
and mindset
• Continued promotion of safety
culture facilitating reduced
lost working time and
operational effectiveness
confirming Imperial as an
employer of choice
www.imperialbrandsplc.com
91
PRINCIPAL RISKS AND UNCERTAINTIES continued
LIQUIDITY AND GOING
CONCERN STATEMENT
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 Group recognises uncertainty of
the external environment. Given the
current macroeconomic situation, our
plans include higher than historical
inflation impact to cost of sales driven
by commodity price increases, energy
and logistic costs, as well as higher
people costs.
During the period of the COVID-19
pandemic, as well as during the
ongoing period of political uncertainty
with regard to Ukraine and Russia, the
Group effectively managed operations
across the world, and has proved it has
an established mechanism to operate
efficiently despite uncertainty. The
Directors consider that a one-off
discrete event with immediate cash
outflow would pose the greatest
potential challenge to short term
liquidity of the Group.
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 or tax payments of
c. £1 billion.
• A rapid and lasting deterioration
in the Group’s profitability due to
markets becoming closed to tobacco
products or sustained failures in our
tobacco manufacturing and supply
chains. These assumed a permanent
reduction in profitability of 15% from
1 October 2022.
• Additional impact of potential bad
debt risks arising from a recession,
of c. £220 million.
• Withdrawal of facilities that
provide receivables factoring
of c. £560 million.
The scenario planning also considered
mitigation actions including
reductions to capital expenditure
and dividend payments and share
buyback programme.
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 the worst-case scenario, where
the largest envisaged downside
scenarios all take place at the same
time, the Group would have sufficient
headroom until December 2023. 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 that could
be implemented should such a
scenario arise.
Based on its review of future cash
flows covering the period through to
March 2024, 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
specifically, have adequate resources
to meet their operational needs from
the date of this Report through to 31
March 2024, 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 2022,
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 ‘Managing risk’
section of this report on pages 82 to 83.
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
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 it has 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, it 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 2025.
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.
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Imperial Brands | Annual Report and Accounts 2022
The Group’s annual corporate planning
processes include completion of a
strategic review, preparation of a
three-year business plan and a
periodic 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:
• 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
• 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, and promotional
marketing programmes.
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 possible costs
associated with legal
and other regulatory
challenges, including
competition inquiries
and tax audits.
The maximum quantifiable impact
of all envisaged business risks,
including the impact of a loss
of market size and share and lack
of pricing.
• Pricing, excise or other product tax outcomes not in
line with planning assumptions
• Failure to manage the impacts of regulatory change.
• Product supply fails to meet market demands
• Major incident resulting from cyber or similar
The value of these combined
risks total £1.4 billion over the
three-year period under review.
A further worst-case scenario has
also been considered, modelling a
15% reduction on remaining
EBITDA after consideration of the
isolated business risks. The value
of this EBITDA modelled totals
£1.8 billion over the three-year
period under review.
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.£100m.
technology risk
• Change in consumer behaviour
• Inability to develop, execute and communicate an
effective ESG strategy in line with expectations of
relevant stakeholders
• Failure to develop a commercially sustainable harm
reduction category
• Product portfolio and/or interaction approach not
aligned to consumer preferences
• Failure to appropriately manage litigation results in
adverse judgements and/or related costs
• Failure to manage direct and indirect tax positions
and reporting
• 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 the 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). Any incremental cost would have an EBITDA impact lower than that modelled as part of the
scenario testing. In 2022 climate-related risks have been assessed as part of the quantified climate scenario analysis, concluding that during FY23-FY25 business will
be relatively unaffected by either physical or transition risks and therefore these do not represent a material risk from a viability perspective.
CONCLUSION
On the basis of this robust assessment of the principal risks facing the Group, 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 Company will be able to continue in operation and meet its liabilities as they fall due over the period
to September 2025.
www.imperialbrandsplc.com
93
GOVERNANCE
CHAIR’S INTRODUCTION
R E A D Y F O R T H E N E X T P H A S E O F
O U R S T R A T E G Y
DEAR SHAREHOLDER
I am pleased to introduce Imperial
Brands PLC’s Corporate Governance
Report for the financial year ended
30 September 2022.
The year in review
During 2022, the Board remained
focused on supporting management’s
disciplined delivery of our five-year
strategy amid continued challenges,
including rising inflation and a
growing cost-of-living squeeze. This
year our business has also been
challenged by Russia’s invasion of
Ukraine, which necessitated urgent
action to protect the long-term
interests of the Company. Our first
priority is the safety and wellbeing of
our people and their families. This
continues to be the case for our
Ukraine colleagues. On page 109, you
can find out more about how we took
into consideration the interests of our
stakeholders in addressing the
situation in Ukraine and in exiting
from Russia.
With the ending of COVID-19
restrictions, the Board has resumed
in-person meetings and engaged face
to face with our broad range of
stakeholders, including shareholders,
consumers, customers, suppliers and,
of course, our people. During the year
the Board has met in the UK, US
and Spain.
This report marks the end of the
second year of our renewed five-year
strategy. It has been a year of
consolidation, reinforcing the progress
of the previous year to ensure a stable
platform from which to move into the
next phase of our strategy. The Board
and the Executive Leadership Team
have worked hard to maintain and
build on a resilient and sustainable
governance framework, which we
believe makes us stronger and better
placed to take sound decisions in
the interests of the Company and
its stakeholders.
demonstrated in their focus on our
consumers, and their care for each
other, most vividly reflected in the
amazing £87k raised by colleagues
around the world for those affected by
the situation in Ukraine.
Purpose, vision and behaviours
Last year, we committed to oversee the
further development and embedding of
the Company’s purpose, vision and
behaviours, a key framework that
underpins the delivery of our strategy.
Responsibility sits at the heart of our
vision and this year in particular saw
developments in our approach to
ESG issues. The reconstituted ESG
Executive Committee, evolved out of
the Board’s ESG Steering Committee
that I was chairing, is in place. It is
chaired by our Chief Executive Officer
and reports directly to the Board,
which retains close oversight of this
important work.
You can read more about our purpose and
vision on page 13, our behaviours on page
23, our corporate governance framework in
the pages that follow, and our ESG
programme on pages 36 to 58.
Our people and culture
Our people remain our greatest asset.
We have been following the progress
being made in developing a
performance-based culture aligned to
our purpose, vision and behaviours. The
Board has been closely involved in the
cultural transformation journey being
led by our People and Culture team.
More details on our workforce engagement
activities can be found on page 31, and more
information about our people and culture
initiatives can be found on pages 52 to 58.
I would like to take this opportunity to
thank all our people for their
contribution to the business,
Succession planning and diversity
Our strong focus on succession
planning, as well as our firm
commitment to diversity, continue and
the commitment does not stop with the
Board. You will read in the People and
Governance Committee report on
pages 113 to 118 about the progress
we are making to address diversity
recommendations at Board and senior
management level.
It is an important feature of delivering
our strategy that our culture is
transformed and becomes performance
based. See pages 55 to 56 for a deep dive
into the progress of our Employee
Resource Groups.
Stakeholders
You will read on pages 30 to 34
about how we ensure that we consider
the views of our stakeholders
in our decision-making process.
Our engagement with stakeholders,
including our employees, provides
the Board with rich context and
background when making decisions.
I am particularly pleased with how we
addressed one of our key objectives for
the year, which was to get closer to the
consumer. Further information on our
stakeholder engagement can be found
on pages 30 to 34 and in our Section
172 statement on pages 108 to 112. Our
people, under the aegis of our the ESG
Executive Committee, have worked
hard on our ESG strategy, building on
previous years’ work and honing our
approach, which we believe now has
clarity and depth.
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Imperial Brands | Annual Report and Accounts 2022
Risk management
Regular reporting has provided the
Board and its Committees with
information to consider and use to
guide management in responding to
the events of the year, including the
ongoing COVID-19 pandemic and the
situation in Ukraine, as well as to
monitor our underlying principal risks.
These are more fully described on pages 82
to 93.
Like many companies, the Board
recognises climate change as a global
threat as well as a direct threat to the
Group’s operations. We are committed
to addressing climate change and we
were one of the first FTSE100
companies to commit to being a Net
Zero company across our global
operations and value chain by 2040.
For more information on our sustainability
initiatives and our first stand-alone report
aligned to the requirements of the Task
Force on Climate-related Financial
Disclosures, see pages 59 to 65.
Shareholder engagement
Our Chief Executive Officer, Chief
Financial Officer, and I have met virtually
and in person with shareholders
throughout the year. In addition to
hearing about our strategy, purpose
and vision, shareholders have been
interested in our ESG initiatives and
our approach to creating a culture and
environment within which our people
will perform best to support our strategy.
As I mentioned earlier, our investor
perception survey suggests they are
supportive of these initiatives. You can
find further detail on our investor
engagement on page 107.
Changes to the Board
In November 2021, we welcomed Ngozi
Edozien and Diane de Saint Victor as
independent Non-Executive Directors.
Their appointments enhance the
breadth of experience and diversity of
views we have on the Board.
Following the Annual General Meeting
on 2 February 2022, Steven Stanbrook
retired as a Non-Executive Director.
I would like to thank Steven for
six years’ valuable service to the
Company. He was a highly engaged
member of the Board, including in his
role as Workforce Engagement Director.
Read about all our Board’s skills and
experience on pages 96 to 100.
Board effectiveness
To ensure the Board and its
Committees continue to work
effectively, the Board has undertaken
an internal review of its performance.
The outcome of this year’s evaluation
concludes that the Board continues to
operate effectively. Details of this year’s
evaluation, and the significant progress
made against last year’s actions can be
found on pages 116 to 118.
1. BOARD LEADERSHIP AND
COMPANY PURPOSE
2. DIVISION OF
RESPONSIBILITIES
The Company is led by an effective
and determined Board, focused on
the long-term sustainable success
of the Company, generating value
for shareholders and stakeholders,
and contributing to wider society.
The Chair and the Chief Executive
Officer have clearly defined and
separate responsibilities, and there
is an appropriate combination of
Executive and independent
Non-Executive Directors.
Read more on pages 13 and 96 to 99.
Read more on page 102.
3. COMPOSITION, SUCCESSION
AND EVALUATION
4. AUDIT, RISK MANAGEMENT
AND INTERNAL CONTROL
Appointments are subject to a
formal, rigorous and transparent
procedure. Succession plans,
designed to promote diversity
of gender, social and ethnic
backgrounds and cognitive and
personal strengths, are in place for
the Board and senior management.
An evaluation of the Board and
its Committees is undertaken
annually, in line with the Code.
Read more on pages 113 to 118.
Formal, transparent policies and
procedures are in place to ensure
the independence and
effectiveness of the internal and
external audit functions and the
integrity of financial and narrative
statements, and to manage and
mitigate risks.
94
96
100
STRUCTURE AND CONTENT
OF THE GOVERNANCE
REPORT
Chair’s introduction
Board Leadership
Compliance statement
Role and purpose of the
Board and its Committees
Governance framework
Board in action
Board engagement with
stakeholders
People and Governance
Committee report
Audit Committee report
Remuneration Committee
report
Directors’ report
Directors’ statement
101
101
104
130
149
155
113
119
108
Looking forward
The progress we have made this year
has provided us with a sound platform
from which to look forward with
confidence to the next phase of
our strategy.
The 2023 Annual General Meeting will
be held on 1 February 2023. Further
details can be found in the Notice of
Annual General Meeting sent to
shareholders and made available on
the Company’s website. I look forward
to meeting many of you then.
Thérèse Esperdy
Chair
5. REMUNERATION
The Company has remuneration
policies and practices designed to
support its strategy and promote
long-term sustainable success.
Executive remuneration is aligned
to the Company’s purpose and
vision, and is clearly linked to the
delivery of the Company’s long-
term strategy.
Read more on pages 119 to 129.
Read more on pages 130 to 148.
www.imperialbrandsplc.com
95
GOVERNANCE CHAIR’S INTRODUCTION continued
GOVERNANCE BOARD LEADERSHIP
1
4
2
5
A
S
D
I
K
I
L
3
V
L
E
E
D
R
A
S
N
6
E
D
Committee membership
P People & Governance Committee
A Audit Committee
B
R Remuneration Committee
O
A
Committee Chair
1. Public listed company.
2. Private organisation.
R
D
Find out more at www.imperialbrandsplc.
com/about-us/leadership-team
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Imperial Brands | Annual Report and Accounts 2022
Skills and Competencies
With a PhD in marketing and
significant exposure to multiple
consumer sectors in large
multinational organisations, Stefan
brings excellent brand-building and
consumer-led sales and marketing
experience to Imperial, notably in
other “challenger” businesses (Burger
King and Bacardi).
External Appointments
• Non-Executive Director of Compass
Group PLC1.
3. Lukas Paravicini
Chief Financial Officer
Appointment
Appointed May 2021.
Career and Experience
Lukas has a proven track record in
multinational consumer goods
companies around the world. He
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.
Skills and Competencies
Lukas brings to Imperial broad
financial and operational experience
in consumer goods companies, and
expertise in driving transformational
change, including implementing
global shared services in large
international organisations.
External Appointments
• None.
4. Sue Clark
Senior Independent Director A P R
Appointment
Appointed Non-Executive Director in
December 2018, Chair of the
Remuneration Committee in February
2019 and Senior Independent Director
in January 2020.
BOARD OF DIRECTORS
1. Thérèse Esperdy
Chair R P
Appointment
Joined the Board in July 2016, serving
as Senior Independent Director from
May 2019 and appointed Chair in
January 2020.
Career 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.
Skills and Competencies
Thérèse brings to Imperial her
excellent international leadership
experience from serving on boards of
both US and UK listed companies. She
brings to bear her astute
understanding of our business, the
sector we operate in and the concerns
of our investors.
External Appointments
• Non-Executive Director, Senior
Independent Director and Chair of
the Finance Committee of National
Grid Plc1.
• Non-Executive Director of Moody’s
Corporation1.
2. Stefan Bomhard
Chief Executive Officer
Appointment
Appointed in July 2020.
Career and Experience
Stefan joined Imperial 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 Inchcape, Stefan was
President of Bacardi Limited’s
European region and was also
responsible for Bacardi’s Global
commercial organisation and Global
Travel Retail. 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.
Career 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.
Skills and Competencies
With a background in corporate and
regulatory affairs, Sue brings to
Imperial international experience in
FMCG and regulated businesses and
major corporate transactions, as well
as expertise in governmental and
regulatory relations. Sue is a
passionate advocate for the
contribution business can make to
wider society, which brings valuable
insight to Imperial’s ESG ambitions.
External Appointments
• Non-Executive Director, Chair of the
Remuneration Committee and
member of the Nominations
Committee of Britvic plc1.
• Non-Executive Director and member
of the Audit, Nominations and
Remuneration Committees of
Mondi plc1.
• Non-Executive Director of Tulchan
Communications LLP2, a leading
advisory firm.
5. Diane de Saint Victor
Non-Executive Director P R
Appointment
Appointed November 2021.
Career and Experience
Diane has strong legal, regulatory,
M&A, business alliance and ESG
experience, having held a number of
General Counsel, Company Secretary
and other key roles in an international
career. She spent 13 years on the
Executive Committee, as General
Counsel & Company Secretary, of ABB,
the global technology company. Prior
to joining ABB, she served as a Senior
Vice President and General Counsel of
Airbus Group from 2004 to 2006 and
from 2003 to 2004 as a Vice President
and General Counsel at SCA Hygiene
Products. She spent a decade working
at Honeywell, ultimately holding the
post of Vice President and General
Counsel International.
www.imperialbrandsplc.com
97
GOVERNANCE BOARD LEADERSHIP continued
Skills and Competencies
Diane brings over 30 years’ experience
of broad international legal, governance
and regulatory expertise gained from
a range of senior executive and
non-executive positions in multinational
organisations, as well as experience of
transforming organisations in sectors
undergoing change.
External Appointments
• Non-Executive Director of
Natixis, SA2.
• Non-Executive Director and member
of the Audit and HSES Committees,
of Transocean Ltd1.
• Non-Executive Director of C&A2.
6. Ngozi Edozien
Non-Executive Director A P
Appointment
Appointed November 2021.
Career and Experience
Ngozi has over 25 years’ experience in
finance/private equity, general
management and strategy/business
development functions with
multinational companies in Europe,
the US and Africa. She joined
McKinsey & Company in 1992, leaving
in 1999 to join Pfizer Inc. as Vice
President, Pfizer Global
Pharmaceuticals (PGP) Strategic
Planning and Business Development, a
position she held until her
appointment in January 2005 as the
Regional Director, PGP East, Central
and Anglophone West Africa. She
served as Head of West Africa for Actis
LLP from 2009 until 2014. She spent six
years on the Board of PZ Cussons and
four years on the Board of Vlisco PLC.
Skills and Competencies
Ngozi brings to Imperial over 30 years’
experience in general management,
finance, strategy, business
development and transformation
gained at multinational companies,
including in regulated consumer
goods, in Europe, the US and Africa.
External appointments
• Non-Executive Director and member
of the Finance and Risk Committee
of Guinness Nigeria, a listed
subsidiary of Diageo1.
• Non-Executive Director of Stanbic
IBTC Holdings PLC1.
• Non-Executive Director of
Barloworld Ltd1.
7. Alan Johnson
Non-Executive Director A P
Appointment
Appointed in January 2021.
8. Bob Kunze-Concewitz
Non-Executive Director P R
Appointment
Appointed November 2020.
Career and Experience
Alan has a strong financial
background in consumer goods and
retail, having held a number of senior
finance positions at Unilever in Africa,
Europe and Latin America 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 of Jerónimo Martins SGPS,
S.A., a food retailer with operations in
Portugal, Poland, and Colombia, until
April 2016, and retains a role as the
independent chairman of the
company’s Internal Control
Committee. Between July 2018 and
September 2020 he was a Non-
Executive Director of the UK
Department for International
Development (DFID) and chaired its
Audit & Risk Assurance Committee.
Skills and Competencies
As well as his financial acumen and
international experience across
mature and developing markets, Alan
brings to Imperial experience of risk
management and successfully
managing business transformations,
lending further strength to the Board’s
governance and effectiveness.
External appointments
• President and Chair of the Board of
the International Federation of
Accountants2.
• Member of the Board and Chair of
the Audit Committee of the
International Valuation Standards
Council2.
• Non-Executive Director of William
Grant & Sons Ltd2.
• Non-Executive Director of
DS Smith plc1.
Career and Experience
Bob is an experienced marketing
professional and has held a number
of senior roles at leading FMCG
companies. He was appointed Chief
Executive Officer of Campari Group,
a major player in the global spirits
industry, in May 2007 having joined
the business in 2005 as Group
Marketing Director. Bob previously
held positions of increasing
responsibility and global reach at
Procter & Gamble, including Global
Prestige Products Corporate
Marketing Director.
Skills and Competencies
With a strong track record of
successfully executing brand and
marketing strategies at the most
senior level, Bob brings to Imperial
international brand experience and a
profound understanding of delivering
for the consumer.
External appointments
• Chief Executive Officer of
Campari Group1.
• Non-Executive Director of Luigi
Lavazza S.p.A.2
9. Simon Langelier
Non-Executive Director A P
Appointment
Appointed June 2017.
Career 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, the
Middle East and Africa. In addition, he
was President of their Next Generation
Products & Adjacent Businesses.
Simon was also Chairman for almost
six years of PharmaCielo Limited,
a Canadian-based supplier of
medicinal-grade cannabis oil
extracts and related products.
Skills and Competencies
As well as a deep understanding of the
tobacco industry, Simon brings to
Imperial knowledge and experience of
its NGP agenda.
External appointments
• Non-Executive Director of CryoMass
Technologies Inc.1
98
Imperial Brands | Annual Report and Accounts 2022
9
7
10
11
10. Jon Stanton
Non-Executive Director A P R
Appointment
Appointed May 2019.
Career 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, where he led
global board-level relationships. Jon is
a Chartered Accountant and a member
of the Institute of Chartered
Accountants in England and Wales.
Skills and Competencies
Jon brings a breadth of experience,
with a first-class international
business track record, including
significant US exposure, as well as
investor relations experience and the
financial acuity to challenge
constructively at the Board and its
Committees.
External appointments
• Chief Executive of
The Weir Group PLC1.
11. John Downing
Company Secretary
Appointment
Appointed June 2012. Secretary to the
Board and each of the Board
Committees.
Career and Experience
John, a qualified solicitor, joined
Imperial in 2005 having previously
8
Committee membership
P People & Governance Committee
A Audit Committee
R Remuneration Committee
Committee Chair
1. Public listed company.
2. Private organisation.
worked for the law firm Linklaters.
He has had a number of senior legal
roles in Imperial, including playing
a leading role in the acquisition of
the Altadis business, 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 has responsibility for the Group’s
governance, security, anti-illicit trade
and information security functions.
www.imperialbrandsplc.com
99
GOVERNANCE BOARD LEADERSHIP continued
BOARD LEADERSHIP
BOARD LEADERSHIP
Early in the year, we strengthened the depth and breadth of capability and experience on our Board and in our Executive
Leadership Team. The enhanced combination of skills and competencies sets up Imperial for delivering the next phase of
our five-year strategy.
Leadership Skills Matrix
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Non-Executive Directors
Thérèse Esperdy (Chair)
Sue Clark (SID)
Diane de Saint Victor **
Ngozi Edozien **
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Steven Stanbrook *
Jon Stanton
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
* Until 2 February 2022 at the end of the AGM
** Ngozi Edozien and Diane de Saint Victor appointed 15 November 2021
COMPLIANCE STATEMENT
It is the Board’s view that for the
financial year ended 30 September
2022, the Company has complied with
all the requirements of the UK
Corporate Governance Code 2018
(the Code).
The Company’s auditor, EY LLP, is
required to review whether the above
statement reflects the Company’s
compliance with the provisions of the
Code specified for its review by the UK
Listing Authority’s Rules (UKLA) and
to report if it does not reflect such
compliance. No such report has
been made.
Our Commitment to Corporate
Governance
The Board is committed to the high
standards of corporate governance set
out in the Code. The Code can be found
at https://www.frc.org.uk/directors/
corporate-governance-and-
stewardship/uk-corporate-
governance-code.
This Corporate Governance Report,
together with the Directors’
Remuneration Report set out on
pages 130 to 148, describe how the
Board has applied the main principles
of good corporate governance and
complied with the relevant provisions
as set out in the Code for the year
under review.
The Directors’ Report also contains
information required to be disclosed
under the UKLA Rules and under
the Disclosure Guidance and
Transparency Rules (DTR). To the
extent necessary, certain information
has been incorporated into this Report
by reference.
Throughout the Corporate Governance
Report and Directors’ Report, we have
set out how we apply the main
principles and complied with the
relevant provisions of the Code.
100
Imperial Brands | Annual Report and Accounts 2022
THE ROLE AND PURPOSE OF THE BOARD AND ITS COMMITTEES
FOCUS IN 2022
• The wellbeing of our people
and continuing business stability
during the ongoing COVID-19
pandemic, as well as the Russia/
Ukraine conflict.
• Board succession and diversity.
• Further development and
embedding of our renewed culture
and purpose.
• Delivery against our strategy.
• Our NGP strategy.
• Our ESG strategy.
LOOKING AHEAD TO 2023
• The wellbeing of our people,
particularly in Ukraine, as well as
those impacted by the cost-of-living
crisis.
• Delivery in our first year of Phase 2
of our strategy, particularly given
geopolitical and macro-economic
factors.
• Our NGP agenda, as we move into an
accelerated roll-out phase.
• The embedding of our cultural
transformation.
• Our ESG agenda.
Board and Committee membership as at 30 September 2022
Board
Audit
Committee
Remuneration
Committee
People &
Governance
Committee
Non-Executive
Directors
Thérèse Esperdy (Chair)
2
1, 2
2
2
Sue Clark (SID)
Diane de Saint Victor
Ngozi Edozien
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Jon Stanton
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
1. Unless dealing with the succession of the Chair.
2. Denotes Chair
Executive Directors are invited to attend when appropriate.
John Downing is Secretary to the Board and each of the Board Committees.
Ngozi Edozien and Diane de Saint Victor appointed 15 November 2021.
GOVERNANCE FRAMEWORK
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 specific
tasks to its Committees. Each of these
Committees has specific written terms
of reference issued by the Board,
adopted by the respective Committee
and published on our website. 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. Minutes of Committee
meetings are circulated to all
Board members.
To ensure Directors are kept up to date
on developments and to enhance the
overall effectiveness of the Board, the
Board Chair and Committee chairs
communicate regularly with the Chief
Executive Officer and the Chief
Financial Officer. Where appropriate
the Board convenes virtually outside
of scheduled meetings to consider
time-sensitive matters.
The Board is responsible to
shareholders and stakeholders for
approving the strategy of the Group,
for overseeing the performance of the
Group and evaluating and monitoring
the management of risk in a manner
that is most likely to promote the
Company’s long-term success.
As part of the governance framework,
the Board has adopted a schedule of
matters on which it must take the final
decision. These include approving the
Group’s strategy, business plans,
dividend, major financial
announcements, and acquisitions
and disposals exceeding
defined thresholds.
Each member of the Board has access,
collectively and individually, to the
Company Secretary and is also
entitled to obtain independent
professional advice at the Company’s
expense, should they decide it is
necessary in order to fulfil their
responsibilities as Directors.
www.imperialbrandsplc.com
101
GOVERNANCE BOARD LEADERSHIP continued
BOARD ROLES AND COMPOSITION
While the Board shares collective responsibility for its activities, some roles have been
defined in greater depth below.
Chair
Leads the Board and creates an
environment that ensures there
are strong links between the Board,
management and stakeholders.
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 other Directors
should they have any concerns not
appropriate to raise with the Chair.
Chief Executive Officer
With the CFO, has day-to-day
management responsibility for the
Group and for implementing
the Group’s strategy.
Chief Financial Officer
Supports the CEO in implementing
strategy and overseeing the finances,
operations and development of
the Group.
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 the Executive
Directors.
Company Secretary
Provides independent advice to
the Board on matters of corporate
governance and supports the Chair
and the Non-Executive Directors.
Is responsible for ensuring good
governance practices at Board level
and throughout the Group.
BOARD COMMITTEES
The Board delegates certain matters, listed below, to Board Committees, consisting of members of the Board.
For further details, see the table of Board and Committee membership at 30 September 2022 on page 103.
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 processes, and the Group Internal Audit
department. The Committee’s responsibilities also include
ensuring the integrity of the Group’s financial statements
and related announcements.
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.
This Committee is chaired by Sue Clark.
This Committee is chaired by Jon Stanton.
See page 130.
Ad hoc committees
Ad hoc committees may be established to review and
approve specific matters or projects. For example, this year
an ad hoc sub-committee of the Board was established to
consider the Company’s approach in respect of the
Ukraine crisis.
See page 119.
People and Governance 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
Executive Leadership Team (ELT) members together with
the Company’s wider organisational structure, its diversity,
equity and inclusion agenda, and its talent management
processes. Oversees workforce engagement and culture.
Reviews and develops the Board’s corporate governance
framework, including the Board performance
evaluation process.
This Committee is chaired by Thérèse Esperdy.
See page 113.
EXECUTIVE LEADERSHIP TEAM
The Board delegates responsibility for developing and implementing strategy, and for the day-to-day running of the
business, to Stefan Bomhard, Chief Executive Officer, who is assisted in his role by the Executive Leadership Team (ELT)
comprising the members listed on page 9.
The ELT is responsible for overseeing the operational execution and delivery of our strategic and financial plans. This
includes: business performance management; transformation and cultural change initiatives; talent, capability and
succession; major investments, divestment and capital expenditure proposals; business development considerations; ESG
initiatives; and risk assessment and management.
For further details, see page 9.
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Imperial Brands | Annual Report and Accounts 2022
The Board delegates certain matters, as follows, to management committees consisting of senior executives:
OTHER NON-BOARD COMMITTEES
Treasury Committee
(reporting to the Audit Committee)
Disclosure Committee
(reporting to the Board)
This Committee reviews and approves material banking
and treasury matters, providing second line of defence
oversight of treasury-related risks.
Approves the release of communications to investors
and the London Stock Exchange. Reviews whether
communications are inside information.
This Committee is chaired by the Chief Financial Officer.
This Committee is chaired by the Company Secretary.
ESG Steering Committee
(reporting to the People and Governance Committee, the
Audit Committee and the Remuneration Committee as well
as the Board)
As highlighted in our last Annual Report, with the new ELT
in place, it was appropriate to reconstitute this Committee
with delegated responsibility to management, and so this
was done this financial year.
The purpose of this Committee is to define the Company’s
strategy relating to ESG and to provide oversight of its ESG
programme, which is designed to assist in promoting the
long-term sustainable success of the Company.
This Committee is chaired by the Chief Executive Officer.
Risk Committee
(reporting to the Board and Audit Committee)
This Committee oversees and manages enterprise-wide risk by
ensuring that the Group Risk Register remains relevant on an
ongoing basis, reflecting the Group’s risk appetite against those
identified risks, and providing perspectives on the risks raised
whilst also establishing the most effective presentation of risks
for ELT and Board review.
In addition, the Committee oversees and, where necessary,
directs the effective design and operation of the Group’s
governance, risk management and internal control framework.
This Committee is chaired by the Chief Executive Officer.
Group Pensions Committee
(reporting to the Audit Committee and the Remuneration
Committee)
This Committee has been established to provide global oversight
on both risk and reward elements of the Group’s pension
arrangements, which were historically dealt with locally.
The Committee’s objectives include tackling the risks inherent
in the Group’s defined benefit pension schemes as well as
reward matters.
This Committee is chaired by the Chief Financial Officer.
BOARD PROGRAMME IN 2022
How the Board discharged its responsibilities in 2022
In addition to the seven scheduled Board meetings, the Board also met virtually a number of times, including during March
and April 2022 to consider and make a decision in response to Russia’s invasion of Ukraine.
Attendance at meetings of the Board, Board Committees and AGM
Name/Meeting
1
11/21
2
02/22
3
03/22
4
05/22
5
06/22
6
08/22
7
09/22
AGM1
n/a
n/a
Non-Executive Directors
Thérèse Esperdy (Chair)
Sue Clark (SID)
Diane de Saint Victor 2
Ngozi Edozien 2
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Steven Stanbrook 3
Jon Stanton4
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
n/a
n/a
n/a
n/a
n/a
Notes:
1. In light of a rise in COVID-19 following the emergence of the Omicron strain, the Board decided that it was in the best interests of the Company to limit the number
of Directors attending the AGM in person.
2. Appointed 15 November 2021.
3. Retired 2 February 2022 following the conclusion of the 2022 Annual General Meeting.
4. Jon Stanton was unable to attend one meeting due to a prior personal commitment.
Note: n/a signifies not eligible to attend.
Standard agenda items include strategy development and implementation, business performance and general corporate
housekeeping. These are supplemented by updates, deep dives, special reports and matters brought to the Board for decision.
www.imperialbrandsplc.com
103
GOVERNANCE BOARD LEADERSHIP continued
BOARD IN ACTION
We focused on the following in 2022:
The wellbeing of our people and our
continuing business stability during the
COVID-19 pandemic
Delivery against our renewed strategy
COVID-19 continued to impact Imperial,
its people and its business. As a Board,
we remained vigilant and ready to
respond to the ongoing challenges
of the global pandemic.
See opposite for an in-depth study of how
we monitored the wellbeing of our people
and ensured the stability of the business.
In this second year of our five-year strategy,
building secure foundations in preparation
for the acceleration phase, the Board
maintained its focus on delivery.
See page 106 for an in-depth study of the
Board’s considerations in the context of
some of the strategic pillars and
critical enablers.
Stakeholders engaged: employees, suppliers,
customers, investors
Stakeholders engaged: employees,
consumers, suppliers, customers, investors,
regulators
S172 factors: a, b, c, d, e, f
S172 factors: a, b, c, d, e, f
See page 108 for definitions of S172 factors.
Board succession and diversity
Further development and embedding of our
renewed culture and purpose
During 2022 we strengthened the Board, and
in doing so addressed succession planning
and diversity. In addition, succession
planning for the ELT was a focus during the
year. Nonetheless, succession planning is an
ongoing requirement and diversity is an
area where continuous improvement is an
absolute necessity – this is acknowledged
and has been codified in the People and
Governance Committee’s terms of reference,
which were amended and approved at the
People and Governance Committee’s
September meeting.
For further information, please see the
People and Governance Committee report at
pages 113 to 118.
As highlighted in the Transforming our
culture section on pages 22 & 23, as well
as the People and Governance Committee
report, the Board takes a keen interest in the
cultural transformation that the organisation
is undertaking. In addition to regular updates
to both the full Board, and the People and
Governance Committee, the Board has
undertaken a number of “Meet the Board”
sessions: in November (Bristol), February
(Bristol), March (Spain), June (US),
and September (London).
Find details on pages 107, 113, and 133.
Stakeholders engaged: employees, investors Stakeholders engaged: employees, investors
S172 factors: a, b, c, d, e, f
S172 factors: a, b, c, d, e, f
Non-Executive
Director Ngozi
Edozien during a
visit to a trade
customer in the US
104
Imperial Brands | Annual Report and Accounts 2022
IN-DEPTH STUDY:
The wellbeing of our people and our continuing business stability
during the COVID-19 pandemic
It is easily forgotten how the first half of our financial year
continued to be impacted by COVID-19. The Board was kept
informed of the impact of the pandemic on our people and on
the business on at least a monthly basis.
The November 2021 meeting noted that whilst the trend in
positive tests was largely stable, some markets were showing
renewed spikes (for example Russia, UK and Ukraine), and
others were experiencing refreshed lockdown challenges (for
example Laos, forcing the temporary closure of the factory
there). In addition, challenges were being experienced in
Global Supply Chain (GSC), particularly with non-tobacco
materials (NTMs), where there was a significant watch-out
on price pressures, commodity shortages and logistics. GSC
confirmed that the situation could be managed successfully.
By the time of the February meeting, the Omicron variant
appeared to be responsible for a rise in cases across the
business, with the biggest spikes in the US, Spain and UK.
Whilst these cases amongst our employees appeared to have
a lower health impact and cause less business disruption to
the business than earlier variants, steps continued to be
taken to ensure our people were fully looked after, including
continuous improvement steps to reinforce segregation in
factories to avoid the risk of cross-infection.
Even at the March Board meeting, weekly infection numbers
were still higher, but with no further hospitalisations since
the last update in early February. The Board noted the
ongoing challenge of absenteeism for the factories, in
particular with the Europe region seeing rates of up to 15%.
Nonetheless, our factories continued to manage through this,
maintaining a zero out-of-stock standard. Likewise, the
supply chain situation remained unchanged, with the
business again managing through the logistics challenges
and supplier pressures.
After over two years, management took the decision at the
start of April to cancel its weekly Group COVID-19 calls and to
consider absenteeism and any discernible COVID-19-related
supply chain impacts within the wider context of performance
management. As such, the Board was also updated on the
wellbeing of our people and our continuing business stability
pursuant to the COVID-19 pandemic in that wider context.
During our regular investor meetings we provided updates
on how we were managing COVID-19-related challenges to
our business.
Having been fully updated on a very regular basis throughout,
the Board remains proud of the Company’s response to the
pandemic, with our employees also acknowledging that
response as a defining feature of the Group’s positive attitude
towards the wellbeing of our people.
BOARD ACTIVITIES 2021/22
The topics covered by the Board in its meetings during the financial year are detailed below:
Meeting
Focus area
Discussion points/Decisions made
November 2021
(Bristol, UK)
• FY21 Performance
• ESG
• Approval of the full year announcement, the year-end results presentation and the
Annual Report and Accounts.
• Review of work on our renewed ESG strategy, including approval of the terms of
reference for the reconstituted ESG Committee.
February 2022
(Bristol, UK)
March 2022
(Madrid, Spain)
May 2022
(London, UK)
• Performance
• Russia/Ukraine
• ESG
• NGP Strategic Review
• Cyber security
• Q1 performance update, including ongoing COVID-19 challenges, contingency planning
in respect of the escalating situation in Ukraine, and the growing inflation cost challenge.
• Endorsement of the Group’s ESG strategy.
• Brand experience, consumer immersion and deep dive into the NGP strategy one year on
from the announcement of the Group strategy.
• Update on the Group’s cyber security posture, including its response preparedness in the
event of a cyber attack.
• Priority markets (Spain)
• Russia / Ukraine
• Risk
• Performance update overall, but with an emphasis on Spain, including management
discussions, consumer immersion, employee engagement, store visits and an update
from Logista’s CEO.
• Assessment of the Ukraine crisis and actions being, and to be, taken.
• Risk assessment update.
• Performance
• Inflation update
• Digital Transformation
• ESG
• Half year performance and announcement, with an update and assessment of the
business being on track with the implementation of its strategy, including the NGP pilots
and progress on the cultural transformation.
• Discussion with the Chief Supply Chain Officer on inflationary pressures and actions to
mitigate the impact of these.
• Investment case for a single digital technology core enterprise resource planning (ERP)
system.
• A review of the ESG landscape.
June 2022
(Greensboro, US)
• Priority markets (US)
• NGP strategy
• Performance update overall, but with an emphasis on the US, including management
discussions, factory visit, leaf education session, consumer immersion, employee
engagement and store visits.
• Focus on the US NGP market, including the legal and regulatory environment.
August 2022
(virtual, via Teams)
• Performance
• Regulatory affairs
• Q3 update, including inflation management, manufacturing capacity (COVID-19
absenteeism, the exit from Russia and the relocation of Kyiv factory production).
September 2022
(London, UK)
• Performance
• Business Plan
• Risk
• Investor audit
• Regulation horizon scanning and strategy.
• Performance update, including inflation tracker.
• Discussion and approval of the FY23 business plan.
• Board risk assessment, including risk appetite.
• Investor feedback discussion.
www.imperialbrandsplc.com
105
GOVERNANCE BOARD LEADERSHIP continued
IN-DEPTH STUDY: DELIVERY AGAINST OUR
RENEWED STRATEGY
As can be seen from the summary of key items discussed at
the various Board meetings over the year, the Board has
maintained its focus on delivery against the strategy, with
this being the second year of building foundations in
preparation for the acceleration phase for years three to
five.
The Board looks at delivery, performance and improvement
in the context of the Group’s strategic pillars and critical
enablers, about which you will read elsewhere. By way of
example, the Board’s activities in 2022 included the
following consideration in respect of key elements of
the strategy:
Focusing on our priority markets
The Board looks in detail at the performance of each
priority market as part of the monthly performance
reporting and/or in the business review at each meeting.
In addition, in March and June the Board visited two of the
five priority markets, Spain and the US. In each review,
discussions centred on overall strategy (including people
and culture and must-win battles, as well as combustibles
and NGP), consumers, portfolio management (including
“local jewel” brands), route to market, market share,
regulation and competitors.
Building a targeted NGP business
Our Chief Consumer Officer presented to the Board in
February on the NGP strategy one year on from the launch
of the Group strategy, outlining the renewed analysis of
the NGP landscape that had been undertaken, together
with data-points and learnings from the ongoing NGP
pilots in Europe and US. The Board endorsed the strategy
and approach, noting that with an improved product,
focused execution, and clear and differentiated target
consumer, Imperial can expect to start to build up its NGP
share position. Learnings from the pilots have provided a
clearer view of the challenges and the investments
required to deliver on our NGP ambition. Taking into
account the investment and project spend required to
support a step-up in innovation and consumer investment,
the Board approved the necessary investment, including
the incremental investment behind the NGP strategy, as
part of the FY23 business plan at the September Board
meeting. For more information on the Board’s decision,
refer to Stakeholder engagement on pages 30 to 34.
As mentioned above, the Board continues to be informed
of, and discuss, the NGP strategy and performance,
including market-specific considerations during its visits
to Spain and the US.
Building a targeted NGP business is also a key part of the
Group’s ESG strategy in relation to consumer health. As set
out above and on pages 36 to 58, ESG has been a focus area
for the Board, with the overall ESG strategy being endorsed
at the February Board meeting. In addition, and following
engagement with investors, as set out in the Directors’
Remuneration Report on page 132, we have included a
consumer health metric into the annual bonus metrics.
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Imperial Brands | Annual Report and Accounts 2022
Consumer at the centre of the business
The Board has focused on this key enabler to the strategy
by overseeing the strengthening of critical capabilities
required to deliver it, including with the building of the
Chief Consumer Office. The consumer has been noticeably
“present” in the Board room, both through regular updates
and discussions on key aspects of bringing the consumer
to the centre of the business, and by Board members
participating in three consumer immersion events at the
February (Bristol), March (Spain), and June (US) Board
meetings. The Board also participated in store visits in
March, June and November.
Simplified and efficient operations
As set out on page 24, a key enabler of our strategy is to
simplify the organisation through global processes
underpinned by technology.
With the need to replace end of life fragmented enterprise
resource planning (ERP) systems, the opportunity to do so
in a way that delivers better standardisation and
integration was acknowledged by the Board. Building on
the Central Finance (CFin) investment, the intention is
therefore to create a standard core ERP with master data
integrity and business platforms supporting all markets
and factories, on which other applications can be built as
the business evolves. The investment case for this single
digital technology core ERP was discussed and approved
at the May Board meeting, with the Board recognising that
the significant multi-year investment will be a key enabler
of the strategy and associated key business objectives.
Details of how the Board took stakeholders into account in
making its decision can be found on page 110.
Driving value from our broader market portfolio
As set out on page 17, our strategy proposed a more
rigorous approach to driving value from the breadth of our
full market portfolio.
The strategy is focused on strengthening our regional and
cluster structures, ensuring each of our markets is
allocated the appropriate investment while managing our
smaller markets to ensure they have the agility they need
to spot trends and capitalise on emerging growth
opportunities.
The Board was kept up to date with progress during the
year, including discussions at its May meeting relating to
the creation of a product innovations team and work
reviewing the positioning of the right brands at the right
price point across a number of markets.
Performance-based culture and capabilities
As set out on page 23, the Board approved the launch of
“Connections”, our new purpose, vision and behaviours to
all of our employees globally.
At its June meeting the Board received a progress report
on culture and capabilities. A further update relating to the
interaction of talent, capability and culture with the
transformation of the operating model was provided to the
Board in September.
Engagement with Investors
We value the support and engagement of our equity and
debt investors and understand the importance of this to our
ability to access capital. 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. Over the course of 2022
our teams held around 650 meetings with investors and
research analysts through the following:
• results presentations and trading updates;
• CEO and CFO participation at investment banking
conferences;
• investor roadshows in the UK, North America, Asia, with
private client brokers and wealth managers and with debt
investors in support of US dollar bond issue;
• two webinars: “Gaining traction in the US market” and
“Our refreshed ESG agenda”;
• our AGM, providing an opportunity for the Board to meet
with shareholders, particularly our retail investors;
• shareholder engagement on our proposed ESG metrics
into FY23 executive remuneration; and
• ad hoc meetings at the investors’ request.
To monitor the effectiveness of this engagement, the Board
commissioned an investor perception study during 2022 to
gather feedback from investors and non-shareholders.
The key findings were that shareholders believe Imperial
has the right strategy in both combustible tobacco and in
NGP, which plays to its strengths and position in the
industry and there is widespread support for the new capital
allocation policy. Shareholders are also supportive of the
management team and are pleased with the operational
progress to date. They are keen to see progress in NGP,
which is considered a critical area to underpin long-term
growth, and they also want to see signs of performance
improving in the next three-year phase of the plan.
Engagement with Colleagues
Despite the challenges of the COVID-19 pandemic, we have
continued our workforce engagement activities. The People
and Governance Committee has embraced its wider role as
the workforce champion. Our “Meet the Board” listening
sessions continue to provide the opportunity for a two-way
dialogue between our colleagues and NEDs, tackling themes
such as diversity and inclusion, ESG and culture. The
sessions also included discussion in respect of investor
sentiment, the Group’s NGP ambitions, its digital marketing
approach, regulation and the Russian invasion of Ukraine.
These open and honest sessions have been positively
received, and are considered by colleagues to be helpful in
connecting to the strategy and the enablers for delivering it.
Specific engagement:
November
2021
UK
March 2022
Spain
June 2022
USA
September
2022
UK
• “Meet the Board” session
• Store visit with UKI team
• “Meet the Board” session
• Office drinks
• Dinner with local management
• “Meet the Board” session
• Office drinks
• Dinner with management
• Factory tour and leaf education
• “Meet the Board” session
• Dinner with management
Read more on how the Board considers all our stakeholders,
and how the Directors fulfil their duties under Section 172 of
the Companies Act 2006, in our S172 statement and
accompanying information on pages 108 to 112.
INVESTOR ENGAGEMENT DURING FY22
OCTOBER
Results
• Pre-close trading update
MARCH
Conferences
• Boston
• Virtual
Engagement
• Webinar on gaining traction
in the US market
APRIL
Results
• Pre-close trading update
MAY
Results
• HY Results
Roadshows
• UK
• North America
NOVEMBER
Results
• FY Results
Roadshows
• UK
• Private Client
DECEMBER
Conferences
• Virtual
Roadshows
• North America
• Private Client
FEBRUARY
Roadshows
• Private Client
Engagement
• AGM 2022
JUNE
Conferences
• Paris
Roadshows
• Private Client
JULY
Roadshows
• Canada
• Asia
AUGUST
Engagement
• Engagement on ESG metrics
in remuneration
SEPTEMBER
Conferences
• Boston
Engagement
• Webinar on Environmental,
Social & Governance
www.imperialbrandsplc.com
107
GOVERNANCE SECTION 172
STATEMENT ON SECTION 172 OF THE
COMPANIES ACT 2006
Effective engagement
with a wide range of
stakeholders, including
consumers, colleagues,
governments and
regulators, our customers,
suppliers, and investors is
key to the successful
delivery of our strategy and
vision in the long term.
During the year, the Directors acted in
a way they considered, in good faith,
most likely to promote the Company’s
long-term success for the benefit of its
members as a whole, paying due
regard to the matters set out in Section
172 of the Companies Act 2006.
In taking into account the various
interests of all relevant stakeholders
when making decisions, the Board
recognises it is not always possible to
achieve each stakeholder’s preferred
outcome. Which stakeholder groups’
interests are considered depends on
the decision at hand. The Board
endeavours to balance the different
priorities and interests of our
stakeholders in a way compatible with
the long-term, sustainable success of
the business and which aligns with
our purpose, vision and behaviours.
Examples of key decisions taken by
the Board during the year and how
stakeholder views and inputs, as well
as Section 172 factors, have been
considered in its decision-making are
shown on the following pages, which
together form our Section 172 statement.
The Board recognises its responsibility
to give due regard to the following
matters in arriving at its decisions:
Section 172 factors
a The likely consequences of any
decision in the long term
b The interests of the Company’s
employees
c The need to foster business
relationships with suppliers,
customers and others
d The impact of the Company’s
operations on the community and the
environment
e The desirability of the Company
maintaining a reputation for high
standards of business conduct
f 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.
Key stakeholders
Consumers
Customers
Governments and regulators
Colleagues
Suppliers
Investors
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Imperial Brands | Annual Report and Accounts 2022
CONSIDERING STAKEHOLDERS
IN KEY DECISIONS
Decision to withdraw from
Russia
a b c d e
f
The Board was informed of the
Company’s ongoing contingency
planning in respect of a possible
invasion of Ukraine at its Board
meeting on 1 February 2022. It was
kept updated on the Company’s
response to the unfolding situation
with regular reports, including being
fully briefed on measures being taken
to assist our employees in Ukraine.
Following an emergency Board call on
7 March 2022, we announced the
suspension of all operations in Russia.
This decision took into account the
complex implications for various
stakeholders, including Imperial’s
reputation as a responsible UK public
company, an assessment of evolving
international sanctions and growing
concerns among suppliers and
shareholders.
The Board then met as scheduled on
10 March 2022 and was briefed on how
stakeholders were reacting to
the crisis, including employees,
consumers, shareholders, media and
governments. The Board discussed
next steps regarding the Russian
business, again taking into account
key stakeholders in both Russia and
Ukraine, as well as competitor and
other FMCG company reactions. A
Board sub-committee was established
to deal with urgent matters, whilst
ensuring the Board was kept informed
of developments.
Taking into account the implications
for its various stakeholders, the Board
decided that it was best for the
success of the Company in the long
term to exit Russia. On 15 March 2022,
following a sub-committee meeting,
the Company announced that it had
begun negotiations to transfer its
Russian assets and operations to a
local third party. In negotiating the
Company’s exit from Russia, the safety
and wellbeing of its employees was
the key priority, with the Board
deciding that an orderly transfer of the
business as a going concern would be
in the best interests of its 1,000
colleagues in Russia. In addition,
despite always operating within the
law, it was increasingly apparent that
the international sanctions being
imposed upon Russia were making
several suppliers nervous about
supplying Imperial, which could
have impacted their business and
Imperial’s relationship with them in
the longer-term.
The Board continued to receive
updates on both the proposed exit
from Russia and the situation in
Ukraine, allowing a sub-committee of
the Board to approve the exit, which
completed on 20 April 2022. The
Company safeguarded every Imperial
job in Russia, with all employees
transferring with the business.
This was particularly important for
those employed in Volgograd, given
the importance of our factories
in the communities in which they
are located.
The Board continued to be updated on
the crisis in Ukraine throughout the
year, including the sad news in August
that one of our Kyiv factory employees,
who had joined the Ukrainian military,
had been killed in the fighting.
S172 CONSIDERATIONS AT A GLANCE
Likely long-term
consequences of the
decision
Our decision brought stability to a complex and quickly evolving situation. It was informed
at every step by consideration of the long-term consequences to the Group of continuing
to do business in Russia or withdrawing from the market and protecting the wider
business and its stakeholders.
Interests of our
colleagues
Fostering business
relationships with
suppliers, customers
and others
Impact on community
and environment
Prompt action meant we safeguarded the interests of our Imperial Russia colleagues by
ensuring their transfer as part of a going concern. At the same time, the interests of our
colleagues in Ukraine and the wider business was a key factor in considering the long-
term consequences of our decision.
We took into account our suppliers’ concerns about the potential impact of international
sanctions on Russia. Our decision has secured our relationships with those suppliers.
We recognised our decision would particularly affect the community around our factory at
Volgograd. Taking that into account, we acted quickly to transfer the business as a going
concern, safeguarding local jobs.
Maintaining a
reputation for high
standards of business
conduct
Imperial conducted itself in this internationally volatile political situation with integrity
and discipline. The Board remained updated and ready to act at short notice, applying high
standards of governance, and considering the interests of all our stakeholders, while
responding decisively.
Need to act fairly
between members
The Board acted fairly when considering all key stakeholders in its decision-making.
Once decisions were made, we provided clear and transparent reporting on our plans
and progress.
www.imperialbrandsplc.com
109
GOVERNANCE SECTION 172 continued
Decision to approve
investment behind our
digital transformation
strategy
a b c d e
f
The Board was fully supportive of the
digital transformation strategy and
therefore the investment case for a
single digital technology core
enterprise resource planning (ERP)
capability with master data integrity.
In particular, the Board took into
account the long-term sustainability
of Imperial as a whole, seeing the
investment as a key enabler of the
strategy and associated key business
objectives, which will further
strengthen the foundations for a
stronger, more resilient future, by:
• allowing the business to better serve
its customers, with a consistent
view of the consumer enabled
by data;
• enabling rapid and nimble product
innovation and introduction to
help provide consumers with
greater choice;
• increasing supply chain
responsiveness and reducing
wastage through an integrated
end-to-end supply chain;
• allowing greater insight into
customer and supplier data, and
greater consistency of data across
the entire business, enabling it to
make decisions about strategic
partners that, for example, share its
ESG values;
• allowing the business to rely on
more predictable and consistent
data, which gives the right
information upon which to make
clear, informed and agile decisions;
• delivering better standardisation
and integration, allowing consistent
reporting and use of data, and better
placing the business to oversee
governance and reinforce its
capabilities to deliver high
standards of business conduct.
S172 CONSIDERATIONS AT A GLANCE
Likely long-term
consequences of the
decision
Interests of our
colleagues
Transforming our digital capabilities is core to the strategy and Imperial’s long-term
success.
Streamlined systems and processes will empower our people to deliver their best work
and make sound data-driven choices. In making its decision, the Board was keen to strike
a balance between speed of implementation and the burden on colleagues to deliver a
multi-year programme.
Fostering business
relationships with
suppliers, customers
and others
Improved access to information allows the business to put the consumer first, giving it the
ability to innovate and introduce new products quickly to satisfy consumer demand. At
the same time, having an enhanced data analytics capability will allow the business to
further develop its strong commercial relationships with our customers and suppliers.
Impact on community
and environment
Greater insight into customer and supplier data, and greater consistency of data across
our business, will enable us to make decisions about strategic partners that share our
values, for example, on ESG and information security.
Maintaining a
reputation for high
standards of business
conduct
Consistent reporting from across our international business means we are better placed to
oversee governance and reinforces our capabilities to deliver high standards of business
conduct.
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Imperial Brands | Annual Report and Accounts 2022
Decision to extend the
roll-out of NGP
a b c d e
f
With NGP being a key enabler to
achieving the Group’s purpose and
vision, as well as the commercial
reality that NGP is gaining an
increasing share of the total nicotine
profit pools, the Board has fully
supported Imperial’s commitment to
building a targeted NGP business
based on consumer insights
and validation.
To assist the Board in understanding
the NGP strategy, one year on from the
launch of Imperial’s overall strategy,
and to allow the Board to make a
decision on the NGP roll-out for the
next few years, the NGP Strategy Team
provided the Board with a brand
experience for both EVP and heated
tobacco. Brand and product display
booths were used to bring the
consumer, product and experience
to life for the Board, together with a
comparison to competitor brands. This
was supplemented with a consumer
immersion event, with Board members
talking to a group of vapers and a
cohort of heated tobacco consumers.
In addition, the Board was presented
with renewed analysis of the NGP
landscape, together with data from the
ongoing NGP pilots in Europe and the
US. The Board was able to consider the
Group’s proposed footprint and
category offerings with data points
which indicated that with an improved
product, focused execution, and a clear
and differentiated target consumer,
Imperial should be able to start
building its NGP share position. Linked
to this was consideration of the need
to establish and maintain key supplier
partnerships, as well as an
understanding of the regulatory
environment in the short, medium and
longer term.
Taking into account a number of
factors, including; consumer
preferences, the attraction and
retention of employees linked to
having a growing non-tobacco
business, investor and ESG analysts’
appetite to see evidence of the
transformation from a predominantly
tobacco business to NGP business,
adopting a challenger mentality by
leading with supplier partnerships for
innovation, and the regulatory
landscape and horizon – the Board
endorsed the roll-out plan for EVP
benefiting from a better product and
scale in Europe, and the accelerated
roll-out of heated tobacco to new
markets, thus helping Imperial’s
sustainability for the long-term.
S172 CONSIDERATIONS AT A GLANCE
Likely long-term
consequences of the
decision
Building a targeted NGP business is one of our key strategic pillars. Our decision to support
the considered extension of our NGP products to new markets is based on learning from
the past while continuing to secure our future.
Interests of our
colleagues
Strengthening the portfolio and building a sustainable NGP business is fundamental to our
Purpose and what we are all striving to achieve over the long term. This not only improves
opportunities for growth for existing employees, but also attracts new talent into a
growing non-tobacco business.
Fostering business
relationships with
suppliers, customers
and others
Impact on community
and environment
Implementing a successful NGP business, which is responsive to consumer demands,
allows the business to build connections with new partners, while strengthening
relationships with existing ones.
Our decision to support our NGP strategy underpins our Purpose, which is to forge a path
to a healthier future for moments of relaxation and pleasure. This is our commitment to
make a positive contribution to a healthier future for our consumers and society, including
through potentially reduced risk products.
www.imperialbrandsplc.com
111
GOVERNANCE BOARD STATEMENTS
Section 172 of the Companies Act
2006
The Board seeks to consider the interests
of all relevant stakeholders when
making decisions. Our formal
statement is disclosed on page 108.
Throughout this Annual Report we
have included information on how the
Board operates and considers the
interests of stakeholders when
making its decisions.
Principal risks and uncertainties
The processes and related reporting
described in the Principal Risks and
Uncertainties section on pages 82 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.
Read more on pages 108 to 111.
Read more on pages 82 to 93.
Viability statement
On the basis of a robust assessment of
the principal risks facing the Group,
and the assumption that they are
managed or mitigated in the ways
disclosed on pages 82 to 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 2025.
Read more on pages 92 and 93.
Going concern basis
Having assessed the principal
risks facing the Group, including the
current and forecast future impacts of
the ongoing COVID-19 pandemic,
emerging geopolitical strains, and the
impact on consumers of fuel, food and
inflation challenges, 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 2024 and,
therefore, concludes that it is
appropriate to prepare the financial
statements on a going concern basis.
Read more on page 92.
Fair, balanced and understandable
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.
Read more on page 127.
Modern slavery statement
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 over
2,500 people who do not have access to
online learning in Laos and
Madagascar including farmers.
Read more on page 50 and 51.
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Imperial Brands | Annual Report and Accounts 2022
GOVERNANCE
PEOPLE AND
GOVERNANCE
COMMITTEE
ABOUT THE PEOPLE AND GOVERNANCE COMMITTEE
Membership* and attendance:
Name/Meeting
Thérèse Esperdy (Chair)1
Sue Clark (SID)
Diane de Saint Victor2
Ngozi Edozien2
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Steven Stanbrook3
Jon Stanton
1
11/21
2
03/22
3
05/22
4
09/22
n/a
n/a
n/a
n/a
n/a
1. Unless dealing with the succession of the Chair.
2. Appointed 15 November 2021.
3. Retired 2 February 2022 following the conclusion of the 2022 Annual General Meeting.
* Only members are entitled to attend. Executive Directors are invited to attend when appropriate.
Note: n/a signifies not eligible to attend
Other regular attendees
• Company Secretary, as Secretary to the People and Governance Committee
• Chief Executive Officer
• Chief Financial Officer
• Chief People and Culture Officer
• Other senior executives as appropriate
Role of the People and Governance Committee
Following the decision to extend its remit, the People and Governance
Committee is also responsible for the social and governance components of our
ESG agenda. The Committee assists the Board in fulfilling its governance
responsibilities to maintain an appropriate balance of skills, experience and
diversity on the Board and in senior management, to implement succession
plans for the Board and senior management, and to evaluate Board, Committee
and Director effectiveness. It also covers the Board’s corporate governance
framework and its workforce engagement strategy.
PEOPLE AND GOVERNANCE
COMMITTEE CHAIR’S OVERVIEW
Dear shareholder
I am pleased to present to
shareholders the report of the People
and Governance Committee for the
year ended 30 September 2022, which
sets out how the Committee has
discharged its duties in accordance
with the Code and details the key
matters it considered during the year.
113
STRUCTURE AND CONTENT
OF THE PEOPLE AND
GOVERNANCE COMMITTEE
REPORT
About the People and
Governance Committee
People and Governance
Committee chair’s
overview
Board balance
Gender balance in senior
management
Diversity and Inclusion
Policy
Committee’s main
responsibilities
Activities in 2022 and
looking ahead to 2023
Board evaluation
Workforce engagement
116
116
118
113
114
114
114
115
Broader scope and terms
of reference
The externally facilitated Board
evaluation conducted in 2021
recommended that, to support the
Company’s cultural transformation,
the remit of the then Succession and
Nominations Committee be broadened
to include employee engagement
strategy and monitoring our wider
culture change activities, essential to
meeting our objectives under the
renewed strategy. To reflect the wider
remit, we changed the name of the
Committee to the “People and
Governance Committee” and updated
its terms of reference, which can be
found on our website.
www.imperialbrandsplc.com
113
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE continued
Board diversity
The diversity we achieved at Board
level by 30 September 2022 is
summarised opposite.
We are always mindful of our
diversity obligations, including the
recommendations of the Hampton–
Alexander Review and the ongoing
FTSE Women Leaders Review,
and will continue to incorporate their
recommendations into our search
criteria for new Board members and
senior management.
We remain committed to the
Hampton-Alexander target of at least
33% female Board membership. As at
the date of this report, Imperial’s figure
is 40%.
We continue to embrace diversity of
gender, cultural background and
experience, and expect this to be
increasingly reflected in our Board
composition over the coming years.
We support the Parker Review’s ethnic
diversity recommendations. We
currently have two Board members
(20%) who identify as being from an
ethnic minority background.
In 18 months, we have transformed our
Executive Leadership Team from 14%
women and 0% People of Colour/
ethnic minority, to 30% women and
20% people of colour/ethnic minority.
This was important in sending an
initial, early signal to our people of the
positive action we will take to create a
truly diverse and inclusive
organisation. We have also created a
dedicated diversity, equity and
inclusion (DEI) team – the first in the
history of the organisation.
As a Group, we are working to address
imbalances in representation
throughout the business and, in
support of this aim, we will be setting
clear KPIs to increase female
representation at senior levels and
taking targeted action as part of our
DEI strategy to maintain oversight of
the delivery of talent and diversity
initiatives, to ensure they remain
consistent with our emerging culture.
See pages 55 and 56 for more information
about our DEI agenda.
BOARD CHANGES DURING
THE YEAR
As you will have read in my letter on
page 95, during the year we welcomed
Ngozi Edozien and Diane de Saint Victor
to the Board and, after six years’ valuable
service, Steven Stanbrook retired.
Induction programme
Since their appointment, Ngozi and
Diane have undertaken a series of
induction meetings with key areas of
the business, both individually and
together, as well as furthering their
understanding of the business when
attending Board meetings – for
example via the educational sessions
held at the Greensboro factory.
Board evaluation
This year’s Board evaluation was
internally facilitated. You can read
more about how we responded to last
year’s externally facilitated evaluation
and the recommendations drawn from
this year’s evaluation on pages 116
to 118.
Election and re-election
of Directors
All Directors are appointed following
a rigorous selection process. This is
led by the People and Governance
Committee which, supported by the
Group People and Culture function,
makes recommendations to the Board.
Read more about the skills and
experience of our Board on pages 96
to 110.
In accordance with the Code and with
the Company’s Articles of Association,
all Directors who are not retiring put
themselves up for re-election annually
at the AGM. The Board recommends
the re-election of all Directors who are
standing at our 2023 AGM.
Each Director may be removed at any
time by the Board or our shareholders.
Board gender balance
60%
40%
Male
Female
Board ethnicity
20%
80%
60%
40%
As at
30 September 2022
Non-ethnic minority background 80%
Ethnic minority background
20%
Tenure of Non-Executive Directors
at 30 September 2022
28.5%
14.3%
57.2%
5-7 Years
3-5 Years
0-3 Years
As at 30
September 2022
28.5%
14.3%
57.2%
Thérèse Esperdy
Chair of the People and Governance
Committee
Senior management gender balance
26%
74%
Male
Female
74%
26%
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Imperial Brands | Annual Report and Accounts 2022
Biographical details of the current
members of the Committee are set
out on pages 96 – 99.
The Committee’s terms of reference,
which can be found on our website
state it must meet at least three
times a year. A quorum for meeting
is two NEDs.
The Committee is authorised to seek
external legal advice and other
independent professional advice as
it sees fit.
MAIN RESPONSIBILITIES
In line with the authority delegated
by the Board, the People and
Governance Committee:
• Reviews and evaluates the
composition and effectiveness of
the Board and its Committees to
maintain the appropriate balance
of skills, knowledge, experience
and independence, and makes
recommendations to the Board
with regard to any changes, while
having due regard to the benefits
of diversity on the Board.
• Ensures that succession plans for
the Chair, Non-Executive Directors
(NEDs), Executive Directors and
Group senior management are in
place and kept under review.
• Nominates suitable candidates for
appointment to the Board and its
Committees, and makes
recommendations to the Board on
any matters relating to the
continuation in office of any
Director at any time.
• Approves the appointment of any
Director to executive or other
office, and retains oversight of the
development plans for Executive
Leadership Team members.
• Reviews and develops the Board’s
corporate governance framework
and monitors its compliance with
corporate governance standards
and practices, ensuring that it
remains appropriate to the size,
complexity and strategy of
the Company.
• Maintains the Directors’ conflicts
of interest policy and determines
the principles on which outside
directorships may be accepted by
Executive Directors.
• Reviews the Board’s policy on
diversity, equality and inclusion
and the effectiveness of its
implementation.
• Owns the workforce engagement
strategy on behalf of the Board,
monitoring its effectiveness, and
reports to the Board.
• Strengthens the employee voice
within the Boardroom.
• Assesses and monitors the
Group’s culture.
The People and Governance
Committee consists entirely of
independent NEDs, as defined in the
UK Corporate Governance Code 2018
(the Code). The Board Chair is the
Chair of the Committee, and was
independent, as defined by the Code,
on appointment.
Meeting
Matters discussed and decisions taken
November 2021
March 2022
May 2022
September 2022
• “Connections” launch update
• Diversity and inclusion, including executives
• Committee terms of reference
• Workforce engagement
• Board evaluation actions update
• Workforce engagement
• “Have Your Say” survey
• Initiatives in place building culture change and engagement
• Engagement survey updates
• Talent and capability deep dive
• Committee terms of reference
• Progress updates on people and organisation strategies, including leadership, operating model
and culture change
• ELT succession
• Board evaluation feedback
www.imperialbrandsplc.com
115
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE continued
PEOPLE AND GOVERNANCE
COMMITTEE’S ACTIVITIES
2021/22
The revised terms of reference of the
People and Governance Committee
have helped it focus its agenda over
the year, covering the issues
highlighted in the summary of
meetings on page 115 with
“Connections” being the umbrella
initiative covering the culture change,
including the establishment of a
performance-based culture. This
included our DEI strategy, updates on
the roll-out of behaviours, talent and
capability-building strategies, and
succession planning. The Committee
also embraced workforce engagement
through its “Meet the Board” sessions
and feedback on the employee
engagement initiatives.
Looking ahead to 2023
The focus of the Committee in 2023
will continue to be on the cultural
transformation of the business, which
will include: updates, discussions and
decisions on our DEI strategy and its
implementation; planned cultural
change activation, talent and
capabilities, a continued focus on
strengthening our succession,
employee engagement and health,
safety and wellbeing.
INDEPENDENCE OF NON-
EXECUTIVE DIRECTORS
We require our Non-Executive
Directors to remain independent from
management so that they are able to
exercise independent oversight and
effectively challenge management. We
therefore continually assess the
independence of each of our NEDs.
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.
that conflicts, or possibly may conflict,
with the interests of the Company, and
must 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.
The Board considers all external
directorships prior to appointment,
reviewing any potential conflict of
interests and time commitment for
both Executive and Non-Executive
Directors. All potential conflicts are
submitted to the Board for
consideration and, if appropriate,
authorisation in accordance with our
Articles of Association and the
Companies Act 2006, and are entered
into our Conflicts Register. As part of
our annual review process, all
situations entered in the Conflicts
Register are reviewed and
reconsidered.
Details of the Directors’ share
interests are shown in the Directors’
Remuneration Report on page 143.
EXTERNAL DIRECTORSHIPS
Non-Executive Directors, 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. The People and
Governance Committee reviews
the extent of the NEDs’ other interests
throughout the year. In line with the
provisions of the Code, they are
required to obtain approval of the
Board prior to accepting any new
office or employment. The Board
is satisfied that each of the Non-
Executive Directors commits
sufficient time to their duties in
relation to the Company. The Chair
and each of the Non-Executive
Directors have confirmed they have
sufficient time to fulfil their
obligations to the Company.
CONFLICTS OF INTEREST
Our Directors have a statutory duty to
avoid situations where they have, or
could have, a direct or indirect interest
The Board encourages the
Executive Directors and members
of the Executive Leadership Team
(ELT) to serve as Non-Executive
Directors of external companies in
order 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. During the financial
year, Stefan Bomhard was also a
non-executive director of Compass
Group PLC. No other ELT members
had an external appointment.
REAPPOINTMENT OF DIRECTORS
In accordance with the Code, all
Directors offer themselves to
shareholders for re-election annually,
except those who are retiring
immediately after the Annual General
Meeting. Each Director may be
removed at any time by the Board or
the shareholders.
INSURANCE AND 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. Each Director is
covered by appropriate directors’ and
officers’ liability insurance which the
Company purchased and maintained
throughout the year.
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, were also in
force throughout the year and up to
the date of this Annual Report.
BOARD EVALUATION
Background
The Code requires that an external
evaluation is carried out every three
years, with an internal evaluation in
the intervening years.
Action taken in relation to 2021
evaluation
An externally facilitated independent
evaluation was undertaken during
May and June 2021, conducted by
Lisa Thomas of Independent Board
Evaluation. A summary of the
recommendations arising from that
evaluation together with how they
have been addressed is as follows:
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Imperial Brands | Annual Report and Accounts 2022
Actions identified
Action taken
Board focus
In addition to its standard agenda, the Board agreed to
prioritise its focus on certain key topics, including ESG, NGP
and people and talent.
(i) As agreed, the Board’s ESG Steering Committee has been
reconstituted as an executive committee, chaired by the
CEO. The ESG Committee reports directly on its meetings to
the Board, ensuring the Board retains oversight of this
important topic. As set out on pages 36 to 58, the Board has
been closely involved in the ESG strategy;
(ii) NGP has remained a key focus, with the Board approving
the continued investment behind developing the Group’s
NGP agenda, as set out on page 111; and
(iii) in addition to its expansion to include governance, the
People and Governance Committee (formerly the Succession
& Nominations Committee) has evolved to encompass the
Group’s people agenda, with updates on the cultural
transformation, including talent, capability and succession,
as further set out on pages 115.
Management has also assisted the Board to further enhance
its approach to risk management, and has further improved
the provision of information to the Board, both by way of
Board papers and at meetings themselves, thus enabling
appropriately-focused discussions to take place.
Workforce engagement
In support of deepening its knowledge of the business and
encouraging greater collaboration with the new senior
leadership team, the Board should ensure there would be a
plan for greater engagement.
The People and Governance Committee has evolved to
encompass a broader remit, including the Board’s annual
programme of workforce engagement initiatives. A number
of workforce engagement activities took place in the year, as
further highlighted on page 115.
Board materials
The Board’s more focused agenda will be reflected in the
approach to Board materials, including enhancing the
information brought to bear in considering the
Company’s stakeholders.
The Board has also continued to build its own relationships
and ways of working, including further cementing its
relationships with management through regular contact,
both inside and outside the boardroom.
As set out on pages 30 to 34, the Board has considered a
broad range of stakeholders in the decisions it has taken. In
addition, and in line with the strategy, the Board has had a
particular focus on the consumer during the year, including
by participating in a number of consumer immersion events
(see page 30).
Feedback to this year’s evaluation noted the improvements
made on overall processes, logistics and materials.
www.imperialbrandsplc.com
117
WORKFORCE ENGAGEMENT
Steven Stanbrook, our nominated
Workforce Engagement Director,
stepped down from the Board on
2 February 2022.
In light of Imperial’s global nature, and
given the importance of our cultural
transformation to the successful
delivery of our strategy, the Board has
determined that a more appropriate
and impactful approach to workforce
engagement is for all NEDs to be
involved in this important aspect of
Board responsibility and oversight.
This is an alternative method to the
Code’s three suggested options.
Our programme for employee
engagement has therefore been
embedded in the wider remit of the
People and Governance Committee.
As well as participating in site visits,
the Board receives the results of
workforce surveys and engages with
employees directly through structured
listening sessions. Regular updates
provide the Board with information
about progress on our people agenda,
including our “Connections”
programme, and our talent and
capability mechanisms to nurture
strength, depth and diversity in our
talent pool.
To increase the reach of its workforce
engagement the Board held four Meet
the Board sessions and participated in
a number of dinners, informal drinks
and office visits. In addition, our Chair
and CEO met with works counsel
representatives in Poland during a
visit to our factory in Radom, and our
CEO met with the works counsel
representative during a visit
to Germany.
Workforce engagement is a key
element of our wider people and
culture initiatives and further detail
can be found on page 31.
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE continued
2022 BOARD EVALUATION
During July and August this year,
the Board underwent an internally
facilitated effectiveness review.
This was led by our Chair, supported
by the Company Secretary.
REVIEW PROCESS
The review considered Board culture,
Board focus, governance and process,
and the Board Committees.
As part of the evaluation, the Chair
held one-to-one meetings with each of
the Board members to discuss their
performance on the Board. The Senior
Independent Director also held
separate meetings with individual
Board members and the Board as a
whole, without the Chair present, to
consider the performance of the Chair.
The evaluation showed that another
year had further strengthened Board
culture and dynamics, with an
inclusive environment allowing for
open discussions on focused
agenda items.
The evaluation confirmed that all
our Directors have sufficient time,
knowledge and commitment to
contribute effectively to our Board and its
Committees, and that the Committees
remain appropriately constituted.
The Board will prioritise its deep-dive
focus on NGP, talent and longer-term
strategic thinking. In addition, the Board
will develop and monitor non-financial
KPIs for qualitative issues such as
culture and change management.
Other areas for consideration included
bringing more external perspectives
into the boardroom and broadening the
Board’s exposure to, and engagement
with, external stakeholders.
INDUCTION AND TRAINING
Following their appointment to
the Board, new Directors receive a
personalised 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 were initially
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.
This year, we concluded the induction
programmes for Ngozi Edozien
and Diane de Saint Victor. These
programmes were tailored to their
individual skills and experiences,
and their roles on the Board. These
induction programmes included:
• One-to-one meetings with senior
executives to understand the roles
played by our senior employees,
and specifically how we do things
at Imperial.
• Meetings with our external advisers,
such as Allen & Overy, our corporate
lawyers, EY LLP, our auditor, and
Deloitte LLP, our Remuneration
Committee adviser, to explain the
legal and regulatory background to
their roles on our Board and how
these matters are approached
at Imperial.
Our Board development programme
focuses on facilitating a greater
awareness and understanding of our
business and stakeholders. Briefings
are given by our advisers on 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, and all Board
members value and learn from their
visits to the different Imperial sites
around the world, where they meet
with local managers of the businesses
and see the daily operations in action.
You can read more about our
stakeholder engagement in more
detail on pages 108 and 112.
The Chair regularly reviews the
development needs of individual
Directors and the Board as a whole.
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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Imperial Brands | Annual Report and Accounts 2022
GOVERNANCE
AUDIT COMMITTEE
ABOUT THE AUDIT COMMITTEE
Membership* and attendance
Name/Meeting
Jon Stanton (Chair)
Sue Clark (SID)
Ngozi Edozien 1
Alan Johnson
Simon Langelier
* Only members are entitled to attend.
1. Appointed 15 November 2021
Note: n/a signifies not eligible to attend
1
11/21
2
02/22
3
05/22
4
09/22
n/a
Other regular attendees during FY22
• Board Chair
• Chief Executive Officer
• Chief Financial Officer
• Finance Director – Group
• Company Secretary, as Secretary to the Audit Committee
• Group Financial Controller
• Director of Assurance and Risk
• Director of Tax
• Head of Internal Audit
• Representatives from EY, our external auditor
Role of the Audit Committee
The Audit Committee assists 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, the Group Internal Audit department and the
external audit.
It also involves ensuring the integrity of the Group’s financial statements and
related announcements.
119
119
STRUCTURE AND CONTENT
OF THE AUDIT COMMITTEE
REPORT
About the Audit Committee
Audit Committee
chair’s overview
Focus in 2022 and looking
ahead to 2023
Audit Committee’s
activities in 2021/22
Key matters considered
Governance, risk
management and
internal control
Internal audit
External audit
Directors’ statement
128
128
128
129
122
123
121
AUDIT COMMITTEE
CHAIR’S OVERVIEW
Dear shareholder
I am pleased to present the report to
shareholders of the Audit Committee
for the year ended 30 September 2022,
which sets out how it has discharged
its duties in accordance with the UK
Corporate Governance Code 2018 (the
Code) and details the key matters
considered and findings during the
year. The Audit Committee has
exercised the authority delegated to it
by the Board to provide assurance for
the integrity of the Group’s financial
statements, to oversee the Group’s
external and internal audit and to
review the Group’s internal control
and compliance frameworks.
This year, the ongoing COVID-19
pandemic, the war in Ukraine and the
challenging global macro-economic
environment provided the backdrop to
Imperial’s second year of its five-year
strategy. It has been a year of
continued improvement for Imperial’s
risk management, control and
financial governance framework,
www.imperialbrandsplc.com
119
GOVERNANCE
The Audit Committee consists entirely
of independent Non-Executive
Directors as defined by the the Code.
The Audit Committee chair and Alan
Johnson meet the Code’s standard of
having recent and relevant financial
experience. The Board is satisfied
that they, and the Audit Committee
as a whole, have the appropriate
competence relevant to the sector in
which the Company operates.
Biographical details of the current
members of the Audit Committee
are set out on pages 96 to 99.
Members of the Audit Committee are
appointed by the Board following
recommendation by the People and
Governance Committee.
The Audit Committee’s terms of
reference state it must meet at least
three times a year. The quorum for
meetings is two.
At each meeting, both the Director
of Assurance and Risk and EY had
the opportunity to meet with the
Audit Committee without
management present.
The Audit Committee is authorised to
seek external legal advice and other
independent professional advice as
it sees fit.
GOVERNANCE AUDIT COMMITTEE continued
in service of the Group’s strategic
ambitions and its emerging
performance-led culture.
The Board and Committee
effectiveness review conducted in
FY21 recommended the Committee
focus on more simplified and efficient
operational processes and promote a
step-up in pace to enhancements of
the Group’s control framework. The
Committee addressed this by ensuring
an improvement in the information
provided to it both in Committee
papers and during Committee
meetings themselves and to the
Group’s risk management processes.
See also the Committee’s focus in 2022
on page 121.
The Audit Committee has closely
scrutinised a number of areas when
assessing critical judgements and
estimates made by management
and ensuring support for a robust
financial close.
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 both 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.
Both external and internal auditors
continue to present feedback on
key financial risks and controls and to
provide objective and appropriate
challenge to management in addressing
these areas. Both 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 123 to 127.
MAIN RESPONSIBILITIES
In line with the authority delegated
by the Board, the Audit Committee:
• Reviews and challenges 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 123
to 127.
• Maintains appropriate oversight
over the work and effectiveness
of Group Internal Audit, including
confirming it is appropriately
resourced, reviewing its audit
findings and monitoring
management’s responses.
• Monitors and evaluates 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.
• Reviews the adequacy and
security of the Company’s
procedures for detecting fraud,
and its systems and controls for
preventing bribery.
• Scrutinises the independence,
approach, objectivity,
effectiveness, compliance and
remuneration of the external
auditor.
• Assesses the going concern
status and medium-term viability
of the Group.
• Assists 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 127).
The terms of reference of the
Audit Committee can be found
on our website.
Jon Stanton
Chair of the Audit Committee
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Imperial Brands | Annual Report and Accounts 2022
Looking ahead to 2023
For the coming year, the Committee
will continue to support and monitor
the Finance team’s transformation
programme, including the roll-out of
the central finance support portal
(CFin), and the roll-out of a refreshed
Group Internal Audit strategy. Linked
to this, the Audit Committee will
engage in the development of the
Group’s total assurance approach,
including the establishment of a
dedicated Governance, Risk and
Control team reporting to the Chief
Legal and Corporate Affairs Officer.
Regulatory developments will also be
high on the agenda for 2023, with the
outcome of the BEIS proposals to be
taken into consideration, as well as
any continuous improvements to our
overall reporting (including our Task
Force on Climate-Related Financial
Disclosures (TCFD)).
AUDIT COMMITTEE REPORT
Focus in 2022
• Oversight of continuous
improvement agenda of risk
management, internal control and
assurance taking into account
BEIS proposals.
• Supporting the finance
transformation being led by the 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-19 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 auditor
and implementation of ongoing
enhancements to derive value from
the external audit whilst also
enhancing audit quality.
• Supporting the Group Internal
Audit strategy refresh.
www.imperialbrandsplc.com
121
GOVERNANCE AUDIT COMMITTEE continued
AUDIT COMMITTEE’S ACTIVITIES 2021/22
A summary of the topics covered by the Audit Committee in its meetings during the financial year is detailed below:
Meeting
Matters discussed and decisions taken
Meeting
Matters discussed and decisions taken
November
2021
• Finance and pensions updates.
• FY21 Results overview and accounting
estimates and judgements update and
recommendations to the Board.
• Financial controls self-certification
and FY21 attestations update.
• Confirmed audit/non-audit service fees.
• Internal controls and risk management
update, allowing confirmation of
internal controls and risk Code
compliance.
May 2022
• Update on transfer pricing, including
tax settlements.
• Review of HY22 Results, including
going concern and accounting
estimates and judgements.
• Financial controls self-certification
and HY22 attestations update.
• External auditor update.
• Recommended half year reporting to
the Board, including interim dividends.
• Considered audit and non-audit
• External and Internal Audit updates
service fees.
• Treasury risk management update.
• Internal controls and risk management
update.
• Group Internal Audit update (including
Group Internal Audit survey).
• Private discussion with external
auditor, Group Internal Audit and CFO.
• Finance update.
• External audit update.
• Updates on risk, assurance and
Internal Audit.
• Risk and controls assurance – pensions.
• Reviewed audit and non-audit fees.
• Reviewed independence of Audit
Committee members.
• Private discussion with external
auditor Group Internal Audit and CFO.
and annual review.
• Recommended preliminary
announcement and Annual Report and
Accounts to Board, including the Audit
Committee report and risk
management disclosure.
• Recommended final dividend to
the Board.
• Recommended reappointment of
external auditor to the Board.
• Update on FY22 Audit Committee
planner.
• Audit Committee improvement plan
and priorities.
• Private discussions with external
auditor, Group Internal Audit and CFO.
September
2022
February 2022 • Finance update.
• Reviewed reasonableness of the
current intangibles policy.
• Update on alternative performance
measures (APMs) and subsidiaries’
statutory accounts.
• Confirmed tax strategy.
• FY22 audit plan and update.
• External audit effectiveness review,
including FY21 learnings to improve
ways of working.
• FY21 management letter.
• Risk and controls assurance – US.
• Internal Audit update.
• Private discussion with external
auditor, Group Internal Audit and CFO.
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KEY MATTERS CONSIDERED
The Audit Committee considered the appropriateness of the following areas of significant judgement, complexity or
estimation in connection with the financial statements:
Focus area
Why this area is significant
How we as an Audit Committee addressed this area
Use of adjusted
measures
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.
During the year the conclusions of a detailed
review and scrutiny of the proposed use of
adjusted measures in FY22 were presented to
the Audit Committee. The Committee also
reviewed and approved changes to the
alternative performance measures (APMs)
proposed by management to provide greater
clarity on the nature and amount of all adjusting
items, together with management’s proposals to
further align adjusted and GAAP measures.
Last year, the Audit Committee considered and
accepted management’s recommendation that
restructuring costs associated with the 2021
strategic review will continue to be incurred by
the Group post FY21 and are expected to
conclude in FY23. The programme is underway
and remains on track.
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 and FY21
should continue to apply unchanged during
FY22, noting that in FY22 only charges relating
to the Group strategic review were eligible for
restructuring treatment as an adjusting item.
Although the framework remained unchanged,
the number of APM’s used during the year was
reduced to be more in line with the number of
GAAP measures used.
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GOVERNANCE AUDIT COMMITTEE continued
Focus area
Why this area is significant
How we as an Audit Committee addressed this area
Goodwill and intangible assets form a major
part of the Group’s balance sheet, and their
current valuations must be supported by
future prospects.
Goodwill and
intangible asset
impairment
reviews
(See note 11 to
the financial
statements
for further
information)
At both the half year and the full year, the Audit
Committee 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 the sale of
the Group’s operations in Russia, and that the
disclosure of sensitivities was appropriate and
on this basis the Committee approved the note
disclosure in the financial statements.
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Imperial Brands | Annual Report and Accounts 2022
Focus area
Why this area is significant
How we as an Audit Committee addressed this area
Taxation
(See notes 7
and 22 to the
financial
statements
for further
information)
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 financing; 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 on pages 216 to
218. The Group is in the process of appealing
three decisions by national Competition
Authorities in the EU.
The Audit Committee received a detailed update
from management at each Committee meeting
on the status of ongoing inquiries 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 Audit Committee continued to receive
specific progress reports on UK CFC following
the EU General Court’s decision, French tax
litigation and the status of the transfer pricing
audits, including settlement proposals on UK,
German and French transfer pricing audits, and
in light of these considered the reasonableness
of provisions and reporting disclosures.
The Audit 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.
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 these actual
and threatened legal proceedings and litigation
matters otherwise covered in this report, along
with any competition authority proceedings, are
appropriately disclosed or provided for in the
Group’s Annual Report and Accounts.
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125
GOVERNANCE AUDIT COMMITTEE continued
Focus area
Why this area is significant
How we as an Audit Committee addressed this area
Going concern and
viability statement
The COVID-19 pandemic continues to impact
the global economy, and 2022 is characterised by
the invasion of Ukraine by Russia, contributing to
and exacerbating a global cost-of-living crisis.
In the context of this global economic
uncertainty, 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.
Revenue
recognition
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.
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 global economic
environment, as well as realisation of other key
risks, including climate change.
The Audit Committee reviewed these tests on
operating cash flows, the ongoing resilience of
demand and supply, the remaining disposal
proceeds from the sale of the Premium Cigar
Division, the financial impact of the disposal of
the business in Russia, and the impact of the war
in Ukraine on the business. The Audit Committee
noted the Group’s ability to raise funds, with the
Group’s recent US$ 1 billion bond issuance
demonstrating ongoing access to debt financing.
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 Annual Report through to 31 March
2024 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 Audit Committee
and, where applicable, disclosed externally.
No breaches were found during the year.
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.
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Focus area
Why this area is significant
How we as an Audit Committee addressed this area
Fair, balanced and
understandable
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.
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, including
ensuring no undue reporting of good news and
material informaiton is given due prominence
(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, Group Internal
Audit, Group Legal, Investor Relations, ESG team
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.
During the year the Audit Committee has
continued its review of the use of APMs,
including ensuring the appropriate balance
of reported and adjusted measures in the
Annual report.
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 financial position and
performance, business model and strategy.
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127
GOVERNANCE AUDIT COMMITTEE continued
GOVERNANCE, RISK
MANAGEMENT AND INTERNAL
CONTROL
Assessing and managing the risks
faced by the Group is fundamental to
achieving our strategic objectives,
safeguarding our stakeholders’
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 82 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 both
current and emerging risks and issues
as discussed in the Principal Risks and
Uncertainties section on pages 82
to 93.
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 the Group’s risk management
and internal control systems,
as well as on the results of risk
assessments and internal control
effectiveness assessments.
The Board and 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. Specific
consideration was given to an allegation
made against an employee responsible
for the procurement of raw leaf
tobacco and noted that no evidence
had been found of any breach of
controls, processes or procedures.
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
Group Internal Audit (GIA) is
responsible for providing independent
and objective assurance on the
adequacy and effectiveness of the
risk management and internal
controls framework.
During the year GIA 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.
The Audit Committee reviewed reports
from GIA at each Audit Committee
meeting to monitor the effectiveness
of the control framework and
considered the effectiveness and
results of the audits undertaken by
GIA, and monitored management
responses to the audit matters raised.
The Audit Committee reviews the
effectiveness of GIA routinely through
post-audit surveys and KPI reporting.
In addition, in FY22 a periodic internal
stakeholder survey was conducted,
as well as an external quality
assessment in accordance with
the best practice guidelines of the
Institute of Internal Auditors.
The Audit Committee reviewed and
approved the proposed direction,
scope and investment required for
the GIA Fit For Future Strategy.
The strategy was developed using
feedback from the FY22 Internal
Stakeholder Survey and the External
Quality Assessment performed by
Deloitte. GIA’s key strategic priorities
relate to aligning to the wider
organisation’s developments on
integrated assurance, building
in-house capabilities to enhance
auditing of IT-related risks, leveraging
technology for audit planning through
data analytics, positioning GIA as a
route for talent within the Company
and improving reporting and insights
sharing. The Audit Committee also
reviewed the FY23 GIA 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 2022 meeting,
EY set out its external audit plan for
the year, which continued to build on
its previous experience, EY’s continued
focus on audit quality and the feedback
it received from management, the Board
and the Audit Committee. EY provided
the Audit 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 Audit Committee considered
the external auditor’s feedback,
management letter and half year
review. EY also provided feedback to
relevant Group and local management
in a number of debrief sessions and
audit close meetings.
The Audit Committee also met
independently with the Director of
Assurance and Risk to discuss
additional insights.
The Audit Engagement Letter detailing
the provision of statutory audit and
half year review services was both
considered and approved.
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Imperial Brands | Annual Report and Accounts 2022
Audit tender
The external audit was last tendered
in 2019. EY was 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 Audit
Committee continues to review the
independence and the quality of the
external audit to assess whether 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 £8.2
million (2021: £7.5 million) (see note 4).
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 156.
Statement in relation to 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.
The Audit Committee has had regular
private meetings with EY and is
satisfied that EY has been given full
access and complete transparency by
management throughout the year.
Independence of our external auditor
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, which provides
clear definitions of services that the
external auditor may and may not
provide as determined by the FRC’s
Revised Ethical Standard published in
December 2019, can be found on our
website at www.imperialbrandsplc.com.
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 third
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 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.
The threshold is currently fixed at
£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 knowledge of the Group
and it being deemed best placed to
provide effectively the services
required. In the current year, non-audit
fees were 7% (2021: 5%) of total audit
fees (see note 4). EY did not undertake
any advisory or consultancy work for
the Group. Following the auditor
independence reviews during the year,
the Audit Committee concluded that
the level of non-audit 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 the
Auditor Independence Policy, during
the year the Audit Committee carried
out four 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 audit scope,
planning, quality and delivery,
challenge and communication, and
independence, and is completed by
members of the Audit Committee,
Logista’s Audit Committee and senior
managers and finance executives
from across the Group. Responses
indicated that EY had delivered a
high-quality and effective audit, with
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 the
Committee’s 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 FY21 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.
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129
GOVERNANCE REMUNERATION REPORT
ANNUAL STATEMENT
FROM REMUNERATION
COMMITTEE CHAIR
Membership and meeting attendance
Members
11/11/2021
11/05/2022
23/06/2022
15/09/2022
Sue Clark (Chair)
Thérèse Esperdy
Diane de Saint Victor
Bob Kunze-Concewitz
Steven Stanbrook
Jon Stanton
n/a
n/a
n/a
n/a
Diane de Saint Victor joined the Committee on 15 November 2021 and Steven
Stanbrook stepped down on 2 February 2022.
Focus in 2022
• Ensuring remuneration supports the implementation of the Company’s
revised strategy
• Remuneration and terms for new members of the Executive Leadership Team
• Development and incorporation of ESG strategy into incentive plans
• Review of remuneration consultants advising the Committee
• Wider workforce reward considerations
Looking ahead to 2023
• Triennial review of the Directors’ Remuneration Policy
• Wider workforce reward strategy to ensure alignment with priorities in a time
of economic volatility
• Attraction and retention of high-performing individuals in a competitive
global market place
135
138
KEY SECTIONS OF THIS
REPORT ARE AS FOLLOWS:
130
Annual Statement
134
Remuneration at a glance
Directors’ Remuneration
Policy (summary)
Pay arrangements for FY23
Annual Report on
Remuneration
Remuneration earned for
FY22
Determination of 2022
Annual Bonus
Executive share ownership
and Directors’ interests
Comparison with
employees’ remuneration
CEO pay ratio
Remuneration Committee
membership and duties
144
145
140
147
143
139
139
DEAR SHAREHOLDER
On behalf of the Board, I am pleased to
present the Directors’ Remuneration
Report (DRR) for the financial year
ended 30 September 2022.
The last year has seen ongoing
challenges for businesses across the
world, including the continued impact
of COVID-19 and the inflationary
pressures caused by the war in Ukraine.
Despite the many challenges, the
Company has delivered against the
stretching remuneration targets that we
set in the strengthening phase of our
five-year strategy to transform into a
more sustainable business capable of
consistent growth. Our new global
Executive Leadership Team (ELT) has
worked extremely well together through
the year, combining fresh perspectives
and experience from a diverse range of
global consumer businesses and FMCG
backgrounds. In the coming year, the
Committee will undertake the triennial
review of our Remuneration Policy to
ensure that it continues to support the
retention and incentivisation of
world-class talent and the delivery of
our ambitious transformation plan.
I wish to thank the ELT and our entire
workforce for their contribution during
the year. I would like to pay special
tribute to our 600 Ukrainian colleagues,
their families and the teams who are
working to keep them safe.
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Imperial Brands | Annual Report and Accounts 2022
As in the prior year, no employees were
placed on furlough and the Group did
not benefit from any Government aid.
Supporting our colleagues
In recent months, the Remuneration
Committee has carefully monitored the
impact of the volatile macroeconomic
environment across our global
workforce, overseeing a range of
initiatives to support those employees.
Our “Meet the Board” sessions are a
valuable way of having open
conversations with colleagues about a
wide range of matters, and we have
spent time engaging on a range of
reward topics including the cost-of-
living crisis. A number of targeted
actions have been taken to support our
colleagues where required:
• Annual salary budgets were
determined with a focus on markets
where wage inflation lagged price
inflation by a significant margin,
recognising the disproportionate
impact for those on lower incomes.
Across the countries we operate in,
salary increases have typically
ranged from 3% to 9% (excluding
higher increases made in countries
experiencing hyperinflation), with
increases in the UK expected to be
approximately 5% or higher for FY23.
• Introduction of a framework where
local markets can request the award
of one-off payments, accelerated
salary payments or exceptional
out-of-cycle increases for targeted
groups of employees, in particular
where inflationary pressures have
impacted business continuity.
• Where appropriate, more frequent
salary increases were made in
countries experiencing
hyperinflation.
• Additionally, we have worked to find
new roles for our displaced Ukrainian
colleagues and ensured the fair
treatment of Russian colleagues
leaving the business.
The Committee will continue to monitor
and review workforce pay and policies
over the coming year, to ensure we
continue to support our colleagues
during this challenging period.
Alignment to purpose and strategy
Ensuring our Remuneration Policy
supports and drives our strategy is a key
focus of the Remuneration Committee.
Our focus on transformation of brands,
markets and culture is guided by our
purpose of “forging a path to a healthier
future for moments of relaxation and
pleasure”. Examples of how we put our
purpose-led approach into practice are
set out on page 4.
During FY22 the business completed a
comprehensive review of our overall
environmental, social and governance
(ESG) strategy to ensure it is fully
aligned with our five-year goals, and this
is set out on pages 36 to 58. Our ESG
priorities reflect issues which are both
important business challenges and
potential opportunities to make a
positive difference. In recent months,
the Committee has carefully considered
the outcome of this review and will
introduce new ESG metrics under the
Annual Bonus for FY23. Further details
are provided below.
Remuneration outcomes for FY22
This year’s results demonstrate the
Group’s continued strong delivery
against the five-year strategy and the
benefit of the additional investment in
transforming the business.
Operational and financial delivery has
strengthened in a year marked by
continued uncertainties. Consumer
buying patterns have been disrupted by
the global pandemic, and geopolitical
events in Russia and Ukraine have
caused uncertainty and exacerbated
global inflationary pressures.
During the year we disposed of our
Russian business to a third party. This
disposal was completed and concluded
in April 2022. We have therefore adjusted
incentive targets for the Annual Bonus
and the LTIP in order to exclude the
disposed Russian business, including
associated direct costs. The approach is
in line with the approach we would take
for any material disposal of a business
during the year. No adjustment was
made for the impact of the suspension
of operations in Ukraine.
The FY22 Annual Bonus was based
on stretching financial measures
with 40% based on adjusted operating
profit, 20% on adjusted operating cash
conversion and 20% on market share.
Strategic objectives formed the
remaining 20% of the bonus.
Investment initiatives and an increased
focus supported a 35 basis points growth
in market share in our five priority
markets, which reverses a pattern of
decline over the past ten years. Adjusted
operating cash conversion was 102%,
driven by a strong working capital
performance. Adjusted operating profit
grew 1.8% at constant currency and
1.9% taking into account the adjustment
for the disposed Russian business.
This performance reflects the increased
investment behind the strategic
initiatives in line with our five-year plan.
The market share and cash conversion
targets were both exceeded, while the
adjusted operating profit target
was achieved.
The Executive Directors performed
exceptionally well against their strategic
objectives during the year. For Stefan
Bomhard, this included the deployment
of our new purpose and behaviours
across the business, the delivery of a
refreshed NGP strategy operating model,
and development of our refreshed ESG
strategy. Lukas Paravicini’s objectives
included key operational efficiency
milestones and further deployment of
technology-focused finance and
integrated reporting solutions. Further
detail is shown on page 140.
In aggregate, as a percentage of
maximum, Stefan received a bonus of
84% and Lukas earned a bonus of 82.5%.
50% of the bonus will be deferred in
Imperial Brands shares for three years.
The Committee believes this outcome
reflects fairly the performance of
the business during the year and
the strong base for growth Stefan and
Lukas have created since joining the
business. No discretion has been applied
by the Committee.
As disclosed on his appointment,
Imperial Brands agreed to compensate
Lukas for a guaranteed bonus he would
have received from his previous
employer in the amount of US $750,000.
This payment was made in December
2021 and has been disclosed in the
single total figure table on page 139.
The LTIP award due to vest in
February 2023 will vest in part, resulting
in 19.83% of the total award vesting.
Of the Executive Directors, only Stefan
Bomhard participates in this award.
No discretion was applied by the
Committee in respect of the
vesting outcome.
www.imperialbrandsplc.com
131
GOVERNANCE REMUNERATION REPORT continued
Meetings held in FY22
In FY22, the Committee met on four occasions and the table below summarises the matters discussed:
November
2021
May
2022
June
2022
September
2022
Review of Executive Directors’ remuneration dashboards
Approval of FY21 Annual Bonus out-turn
Approval of 2019-2021 LTIP out-turn
Approval of FY22 Annual Bonus metrics and weightings
Approval of FY22 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 FY22 grant
Approval of operation of Discretionary Share Plan and Sharesave for FY22
Review of FY23 bonus plan design
Discussion on workforce remuneration
Review of forecast Annual Bonus out-turn
Review of forecast LTIP out-turns
Discussion on ESG measures and remuneration
Review of ESG measures and targets in incentives
Discussion of FY23 Annual Bonus plan
Approval of base salaries for Executive Leadership Team and Chair’s fee
Review of the Committee’s terms of reference
Environmental, social and
governance (ESG)
As noted above, over the last year the
Committee has carefully considered
all areas of our ESG strategy and how
these key priorities could be
introduced into our incentive plans for
FY23. The Committee considered a
broad range of metrics and was
mindful that any measures used must
be appropriate for the business,
reflecting the stage of the business on
its ESG journey, and have the ability to
be tracked and measured.
We recognise that consumer health is
the most important ESG priority for
many of our stakeholders. This is a key
pillar of our business strategy, which
demonstrates our commitment to
making a meaningful contribution to
harm reduction by offering adult
smokers a range of potentially reduced
harm products. The Group has
refreshed its NGP strategy, focusing on
heated tobacco and vapour.
We are also committed to making a
distinctive contribution to the
environment and have pledged to
become a net zero company by 2040,
with a series of challenging
intermediate objectives to reduce our
carbon footprint as set out on page 41.
Imperial Brands has been recognised
as a 2022 Climate Leader by the
Financial Times for a second
consecutive year, and we are proud to
have maintained our position on CDP’s
climate A list this year.
Reflecting these key priorities, as a
first step for FY23 we will introduce
two quantitative ESG measures under
the Annual Bonus plan, with an overall
weighting of 10%. The measures have
been selected as areas of high priority
for our key stakeholders, including
investors and employees.
Consumer health (5%) – will be
measured by reference to revenue
from our next generation products,
which offer adult smokers a range
of products with the potential of
harm reduction.
Climate change (5%) – will measure
reduction in Scope 1 and 2 CO2e
emissions and energy consumption
(total GWh). Scope 1 and 2 emissions,
and energy data, are independently
assured on an annual basis and
reported in our Annual Report
and Accounts.
An overall weighting of 80% on
financial metrics will be retained and
the ESG metric will be incorporated by
reducing the weighting of strategic
performance objectives. We intend
to consider the longer-term approach
to ESG as part of the detailed
Remuneration Policy review over
the coming 12-18 months.
Implementation for FY23
The Committee reviews remuneration
trends and plans for the wider
workforce each year and considers
this to be important and relevant
context for the decisions it makes
regarding the Executive Directors
and senior managers.
In reviewing salaries this year, the
Committee has been mindful of the
global inflationary pressures that have
been impacting many of our people
across the Group. The Company has
put in place measures to target support
where needed, as described above.
The annual salary review is effective
from 1 October 2022. As I mentioned
earlier salary increases awarded to
employees have typically ranged from
132
Imperial Brands | Annual Report and Accounts 2022
3% to 9% across the markets we
operate in (excluding higher increases
made in countries experiencing
hyperinflation), with increases in
the UK expected to be approximately
5% or higher for FY23.
In setting the salary for the CEO, the
Committee took into consideration
global inflationary pressures, the
approach taken for colleagues, the
need to balance restraint with fair
reward for contribution, and the
impact on total remuneration. After
careful consideration, the Committee
decided to award a salary increase
of 3% to Stefan, in the light of his
exceptional contribution during the
year. In taking this decision, the
Committee considered the comparison
with wider workforce increases noting
that the increase was below the
average increase for the UK workforce.
His new salary is £1,339,747 pa.
The CFO was appointed to the Board in
May 2021, and at that time it was
agreed that his salary would not be
adjusted before 1 January 2023. At the
end of the year, the Committee did
however take the opportunity to
review both Directors’ salaries and
after careful consideration concluded
that a 4% increase be awarded to
Lukas, effective from 1 January 2023.
This increase reflects his strong
contribution and impact since joining
the Company and acknowledges that
he will not have received an increase
for over 18 months. Lukas’ new salary
will be £759,200 pa. The increase for
Lukas is also below the average
increase for the UK workforce.
FY23 is an important year of delivery
as we move from the investment
and foundation-building phase
of our strategy into the “improving
returns” phase.
At the same time, the Committee
recognised that it is a more uncertain
and challenging macroeconomic and
geopolitical environment.
The Committee considered carefully
the Annual Bonus measures for FY23
and concluded that the financial
metrics will remain the same as those
for FY22: adjusted operating profit at
constant currency (40% weighting),
adjusted operating cash conversion
(20% weighting) and market share
growth (20% weighting). Individual/
strategic objectives will reduce from a
20% weighting to 10% and the new ESG
measure of 10% will be introduced as
detailed above. The financial targets
will be aligned with the guidance
provided at our Capital Markets Day
and in our latest trading statements.
The FY23 LTIP will be granted in
February 2023. As the business
reached its target leverage levels in
FY22, net debt/EBITDA will be
removed as a measure for the FY23
plan and its 20% weighting reallocated
to TSR. The measures for the FY23
award will therefore be: adjusted EPS
growth at constant currency (40%
weighting), return on invested capital
(20% weighting) and relative TSR (40%
weighting). The targets are detailed on
page 138.
Chair fees
The Committee reviewed and
approved a 3% fee increase for the
Company Chair. Thérèse Esperdy’s fee
will be £638,729 pa from 1 October 2022.
Consideration of shareholder views
We are very grateful for the time
shareholders spent with us to discuss
plans prior to the 2022 AGM, and were
delighted with the strong support we
received for the Directors’ Remuneration
Report (95.93%). During the course of
the year, we continued to engage with
shareholders to understand their
views on our proposals to include
ESG measures in our incentive plans.
The feedback received was very
valuable and has helped inform the
proposals shared in this report.
In the coming year, we will undertake
the triennial review of our current
Remuneration Policy (approved by
95.3% of shareholders at the 2021 AGM)
to ensure that it remains appropriate
and continues to support the retention
and incentivisation of a world-class
executive team. This will involve
engagement with a range of key
stakeholders and we will consult
with shareholders on any material
changes proposed.
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
107. Our “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, the ESG
agenda, our purpose, vision and
culture, and diversity, equity 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 covering attraction and
retention, flexible working practices and
the cost-of-living crisis. I have been
encouraged by the level of openness,
engagement and interest shown by our
colleagues, and would like to thank
them for their valued contribution.
Remuneration Committee advisers
During the year, the Committee
undertook a competitive tender of its
advisers, following which Deloitte LLP
(Deloitte) was appointed. The process
involved submission of written proposals,
followed by shortlisted candidates
being interviewed by members of the
Committee. The Committee selected
and appointed Deloitte with effect from
February 2022. Further details are
provided on page 148.
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 to
grow value for all its stakeholders.
In the coming year, the Committee will
continue to support management in
achieving its ambitious objectives,
while listening closely to all our key
stakeholders and acting thoughtfully
to meet 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
www.imperialbrandsplc.com
133
GOVERNANCE REMUNERATION REPORT continued
REMUNERATION AT A GLANCE
OUR EXECUTIVE PAY
PRINCIPLES
• 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 APPROACH TO REWARDING EXECUTIVE DIRECTORS IN 2023
Our strategic priorities
D R I V ING VALUE
F R O M O UR BROADER
P O RTFOLIO
T
B
A
U
R
G
I
L
B
U
E
D
S
I
T
E
I
N
G
N
D
E
S
S
A
N
G
P
SING O N
RIORIT Y
KETS
R P
U
O
R
A
M
U
C
O
F
Measuring performance
Annual Bonus:
• Adjusted operating profit growth
C
O
H
T
H
N
T
M
E
U
B
S
E
C
E
N
E
at constant currency (40%)
A
R
R
S
T
U
I
• Adjusted operating cash
F
S
O
E
S
N
E
T
conversion (20%)
• Market share growth (20%)
• Strategic/individual (10%)
• Climate change, consumer health
(20%)
PERFORM A N C E
BASED CUL T U R E
AND CAPABI L T I E S
LTIP:
D
• Adjusted EPS growth at constant
currency (40%)
• Return on invested capital (ROIC)
T
N
S
N
TIO
A
SIM PLIFIE
A N D EFFICIE
O PER
• Relative TSR (40%)
(10%)
EXECUTIVE DIRECTORS’ VARIABLE REMUNERATION OUTCOMES FOR 2022
Annual
Bonus
Adjusted operating profit growth at constant currency
Adjusted operating cash conversion
Weighted market share growth
Strategic/individual – Stefan Bomhard
Maximum
%
of bonus/
LTIP
40%
20%
20%
20%
25%
20%
20%
19%
Out-turn
as a % of
maximum
bonus/
LTIP % of weighting achieved
Strategic/individual – Lukas Paravicini
20%
17.5%
Long-Term
Incentive
Plan1
Adjusted EPS growth at constant currency
40%
0%
0%
Adjusted net revenue growth at constant currency
40%
37.08%
14.83%
63%
100%
100%
95%
87.5%
Relative TSR
1. In respect of Stefan Bomhard only.
TOTAL SINGLE FIGURE IN 2022
Stefan Bomhard
26.3%
38.3%
35.4%
Lukas Paravicini
32.4%
46.0%
21.6%
Fixed pay
Annual Bonus
LTIP
Other
20%
25%
5%
(£,000)
Base salary
Benefits and pension
Total fixed pay
Annual Bonus
LTIP1
Other2
Total remuneration
Stefan
Bomhard
Lukas
Paravicini
1,301
199
1,500
2,185
2,022
0
5,707
730
117
847
1,205
0
566
2,618
1. Includes FY20 LTIP and Recruitment Award tranches 3 & 4
of 4.
2. Buyout from previous employer.
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Imperial Brands | Annual Report and Accounts 2022
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
Purpose
Operation
Salary
Attract and retain
high-performing
individuals, reflecting
market value of
the role and the
Executive Director’s
skills, experience
and performance.
Pension
Provision of
market-competitive
pension aligned
to workforce.
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.
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.
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.
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.
Executive Directors
receive a workforce
aligned pension
rate (currently 14%
of salary).
Benefits
Annual
Bonus Plan
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.
The level of benefit
provision is fixed
although the
value may vary
depending on the
cost of providing
such provisions.
Reasonable business-related expenses will be reimbursed
including any consequential tax arising.
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% 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.
www.imperialbrandsplc.com
135
GOVERNANCE REMUNERATION REPORT continued
Element
Purpose
Operation
Maximum opportunity
Annual
Bonus Plan
– continued
Long-Term
Incentive Plan
All-employee
arrangements
Shareholding
guideline
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.
Performance below the threshold results in zero payment.
Payments rise from zero to 100% 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% 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% 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% 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% of base
salary. Other Executive
Directors: 250% 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% of
gross base salary.
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Imperial Brands | Annual Report and Accounts 2022
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 and the chairs of the
Audit and Remuneration Committees 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 1 February 2022. 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.
www.imperialbrandsplc.com
137
GOVERNANCE REMUNERATION REPORT continued
PAY ARRANGEMENTS FOR 2023
Stefan Bomhard
Lukas Paravicini
£’000
12,000
10,000
8,000
6,000
4,000
2,000
0
£11,257
21%
42%
£8,913
53%
£4,056
29%
33%
38%
£1,544
100%
30%
24%
17%
13%
Minimum
Target
Maximum
Max + share
price growth 50%
Fixed pay
Annual bonus
LTIP
Share price growth
£’000
12,000
10,000
8,000
6,000
4,000
2,000
0
£4,297
44%
35%
21%
£5,246
18%
36%
29%
17%
£2,114
22%
36%
42%
£881
100%
Minimum
Target
Maximum
Max + share
price growth 50%
The table below summarises how we intend to apply the main areas of our Directors’ Remuneration Policy for FY23.
Element
Implementation
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.
The CEO’s salary was increased by 3% on 1 October 2022 to
£1,339,747 pa. The CFO’s salary will increase by 4% to £759,200 pa
on 1 January 2023..
No change to maximum opportunity.
Measures and weightings:
• Adjusted operating profit growth at constant currency
• Adjusted operating cash conversion
• Market share growth
• ESG – climate change (Scope 1 and 2 CO2e emissions /
energy consumption) and consumer health (NGP revenue)
• Strategic/individual
40%
20%
20%
10%
10%
Underlying targets are commercially sensitive and will be fully
disclosed in next year’s Annual Report.
LTIP
Maximum award size: CEO: 350% of base salary, CFO
250% of base salary.
No change to maximum opportunity.
Measures, weightings and targets:
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.
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.
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.
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Imperial Brands | Annual Report and Accounts 2022
• Adjusted EPS growth at constant currency (40%). Cut in 4.4%
– max 6.3%
• Return on invested capital (ROIC) (20%). Cut in 20.2% – max 21.0%
• Relative TSR against a group of FMCG companies (40%). Cut in
at median – max upper quartile.
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-prorated basis subject to the achievement of the
applicable performance criteria.
With effect from 1 October 2022:
• Chair’s fee will increase by 3% from £620,125 to £638,729 pa
• NED base fee will increase by approximately 3% from £ £81,500
to £83,945 pa
• Senior Independent Director and chairs of the Remuneration
and Audit Committees’ fees will increase by approximately 1.9%
from £27,000 to £27,500 pa
• Committee membership fees will remain at £5,500 pa.
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.
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 2022
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 2022
Single Total Figure of Remuneration for each Director (Audited)
Executive Directors
Stefan Bomhard
Lukas Paravicini
Total
Total
Year
2022
2021
2022
2021
2022
2021
Salary
£’000
1,301
1,269
730
304
2,031
1,573
Benefits
£’0001
Pension
£’0002
Total fixed
pay
Annual
bonus
£’0003
2,185
1,627
1,205
353
1,500
1,463
847
353
2,347
1,816
3,390
1,980
17
17
15
6
32
23
182
177
102
43
284
220
LTIP
£’0004
2,022
366
–
–
2,022
366
Other
£’0005
Total
variable pay
Total pay
–
–
566
–
566
–
4,207
1,993
1,771
353
5,707
3,456
2,618
706
5,978
2,346
8,325
4,162
Notes
1. Each individual received an annual car allowance of £15,000; Stefan Bomhard received private medical insurance and Lukas Paravicini received health cash plan.
2. Each individual received a cash supplement of 14% of salary in lieu of membership of the pension fund.
3. Annual bonus for the year ended 30 September 2022. Half of the gross value is deferred into an award over shares for three years; no further performance
conditions apply.
4. For Stefan Bomhard, LTIP also represents the value of the FY20-22 LTIP awards whose performance period ended 30 September 2022. As these awards do not vest
until February 2023 they are based on a share price of £18.73, being the three-month average to 30 September 2022, and an estimate of dividend roll-up based on
announced dividend payable on 31 December 2022. For Stefan Bomhard, LTIP also represents the third and fourth tranches of the Recruitment Award which vested
on 11 April 2022 on a share price of £16.90. Of the values shown, £512,791 and £42,352 is attributable to share price growth under the FY20 LTIP and Recruitment
Award, respectively. The 2021 LTIP value represents the first tranche of the Recruitment Award which vested on 12 April 2021, and has been restated to reflect the
actual dividend roll-up applying to this award.
5. For Lukas Paravicini ‘Other‘ represents the buyout of a guaranteed bonus he would have received from his previous employer.
Non-Executive Directors
Thérèse Esperdy
Sue Clark2
Diane de Saint Victor3
Ngozi Edozien3 4
Alan Johnson5
Bob Kunze-Concewitz
Simon Langelier
Pierre-Jean Sivignon6
Steven Stanbrook7
Jon Stanton8
Total
Fees £’000
Taxable benefits1
2022
620
141
77
87
87
87
87
-
36
114
1,336
2021
605
138
–
–
64
78
85
58
103
112
1,243
2022
2021
14
2
3
17
3
3
3
-
0.4
1
46
–
–
–
–
–
–
–
–
–
–
–
2022
634
143
80
104
90
90
90
-
36
115
1,382
Total
2021
605
138
–
–
64
78
85
58
103
112
1,243
Notes
1. Benefits in kind for Non-Executive Directors relate to the reimbursement of travelling expenses to meetings held at the Company’s registered office.
2. Includes payments in respect of Senior Independent Director and Chair of the Remuneration Committee fees of £27,000 respectively pa.
3. Diane de Saint Victor and Ngozi Edozien were appointed to the Board on 15 November 2021.
4. Includes a payment in respect of a non-European travel allowance of £12,000 pa in recognition of the extra time commitment required for travel.
5. Alan Johnson was appointed to the Board on 1 January 2021.
6. Pierre-Jean Sivignon stepped down from the Board on 4 June 2021.
7. Steven Stanbrook stepped down from the Board on 2 February 2022. Includes a payment in respect of Workforce Engagement Director of £5,500 pa and a
non-European travel allowance of £12,000 pa in recognition of the extra time commitment required for travel.
8. Includes payment in respect of chair of the Audit Committee fees of £27,000 pa.
www.imperialbrandsplc.com
139
GOVERNANCE REMUNERATION REPORT continued
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in
lieu of pensions, Annual Bonus, LTIP was £9,708k (2021 restated: £6,715k).
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 and therefore, no pension disclosure is required.
Determination of 2022 Annual Bonus (Audited)
The 2022 Annual Bonus was based on a scorecard of measures. Details of the measures, their weightings, targets and extent
of achievement are set out in the table below.
Measure
Adjusted operating profit at constant currency
Adjusted operating cash conversion
Weighted market share
Strategic/individual – Stefan Bomhard
Strategic/individual – Lukas Paravicini
Total bonus Stefan Bomhard
Total bonus Lukas Paravicini
Weighting
40%
20%
20%
20%
20%
100%
100%
Cut in
1.0%
87%
-2bps
–
–
Target
1.8%
93%
+2bps
–
–
Max
Achievement
Pay-out
3.0%
97%
+7bps
–
–
1.9%
102%
35bps
95%
87.5%
25%
20%
20%
19%
17.5%
84% of
max
82.5% of
max
The Committee set the following strategic goals for the Executive Directors:
Strategic/individual
measures and targets
Performance assessment highlighting key achievements
Stefan
Bomhard
• Deploy new
• Significant senior leader investment with impact measured through Top 500 Pulse
Purpose, Vision,
Behaviours and
Operating Model
(10%)
Survey which showed:
- Overall engagement score top quintile versus other global organisations.
- 93% fully understand our Behaviours and what they mean for them in their role.
- 91% understand our Purpose, Vision, and Strategy and how we will achieve them.
• Formulate and
start to deploy
rejuvenated ESG
strategy (5%)
• Qualify a
sustainable NGP
proposition (5%)
• High performing ELT in place and operating as a committed and cohesive team.
• Substantial investment in series of immersion and development events for every
employee across the 120 markets.
• ESG Strategy launched and in progress, with clear ambitions, sponsors, and owners
in place.
• People and Planet Strategy launched to whole organisation.
• Enhanced ESG reporting to stakeholders including an ESG focused webinar
for investors.
• Updated SBTi in line with the 1.5C Net Zero by 2040 commitment.
• Strengthened governance, agreed by ESG Committee and endorsed by Board.
• NGP Pilots executed in line with timelines with all metrics ahead of target.
• New consumer proposition for both Blu and Pulze resonating strongly
with consumers.
• Blu 2.0 rolled out in France ahead of schedule.
• Launch of disposables through an agile team.
Total payout as a % of maximum bonus: 19%
Lukas
Paravicini
• Drive shareholder
value (10%)
• Strategy delivering strong Free Cash Flow for FY22 above target levels.
• Group ERP Strategy developed to implement industry standard, integrated,
end-to-end commercial and manufacturing processes, data and technology
globally. Strategy approved by Board.
• ERP Programme Director and Leadership Team appointed.
• Vendor partnerships finalised.
• Robust governance in place, project mobilisation and first wave implementation
commenced.
• CFin (Finance SAP/S4 Hana) Solution deployment commenced and in budget.
• Strengthening of cybersecurity with 13 key sites all upgraded to cautious risk levels
of security.
• Acceleration of planned FY23 activities providing improved cyber security to
remaining sites including ‘Forescout’ Network Access Controls, perimeter firewalls,
autopilot devices enrolments, partner VPN improvements and Azure cloud server
migrations for visibility and patching.
140
Imperial Brands | Annual Report and Accounts 2022
Strategic/individual
measures and targets
• Create efficient
operations (10%)
Performance assessment highlighting key achievements
• New Finance and IT Operating model, supporting Group strategy, designed
and deployment well underway.
• Extended Financial Shared Services, providing top quartile transactional
scope, to all key markets.
• Increased Financial Shared Services scope to include value-add Reporting,
Tax and Statutory and Risk and Control Compliance services with new
roles based in and first reports provided from Krakow, Poland.
• Building on Financial Shared Service created Global Business Service
(GBS), as the Group’s shared service platform, with GBS IT and Data
Services roll-out having commenced including new IT roles based
in Sofia, Bulgaria.
• In market, consumer and customer centric Finance and IT organisation
designed and in consultation for key markets.
Total payout as a % of maximum bonus: 17.5%
Individual Annual Bonus payments:
Executive Directors
Stefan Bomhard
Lukas Paravicini
Notes
1. Half of the bonus will be deferred into an award over shares.
Maximum
£2,601
£1,460
Total annual bonus £’000
Actual1
£2,185
£1,205
Long-Term Incentive Plan awards vesting (Audited)
Performance awards vesting in February 2023 are based on performance measured over the three-year period ended
30 September 2022. Of the current Directors only Stefan Bomhard participated in this LTIP cycle.
Measure
Adjusted EPS growth at constant currency
(average annual growth)
Adjusted net revenue growth at constant currency
(average annual growth)
Relative TSR (return over three financial years)
Achievement
Weighting
Cut-in
(25% vesting)
Target (60%
vesting)
Maximum
(100% vesting)
Actual
performance
Percentage of
award vesting
40%
2.00%
3.87%
6.00%
0.57%
0%
40%
1.00%
2.40%
20% Median
n/a
4.00%
Upper
quartile
1.48%
14.83%
13/25
5%
19.83%
The TSR measure compared the Company’s performance against the following companies: Altria Group, Anheuser-Busch
InBev, Beiersdorf, British American Tobacco, Brown-Forman, Carlsberg, 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 Benckiser Group, Swedish Match, Unicharm and Unilever PLC.
Vested awards granted for FY21 onwards are subject to a two-year holding period.
Recruitment Award vesting during the year ended 30 September 2022
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 third and fourth tranches of the Recruitment Award were capable of vesting on 11 April
2022, and the final vesting outcome was 40%. Full details of the vesting of the forfeited award are disclosed in Inchcape Plc’s
Annual Report and Accounts 2021. 47,899 shares were granted under the third and fourth tranches of the Recruitment Award
and the number of shares vesting (including dividend roll-up) was 24,695 at a value of £417,346.
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. As disclosed last year, his
outstanding LTIP awards remained eligible to vest on their normal vesting dates, subject to their original performance
conditions and prorated to reflect the period of service rendered. The LTIP award due to vest in February 2023 will vest in
part resulting in 19.83% of the total award vesting.
www.imperialbrandsplc.com
141
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 the Directors’ awards, the Committee took into account the prevailing share price performance over
the year and the number of shares awarded as a result.
Date of grant
Share price1
Number of nil-cost options
Face value
Amount
of base salary
End of performance period
Stefan Bomhard
Lukas Paravicini
15 February
2022
15 February
2022
£17.81
£17.81
1. Valued using the closing share price the trading day prior to grant
255,616
£4,552,521
350% 30 September 2024
102,470
£1,824,991
250% 30 September 2024
The targets for the above performance awards are as follows:
Measure
Adjusted EPS growth at constant currency
Adjusted net debt/EBITDA (for FY24)
Return on invested capital (ROIC) (average annual)
Relative TSR
Weight
40%
20%
20%
20%
Minimum performance (25% vesting) Maximum performance (100% vesting)
Target
3.7%
1.46x
18.7%
Median
Target
5.6% or higher
1.28x or lower
19.5% or higher
Upper quartile
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 comprises the following companies – Altria Group, Anheuser Busch Inbev, British American
Tobacco, Brown-Forman, Carlsberg B, Carnival, Clorox, Constellation Brands, Diageo, Heineken, Henkel, Japan Tobacco,
Kimberly-Clark, Kirin Holdings, L’Oreal, Monster Beverage, Pernod Ricard, PepsiCo, Philip Morris International, Procter &
Gamble, Reckitt, Swedish Match, Unicharm, 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 earlier of
30 September 2022 and leaving date
Dividends
reinvested post
year end
Owned outright
Subject to
a holding period
Owned outright
Conditional awards and options held at earlier of
30 September 2022 and leaving date
Awards
unvested and
subject to
performance
conditions
Awards
unvested
and subject
to continued
employment
Options unvested
and subject
to continued
employment
Vested but not
exercised
Executive Directors
Stefan Bomhard
Lukas Paravicini
Non-Executive Directors
Thérèse Esperdy1
Sue Clark
Diane de Saint Victor
Ngozi Edozien
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Steven Stanbrook1,2
Jon Stanton
3,930
–
29,419
–
338
–
871,754
215,543
51,926
11,281
687
–
37,787
6,506
252
252
586
50,630
26,101
19,559
2,820
–
–
–
–
–
–
–
–
–
–
13
–
–
3
–
19
–
11
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. Thérèse Esperdy and Steven Stanbrook hold their shares in the form of American Depositary Receipts.
2. Steven Stanbrook stepped down from the Board on 2 February 2022.
Options
exercised
during the
year
48,242
–
–
–
–
–
–
–
–
–
–
142
Imperial Brands | Annual Report and Accounts 2022
Our middle market share price at the close of business on 30 September 2022, being the last trading day of the financial year,
was £18.55 and the range of the middle market price during the year was £14.86 to £19.525.
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
Non-Executive
Directors6
Thérèse Esperdy
Sue Clark
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier
Diane de Saint Victor7
Ngozi Edozien7
Steven Stanbrook8
Jon Stanton
7,659
–
33,349
–
25,690
–
36,125
6,121
263
50,388
25,665
–
–
19,559
2,451
37,787
6,506
586
50,630
26,101
252
252
19,559
2,820
1,662
385
323
242
436
252
252
–
369
119
–
563
95
4
785
400
–
–
305
38
619
–
701
121
11
939
484
5
5
363
52
500
–
300
300
48
–
Yes
Yes
138
26
7
154
84
5
5
58
14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 £15.585, being the closing price on 30 September 2021, 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 £18.55, being the closing price on 30 September 2022.
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. 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.
7. Diane de Saint Victor and Ngozi Edozien joined the Board on 15 November 2021.
8. Steven Stanbrook stepped down from the Board on 2 February 2022.
REVIEW OF PAST PERFORMANCE
The chart below shows the value of £100 invested in the Company on 1 October 2012 compared with the value of £100 invested
in the FTSE 100 Index for each of our financial year-ends to 30 September 2022. 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.
Total shareholder return
Index value
225
200
175
150
125
100
75
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Imperial Brands
FTSE 100 Return Index
www.imperialbrandsplc.com
143
GOVERNANCE REMUNERATION REPORT continued
CHANGE IN CHIEF EXECUTIVE OFFICER REMUNERATION
2020
Dominic
Brisby
2020
Joerg
Biebernick
2022
Stefan
Bomhard
2021
Stefan
Bomhard
2020
Stefan
Bomhard
2020
Alison
Cooper
2019
Alison
Cooper
2018
Alison
Cooper
2017
Alison
Cooper
2016
Alison
Cooper
2015
Alison
Cooper
2014
Alison
Cooper
2013
Alison
Cooper
Total remuneration
£’000
Annual bonus as
a percentage of
maximum
Shares vesting
as a percentage
of maximum
5,707
3,421
1,104
963
943
448
2,137
3,935
4,657
5,404
3,637
2,686
2,011
84
64.1
401
401
401
401
312
87
60
72
80
69
34
19.83
30.84
nil
nil
nil
nil
nil
20
44.4
45.7
15.8
5.8
nil
1. 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%.
2. 51% was the formulaic out-turn; however, the Remuneration Committee used its discretion and reduced this to 31%.
3. Relates to vesting of Long-term Incentive Plan (excluding Recruitment Award).
4. Relates to vesting of Recruitment Award based on performance criteria of former employer.
3. HOW DIRECTORS’ REMUNERATION COMPARES WITH EMPLOYEES’ REMUNERATION
There is a strong alignment between 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 attract, incentivise and retain the best talent, driven by market practice, skills and experience.
Executive Directors
UK employees
Increase in line with wider workforce
Mix of financial/strategic measures, with 50% of
bonus deferred into award over shares
Performance metrics measured over three years,
with two-year holding period after vesting
14% cash or contributions into Company’s
pension fund
Salary
Annual Bonus
LTIP
Pension
Average increase for FY23 – between 3% and 9%
Mix of financial/strategic measures 100% paid
in cash
Performance metrics measured over three years
No holding period
The majority of UK employees receive a
contribution of 14% of salary
£250 per month and three-year savings period
Sharesave
£250 per month and three-year savings period
Consideration of colleagues’ views
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 including our
strategy, ESG, culture, and diversity, equity 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 measures and how this links to culture and performance
• Focus on the wider package including opportunities and culture and links to attraction and retention
• Flexible working practices
• Recognition that pay and benefits are attractive within the Company and discussion on how these can be made
more transparent
• Linking ESG targets to remuneration
• Cost-of-living crisis
The Board is committed to listening to colleagues and appreciates the opportunity to understand what is important to them.
These views, such as the importance of ESG, are taken into account in decision-making and have been reflected in actions
taken in the year.
We will look to hold further listening sessions on reward in FY23.
144
Imperial Brands | Annual Report and Accounts 2022
PERCENTAGE CHANGE IN BOARD REMUNERATION
The table below shows the percentage change in the salary, benefits and Annual Bonus for the Directors, between FY22 and
FY21, as well as the disclosures for FY21 and FY20.
Year-on-year change in pay for Directors compared with UK employees
2022
2021
2020
Salary
Benefits Annual Bonus
Salary
Benefits Annual Bonus
Salary
Benefits Annual Bonus
Executive Director
Stefan Bomhard
Lukas Paravicini1
2.5%
140.1%
0.0%
150.0%
34.3%
241.4%
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 2021
Non-Executive
Directors
Thérèse Esperdy
Sue Clark
Alan Johnson
Bob Kunze-
Concewitz4
Simon Langelier
Pierre-Jean Sivignon
Steven Stanbrook
Jon Stanton5
Ngozi Edozien
Diane de Saint Victor
All UK employees
2.5%
2.2%
n/a
n/a
n/a
n/a
24.7%
7.0%
(100%)
(100%)
n/a
n/a
353.27%2
55.42%
-41.30%
-50.00%
n/a
n/a
Alan was appointed to the Board on 1 January 20213
n/a
n/a
11.5%
2.4%
n/a
n/a
Pierre-Jean stepped down from
the Board on 4 June 2021
Steven stepped down from
the Board on 2 Feb 2022
1.8%
n/a
n/a
Bob was appointed to the Board on 1 November 2020
0.0%
(100%)
n/a
176.2%
n/a
n/a
2.41%
n/a
-40.00%
Pierre-Jean was appointed to
the Board on 1 July 2020
0.0%
17.9%
(100%)
(100%)
n/a
n/a
8.42%
187.88%5
-66.67%
0.00%
n/a
n/a
Ngozi was appointed to the Board on 15 Nov 20213
Diane was appointed to the Board on 15 Nov 20213
2.7%
7.3%
2.9%
0.0%
2.4%
7.9%
6.69%
-5.72%
32.44%
1. Lukas was appointed to the Board on 1 May 2021.
2. Increase reflects first full year as Chair.
3. A year on year comparison is not possible in these circumstances.
4. Bob was appointed to the Board on 1 November 2020
5. 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 by 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% of maximum bonus opportunity), although some employees may receive a variation of
this in practice. In 2021 total CEO remuneration used to calculate the ratios was £3,421,078; and in respect of base salary only
£1,269,000 was used.
The pay levels shown for the percentiles reflect remuneration for the 12 months to 30 September 2022.
Financial year
Calculation methodology
P25 (lower quartile) x:1
P50 (median) x:1
P75 (upper quartile) x:1
2022
20211
2020
2019
A
A
A
A
102.9
60.7
50.2
53.0
79.6
48.4
38.7
36.5
52.1
31.1
24.4
22.0
Total remuneration
Base salary
Stefan Bomhard
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
£5,707,264
£1,300,725
102.9
32.3
79.6
26.3
52.1
18.4
1. 2021 CEO pay ratios have been updated to reflect the value of the updated 2021 CEO single figure which incorporates long-term incentives based on actual vesting,
rather than the estimate used for the 2021 disclosure. Historical data excludes Nerudia.
The CEO total remuneration pay ratio has increased across all percentiles, due to an increase in CEO total remuneration
driven by incentive out-turns and strong share price performance. The CEO base salary ratio has remained static,
confirming that the variance is driven by performance-related variable pay.
The salary component for FY22 at each quartile is £40,232 (P25), £49,412 (P50) and £70,647 (P75). The equivalent total pay
numbers are £55,452 (P25), £71,685 (P50) and £109,463 (P75).
The Committee is satisfied that the overall picture presented by the 2022 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.
www.imperialbrandsplc.com
145
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
2022
8
642
1,320
2021
54
775
1,305
Percentage
change
52
(17.2)
1.1
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 FY21 or FY22.
4. The total single figure for FY21 has been restated to reflect the actual vesting of Sfefan Bomhard’s 2021 LTIP award on 12 April 2021.
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 2022, we held 70,289,137 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:
Balance at
01/10/2021
Acquired
during year
Distributed
during year
Balance at
30/09/2022
Ordinary shares
under award at
30/09/2022
Surplus/
(shortfall)
Executive Trust
2001 Trust
SHARE PLAN FLOW RATES
584,370
(545,013)
371,833 3,050,000 (1,264,376) 2,157,457 8,600,580 (6,443,123)
1,504,333 2,049,346
1,000,000
(80,037)
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% of the 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% of issued share capital over the same 10-year period).
As at 30 September 2022, an aggregate total of 1% 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)
2.5
1.7
2.0
0.3
0.3
0.3
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 £90,000 fee received
from this position in the financial year.
146
Imperial Brands | Annual Report and Accounts 2022
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 that 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.
Biographical details of the current members of the Remuneration Committee are set out at pages 96 to 99. Members of the
Committee are appointed by the Board following recommendation by the People and Governance Committee (formerly
known as the Succession and Nominations Committee).
The Committee must meet at least twice a year. A quorum for meeting is two.
The Committee considers its key responsibility as being to support the Company’s strategy and its short and long-term
sustainable success. This is ensured by the adherence to our Executive Pay Principles set out on pages 134 to 136 and to the
Directors’ Remuneration Policy which together 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 and
other stakeholders 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 2022. 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 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 in-flight 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.
www.imperialbrandsplc.com
147
GOVERNANCE REMUNERATION REPORT continued
Remuneration Committee meetings 2021/22
The Remuneration Committee met for four scheduled meetings during the year, although there was significant work outside
these meetings for the Committee to agree remuneration packages for new members of the senior leadership team and to
review and appoint a remuneration adviser, Deloitte LLP. On appointment, Deloitte conducted a training session, which was
an opportunity for Non-Executive Directors and relevant senior managers to meet the new adviser. Details of the main
activities are set out in the Chair’s statement at the beginning of the DRR on page 130.
Other regular attendees include the CEO, Company Secretary, Remuneration Committee Secretary, Chief People and Culture
Officer, Global Reward Director and the Committee’s principal adviser. None of the individuals were involved in any
decisions relating to their own remuneration.
Advice provided to the Remuneration Committee
FIT Remuneration Consultants LLP (FIT) acted as the independent remuneration adviser to the Committee until 6 January
2022. FIT was appointed by the Committee with effect from 1 November 2017. Following a comprehensive tendering process,
Deloitte LLP was appointed as the independent adviser to the Committee effective 7 February 2022. FIT was paid fees of
£14,774 for its services during the year. Deloitte was paid fees of £121,200 for its services during the year.
Both FIT and Deloitte are members of the Remuneration Consultants’ Group and comply with its Code of Conduct which sets
out guidelines to ensure that their advice is independent and free of undue influence. FIT carried out no other work for
Imperial Brands or its subsidiaries. Deloitte LLP provided other advisory services including corporate tax and employee
mobility advice, and technology consulting services.
The Committee is satisfied that advice received by FIT and Deloitte during the year was independent and objective and that
all individuals who provided remuneration advice to the Committee have no connections with Imperial Brands that may
impair their independence.
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 £16,900 for these services. Willis Towers Watson also provided actuarial and wider reward-related
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 2022 AGM
At the 2022 AGM there was a vote to approve the Directors’ Remuneration Report. We received a strong vote in favour of our
Director’s Remuneration Policy at our 2021 AGM.
Resolution
Directors’ Remuneration
Report (2022 AGM)
Director’s Remuneration
Policy (2021 AGM)
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
702,037,143
95.93
29,784,340
4.07
731,821,483
680,193
732,501,676
706,375,474
95.28
34,958,557
4.72
741,334,031
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 Report followed engagement with our largest shareholders
during 2021 and 2022. The input we received from shareholders was extremely helpful. Following the AGM, we continued to
engage with our largest shareholders, taking their feedback on our plans to include ESG measures into our FY23 incentives.
At the 2023 AGM, shareholders will be invited to vote on the 2022 Directors’ Remuneration Report (advisory vote).
Sue Clark
Chair of the Remuneration Committee
148
Imperial Brands | Annual Report and Accounts 2022
GOVERNANCE DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Directors present their report and
audited financial statements for the
year ended 30 September 2022. This
Directors’ Report forms part of the
management report required under the
Disclosure Guidance and Transparency
Rules (DTR). The Company has chosen,
in accordance with Section 414 C(11) of
the Companies Act 2006, to include
certain matters in the Strategic Report
that would otherwise be required to
be disclosed in the Directors’ Report.
The Strategic Report can be found on
pages 2 to 93 and includes an indication
of future likely developments of
the Company, details of important
Company events and the Company’s
business model and strategy. The
Corporate Governance Report on
pages 94 to 128, the Directors’ Report
on pages 150 to 154 and the Directors’
Responsibilities Statement on page 155
are incorporated into the Directors’
Report by reference.
Specifically, the following disclosures
have been included elsewhere in the
Annual Report and are incorporated
into the Directors’ Report by reference:
Disclosure
Future developments in
the business
Disclosure of greenhouse
gas emissions
Going concern statement
Viability statement
Qualifying Director’s
indemnity provisions
Statement of Directors’
responsibilities including
disclosure of information
to the auditor
Financial risk
management
Shareholder information
Page
26
42
92
92
116
129 and
155
197
245
EQUAL OPPORTUNITIES
SHARE CAPITAL
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
people 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 AND 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. In addition,
a number of our subsidiaries donate to
charitable and community endeavours
from local budgets.
All charitable donations and partnership
investments are subject to the
requirements of our Code of Conduct.
No political donations were made
to UK or non-UK political parties,
organisations or candidates during
the year (2021: nil). This approach
is aligned with our Group policy and
Code of Conduct.
Details of our share capital are shown
in note 25 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 2022 we held
70,289,137 shares in treasury, which
represented approximately 7.39
per cent of the Company’s issued
share capital and had an aggregate
nominal value of £7,028,914.
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.
Transaction in own shares
Imperial Brands PLC (the Company)
was on Friday 4 February 2022 informed
of the transfer, on 4 February 2022, by
way of gift of 3,000,000 (three million)
of its ordinary shares of 10 pence each
(Shares), which were held in treasury,
to the Imperial Tobacco Group PLC
2001 Employee Benefit Trust and
1,000,000 (one million) Shares, which
were held in treasury, to the Imperial
Tobacco Group PLC Employee and
Executive Benefit Trust. The shares
were to be used to satisfy awards
outstanding under the Company’s
employee share plans.
Purchase of ordinary shares
During 2022, we announced a
commitment to return surplus capital
to shareholders though regular annual
share buybacks if circumstances were
right, expected to be in the region of
£1 billion in the financial year ending
30 September 2023.
At its AGM on 2 February 2022,
the Company obtained shareholder
authorisation for the buyback of up
to 94,600,000 shares. No shares were
purchased during the year or in the
previous financial year.
www.imperialbrandsplc.com
149
GOVERNANCE DIRECTORS’ REPORT continued
INTEREST IN VOTING RIGHTS
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 not been notified of any changes to these
interests since the year-end and up to 14 November 2022, being a date not more than one month prior to the date of the AGM
Notice of Meeting, in accordance with DTR 5:
Disclosure
BlackRock
Spring Mountain Investments Ltd
Capital Group Companies Inc
FIL Limited
1. Direct holding.
2. Indirect holding.
RESULTS AND DIVIDENDS
Number of ordinary
shares at the date of
notification
(millions)
Percentage of issued
share capital at the
date of notification
53
48
48
47
5.621
5.192
5.091
4.981
We include a review of our operational and financial performance on pages 28 and 29.
The profit attributable to equity holders of the Company for the financial year was £1,570 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 2022 were paid on 30 June 2022 and
30 September 2022 respectively. The third dividend will be paid on 30 December 2022 and, subject to AGM approval, the final
dividend will be paid on 31 March 2023 to our shareholders on the Register of Members at the close of business on
17 February 2023. The associated ex-dividend date will be 16 February 2023.
Following a review by the Audit Committee at its meeting in November 2022, which confirmed the accounts showed
distributable reserves sufficient to support the expected third interim and final dividends and the interim dividends
in financial year 2023, the Directors have declared and propose dividends as follows:
Ordinary shares
Interim paid – June 2022
21.27p per share
Interim paid – September 2022
21.27p per share
Declared interim – December 2022
49.31p per share
Proposed final – March 2023
49.32p per share
Total ordinary dividends
141.17p per share
(2021: 139.08p)
2022
£ million
2021
£ million
202
202
467
467
199
199
458
458
1,338
1,314
150
Imperial Brands | Annual Report and Accounts 2022
PENSION FUND
The Group Pensions Committee has
been established to provide global
oversight on both risk and reward
elements of the Group’s Pension
arrangements.
The Committee’s objectives include
tackling the risks inherent in the
Group’s defined benefit pension
schemes as well as reward matters.
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
The agreements summarised below
are those which we consider to be
significant to the Group as a whole
and which contain provisions that
take effect, or give the other party or
parties a specific right to alter or
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 (now Reemtsma
Cigarettenfabriken 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% 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% 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% 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.
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%
guaranteed notes due 2025;
• 12 February 2019 €750 million 1.125%
guaranteed notes due 2023; and
• 12 February 2019 €750 million 2.125%
guaranteed notes due 2027.
www.imperialbrandsplc.com
151
GOVERNANCE DIRECTORS’ REPORT continued
The bonds Imperial Brands Finance
Netherlands B.V. issued in such
manner are as follows:
The bonds issued in such manner are
as follows:
• 11 February 2013 $1,000 million 3.5
• 18 March 2021 €1,000 million 1.750%
per cent guaranteed notes due 2023;
• 21 July 2015 $1,500 million 4.25
per cent guaranteed notes due 2025;
• 26 July 2019 $1,000 million 3.125
per cent guaranteed notes due 2024;
• 26 July 2019 $750 million 3.5%
guaranteed notes due 2026;
• 26 July 2019 $1,000 million
3.875 per cent guaranteed notes
due 2029; and
• 27 July 2022 $1,000 million 6.125%
guaranteed notes due 2027.
guaranteed notes due 2033.
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
(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.
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Imperial Brands | Annual Report and Accounts 2022
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.
2022 ANNUAL GENERAL MEETING VOTE
At the Annual General Meeting in 2022, the Company received strong support for all its resolutions.
POST-YEAR-END EVENTS
Share buybacks
On 6 October 2022 the Company announced the start of an ongoing share buyback programme, to initially repurchase up to
£1 billion of shares in the period from 7 October 2022 to 30 September 2023.
Pension fund loan
Imperial Brands Finance PLC provided a temporary loan facility of £320 million to the Imperial Tobacco Pension Fund, of
which £200 million had been drawn down during the first half of October 2022 to support ongoing liquidity requirements
within the Fund’s Liability Driven Investment holdings during a period of volatility in the UK Government Bond market.
£70 million of the drawn amount has been repaid, with the remaining £130 million to be repaid before 31 March 2023.
Logista acquisitions
In October 2022, the Group’s subsidiary Logista completed the acquisition of Carbo Collbatelle, S.L. and Transportes El Mosca.
Further details can be found in note 10 to the consolidated financial statements.
Russian disposal – associate market exits
Following the decision to sell the Volgograd factory that completed April 2022, it was determined that it would no longer be
economically viable to operate in a number of associated markets. As a consequence of this, the Group announced on
1 November 2022 that it was ending all operations in Kazakhstan, Kyrgyzstan, Mongolia and Armenia.
2023 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
1 February 2023 at 2.30pm.
Details of the resolutions to be put to the meeting can be found in the Notice of Annual General Meeting sent to shareholders
and made available on the Company’s website.
SUMMARY
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
134, 136, 138,
139, 141 and
142
N/A
135, 136 and
140
N/A
N/A
N/A
151
N/A
See above
See above
N/A
www.imperialbrandsplc.com
153
GOVERNANCE DIRECTORS’ REPORT continued
The Strategic Report and this
Directors’ Report were approved and
signed by order of the Board.
John Downing
Company Secretary
15 November 2022
Imperial Brands PLC
Incorporated and domiciled in
England and Wales No: 3236483
OTHER INFORMATION
In accordance with the Companies Act
2006, 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 investment case
commencing on page 26;
• information relating to our people,
including colleague engagement,
is included in the Stakeholder
Engagement section on page 31,
our People and Planet agenda on
pages 36 and 37, Safe and Inclusive
workforce on pages 52 to 57 and
on pages 105 and 107 in our
Governance Report;
• our principal risks are detailed
on pages 82 to 93;
• information relating to our
sustainability approach that
supports our environmental,
social and governance agenda
is included on pages 36 to 58;
• responsibilities to a broader
stakeholder group, including
consumers and customers,
are included on pages 30 to 34,
and 108 to 112;
• information on our greenhouse
gas emissions is included on
page 42; and
• the Directors of the Company are
listed on pages 96 to 99.
Our report under the Streamlined
Energy and Carbon Reporting
requirements can be found on
pages 42 and 43.
154
Imperial Brands | Annual Report and Accounts 2022
STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for
preparing the Annual Report and
Group and Parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, the
Directors are required to prepare the
Group financial statements in
accordance with UK – adopted
International Accounting Standards
(UK – adopted IFRS). In addition, the
Directors have elected to prepare the
Parent Company financial statements
in accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom Accounting
Standards and applicable law),
including FRS 101 ‘Reduced Disclosure
Framework’. 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 and Parent
Company for that period.
In preparing the Group financial
statements, International Accounting
Standard 1 requires that Directors:
• properly select and consistently
apply suitable accounting policies;
• present information, including
accounting policies, in a manner that
provides relevant, reliable, comparable
and understandable information;
• provide additional disclosures when
compliance with the specific
requirements in IFRS are
insufficient to enable users to
understand the impact of particular
transactions, other events and
conditions on the entity’s financial
position and financial performance;
• state whether the Group financial
statements have been prepared in
accordance with UK-adopted
International Accounting Standards,
subject to any material departures
disclosed and explained in the
financial statements; and
• prepare the Group financial
statements on the going concern
basis unless it is inappropriate to
presume that the Group will
continue in business.
In preparing the Parent Company
financial statements, the Directors are
required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable
and prudent;
• state whether applicable United
Kingdom Accounting Standards
have been followed, subject to any
material departures disclosed and
explained in the financial
statements; and
• prepare the financial statements
on the going concern basis unless
it is inappropriate to presume that
the Parent Company will continue
in business.
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 on a consolidated
and individual basis, and to enable
them to ensure that the Group
financial statements comply with the
Companies Act 2006. They are also
responsible for safeguarding the
assets of the Parent Company and its
subsidiaries and hence for taking
reasonable steps for the prevention
and detection of fraud and
other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Remuneration Report and
Corporate Governance Statement
that comply with the 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
legislation in other jurisdictions.
Each of the Directors, whose names
and functions are listed on pages 96
to 99, confirms that, to the best of
their knowledge
• the Group and Parent Company
financial statements, which have
been prepared in accordance with
IFRS as adopted by the UK and UK
GAAP FRS 101 respectively, give a
true and fair view of the assets,
liabilities, financial position and
profit of the Group and Parent
Company on a consolidated and
individual basis;
• the Strategic Report and the
Directors’ Report contained in the
Annual Report and Accounts
include a fair review of the
development and performance of
the business and position of the
Group and Parent Company,
together with a description of the
principal risks and uncertainties
that it faces; and
• they consider that the Annual
Report and Accounts, taken as a
whole, are fair, balanced and
understandable and provide the
information necessary for
shareholders to assess the Group
and the Parent Company’s position
and performance, business model
and strategy.
The Directors’ responsibilities in
relation to the disclosure of information
to auditors is disclosed in the Audit
Committee Report on page 129.
This Statement of Directors’
Responsibilities was approved by the
Board and signed on its behalf.
The Strategic Report and the Directors’
Report were approved by the Board
and signed on its behalf.
By order of the Board.
John Downing
Company Secretary
15 November 2022
Imperial Brands PLC
Incorporated and domiciled in
England and Wales
No. 3236483
www.imperialbrandsplc.com
155
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
2022 and of the group’s profit for the year then ended;
• the consolidated financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice and in accordance with section 408 of the Companies Act 2006; 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 2022 which comprise:
Group
Parent company
Consolidated balance sheet at 30 September 2022
Balance sheet at 30 September 2022
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 X 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 34 to the financial statements, including a
summary of significant accounting policies and the
supplementary information on pages 221 to 228
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable
law and UK adopted international accounting standards, 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 2024;
• assessing the appropriateness of the duration of the going concern assessment period to 31 March 2024 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;
• assessing whether assumptions made, including those relating to current economic challenges, 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;
156
Imperial Brands | Annual Report and Accounts 2022
• 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 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,
• 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 that result in breaches to liquidity or
financial covenants has no more than a remote possibility of occurring;
• 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 and will not breach banking covenants. Under management’s worst-case
scenario, which includes a permanent reduction in profitability of 30%, an increase in bad debt and the loss of factoring
facilities, liquidity is eliminated in January 2024. This scenario is not considered plausible. We have not identified any
climate-related risks that would materially impact the group’s forecasts to 31 March 2024.
• Controllable mitigating actions available to management over the going concern assessment period, including reductions
to non-declared dividend payments and uncommitted share buybacks, 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 2024.
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 14 components.
• The components where we performed full or specific audit procedures accounted for 91% of Profit
before tax on an absolute basis, 83% of Revenue and 89% of Total assets.
Key audit matters
• Revenue recognition, including management override of controls
• Measurement and classification of adjusting items
• Uncertain tax positions
• Litigation
Materiality
• Overall group materiality of £126m which represents 5% of profit before tax.
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, management’s assessment of control effectiveness, 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 394 reporting components of the group, we
selected 19 components covering entities within the UK, USA, Germany, Spain, Australia, Morocco, France, Poland and
Belgium, which represent the principal business units within the group.
Of the 19 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 14 components (“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.
The audit scope of specific scope components may not have included testing of all significant accounts of the component but
will have contributed to the coverage of significant accounts tested for the group. We also covered 18 additional locations and
performed specified procedures over Cash and Cash equivalents by obtaining bank confirmation letters to validate the
amounts held in those locations in order to increase the coverage of this account to 95% of the total group cash balance at
30 September 2022. Of the remaining 357 components that together represent 9% of the group’s Profit before tax on an absolute
basis, none are individually greater than 1% 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.
www.imperialbrandsplc.com
157
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC continued
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
2022
2021
% of group
PBT (on
absolute
basis)1
Number
% of group
Revenue
% of group
Assets
Number
5
14
18
37
357
394
73%
18%
0%
91%
9%
60%
23%
0%
83%
17%
70%
19%
1%
90%
10%
100%
100%
100%
5
19
10
34
354
388
% of group
PBT (on
absolute
basis)1
63%
32%
1%
96%
4%
100%
% of group
Revenue
% of group
Assets
60%
25%
1%
86%
14%
100%
55%
25%
2%
82%
18%
100%
1. Coverage of profit before tax measured on an absolute basis for each component (components with a loss would be added to both the numerator and denominator).
Changes from the prior year
The approach to audit scoping is similar to the prior year audit. Our scoping changes from the prior year arise due to a
change in either the risk assigned to the components or the contribution by the component include the following:
• The Russian component has been removed from scope as a result of its disposal which completed in April 2022;
• Certain components in Belgium, Netherlands and USA have moved from specific scope to review scope reflecting lowered
audit risk and reduced contribution 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 primary audit team and four by component audit teams. For the 14 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 work that needed to be undertaken at each of the locations by the group
engagement team or by auditors from local EY teams.
The group audit team continued to follow a programme of planned visits that has been designed to ensure that the Senior
Statutory Auditor, and other group Partners, visit all full scope and other key locations. During the current year’s audit cycle,
visits were undertaken by the primary audit team to the component teams in the USA, Germany, Spain, Morocco, France and
Poland. These visits involved discussing the audit approach with the component team and any issues arising from their
work, meeting with local management, and reviewing relevant audit working papers on risk areas. The primary team
interacted regularly with the component teams, where appropriate, during various stages of the audit, reviewed relevant
working papers and were responsible for the scope and direction of the audit process. At critical periods of the audit, we
increased the use of online collaboration tools to facilitate team meetings, information sharing and the evaluation, review
and oversight of component teams. We requested more detailed deliverables from component teams, and we utilised fully
the interactive capability of EY Canvas, our global audit workflow tool, to review remotely the relevant underlying work
performed. Other group partners are responsible for the UK component teams. For the UK components, communication has
been maintained throughout the audit with the Senior Statutory Auditor covering the same areas described above applicable
to all non-UK component teams. This, together with the additional procedures performed at group level, gave us appropriate
evidence for our opinion on the group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact Imperial Brands PLC. The group
has determined that the most significant future impacts from climate change on their operations will be from:
• an increase in material costs
• increased costs from emerging regulation such as carbon taxation
• changes in the tobacco crop yield that may lead to agricultural supply chain disruption; and,
• other impacts that may cause supply chain disruption or affect production capacity, namely:
• increased frequency and severity of extreme weather events
• physical hazards such as flooding
• chronic drought risk; and
• more severe hurricane risk.
These are explained on pages 59 to 65 in the required Task Force for Climate related Financial Disclosures, which form part
of the “Other information,” rather than the audited financial statements. Our procedures on these disclosures therefore
consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appear to be materially misstated.
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Imperial Brands | Annual Report and Accounts 2022
As explained in note 2, Accounting estimates and judgements, governmental and societal responses to climate change risks
are still developing, and are interdependent upon each other, and consequently financial statements cannot capture all
possible future outcomes as these are not yet known. The degree of certainty of these changes may also mean that they
cannot be taken into account when determining asset and liability valuations and the timing of future cash flows under the
requirements of UK adopted international accounting standards.
Our audit effort in considering climate change was focused on evaluating management’s assessment of the impact of
physical and transition climate risk, and ensuring that the effects of material climate risks disclosed on pages 62 and 63
have been appropriately reflected in asset values and associated disclosures where values are determined through
modelling future cash flows, being goodwill and intangible assets impairment assessment (note 11) and the recoverability of
deferred tax assets (note 22). We also challenged the Directors’ considerations of climate change in their assessment and
disclosure of going concern (note 1) and viability.
Whilst the group have stated their commitment to the aspirations of the Paris Agreement to achieve net zero emissions by
2040, the group are currently unable to determine the full future economic impact on their business model, operational plans
and customers to achieve this and therefore as set out above the potential impacts are not fully incorporated in these
financial statements.
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
Revenue recognition, including
management override of controls
(2022: £32,551m, 2021: £32,791m)
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).
There is also a risk of error relating to the
accounting for non-routine transactions.
Due to the size of the revenue balance,
even errors representing a relatively
small proportion could lead to material
misstatement of profit.
In addition, the impact of promotional
activity around period ends leading to
trade loading 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.
Refer to the audit committee report
(page 126); accounting policies (note 1);
accounting estimates and judgements
(note 2); and segmental information
(note 3) of the consolidated
financial statements.
Our response to the risk
We have reviewed Imperial’s Code of Conduct, Speaking-up, and Fraud risk
management policies in order to evaluate the ‘tone at the top’.
We obtained an understanding of the revenue process and understood how
Imperial’s revenue recognition policies are applied. We also assessed the processes
and key controls over rebate accounting, by walking through the process from
identification to recording.
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 those in respect of rebate arrangements.
As part of our overall revenue recognition testing, for Tobacco & NGP components
with revenue in scope, we used data analytics techniques. This included testing
the occurrence of revenue by analysing the correlation 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 £17.6 billion
(75%) of Tobacco & NGP revenue recognised by the group. For one in-scope
component where we did not use data analysis techniques, we performed
substantive tests of detail, including procedures to identify fictitious manual
journals and non-routine transactions to ensure these were appropriately recorded.
For the Distribution component, we performed a combination of tests of controls
and substantive tests of detail to obtain assurance over £8.5 billion (87%) of
Distribution revenue recognised by the group.
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.
On a sample basis, we obtained third party confirmations of trade terms from
customers to assess for indicators of trade loading, where relevant, such as
unusual sales patterns, rebates/discounts or increased receivable days at period-
ends. We 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.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC continued
Risk
Our response to the risk
Our remaining 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;
• 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 and shared service centre 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 during the year.
Measurement and classification of
adjusting items
A number of Alternative Performance
Measures (APMs) are used in the
annual report, including adjusted
measures that are linked to executive
remuneration. There is a risk that
management could override controls by
classifying costs as adjusting that do
not meet the criteria as defined by
group policy to manipulate KPIs which
have a bearing on remuneration. In the
current year we identified the following
adjusting items as areas of focus:
• Incorrect classification of items as
restructuring costs, including Project
Novo, in order to manipulate the
adjusted operating profit metric;
• Errors relating to working capital
metrics, particularly focused on
inappropriate cash cut-off to
manipulate working capital and
therefore the adjusted operating cash
conversion metric
Refer to the audit committee report
(page 123); accounting policies (note 1);
accounting estimates and judgements
(note 2); restructuring provision (note 5)
of the consolidated financial statements;
and the supplementary information.
Measurement and classification of adjusting items
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 recent thematic reviews.
We assessed the APM policy for alignment with ESMA guidance, specifically:
• The clarity of definitions and explanations for the use of APMs;
• adequacy of reconciliations to GAAP measures;
• equal prominence to GAAP measures; and
• consistency of application, including explanations for any changes.
In respect of our focus on restructuring costs, we have:
• Challenged the classification and timing of recognition of one-off costs as
adjusting and evaluated the one-off adjustments for indicators of
management bias; in particular, whether both income and expense items are
treated consistently.
• We tested the completeness and accuracy of restructuring costs including
verifying that IAS 37 criteria had been correctly met. 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.
In respect of our focus on working capital metrics, we have:
• performed cut-off testing at year end on working capital balances to a lower
testing threshold. Namely, on trade receivables, inventory and trade payables
to ensure that working capital metrics are not recorded pre year end and
then reversed post year end to manipulate the adjusted operating cash
conversion metric.
• performed detailed, disaggregated analytical review to identify unusual
trends and positions in key significant accounts such as cash, trade
receivables, trade payables and inventory to identify potential manipulation
of these balances that would influence working capital balances.
• Made inquires outside of finance, for example with Sales, to identify any
unusual and new arrangements entered into during the last quarter of
Imperial’s financial year to assess if these are being manipulated to flatter
working capital.
We reviewed the annual report disclosures, including Imperial’s management
rationale for treating as adjusting, whether equal prominence had been given
with statutory measures and the transparency of the reconciliation of statutory
measures to APM’s.
Key observations communicated to the Audit Committee
We confirmed that the APM policy is substantially aligned to ESMA guidance, with the basis for use and reconciliation to
GAAP measures appropriately disclosed in the annual report.
We consider that restructuring costs and provisions are materially correct and disclosed appropriately.
Following our procedures performed over working capital metrics, we consider these balances are materially correct.
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Risk
Uncertain tax positions (Provision for
uncertain tax positions – 2022:
£148m, 2021: £306m)
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.
Refer to the audit committee report
(page 125); accounting policies (note 1);
accounting estimates and judgements
(note 2); and tax disclosure (note 7) of
the consolidated financial statements.
Our response to the risk
We understood:
• 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 provisioning for uncertain
tax positions. Our work utilised additional support from country tax specialists
in France, Germany, Malta, Netherlands 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 the group’s judgement relating to the UK CFC’s State Aid
investigations, including holding discussions with management’s
legal advisors.
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.
www.imperialbrandsplc.com
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC continued
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 quantification and 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 independently 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.
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.
Risk
Litigation
There are a number of ongoing legal
cases in different jurisdictions relating
to competition, product liability,
intellectual property and commercial
litigation. Significant judgements are
involved in determining the likelihood
of a probable outflow occurring from
legal cases, together with the estimate
of the likely financial cost. The group’s
assessment includes evaluating the
relevant law, historical and pending
court rulings with the support of
legal counsel.
Given the judgements and the
significance of the amounts involved,
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 if the
potential exposures were to be realised,
and any cases which could indicate
non-compliance with the legal and
regulatory frameworks with which the
group is required to comply.
Refer to the audit committee report
(page 125); accounting policies (note 1);
accounting estimates and judgements
(note 2), and contingent liabilities (note
29) 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 recorded 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 range of exposures facing the company, where that is possible.
In the prior year, our auditor’s report included a key audit matter in relation to the carrying value of NGP intangible assets. In
the current year, the continued amortisation of such assets and absence of additions meant this was no longer considered
as significant for the financial statements as a whole.
In the prior year, our auditor’s report included a key audit matter in relation to reporting performance. This year, the key
audit matter has been refined to focus on the measurement and classification of adjusting items. We now focus on the
manipulation of adjusted measures that are linked to executive remuneration, namely working capital balances that impact
the adjusted operating cash conversion metric, and the classification of items as restructuring.
Both in the current year and prior year, our auditor’s report includes key audit matters in relation to revenue recognition
including management override, uncertain tax positions and litigation. The risk associated with these matters remained
consistent with the prior year.
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 £126 million (2021: £148 million), which is 5% of Profit before tax (2021: 5% of
profit before tax, adjusted for one-off gain on disposal of subsidiaries). We believe that Profit before tax provides the most
relevant performance measure to the stakeholders of the group.
We determined materiality for the Parent Company to be £309 million (2021: £275 million), which is 2% (2021: 2%) of
net assets. In performing our procedures, materiality was capped at the group allocated materiality of £30 million
(2021: £25 million).
162
Imperial Brands | Annual Report and Accounts 2022
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 75% (2021: 50%) of our planning materiality, namely £95 million (2021: £74
million). Performance materiality has increased to 75% this year as a result of a lower number of audit adjustments
identified in the September 2021 audit.
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
£19 million to £30 million (2021: £7 million to £39 million).
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 £6 million
(2021: £7 million), 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 1-155, 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 this gives rise to 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.
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
We have reviewed 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 by the Listing Rules.
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 112;
www.imperialbrandsplc.com
163
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IMPERIAL BRANDS PLC continued
• 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 page 92 to 93;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and
meets its liabilities set out on page 112;
• Directors’ statement on fair, balanced and understandable set out on page 112;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 84
to 91;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 82 to 83; and;
• The section describing the work of the audit committee set out on page 119 to 120
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 155, 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.
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.
• 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 and
are those that relate to the reporting framework (UK adopted international accounting standards, 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 inquiries of management, internal audit,
those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries 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 inquiries 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 inquiries 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
164
Imperial Brands | Annual Report and Accounts 2022
platform in performing our work on the order to cash and purchase to pay and inventory processes to assist in identifying
higher risk transactions for testing. In addition, as a result of the sanctions imposed to Russia and Belarus companies and
individuals, we have performed inquiries to understand Imperial’s process to identify these and whether there were
impacts to the business.
• 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.
Other matters we are required to address
• Following the recommendation from the audit committee, we signed an engagement letter on 15 January 2020 which was
subsequently replaced on 23 August 2022. 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 three years, covering the
years ending 2020 to 2022.
• 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 2022
www.imperialbrandsplc.com
165
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2022
£ million unless otherwise indicated
Revenue
Duty and similar items
Other cost of sales
Cost of sales
Gross profit
Distribution, advertising and selling costs
Administrative and other expenses
Operating profit
Investment income
Finance costs
Net finance (costs)/income
Share of (loss)/profit of investments accounted for using the equity method
Profit before tax
Tax
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per ordinary share (pence)
– Basic
– Diluted
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2022
£ million
Profit for the year
Other comprehensive income
Exchange movements
Exchange movements recycled to profit and loss upon disposal of subsidiaries
Hyperinflation adjustment in the year
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
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income for the year
Notes
3
4
14
4
7
9
9
Notes
10
1
23
2022
32,551
(15,644)
(10,869)
(26,513)
6,038
(2,021)
(1,334)
2,683
1,600
(1,717)
(117)
(15)
2,551
(886)
1,665
1,570
95
165.9
164.7
2022
1,665
841
190
11
148
–
2021
32,791
(16,229)
(10,535)
(26,764)
6,027
(2,118)
(763)
3,146
1,060
(979)
81
11
3,238
(331)
2,907
2,834
73
299.9
299.1
2021
2,907
(680)
(337)
–
(105)
(12)
1,190
(1,134)
76
10
(52)
34
1,224
2,889
2,778
111
2,889
41
2
(21)
22
(1,112)
1,795
1,761
34
1,795
166
166
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
CONSOLIDATED BALANCE SHEET
at 30 September
£ million
Non-current assets
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
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Derivative financial instruments
Current assets held for disposal
Total assets
Current liabilities
Borrowings
Derivative financial instruments
Lease liabilities
Trade and other payables
Current tax liabilities
Provisions
Current liabilities held for disposal
Non-current liabilities
Borrowings
Derivative financial instruments
Lease liabilities
Trade and other payables
Deferred tax liabilities
Retirement benefit liabilities
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium and capital redemption
Retained earnings
Exchange translation reserve
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Notes
2022
2021
11
12
13
14
23
16
20/21
22
7
15
16
7
17
20/21
10
19
20/21
13
18
7
24
10
19
20/21
13
18
22
23
24
25
17,777
1,659
228
56
826
67
985
439
–
16,674
1,715
242
88
1,046
62
391
564
101
22,037
20,883
4,140
2,543
334
1,850
54
–
8,921
30,958
(1,011)
(54)
(58)
(9,506)
(307)
(203)
–
3,834
2,749
234
1,287
68
35
8,207
29,090
(1,107)
(62)
(57)
(9,106)
(253)
(188)
(35)
(11,139)
(10,808)
(8,996)
(1,072)
(190)
(10)
(961)
(894)
(223)
(12,346)
(23,485)
7,473
103
5,837
(443)
1,363
6,860
613
7,473
(8,715)
(984)
(194)
(7)
(1,037)
(1,199)
(206)
(12,342)
(23,150)
5,940
103
5,837
(788)
200
5,352
588
5,940
The financial statements on pages 166 to 244 were approved by the Board of Directors on 15 November 2022 and signed on its
behalf by:
LUKAS PARAVICINI
DIRECTOR
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
167
167
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2022
£ million
At 30 September 2021
Hyperinflation restatement to 1 October 2021
At 1 October 2021
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
Hyperinflation adjustment in the year
Current tax on 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
Total comprehensive income
Transactions with owners
Costs of employees' services compensated by
share schemes
Changes in non-controlling interests
Deferred tax on share based payments
Dividends paid
At 30 September 2022
At 1 October 2020
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/(expense)
Total comprehensive income/(expense)
Transactions with owners
Costs of employees' services compensated by
share schemes
Dividends paid
At 30 September 2021
Share
premium
and capital
redemption
5,837
–
5,837
Share
capital
103
–
103
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103
5,837
103
5,837
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103
5,837
Retained
earnings
Exchange
translation
reserve
Equity
attributable
to owners
of the
parent
Non-
controlling
interests
(788)
22
(766)
1,570
–
–
–
–
11
–
76
10
(52)
45
1,615
29
(3)
2
(1,320)
(443)
(2,364)
2,834
–
–
–
–
–
–
41
2
(21)
22
2,856
25
(1,305)
(788)
200
–
200
–
1,518
(649)
(44)
190
–
148
–
–
–
1,163
1,163
–
–
–
–
1,363
1,295
–
(1,034)
476
(83)
(337)
(105)
(12)
–
–
–
(1,095)
(1,095)
–
–
200
5,352
22
5,374
1,570
1,518
(649)
(44)
190
11
148
76
10
(52)
1,208
2,778
29
(3)
2
(1,320)
6,860
4,871
2,834
(1,034)
476
(83)
(337)
(105)
(12)
41
2
(21)
(1,073)
1,761
25
(1,305)
5,352
588
–
588
95
16
–
–
–
–
–
–
–
–
16
111
–
3
–
(89)
613
647
73
(39)
–
–
–
–
–
–
–
–
(39)
34
–
(93)
588
Total
equity
5,940
22
5,962
1,665
1,534
(649)
(44)
190
11
148
76
10
(52)
1,224
2,889
29
–
2
(1,409)
7,473
5,518
2,907
(1,073)
476
(83)
(337)
(105)
(12)
41
2
(21)
(1,112)
1,795
25
(1,398)
5,940
168
168
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2022
£ million
Cash flows from operating activities
Operating profit
Dividends received from investments accounted for under the equity method
Depreciation, amortisation and impairment
Loss on disposal of non-current assets
Loss/(profit) on disposal of subsidiaries
Post-employment benefits
Costs of employees' services compensated by share schemes
Fair value adjustment to financial assets
Movement in provisions
Operating cash flows before movement in working capital
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Movement in working capital
Tax paid
Net cash flows generated from operating activities
Cash flows from investing activities
Interest received
Proceeds from the sale of non-current assets
Proceeds from sale of subsidiaries, net of cash disposed of (note 10)
Purchase of non-current assets
Purchase of brands and operations (note 10)
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Interest paid
Purchase of shares by Employee Share Ownership Trusts
Lease liabilities paid
Increase in borrowings
Repayment of borrowings
Cash flows relating to derivative financial instruments
Dividends paid to non-controlling interests
Dividends paid to owners of the parent
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Effect of foreign exchange rates on cash and cash equivalents
Cash and cash equivalents at end of year
2022
2021
2,683
3,146
7
660
–
428
(56)
29
37
39
3,827
(195)
89
146
40
(681)
3,186
8
53
27
(230)
(13)
(155)
(366)
(1)
(68)
1,710
(2,476)
94
(89)
(1,320)
(2,516)
515
1,287
48
1,850
4
815
2
(281)
(63)
25
(15)
18
3,651
70
(201)
(533)
(664)
(820)
2,167
15
50
845
(200)
–
710
(415)
–
(69)
858
(2,224)
41
(93)
(1,305)
(3,207)
(330)
1,626
(9)
1,287
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11.. AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS
Basis of preparation
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.
The consolidated financial statements have been prepared in accordance with UK-adopted International Accounting Standards
(“UK-adopted IAS”).
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 consolidated financial statements are presented in pounds sterling, the presentation currency of the Group, and the functional
currency of the Company. All values are rounded to the nearest one million (£1 million) except where otherwise indicated.
Adjusted performance measures
During the year the Group conducted a review of Adjusted Performance Measure (APM) metrics within the Annual Report and
Accounts. The aim of the review was to increase transparency as to the definition of APMs and to ensure that reconciliations to
IFRS-based measures were presented in a consistent and understandable format. Information on APMs is now presented within the
Supplementary Information section of this document. As part of the changes key adjusting items within administration costs which
were previously shown on the face of the Group Income Statement are now set out within the APM disclosures area.
Basis for going concern
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 Group recognises uncertainty of the external environment. Given the current macroeconomic situation, our plans include higher
than historical inflation impact to cost of sales driven by commodity price increases, energy and logistic costs; as well as higher
people costs. During the period of the Covid-19 pandemic as well as during the ongoing period of political uncertainty with regard to
Ukraine and Russia, the Group effectively managed operations across the world, and has proved it has an established mechanism to
operate efficiently despite uncertainty. The Directors consider that a one-off discrete event with immediate cash outflow is of
greatest concern to short-term liquidity of the Group.
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; and/or other legal and
regulatory risks materialising; of c. £1,000 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%
from 1 October 2022.
• The additional impact of potential bad debt risks arising from a recession of c. £220 million.
• The withdrawal of facilities that provide receivables factoring of c. £560 million.
The scenario planning also considered mitigation actions including reductions to capital expenditure, dividend payments and share
buyback programme. 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 the worst-case scenario, where the largest envisaged downside scenarios all take place at the same time the Group would
have sufficient headroom until December 2023. 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 this scenario Group would implement
a number of mitigating actions including revoking the uncommitted dividend, pausing share buyback and reducing discretionary
spend such as capex.
Based on its review of future cash flows covering the period through to March 2024, 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 2024 and concludes that it is appropriate to prepare the financial
statements on a going concern basis.
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 2022. 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
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 (loss)/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
Closing rate
Average rate
Closing rate
Average rate
2022
2021
EUR
USD
1.1325
1.1040
1.1807
1.2813
1.1621
1.3456
1.1451
1.3690
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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 29 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 in which 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.
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 is considered by the Directors to have an indefinite
life based on the fact that it is an established international brand 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.
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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
straight line
straight line
straight line
straight line
Property, plant and equipment
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.
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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.
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.
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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.
Hyperinflation
The Turkish economy was designated hyperinflationary from April 2022. The Group has applied IAS 29 Financial Reporting in
Hyperinflationary Economies to its Turkish operations from the beginning of the 2022 financial year. IAS 29 requires that
hyperinflationary adjustments are reflected from the start of the reporting period in which it is applied. For the Group’s Turkish
operations this is 1 October 2021. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, the comparative
figures for the year ended 30 September 2021 have not been modified. The adjustments required by IAS 29 are set out below.
• Adjustment of historical cost non-monetary assets and liabilities from their date of initial recognition to the balance sheet date to
reflect the changes in purchasing power of the currency caused by inflation, as measured by the official Consumer Price Index
(CPI) published by the Turkish Statistical Institute (TurkStat).
• Adjustment of the components of the income statement and cash flow statement for the inflation index since their generation,
with a balancing entry in the income statement and a reconciling item in the cash flow statement, respectively.
• Adjustment of the income statement to reflect the impact of inflation on holding monetary assets and liabilities in local currency,
where necessary.
• The financial statements of the Group’s Turkish operations have been translated into Sterling at the closing exchange rate at
30 September 2022.
• The impact of adjustments to non-monetary assets recognising inflation from the adoption date to the closing balance sheet date,
on translation into Sterling at the closing balance sheet rate has been recognised within Other Comprehensive Income.
• The cumulative impact corresponding to previous years has been reflected directly in equity as an adjustment to the opening
retained earnings reserve at 1 October 2021.
The TurkStat CPI index was 570.66 at 30 September 2021 and 1,046.89 at 30 September 2022. The inflation index for the year is
therefore 1.8345. The Turkish economy has been designated hyperinflationary since April 2022, but the impact on the Group’s results
remains immaterial.
New accounting standards
The following amendments to the accounting standards, issued by the IASB or International Financial Reporting Interpretations
Committee (IFRIC) and endorsed for use in the UK, have been adopted by the Group from 1 October 2021 with no impact on the
Group’s consolidated results, financial position or disclosures:
• 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
Group 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 GBP LIBOR derivatives were changed to reference SONIA instead of GBP LIBOR. All USD
LIBOR derivatives will be changed to reference SOFR instead of USD LIBOR during the remainder of calendar year 2022. There are no
changes pending for euro derivatives. No temporary reliefs or practical expedients were required to be taken by the Group.
New accounting standards and interpretations not yet in issue
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 CONSOLIDATED FINANCIAL STATEMENTS continued
22.. AACCCCOOUUNNTTIINNGG EESSTTIIMMAATTEESS AANNDD JJUUDDGGEEMMEENNTTSS
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.
Significant estimates
Companies are required to state whether estimates have a significant risk of a material adjustment to the carrying amounts of assets
and liabilities within the next financial year. We have reviewed the items below where estimation uncertainty exists. While a number
of these areas do involve estimation of the carrying value of assets or liabilities that are potentially significant within the context of
the financial statements the Group considers the probability of a significant risk of material adjustment to be low. None of these
estimates are expected to present a material adjustment to the carrying amount of assets and liabilities in the next financial year.
Therefore, no significant estimates are required to be disclosed.
Other estimates
Other estimates involve other uncertainties, such as those carrying lower risk, which have a smaller potential impact or would be
expected to crystallise over a longer timeframe than a significant estimate. These items, listed below, are only disclosed where this
provides material relevant information.
Determination of useful economic life of intangible assets
For non-goodwill intangible assets, there is a need to estimate the useful economical life of each asset. This includes 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.
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 time period during which an intangible asset will support future cash flows, and the quantum of those 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, an impairment to 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 can 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
significantly change it is possible that materially different amounts could be reported in the Group’s financial statements in future
periods. 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 value 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 11.
Corporate income taxes
Where tax liabilities have been judged to exist, estimation is often required to determine the potential future tax payments. The Group
is subject to 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 valuation estimates related to tax provisions are given in note 7 to these financial statements.
176
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Legal proceedings and disputes
Where a liability is determined there can be a degree of estimation of the potential level of damages expected. Key areas of
estimation uncertainty include consideration as to the expected future amount to be paid out in the event the claim succeeds.
In some situations where a probability risk calculation is required to determine the amount of an associated provision, both the
quantum of future payments and the probability of those payments crystallising needs to be considered, both factors having a degree
of uncertainty. More detail as to the considered position of these claims is given in note 29 of the financial statements. 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.
Restructuring provisions
The Group holds restructuring provisions where appropriate in respect of estimated future economic outflows which arise due to past
events. Estimates are based on 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. These provisions
cover 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 24.
Judgements
Paragraph 122 of IAS 1 requires disclosure of judgements made by management in applying an entity’s accounting policies, other
than those relating to estimation uncertainty. Paragraph 125 of IAS 1 requires more wide-ranging disclosures of judgements that
depend on management assumptions about the future, and other major sources of estimation uncertainty ('Significant Judgements').
Corporate income taxes
Judgement is involved in determining whether the Group is subject to a tax liability or not in line with tax law. The Group is subject to
income tax in numerous jurisdictions and significant judgement is required in determining whether there is a liability requiring a
provision for tax. Recognition of tax liabilities in situations where there is uncertainty is based on precedent in similar tax cases and
external advice as to whether challenges by tax authorities are likely to result in future tax payments being made. The recognition of
a tax liability involves consideration of the probability of tax authorities would accept the position taken in the tax return and there is
therefore some uncertainty.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unused tax credits to the extent that it
is probable that taxable profit will be available against which the temporary differences, losses and credits can be utilised. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits, together with future tax planning strategies. The Group has determined that it cannot
recognise deferred tax assets on the temporary differences, tax losses and tax credits carried forward for certain subsidiaries.
Further details of the estimates related to deferred taxes are given in note 22 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. A provision will only be recognised where it is probable that the Group will be required to
settle a claim.
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 % 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.
Climate change
The Group have a designated a programme to manage and mitigate climate related risks. The effect of climate change is not
considered to have a material effect on the estimates in the financial statements. Governmental and societal responses to climate
change risks are still developing and consequently financial statements cannot capture all possible future outcomes as these are not
yet known or do not have sufficient certainty to be taken into account when determining asset and liability valuations and the
timing of future cash flows under the requirements of UK adopted international accounting standards. Please refer to the following
sections for further discussion on the impact of climate change relating to going concern assumptions in note 1, intangible assets
impairment assumptions in note 11 and recoverability of deferred tax assets in note 22.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
33.. SSEEGGMMEENNTT IINNFFOORRMMAATTIIOONN
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 the 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, Saudi Arabia, Taiwan and our African markets including Algeria and Morocco.
Tobacco & NGP
£ million unless otherwise indicated
Revenue
Net revenue
Operating profit
Adjusted operating profit
Adjusted operating margin %
Distribution
£ million unless otherwise indicated
Revenue
Distribution net revenue
Operating profit
Adjusted operating profit
Adjusted operating margin %
Revenue
£ million
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Eliminations
Total Group
Tobacco
23,232
7,545
NGP
224
208
2022
Tobacco
& NGP
23,456
7,793
2,472
3,441
44.2
Tobacco
23,664
7,422
NGP
199
188
2022
9,756
1,046
212
254
24.3
Total
revenue
14,720
3,393
5,750
23,863
9,589
(661)
32,791
Total
revenue
14,194
3,756
5,506
23,456
9,756
(661)
32,551
2022
External
revenue
13,533
3,756
5,506
22,795
9,756
–
32,551
2021
Tobacco
& NGP
23,863
7,610
2,991
3,308
43.5
2021
9,589
1,069
148
258
24.1
2021
External
revenue
14,059
3,393
5,750
23,202
9,589
–
32,791
The eliminations all relate to Tobacco & NGP sales to Distribution.
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Tobacco & NGP net revenue
£ million
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Tobacco
3,306
2,784
1,495
7,585
NGP
166
42
–
208
2022
Total
3,472
2,826
1,495
7,793
Tobacco
3,425
2,478
1,519
7,422
NGP
126
56
6
188
2021
Total
3,551
2,534
1,525
7,610
Adjusted operating profit and reconciliation to profit before tax
£ million
2022
2021
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Eliminations
Adjusted operating profit
Russian and associated markets exit – Tobacco & NGP
Acquisition and disposal costs – Tobacco & NGP
Acquisition and disposal costs – Distribution
(Loss)/profit on disposal of subsidiaries – Tobacco & NGP
Loss on disposal of subsidiaries – Distribution
Amortisation and impairment of acquired intangibles – Tobacco & NGP
Amortisation of acquired intangibles – Distribution
Excise tax provision – Tobacco & NGP
Fair value adjustment to financial assets – Tobacco & NGP
Buy-out of liabilities on Irish pension scheme – Tobacco & NGP
Restructuring costs – Tobacco & NGP
Restructuring costs – Distribution
Operating profit
Net finance (costs)/income
Share of (loss)/profit of investments accounted for using the equity method
Profit before tax
Other information
£ million
Tobacco & NGP
Europe
Americas
Africa, Asia & Australasia
Total Tobacco & NGP
Distribution
Total Group
1,562
1,179
700
3,441
254
(1)
3,694
(399)
(5)
–
(13)
(16)
(323)
(26)
9
(37)
(4)
(197)
–
2,683
(117)
(15)
2,551
1,670
1,037
601
3,308
258
7
3,573
–
–
(17)
281
–
(365)
(85)
1
15
–
(249)
(8)
3,146
81
11
3,238
2022
Additions
to property,
plant and
equipment
Depreciation
and
software
amortisation
Additions
to property,
plant and
equipment
2021
Depreciation
and
software
amortisation
63
31
22
116
29
145
103
25
25
153
32
185
87
26
20
133
32
165
99
28
27
154
40
194
Additional geographic analysis
External revenue and non-current assets are presented 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
2022
2021
External
revenue
Non-current
assets
External
revenue
Non-current
assets
4,286
4,238
3,215
3,726
17,086
32,551
112
3,269
2,365
6,410
7,336
19,492
4,558
4,566
3,537
3,405
16,725
32,791
102
3,246
2,336
5,486
7,307
18,477
Non-current assets comprise intangible assets, property, plant and equipment and investments accounted for using the
equity method.
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179
179
2022
857
2,660
7,350
235
406
5
3
2
74
75
20
–
(3)
2021
947
2,700
7,009
170
575
17
4
2
66
(442)
117
2
(10)
2022
2021
2.2
5.6
7.8
0.4
8.2
0.6
0.6
8.8
2022
103
70
24
197
2.0
5.1
7.1
0.4
7.5
0.4
0.4
7.9
2021
145
92
20
257
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
44.. PPRROOFFIITT BBEEFFOORREE TTAAXX
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 and impairment to investments in associates
Acquisition and disposal costs
Expenses relating to short-term leases
Expenses relating to low value asset leases
Depreciation and impairment of right of use assets
Net foreign exchange losses/(gains)
Write down of inventories
Loss on disposal of non-current assets
Write back 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
Total audit fees
Audit related assurance services
Total audit related fees
Other assurance services
Total non-audit fees
Total auditor's remuneration
55.. RREESSTTRRUUCCTTUURRIINNGG CCOOSSTTSS
£ million
Employment related
Asset impairments
Other charges
Analysed by workstream:
£ million
2021 Strategic review programme
Cost optimisation II
Cost optimisation I
Other
Costs
Cash spend
197
–
–
–
197
56
19
11
5
91
2022
Cumulative
cash spend
104
567
582
90
1,343
Costs
Cash spend
226
16
7
8
257
48
41
12
11
112
2021
Cumulative
cash spend
48
548
571
85
1,252
The charge for the year is £197 million (2021: £257 million). In the year to 30 September 2022 this all relates to the 2021 Strategic
review programme.
Restructuring projects involve significant one-off costs that are incurred in integrating acquired businesses and in major
rationalisation and optimisation initiatives together with their related tax effects.
As these projects are not part of business as usual any costs incurred are classified as restructuring costs and are included within
administrative and other expenses in the consolidated income statement and treated as adjusting items.
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 total restructuring costs in respect of the programme were expected to be in the range of £375 million – £425 million.
The programme is now complete, and total restructuring costs in respect of the programme are £423 million, there are no further
costs expected beyond September 2022.
Restructuring costs of £197 million (2021: £226 million) related to the 2021 Strategic review programme have been incurred in the year,
representing £121 million costs in respect of the change programme itself and £76 million of impairments and other non-cash costs
associated with machine and property assets.
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Cost optimisation programmes
The cost optimisation programmes (Phase I announced in 2013 and Phase II announced in November 2016) were 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 has delivered savings of c. £305 million per annum from September 2018.
Phase II was concluded at the end of 2021 and has delivered savings of c. £320 million per annum from September 2021.
Whilst both programmes are concluded there remain some ongoing cash costs.
66.. DDIIRREECCTTOORRSS AANNDD EEMMPPLLOOYYEEEESS
Employment costs
£ million
Wages and salaries
Social security costs
Other pension costs (note 23)
Share-based payments (note 26)
Operating executive (excluding executive directors)
£ million
Base salary
Benefits
Pension salary supplement
Bonus
Termination payments
LTIP annual vesting1
2022
642
142
64
29
877
2021
775
177
75
25
1,052
2022
2021
4.3
0.7
0.7
5.3
5.8
1.5
18.3
3.0
0.7
0.3
2.9
–
0.8
7.7
1. Share plans vesting represent the value of LTIP awards (inclusive of recruitment awards) where the performance periods ends in the year.
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 £31,671,710
(2021: £16,439,675).
Key management compensation1
£ million
Short term employee benefits
Post-employment benefits
Termination payments
Share based payments (in accordance with IAS 24)
2022
17.6
0.1
5.7
3.6
27.0
2021
12.7
0.5
–
0.9
14.1
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 130–148 includes details on salary, benefits, pension and share plans. These disclosures form part of the financial statements.
Number of people employed by the group during the year
Tobacco & NGP
Distribution
Number of people employed by the group by location during the year
UK and European Union
Americas
Rest of the World
At 30
September
19,900
5,800
25,700
At 30
September
14,000
5,700
6,000
25,700
2022
Average
22,600
6,000
28,600
2022
Average
14,200
7,800
6,600
28,600
At 30
September
24,100
6,200
30,300
At 30
September
14,600
8,300
7,400
30,300
2021
Average
24,000
6,200
30,200
2021
Average
14,700
8,000
7,500
30,200
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181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
77.. TTAAXX
The major components of income tax expense for the years ended 30 September 2022 and 2021 are:
£ million
UK current tax:
Current year charged to the consolidated income statement
Current year (credited)/charged to consolidated other comprehensive income
Total current year UK current tax
Adjustments in respect of prior years charged/(credited) 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 (credited)/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
2022
2021
217
(158)
59
149
208
670
–
670
(116)
554
762
21
105
126
(38)
88
458
(2)
456
46
502
590
2022
2021
217
149
670
(116)
920
(34)
886
21
(38)
458
46
487
(156)
331
£ million
2022
2021
Tax related to items recognised in consolidated other comprehensive income during the year:
Current tax on hedge of net investment and quasi-equity loans
Current tax on actuarial gains and losses
Total current tax
Deferred tax on hedge of net investment and quasi-equity loans
Deferred tax on actuarial gains and losses
Deferred tax on hyperinflation adjustment
Total deferred tax
Total tax (credited)/charged to consolidated other comprehensive income
£ million
Tax related to items recognised in equity during the year:
Deferred tax on share based payments
Total tax charged to equity
(148)
(10)
(158)
–
52
3
55
105
(2)
103
12
21
–
33
(103)
136
2022
2021
(2)
(2)
–
–
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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% (2021: 19.0%) as follows:
£ million
Profit before tax
Tax at the UK corporation tax rate of 19.0% (2021: 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 (loss)/profit of investments accounted for using the equity method
Non-deductible expenses
Non-deductible losses/(non-taxable gains) on net foreign exchange on financial instruments
Non-taxable gain on Premium Cigar Division disposal
Exempt losses on Russian and associated markets exit
Provision for state aid recoverable
Adjustments in respect of prior years
Total tax charged to the consolidated income statement
2022
2,551
484
118
(78)
4
–
(1)
14
(26)
3
18
145
–
88
101
16
886
2021
3,238
615
107
49
15
(239)
(5)
12
(4)
(2)
35
(169)
(81)
–
–
(2)
331
Differences in effective tax rates on overseas earnings represents the impact of worldwide profits being taxed at rates different from
19.0%. 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 £nil (2021: £239 million) in the Group's Spanish business arising from an
internal reorganisation during the prior year.
Remeasurement of previously recognised deferred tax assets includes £nil (2021: £8 million) recognition in relation to deferred tax
assets for tax losses in the Group's Dutch 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, 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 £4 million (2021: £15 million).
During the year the Group has decreased the provision for deferred tax on unremitted earnings by £26 million (2021: £4 million).
The tax will arise on the distribution of profits through the Group and on planned group simplification.
Movement on the current tax account
£ million
At 1 October
Charged to the consolidated income statement
Credited/(charged) to other comprehensive income
Cash paid
Exchange movements
Balance sheet reclassification
At 30 September
2022
82
(920)
158
681
(7)
33
27
2021
(144)
(487)
(103)
820
3
(7)
82
The cash tax paid in the year is £239 million lower than the current tax charge (2021: £333 million higher). 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
2022
–
334
(307)
27
2021
101
234
(253)
82
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183
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Uncertain tax positions
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 2022 the total value of these provisions, including foreign exchange movements, was £148 million
(2021: £306 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
£240 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 £240 million (2021: £234 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. All submissions have been made to the court and we await a hearing date. The Group
believes it is appropriate to maintain a £42 million (2021: £41 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 the Commission’s decision and despite the appeals, the UK government was obliged to recover State Aid received.
Whilst the Group’s position remains no State Aid has been received, in February 2021 a recovery charging notice for £101 million
was issued to the Group by HMRC, and has since been paid.
In June 2022 the European General Court rejected the appeals. Whilst this decision has been appealed to the Court of Justice of the
European Union (CJEU) and the appeal may possibly be successful, in the light of the European General Court's decision we have
reassessed recoverability of the £101 million previously recorded as a receivable and have now determined it is appropriate to provide
in full.
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 £200 million
(2021: £900 million). The Group holds a provision of £54 million (2021: £260 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 since been paid and recognised as a
receivable. 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, which has since been paid and recognised as a receivable. Based on advice, the Group
continues to believe this is a transfer pricing matter. In September 2022 this matter was concluded as a transfer pricing matter,
in respect of which a settlement was made. These DPT payments are now expected to be refunded.
In December 2021 the Group concluded a transfer pricing audit with the French tax authorities. In September 2022 the Group
concluded transfer pricing audits with the UK and German tax authorities. Settlements of the French and UK audits were made
during the Group's year ended 30 September 2022.
The Group believe the transfer pricing provision held above appropriately provides for this and other transfer pricing issues.
French branch tax
In December 2021 the Group received assessments from the French tax authorities which could lead to additional liabilities of
£169 million. The challenge concerns the intragroup financing of the French branch of Imperial Tobacco Limited. In February 2022
the Group appealed against the assessment. In September 2022 the French tax authorities opened a further tax audit into this matter.
Following discussions with the French tax authorities a settlement proposal covering all years has been made for £48 million
including interest, for which a provision has been made.
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Imperial Brands | Annual Report and Accounts 2022
88.. DDIIVVIIDDEENNDDSS
Distributions to ordinary equity holders
£ million
Paid interim of 42.54 pence per share (2021: 42.12 pence, 2020: 41.70 pence)
– Paid June 2020
– Paid September 2020
– Paid December 2020
– Paid June 2021
– Paid September 2021
– Paid December 2021
– Paid June 2022
– Paid September 2022
Interim dividend paid
Proposed interim of 49.31 pence per share (2021: 48.48 pence, 2020: 48.00 pence)
– To be paid December 2022
Interim dividend proposed
Proposed final of 49.32 pence per share (2021: 48.48 pence, 2020: 48.01 pence)
– Paid March 2021
– Paid March 2022
– To be paid March 2023
Final dividend
Total ordinary share dividends of 141.17 pence per share (2021: 139.08 pence, 2020: 137.71 pence)
2022
2021
2020
–
–
–
–
–
–
202
202
404
467
467
–
–
467
467
1,338
–
–
–
199
199
458
–
–
856
–
–
–
458
–
458
1,314
197
197
453
–
–
–
–
–
847
–
–
454
–
–
454
1,301
The third interim dividend for the year ended 30 September 2022 of 49.31 pence per share amounts to a proposed dividend of
£467 million, which will be paid in December 2022.
The proposed final dividend for the year ended 30 September 2022 of 49.32 pence per share amounts to a proposed dividend payment of
£467 million in March 2023 based on the number of shares ranking for dividend at 30 September 2022, and is subject to shareholder
approval. If approved, the total dividend paid in respect of 2022 will be £1,338 million (2021: £1,314 million). The dividend paid during
2022 is £1,320 million (2021: £1,305 million).
99.. EEAARRNNIINNGGSS PPEERR OORRDDIINNAARRYY SSHHAARREE
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
2022
1,570
2021
2,834
2022
2021
946.2
6.8
953.0
2022
165.9
164.7
945.0
2.5
947.5
2021
299.9
299.1
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WWW.IMPERIALBR ANDSPLC.COM
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1100.. AACCQQUUIISSIITTIIOONNSS AANNDD DDIISSPPOOSSAALLSS OOFF SSUUBBSSIIDDIIAARRIIEESS
Russian and associated markets exit
The total loss on exit from the Russian and associated markets was £423 million, comprising a loss on transfer of Russian operations
of £364 million, impairment of assets and exit costs of the associated markets of £35 million and the impairment of an intangible
asset held by the Global Horizon Ventures Limited joint venture of £24 million.
Loss on transfer of Russian operations
On 27 April 2022, following registration with the Russian tax authority, the Group completed the transfer of its Russian assets to a
third party for a total consideration of £20 million. Disposal costs of c. £4 million were incurred. An impairment charge against the
Russian assets of £166 million was recognised as at 31 March 2022 when the assets were classified as an asset held for sale. A further
net loss of £198 million arose on completion including recycled foreign exchange losses of £190 million. The total loss on disposal was
£364 million. The impairment and disposal losses have been treated as adjusting items and are excluded from adjusted earnings.
Exit of the associated markets
The decision to transfer the assets of the Russian operations has implications for a limited number of Group markets that have
historically been supplied by the Volgograd factory. Following a review of the impacts resulting from the decision to transfer the
Russian factory it was determined that it was unviable to continue trading in these areas for a number of reasons including duty and
supply chain challenges. The decision to exit operations results in a number of assets held by these markets having been impaired.
In addition certain exit costs are expected to have to be incurred in the process of ending operations. Total impairment and exit costs
of £35 million are now required to be recognised. Provisions for the costs of exit have been recognised as at the 30 September 2022
balance sheet date.
Impairment of Global Horizons Ventures Limited
The Group has an investment in the Global Horizon Ventures Limited joint venture company which is accounted for as an
investment using the equity method. This entity held an intangible asset relating to royalties arising on the sales of a specific brand
within Russia. Following the transfer of the Russian assets these royalties will cease and therefore the Group’s share of this asset has
now been fully impaired with a charge of £24 million.
Premium Cigar Division
On 27 April 2020 the Group announced that it had agreed the sale of the Premium Cigar Division (“the Division”). The share sale
element of the sale of the Division completed on 29 October 2020. Further deferred consideration of €88 million (£74 million) relating
to the share sale was received on 26 October 2021.
The sale of the La Romana factory in the Dominican Republic completed on 2nd August 2022. Sales consideration of €54 million
(£46 million) was received on completion. A loss of £13 million was recognised on disposal.
Logista
Disposals
On 2 February 2022 the Group’s subsidiary Logista sold its interest in Supergroup S.A.S. for a consideration of £nil. As at 30 September
2021 Supergroup S.A.S was held as an asset held for sale. A loss on disposal of £16 million before tax and £9 million after tax has been
recognised. In addition Logista sold two properties in the year that had previously been recognised as assets held for sale for
consideration of €15 million (£13 million).
Speedlink
On 16 February 2022, the Group’s subsidiary Logista acquired 70% of the share capital of Speedlink Worldwide Express B.V. for a
purchase consideration of €17 million (£14 million) comprised of €15 million (£13 million) which has been paid in cash and €2 million
(£2 million) of contingent consideration which is payable upon achievement of certain business objectives, the maximum contingent
consideration payable is €3 million (£3 million). There is an intention to purchase the remaining 30% of share capital over the next
3 years. As effective control has been achieved through this acquisition, Speedlink Worldwide Express B.V. has been consolidated as
a subsidiary within the Group with a 65% minority interest. Goodwill of €11 million (£10 million), intangible assets of €15 million
(£13 million) and deferred tax liability of €4 million (£3 million) were recognised on acquisition.
Carbó Collbatallé, S.L.
In April 2022, the Group's subsidiary Logista reached an agreement to acquire 100% of Carbó Collbatellé, S.L. for an expected
maximum purchase consideration of €51 million (£44 million) based on achievement of certain business conditions being met.
The acquisition was completed in October 2022, after these conditions had been met and payment of the full €51 million (£44 million)
was made.
Transportes El Mosca
On 17 June 2022, the Group's subsidiary Logista announced the acquisition of 60% of Transportes El Mosca for an expected maximum
purchase consideration of €106 million (£91 million). The acquisition of the remaining 40% is expected over the next three years.
The acquisition is was completed in October 2022, when Logista paid €83 million in addition to an advance payment of €15 million
contingent consideration which will be payable or repayable in part or in full based on achievement of certain business conditions
being met.
Assets and Liabilities Held For Disposal
There are no assets or liabilities classified as held for disposal in 2022 (2021: £35 million assets, £35 million liabilities).
186
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| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
1111.. IINNTTAANNGGIIBBLLEE AASSSSEETTSS
£ million
Cost
At 1 October 2021
Additions
Acquisitions
Disposals
Reclassifications
Exchange movements
At 30 September 2022
Amortisation and impairment
At 1 October 2021
Amortisation charge for the year
Impairment
Disposals
Reclassifications
Exchange movements
Accumulated amortisation
Accumulated impairment
At 30 September 2022
Net book value
At 30 September 2022
£ 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
Intellectual
property and
product
development
12,359
20
–
–
–
Goodwill
13,417
–
10
–
4
797
14,228
1,492
13,871
1,542
–
–
–
4
41
–
1,587
1,587
7,735
331
–
–
–
859
8,386
539
8,925
2022
Supply
agreements
Software
Total
1,387
451
27,614
1
13
–
–
32
65
–
(8)
–
14
1,433
522
1,355
27
–
–
–
32
1,414
–
1,414
308
35
1
(5)
–
12
350
1
351
86
23
(8)
4
2,335
30,054
10,940
393
1
(5)
4
944
10,150
2,127
12,277
12,641
4,946
19
171
17,777
Intellectual
property and
product
development
Goodwill
Supply
agreements
Software
Total
2021
14,435
12,994
1,463
–
(260)
(758)
13,417
9
5
(649)
12,359
–
(2)
(74)
1,387
1,895
7,663
1,341
–
–
(260)
(93)
–
1,542
1,542
333
118
–
(379)
7,196
539
7,735
85
–
(1)
(70)
1,355
–
1,355
465
28
(22)
(20)
451
298
37
2
(15)
(14)
304
4
308
29,357
37
(279)
(1,501)
27,614
11,197
455
120
(276)
(556)
8,855
2,085
10,940
11,875
4,624
32
143
16,674
Amortisation and impairment of acquired intangibles excluded from adjusted operating profit amounted to £349 million (2021:
£450 million), this comprises amortisation on intellectual property of £323 million (2021: £320 million) and amortisation on supply
agreements of £26 million (2021: £85 million).
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.
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
187
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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
2022
Intangible
assets with
indefinite
lives
343
–
–
343
–
343
Goodwill
4,710
4,326
1,862
10,898
1,743
12,641
2021
Intangible
assets with
indefinite
lives
334
–
132
466
–
466
Goodwill
4,402
4,042
1,740
10,184
1,691
11,875
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 up-trading and down-trading, 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
2022
2021
10.3
8.7
11.1
11.8
4.6
5.2
2.8
3.9
0.6
1.6
1.3
1.5
9.9
9.8
12.1
11.2
2.7
5.7
1.7
1.5
0.1
1.6
0.3
1.4
The calculation to determine the value in use involves a discounted future cash flow forecast model. Nominal cash flows are used in
the calculation which will themselves already factor in the effects of inflation. The cash flows are sourced from the Group business
plan which considers and factors in the risk of variability of future business performance and hence cash flow variation. A nominal
discount rate is used within the model based on the Group's weighted average cost of capital which is itself calculated using the
Capital Asset Pricing Model. As risk has been applied within the undiscounted cash flows no adjustment is made to the discount rate
for risk, except for the application of country risk premia over and above the Group weighted average cost of capital where appropriate.
Country specific discount rates are used based on the Group’s weighted average cost of capital adjusted for country risk premium.
The impairment review is undertaken at a CGUG level which involves the aggregation of the individual value in use amounts for the
individual countries which constitute each CGCG. Our impairment projections are prepared under the basis set out in IAS 36 which
can differ from our internal plans.
Nominal 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 cash flow 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.
188
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Imperial Brands | Annual Report and Accounts 2022
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.
Europe's initial growth rate has improved compared with the prior year, with a minor improvement in the long term growth rate.
This primarily reflects improvements in the Spanish market, travel retail and global duty free businesses.
Americas was broadly in line with the prior year growth assumptions for the initial and medium growth rate.
Africa, Asia & Australasia (AAA) increases in the initial growth rates are driven by improved medium term forecasts, which are due to
changes in the growth outlook for a number of key markets. Improvements in forecast profitability reflect actions delivered in line
with our strategic goals. The long term growth rate improvement reflects changes in certain assumptions associated with the
extrapolation of the initial growth rate for a number of individual markets.
Goodwill and Intangible asset impairment review conclusion
Our impairment testing confirms there are sufficient cash flows to support the current carrying values of the goodwill held at
30 September 2022. 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 can 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
significantly change it is possible that materially different amounts could be reported in the Group’s financial statements in future
periods. 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.
Consideration of the impact of climate change
The Group has completed an assessment of the impact of climate change which includes how it will vary future costs and therefore
cash flows. The detail of the Tobacco & NGP climate change review can be found in the ESG review section. The review has
concluded that there are limited impacts on future cash flows as a result of climate change. Within the impact assessment there is
recognition that gross incremental costs of up to £3,466 million may be incurred in the period up to 2050. We have factored these
additional costs to the Group into our discounted cash flow forecasts used for impairment testing valuation purposes. This concluded
that there continues to be sufficient headroom. There is therefore no impairment recognised as result of incremental climate change
costs. However, the Group will continue to review the climate change impact going forward and any future changes in impact
assessment could potentially result in changes to the impairment assessment.
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.
No such impairment triggers were noted in the year ended 30 September 2022 and hence no impairment charge has been incurred
(2021: £118 million).
£1 million (2021: £2 million) impairment charge was incurred in the year relating to software.
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
189
189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1122.. PPRROOPPEERRTTYY,, PPLLAANNTT AANNDD EEQQUUIIPPMMEENNTT
£ million
Cost
At 30 September 2021
Hyperinflation restatement to 1 October 2021
At 1 October 2021
Additions
Disposals
Hyperinflation adjustment
Reclassifications
Exchange movements
At 30 September 2022
Depreciation and impairment
At 30 September 2021
Hyperinflation restatement to 1 October 2021
At 1 October 2021
Depreciation charge for the year
Impairment
Disposals
Reclassifications
Exchange movements
At 30 September 2022
Net book value
At 30 September 2022
£ 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
797
1
798
13
(51)
1
19
26
806
162
–
162
14
10
(13)
–
8
181
2,086
24
2,110
74
(170)
7
(4)
63
2,080
1,146
–
1,146
102
69
(146)
(4)
33
1,200
411
2
413
58
(24)
–
(5)
13
455
271
–
271
34
6
(21)
1
10
301
2022
Total
3,294
27
3,321
145
(245)
8
10
102
3,341
1,579
–
1,579
150
85
(180)
(3)
51
1,682
625
880
154
1,659
Property
Plant and
equipment
Fixtures
and motor
vehicles
905
13
(78)
4
(8)
(39)
797
188
20
2
(40)
4
(12)
162
2,216
99
(114)
1
–
(116)
2,086
1,190
104
11
(93)
(6)
(60)
1,146
438
53
(43)
(4)
(12)
(21)
411
282
33
–
(30)
(2)
(12)
271
2021
Total
3,559
165
(235)
1
(20)
(176)
3,294
1,660
13
(163)
(4)
(84)
1,579
635
940
140
1,715
190
190
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
1133.. RRIIGGHHTT OOFF UUSSEE AASSSSEETTSS AANNDD LLEEAASSEE LLIIAABBIILLIITTYY
The movements in right of use assets in the year were as follows:
£ million
Net book value
At 1 October 2021
Additions
Terminations and modifications
Depreciation and impairment
Exchange movements
At 30 September 2022
The movements in lease liabilities in the year were as follows:
£ million
At 1 October 2021
Cash flow
Accretion of interest
New leases, terminations and modifications
Exchange movements
At 30 September 2022
Property
Plant and
equipment
Fixtures
and motor
vehicles
202
57
(13)
(56)
4
194
6
1
–
(4)
–
3
34
11
(2)
(14)
2
31
2022
Total
242
69
(15)
(74)
6
228
Lease
Liabilities
251
(68)
6
54
5
248
The maturity profile of the carrying amount of the Group's lease liabilities and the contractual cash flows as at 30 September 2022 is
as follows:
£ million
Amounts maturing:
Within one year
Between one and five years
In five years or more
Future minimum lease payments liabilities are analysed as below:
£ million
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
Lease
liabilities
Effect of
discounting
Contractual
cash flows
2022
58
108
82
248
6
32
3
41
Property
Plant and
equipment
Fixtures
and motor
vehicles
48
121
85
254
2
2
–
4
14
17
–
31
64
140
85
289
2022
Total
64
140
85
289
(41)
248
The following are the amounts recognised in the consolidated income statement:
£ million
Expenses relating to short-term leases
Expenses relating to low value asset leases
Depreciation and impairment expense of right of use assets
Interest on lease liabilities
2022
2021
3
2
74
6
4
2
66
7
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The movements in right of use assets in the year ending 30 September 2021 were as follows:
£ million
Net book value
At 1 October 2020
Additions
Terminations and modifications
Depreciation
Exchange movements
At 30 September 2021
Property
Plant and
equipment
Fixtures
and motor
vehicles
254
29
(21)
(49)
(11)
202
8
2
(2)
(2)
–
6
31
22
(3)
(15)
(1)
34
The movements in lease liabilities in the year ending 30 September 2021 were as follows:
£ million
At 1 October 2020
Cash flow
Accretion of interest
New leases, terminations and modifications
Exchange movements
At 30 September 2021
2021
Total
293
53
(26)
(66)
(12)
242
Lease
Liabilities
299
(69)
7
26
(12)
251
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:
Lease
liabilities
Effect of
discounting
Contractual
cash flows
2021
57
124
70
251
7
17
8
32
64
141
78
283
2021
Total
64
141
78
283
(32)
251
£ 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 2021 are analysed as below:
£ million
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
47
116
78
241
2
3
–
5
15
22
–
37
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Imperial Brands | Annual Report and Accounts 2022
1144.. IINNVVEESSTTMMEENNTTSS AACCCCOOUUNNTTEEDD FFOORR UUSSIINNGG TTHHEE EEQQUUIITTYY MMEETTHHOODD
The principal joint venture during the year was Global Horizon Ventures Limited. The entity held an intangible asset relating to
royalties arising on the sales of a specific brand within Russia. Following the transfer of the Russian assets these royalties will cease
and therefore the Group's share of this asset has now been fully impaired with a charge of £24 million.
Corporación Habanos SA, Cuba and Altabana SL, Spain were part of the Premium Cigar Division, disposed of on 29 October 2020.
Summarised financial information for the Group's joint ventures, which are accounted for under the equity method, is shown below:
£ million
Revenue
(Loss)/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
Global Horizon
Ventures
Others
Total
2022
23
(7)
–
62
62
–
(7)
(7)
55
27
5
6
44
50
(39)
(10)
(49)
1
Corporación
Habanos
Altabana
Global Horizon
Ventures
Others
15
5
–
–
–
–
–
–
–
30
5
–
–
–
–
–
–
–
18
13
24
47
71
(3)
–
(3)
68
27
5
3
49
52
(43)
(9)
(52)
–
50
(2)
6
106
112
(39)
(17)
(56)
56
2021
Total
90
28
27
96
123
(46)
(9)
(55)
68
Transactions and balances with joint ventures
£ million
Sales to
Purchases from
Accounts payable to
Movement on investments accounted for using the equity method
£ million
At 1 October
Share of (loss)/profit for the year from joint ventures
Share of profit for the year from associates
Increase in investment in associates
Impairment of investment in associates
Dividends
Classification to held for disposal and disposals of business
Foreign exchange losses
At 30 September
2022
2021
–
11
(3)
2022
88
(15)
2
2
(12)
(9)
–
–
56
6
19
(3)
2021
117
11
–
3
–
(9)
(32)
(2)
88
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
1155.. IINNVVEENNTTOORRIIEESS
£ million
Raw materials
Work in progress
Finished inventories
Other inventories
2022
910
73
2,969
188
4,140
2021
839
58
2,765
172
3,834
Other inventories mainly comprise duty-paid tax stamps.
Within finished inventories of £2,969 million (2021: £2,765 million) there is excise duty of £1,255 million (2021: £1,282 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
£114 million (2021: £115 million) of leaf tobacco held within raw materials will not be utilised within a year of the balance sheet date.
1166.. TTRRAADDEE AANNDD OOTTHHEERR RREECCEEIIVVAABBLLEESS
£ 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 increase/(decrease) in provision
At 30 September
2022
2021
Current
Non-current
Current
Non-current
2,262
(76)
2,186
200
157
2,543
3
(3)
–
37
30
67
2,431
(68)
2,363
227
159
2,749
3
(3)
–
58
4
62
2022
2021
Current
Non-current
Current
Non-current
2,084
93
9
76
2,262
–
–
–
3
3
2,271
85
7
68
2,431
2022
71
8
79
–
–
–
3
3
2021
116
(45)
71
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.
1177.. CCAASSHH AANNDD CCAASSHH EEQQUUIIVVAALLEENNTTSS
£ million
Cash at bank and in hand
Short-term deposits and other liquid assets
2022
703
1,147
1,850
2021
673
614
1,287
£144 million (2021: £152 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.
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1188.. TTRRAADDEE AANNDD OOTTHHEERR PPAAYYAABBLLEESS
£ million
Trade payables
Duties payable
Other taxes and social security contributions
Other payables
Accruals
1199.. BBOORRRROOWWIINNGGSS
The Group’s borrowings held at amortised cost, are as follows:
£ million
Current borrowings
Bank loans and overdrafts
Capital market issuance:
£1,000 million 9.0% notes due February 2022
US$ 354 million 3.5% notes due February 2023
€750 million 1.125% notes due August 2023
Total current borrowings
Non-current borrowings
Bank loans
Capital market issuance:
US$ 1,000 million 3.5% notes due February 2023
€750 million 1.25% notes due August 2023
£600 million 8.125% notes due March 2024
US$ 1,000 million 3.125% notes due July 2024
€500 million 1.375% notes due January 2025
US$ 1,500 million 4.25% notes due July 2025
€650 million 3.375% notes due February 2026
US$ 750 million 3.5% notes due July 2026
£500 million 5.5% notes due September 2026
€750 million 2.125% notes due February 2027
US$ 1,000 million 6.125% notes due July 2027
US$ 1,000 million 3.875% notes due July 2029
£500 million 4.875% notes due June 2032
€1,000 million 1.75% notes due March 2033
Total non-current borrowings
Total borrowings
Analysed as:
Capital market issuance
Bank loans and overdrafts
2022
2021
Current
Non-current
Current
Non-current
1,345
5,453
1,412
500
796
9,506
–
–
–
–
10
10
1,018
5,507
1,399
449
733
9,106
–
–
–
–
7
7
2022
2021
27
–
322
662
1,011
1
–
–
626
910
445
1,367
584
682
500
670
908
909
505
889
8,996
10,007
9,979
28
51
1,056
–
–
1,107
1
746
646
626
745
434
1,119
570
559
500
653
–
745
505
866
8,715
9,822
9,770
52
Current and non-current borrowings include interest payable of £2 million (2021: £56 million) and £104 million (2021: £93 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 17 February 2022, £1,000 million 9.0% notes were repaid. On 27 July 2022, US$ 1,000 million (£829 million equivalent) 6.125% notes
were issued. On 27 July 2022, a partial repayment of the US$ 1,000 million 3.5% notes was made; US$ 646 million (£535 million
equivalent) was repaid with the remaining US$ 354 million due February 2023.
All borrowings are unsecured and the Group has not defaulted on any borrowings during the year (2021: no defaults).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Non-current financial liabilities
The maturity profile of the carrying amount of the Group's non-current liabilities as at 30 September 2022 (including lease liabilities
detailed in note 13 and net derivative financial instruments detailed in note 21) is as follows:
£ million
Amounts maturing:
Between one and two years
Between two and five years
In five years or more
£ million
Amounts maturing:
Between one and two years
Between two and five years
In five years or more
Net derivative
financial
liabilities/
(assets)
Lease
liabilities
44
64
82
190
18
148
(79)
87
Borrowings
1,537
5,155
2,304
8,996
Borrowings
Lease
liabilities
Net derivative
financial
liabilities/
(assets)
1,393
4,553
2,769
8,715
49
75
70
194
(6)
(9)
608
593
2022
Total
1,599
5,367
2,307
9,273
2021
Total
1,436
4,619
3,447
9,502
Fair value of borrowings
The fair value of borrowings as at 30 September 2022 is estimated to be £9,030 million (2021: £10,386 million). £9,002 million
(2021: £10,334 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 two and five years
2022
Balance sheet
amount
Fair value
Balance sheet
amount
1,631
3,250
5,098
9,979
1,457
2,777
4,768
9,002
2,686
3,168
3,916
9,770
2021
Fair value
2,894
3,278
4,162
10,334
2022
2021
3,091
3,091
3,012
3,012
During the year the maturity date of €3,316 million of the Group's existing syndicated multicurrency facility of €3,500 million was
extended to 30 September 2025. One syndicate member opted not to extend their participation of €184 million which has a maturity
date of 31 March 2025.
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Imperial Brands | Annual Report and Accounts 2022
2200.. FFIINNAANNCCIIAALL RRIISSKK FFAACCTTOORRSS
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, the Director of Treasury and three Group Regional Finance Directors. 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:
(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 23, the
investment in convertible debentures issued by Auxly Cannabis Group Inc. and an equity holding in Oxford Cannabinoid
Technologies PLC. 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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 2022. 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 (2021: 10%)
10% appreciation of Sterling against US dollar (2021: 10%)
2022
2021
Increase in
income
Increase in
income
59
2
378
7
An equivalent depreciation of Sterling against the above currencies would cause a decrease in income of £72 million and £2 million
for euro and US dollar exchange rates respectively (2021: £462 million and £9 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 (2021: 10%)
10% appreciation of Sterling against US dollar (2021: 10%)
2022
2021
Change in
equity
Change in
equity
621
276
264
270
An equivalent depreciation of Sterling against the above currencies would result in a change in equity of £(759) million and
£(338) million for euro and US dollar exchange rates respectively (2021: £(323) million and £(330) million).
At 30 September 2022, after the effect of derivative financial instruments, approximately 80% of the Group’s net debt was
denominated in euro and non US dollar currencies (2021: 78%), 20% in US dollars (2021: 22%).
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 2022, after adjusting for the effect of derivative financial instruments detailed in note 21, approximately 103%
(2021: 68%) of reported net debt was at fixed rates of interest and (3)% (2021: 32%) was at floating rates of interest. After adjusting for
cash held in subsidiary bank accounts and cash in transit, accrued interest, the mark to market of the derivative portfolio and finance
leases, approximately 97% (2021: 66%) of debt was at fixed rates of interest and 3% (2021: 34%) 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 2022, 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 (2021: £nil).
£ million
Income statement impact of interest rate movements:
+/- 1% increase in euro interest rates (2021: 1%)
+/- 1% increase in US dollar interest rates (2021: 1%)
2022
2021
Change in
income
Change in
income
13
(9)
28
6
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Imperial Brands | Annual Report and Accounts 2022
(B) credit risk
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 £5,151 million at 30 September 2022 (2021: £4,177 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 2022 the
level of trade receivables that were sold to a financial institution under a non-recourse factoring arrangement, and subsequently
derecognised totalled £570 million (2021: £627 million). The total value of trade receivables reclassified as fair value was £50 million at
30 September 2022 (2021: £69 million). There was no valuation difference between amortised cost and fair value. Analysis of trade
and other receivables is provided in note 16.
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 £12 million as at 30 September 2022 (2021: £37 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 2022. 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
2022
Maximum
exposure to
credit risk
£ million
S&P credit
rating
A+
A-
A-
A
A+
136
135
128
127
114
2021
Maximum
exposure to
credit risk
£ million
35
–
–
–
–
S&P credit
rating
A+
–
–
–
–
(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 2022, the Group held liquid assets of
£1,850 million (2021: £1,287 million).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
The table below summarises the Group’s non derivative financial liabilities by maturity based on their contractual cash flows as at
30 September 2022. 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 21.
£ 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
Total non-derivative financial liabilities
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
> 5 years
2022
28
9,979
1,345
248
11,600
28
11,440
1,345
289
13,102
27
1,349
1,345
64
2,785
1
1,830
–
56
1,887
–
5,710
–
84
–
2,551
–
85
5,794
2,636
2021
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
> 5 years
52
9,770
1,018
251
11,091
52
11,158
1,018
283
12,511
51
1,341
1,018
64
2,474
1
1,678
–
55
–
5,068
–
86
–
3,071
–
78
1,734
5,154
3,149
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. Management have assessed that the likelihood of a future covenant breach is remote.
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 2022 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
Equity attributable to the owners of the parent
Total capital
2022
8,054
6,860
14,914
2021
8,615
5,352
13,967
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, foreign exchange swaps and foreign currency
denominated debt.
The Group only designates the undiscounted spot element of the cross currency swaps, foreign exchange 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 2022.
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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
Foreign exchange swaps
£ million
Bonds
Cross-currency swaps
Total
notional
balance
(5,378)
(3,623)
(273)
(9,274)
Total
notional
balance
(5,253)
(2,782)
(8,035)
<1 year
(982)
–
(273)
(1,255)
<1 year
–
(1,026)
(1,026)
Between 1 and
2 years
Between 2 and
5 years
(906)
(1,475)
–
(3,490)
(1,596)
–
(2,381)
(5,086)
Between 1 and
2 years
Between 2 and
5 years
(1,389)
–
(1,389)
(3,219)
(1,218)
(4,437)
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
Foreign exchange swaps
Hedged item:
Investment in a foreign operation
£ million
Hedging instrument:
Bonds
Cross-currency swaps
Hedged item:
Investment in a foreign operation
Carrying amount
Notional
balance
5,378
3,623
273
Assets
Liabilities
Balance sheet line item
–
–
–
5,414 Borrowings
331 Derivative financial
instruments
7 Derivative financial
instruments
n/a
9,274
Carrying amount
Notional
balance
5,253
2,782
Assets
Liabilities
Balance sheet line item
–
–
5,286 Borrowings
214 Derivative financial
instruments
n/a
8,035
2022
Maturity
> 5 years
–
(552)
–
(552)
2021
Maturity
> 5 years
(645)
(538)
(1,183)
2022
Changes in fair
value used for
calculating
hedge in-
effectiveness
(532)
(117)
–
(649)
2021
Changes in fair
value used for
calculating
hedge in-
effectiveness
308
168
476
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NOTES TO THE CONSOLIDATED 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
£ million
Derivatives in net investment hedges of foreign operations
Bonds in net investment hedges of foreign operations
At the
beginning of
the year
Income
Statement
Other
Comprehensive
Income
Designations/
(de-designations)
At the end
of the year
2022
(214)
(5,286)
(7,165)
(583)
(3)
(586)
(117)
(532)
(649)
576
407
983
(338)
(5,414)
(5,752)
2021
At the
beginning of
the year
Income
Statement
Other
Comprehensive
Income
Designations/
(de-designations)
At the end
of the year
(410)
(6,755)
(7,165)
28
13
41
168
308
476
–
1,148
1,148
(214)
(5,286)
(5,500)
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 €674 million (£595 million equivalent)
(2021: €2,506 million (£2,156 million equivalent)) 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
£3 million (2021: £19 million) and would have been an £8 million (2021: £49 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 to equity at a conversion
price of CAD$ 0.81 per share. Repayment of the debenture is due 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% (2021: 14%) plus the application of an expected credit loss
provision. At 30 September 2022 the loan was held at a fair value of £17 million (30 September 2021: £37 million), net of an expected
credit loss provision of £53 million (30 September 2021: £16 million).
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Imperial Brands | Annual Report and Accounts 2022
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.
2022
Net
91
2021
Net
24
(611)
2022
Gross
collateral
assets/
liabilities
set-off
Net financial
assets/
liabilities per
balance sheet
Related
amounts not
set-off in the
balance sheet
1,039
(948)
(1,126)
948
(178)
£ million
Assets:
Derivative financial instruments
Liabilities:
Derivative financial instruments
£ million
Assets:
Derivative financial instruments
Liabilities:
Derivative financial instruments
Gross
financial
assets/
liabilities
1,051
(1,138)
Gross
financial
assets/
liabilities
496
(1,083)
(12)
12
Gross
collateral
assets/
liabilities
set-off
(37)
37
Net financial
assets/
liabilities per
balance sheet
Related
amounts not
set-off in the
balance sheet
459
(435)
(1,046)
435
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 assets/(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
17
–
1,039
1,056
–
–
(788)
–
(788)
268
–
–
–
–
–
–
(338)
–
(338)
(338)
2,406
1,850
–
4,256
(10,007)
(8,710)
–
(248)
(18,965)
(14,709)
Fair value
through
income
statement
Fair value
through other
comprehensive
income
Assets and
liabilities at
amortised
cost
37
–
459
496
–
–
(832)
–
(832)
(336)
–
–
–
–
–
–
(214)
–
(214)
(214)
2,611
1,287
–
3,898
(9,822)
(8,373)
–
(251)
(18,446)
(14,548)
Total
2,423
1,850
1,039
5,312
(10,007)
(8,710)
(1,126)
(248)
(20,091)
(14,779)
Total
2,648
1,287
459
4,394
(9,822)
(8,373)
(1,046)
(251)
(19,492)
(15,098)
Current
Non-Current
2,386
1,850
54
4,290
(1,011)
(8,710)
(54)
(58)
(9,833)
(5,543)
37
–
985
1,022
(8,996)
–
(1,072)
(190)
(10,258)
(9,236)
2021
Current
Non-Current
2,590
1,287
68
3,945
(1,107)
(8,373)
(62)
(57)
(9,599)
(5,654)
58
–
391
449
(8,715)
–
(984)
(194)
(9,893)
(9,444)
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 2022 of those bonds included in the above table is £5,414 million (2021: £5,286 million). All of the Group's net
investment hedges remain effective.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2211.. DDEERRIIVVAATTIIVVEE FFIINNAANNCCIIAALL IINNSSTTRRUUMMEENNTTSS
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
2022
2021
6
31
17
54
–
54
680
305
985
–
985
1,039
686
31
322
–
(36)
(13)
(5)
(54)
–
(54)
(746)
(338)
(1,084)
12
(1,072)
(1,126)
(782)
(13)
(343)
12
(30)
18
12
–
–
–
(66)
(33)
(99)
12
(87)
(87)
(96)
18
(21)
12
(87)
60
4
4
68
–
68
391
–
391
–
391
459
451
4
4
–
(33)
(4)
(25)
(62)
–
(62)
(780)
(241)
(1,021)
37
(984)
(1,046)
(813)
(4)
(266)
37
459
(1,046)
27
–
(21)
6
–
6
(389)
(241)
(630)
37
(593)
(587)
(362)
–
(262)
37
(587)
Total carrying value of derivative financial instruments
1,039
(1,126)
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 reputed financial data provider and valuations are validated by comparison 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 £3 million (2021: £19 million) and would have been an £8 million (2021: £49 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 20.
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 2022. 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 2022. 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 20.
£ 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
(84)
(3)
–
–
(87)
(14,576)
–
26,616
(9,635)
2,405
<1 year
(2,739)
–
5,403
(1,851)
813
Between 1 and
2 years
Between 2 and
5 years
(2,025)
(4,645)
–
6,056
(3,201)
830
–
9,471
(3,944)
882
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
(325)
(262)
–
–
(587)
(480)
–
5,667
(5,818)
(631)
16
–
2,516
(2,521)
11
(1)
–
66
(48)
17
(157)
–
2,522
(2,661)
(296)
2022
>5 years
(5,167)
–
5,686
(639)
(120)
2021
>5 years
(338)
–
563
(588)
(363)
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Derivatives as hedging instruments
As outlined in note 20, 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.
Following the discontinuation of GBP LIBOR at the end of 2021 and the pending US$ LIBOR discontinuation in 2023, in the first half
of the fiscal year the Group amended all GBP LIBOR derivatives to reference the daily risk free rate of SONIA instead of GBP LIBOR.
All existing US$ LIBOR derivatives will be changed to reference the daily risk free rate of SOFR instead of US$ LIBOR during the last
quarter of calendar year 2022. New US$ derivatives transacted during the fiscal year are referencing SOFR. There are no changes
pending for EUR derivatives. 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 2022, 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 £9,578 million equivalent (2021: £10,775 million
equivalent) with a fair value of £755 million liability (2021: £425 million asset). The fixed interest rates vary from 1.1% to 7.9% (2021: 1.1%
to 8.7%), and the floating rates are EURIBOR, SONIA and US dollar LIBOR.
As at 30 September 2022, 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 £11,548 million
equivalent (2021: £8,806 million equivalent) with a fair value of £671 million asset (2021: £750 million liability). The fixed interest rates
vary from 0.5% to 4.0% (2021: 0.5% to 4.4%), and the floating rates are EURIBOR, SOFR and US dollar LIBOR. This includes forward
starting interest rate swaps with a total notional amount of £3,353 million equivalent (2021: £1,531 million equivalent) with tenors
between 1 and 6 years, starting between October 2022 and October 2030.
US dollar interest rate swaps with a total notional amount of US$ 8,240 million will be impacted by the changes to the use of US dollar
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 2022, 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 £1,600 million (2021: £2,600 million) and the fair value of these swaps was
£232 million net liability (2021: £214 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 US$ 2,250 million (2021: US$ 1,750 million) and the fair
value of these swaps was £211 million net asset (2021: £48 million net liability).
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 2022, the notional amount of these contracts was £1,662 million equivalent (2021: £1,430 million equivalent) and the fair
value of these contracts was a net asset of £18.5 million (2021: £0.6 million net liability).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Hedges of net investments in foreign operations
As at 30 September 2022, cross currency swaps with a notional amount of €4,103 million (2021: €3,233 million) were designated as
hedges of net investments in foreign operations. During the year, foreign exchange translation losses amounting to £105 million
(2021: £168 million gains) 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 (2021: £nil).
As at 30 September 2022, foreign exchange swaps with a notional amount of €309 million (2021: €nil) were designated as hedges of
net investments in foreign operations. During the year, foreign exchange translation losses amounting to £12 million (2021: £nil) were
recognised within exchange movements in other comprehensive income in respect of foreign exchange swaps that had been
designated as hedges of a net investment in foreign operations. No hedging ineffectiveness occurred during the year (2021: £nil).
The movements in Other Comprehensive Income due to net investment hedging in the period were as follows:
£ million
Foreign exchange (losses)/gains on borrowings
Foreign exchange (losses)/gains on derivative financial instruments
Reclassification to the Income Statement
2022
(532)
(117)
–
(649)
2021
308
168
117
593
US dollar cross currency swaps with a total notional amount of US$ 1,750 million 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.
2222.. DDEEFFEERRRREEDD TTAAXX AASSSSEETTSS AANNDD LLIIAABBIILLIITTIIEESS
Deferred tax assets
£ million
Accelerated depreciation and amortisation
Retirement benefits
Tax credits and losses
Accruals, provisions and 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 30 September 2021
Hyperinflation restatement to 1 October 2021
At 1 October 2021
Charged to the income statement
Charged to other comprehensive income
Credited to equity
Exchange movements
Other movements
As at 30 September
Consolidated
income
statement
2022
Consolidated
income
statement
2021
Consolidated
balance
sheet
2022
Consolidated
balance
sheet
2021
14
(4)
(17)
41
34
(7)
(38)
171
30
156
(895)
(90)
278
185
(864)
(23)
301
113
(522)
(473)
2022
439
(961)
(552)
2022
(473)
(6)
(479)
34
(55)
2
(18)
(6)
(522)
2021
564
(1,037)
(473)
2021
(543)
–
(543)
156
(33)
–
(55)
2
(473)
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| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
Unrecognised deferred tax assets
£ million
Tax losses
Tax credits
Other temporary differences
Analysis of unrecognised deferred tax assets by expiry date
£ million
Tax losses expiring:
Within 1 year
Within 2-5 years
No expiry
Tax credits expiring:
Within 1 year
Within 2-5 years
No expiry
Other temporary differences expiring:
No expiry
Gross
2022
278
25
71
374
Gross
2022
–
20
258
278
22
1
2
25
71
71
Net
2022
75
25
20
120
Net
2022
–
4
71
75
22
1
2
25
20
20
Gross
2021
504
56
47
607
Gross
2021
4
36
464
504
36
21
–
57
47
47
Net
2021
130
56
13
199
Net
2021
1
8
121
130
36
21
–
57
13
13
Included within net deferred tax liabilities are deferred tax assets recognised of £257 million (2021: £267 million) for tax credits arising
in the Group's Spanish business. The majority (£256 million) of these tax credits were recognised in the prior 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 (including the future effects of climate change)
these deferred tax assets are expected to be utilised over a period of 18-22 years.
Included within net deferred tax liabilities are deferred tax assets recognised for retirement benefits of £55 million (2021: £157 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 £20 million (2021: £33 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.
We have reviewed the recoverability of deferred tax assets in overseas territories in the light of forecast business performance.
In 2022 we have recognised deferred tax assets of £1 million that were previously unrecognised (2021: recognised deferred tax
assets of £8 million that were previously unrecognised) on the basis that it is more likely than not that these are recoverable
(2021: recoverable).
A deferred tax liability of £43 million (2021: £101 million) is recognised in respect of taxation expected to arise on the future
distribution of unremitted earnings totalling £2 billion (2021: £5 billion).
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 £1,244 million (£37 million net) (2021: £1,027 million
(£29 million net)). 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2233.. RREETTIIRREEMMEENNTT BBEENNEEFFIITT SSCCHHEEMMEESS
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 62%,
15% and 10% of the Group's total defined benefit obligations and 31%, 32% and 10% of the current service cost respectively.
Imperial Tobacco Pension Fund
The UK scheme, the Imperial Tobacco Pension Fund (or 'ITPF' or ‘Fund’), is a capped final salary pension scheme with a normal
retirement age of 60 for most members, pensionable pay was capped as at 1 September 2017 to £75,000 (or actual pensionable pay if it
was higher at that date). The ITPF was offered to employees who joined the company before 1 October 2010 and has a weighted
average maturity of 12 years. By number, the population as at the most recent funding valuation comprises 78% in respect of
pensioners and dependants, 21% in respect of deferred members and 1% in respect of current employees. New employees in the UK
are now enrolled into 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.
A new valuation is underway as at 31 March 2022 and will be finalised during the first half of 2023. The last valuation in 2019 reported
total assets of £4,137 million which covered 110% of past service liabilities. Following the 2019 valuation, a dynamic contribution
schedule was agreed such that ITL’s annual contributions will reduce or increase depending on the ITPF's valuation going forward.
The level of the ITL's annual contribution to the Fund was £50 million for the year to 31 March 2022, no contributions are expected for
the year to 31 March 2023. 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 with a total value of £225 million and
a parental guarantee from Imperial Brands PLC remains in place.
The ITPF undertook a key de-risking step in purchasing a buy-in policy with Standard Life in December 2021 covering around 60% of
the current pensioner liabilities. The buy-in eliminates investment return, longevity, inflation and funding risks in respect of those
liabilities covered. The buy-in is held as an asset of the ITPF.
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 ITPF or otherwise augment the benefits due to the ITPF's members. Based on these
circumstances, any net surplus in this scheme is recognised in full.
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 18 years. The scheme population comprises
51% in respect of pensioners, 19% in respect of deferred members and 30% 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.
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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, is a defined benefit pension plan that is closed to new
entrants. It has a weighted average maturity of 9 years. The population comprises 79% in respect of pensioners, 9% in respect of
deferred members and 12% 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 2022 the Group included no new schemes 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 2022 in order to
determine the amounts to be included in the Group's consolidated financial statements. The aggregate IAS 19 position is as follows:
Defined benefit plans
£ million
At 1 October
Consolidated income statement expense:
Current service cost
Settlements gains/(losses)
Past service (costs)/income
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 (loss)/gain due to liability experience
Actuarial gain/(loss) due to financial assumption changes
Actuarial gain due to demographic assumption changes
Return on plan assets excluding amounts included in net
interest (expense)/income above
Remeasurement effects recognised in other
comprehensive income
Cash:
Employer contributions
Employee contributions
Benefits paid directly by the company
Benefits paid from plan assets
Net cash
Schemes brought into scope of IAS19
Exchange movements
Total other
At 30 September
DBO
(5,319)
Assets
5,166
(49)
136
(2)
(10)
(99)
–
(94)
1,659
10
–
–
(1)
311
–
–
(151)
–
(139)
–
–
107
(5)
–
–
–
120
1
(311)
–
–
101
(3,609)
3,541
2022
Total
(153)
(49)
(3)
(2)
(10)
8
(5)
(61)
(94)
1,659
10
76
120
–
–
–
120
–
(50)
(50)
(68)
DBO
(5,498)
Assets
5,182
(47)
13
9
(18)
(87)
–
64
(114)
4
–
–
(1)
264
–
(13)
105
–
(13)
–
–
89
(5)
–
–
–
87
126
1
(264)
–
–
(37)
(5,319)
5,166
2021
Total
(316)
(47)
–
9
(18)
2
(5)
(59)
64
(114)
4
87
41
126
–
–
–
126
(13)
68
55
(153)
(1,499)
(1,499)
The cost of termination benefits in the year ended 30 September 2022 and 30 September 2021 mainly relate to restructuring activity
in Germany.
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209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
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
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
ITPF
2,229
(2,958)
(729)
15
50
5.3
3.7
3.7
3.7
Male
21.1
21.8
Male
21.1
22.1
RCPP
2022
ITGBH
538
–
538
15
–
3.7
3.7
2.5
2.5
ITPF
Female
22.4
23.7
ITPF
Female
22.7
23.9
365
(405)
(40)
3
–
5.4
n/a
n/a
2.3
Male
20.5
22.6
Male
20.5
22.6
ITPF
3,404
(4,386)
(982)
17
65
2.1
3.4
3.4
3.4
RCPP
Female
23.9
25.6
RCPP
Female
23.9
25.6
2022
2021
69
16
85
61
19
80
2022
2021
25
39
21
85
2022
826
(894)
(68)
RCPP
765
–
765
15
–
1.1
3.1
2.0
2.0
Male
19.7
20.9
Male
19.7
20.9
26
33
21
80
2021
1,046
(1,199)
(153)
2021
ITGBH
403
(396)
7
3
–
2.7
n/a
n/a
2.3
2022
ITGBH
Female
21.7
22.9
2021
ITGBH
Female
21.7
22.9
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 (2021: 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 Middle table with a
105% multiplier. An allowance for improvements in longevity is made using the 2021 (2021: 2018) CMI improvement rates with a
long-term trend of 1.25% per annum.
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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
6.1
(4.9)
RCPP
9.5
(6.3)
3.7
4.7
2022
ITGBH
4.9
n/a
4.6
ITPF
8.6
(6.9)
RCPP
10.8
(7.0)
5.1
5.1
2021
ITGBH
5.8
n/a
5.1
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% decrease in the discount rate at the start of the year would have increased the consolidated income
statement pension expense by approximately £22 million.
An approximate split of the major categories of ITPF scheme assets is as follows:
£ million unless otherwise indicated
Bonds – index linked government
Bonds – corporate and other
Property
Absolute return
Insurance contract
Other – including derivatives, commodities and cash
2022
Percentage
of ITPF
scheme
assets
14
1
20
28
36
1
Fair value
2,115
815
592
849
–
15
100
4,386
2021
Percentage
of ITPF
scheme
assets
48
19
14
19
–
–
100
Fair value
409
34
604
827
1,058
26
2,958
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 % on
a buy-out basis by 2028.
The majority of the assets are non-quoted. The ITPF holds £nil of self-invested assets (2021: £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.
2022
Percentage
of ITGBH
scheme
assets
–
–
–
100
100
Fair value
–
–
–
405
405
2021
Percentage
of ITGBH
scheme
assets
70
5
16
9
100
Fair value
279
20
63
34
396
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211
211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2244.. PPRROOVVIISSIIOONNSS
£ million
At 1 October 2021
Additional provisions charged to the consolidated income statement
Amounts used
Unused amounts reversed
Exchange movements
At 30 September 2022
Analysed as:
£ million
Current
Non-current
Restructuring
Other
251
115
(61)
(27)
8
286
143
46
(13)
(39)
3
140
2022
203
223
426
2022
Total
394
161
(74)
(66)
11
426
2021
188
206
394
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 £155 million, cost optimisation programmes of
£121 million and other programmes of £10 million.
Within the cost optimisation programme provisions there is £67 million related to costs of consolidating the manufacturing capacity
within the Group.
Other provisions include £46 million relating to various local tax or duty requirements, £37 million relating to local employment
requirements including holiday pay, £21 million of distribution requirements relating to employment and duty and £21 million of market
exit provisions. The provisions are spread throughout the Group and payment will be dependent on local statutory requirements.
Most provisions will be utilised within the next two years, though certain employee related provisions may be required to be held for
a period of up to 10 years.
2255.. SSHHAARREE CCAAPPIITTAALL
£ million
Authorised, issued and fully paid
1,020,697,238 ordinary shares of 10p each (2021: 1,020,697,238)
2022
2021
103
103
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.
2266.. SSHHAARREE SSCCHHEEMMEESS
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.
212
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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% 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.
Analysis of charge to the consolidated income statement
£ million
Share Matching Scheme
Long Term Incentive Plan
Sharesave Plan
Discretionary Share Awards Plan
2022
2021
2
25
1
1
29
3
20
1
1
25
The awards are predominantly equity settled. The balance sheet liability in respect of cash settled schemes at 30 September 2022
was £3.6 million (2021 £1.8 million).
Reconciliation of movements in awards/options
Thousands of shares unless otherwise indicated
Outstanding at 1 October 2021
Granted
Lapsed/cancelled
Exercised
Outstanding at 30 September 2022
Exercisable at 30 September 2022
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
Share
matching
scheme
awards
482
192
(23)
(165)
486
–
Share
matching
awards
461
253
(25)
(207)
482
–
LTIP
awards
Sharesave
options
DSAP
awards
7,412
2,658
(873)
(1,077)
8,120
–
LTIP
awards
6,595
3,763
(2,003)
(943)
7,412
–
2,053
274
(321)
(72)
1,934
151
60
106
(5)
(41)
120
–
Sharesave
options
DSAP
awards
2,006
371
(323)
(1)
2,053
170
70
17
(3)
(24)
60
–
2022
Sharesave
weighted
average
exercise
price £
13.89
14.56
18.11
16.14
13.21
17.45
2021
Sharesave
weighted
average
exercise
price £
15.31
13.09
21.74
5.45
13.89
22.24
The weighted average Imperial Brands PLC share price at the date of exercise of awards and options was £16.83 (2021: £14.96).
The weighted average fair value of Sharesave options granted during the year was £3.30 (2021: £2.35).
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213
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Summary of awards/options outstanding at 30 September 2022
Thousands of shares unless otherwise indicated
Share Matching Scheme
2020
2021
2022
Total awards outstanding
Long Term Incentive Plan
2020
2021
2022
Total awards outstanding
Sharesave Plan
2019
2020
2021
2022
Total options outstanding
Discretionary Share Awards Plan
2021
2022
Total options outstanding
Number of
awards/options
outstanding
Vesting
period
remaining
in months
Exercise price
of options
outstanding £
139
197
151
487
2,137
2,815
3,168
8,120
151
1,161
340
273
1,925
13
106
119
5
17
29
10
19
29
–
11
23
33
17
30
n/a
n/a
n/a
n/a
n/a
n/a
17.45
12.37
13.09
14.56
n/a
n/a
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 2022 and 2021 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
2.0
35.5
3.0
9.2
10.35
13.65
n/a
Share
matching
0.7
36.0
3.0
8.9
12.37
16.00
n/a
Sharesave
1.2-2.2
35.3-35.5
3.0
9.2
2022
DSAP
2.0-2.2
35.5
3.0
9.2
3.21-3.31
10.35-10.67
17.83-18.39
13.65-14.08
14.56
Sharesave
(0.4)-0.2
33.9
3.0
8.9
2.31-2.56
16.00
13.09
n/a
2021
DSAP
0.7
26.3
3.0
6.7
12.86
15.27
n/a
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| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
Market conditions were incorporated into the Monte Carlo method used in determining the fair value of LTIP awards at grant date.
Assumptions in 2022 and 2021 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
2022
29.6
–
2021
31.2
–
17.0-83.7
17.4-40.9
24.4
26.7
Employee share ownership trusts
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 2022. 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
2022
0.9
4.0
(1.2)
3.7
2021
2.1
–
(1.2)
0.9
The shares in the Trusts are accounted for on a first in first out basis and comprise nil shares acquired in the open market (2021: nil)
and £3.7 million (2021: £0.9 million) treasury shares gifted to the Trusts by the Group. There were 4 million shares (2021: nil) gifted in
the year ended 30 September 2022.
2277.. TTRREEAASSUURRYY SSHHAARREESS
Subject to authorisation by special resolution, the Group may purchase its own shares in accordance with the Companies Acts.
Any shares which have been bought back may be held as treasury shares or, if not so held, must be cancelled immediately upon
completion of the purchase, thereby reducing the amount of Group’s issued share capital. Shares held in treasury do not qualify for
dividends. Although the Group did not purchase any shares during the period, a share buyback programme was initiated after the
balance sheet date, and these shares will be cancelled on completion of the purchase. Treasury shares reduced in the period after
4.0 million shares were gifted to the Employee Share Ownership Trusts to satisfy commitments to the employee share schemes.
£ million unless otherwise indicated
At 1 October
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
2288.. CCOOMMMMIITTMMEENNTTSS
Capital commitments
£ million
Contracted but not provided for:
Property, plant and equipment and software
Millions of
shares
(number)
74.3
(4.0)
70.3
6.9
2022
Value £
2,183
–
2,183
n/a
Millions of
shares
(number)
74.3
–
74.3
7.3
2021
Value £
2,183
–
2,183
n/a
2022
2021
95
86
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
215
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
2299.. CCOONNTTIINNGGEENNTT LLIIAABBIILLIITTIIEESS
The following summary includes updates to matters that have developed since the 2021 Annual Report and Accounts.
USA state settlement agreements
In November 1998, the major United States 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”, with Mississippi, Florida, Texas and Minnesota known collectively as the “Previously Settled
States”). ITG Brands (ITGB) is a party to the MSA and to the Mississippi, Minnesota, and Texas State Settlement Agreements.
In connection with its 12 June 2015 acquisition of four cigarette brands (Winston, Salem, Kool and Maverick, referred to as the
“Acquired Brands”) from Reynolds and Lorillard, ITGB has been involved in litigation and other disputes with the Previously Settled
States, Philip Morris, and Reynolds in their state courts. ITGB has also been involved in litigation with Reynolds in the Delaware court
that has jurisdiction over disputes under the acquisition agreement for the Acquired Brands. All cases have now been resolved with
the exception of Delaware court which involves Reynolds’ claim to indemnity for Florida settlement payments. Amounts at issue
range from US$ 73 million to US$ 182 million through 2021, plus interest and attorney’s fees, and US$ 20 million to US$ 29 million
annually going forward. Details are provided below.
Delaware
ITGB and Reynolds are 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 regardless of that “reasonable best efforts” requirement 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. The parties filed summary
judgment motions. A trial was set for 24 October 2022. On 30 September 2022, the trial court granted summary judgment to Reynolds
and denied summary judgment to ITGB. It held that the Florida court’s determination that ITGB did not assume payments under the
Florida settlement unless it agreed to do so was not binding on the Delaware courts under principles of issue preclusion under
Florida law, and further held that as a matter of law the contract provisions were unambiguous and no evidence was required to
determine that ITGB had assumed and was required to indemnify Reynolds for Florida settlement payments. The court did not
determine the amount of Reynolds’ damages but left that question open for further proceedings. The parties have submitted an
agreed schedule to the court to address the issue of damages which would result in initial motions on that issue being submitted by
mid-January 2023.
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 continues to
deny that indemnity is appropriate and intends to appeal that determination, and further contends that Reynolds’ damages should
be substantially reduced by the amount by which Reynolds’ settlement payments have been reduced through operation of the
“profit adjustment” by reason of ITGB not becoming a party to the Florida settlement as well as by reason of Reynolds’ and third-parties’
conduct. Based on the current facts and circumstances we consider it improbable that this potential liability will crystalise and
therefore no provision has been recognised.
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 c. US$ 65 million.
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.
216
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| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
Product liability matters
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.
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 stated that such conduct may be contrary to
Article IV.1 CEL and Article 101 TFEU.
Following the parties' defence and a hearing, an infringement Decision was issued in April 2022 by the BCA Competition College
imposing a fine of €7.14 million on the Company’s Belgian subsidiary, payable within 30 Days of the notification of the Decision.
This amount had been paid and accounted for during the year so no provision or contingent liability remains at the year-end relating
to this case. An appeal to the Market Court in Brussels was made on 18 May 2022. The parties will exchange submissions ahead of the
Market Court hearing on 23 and 30 November 2022.
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. In the Logista appeal,
Logista submitted their pleadings before the High Spanish Court in February 2021. The judgment of the Court of First Instance is
currently pending.
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 United States nationals with a cause of
action and a claim for treble damages against persons who have “trafficked” in property expropriated by the Cuban government.
Treble damages are automatically available under Helms-Burton. Although the filed claim is for unquantified damages, we understand
the claim could potentially reach approximately US$ 365 million, based on the claimants’ claim to own 90% of the property, which
they value at US$ 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.
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 United Kingdom Secretary of State for International Trade authorised Imperial to file and litigate a motion to dismiss the action.
A hearing on the motion to dismiss took place on 26 July 2022 before a magistrate judge. On 2 November 2022 the magistrate judge
recommended that the action be dismissed, without prejudice to re-filing in a proper venue. The district judge will review the
recommendation, consider any objections to the recommendation filed by the parties, and issue a final order on the motion to
dismiss. In the event the motion to dismiss is denied, the court has set a schedule for further proceedings, with trial commencing in
July 2023. No provision has been made for potential liabilities related to this claim. The magistrate judge has recommended that the
action be dismissed. In the event the district judge rejects that recommendation and the motion to dismiss is denied, the Company
will have an opportunity to file a defence to the claim on the merits.
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
217
217
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
UK
In June 2020, the Group responded to a claimant law firm’s allegation 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 United Kingdom High Court
against Imperial Brands plc, Imperial Tobacco Limited and four of its subsidiaries (the Imperial Defendants) and two entities in the
British American Tobacco (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 scheduled for November/December 2021 was adjourned. The deadline for Imperial and BAT to file a defence has
been postponed pending other case management actions and will be determined at a subsequent case management hearing which
will be held after the completion of a matching exercise (which will seek to establish whether the claimants worked for farmers who
grew tobacco purchased by either Defendant group). The claim is unquantified and given the early stage of the litigation a provision
would not be appropriate.
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. A total
of 188 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. SMT has filed retractions proceedings and raised new legal arguments in pending and
new claims before the lower courts.
The written reasoned judgment of the Cour de Cassation in claims found against SMT 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
defend its position.
Spain
A claim has been made against the Group’s subsidiary, Altadis SA, by the General Attorney of Spain seeking repayment of state aid
paid out between c. 2004 and 2010 (part of which period was prior to the Group’s acquisition of Altadis, which took place in 2008).
State aid was paid by the regional government of Andalusia to various insurance companies, to finance the early retirement costs of
Altadis ex-employees following the termination of their employment contracts related to closure of an Altadis factory. In January
2022 the Court ordered that the claim should proceed to the next stage and that Altadis should file a bank guarantee in the sum of
€27.3 million at Court (the amount claimed plus 1/3 required under Spanish law). Altadis appealed the ruling on the guarantee and,
in September 2022, the Appeal Court decided that Altadis should not provide any guarantee. There are no dates scheduled in the
court timetable for hearing the appeals against the main claim. The Group does not expect this claim to succeed, and no associated
provision has been recognised.
3300.. NNEETT DDEEBBTT
The movements in cash and cash equivalents, borrowings, and derivative financial instruments in the year were as follows:
£ million
At 1 October 2021
Reallocation of current borrowings from
non-current borrowings
Net cash flow
Accretion of interest
Change in fair values
New leases, terminations and modifications
Exchange movements
At 30 September 2022
£ million
At 1 October 2020
Reallocation of current borrowings from
non-current borrowings
Net cash flow
Accretion of interest
Change in fair values
New leases, terminations and modifications
Exchange movements
At 30 September 2021
Current
borrowings
Lease
liabilities
Non-current
borrowings
Derivative
financial
instruments
Liabilities
from financing
activities
Cash
and cash
equivalents
(1,107)
(251)
(8,715)
(587)
(10,660)
1,287
(1,392)
1,595
58
–
–
(165)
(1,011)
–
68
(6)
–
(54)
(5)
(248)
1,392
(829)
(16)
–
–
(828)
(8,996)
–
(94)
(7)
270
–
331
(87)
–
740
29
270
(54)
(667)
(10,342)
–
515
–
–
–
48
1,850
Current
borrowings
Lease
liabilities
Non-current
borrowings
Derivative
financial
instruments
Liabilities
from financing
activities
Cash
and cash
equivalents
(1,442)
(299)
(10,210)
(816)
(12,767)
1,626
(1,055)
1,294
13
–
–
83
(1,107)
–
69
(7)
–
(26)
12
(251)
1,055
72
1
–
–
367
(8,715)
–
(41)
1
51
–
218
(587)
–
1,394
8
51
(26)
680
–
(330)
–
–
–
(9)
(10,660)
1,287
(9,373)
Total
(9,373)
–
1,255
29
270
(54)
(619)
(8,492)
Total
(11,141)
–
1,064
8
51
(26)
671
Average reported net debt during the year was £9,822 million (2021: £11,148 million).
218
218
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
Analysis by denomination currency
£ million
Cash and cash equivalents
Total borrowings
Effect of cross currency swaps
Lease liabilities
Derivative financial instruments
Net debt
£ million
Cash and cash equivalents
Total borrowings
Effect of cross currency swaps
Lease liabilities
Derivative financial instruments
Net debt
GBP
257
(1,631)
(1,374)
1,561
187
(45)
GBP
190
(2,696)
(2,506)
2,580
74
(37)
EUR
216
(3,261)
(3,045)
(3,637)
(6,682)
(148)
EUR
188
(3,179)
(2,991)
(4,147)
(7,138)
(153)
USD
971
(5,096)
(4,125)
2,056
(2,069)
(20)
USD
505
(3,917)
(3,412)
1,305
(2,107)
(23)
3311.. RREECCOONNCCIILLIIAATTIIOONN OOFF CCAASSHH FFLLOOWW TTOO MMOOVVEEMMEENNTT IINN NNEETT DDEEBBTT
£ million
Increase/(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
Lease liabilities
Exchange movements
Movement in net debt during the year
Opening net debt
Closing net debt
Other
406
(19)
387
–
387
(35)
Other
404
(30)
374
–
374
(38)
2022
515
(94)
68
(1,710)
2,476
1,255
299
(54)
(619)
881
(9,373)
(8,492)
2022
Total
1,850
(10,007)
(8,157)
(20)
(8,177)
(248)
(67)
(8,492)
2021
Total
1,287
(9,822)
(8,535)
(262)
(8,797)
(251)
(325)
(9,373)
2021
(330)
(41)
69
(858)
2,224
1,064
59
(26)
671
1,768
(11,141)
(9,373)
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.
3322.. NNOONN--CCOONNTTRROOLLLLIINNGG IINNTTEERREESSTTSS
Material non-controlling interests
Detailed below is the summarised financial information of Logista, being a subsidiary where the non-controlling interest of 49.99 % is
considered material to the Group.
Summarised balance sheet
at 30 September
Euro million
Current assets
Current liabilities
Current net assets
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
2022
6,094
(6,763)
(669)
1,599
(365)
1,234
565
2021
5,958
(6,687)
(729)
1,630
(376)
1,254
525
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
219
219
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
Summarised statement of comprehensive income
for the year ended 30 September
Euro million
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
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
Net increase in cash and cash equivalents
3333.. PPOOSSTT BBAALLAANNCCEE SSHHEEEETT EEVVEENNTTSS
2022
11,464
199
7
206
2022
649
(63)
(539)
47
2021
10,817
174
–
174
2021
(302)
505
(194)
9
Share Buybacks
On 6 October 2022 Imperial Brands plc ("the Company") announced the start of an ongoing share buyback programme, to initially
repurchase up to £1 billion of shares in the period from 7 October 2022 to 30 September 2023.
Pension fund loan
Imperial Brands Finance PLC provided a temporary loan facility of £320 million to the Imperial Tobacco Pension Fund, of which
£200 million had been drawn down during the first half of October 2022 to support ongoing liquidity requirements within the Fund’s
Liability Driven Investment holdings during a period of volatility in the UK Government Bond market. £70 million of the drawn
amount has been repaid, with the remaining £130 million to be repaid before 31 March 2023.
Logista acquisitions
In October 2022, the Group's subsidiary Logista completed the acquisition of Carbó Collbatellé, S.L. and Transportes El Mosca.
Further details can be found in note 10.
Russian disposal – associated markets exits
Following the decision to sell the Volgograd factory that completed April 2022, it was determined that it would no longer be
economically viable to operate in a number of associated markets. As a consequence of this, the Group announced on
1 November 2022 that it was ending all operations in Kazakhstan, Kyrgyzstan and Mongolia.
3344.. RREELLAATTEEDD UUNNDDEERRTTAAKKIINNGGSS
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 2022, are provided in the entity financial statements of Imperial Brands PLC. There are no material related parties other
than Group companies.
220
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
SUPPLEMENTARY INFORMATION
AADDJJUUSSTTEEDD PPEERRFFOORRMMAANNCCEE MMEEAASSUURREESS
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 exclude, where applicable, amortisation and impairment of acquired intangibles,
profit/loss on disposal of subsidiaries, Russian and associated markets exit, restructuring costs, acquisition and disposal costs, fair
value and exchange gains and losses on financial instruments, post-employment benefits net financing cost, and related tax effects
and tax matters. Other significant gains or losses which are not representative of the underlying business may also be treated as
adjusting items where there is appropriate justification. 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 adjusted performance
measures that are used by the Group are defined and reconciled back to the associated IFRS metrics as detailed below.
Summary of key adjusting items
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.
Consolidated income statement adjusting items
The following tables summarise the key items recognised within the consolidated income statement that have been treated as
adjusting items:
Adjusting items recognised within administrative and other expenses
£ million
Russian and associated markets exit costs
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment to financial assets
(Loss)/profit on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Buy-out of liabilities on Irish pension scheme
Total adjusting administrative and other expenses
Total non-adjusting administrative and other expenses
Administrative and other expenses
Notes
2022
5
10
(399)
(349)
(197)
(37)
(29)
(5)
9
(4)
(1,011)
(323)
(1,334)
2021
–
(450)
(257)
15
281
(17)
1
–
(427)
(336)
(763)
221
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
www.imperialbrandsplc.com
221
SUPPLEMENTARY INFORMATION continued
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. The Group 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.
Total amortisation and impairment for the year is £394 million (2021: £575 million) of which £349 million (2021: £450 million)
relates to acquired intangibles and is adjusting and £45 million (2021: £125 million) relates to internally generated intangibles
and is non adjusting. In the year to 30 September 2022 adjusting items all relate to amortisation. £323 million (2021: £320 million)
is attributable to Tobacco & NGP and £26 million (2021: £85 million) is attributable to distribution.
Profit/loss on disposal of subsidiaries/acquisition and disposal costs
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 and disposal 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.
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.
Russian and associated markets exit
The portion of the loss on exit of the Russian and associated markets adjusted out of operating profit was £399 million comprising
a loss on transfer of Russian operations of £364 million and impairment of assets and exit costs of the associated markets of
£35 million.
Fair value adjustment to financial assets
As the movement in the fair value of loan receivables associated with the investment in Auxly Cannabis Group Inc. and the
movement in the investment in associate Oxford Cannabinoid Technologies Holdings plc has the potential to be significant, and do
not relate to the day to day operational performance of the group, the Group has excluded these fair value movements from adjusted
operating profit.
Adjusting items recognised within share of (loss)/profit of investments accounted for using the equity method
£ million
Notes
2022
Impairment of intangible assets held by Global Horizons Ventures Limited
Other profits from investments accounted for using the equity method
Share of (loss)/profit of investments accounted for using the equity method
(24)
9
(15)
2021
–
11
11
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Impairment of intangible assets held by global horizon joint venture
The Group has an investment in the Global Horizon Ventures Limited joint venture company which is accounted for as an
investment using the equity method. This entity held an intangible asset relating to royalties arising on the sales of a specific brand
within Russia. Following the transfer of the Russian assets these royalties will cease and therefore the Group’s share of this asset has
now been fully impaired with a charge of £24 million.
Adjusting items recognised within tax
£ million
Deferred tax on amortisation of acquired intangibles
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 subsidiaries
Recognition of tax credits
Provision for state aid tax recoverable
Uncertain tax positions
Deferred tax on unremitted earnings
Tax on unrecognised losses
Other non-adjusting taxation charges
Reported tax
2022
15
(183)
–
49
8
–
(101)
63
26
(8)
(755)
(886)
2021
31
78
1
72
11
239
–
–
–
(47)
(716)
(331)
Tax adjustments related to other pre-tax adjusting items
The adjusted tax charge has been calculated to include the tax effects of a number of pre-tax adjusting items including the
amortisation of acquired intangibles, net foreign exchange gains and losses, fair value movements on financial instruments,
restructuring costs and post-employment benefits net financing cost. The tax effect of the result of the disposal of subsidiaries has
also been adjusted.
Significant one-off tax charges or credits
The adjusted tax charge also excludes 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 tax losses and tax credits not historically generated in the normal
course of business are excluded on the same basis.
Recognition of tax credits
The recognition and utilisation of deferred tax assets relating to tax credits not historically generated in the normal course of
business are excluded from the adjusted tax charge.
Uncertain tax positions
Significant one-off tax charges or credits arising from a provision for uncertain tax items not arising in the normal course of business
are excluded from the adjusted tax charge.
Provision for State aid recoverable
Significant one-off tax charges or credits arising from prior period items are excluded from the adjusted tax charge. The provision
against the state aid tax recoverable is excluded from the adjusted tax charge on this basis.
Deferred tax on unremitted earnings
Significant one-off tax charges or credits arising from prior period items are excluded from the adjusted tax charge. The tax effect of
the release of a provision for deferred tax on unremitted earnings is excluded from the adjusted tax charge on this basis.
Tax on unrecognised losses
The recognition and utilisation of deferred tax assets relating to losses not historically generated in the normal course of business are
excluded from the adjusted tax charge.
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SUPPLEMENTARY INFORMATION continued
DDEEFFIINNIITTIIOONNSS AANNDD RREECCOONNCCIILLIIAATTIIOONNSS OOFF AADDJJUUSSTTEEDD MMEEAASSUURREESS
A) Tobacco & NGP 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 the Group treat Logista as an arm’s 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.
Reconciliation from Tobacco & NGP revenue to Tobacco & NGP net revenue
£ million
Revenue
Duty and similar items
Sale of peripheral products
Net revenue
Tobacco
23,232
(15,628)
(19)
7,585
NGP
224
(16)
–
208
2022
Total
23,456
(15,644)
(19)
7,793
Tobacco
23,664
(16,218)
(24)
7,422
NGP
199
(11)
–
188
2021
Total
23,863
(16,229)
(24)
7,610
B) 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.
Reconciliation from Distribution revenue to Distribution net revenue
£ million
Revenue
Cost of sales – Distribution
Distribution net revenue
2022
9,756
(8,710)
1,046
2021
9,589
(8,520)
1,069
C) 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.
Reconciliation from profit before tax to adjusted operating profit
£ million
Profit before tax
Net finance costs/(income)
Share of loss/(profit) of investments accounted for using the equity method
Operating profit
Russian and associated markets exit costs
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment to financial assets
Loss/(profit) on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Buy-out of liabilities on Irish pension scheme
Total adjustments
Adjusted operating profit
2022
2,551
117
15
2,683
399
349
197
37
29
5
(9)
4
1,011
3,694
2021
3,238
(81)
(11)
3,146
–
450
257
(15)
(281)
17
(1)
–
427
3,573
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Reconciliation from Tobacco & NGP operating profit to adjusted operating profit
£ million
Operating profit
Russian and associated markets exit
Amortisation and impairment of acquired intangibles
Restructuring costs
Loss/(profit) on disposal of subsidiaries
Fair value adjustment to financial assets
Acquisition and disposal costs
Excise tax provision
Buy-out of liabilities on Irish pension scheme
Adjusted operating profit
Reconciliation from distribution operating profit to adjusted operating profit
£ million
Operating profit
Loss on disposal of subsidiaries
Acquisition and disposal costs
Amortisation of acquired intangibles
Restructuring costs
Adjusted operating profit
2022
2,472
399
323
197
13
37
5
(9)
4
2021
2,991
–
365
249
(281)
(15)
–
(1)
–
3,441
3,308
2022
212
16
–
26
–
254
2021
148
–
17
85
8
258
See note 7 for details of the Excise tax. See note 11 for details on amortisation and impairment, note 10 for details of acquisition and
disposal costs, and note 5 for details of restructuring costs.
D) 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 businesses where appropriate. There is no reconciliation
required for this metric.
E) 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.
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.
The Group 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.
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.
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SUPPLEMENTARY INFORMATION continued
Reconciliation from reported net finance costs to adjusted net finance costs
£ million
Reported net finance costs/(income)
Fair value gains on derivative financial instruments
Fair value losses on derivative financial instruments
Exchange (losses)/gains 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
2022
117
1,483
(1,213)
(69)
201
107
(99)
8
326
(9)
6
329
326
2021
(81)
508
(457)
445
496
89
(87)
2
417
(18)
7
428
417
F) 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.
The adjusted tax rate is calculated as the adjusted tax charge divided by the adjusted profit before tax.
£ million
Reported tax
Deferred tax on amortisation of acquired intangibles
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 subsidiaries
Recognition of tax credits
Provision for state aid recoverable
Uncertain tax positions
Deferred tax on unremitted earnings
Tax on unrecognised losses
Adjusted tax charge
2022
886
15
(183)
–
49
8
–
(101)
63
26
(8)
755
2021
331
31
78
1
72
11
239
–
–
–
(47)
716
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G) Adjusted earnings per share
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. Adjusted earnings per share
is calculated by dividing adjusted earnings by the weighted average number of shares.
Reconciliation from reported to adjusted earnings and earnings per share
2022
2021
£ million unless otherwise indicated
Reported basic
Russian and associated markets exit
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment to financial assets
Profit on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Buy-out of liabilities on Irish pension scheme
Tax on disposal of premium cigar division
Net fair value and exchange movements on financial instruments
Post-employment benefits net financing cost
Brand impairment in equity accounted joint venture
Provision for state aid recoverable
Uncertain tax positions
Deferred tax on unremitted earnings
Tax on unrecognised losses
Recognition of tax credits
Adjustments above attributable to non-controlling interests
Adjusted
Adjusted diluted
Earnings
per share
(pence)
165.9
42.2
35.4
15.6
Earnings
1,570
399
334
148
3.9
2.2
0.5
(1.0)
0.4
–
(1.9)
(0.8)
2.5
10.7
(6.7)
(2.7)
0.8
–
(1.8)
37
21
5
(9)
4
–
(18)
(8)
24
101
(63)
(26)
8
–
(18)
265.2
263.3
2,509
2,509
Earnings
per share
(pence)
299.9
Earnings
2,834
–
44.3
19.6
(1.6)
(29.7)
1.8
(0.1)
–
(1.2)
(60.7)
(0.3)
–
–
–
–
5.0
(25.3)
(4.6)
247.1
246.4
–
419
185
(15)
(281)
17
(1)
–
(11)
(574)
(3)
–
–
–
–
47
(239)
(43)
2,335
2,335
H) Return on invested capital (ROIC)
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.
£ million unless otherwise stated
Reported operating profit
Adjusting items (see reconciliation c)
Adjusted operating profit
Equivalent tax charge
Net adjusted operating profit after tax
Working capital
Intangibles
Property, plant & equipment
Assets held for disposal
Invested capital
Average annual invested capital
Return on invested capital
2022
2,683
1,011
3,694
(827)
2,867
(2,823)
17,777
1,659
–
16,613
16,240
17.7%
2021
3,146
427
3,573
(807)
2,766
(2,523)
16,674
1,715
–
15,866
16,741
16.5%
2020
–
–
–
–
–
(3,467)
18,160
1,899
1,024
17,616
–
–
I) Constant currency
Constant currency removes the effect of exchange rate movements on the translation of the results of our overseas operations.
The Group translate current year results at prior year foreign exchange rates. An analysis of all key metrics can be found in the Group
Financial Review on pages 73-81.
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SUPPLEMENTARY INFORMATION continued
J) 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.
Adjusted net debt calculation
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
2022
(8,492)
105
248
85
2021
(9,373)
140
251
367
(8,054)
(8,615)
Average adjusted net debt during the year was £9,198 million (2021: £10,361 million).
K) Adjusted net debt to earnings before interest, taxation, depreciation and amortisation (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 table J above. Adjusted EBITDA is calculated as adjusted operating profit plus amortisation,
depreciation and impairments. The reconciliation from reported Group operating profit to EBITDA is shown below.
£ million
Operating profit
Depreciation, amortisation and impairments
EBITDA
2022
2,683
660
3,343
2021
3,146
815
3,961
L) Adjusted operating cash conversion
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.
Adjusted operating cash conversion calculation
£ million
Net cash flows generated from operating activities
Tax
Net capital expenditure
Restructuring
Cash flow post capital expenditure pre interest and tax
Adjusted operating profit
Adjusted operating cash conversion
2022
3,186
681
(177)
91
3,781
3,694
102%
2021
2,167
820
(150)
112
2,949
3,573
83%
M) Free cash flow
Free cash flow is adjusted operating profit 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.
Net cash flows generated from operating activities to free cash flow
£ million
Net cash flows generated from operating activities
Net capital expenditure
Cash interest
Minority interest dividends
Free cash flow
2022
3,186
(177)
(358)
(89)
2,562
2021
2,167
(150)
(400)
(93)
1,524
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Imperial Brands | Annual Report and Accounts 2022
GGLLOOSSSSAARRYY
Financial terms
Adjusted earnings per share
This is an adjusted performance measure which is defined within section G of the supplementary information
Adjusted net debt
This is an adjusted performance measure which is defined within section J of the supplementary information.
Adjusted net debt to EBITDA multiple This is an adjusted performance measure. Adjusted net debt is defined within section J of the supplementary
information. EBITDA is defined within section K of the supplementary information.
Adjusted EBITDA
Adjusted EBITDA is calculated as adjusted operating profit plus amortisation, depreciation and impairments.
Adjusted net finance costs
This is an adjusted performance measure which is defined within section E of the supplementary information.
Adjusted operating cash conversion
This is an adjusted performance measure which is defined within section L of the supplementary information.
Adjusted operating profit
This is an adjusted performance measure which is defined within section C of the supplementary information.
Adjusted operating profit margin
Adjusted operating profit margin is calculated as adjusted operating profit divided by net revenue.
Adjusted (Non-GAAP)
Adjusted tax charge
Aggregate priority market share
All in cost of debt
Constant currency
Dividend per share
GAAP
EBITDA
Market share
Net debt to EBITDA
Reported (GAAP)
Non-GAAP measures provide a useful comparison of performance from one period to the next.
This is an adjusted performance measure which is defined within section F of the supplementary information.
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 October to September. The market volume size used in the weighting calculation is based on a
constant prior year end actual market size.
Adjusted net finance costs divided by the average net debt in the year.
Removes the effect of exchange rate movements on the translation of the results of our overseas operations.
The Group translate current year results at prior year foreign exchange rates.
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.
Generally accepted accounting principles.
Earnings before interest, taxation, depreciation and amortisation
Market share data is presented as a 12-month moving average weighted across the markets in which
we operate.
Adjusted closing net debt divided by adjusted EBITDA.
Reported (GAAP) Complies with International Financial Reporting Standards and the relevant legislation.
Return on invested capital
This is an adjusted performance measure which is defined within section H of the supplementary information.
Stick equivalent volumes
Stick equivalent volumes reflect our combined cigarette, fine cut tobacco, cigar and snus volumes
Tobacco & NGP Net revenue/
Distribution Net Revenue
These are adjusted performance measures which are defined within sections A and B of the
supplementary information.
Total shareholder
return
A,A,A
CEO
CFO
Distribution
ELT
ERG
ESG
FCT
FMC
KPI
LTIP
MMC
MPI
NGP
NTM
OND
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.
Africa, Asia and Australasia
Chief Executive officer
Chief Financial officer
Logistics segment
Executive leadership team
Employee resource groups
Environmental, social and governance
Fine cut tobacco
Factory made cigarette
Key performance indicators
Long term incentive plans
Mass market cigar
Manufacturer’s price increase
Next Generation Products
Non-tobacco materials
Oral nicotine delivery category
Priority markets
Top 5 combustible markets USA, Germany, UK, Spain and Australia
PCD
SBTi
SE
STP
TCFD
Premium Cigar Division
Science based target initiatives
Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and snus volumes
Sustainable Tobacco Programme
Task force on climate-related financial disclosures
Tobacco & NGP
Tobacco & Next Generation Products
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
www.imperialbrandsplc.com
229
IMPERIAL BRANDS PLC BALANCE SHEET
at 30 September 2022
£ million
Fixed assets
Investments
Current assets
Debtors
Creditors: amounts falling due within one year
Net current assets
Net assets
Capital and reserves
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 – dividends paid
Total shareholders' funds
Notes
2022
2021
iii
iv
v
vi
7,968
7,968
4,744
3,056
(39)
4,705
12,673
103
4
5,833
5,047
3,006
(1,320)
12,673
(37)
3,019
10,987
103
4
5,833
6,348
4
(1,305)
10,987
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 £3,006 million (2021: £4 million).
The financial statements on pages 230-244 were approved by the Board of Directors on 15 November 2022 and signed on its behalf by:
Share premium
and capital
redemption
Share capital
103
5,837
–
–
–
103
103
–
–
–
–
–
–
5,837
–
–
–
103
5,837
Retained
earnings
5,047
3,006
3,006
(1,320)
6,733
Total equity
10,987
3,006
3,006
(1,320)
12,673
4
4
4
4
(1,305)
5,047
(1,305)
10,987
5,837
6,348
12,288
LUKAS PARAVICINI
DIRECTOR
IMPERIAL BRANDS PLC STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2022
£ million
At 1 October 2021
Profit for the year
Total comprehensive income
Transactions with owners
Dividends paid
At 30 September 2022
At 1 October 2020
Profit for the year
Total comprehensive income
Transactions with owners
Dividends paid
At 30 September 2021
Total distributable reserves were £6,720 million (2021: £5,033 million).
230
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Imperial Brands | Annual Report and Accounts 2022
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC
II.. AACCCCOOUUNNTTIINNGG PPOOLLIICCIIEESS
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 2022.
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 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 176-177).
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 38 of IAS 1 'Presentation of financial statements' – comparative information requirements in respect of:
(i) paragraph 79(a)(iv) of IAS 1 ;
• The following paragraphs of IAS 1 'Presentation of financial statements':
(ii) 10(d) – statement of cash flows;
(iii) 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;
(iv) 16 – statement of compliance with all IFRS;
(v) 38A – requirement for minimum of two primary statements, including cash flow statements;
(vi) 38B-D – additional comparative information;
(vii) 40A-D – requirements for a third statement of financial position;
(viii) 111 – cash flow information; and
(ix) 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 Accounting Estimates and Judgements of the
consolidated financial statements for further detail.
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
231
231
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
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.
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.
IIII.. DDIIVVIIDDEENNDDSS
Distributions to ordinary equity holders
£ million
Paid interim of 42.54 pence per share (2021: 42.12 pence, 2020: 41.70 pence)
– Paid June 2020
– Paid September 2020
– Paid December 2020
– Paid June 2021
– Paid September 2021
– Paid December 2021
– Paid June 2022
– Paid September 2022
Interim dividend paid
Proposed interim of 49.31 pence per share (2021: 48.48 pence, 2020: 48.00 pence)
– To be paid December 2022
Interim dividend proposed
Proposed final of 49.32 pence per share (2021: 48.48 pence, 2020: 48.01 pence)
– Paid March 2021
– Paid March 2022
– To be paid March 2023
Final dividend
Total ordinary share dividends of 141.17 pence per share (2021: 139.08 pence, 2020: 137.71 pence)
2022
2021
2020
–
–
–
–
–
–
202
202
404
467
467
–
–
467
467
1,338
–
–
–
199
199
458
–
–
856
–
–
–
458
–
458
1,314
197
197
453
–
–
–
–
–
847
–
–
454
–
–
454
1,301
The third interim dividend for the year ended 30 September 2022 of 49.31 pence per share amounts to a proposed dividend of
£467 million, which will be paid in December 2022.
The proposed final dividend for the year ended 30 September 2022 of 49.32 pence per share amounts to a proposed dividend payment
of £467 million in March 2023 based on the number of shares ranking for dividend at 30 September 2022, and is subject to
shareholder approval. If approved, the total dividend paid in respect of 2022 will be £1,338 million (2021: £1,314 million). The dividend
paid during 2022 is £1,320 million (2021: £1,305 million).
232
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
IIIIII.. IINNVVEESSTTMMEENNTTSS
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 235-244.
IIVV.. DDEEBBTTOORRSS
£ million
Amounts owed from Group undertakings
2022
7,968
7,968
2021
7,968
7,968
2022
4,744
2021
3,056
Amounts owed from Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable
on demand.
VV.. CCRREEDDIITTOORRSS:: AAMMOOUUNNTTSS FFAALLLLIINNGG DDUUEE WWIITTHHIINN OONNEE YYEEAARR
£ million
Amounts owed by Group undertakings
Bank overdrafts
Other creditors
2022
2021
35
2
2
39
35
2
–
37
Amounts owed by Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable on
demand.
VVII.. CCAALLLLEEDD UUPP SSHHAARREE CCAAPPIITTAALL
£ million
Authorised, issued and fully paid
1,020,697,238 ordinary shares of 10p each (2021: 1,020,697,238)
2022
2021
103
103
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.
VVIIII.. RREESSEERRVVEESS
Treasury shares
Subject to authorisation by special resolution, the Group may purchase its own shares in accordance with the Companies Acts.
Any shares which have been bought back may be held as treasury shares or, if not so held, must be cancelled immediately upon
completion of the purchase, thereby reducing the amount of Group’s issued share capital. Shares held in treasury do not qualify for
dividends. Although the Group did not purchase any shares during the period, a share buyback programme was initiated after the
balance sheet date, and these shares will be cancelled on completion of the purchase. Treasury shares reduced in the period after
4.0 million shares were gifted to the Employee Share Ownership Trusts to satisfy commitments to the employee share schemes.
£ million unless otherwise indicated
At 1 October
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
Millions of
shares
(number)
74.3
(4.0)
70.3
6.9
2022
Value
£
2,183
–
2,183
n/a
Millions of
shares
(number)
74.3
–
74.3
7.3
2021
Value
£
2,183
–
2,183
n/a
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
233
233
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
VVIIIIII.. GGUUAARRAANNTTEEEESS
The Company provides guarantees to the following subsidiaries under section 479A of the Companies Act 2006, whereby the
subsidiaries, incorporated in the UK, are exempt from the requirements of the Act relating to the audit of individual accounts for the
financial year ending 30 September 2022:
• Imperial Tobacco Holdings (2007) Limited
• Imperial Tobacco Ventures Limited
• Rizla UK Limited
• Imperial Tobacco Overseas (Polska) Limited
• La Flor de Copán UK Limited
• Tabacalera de García UK Limited
• Imperial Brands Ventures Limited
• Nerudia Consulting Limited
• Imperial Brands Ventures Finance Limited
• Imperial Brands Ventures Holdings (1) Limited
• Imperial Brands Ventures Holdings (2) 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 2022, the amount guaranteed is £14,151 million
(2021: £14,708 million).
The guarantees include the Dutch subsidiaries, all of which are included in the consolidated financial statements as at
30 September 2022.
Many of the committed revolving credit facilities remain undrawn as at 30 September 2022 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 subsidiary, namely John Player & Sons Limited, which is included in the consolidated financial
statements as at 30 September 2022.
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.
IIXX.. RREELLAATTEEDD PPAARRTTYY DDIISSCCLLOOSSUURREESS
Details of Directors’ emoluments and interests are provided within the Directors’ Remuneration Report. The Directors
Remuneration Report, on pages 130-148 includes details on salary, benefits, pension and share plans. These disclosures form
part of the financial statements.
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Imperial Brands | Annual Report and Accounts 2022
XX.. RREELLAATTEEDD UUNNDDEERRTTAAKKIINNGGSS
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 2022 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.
SSUUBBSSIIDDIIAARRIIEESS:: RREEGGIISSTTEERREEDD IINN EENNGGLLAANNDD AANNDD WWAALLEESS,, WWHHOOLLLLYY OOWWNNEEDD
Name
Altadis New Co 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)
Principal activity and registered address
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
In strike off
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
Provisional 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
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
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
Dormant
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
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
235
235
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Principal activity and registered address
Imperial Tobacco Pension Trustees (Burlington House) Limited Dormant
Imperial Tobacco Pension Trustees Limited (iv)
Imperial Tobacco Ventures Limited
ITG Brands Limited
Joseph & Henry Wilson Limited
Nerudia Limited (v)
Nerudia Consulting Limited
La Flor de Copán UK Limited
Park Lane Tobacco Company Limited
Rizla UK Limited
Sensus Investments Limited
Tabacalera de García UK Limited
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
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol BS3 2LL England
Research and development of e-vapour products
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Research and development of e-vapour products
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Entity ceased trading
121 Winterstoke Road, Bristol, BS3 2LL, England
In strike off
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
236
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| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
SSUUBBSSIIDDIIAARRIIEESS:: IINNCCOORRPPOORRAATTEEDD OOVVEERRSSEEAASS,, WWHHOOLLLLYY OOWWNNEEDD
Name
Country of incorporation
Principal activity and registered address
1213509 B.C. Limited
Canada
Altadis Canarias S.A.U. (ii)
Spain
Altadis Holdings USA Inc
United States of America
Altadis Management Services
Corporation
United States of America
Altadis Middle East FZCO
United Arab Emirates
Altadis Ocean Indien S.A.S.
France (La Réunion Island)
Altadis Retail Corporation
United States of America
Altadis S.A.U.
Spain
Altadis Shade Company LLC
United States of America
Athena IP Vermogensverwaltunos
GmbH
Germany
Cacique, SA - Comércio, Importaçao
e Exportaçao
Brazil
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 Azcárraga 5, Madrid, 28016, Spain
Holding investments in subsidiary companies
714 Green Valley Road, Greensboro, NC27408 USA
Trademark service company
714 Green Valley Road, Greensboro, NC27408 USA
Sales and marketing of tobacco products in the Middle East
P.O. Box. No. 261718, Jebel Ali Free Zone, Dubai, 261718, United Arab Emirates
Sales and distribution of tobacco products in la Réunion Island
ZI n° 2 - BP 256 - 97457 Saint Pierre Cedex, La Réunion
Trademark owner
300 Delaware Avenue, Ste. 1230, Wilmington, DE, 19801, USA
Manufacture, sales and distribution of tobacco products in Spain
C/Comandaute Azcárraga 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
CBHC Inc
United States of America
Dormant714 Green Valley Road Greensboro, NC27408 USA
Commonwealth-Altadis, Inc
United States of America
Commonwealth Brands Inc
United States of America
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.
France
Ets L Lacroix Fils NV/SA
Belgium
Fontem (Beijing) Technology
Solutions Limited (i)
People’s Republic of China
Fontem Canada Limited
Canada
Fontem US, LLC.
United States of America
Fontem Ventures B.V.
The Netherlands
Huotraco International Limited
Cambodia
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
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
Imperial Brands Colombia S.A.S.
Colombia
In Liquidation
TV21 No.98 05, Bogotá D.C. Colombia
Imperial Brands CR s.r.o. ( formerly
Imperial Tobacco s.r.o.)
Czech Republic
Sales and marketing of tobacco products in the Czech Republic
Karla Engliše 3201/6, 15 00, Praha 5
Imperial Brands Finance
France SAS
Imperial Brands Finance
Netherlands B.V.
France
The Netherlands
Imperial Brands Finland Oy
Finland
Imperial Brands Global Duty Free
& Export S.L.
Spain
Imperial Brands Holdings
International B.V.
Imperial Brands Japan
Kabushiki Kaisha (v)
The Netherlands
Japan
Provision of finance to other Group companies
200-216 rue Raymond Losserand, 75014, Paris
Provision of finance to other Group companies
Slachtedijk 28a, 8501 ZA, Joure, Netherlands
Sales and marketing of tobacco products in Finland
Auriga Business Center, Juhana Herttuan Puistokatu 21, 20100 Turku
Sale and export of duty-free tobacco products
C/Comandaute Azcárraga 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 Toranomon, Minato-ku, Tokyo
105-0001, Japan
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
237
237
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Country of incorporation
Principal activity and registered address
Imperial Brands La Romana
(formerly Tabacalera de García
S.A.S.)
Dominican Republic
Manufacture of cigars in the Dominican Republic
Industrial Free Zone #1, La Romana, Domincan Republic
Imperial Brands Luxembourg sarl
Luxembourg
Imperial Brands Malta Limited
Malta
Imperial Brands Services Polska
spolka z.o.o
Poland
Imperial Brands Ventures LLC
United States of America
Imperial Finance Ireland Limited
Ireland
Imperial Finance Malta Limited
Malta
Imperial Nominees Limited (ii)
New Zealand
Imperial Tobacco (Asia) Pte. Ltd.,
Singapore
Imperial Tobacco Australia Limited Australia
Imperial Tobacco Austria Marketing
Service GmbH
Imperial Tobacco BH doo (i)
Austria
Bosnia-Herzegovina
Imperial Tobacco Bulgaria EOOD (i) Bulgaria
Imperial Tobacco Distribution
Romania srl
Romania
Imperial Tobacco EFKA
Management GmbH
Germany
Imperial Tobacco España, S.L.U.
Spain
Imperial Tobacco Estonia OÜ
Estonia
Imperial Tobacco Hellas S.A.
Greece
Imperial Tobacco Holdings
(Netherlands) B.V.
Imperial Tobacco Holdings
International B.V.
Imperial Tobacco Intellectual
Property Limited
Imperial Tobacco International
GmbH
Imperial Tobacco Ireland
Unlimited Company (v)
Imperial Tobacco Italia S.r.l.
Imperial Tobacco Italy S.r.l.,
The Netherlands
The Netherlands
Ireland
Germany
Ireland
Italy
Italy
Imperial Tobacco Kyrgyzstan LLC (i) Kyrgyzstan
Imperial Tobacco Magyarország
Dohányforgalmázo Kft (Imperial
Tobacco Hungary)
Imperial Tobacco Management
Luxembourg sarl
Imperial Tobacco Marketing
Sdn Bhd
Imperial Tobacco New Zealand
Limited
Imperial Brands Norway A.S.
(formerly Imperial Tobacco A.S.)
Imperial Tobacco Polska
Manufacturing S.A.
Hungary
Luxembourg
Malaysia
New Zealand
Norway
Poland
Sale of tobacco products in Luxembourg
56 Rue Charles Martel, L-2134, Luxembourg
Provision of finance to other Group companies
Office 3, AX Business Centre, Ground Floor, Triq id-Difiża Ċivili Mosta, MST
1741, Malta
Manufacturing and supply chain services to other group companies
Jankowice, Przemyslowa 1, 62-080 Tarnowo Padgórne, Poland
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
Office 3, AX Business Centre, Ground Floor, Triq id-Difiża Ċivili Mosta, MST
1741, Malta
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 Henrik 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/Comandaute Azcárraga 5, Madrid 28016, Spain
Dormant
Veskiposti 2, 10138 Tallinn, Tallinn, Estonia
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
Sales and marketing of tobacco products in Hungary
Váci út 141, 1138, Budapest, Hungary
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
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
238
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IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
Name
Country of incorporation
Principal activity and registered address
Imperial Tobacco Polska S.A.
Poland
Imperial Tobacco Portugal SSPLC Portugal
Imperial Tobacco Production
Ukraine (i)
Imperial Tobacco SCG doo Beograd (i) Serbia
Ukraine
Imperial Tobacco Sigara ve
Tutunculuck Sanayi Ve Ticaret A.S.
Turkey
Imperial Tobacco Slovakia a.s.
Slovak Republic
Imperial Tobacco Taiwan Co
Limited
Taiwan
Imperial Tobacco Taiwan
Manufacturing Company Limited
Imperial Tobacco Tutun Urunleri
Satis Ve Pazarlama A.S.
Taiwan
Turkey
Imperial Tobacco Ukraine (i)
Ukraine
Imperial Tobacco US Holdings BV The Netherlands
Imperial Tobacco West Africa S.A.S. (i) Cote D'Ivoire
Imperial Tobacco Zagreb doo (i)
Croatia
IMPTOB South Africa (Pty) Limited South Africa
ITG Brands Holdco LLC
United States of America
ITG Brands, LLC
United States of America
ITG Cigars Inc
United States of America
ITG Holdings USA Inc (iv)
United States of America
ITL Pacific (HK) Limited
Hong Kong
Imperial Ventures Malta Limited Malta
JAW-Invest Oy
Finland
John Player & Sons Limited
Ireland
John Player Ireland Pension
Trustee Limited
JSNM SARL
MYBLU Spain S.L.
Ireland
France
Spain
Max Rohr, Inc
United States of America
Millennium Tobacco Unlimited
Company
Newglade International Unlimited
Company
Ireland
Ireland
Philippine Bobbin Corporation
Philippines
Real Club de Golf la Herrería S.A.
Spain
Reemtsma Cigarettenfabriken
GmbH
Skruf Snus AB
Germany
Sweden
Manufacture and sale of tobacco products in Poland
Jankowice, ul. Przemyslowa 1, Pl-62-080, Tarnowo-Podgóme, 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
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
121, Winterstoke Road, Bristol, BS3 2LL
Holding investments in subsidiary companies
Cocody-Nord, Quartier Gendarmerie, TF 5937, 01 B.P. 724 Abidjan
Dormant
Julija Kniefera 7, HR-100, Croatia
Provision of services to other Group companies
5 Sandwood Hills, Dunkirk Estate, Zimbali, South Africa
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
Manufacture and sale of tobacco and tobacco related products
Room 3907-08, 39th Floor, Hopewell Centre, 183 Queens Road East, Wanchai,
Hong Kong
Provision of finance to other Group companies
Office 3, AX Business Centre, Ground Floor, Triq id-Difiża Ċivili Mosta, MST
1741, Malta
Trademark owner
Auriga Business Center, Juhana Herttuan puistokatu 21, 20100 Turku, Findland
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-vaopur products in Spain
CR. Robledo de Chavela, S/N. San Lorenzo del Escorial, Madrid, 28200, Spain
Trademark owner
300 Delaware Avenue, Ste. 1267, Wilmington, DE,19801, USA
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
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
Manufacture, marketing, sales of tobacco products in Sweden
PO Box 3068, Stockholm, SE-103 61, Sweden
Société Centrafricaine de
Cigarettes S.A. (i)
Central African Republic
Manufacture and distribution of cigarettes in Central African Republic
Rue David Dacko, BP 1446, Bangui, Central African Republic
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
239
239
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Country of incorporation
Principal activity and registered address
Société Centrafricaine de
Distribution Sarl (i)
Société du Mont Nimba Sarl (i)
Central African Republic
Guinee Conakry
Dormant
Avenue Boganda Pk4, Bangui, Central African Republic
In Liquidation
BP 3391, Conakry, Guinea
Société Nationale d’Exploitation
Industrielle des Tabacs et
Allumettes SAS (SEITA)
France
Société pour le Développement du
Tabac en Afrique S.A.S.
France
System Designed to Africa Sarl
Morocco
Tabacalera Brands Inc
United States of America
Tabacalera de García Limited
Bermuda
Tabacalera de García S.A.S.
France
Tahiti Tabacs SASU
France, Papeete (Tahiti)
Tobaccor S.A.S. (v)
Tobačna 3DVA, trgovsko podjetje,
d.o.o.
France
Slovenia
Tobačna Grosist d.o.o.
Slovenia
Tobačna Ljubljana d.o.o.
Slovenia
Van Nelle Tabak Nederland B.V.
The Netherlands
Van Nelle Tobacco International
Holdings B.V.
Von Erl. Gmbh (i)
The Netherlands
Austria
Manufacture and sale of tobacco products in France, and export of tobacco
products
200-216 rue Raymond Losserand, Paris, 75014, 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
Clarendon House, 2 Church Street, Hamilton, HM 11 Bermuda
Manufacture of cigars in the Dominican Republic
320, Rue Saint-Honore, Paris, 75001, France
Importation, distribution and selling of tobacco products in Tahiti (French
Polynesia)
PK 4, 300 Côté mer, 98701 Arue, BP 20692 Papeete, French Polynesia
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 - Ĉrnuče, Slovenia
Marketing and distribution in Slovenia
Cesta 24., junija 90, SI 1231 Ljubljana - Ĉrnuče, Slovenia
Sales and marketing tobacco products in Slovenia
Cesta 24., junija 90, SI 1231 Ljubljana - Ĉrnuče, 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
240
240
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
SSUUBBSSIIDDIIAARRIIEESS:: IINNCCOORRPPOORRAATTEEDD OOVVEERRSSEEAASS,, PPAARRTTLLYY OOWWNNEEDD
Name
Country of incorporation
Principal activity and registered address
Percentage
owned
Be To Be Pharma, S.L.U
Spain
CDIL Companhia de
Distribuçao Integral
Logista Portugal, SA.
Portugal
Compagnie Agricole et
Industrielle des Tabacs
Africains S.A.S.
France
Distribution of pharmaceuticals
C/ Trigo, 39 - Polígono Industrial Polvoranca, Leganés, Madrid, 28914, 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
Réunion Island)
Manufacture of cigarettes
ZI n° 2 - BP 256 - 97457 Saint Pierre Cedex, La Réunion
Compañía de Distribución
Integral de Publicaciones
Logista S.L.U. (iv)
Compañía de Distribución
Integral Logista Holdings,
S.A. (iii)
Compañía de Distribución
Integral Logista Polska, sp.
Z o.o. (SL)
Spain
Spain
Poland
Compañía de Distribución
Integral Logista S.A.U.
Spain
Dronas 2002, S.L.U.
Spain
Imperial Tobacco TKS a.d. (i) Macedonia
Imperial Tobacco TKS a.d.
- Dega Kosove
Kosovo
Imprimerie Industrielle
Ivoirienne SA (i)
Côte D'Ivoire
La Mancha 2000, S.A.,
Sociedad Unipersonal
Spain
Logesta Deutschland
Gmbh, Sociedad
Unipersonal
Germany
Logesta France SARL
France
Logesta Gestión de
Transporte S.A.U.
Logesta Italia, S.R.L.,
Sociedad Unipersonal
Spain
Italy
Logesta Lusa LDA
Portugal
Logesta Polska Sp Zoo
Poland
Logista France Holding
S.A.
France
Logista France S.A.S.
France
Logista Italia Spa
Italy
Logista Payments, S.L.U.
Spain
Logista Pharma Canarias,
S.A.U.
Spain
Logista Pharma S.A.U.
Spain
Distribution of published materials and other products
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a - Modulo 3,
Alcorcón, Madrid, 28922, Spain
Holding investments in subsidiary companies
C/ Trigo, 39 - Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Distribution of tobacco products in Poland
AV. Jerozolimskie 96 - 7ª Planta, Edificio Equator II, 02-304 Warsaw, Poland
Distribution of tobacco products in Spain
C/ Trigo, 39 - Polígono Industrial Polvoranca, Leganés, Madrid, 28914, 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/Abidjan,
Côte d'Ivoire
Distribution services
Av. de la Veguilla, 12-Nave A- Parcela S-120, Cabanillas del Campo, Guadalajara,
19171, Spain
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
Edifico Logista, Rua do Vale da Fonte Coberta, 153 E 167, 2890-182 Alcochete,
Portugal
Long haul transportation in Poland
Av. Jerozolimskie 96 - 7ª Planta Edificio Equator II, 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
C/ Trigo Núm. 39 - Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Logista Promotion et
Transport S.A.S.
France
Marketing and distribution of tobacco products in France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes, France
50.0
50.0
99.9
98.9
50.0
50.0
50.0
50.0
50.0
99.1
99.1
78.8
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
50.0
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
241
241
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Country of incorporation
Principal activity and registered address
Percentage
owned
Logista Regional de
Publicaciones, S.A.U.
Logista Strator, SLU
(formerly Cyberpoint,
S.L.U.)
Spain
Spain
Logista Transport Europe
B.V.
Logista, Transportes,
Transitários e Pharma,
Lda., Sociedad Unipersonal
The Netherlands
Portugal
Logista-Dis S.A.U.
Spain
MABUCIG Industries S.A. Burkina Faso
MABUCIG (Manufacture
Burkinabe de Cigarette)
Burkina Faso
Marketing, distribution and sale to points of sale in Spain.
Poligono Industrial Polvoranca, Calle Trigo 39, Leganes, Madrid, Spain
Distribution of POS software
C/ Trigo, 39 - Polígono Industrial Polvoranca, Leganés, Madrid, 28914, Spain
Holding Company
Learderhoogtwig 25, 1101 EB, Amsterdam, The Netherlands
Industrial parcel delivery and pharmaceutical Distribution in Portugal
Edifico Logista, Rua do Vale da Fonte Coberta, 153 E 167, 2890-182 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
Macotab S.A.S.
(Manufacture Corse des
Tabacs)
France, Bastia
Manufacture and sales of cigarettes
Route Nationale 193, Furiani, 20600, France
Manufacture de Cigarettes
du Tchad S.A.
Tchad
Manufacture and distribution of cigarettes in Chad
0502 rue 1039, Arrondissement 1, N'Djamena, Chad
Midsid – Sociedade
Portuguesa de Distribução,
S.A., Sociedad Unipersonal
MTOA S.A. (i)
Publicaciones y Libros
S.A.U.
Portugal
Senegal
Spain
Reemtsma Kyrgyzstan
OJSC (i)
S3T Pte Ltd (i)
Kyrgyzstan
Singapore
SACIMEM S.A. (i)
Madagascar
SITAB Industries S.A. (i)
Cote D'Ivoire
Wholesale of tobacco and other products
Edificio Logista, Pracetta do Vale Da Fonte, Coberta 153/167, Freguesia de
Alcochete, Portugal
Manufacture and sales of cigarettes in Senegal
Km 2-5 Bld du Centenaire de la commune de Dakar, Dakar, Senegal
Publishing company
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a - Modulo 3,
Alcorcón, Madrid, 28922, Spain
In liquidation
115, Ibraimov Str., 10th Floor, Business Center "Asyl-Tash",, Bishkek, 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 Côte D'Ivoire
Rue de I'Industrie - Lot No 19, 01 - BP 607, Bouake, Côte d'Ivoire
SITAR Holding S.A.S.
France (La Réunion Island) Holding investments in subsidiary companiesr
Société Africaine
d’Impression Industrielle
S.A. (i)
Société Allumettiere
Française S.A.S.
Société des Cigarettes
Gabonaises S.A. (i)
Société Industrielle et
Agricole du Tabac Tropical
S.A. (i)
Société Ivoirienne des
Tabacs S.A. (i) (iii)
Société Marocaine des
Tabacs S.A.
SOCTAM S.A. (i)
Senegal
France
Gabon
Congo
Côte D'Ivoire
Morocco
Madagascar
SOTCHADIS S.A.S.
Chad
Terzia SPA
Italy
Z.I n2, B.P. 256, 97457 Saint Pierre, IIe de la Réunion, 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 Ivory Coast
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 Mali
15 Rue Geoges V, Mahajanga, Madagascar
Non-trading
502 Rue 1039, BP 852, N'Djamena, Chad
Wholesale to tobacconists in Italy
Via Valadier, 37 - 00193 Roma, Italy
50.0
50.0
50.0
50.0
50.0
72.7
72.7
99.9
95.0
50.0
98.3
50.0
99.7
51.0
65.4
75.9
99.0
99.8
50.0
87.8
89.7
74.9
99.9
50.5
95.0
50.0
242
242
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
AASSSSOOCCIIAATTEESS:: IINNCCOORRPPOORRAATTEEDD OOVVEERRSSEEAASS
Name
Country of incorporation
Principal activity and registered address
24 Hours B.V
Alcome S.A.S.
The Netherlands
France
Azur Finances S.A.
Cameroon
Courier Express Sector
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
Waste management
88 avenue des Ternes, Paris, 75017, France
Holding investments in subsidiary companies
B.P 1105, Douala, Cameroon
Compañia Española de
Tabaco en Rama SA
(Cetarsa) (i)
Distribuidora de Ediciones
SADE, S.A.
Spain
Spain
Distribuidora de
Publicaciones del Sur, S.A.
Spain
Distribución de
Publicaciones Siglo XXI,
Guadalajara
Spain
Distribuidora Valenciana
de Ediciones S.A.
Spain
Entreprises des Tabacs en
Guinée (i)
German-Ex B.V.
Guinée Conakry
The Netherlands
Lao Tobacco Limited (i)
Laos
Logista Libros S.L.
Spain
Madagascar
Cameroon
Spain
Madagascar
Mali
Promotion et Distribution
a Madagascar (i)
SITABAC S.A.
Sociedad Anonima
Distribuidoria De
Ediciones
Société Internationale des
Tabacs Malgaches (i)
Société Nationale des
Tabacs et Allumettes du
Mali S.A. (i)
Speedlink Worldwide
Express B.V.
Production and sale of raw tobacco
Avenida de las Angustias, 20, 10300 Navalmoral de la Mata, Cáceres, 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
Distribution of published materials and other products
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
Distribution of published materials and other products in Valencia
Pedrapiquers 5, Poligono Industrial Vara de Quart, Valencia, 46014, Spain
Dormant
B.P 3391, Conakry, Guinea
Courier Express Sector
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
Manufacture and distribution of cigarettes in Laos
KM 8, Thadeua Road, P O Box 181, Vientiane, Lao People's Democratic Republic
Distribution of books
Avda. Castilla La Mancha, 2 - Naves 3-4 del Polígono Industrial La Quinta,
Cabanillas del Campo, Guadalajara, Spain
Distribution of cigarettes in Madagascar
Tour ZITAL Ankorondrano, Antananarivo, Madagascar
Manufacture and distribution of tobacco products in Cameroon
113 Rue Kitchener, 1067 Bonanjo, Douala, Cameroon
Publications distribution
Calle B, esquina calle 4, s/n. Sector B Polígono, Industrial Zona Franca, 08040
Barcelona
Leaf processing
BP 270, 401 Mahajanga, Madagascar
Manufacture and distribution of cigarettes in Mali
Route Sotuba - Z.I., BP 59, Bamako, Mali
Percentage
owned
35.0
24.0
20.0
20.8
35.0
25.0
40.0
25.0
34.0
35.0
43.7
25.0
33.4
34.5
35.0
47.9
28.0
35.0
The Netherlands
Courier Express Sector
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
JJOOIINNTT VVEENNTTUURREESS:: IINNCCOORRPPOORRAATTEEDD OOVVEERRSSEEAASS
Name
Country of incorporation
Principal activity and registered address
Global Horizon Ventures
Limited
Hong Kong
Intertab S.A. (i)
Switzerland
West Tobacco Pte Ltd (i)
Singapore
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
1 Harbourfront Avenue #14-07, Keppel Bay Tower, 098632 Singapore
Percentage
owned
50.0
50.0
50.0
www.imperialbrandsplc.com
WWW.IMPERIALBR ANDSPLC.COM
243
243
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
PPAARRTTNNEERRSSHHIIPPSS
The Group also owns the following partnerships:
Name
Fabrica de Tabacos La Flor
de Copán S de R.L. de CV
Country
Honduras
Imperial Tobacco (Efka)
GmbH & Co. KG
Germany
Imperial Tobacco
Kazakhstan LLP (i)
Kazakhstan
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
Manufacture of tubs in Germany
Registered address and principal place of business: Max-Born-Straße 4, Hamburg, 22761, Germany
Marketing and distribution of tobacco products in Kazakhstan
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% of the voting rights, are held by a number of
Group companies.
244
244
IMPERIAL BRANDS
| ANNUAL REPORT AND ACCOUNTS 2022
Imperial Brands | Annual Report and Accounts 2022
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
AND DIVIDENDS
Half year results are expected to
be announced in May 2023 and the
Full year results in November 2023.
The Annual General Meeting of the
Company will be held on Wednesday
1 February 2023 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 2022
final dividend, if approved, will be
on 31 March 2023 to shareholders on
the Register of Members at the close
of business on 17 February 2023. The
associated ex-dividend date will be
16 February 2023.
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
REGISTERED OFFICE
121 Winterstoke Road
Bristol BS3 2LL
+44 (0)117 963 6636
Incorporated and domiciled in
England and Wales No: 3236483
REGISTRAR
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
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 below.
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.
8am 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.
INDIVIDUAL SAVINGS ACCOUNT
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.
For further information please go 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
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.
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
* Lines are open Monday to Friday 7am to 7pm
(Central Time US).
AUDITOR
Ernst & Young LLP
1 More London Place
London
SE1 2AF
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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
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A digital version of this Annual Report is available online
Visit www.imperialbrandsplc.com
Registered Office
Imperial Brands PLC
121 Winterstoke Road
Bristol BS3 2LL
UK
www.imperialbrandsplc.com