D RIV E N B Y A
C H A L L E N G E R
M IN D S E T
A N D A C C O U N T S 2 0 2 3
A N N U A L R E P O R T
INTRODUCTION AND CONTENTS
WE ARE TRANSFORMING INTO
A CONSUMER-LED
CHALLENGER BUSINESS
New capabilities, a performance culture and more effective
ways of working are enabling Imperial to deliver a stronger
operational performance and enhanced financial returns.
STRATEGIC REPORT
GOVERNANCE
At a Glance
Our Consumer Focus
Our Investment Case
Chair’s Statement
Chief Executive’s Statement
Our Distinct Approach
Our Strategy in Action
KPIs
Stakeholder Engagement
Non-Financial and Sustainability
Information Statement
ESG Review
TCFD
Market Review
Operating Review
Group Financial Review
Principal Risks and Uncertainties
2
4
6
8
10
14
16
30
32
37
38
70
82
84
92
100
Governance at a Glance
Chair’s Introduction
Board Leadership
Section 172
Board Statements
People and
Governance Committee
Audit Committee
Remuneration Report
Directors’ Report
FINANCIALS
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement
of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement
of Changes in Equity
Consolidated Cash
Flow Statement
Notes to the Consolidated
Financial Statements
MEET OUR PEOPLE
Hind, Brand Manager, Morocco
Sarah Jean, Regulatory Toxicology
Coordinator, Germany
Mandjou, Insights & Intelligence
Analyst, Morocco
Miguel, Market Manager, Portugal
Hind, Communications Manager,
Morocco
Elio, End-to-end Planner, Poland
Andrea, Electronics Development
Manager, UK
Thomas, Sales & Marketing Manager,
Ivory Coast
Angelina, Production Engineer,
Germany
Mirko, Area Sales Manager, Germany
Lea, Sales Representative, US
Adery, Regional Sales Manager, Taiwan
Cover
Cover
Cover
1
3
7
14
16
16
19
19
20
Jennifer and Wen-Hsiang, Production
Operator and Production Team Leader,
Taiwan
Sara, Trade Marketing Analyst, Portugal
Rafael, Process Engineer, Dominican
Republic
Matthew, Retail Development
Representative, UK
Christoph, OHS&E Coordinator, Germany
Assia, Accountant, Morocco
Zineb, Production Operator, Morocco
Omar, Production Operator, Morocco
Ana, People & Culture Business
Partner, Portugal
Mykola, Factory Storekeeper, Ukraine
Andreas, Lab Technician, Germany
Mikaela, Machine Operator, Sweden
Peikerr, Retail Development Executive,
Taiwan
SUPPLEMENTARY
INFORMATION
Alternative Performance
Measures
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
SHAREHOLDER
INFORMATION
Shareholder Information
For more information see
www.imperialbrandsplc.com
Chih-Min and Chang-Wei, Production
Shift Leaders, Taiwan
Marina, Machinist, Spain
Iryna, Production Operator, Ukraine
Reka, People & Culture Operations
Specialist, Germany
Emmanuel, Product Characterisation
Specialist, UK
Rogelio and Carmen, Tobacco
Operations Leader and People &
Culture Clerk, Dominican Republic
Adam, Sales Representative, US
Jamal, Sales Representative, US
Said, Factory Storekeeper, Morocco
Henry, Reporting Specialist, Germany
Alanah, Supply Chain Manager,
Dominican Republic
235
244
247
247
248
263
61
62
64
67
69
76
83
87
91
115
126
112
114
116
126
128
129
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164
169
178
178
179
180
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182
21
21
24
24
27
27
28
29
33
35
44
48
52
Performance measures used throughout the report
Reported (GAAP)
Complies with UK-adopted International Accounting 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 94 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.
www.imperialbrandsplc.com
1
IMPERIAL BRANDS AT A GLANCE
Three years into our strategy, we have built a
consistent track record of delivery against our
key objectives. At the same time we are making
progress on bringing to life our purpose: forging
a path to a healthier future for moments of
relaxation and pleasure.
D ELIV E RIN G O N
O U R S T R A T E G Y
OUR FOCUSED STRATEGY
OUR PASSION FOR BRANDS
STRATEGIC PILLARS
Pages 18-23
International brands
D R I V ING VALUE
F R O M O UR BROADER
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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 24-29
Markets we
operate in:
c.120
2
Imperial Brands | Annual Report and Accounts 2023
Next generation products (NGP)
Vapour
Heated tobacco
Modern oral
ACCELERATING DELIVERY ON OUR STRATEGIC PRIORITIES
Operational improvements, enhanced capital returns to shareholders
and progress on environmental, social and governance priorities
Aggregate market share of our five
priority combustible markets
NGP net revenue growth at
constant currency
+10bps
(2022: +35bps)
+26.4%
(2022: +10.8%)
FY24 share repurchase announced
£1.1bn
(2023: £1.0bn)
Tobacco & NGP net revenue
(£ billion)
£8.0bn
2022: £7.7bn*
Dividend per share (pence)
146.82p
2022: 141.17p
Absolute CO2 equivalent emissions
Scope 1 and Scope 2 market-based
(tonnes)
99,985t
2022: 175,766t
n
b
0
8
.
n
b
6
.
7
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5
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5
8
9
9
9
,
21
22
23
21
22
23
17* 22
23
2023 Tobacco & NGP net revenue growth
at constant currency +1.4%
* Excluding Russia
2023 DPS growth +4.0%
Our target is to be Net Zero in our direct
operations by 2030
* 2017 is the baseline year
www.imperialbrandsplc.com
3
OUR CONSUMER FOCUS
Our portfolio of brands and products is
designed to meet the diverse and evolving
expectations of adult consumers in
markets worldwide. We responsibly serve
those who choose to smoke and, at the
same time, we continue to develop
potentially less harmful products which
also satisfy consumer needs.
W E S T A R T W IT H
T H E C O N S U
M E R
“I use Pulze and iD heat sticks
every day, and on different
occasions, like when I am
waiting for the bus, having a
beer, or during a break from
work. Sometimes I vape too, for
the flavours. I used to smoke
regular cigarettes, but I haven’t
for more than five years now.”
Karolina,
Czech Republic
“I started vaping to stop smoking,
as I was worried about the effect
on my health and the odours. I
love the wide variety of flavours
that are available with blu 2.0,
the ease of use, its affordability,
and the battery life. For me,
these are all advantages.”
Salvador,
Spain
4
Imperial Brands | Annual Report and Accounts 2023
“A Backwoods with my crew is
always in the mix. A Backwoods
moment is when you are with
friends, and when you need to
unwind. The ritual is familiar and
like nothing else. If Backwoods
can continue to deliver on high
quality and freshness, I will
always be a consumer.”
Mark,
USA
“I switched to Davidoff about
10 years ago. It’s a longer
cigarette and I like its quality
and taste and the less lingering
smells that other brands have.
As an engineer, I know that
machines built in Germany
are renowned for their
craftsmanship and I think
this is true for Davidoff too.”
Chien-Hung,
Taiwan
“I smoke Golden Virginia as it’s
tastier than other tobacco I’ve
used, and easier to roll. I’ve tried
other brands but always come
back to this one. Golden Virginia
is part of my daily routine now.
I’ve tried vaping but I don’t think
I would change anytime soon.”
Mark,
UK
“Winston has always been my
go-to brand; I enjoy the taste.
Smoking is part of my daily
routine – in the morning with
my coffee, after a meal. There
is nothing like sitting on the
porch after a long day at work
and taking a moment to wind
down and relax with Winston.”
Amy,
USA
www.imperialbrandsplc.com
5
By building a more consumer-focused
challenger business and following a
disciplined capital allocation framework
we are continuing to invest behind our
strategy, while maintaining a strong,
efficient balance sheet and delivering
enhanced shareholder returns.
OUR INVESTMENT CASE
H Y IN V E S T
IN IM PE RIA L?
W
REVITALISED
TOBACCO BUSINESS
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, and
through selective investment in brand
equity and our sales force, we have
stabilised market share, after years of
sharp declines. This, combined with a
more disciplined focus on our broader
market portfolio, is driving improved
combustible returns.
BUILDING A SUSTAINABLE
NEXT GENERATION
PRODUCT BUSINESS
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 consumer
focus, a partnership approach to
innovation and disciplined execution.
As a challenger, our role is to offer
consumers a choice where they have
already expressed an NGP preference
and where we can leverage our existing
customer relationships.
SELF-HELP INITIATIVES
DELIVERING OPERATIONAL
IMPROVEMENT
We have identified multiple initiatives
to deliver operational improvements
that will enhance our decision-making
and drive efficiencies. For example,
we are adopting new ways of working
with our enabling functions using a
global business service model and
implementing a new ERP system to
replace our 60 legacy systems.
Aggregate priority market
share vs prior year (%)
NGP net revenue (£ million)
23
22
21
-2bps
10bps
35bps
23
22
21
£265m
£208m
£188m
Annual cost savings from
restructuring programme
£150m
Improving tobacco and NGP net
revenue trajectory, with a compound
annual growth rate of 1% to 2%.
Improving profitability through
operational leverage, better geographic
mix from continued stabilisation of
priority market shares, reduced losses
from our investment in NGP and
restructuring cost savings driving a
mid-single-digit compound annual
growth rate for Group adjusted
operating profit.
The business is 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%.
Free cash flow generated in FY23
£2.4bn
6
Imperial Brands | Annual Report and Accounts 2023
COMBINED, THESE ARE GENERATING A STRONG FINANCIAL OUTLOOK We have a clear capital allocation
framework alongside our strategy:
1. INVEST IN STRATEGY
Since our strategy is largely organic
and we work with innovation partners,
our capital expenditure needs are
relatively light. Any M&A is likely
to be small.
2. MAINTAIN LEVERAGE
We are committed to an investment
grade credit rating and will maintain
our leverage at the lower end of the
range 2.0-2.5 times adjusted net debt/
EBITDA range.
3. PROGRESSIVE
DIVIDEND GROWTH
We have committed to grow
our dividend every year, taking
into account the underlying
business performance.
4. RETURN SURPLUS CAPITAL
TO SHAREHOLDERS
Having reached our leverage target,
we have committed to an ongoing
share buyback programme, with
£1.1 billion committed in FY24.
Capital returned to shareholders
in FY23
£2.3bn
Further information on our strategy
can be found on pages 16 to 29.
www.imperialbrandsplc.com
7
ENHANCING OUR CAPITAL RETURNS CHAIR’S STATEMENT
T R A N SF O R MIN G
S U C C E S S
F O R
Dear Shareholders
The transformation of Imperial into a
consumer-focused challenger business
is now translating into a stronger and
more consistent operational
performance and enhanced
shareholder returns. Despite a difficult
macroeconomic and geopolitical
environment, with inflationary
headwinds, shifting consumer
preferences and regulatory challenges,
we continue to methodically deliver on
our external commitments.
One of my highlights of the past year
was attending our capital markets
event in New York in June, where
management showcased our new
consumer capabilities in insights,
innovation and marketing. What
impressed me was both the best-in-
class quality of the work by our new
global centres of expertise and the deep
collaboration with local markets. We
are making progress in other
transformation priorities:
improvements in data, simplification of
processes, and the development of a
performance-based culture.
All of this enabled the business to
deliver an improved performance in
both combustible and next generation
products (NGP) during the 2023 fiscal
year. Furthermore, we are providing
shareholders with consistent,
growing returns through a progressive
dividend policy and an ongoing share
buyback programme.
I would like to thank the 25,000 people
who work at Imperial, as well as our
many valued business partners, for
their individual contributions to our
growing collective success.
CONSUMER INSIGHTS ARE
DRIVING OUR TRANSFORMATION
Everything we do starts with
consumers – and their diverse voices
can be heard on pages 4-5 and
throughout this report. Consumers tell
us they value local brands with strong
heritage and global brands with
distinctive personalities – traditional
areas of strength for Imperial, which we
are now further developing. Many
consumers also tell us they have yet to
find a perfect potentially reduced-harm
replacement for cigarettes. This means
we are seeing a growing diversity of
behaviour with consumers using
different products for different
moments in their day.
Therefore, we see a future for this
industry where multiple nicotine
categories and a diverse ecosystem of
businesses will coexist and evolve.
Innovation, and responsible
competition and regulation, will be the
motors which drive us to a healthier
future. Thanks to our focused
investments in transformation,
Imperial is now well placed to make a
positive contribution to this wider
industry transition.
8
Imperial Brands | Annual Report and Accounts 2023
ENHANCING BOARD CAPABILITIES
In March, we welcomed Andrew
Gilchrist as a Non-Executive Director
and as a member of the Audit and
People and Governance Committees.
Andrew, who was Chief Financial
Officer of Reynolds American Inc,
brings to our Board two decades of
operational and financial experience in
the tobacco sector. At February’s
Annual General Meeting (AGM), we said
farewell to Simon Langelier, who after
serving nearly six years on the Board
had decided to step down. I would like
to thank Simon again for his significant
contribution to the Board and we wish
him well in his future endeavours.
We continue to hold valuable
educational sessions to ensure that
Board members are well able to provide
appropriate challenge and support for
management. Topics covered over the
past year have included tax and excise,
patents and intellectual property, and
regulatory policy.
See the Governance section, starting
on page 112, for more information.
BROADENING STAKEHOLDER
ENGAGEMENT
Building on the programmes of
previous years, the Board held meetings
in Germany and Morocco, during which
we had the opportunity to meet with
employees and consumers. I continue
to have regular interactions with our
largest investors, and over the past year
we consulted with them on our
refreshed Remuneration Policy, which
will be brought to the 2024 AGM for
approval. Having carefully considered
the existing approach and alternative
remuneration structures, the Board
concluded that the current structure,
with a small number of refinements,
remains appropriate for the Company
at this time.
ADVOCATING FOR HARM
REDUCTION
Public health bodies agree it is the
smoke created by the burning of
tobacco leaf which contains most of the
harmful chemicals responsible for
smoking-related disease. Yet, many
consumers, policymakers and medical
professionals continue to believe that
nicotine is the principal cause of
ill-health. We will continue to campaign
to build a greater understanding of the
positive role that potentially less
harmful products can play in helping
adult smokers.
All of Imperial’s products are designed
for and marketed to adult smokers and
existing nicotine consumers. We are
actively engaging to support the
development of stronger, more
enforceable regulation which balances
the need to make an attractive range of
NGP available to adult smokers while
driving out irresponsible products and
preventing youth access.
However, we are concerned with new
policy proposals in some markets,
which see prohibition as the solution.
Outlawing legal products can inevitably
lead to unintended consequences,
in particular, the proliferation of illicit
trade and the growth of black-market
products outside the regulated
framework.
While engaging to create regulatory
environments that enable successful
tobacco harm reduction, we will also
support the freedoms of our legal adult
consumers who choose to continue
to smoke.
DELIVERING ON OUR PRIORITIES
FOR PEOPLE AND PLANET
Alongside our progress on harm
reduction, we are delivering on our
other key environmental, social and
governance priorities (ESG). In 2022 we
refreshed our approach to ESG, which
internally we call “People and Planet”,
and over the past year we have
continued to enhance our governance
and disclosures, and work towards our
key commitments. Among these is our
goal to be a fully Net Zero company by
2040, and since our baseline year of
2017 we have reduced carbon emissions
by 65% within the business. In
November 2022, the Board approved a
new diversity, equity and inclusion
strategy, which defines our processes,
practices and long-term measures for
success. In particular, we now have a
clear goal to increase the proportion of
women in senior management to 35%
by 2027.
For more on People and Planet see
pages 38-69.
EFFECTIVELY ALLOCATING
CAPITAL
The combination of our strong cash
flows and relatively low capital
intensity means we generate surplus
capital. The Board believes the
disciplined allocation of capital is a key
value lever alongside the delivery of the
Group’s strategy. We have clearly
defined our capital allocation priorities,
which start with investment to support
our strategic delivery. While the
investment needs of the business are
relatively modest, we approved a small
acquisition to facilitate our launch of
modern oral in the United States. We
have also strengthened our balance
sheet to reach our target leverage and
underpin our commitment to
investment grade status.
Our objective is to support the long-
term sustainable cash flows of the
business to enable us to maintain our
progressive dividend policy and
ongoing share buyback. The Board is
recommending an annual dividend
increase of 4.0%, to 146.82 pence per
share. We have also committed to a
£1.1 billion share buyback to be
completed in FY24, an increase
of 10% on FY23.
MOVING CLOSER TO A
HEALTHIER FUTURE
Looking ahead, we expect the
continuing benefits of our
transformation to enable a further
acceleration of our financial
performance during the final two years
of our five-year strategy. We look
forward to building on our growing
operational track record to deliver
sustainable shareholder returns and
play a positive, distinctive role in
this industry’s transition to a
healthier future.
Thérèse Esperdy
Chair
“The transformation of Imperial
into a consumer-focused
challenger business is now
translating into enhanced
shareholder returns.”
www.imperialbrandsplc.com
9
CHIEF EXECUTIVE’S STATEMENT
W IT H P U R P O S E
PE R F O R MIN G
Three years into our strategy, I am
pleased with the consistent track
record we are building and excited by
the growing opportunities ahead. Our
focus has been to develop Imperial into
a strong, consumer-centric challenger
business, capable of growth, year in and
year out. Since the launch of our
strategy in early 2021, we have been
creating the team and the capabilities
to enable the revival of our combustible
business and the successful reboot of
our next generation products (NGP).
This approach is leading to clear
operational progress, despite a
challenging macro-economic
environment. In our five priority
combustible markets, which account
for around 70% of our operating profit,
we have stabilised the share declines
and exceeded our expectations with a
43 basis point growth in aggregate
share since September 2020. Over the
same period, NGP net revenue has
grown by 41% at actual exchange rates,
underpinned by market launches and
new products in all three categories.
We have also delivered a material
step-up in shareholder returns.
During FY23 and FY24, through a
combination of dividends and our
ongoing share buyback programme, we
expect to make cumulative capital
returns of £4.7 billion. This is the
equivalent of c.30% of Imperial’s market
value as at 30 September 2023.
Meanwhile, we are continuing to make
focused investments in consumer
capabilities, data, processes and
systems, and our culture to ensure we
can grasp future opportunities across
all segments. While I am pleased with
our progress so far, I believe that the full
benefits of Imperial’s transformation
will continue to emerge in the next few
years and beyond.
BUILDING OUR CHALLENGER
CAPABILITIES
Imperial is the fourth largest – and
smallest – of the global businesses in
our sector. To outperform consistently,
we need to do things differently to our
larger rivals – to act as the industry’s
challenger. Being a challenger is about
being close to the consumer, having
robust data and processes to enable
fast, well-informed decisions, and
developing a performance-based
culture. Taken together, these are the
critical enablers for strategic success
and the focus for our investments over
the past three years.
In a sector where consumer behaviour
is becoming increasingly diverse,
strong insights, innovation capabilities
and brand building are more and more
crucial. In June, I joined our consumer
team at a capital markets event in New
York City. Their presentations included
our new research in consumer demand
spaces, our emerging partnership
approach to innovation, and our activity
to refresh both our international and
local brands. Since then, we have
continued to improve our ways of
working to ensure that our centres of
expertise work as effectively as
possible with our teams in the markets.
For more on our investments in our
consumer capabilities see pages
24-25.
Today’s Imperial was assembled
through a series of global acquisitions
during the past quarter century. A clear
demonstration of our transformation
journey is how we are replacing more
10
Imperial Brands | Annual Report and Accounts 2023
than 60 legacy systems with a single,
unified platform. In parallel, we are also
creating an end-to-end supply chain
system – from leaf to store. These
investments will make a significant
contribution to future operational
improvements, by giving our people
more robust, actionable data, and
automating low-value processes,
freeing up time to focus on meeting
consumer needs. While these
programmes will each take several
years to complete, pilot markets and
factories are currently adopting the
new systems and ways of working.
See pages 28-29 for
more information.
We continue to build a distinctive,
performance-based challenger culture,
which internally we call “Connections”.
Having introduced our new behaviours
in 2021, during 2022 all colleagues went
through training to help them better
understand how to deploy these
behaviours in their everyday working
lives. Over the past year, we moved to
the next phase of this culture change
journey by inviting 300 of our senior
leaders to spend seven working days on
a coaching programme to help them
nurture high-performing teams (see
pages 26-27). We also launched a new
long-term diversity, equity and
inclusion strategy designed to ensure
that everyone in Imperial can feel that
they belong (see pages 67-69).
Another important focus this year has
been to support our colleagues in
markets dealing with exceptional
challenges. These include Laos and
Morocco, which have been affected
by natural disasters and, of course,
in Ukraine.
Our 2023 employee experience survey
was completed by 91% of eligible
colleagues around the world, and we
maintained our above-benchmark
engagement score of 74%.
IMPROVED, MORE CONSISTENT
PERFORMANCE
Our focused investments in the critical
enablers of our strategy are driving
improved business performance. In the
period, excluding Russia we delivered
growth in tobacco and NGP net revenue
of 1.4% and in Group adjusted operating
profit of 3.9%, at constant currency.
Reported revenue was down 0.2% due to
lower excise partially offset by higher
Logista revenues. Operating profit grew
26.8% as charges relating to our exit
from Russia were not repeated.
Once again, these achievements have
been delivered against an inflationary
backdrop which has squeezed
consumer purchasing power.
As anticipated, we delivered strong
tobacco price mix for the year
at 10.4% which more than offset
volume declines.
During 2023, market share in our
five priority markets increased by
10 basis points.
In our largest market, the United States,
our challenger approach supported a
share increase of 65 basis points for the
year. Our flagship cigarette brands
Winston and Kool were stable in their
segments thanks to distinctive brand
positioning and focused sales
execution, and we continued to
increase share in the deep discount
segment. In mass market cigars we
faced a decline in net revenue against a
strong comparator period. As expected,
this headwind, which we reported at
the half year, has eased during the
second half.
We continue to refine our approach
in Germany with investment in
building brand equity and in our sales
force effectiveness.
In the UK and Spain our strategy has
been focused on investment in local
jewel brands, while in Australia
our approach to revenue growth
management underpinned our clear
brand offerings at each of the key
price points.
See pages 18-19 for more on our
priority markets.
To improve focus on our medium-sized
and smaller markets, we have created
the new AAACE region which includes
Africa, Asia, Australasia and Central &
Eastern Europe. Strong tobacco pricing
across the region offset volume
declines, while Central & Eastern
Europe benefited from NGP growth.
See pages 20-21 for
more information.
In NGP, we now have credible
consumer propositions across all
categories – vape, heated tobacco and
modern oral. During 2023 we
accelerated the roll-out of new products
in Europe, with the pod-based vape blu
2.0 now available in nine markets, the
blu bar disposable in 11 markets, and
Pulze 2.0, our heated tobacco device, in
seven markets. We have also expanded
the flavour range of Zone X pouches in
Europe. In the Europe region, NGP net
revenue grew by 40% year on year on a
constant currency basis. We are
pleased with the progress and feel that
we now have a full product platform for
the NGP category. We will continue to
be disciplined and will now aim to
consolidate momentum in our current
markets. This means investing only in
markets where NGP categories account
for a material proportion of the overall
nicotine market and where we have a
strong route to market. In the US, we
welcomed the unanimous federal court
decision in August to vacate an earlier
Marketing Denial Order issued by the
Food and Drug Administration against
our myblu pod-based vapour portfolio.
In 2024, we will launch our new modern
oral range under the brand “Zone”. This
follows the acquisition of a range of US
pouches from TJP Labs in June.
For more on our approach to
investment in next generation
products, see pages 22-23.
PURPOSE, PEOPLE AND PLANET
A consumer-centric, challenger
approach to NGP is how we will
contribute to the broader industry-wide
commitment to reduce harm. As the
smallest of the international
businesses, we know we cannot deliver
a healthier future on our own. But, by
getting close to our consumers,
innovating fast and working with
partners, we can drive responsible
competition and help accelerate the
transition to potentially reduced-harm
products. This distinctive way of
working is most clearly seen in our new
Sense Hubs in Liverpool and Hamburg,
which bring together consumers, our
OUR BEHAVIOURS
For more information,
see pages 26-27.
www.imperialbrandsplc.com
11
Our earnings per share growth will
benefit additionally from the continued
reduction in the number of shares as a
result of our ongoing share buyback
programme, although this will be offset
slightly by increased adjusted finance
and tax costs.
At current rates, foreign exchange
translation is expected to be a 0-1%
headwind to net revenue, adjusted
operating profit and earnings per share.
We look forward to building on our
growing operational track record to
deliver shareholder returns through an
ongoing buyback and progressive
dividend, and to play a positive,
distinctive role in this industry’s
transition to a healthier future.
Stefan Bomhard
Chief Executive Officer
CHIEF EXECUTIVE’S STATEMENT continued
EMBRACING CHANGE
Since joining Imperial in June 2020, I
have visited a total of 35 markets and
nine factories and had conversations
both face to face and virtually with
many hundreds of colleagues. During
this past three years, I have seen how
our people have embraced change,
balancing the need for near-term
delivery with supporting our long-term
transformation. I have seen too a
growing spirit of collaboration,
accountability and inclusivity, as we
integrate new hires with strong global
consumer experience and our
colleagues with deep local and sector
expertise. Above all else it is the power
of our people which gives me
confidence in our ability to continue
to deliver over our five-year strategy
period and beyond.
OUTLOOK
Our five-year strategy is continuing to
drive the operational and cultural
changes which, despite challenging
macro-economic headwinds, are
strengthening our financial delivery.
This underpins our confidence in
delivering against the final two years of
our plan with a further improvement in
adjusted operating profit growth to
support a mid-single-digit constant
currency compound annual growth rate
over FY23-FY25, in line with our
medium-term guidance.
In the coming year, we expect to deliver
low single-digit constant currency
tobacco and NGP net revenue growth
and to grow our constant currency
adjusted operating profit close to the
middle of our mid-single-digit range.
Performance will be weighted to the
second half of the year driven by the
phasing of investments in NGP and the
phasing of our pricing in FY23. As a
result, first half operating profit is
expected to grow at low single digits, at
constant currency.
own product developers and third-party
partners in a single collaborative space.
Consumer health is a key element of
our broader environmental, social and
governance (ESG) framework, which
internally we refer to as our People and
Planet agenda. We are making material
progress in our other priority areas. We
are committed to becoming a fully Net
Zero carbon emission company by 2040
and, driven by an overall reduction in
energy consumption, we have reduced
our Scope 1 and Scope 2 market-based
carbon emissions by 65% since our
baseline year 2017. We are also on
course to meet our commitment to
eliminate landfill waste in our
operations by 2025. For more
information on People and Planet see
pages 38-69.
ALLOCATING CAPITAL WITH
DISCIPLINE
Capital allocation is a key value lever
for the business. Focus and discipline
are the key principles behind our four
capital allocation priorities:
• Invest behind the 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
adjusted net debt to EBITDA range of
2-2.5 times.
• A progressive dividend policy
with dividend growing annually,
taking into account underlying
business performance.
• Return surplus capital to shareholders
while maintaining our target leverage.
Having reached our target leverage, in
October 2022 we began returning
surplus capital to shareholders via a
share buyback. We completed an initial
buyback of £1 billion during FY23, and
we have announced the next £1.1 billion
tranche for FY24. As a result, we expect
in total our returns to shareholders will
exceed £2.4 billion in the coming
fiscal year.
Given the highly cash generative
nature of the business and our current
valuation, we remain committed to a
progressive dividend policy and an
ongoing buyback programme, which
will meaningfully reduce the capital
base and generate significant
shareholder returns.
For our investment case,
see pages 6-7.
12
Imperial Brands | Annual Report and Accounts 2023
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, Australasia
and Central & Eastern Europe
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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UNRIVALLED FMCG EXPERIENCE
Our Executive Leadership Team has a strong
blend of experience from across leading
global consumer companies and deep
tobacco and local market knowledge.
For more information see
www.imperialbrandsplc.com
www.imperialbrandsplc.com
13
OUR CHALLENGER
APPROACH
We take a different,
challenger approach to
running our business,
differentiating ourselves
from our global peers
CONSUMER CENTRICITY
We put the consumer at the
centre of our business with
strong consumer insight
guiding all our decision-
making (see pages 24-25).
OUR DISTINCT APPROACH
B U SIN E S S
M O D EL
OUR COLLEAGUES
OUR OPERATIONS
Our colleagues are our most important
asset. We have 25,000 committed and
passionate employees who want to
make a difference.
We have a network of 30 manufacturing
sites that source and process tobacco
raw materials to provide high-quality
products at lowest cost.
OUR BRANDS
OUR INDUSTRY KNOWLEDGE
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 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.
ADULT CONSUMER INSIGHTS
SCIENCE & REGULATION
MARKETING & INNOVATION
We start with the consumer – and
everything we do is based around a
deep understanding of adult smokers
and nicotine consumers. Our insights
research is led by our Global Consumer
Office and we unlock value by ensuring
we offer our consumers the right
product choices to meet their needs.
These insights provide competitive
advantage, and inform our product
offerings in both combustible tobacco
and NGP and underpin how we
communicate with adult consumers.
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.
Our marketing and innovation teams
add value by using consumer insights
to develop a portfolio of combustible
tobacco and potentially reduced-
harm products to engage and excite
adult consumers. We use sales and
marketing communications and
innovation to differentiate our brands
and meet evolving consumer needs,
while at the same time ensuring our
products do not appeal to youth.
14
Imperial Brands | Annual Report and Accounts 2023
OUR ASSETSWHAT WE DO LOCAL AND
INTERNATIONAL BRANDS
Our differentiated brand portfolio
means we offer consumers heritage
brands with local provenance and
international brands that resonate with
distinct global tribes.
FOCUS
PARTNERSHIPS
We focus our investment on clear
performance drivers in our five priority
combustible markets and drive value
from our broader market portfolio
We are building our NGP business in
markets where consumers have
already expressed their preferences
and where we already have
established distribution.
Our partnership approach to innovation
enables us to compete in multiple NGP
categories with an agile response to
changing market dynamics and fast
product development.
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.
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
policymakers and regulators.
OUR COLLEAGUES
OUR INVESTORS
It is essential we create a supportive,
safe and rewarding work environment
to enable them to deliver our goals and
develop their careers.
Our investors provide capital to the
business and monitor management’s
allocation of that capital within
the business.
OUR CUSTOMERS
OUR SUPPLIERS
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.
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.
SUSTAINABLE SOURCING
EFFICIENT MANUFACTURING
STRONG RETAIL PARTNERSHIPS
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.
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.
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.
www.imperialbrandsplc.com
15
STAKEHOLDER VALUE OUR STRATEGY IN ACTION
The choices we make are guided by
our strategy, purpose and vision as
well as our approach to managing our
environmental, social and governance
(ESG) priorities.
O U R S T R A TEG Y
IN A C TIO N
16
Imperial Brands | Annual Report and Accounts 2023
OUR PURPOSE
OUR VISION
STRATEGIC
PILLARS
Pages 18-23
CRITICAL ENABLERS
Pages 24-29
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.
D R I V ING VALUE
F R O M O UR BROADER
P O RTFOLIO
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KETS
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PERFORM A N C E
-BASED CUL T U R E
AND CAPABI L I T I E S
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SIM PLIFIE
A N D EFFICIE
O PER
OUR
BEHAVIOURS
Pages 26-27
Start with the Consumer
Be Authentic, Inclusive to all
Collaborate with Purpose
Build our Future
Take Accountability with Confidence
HOW WE MEASURE
OUR PERFORMANCE
Pages 30-31
To measure our performance we have 10 financial and four non-financial
key performance indicators. We also measure the performance of several
other indicators. Financial performance is reported on pages 92 to 99,
and non-financial performance is reported on pages 38 to 81.
OUR APPROACH TO ESG
Pages 38-69
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
17
OUR STRATEGY IN ACTION continued
STRATEGIC PILLARS
O U R P RIO RIT Y
F O C U S O N
M A R K ET S
Focused investment in our most material combustible
opportunities has driven stabilisation of our aggregate
market share.
PRIORITY MARKET SHARES
12-month share
USA
+65bps
Germany
-80bps
UK
-50bps
Spain
+10bps
Australia
+10bps
In each of these markets Imperial enjoys a
top-three market position, with established
brands and strong customer relationships.
Growth in aggregate market share +10bps
As a challenger business, we need to
channel our investment and energies
towards the most material opportunities.
This means a consistent laser-focus on
our five largest combustible markets,
which make up around 70% of our
operating profits. These are the United
States, Germany, the United Kingdom,
Spain and Australia. Each market has
attractive features. The US and Germany
are both markets where cigarettes
continue to be relatively affordable,
creating opportunity for long-term growth.
Together these two markets account for
around 50% of our operating profit. In
the UK and Spain, we enjoy strong
market positions supported by iconic
local jewel brands, which are proving
increasingly popular with consumers
seeking distinctive propositions with
strong heritage. In Australia, a market
heavily restricted by regulation, we
have opportunities to capitalise on our
status as the second largest player and
optimise value creation.
Each market has tightly defined
priorities in marketing, distribution
and portfolio management, which are
subject to monthly reviews. Our
strategy, launched in early 2021,
defined six operational levers to
improve combustible performance
across the five markets, and three
years on we continue to make progress
on each.
1. Increase participation in premium
segments: In the US, focused
investment in our flagship brands
Winston and Kool has led to
stabilisation of our share of the
premium segment after years
of decline.
2. Rejuvenate local jewels: In Spain, our
refresh of Nobel in 2022, including new
packaging and line extensions,
supported the brand gaining 30bps
in FY23. In the UK, the rejuvenation
of local brands Embassy and Regal
led to share growth of these brands.
3. Optimise the value segment: It is
important that we are able to offer
consumers high-quality choices
– whatever their price points. Across
our markets, we have been investing
in more rigorous approaches to
portfolio management. In Australia,
the introduction of Lambert & Butler
in the fifth price tier underpinned a
refresh of our pricing strategy across
our brand portfolio enabling share
and value growth in FY23.
4. Maximise the potential of fine cut
tobacco: In Germany, where high
inflation is driving downtrading,
the launch of our Paramount brand
grew our share of the sub-value fine
cut segment.
18
Imperial Brands | Annual Report and Accounts 2023
Priority markets
account for
c.70%
of operating profit
www.imperialbrandsplc.com
19
5. Drive performance in under-
penetrated channels: In the US our
larger sales force has enabled us to
increase coverage of smaller
convenience stores and gas stations.
6. Maximise value creation through key
accounts: In the US a focus on joint
business plans with our key accounts
underpinned out-performance of our
cigarette portfolio.
Consistent progress across these six
areas of focus means that, after years of
sharp declines in market share, we
have now reported three years of
stable-to-growing aggregate market
share for our priority markets. At Group
level, we manage these five markets as
a portfolio and therefore in any
reporting period we would not expect
all five to increase share. What matters
is maintaining stable or growing share
in aggregate over the long term.
OUR STRATEGY IN ACTION continued
STRATEGIC PILLARS
D RIVIN G V A L U E
B R O A D E R M A R K ET
FR O M O U R
P O R TF O LIO
We have identified a clear
role for each of our
diverse markets.
In a similar way to how we have
focused our investment in our five
priority markets, we have brought an
equally rigorous approach to creating
value and identifying future growth
opportunities across our broader
portfolio. We have created new
structures and processes designed to
help the teams in all our markets
maximise their contribution to the
success of the Group.
In particular, over the past year we have
created a new regional structure with
the formation of the AAACE region,
covering Africa, Asia, Australasia and
Central & Eastern Europe. Led by Paola
Pocci this unit is being developed as a
centre of expertise for our medium-
sized and smaller markets, many of
which have attractive margins and the
potential to become platforms for future
growth in combustible tobacco and
next generation products.
20
Imperial Brands | Annual Report and Accounts 2023
In aggregate, some of these market
clusters, such as Africa which accounts
for about 10% of Group tobacco profit,
have the potential to make a significant
contribution to overall Group success.
Within each portfolio, every market is
assigned a specific role and a distinct
set of priorities.
Under the new regional structure,
groups of markets are now being run
more effectively as portfolios with
insights, expertise and services
being pooled.
Greater consumer engagement in each
market has guided our investment in
wider consumer choice. Brand
innovations have supported brand
equity building and underpin
sustainable price increases.
We have also shared best practice
across our wider markets. Disciplined
go-to-market strategies used to good
effect elsewhere in the Group have
been repeated across our wider
markets, where appropriate. In our
African markets strong price increases
were combined with revenue growth
management measures and tools
developed together with our Global
Consumer Office team.
We use our unique portfolio of local
jewel and international brands to meet
local consumer preferences. For
instance, in the Middle East
international brand Davidoff resonates
well with consumers, particularly in
Kuwait. Here the country benefited
from reopened borders and we
exercised strong pricing discipline and
a more focused go-to-market approach
to drive revenue growth there.
Our global duty free business performed
well during the year as travel plans
returned to pre-pandemic levels in
most locations, apart from Asia where
travelling is expected to recover to
pre-pandemic levels over time. Our
performance was enhanced as we
increased our share of market in major
airports, mainly in Europe and the
Middle East.
In line with our approach as a focused
challenger, we have been ready to
exit markets where we believe we lack
the right to win. In 2022 we exited
Japan, a large market for tobacco but
one where after a decade of investment,
the business remained small and
unprofitable. Also in 2022, following
the invasion of Ukraine we decided
to exit Russia and subsequently,
we have closed our operations in
several central Asian markets,
which had previously been reliant
on our Russian supply chain.
Focus, discipline and our new
consumer approach and revenue
growth management frameworks are
enabling us to continue to drive value
from our broader market portfolio.
www.imperialbrandsplc.com
21
OUR STRATEGY IN ACTION continued
STRATEGIC PILLARS
S C A L E IN N G P
B UIL DIN G
NGP as percentage of Imperial’s overall net revenue in
European markets
38%
34%
26%
24%
23%
21%
Italy
Greece
Austria
Portugal
Norway
Sweden
France
Spain
UK
Czech Republic
Finland
9%
7%
6%
6%
6%
Canaries
5%
Hungary
Poland
4%
3%
Germany
2%
Europe
7%
FY23 saw a step-up in
our next generation
product operations.
For our potentially reduced-harm
business this has been an important
year, with product innovation and
targeted market launches translating
into accelerated revenue growth.
Following the introduction of new
propositions in vape, heated tobacco
and oral nicotine, we now have credible
offerings in all three major categories.
And consumers can now buy our NGP
in more than 20 European markets, as
well as the United States.
This operational acceleration has
translated into revenue growth of 26.4%
globally, and 40.4% in Europe where we
have been focusing our investment.
T R A N S F O RMATION IN ACTION
Next generation products (NGP)
Vapour
Heated tobacco
Modern oral
2020
NGP reboot:
disciplined market
exits and under-
performing
investments cut
2021
Investment aligned
behind new strategy;
Pulze 1.1 trials begin in
Greece and Czech
Republic
NGP net revenue growth
at constant currency
-27% -4%
22
Imperial Brands | Annual Report and Accounts 2023
The step-up during FY23 follows a
comprehensive reboot of our approach
to NGP in line with the strategy we
launched in January 2021.
We operate as a challenger both in
our choice of markets and in the way
we innovate.
This means we focus only on markets
where an NGP category has already
become a material proportion of overall
nicotine consumption, and where we
have strong existing routes to market.
In innovation, reflecting our agility and
our smaller size compared to other
global players, we have developed a
partnership approach.
This is exemplified by our three new
innovation centres. Our Sense Hubs in
Liverpool and Hamburg bring together
our own development teams with
third-party partners and our consumers.
Our Shenzhen site enables us to get
closer to our supply chain partners.
Our new way of working has halved
the time from initial concept to
market launch and increased our
capacity to work simultaneously on
multiple projects.
This is particularly important because
of the need for us to take a multi-
category approach, reflecting the way
different markets are evolving different
NGP preferences because of local
culture and regulatory environments.
During FY21 and FY22, we first
refocused the business, by withdrawing
from several markets, such as heated
tobacco in Japan, which did not fit our
challenger criteria.
Then we began a test-and-learn process
introducing new products in pilot
markets, closely studying reaction from
consumers and customers, before
scaling up.
For example, in heated tobacco, we
introduced the Pulze and iD proposition
to Greece and the Czech Republic, while
blu 2.0, our latest pod-based vape, was
trialled in selected French cities. This
helped to validate our propositions with
consumers.
Then over the past year, having
studied consumer feedback and made
alterations to devices, flavours and
brand propositions, we began to scale
up. Our blu 2.0 device is now available
in nine markets and our disposable blu
bar is available in 11 markets, while our
heated tobacco offerings, which include
an upgraded Pulze 2.0 device, are up
and running in seven markets.
In oral nicotine, with our Zone X and
Skruf brands, we have focused on
selected markets, mainly in the Nordic
region, where this category is preferred
by consumers. Here we have been
innovating with a range of new flavours
and brand propositions. During 2024 we
will launch a range of oral nicotine
pouches in the US.
Already, in some European markets
where our combustible presence had
historically been smaller, NGP has
grown to become a significant
proportion of overall net revenue
(see chart on opposite page).
Our challenge next is to build a larger
NGP presence in our major European
markets, where we can leverage the
strength of our sales forces and broader
business infrastructure.
FY24 will be a year of consolidation as
we continue to innovate, build brand
equity and develop the markets we
have already entered.
The strength of our competitors and the
accelerating pace of regulatory change
mean that we cannot expect to make
progress in all markets in all years.
However, as more consumers make
potentially healthier choices, we see a
future where NGP becomes a larger
proportion of nicotine consumption
over time and where Imperial secures
its fair share of this growing market.
MAIN NGP MARKETS
Vapour
France
UK
Spain
Canaries Germany Greece
Italy
Portugal
Czech Rep
USA
Belgium Ireland
Heated tobacco
Czech
Italy
Greece
Hungary Portugal
Bulgaria
Poland
Modern oral
Sweden
Estonia
Norway
Denmark Austria
Iceland
2022
blu 2.0 trialled in four
French cities and
roll-out of new Zone X
flavours
2023
Pulze 2.0, blu 2.0 and
blu bar launched in
multiple markets
For more information
on consumer health
see pages 44-47.
+11%
+26%
www.imperialbrandsplc.com
23
OUR STRATEGY IN ACTION continued
CRITICAL ENABLERS
P U T TIN G T H E
M E R A T
T H E CE N T R E O F
T H E B U SIN ESS
C O N S U
8,600
consumer
interviews
We’re investing to support
a more rigorous approach
to consumer insight,
innovation and marketing.
A critical enabler for our strategy is to
place the consumer at the centre of the
business. Our refreshed focus on
starting with the consumer is a key
element of our challenger mindset. The
tobacco and nicotine environment has
undergone transformative change
recently. Consumer tastes are
becoming more eclectic – choice
matters more. The pace of innovation is
accelerating and there is now a broad
NGP ecosystem where partnering is
important to success.
We’re building a holistic approach to
understanding our consumers by
developing a multi-disciplinary
community to design and develop
products. This means investing in
capabilities, data and insights to ensure
that the voice of the consumer shapes
and influences our decision-making and
becomes part of the fabric of our culture.
Since the creation in 2021 of our Global
Consumer Office (GCO) we have
successfully attracted talent from a
range of blue-chip consumer goods
firms who are bringing best practice to
the team and combining it with our
24
Imperial Brands | Annual Report and Accounts 2023
existing deep knowledge in tobacco
and local markets. The GCO team,
collaborating closely with the wider
business, is supporting our vision by
listening carefully to smokers and next
generation product users, and we are
challenging on behalf of these
consumers to provide them with
more choice.
In June 2023, we hosted our “Start with
the Consumer” capital markets day in
New York to demonstrate our progress
on consumer centricity. The event
provided insight into how we are
putting the consumer at the centre of
the business with presentations on
insights, marketing, innovation and
NGP. The full slides and transcript are
available on our website,
www.imperialbrandsplc.com
ENHANCING OUR
CONSUMER INSIGHTS
We have refreshed our consumer
insights and how we analyse new
opportunities now follows a consistent
global approach applied across markets
and categories. At the centre of this
new approach is our investment in one
of Imperial’s largest ever pieces of
consumer research.
We used an approach called demand
spaces, a type of analysis which is well
established in other consumer sectors
but is still quite new in tobacco and
nicotine. This method, which internally
we call “Dimensions”, breaks down the
lives of our consumers into individual
moments when they enjoy our
products, for example, morning or
evening, in the home or out and about,
alone or with friends. We interviewed
8,600 consumers across eight countries,
collecting in-depth information on
15,800 different consumption
occasions. By analysing these different
moments of consumption we are better
able to differentiate our offerings to the
same consumer.
In addition, we have created new data
and analytics tools and made these
available across the organisation.
This is a clear example of how we are
putting technology to work in the
consumer space. Having piloted the
tracker in 2022, we launched the
revamped dashboard this year to
strengthen our ability to compare brand
funnels and understand switching and
other brand dynamics.
UNLOCKING OUR PORTFOLIO
We are embracing our role as a
challenger, by taking control of our
portfolio. Imperial is transitioning from
a business which only prioritised global
brands to one that also embraces its
portfolio of local jewels, widening
consumers’ choice with brands
reflecting their national identity or
their global tribe. We are a business
with a clear portfolio strategy where
each brand has a clear role and targets
a specific consumer and price, tying
into the new Dimensions framework
developed by the insights team.
We have reinvested in our brands,
increasing investment in marketing as an
overall percentage of net revenue. This is
delivering results, as demonstrated by the
success of brands such as Nobel in Spain,
together with Winston and Kool in the US.
A NEW APPROACH TO INNOVATION
Our innovation capabilities have been
reoriented to provide consistent and
coherent consumer experiences across
combustibles and NGP. A new and
differentiated approach to innovation
has been developed. It is one that is
consumer led and involves close
collaboration across functions. We are
now delivering NGP in a more
sustainable way, and at pace. In
improving our agility, we can respond to
the needs of consumers more quickly.
We have created and embraced a
partner ecosystem, and these partners
are working with us on our innovation
agenda across flavour, device, digital,
sensory and packaging. We are building
deep partnerships that allow us to be
unencumbered by ownership of an
entire value chain in a sector where
technologies and products are evolving
quickly. We are operating innovation
centres in Liverpool, Hamburg and
Shenzhen, which will accelerate the
feedback loop by giving us the ability to
test and learn from consumers as
we innovate.
A CHALLENGER APPROACH TO NGP
Collaboration between the NGP team and
our insights, innovation and marketing
teams has enabled us to leverage
consumer insights from combustibles,
and develop a holistic view of consumer
behaviour and preferences. This financial
year has been a breakout year for NGP
launches: we have successfully rolled out
our blu 2.0, blu bar and Pulze 2.0 devices.
There has been a noticeable increase in
the pace of innovation.
Our market roll-out strategy is clearly
defined. We will only enter markets
where the category has already been
created and we have an existing route
to market. Product development in
vapour and heated tobacco has been
complemented by new flavour roll-outs
in our oral nicotine products in Europe.
In June 2023, we completed the
acquisition of a US oral nicotine
product range from TJP Labs, and we
are excited about launching our new
brand, Zone, in 2024.
Looking ahead, we will optimise the
organisational design to make sure the
consumer centre of excellence is
working in tandem with the markets to
continue to deliver maximum benefit
for the business and our consumers.
“The Global Consumer
Office is supporting
our vision by listening
carefully to smokers
and next generation
product users.”
October 2022
First half of 2023
Throughout 2023
Launch of Nobel
Super Slims in Spain
First launches of blu 2.0,
blu bar and Pulze 2.0
Increased flavour
roll-out across the
OND portfolio
T I O N I N A C T I O N
T R A N S F O R M A
February 2023
New JPS campaign
launched in Germany
March 2023
Davidoff Double
Crushball launched
in the Middle East
Q4 2023
Premium non-menthol variant
of Kool launched in the US
www.imperialbrandsplc.com
25
OUR STRATEGY IN ACTION continued
CRITICAL ENABLERS
T R A N S F O R M IN G
O U R C U LT U R E
Over the past three years, as part of
Imperial’s transformation into a strong
challenger business, we have been
developing a performance culture
which is more collaborative,
accountable and inclusive.
This has been a highly structured,
multi-year programme and, while we
know there is considerable work still
to do, we are pleased with our progress
so far.
The process of cultural change began in
2021 when, in support of our newly
launched strategy, we unveiled a new
purpose, vision and five behaviours.
These behaviours, which have been the
foundation of all subsequent activity,
are: Start with the Consumer;
Collaborate with Purpose; Take
Accountability with Confidence;
Be Authentic and Inclusive to all;
and Build our Future.
TRANSFORMATION IN ACT I O N
During 2022, our focus was on
supporting colleagues to become
familiar with these behaviours.
Every employee received training in
understanding how best to live our
behaviours in their working lives, with
leaders going through an immersive
five-day programme, which we
called Connections.
We also rebranded our global office and
factory estate, and stepped up our
internal communications with new
global, regional and functional events
enabling broad-ranging dialogues and
the sharing of best practice.
Over the past year, we have continued
to develop this new culture. Our
behaviours are now embedded in the
way we manage performance, with
leaders paid bonuses based not just on
what they achieve but also how they
deliver those achievements.
Also during 2023, we have made a
significant investment in the coaching
and development skills of our senior
managers. Three hundred leaders,
including the full Executive Leadership
Team, have completed a bespoke
course, called Connected Leadership,
designed to help each of them become
better coaches and unlock the full
potential of their teams. Examples of
our people’s response to the programme
are on the opposite page.
As part of our broader culture change
agenda, during 2021 and 2022, we built
the foundations of a new, more rigorous
approach to diversity, equity and
inclusion (DEI). This included the
establishment of Employee Resource
Groups covering gender, ethnicity,
disability and LGBTQ+, and the
recruitment of a new central team.
During 2023, we agreed a set of
long-term DEI ambitions. These are
covered in more detail on pages 67-69.
The positive impact of these activities
is evidenced in our most recent global
employee experience survey, where we
saw a 91% response rate and
maintained our above-benchmark
engagement score of 74%. Among our
Global Business Leaders – roughly our
top 500 people – we saw engagement
improve by 10 percentage points to 84%.
We will continue to embed our new
culture through rigorous performance
management and further coaching to
support our leaders.
Jan 2021
Strategy launch:
Culture is identified as
a key enabler for
improved performance
Oct 2021
New purpose, vision &
behaviours unveiled at
first-ever all-colleague
conference
Nov 2021
Immersive Connections
sessions start. All colleagues
receive training in how to
bring to life our behaviours in
their daily working lives
Feb 2022
Launch of Connected
Performance. New
performance management
process embeds behaviours
into objective setting
and bonuses
26
Imperial Brands | Annual Report and Accounts 2023
2023 employee
engagement
74%
WHAT LEADERS ARE SAYING
ABOUT OUR CONNECTED
LEADERSHIP PROGRAMME…
“In 15 years here, this is the first
time ever I have seen such
investment from the
leadership in us.”
“This is the only time learning
had made me a better leader
on a day-to-day basis.”
“I’ve had more difficult
conversations now re people’s
performance than ever before
– caring and challenging.”
AND WHAT TEAMS ARE SAYING
ABOUT THEIR LEADERS…
“My leader is making me
think differently, when I
make a commitment, it feels
more personal.”
“I can see a positive 360 change
in leading – asking more
questions, making us think
more, solve our own problems
and not tell us.”
“My leader is pausing and
listening more – I noticed it.”
Nov 2022
Long-term diversity, equity
and inclusion ambitions
approved by the Board. This
is followed by the launch of
the “I Belong” campaign to
build awareness and buy-in
for self-declaration data
gathering (see pages 67-69
for more details)
Dec 2022
Second all-employee
conference highlights how
colleagues have adopted
new behaviours.
Contributions from
markets across all regions
show how culture change
is translating into
operational progress
Jan 2023
Connected Leadership
coaching courses begin.
During 2023, 300 leaders
devoted seven working
days to building skills in
developing and supporting
their teams to improve
performance and
unlock potential
Oct 2023
Record 91% response
rate for global employee
experience survey. We
maintain benchmark-
beating 74%
engagement score
www.imperialbrandsplc.com
27
OUR STRATEGY IN ACTION continued
CRITICAL ENABLERS
A N D EFFICIE N T
SIM P LIFIE D
O PE R A TIO N S
We are improving our global
processes and digital
strategies.
Imperial emerged as the world’s fourth
largest 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 strong stable of local and
international brands.
Our strategy, launched in 2021,
identified a need to better integrate this
portfolio of businesses to create
simpler, more efficient operations,
enabling us to better capture future
opportunities. Three years on, our
transformation is well underway with
28
Imperial Brands | Annual Report and Accounts 2023
significant structural changes, the
introduction of new capabilities, and
investment in our digital backbone.
In addition to restructuring our regions
in FY21 to allow a greater focus on our
largest market, the United States, this
year we created a new region to include
Africa, Asia, Australasia and Central &
Eastern Europe (AAACE).
This change reflects our more rigorous
approach to how we manage our
broader portfolio of small and medium-
sized markets, some of which have the
potential to become engines of future
growth for the Group. We have also
rationalised the number of clusters and
defined clearer operating models for
our large, medium-sized and smaller
markets. These changes are supported
by a rigorous monthly performance
review process.
Our drive to create value from our
broader markets is covered in more
detail on pages 20-21.
T R A NSFORMATION IN ACTION
2021
New performance
management approach
introduced
Market clusters reduced
from 13 to 10
In our two largest markets, the United
States and Germany, we have invested
in our sales teams, and, where
applicable, have supported them with
training and new sales technology to
support faster decision-making. In
order to derisk our investments, we are
deliberately using technologies which
have already been proven by our peers
in the consumer goods sector.
Our focus on our top five priority
markets is covered in more detail on
pages 18-19.
We have been introducing new ways of
working to ensure strong collaboration
between our central functions and
market teams, and to develop high-
quality business partnering. A major
focus this year has been embedding our
new Global Consumer Office to work
closely with our regions, supporting
consumer insight, revenue growth
management, and brand and portfolio
management. An example of how we
have achieved this is the creation of our
central business intelligence function
focusing on market and business
performance. The architecture of this
function was co-created by both central
and market teams in a collaborative
process with the resulting new insights
centre of expertise enabling local
execution with central support.
Our drive towards greater consumer
centricity is covered in more detail
on pages 24-25.
In our business partnering functions –
including Finance, Procurement, IT
and People & Culture – we created
Global Business Services (GBS) to deliver
more strategic support to our sales,
marketing and manufacturing teams,
and to provide the flexibility to adapt
and respond to changes in the market.
In creating GBS, we streamlined our
global processes 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.
Across this year, we have seen over 300
roles move to the GBS, with the opening
of a new office in Krakow, Poland, for
specialists in areas including Finance,
IT, Data and Procurement.
Our Global Supply Chain has also been
transforming. Here, the focus has been
on building a fully integrated supply
chain with centralised planning,
resourcing and demand forecasting
capabilities based in our Warsaw hub.
This team, collaborating closely with our
factories and people in the markets,
offers a range of skill sets, experiences
and backgrounds – from packaging
solutions to end-to-end planning.
The new hub is designed as a space for
more agile decision-making and
professional excellence.
These changes are all being supported
by significant digital improvements.
Our investment in an all-new Enterprise
Resource Planning (ERP) system will
make us a more connected organisation
by replacing local legacy systems and
provide a new technology backbone. This
is a once-in-a-generation opportunity to
enhance the speed, integrity and
availability of business information,
improving our decision making and
agility. Alongside this, the programme
will simplify and standardise core
processes across our finance, supply
chain and commercial operations.
A strong programme team has been
mobilised, combining external expertise
in similar transformations and
experience from within Imperial, together
with best-in-class delivery partners and
specialists that can help us accelerate the
delivery. During this financial year we
have made significant progress, having
completed the global design phase, and
we are now implementing the model in
the first market and factory, which are
set to go live in the second half of the
next financial year.
The initial change programme, outlined
in our 2021 strategy, is now complete.
However, the work to develop a simpler
and more efficient organisation
continues, as we seek to create a
working environment where our people
can be more fulfilled and effective,
enabling improved operational and
financial outcomes.
2022
Changes to business
support functions
Investment in new ERP
system announced
2023
Embedding consumer
capabilities
300 roles moved to new
Global Business Services unit
www.imperialbrandsplc.com
29
KPIs
H O W W E A R E
P E R F O R M IN G
-2bps
22
23
21
FINANCIAL KPIs1
We use key performance indicators to assess
the progress we are making in delivering our
purpose, vision and strategy.
Aggregate priority market
share vs prior year (%) R
NGP net revenue (£m) R
10bps
35bps
23
22
21
£265m
£208m
£188m
Performance
Our “focus on our priority markets” has
enabled us to stabilise the market share
loss we experienced for a number of years
and led to the second year of an increase in
aggregate priority market share vs prior year.
Gains in the US, Spain and Australia offset
declines in the UK and Germany.
Performance
NGP revenue grew by 26.4% on a constant
currency basis in the year. This growth in our
NGP revenue reflects our strategic priority to
“build a targeted NGP business” and the step
up in investment during the period. This
metric is used as a bonus performance
criterion for Executive Directors.
Tobacco & NGP
net revenue (£bn)
Tobacco & NGP adjusted
operating margin (%)
Adjusted earnings
per share (pence) R
23
22
21
£8.0bn
£7.7bn*
£7.6bn
23
22
21
44.7%
44.4%*
43.5%
23
22
21
278.8p
264.8p*
246.5p
Performance
Tobacco & NGP net revenue grew by 3.6% at
actual exchange rates and increased by 1.4%
on a constant currency basis excluding
Russia from the prior year. Including Russia,
tobacco & NGP net revenue grew by 0.7% at
constant currency. Tobacco net revenue was
up 0.7% at constant currency excluding
Russia, reflecting progress made in the two
combustible strategic priorities of: “focus on
our priority markets” and “driving value from
our broader portfolio”.
* Excluding Russia.
Performance
Margins improved 30 basis points at actual
rates and 70 basis points at constant
currency excluding Russia from the prior
year. Including Russia, margins grew 90
basis points at constant currency. The
improvement is a result of the operational
gearing impact of higher sales on lower
volumes and the benefit of cost savings from
our 2021 strategic restructuring programme.
*
Excluding Russia.
Performance
Adjusted earnings per share increased 5.3% at
actual exchange rates and increased 4.3% on
a constant currency basis excluding Russia
in the prior year. Including Russia, adjusted
earnings per share grew 4.2% on a constant
currency basis. Reported earnings per share
grew 52.1%. This movement is explained in
the Group Financial Review.
* Excluding Russia.
Dividend per share (pence)
Adjusted operating cash
conversion rate (%) R
Adjusted net debt to EBITDA
(multiple) R
23
22
21
146.82p
141.17p
139.08p
23
22
21
92%
102%
83%
23
22
21
1.9x
2.0x
2.2x
Performance
The dividend grew 4.0% reflecting
our progressive dividend policy and in line
with our capital allocation policy.
Performance
2023 adjusting cash conversion of 92% was
lower than the prior year due to working
capital outflow.
Performance
Adjusted net debt to EBITDA reduced 0.1x to
1.9x in FY23, close to our capital allocation
target of 2.0x to 2.5x. Adjusted net debt
reduced by £0.1 billion, after £2.3 billion of
returns to shareholders via dividend and
share buyback. EBITDA increased year-on-
year, reflecting the growth in adjusted
operating profit during the financial year.
1. Definitions for financial KPIs can be found in Supplementary Information.
30
Imperial Brands | Annual Report and Accounts 2023
NON-FINANCIAL KPIs1
More non-financial performance indicators can be found in the ESG Review
on pages 38, 48, 52 and 64 and in our Reporting Criteria document available on
our website.
Return on invested capital
(%) R
Energy consumption (GWh) R
Absolute Scope 1 and 2 market-based
C02 equivalent emissions (tonnes) R
23
22
21
18.5%
17.7%
16.5%
23
22
17
650
712
875
23
22
17
81,089
18,896
91,007
84,759
114,270
173,902
Performance
Return on invested capital improved in
the year by 80bps to 18.5% driven by an
increase in adjusted operating profit that
more than offset the increase in average
annual capital.
Performance
We set a target to reduce our absolute energy
consumption by 25% by 2030 versus a 2017
baseline. We are pleased to report that in
FY23 we exceeded this target with a 27%
reduction compared to the baseline. We will
now set a new target for energy reduction
moving forward.
Our 2023 relative energy consumption is
81,128 KWh/£m net revenue.
Total shareholder return R
Waste (tonnes)
Scope 1
Scope 2 market-based
Total value is total Scope 1 and Scope
2 market-based absolute CO2e emissions
Performance
We have seen a 65% decrease in our total
Scope 1 and Scope 2 market-based emissions
from our 2017 baseline year. This has been
driven by our increased use of electricity
purchased from traceable renewable sources.
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.
Lost time accident frequency rate
(per 200,000 hours)
23
22
17
35,744
41,969
49,141
23
22
19
0.30
0.24
0.40
Performance
Our target is to reduce waste by 20% by 2030.
We have exceeded this target with a 27%
reduction in waste compared to the 2017
baseline year. We will set a new target for
waste reduction moving forward.
Performance
We have seen a 25% increase in our lost time
accident rate compared to last year. The
number of LTAs stayed the same as last year
while the number of hours worked has
reduced, leading to the 25% increase in
LTA rate.
During FY23 we continued to increase the
use of leading indicators to better manage
risk throughout our operations..
— Imperial Brands total return
Performance
We have delivered total shareholder returns
of 56% over the prior three-year period.
Delivery in line with our guidance supports
growing investor confidence in our
management team’s ability to implement
our strategy.
To monitor the progress of our cultural change programme, we conduct an annual
employee experience survey. In FY23, our employee engagement score was 74%, the
same level as the prior year and above the global benchmark. Participation in the
survey was 91%. Additionally, we have developed an internal bespoke index with
which to monitor the outcome of our leadership talent development programmes.
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
C
O
T
H
N
E
S
T
H
E
C
U
E
M
B
U
N
E
T
R
S
I
R
N
E
A
T
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O
S
F
S
PERFORM A N C E
BASED CUL T U R E
AND CAPABI L I T I E S
T
N
S
N
TIO
A
D
SIM PLIFIE
A N D EFFICIE
O PER
R
KPIs used as bonus and LTIP performance
criteria for Executive Directors.
See Remuneration Report on pages
142 to 163 for more information
1. Definitions for non-financial KPIs can be found in the ESG Review on pages 38 to 69 and in the Reporting
Criteria document available on our https://www.imperialbrandsplc.com/healthier-futures/our-performance.
2. 2023 non-financial data has been independently assured by Ernst & Young LLP (EY) under the limited
assurance requirements of the ISAE 3000 standard. EY’s Assurance Opinion is available on our website.
Our reporting scope and definitions are detailed in the Reporting Criteria document published on our website.
See https://www.imperialbrandsplc.com/healthier-futures/our-performance for more information.
3. Our 2023 environmental data follows the reporting period Q4 financial year 2022 to Q3 financial year 2023.
This is to allow for data collection, validation and external assurance. Our reporting scope and definitions are
detailed in the Reporting Criteria document published on our website.
4. Our health and safety data is for the full 2023 financial year. Our reporting scope and definitions are detailed in
the Reporting Criteria document published on our website.
www.imperialbrandsplc.com
31
21519517515513511595752023202220212020
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.
Further information on how the
Board has considered stakeholders
when making key decisions is given
on the following pages and also in
the Governance Report on pages 126
to 128.
• Our focus groups have shown us
that listening to these needs and
responding to them allows us to
remain relevant and underpins
consumer loyalty to brands.
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
Executive with evidence and an
opportunity to challenge
assumptions when making decisions
related to our product portfolio.
STAKEHOLDER ENGAGEMENT
T R U S T W IT H O U R
S T A K E H O L D E R S
B UIL DIN G
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 Germany
and Morocco. These afforded Board
members the opportunity to get
closer to the consumer by hearing
directly from them about their
behaviours, 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 also heard about
the different buying habits of
consumers and the impact of the
rising cost of living.
• Our CEO and CFO also met separately
with consumers during the year.
• A tour of our Langenhagen factory
during the Board visit to Germany
provided Board members with further
insight and understanding of the full
life-cycle of the products our
consumers enjoy.
How we engage with this stakeholder
• Consumer roundtables and focus
groups are held to understand
consumers’ specific requirements
and 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.
32
Imperial Brands | Annual Report and Accounts 2023
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.
The Board’s decision-making process
is brought to life in our Section 172(1)
statement on pages 126 to 128 which
is incorporated into this Strategic
Report by reference and references
specific recent examples.
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 People and
Governance Committee.
• The Board held three “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, including a tour of our
Langenhagen factory during the
Board visit to Germany.
• The Board receives regular feedback
from our employees through updates
at the People and Governance
Committee. These include the results
of our employee experience (“Have
Your Say”) surveys, which prove
invaluable in helping to understand
what works well and what we may
need to change, as well as 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).
How we engage with this stakeholder
• “Connections”, our purpose, vision and
behaviours programme, continued,
ensuring all new and existing
colleagues experience 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
under-represented 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 (see
pages 64 to 66).
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
33
STAKEHOLDER ENGAGEMENT continued
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 Germany and Morocco over
the course of the 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 the regulation of
tobacco and nicotine 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.
• Our Chief Legal & Corporate Affairs
Officer presents to the Board
regularly on the Group’s key
regulatory risks and our corporate
affairs strategy to manage these risks.
• Management provides updates to the
Board as part of the regional business
reviews, including, where relevant, any
updates on the regulatory landscape.
How we engage with this stakeholder
• While the Board welcomes
constructive engagement with
regulators, management is primarily
responsible for understanding and
ensuring compliance with applicable
laws and regulations.
• We monitor changing regulations in
our markets and assess the impact on
our existing portfolio and innovations.
• We assess regulatory impact on
product 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 from regulators.
34
Imperial Brands | Annual Report and Accounts 2023
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 development of our NGP
business, sustainability of the
tobacco value model, 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.
• Investor perception is assessed on an
ongoing basis through feedback on
meetings, our events and our
conference presentations. When
appropriate, this feedback is shared
with the Board in the IR Board Report.
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.
• Investor perception is assessed
on an ongoing basis through
feedback on meetings, events and
conference presentations.
• Our AGM provides an opportunity for
the Board to meet with investors.
• Sue Clark, Chair of our Remuneration
Committee, engaged with investors
in July 2023 and subsequently about
our new Remuneration Policy, which
is to be approved at our forthcoming.
AGM. Further details of the Policy
can be found in the Directors’
Remuneration Report on pages
142 to 163.
How we engage with this stakeholder
• Our Annual and Interim results
presentations inform investors how
the business is performing.
• We maintain a programme of active
dialogue with our key financial
stakeholders, including institutional
shareholders, potential investors,
holders of our bonds and sell-side
research analysts.
• Our CEO, CFO and senior
management present at various
conferences throughout the year,
including the Consumer Analyst
Group of New York (CAGNY)
Conference in February 2023.
• Our CEO led our “Start with the
Consumer” capital markets event in
New York in June 2023, showcasing
how we have built our consumer-
facing capabilities and how they are
supporting our operational and
strategic delivery.
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, and to deliver on
that strategy.
• The setting of realistic expectations
combined with transparent reporting
of performance against KPIs, both
financial and non-financial,
including ESG metrics.
• Disciplined capital allocation.
www.imperialbrandsplc.com
35
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.
• Factory and site visits help the Board
understand the complexities of our
global supply chain.
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.
36
Imperial Brands | Annual Report and Accounts 2023
NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
NON-FINANCIAL AND
SUSTAINABILITY
INFORMATION
STATEMENT
The following table constitutes our
Non-Financial and Sustainability
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
Further information
Page
• Environmental Policy
• Filter Policy
• Sustainable Tobacco Programme
• Biodiversity Statement
Environmental targets
31, 48, 52, 61, 75, 78, 80
International management
systems
49, 70 to 81
Climate and energy
31, 48 to 51, 70 to 81
• Code of Conduct
• Group-wide Employment Policy
• Fairness at Work Policy
• Speaking Up Policy
• Occupational Health, Safety and
Reducing waste
Sustainable tobacco supply
52 to 54
55 to 61
Diverse and engaged workforce
67 to 69
Workplace health and safety
31, 64 to 66
International management
systems
54, 68
Environmental Policy and framework
Lost time accident (LTA) rate
31
• Human Rights Policy
• Code of Conduct
• Supplier Code of Conduct
• Health Protection and
Wellbeing Policy
• Fairness at Work Policy
• Speaking Up policy
Diverse and engaged workforce
67 to 69
Workplace health and safety
31, 64 to 66
Human rights
International management
systems
Human rights
Youth access prevention
62 to 63
63
62 to 63
47
Farmer livelihoods and welfare
55 to 58
Social matters*
• International Marketing Standards
• Policy on taxation
• Community Contributions and
Volunteering Policy
• Information Security Policy
Charitable and political donations 164
Anti-corruption
and anti-bribery*
• Code of Conduct
• Fraud Risk Management Policy
• Speaking Up Policy
• Supplier Code of Conduct
Description of
principal risks and
impact of
business activity
Description of the
business model
Non-financial key
performance
indicators
Climate-related
Financial Disclosures
How we manage risk
100
Governance, risk management
and internal control
100 to 111, 140
Principal risks and uncertainties
102 to 109
Governance, risk management
and internal control
Business model -
Our Distinct Approach
100 to 111, 140
14 to 15
Key performance indicators
30 to 31
Sustainability
performance indicators
TCFD Report
40, 50, 51, 54
70
* Further information on our policies, due diligence and outcomes in these areas is contained throughout the Strategic Report..
www.imperialbrandsplc.com
37
ESG REVIEW
S O LID P R O G R E S S
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.
OUR ESG HIGHLIGHTS
Reduced our Scope 1 and
Scope 2 market-based
emissions by
65%
since 2017
Reduced absolute waste across
our operations by
27%
since 2017
Scored
92%
on 2022 ShareAction Workforce
Disclosure Initiative
We are now into the third
year of our five-year strategy
to transform Imperial into
a business better able to
deliver sustainable growth
year in, year out.
Our commitment to environmental,
social and governance (ESG) issues is
integral to our business strategy and
underpins our purpose and vision.
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”.
Double materiality assessment
In 2023 we continued to build on the
strong foundations of our ESG strategy
established in 2022. Following on
from the materiality assessment we
conducted in 2021 where we considered
the views of consumers, customers,
employees, investors and shareholders
to establish our priority ESG issues, in
2023 we conducted our first double
materiality assessment.
Double materiality identifies both how
a company's operations impact people
and the environment and how
sustainability matters impact the
company itself. We used an Artificial
Intelligence tool through an external
provider, Datamaran, to process
thousands of data points from
corporate reports, mandatory and
voluntary regulations, and online news.
38
Imperial Brands | Annual Report and Accounts 2023
Tony Dunnage
Global ESG Director
This allowed us to define which issues
were most material to our business.
In addition to desk research and
interviews, using an objective and
consistent methodology on large
amounts of information makes the
data-driven insights fully traceable and
better suited for auditing purposes,
including reasonable assurance.
Results from the double materiality
assessment show that consumer health
remains as our top priority as we
continue to strengthen 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. The assessment confirmed
our eight focus areas, as detailed on
page 40, remain priorities. We will
check the validity of our material ESG
priorities on an annual basis.
ESG REPORTING FRAMEWORK
Our Reporting Criteria document
provides further information on
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 2023 GRI and SASB Index.
To note: Logista remains out of scope
for all Imperial ESG-related KPIs.
However, the steps Logista is taking
to address climate change impacts on
its business are detailed in our TCFD
disclosures on page 70.
We have grouped our most material
ESG issues 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) and
more detail is provided under each
ESG issue.
Governance continues to be a key focus
and in FY23 we have built upon the ESG
Governance framework introduced in
FY22. More detail is provided on page
41. Executive Leadership Team (ELT)
sponsors have been appointed for each
of our eight ESG priorities, to be
accountable for performance, challenge
strategy development, and drive
integration and visibility from the
top down.
Internally, we refer to ESG as our
“People and Planet” agenda. To further
embed our ESG strategy across the
business and to inspire employee
engagement we developed our Triple
Zero campaign. Triple Zero refers to our
aspirations and targets for zero injury,
zero carbon and zero waste. Through
this ambitious message, we aim to
harness employee engagement and
deepen their understanding of the
required collective effort to achieve
these ambitions.
In FY23 we held Triple Zero events in the
US and Turkey, bringing together factory
managers, regional directors and subject
matter experts from across our
operations to ensure we adopt a
consistent approach across the business
to meet our targets, as well as develop
plans in support of our aspirations. The
progress in both employee
understanding and likely actions will be
measured through our annual employee
experience survey.
ESG: People and Planet
Performance Summary 2023
Further information on our People
and Planet agenda is available on our
website in our 2023 ESG: People and
Planet Performance Summary.
As part of our approach to continually
improve our ESG performance we take
a data-led approach. Sources include
our online non-financial reporting
system, which compiles monthly
information on energy consumption,
water usage, as well as safety data. This
is to drive more robust performance
and transparency in our ESG reporting.
In 2023 we have integrated ESG
metrics for consumer health and
climate into our FY23 executive
remuneration. In FY24 ESG metrics
will continue to be part of executive
remuneration. See pages 142-163 for
more information.
We keep abreast of developing and new
ESG-related regulations. The Corporate
Sustainability Reporting Directive
(CSRD) was formally adopted by the EU
in November 2022. To meet the
requirements of the CSRD, the European
Financial Reporting Advisory Group
(EFRAG) has developed the European
Sustainability Reporting Standards
(ESRS). Earlier this year we asked a third
party to conduct a gap analysis of our
current ESG reporting against the
requirements of the CSRD. The aim was
to identify the areas we need to focus on
to ensure we comply with the reporting
requirements which will come into force
in 2025 for companies and entities in
scope. The CSRD drives in-scope
companies to bring non-financial
reporting on par with financial reporting,
with assurance of non-financial data
becoming mandatory.
In FY24 we will establish a CSRD
working group to ensure we remain
on track to disclose in line with
the requirements.
OUR JOURNEY TO DATE
“As we enter the third year of our
ESG ambition, we remain very
encouraged by the progress
made to date and we are
determined to maintain this level
of performance. We believe the
governance structure we have
put in place, coupled with our
employee engagement efforts,
positions us in good stead to
continue to remain on track to
deliver against our ambitions.”
Tony Dunnage
NET ZERO SYMPOSIUM
Lukas Paravicini, Chief Financial
Officer, is the ELT sponsor of the
climate change pillar of our
ESG strategy.
On 22 March 2023 we held a Net
Zero Symposium in our London
hub. The event, opened by Lucas
discussed how collective
responsibility, partnerships and
action will lead to the impact
necessary to keep us on track to
deliver our Net Zero ambition. We
brought together topic experts and
practitioners from across our Global
Supply Chain, Procurement,
Finance, Corporate and Legal
Affairs as well as valued partners
from insurers, advisers, and leaf
suppliers to review the progress and
to debate how we could go further,
faster, building upon the positive
progress we have made to date.
2021
• New business
strategy launched
• Purpose, vision and
behaviours unveiled
• ESG materiality
study completed
2022
Sept 2023
Looking forward into FY24
• 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
ESG priorities
integrated into
executive
remuneration
metrics (introduced
for FY23)
• Continuous monitoring
by the working groups
and ESG Committee
• Continuous sponsorship
and engagement across
the organisation
www.imperialbrandsplc.com
39
ESG REVIEW continued
HEALTHIER FUTURES
Consumer health
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.
Climate change
We are committed to
reducing our impact on the
climate throughout our value
chain. Focusing on both
mitigation and adaptation.
Packaging and waste
We are committed to
minimising waste associated
with our products, packaging
and production processes.
NGP net revenue has
increased by
41%
between FY21 and FY23
Reduced our Scope 1
and Scope 2 market-
based emissions by
65%
since 2017
Reduced absolute
waste across our
operations by
27%
since 2017
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.
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.
155,000
people in our leaf supply chain benefiting from our
Leaf Partnership Projects aimed at improving access
to clean water
We have been recognised by CDP as
a supplier engagement leader
for a 4th consecutive year
SAFE & INCLUSIVE WORKPLACE
Employee health,
safety & wellbeing
We are committed to achieving
world-class occupational
health, safety and wellbeing
for all our employees.
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.
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.
Reduced lost time
accidents by
44%
since 2019
(absolute numbers)
Scored
92%
on 2022 ShareAction
Workforce
Disclosure Initiative
All factories report against
21
modern slavery leading
indicators monthly
Our ESG strategy remains aligned
with the United Nations
Sustainable Development Goals.
40
Imperial Brands | Annual Report and Accounts 2023
POWERED BY
RESPONSIBILITY
“Imperial’s ESG strategy
is underpinned by
strong corporate and
regulatory governance”.
Emily Carey,
Company Secretary
Andrew Gilchrist
at the Board
immersion session.
We are committed to
conducting our operations
responsibly and respecting
our people, our communities
and our planet.
Our ESG responsibilities are fulfilled
through a robust governance
framework, upholding high standards
of corporate governance, transparency
and ethics. We continuously review
and improve our risk management
processes and disclosure practices to
ensure we meet evolving standards
and practices.
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
the Executive Leadership Team (ELT),
making it an executive committee. The
purpose of the ESG Committee is to
provide oversight, advice and direction
on the implementation of our People
and Planet agenda and the Company’s
progress on its ESG commitments and
objectives, as well as ensuring adequate
resources to deliver these. Senior
managers representing functions
including Investor Relations, Group
Legal, Governance, Corporate Affairs,
Supply Chain and Procurement,
Communications, Group Science and
ESG attend meetings as required.
Our comprehensive governance
structure enables appropriate levels of
focus, cross-collaboration, risk
management and escalation pathways
covering every ESG area of focus.
The Board will review our ESG
performance on a quarterly basis. The
ESG Committee reports to the Board for
ESG-related opportunities, and potential
material ESG-related risks are reported
to the Group Risk Committee.
ESG Governance structure
Board of Directors
Opportunity
The Board of Directors was updated
on ESG-related matters throughout
the year.
ESG Committee
Risk
Group Risk Committee
Environmental
Strategy Group
Social Strategy
Group
Group ESG
Function
Other relevant
Functions
Operational Working Groups
www.imperialbrandsplc.com
41
ESG REVIEW continued
Our CEO, Stefan
and independent
Board Director,
Diane during a store
visit in Germany.
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
markets to provide accessible local-
language versions of courses for
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 modern slavery, now available in
15 languages. This course provides
a short overview of modern slavery
and explains how employees can
raise concerns.
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
operational working groups which are
noted in each of the ESG focus areas.
This activity is facilitated by the ESG
team. This strengthened governance
approach enables cross-functional
collaboration and avoids duplication
of efforts.
Achieving our ESG targets requires a
strong commitment from the top of our
organisation. ELT sponsors have been
appointed for each of our eight ESG
priorities, to be accountable for
performance, challenge strategy
development, and drive integration and
visibility from the top down. 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. Our executive sponsors will
work with management teams to
integrate our ESG targets into our
business strategy, monitor progress
regularly, report transparently, and lead
by example. Their commitment and
role-modelling will foster a culture
of responsibility throughout
the organisation.
Further information on our approach
to risk and opportunity management
is available on pages 100-111.
We have a broad range of policies to
support our approach to risk
management and good governance.
Our key policies relating to each of our
eight ESG focus areas are listed under
the ESG topic area. Our Code of
Conduct, translated into 27 languages,
is embedded throughout Imperial
Brands and enables 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, refreshed
in 2023, 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 refreshed Supplier Code of Conduct
will be made available in a wide variety
of languages.
For further information on our policies,
visit www.imperialbrandsplc.com/
healthier-futures/governance/policies
42
Imperial Brands | Annual Report and Accounts 2023
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 and claims
relating to pay and employment
conditions. Where grievances were
determined to have merit (in part or
whole), appropriate corrective actions
were implemented. None of these
claims were determined to be systemic.
Allegations were also received of
misuse and/or theft of Company
property. These claims were not
material in value and were determined
to be unfounded.
Reports made through our Speaking Up
platform were determined to be
without merit. A number of alleged
frauds were also investigated through
the Group’s fraud reporting process.
Some of these allegations were found
to be valid in whole or part. None were
of material value.
All reports made to our Speaking Up
platform were investigated by
appropriate senior management,
including from our People and Culture
teams, Group Finance, Group Security,
and Group Legal. At all times, protection
of the individual making the report was
a key consideration.
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 2023. 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.
INVESTOR BENCHMARKS
Our ESG management and performance
is evaluated by a wide range of external
rating agencies.
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.
In its August 2023 updated report,
Sustainalytics states that: Imperial is at
high risk of experiencing material
financial impacts from ESG factors,
has 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.
Imperial’s overall ESG Risk exposure is
medium and is moderately above
subindustry average.
We are pleased to note that MSCI has
upgraded our rating from an ‘A’ to an
‘AA’. Its latest report dated August 2023
states: “Imperial Brands continues to
lead global peers on corporate
governance practices. The company
has responsible marketing policies and
enforcement mechanisms such as
regular audits and employee training.
However, like industry peers, the
company continues to face scrutiny
over its supply chain labour practices.”
In 2022, CDP awarded us an A rating for our
Climate Change submission for a fourth
consecutive year. We await the results of
our 2023 submissions to CDP for Climate,
Water and Forests. 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 2022 for a fourth
consecutive year.
Moody’s Analytics gave us an overall
ESG score of 42/100 and a Company
Reporting Rate of 82% in their last
update in October 2021.
We are proud to have been recognised
for a third consecutive year as a
Climate Leader by the Financial Times
in its ranking of actions taken by
European businesses.
We have also participated in the investor-
backed Workforce Disclosure Initiative
(WDI) since 2019. This benchmark is
currently based on a disclosure score, and
performance scores have not been
allocated. We received a 92% disclosure
score for our 2022 submission and have
submitted our 2023 disclosures to the WDI.
www.imperialbrandsplc.com
43
ESG REVIEW continued
HEALTHIER FUTURES
CONSUMER
HEALTH
NGP net
revenue has
increased by
41%
between FY21
and FY23
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.
Behaviours
Link to SDGs
SDG 3: We are
committed to tobacco
harm reduction
OUR PLAN
2023
• Consumer Health Working Group created.
• Three innovation hubs in Liverpool,
Hamburg and Shenzhen.
• Acquisition of range of US oral nicotine
pouches from TJP Labs.
• Launch of blu bar, our disposable vape.
44
Imperial Brands | Annual Report and Accounts 2023
2024
• New NGP innovations planned
across multiple markets.
Governance
• Consumer Health
Working Group
• Product Stewardship and
Health Group (PSHG)
Key Policies
• International
Marketing Standards
• NGP Policy Positions
ELT sponsor
• Andy Dasgupta,
Chief Consumer Officer
• Sean Roberts, Chief Legal and
Corporate Affairs Officer
As a responsible manufacturer, we
understand and maintain a detailed
knowledge of our products and monitor
the relevant scientific developments
and literature relating to our products
and respond accordingly. The Product
Stewardship and Health Group (the
PSHG) is responsible for formally
advising the Board, via the Chief
Executive, on all consumer
safeguarding issues.
To oversee a more holistic approach to
consumer health, in FY23 we set up the
Consumer Health Working Group which
brings together internal stakeholders
from across the business including the
ESG team, Group Science & Regulatory
Affairs, Investor Relations, Group
Communications, Corporate and Legal
Affairs, Product Innovation and the
Global Consumer Office. This group is
responsible for overseeing the actions
taken and the progress made related to
consumer health.
Making a positive impact on
consumer health through our NGP
continues to be a priority.
Globally, more than a billion adults still
smoke. Along with others in our
industry, we acknowledge society’s
concerns about the health risks of
smoking, and we have a duty to help to
potentially improve public health by
reducing smoking-related harm. This
ambition aligns with SDG 3.4 which
aims to: “reduce mortality from
non-communicable diseases and
promote mental health”.
A consumer-centric, challenger
approach to next generation products
(NGP) supports Imperial’s specific
contribution to this broader industry-
wide commitment to reduce potential
harms. As the smallest of the
international businesses, we are
humble about what we can achieve on
our own. But, by engaging with our
consumers, innovating fast and
working with business partners, we
believe we can drive responsible
competition and help accelerate the
transition to potentially reduced-
harm products.
NGP have the potential to make
a significant contribution to
harm reduction.
Both our own – and independent –
scientific evidence suggests all nicotine
products which do not involve the
burning of tobacco are potentially less
harmful to consumers, compared to
continuing to smoke cigarettes.
While public health bodies have
concluded that nicotine is addictive,
they also agree that it is the smoke
created by the burning of tobacco leaf
that contains most, and in the highest
levels, of the 100-plus harmful
chemicals responsible for smoking-
related disease. Advances in science
and technology enable our NGP to
deliver nicotine to consumers without
the need to burn tobacco.
To aid understanding of the harm
reduction potential of each NGP relative
to cigarettes, we have developed an
illustrative representation of the
current scientific evidence – the
relative risk scale illustrated above.
Imperial has accelerated
innovation in potentially
harm-reduced products.
Since the launch of our current Group
strategy in January 2021, we have been
investing in consumer insights,
innovation capabilities and third-party
partnerships to accelerate our NGP
operations. This way of working is most
clearly seen in our new innovation
centres. Our Sense Hubs in Liverpool
and Hamburg, opened in 2023, bring
together consumers, our own product
developers and third-party partners
in a single collaborative space. Our
Shenzhen site enables us to get closer
to our supply chain partners.
These focused investments have led to a
step change in the pace of development of
new products across multiple categories
– all designed to appeal to existing adult
smoker and nicotine consumers.
• Pulze 2.0, our latest heated tobacco
innovation, is now available in
seven markets.
• blu 2.0, the evolution of our myblu
pod-based vape, is available in
nine markets.
• blu bar, our new disposable vape, is
already established in 11 markets.
• Three new variants of Zone X, our
tobacco-free oral nicotine pouches, in
select established European markets.
In the US we are poised to launch a new
range of oral nicotine products following
the acquisition of TJP Labs’ range of US
nicotine pouches in June 2023.
Our NGP net revenue has
increased by 41% between
FY21 and FY23*
* FY23 NGP net revenue was £265 million and has
been independently assured by Ernst & Young LLP
(EY) under the limited assurance requirements of
the ISAE 3000 standard. EY’s Assurance Opinion
is available on our website.
www.imperialbrandsplc.com
45
ESG REVIEW continued
Supporting consumer choice –
consumer behaviour is becoming
more diverse.
The tobacco industry has made
significant progress in tobacco harm
reduction. However, even in Europe, the
region where NGP has made most
progress, cigarettes still represent 91%
of the total market.
Analysing the global and regional
figures, we are seeing growing diversity
in consumer behaviour market by
market. For instance, in three examples
of neighbouring countries in Europe:
France is a significant vaping market,
while Italy is the largest heated tobacco
market in Europe and in Austria oral
nicotine is the dominant NGP category.
Furthermore, we are seeing similar
diversity of consumer behaviour when
we analyse nicotine use by individual
occasions – or “moments.” Over the
past two years, Imperial has conducted
a major piece of consumer research,
using an approach called “demand
spaces”. This method breaks down the
lives of our consumers into individual
moments when they enjoy our
products: for instance, in the morning
or evening; in the home or out and
about; and alone or with friends.
THE HARM REDUCTION EQUATION
We interviewed c.8,600 consumers
across eight countries, collecting
in-depth information on c.15,800
different consumption occasions. Our
research highlighted how, moment by
moment, there are wide variations in
how consumers behave.
We learned that, in some markets, NGP
are already the dominant category for
certain moments or occasions – the
moments, for example, when people
meet with friends outside the home.
Equally, however, we learned that there
are certain moments – which account
for a high proportion of nicotine
consumption – where NGP have made
few inroads. These are typically
moments when people are on their own
at home, for example taking a break
between tasks.
These trends suggest that there will be
no one-size-fits-all solution in tobacco
harm reduction – and there is room for
a wide range of businesses, including
Imperial, to carve out distinctive roles
catering for specific consumer needs.
Substantiation of reduced risk - our
innovation is underpinned by a
rigorous scientific framework.
Our Group Science function, partnering
closely with our consumer teams,
ensures each of our NGP is substantiated
against our Scientific Assessment
Framework. This is designed to:
1. Reassure our consumers by ensuring
all our products are manufactured to
a high and consistent standard.
2. Evidence that our NGP are
potentially reduced-risk compared
to continuing to smoke, and that
they are compelling to try and
satisfying when used by adult
smokers and existing NGP users (the
“off-ramp” on the graphic below).
3. Support the conclusion through a
wide range of measures that our
NGP are unattractive to unintended
populations, including never-
smokers and the under-age.
Furthermore, current internal
research indicates that alternative
nicotine products may be competing
with combustible cigarettes rather
than promoting smoking thereby
potentially preventing “on-ramp” to
potential cigarette smoking.
For further information please visit
Imperial Brands Science website:
www.imperialbrandsscience.com
46
Imperial Brands | Annual Report and Accounts 2023
SCIENTIFIC ASSESSMENT
OF NGP
One example of our structured
approach to scientifically
assessing our NGP through our
Scientific Assessment
Framework is the research we
have conducted into our heated
tobacco system, Pulze and iD.
After proving that Pulze does
indeed heat, and not burn,
tobacco, we analysed its aerosol
and demonstrated significant
reductions in the harmful and
potentially harmful constituents
compared to cigarette smoke.
We then confirmed these
findings translated to reduced
cell toxicity across a series of
laboratory tests, with reductions
of between 90-98% compared to
cigarette smoke.
Clinical trials have also been
conducted to confirm Pulze and
iD delivered nicotine effectively
to adult smokers, while also
reducing their desire to smoke.
Simultaneously, we published
behavioural research to show
Pulze appealed to its intended
audience – adult smokers – but
was not attractive to never-
smokers, including young adults.
This activity also supports our
dialogues with regulators and policy
makers as we seek approval for new
NGP products and secure support for
the broader principles of tobacco
harm reduction.
To confirm the tobacco harm reduction
potential of our heated tobacco
products in market, we have recently
conducted a behavioural study on Pulze
2.0 in the Czech Republic, where we
tracked adult smoking participants to
understand how they use our products
over time to potentially help cut down
– or perhaps even entirely replace –
cigarette smoking. Initial findings
from the draft report are positive,
suggesting the system’s potential
to help adult smokers either stop
smoking or substantially reduce their
cigarette consumption.
While we seek to provide strong,
responsible competition in the NGP
segment, we also recognise we are part
of an industry-wide transformation.
Therefore, we are committed to playing
our part in furthering the broader
scientific debate on tobacco harm
reduction. We have published 30
peer-reviewed Imperial-authored
papers and presented 29 scientific
research posters at conferences over
the last five years.
Unintended use of NGP - we are
committed to discouraging
unintended use.
Imperial is proud of its long track
record in minimising consumption of
its products by unintended users,
including young people.
Our blu vape brand was launched in
2009 and acquired by Imperial in 2015,
and the average age of blu consumers
in the UK – the brand’s largest market
– is closely aligned to the average age
of cigarette smokers.
Across all markets, blu’s marketing
proposition targets mature consumers
making a broader lifestyle shift.
Similarly, the Pulze heated tobacco
proposition, with its long battery life, is
specifically designed to encourage
smokers to stay within the heated
tobacco category.
We are committed to marketing and
advertising our products responsibly
within the laws, codes of practice and
voluntary agreements of those
countries where we operate. Our
commitment to responsible marketing
and sale of our NGP and combustible
tobacco products is summarised by our
Marketing Principles and underpinned
by a strict Group-wide International
Marketing Standard for Next
Generation Products.
In some markets, irresponsible product
design, marketing and sales, combined
with inadequate and inconsistently
enforced regulation, have created
growing public unease about youth
access to nicotine products. We share
these concerns. That is why we are
engaging with policymakers to develop
regulatory frameworks which better
balance adult smokers’ needs for an
attractive range of potentially harm-
reduced alternatives with the
imperative that children should not
have access to nicotine products.
Europe has been the key area of focus
for Imperial in NGP over the past two
years – and in this region we are
campaigning for:
1. Regulatory codes for NGP naming,
packaging and marketing.
2. Retailer licensing regimes which
provide stronger deterrents against
under-age sales.
3. The extension of the excise system
to the vape category to provide
additional enforcement tools against
rogue manufacturers and retailers.
The implementation of measures like
these will, we believe, help to prevent
youth access, and enable responsible
NGP manufacturers to continue
advancing tobacco harm reduction by
offering adult smokers increasingly
attractive, potentially less harmful
alternatives to cigarettes.
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 do not 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.
www.imperialbrandsplc.com
47
ESG REVIEW continued
HEALTHIER FUTURES
CLIMATE
CHANGE
Reduced our Scope 1
and Scope 2 market-
based emissions by
65%
since 2017
We are committed to reducing our impact on the climate
throughout our value chain, focusing on both mitigation
and adaptation.
Behaviours
Link to SDGs
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%.
• SDG 13: Take urgent action to
combat climate change and
its impacts
• SDG 7: Ensure access to
affordable, reliable, sustainable
and modern energy for all
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 50%.
• Reduce absolute Scope 3 emissions
by 50%.
• Reduce energy consumption by 25%
• Reduce water consumption across
our operations by 30%.
48
Imperial Brands | Annual Report and Accounts 2023
Governance
• Environmental Compliance
Working Group
• Climate Change
Engineering Forum
Key policies
• Environmental Policy
• Biodiversity Statement
ELT sponsor
• Lukas Paravicini,
Chief Financial Officer
2040
• Our value chain will be Net Zero
emissions (absolute Scope 1, 2 and 3
GHG emissions).
STRONG TRACK RECORD
OF PERFORMANCE
From our 2017 baseline year
we have:
Reduced our absolute Scope 1
and Scope 2 market-based
carbon emissions (CO2e
tonnes) by
65%
Reduced our absolute energy
consumption (GWh) by
26%
Reduced absolute water
consumption in our operations
(m3) by
32%
The specific SDG 13 and 7 targets
we are supporting:
SDG 13.1: Strengthen resilience and
adaptive capacity to climate-related
hazards and natural disasters in
all countries.
In support of this target, 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.
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 in terms of both risk and
opportunities. This includes the steps
Logista is taking as well.
Please see page 70 for details.
SDG 13.3: Improve education,
awareness raising and human and
institutional capacity on climate
change mitigation, adaptation, impact
reduction and early warning.
In support of this target, we want our
global workforce to have a common
understanding of the topic of climate
change. In FY23 we published a training
on climate change for our employees.
The training focuses on the general
topic of climate change as well as
Imperial Brands’ specific measures and
targets that mitigate the risks of climate
change, enhance opportunities and
create responsible business behaviours.
SDG 7.2: By 2030, increase
substantially the share of renewable
energy in the global energy mix.
In support of this target, we aim to have
100% of our purchased grid electricity
from traceable renewable sources by
2025 and we aim to source 100% of all
our energy from renewable sources
by 2030.
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. We
recognise the importance of disclosing
how we are managing climate-related
risks and opportunities and we have
reported on our approach for several
years now, both within our TCFD
section on pages 70-81 and through our
CDP disclosures which are available on
the CDP website.
In FY23 we reviewed the membership
of our Environmental Compliance
Working Group and the Climate Change
Engineering Forum to ensure these
groups bring together subject matter
experts and engineers from across our
operations to discuss initiatives and
approve projects to achieve our Net
Zero ambition. These groups also
provide a platform to exchange
knowledge and best practice to help
drive consistent performance across
our operations.
Further details on our carbon transition
plan can be found in our 2023 ESG
Performance Summary and in our
TCFD section on page 70. Our Net Zero
commitment is part of our Triple Zero
campaign and all our operations continue
to develop local carbon transition plans
to ensure they are taking the correct
steps and actions to contribute to this
Net Zero commitment.
We also established an internal carbon
pricing mechanism to account for the
cost of greenhouse gas emissions
resulting from our operations. The price
will be reviewed annually and adjusted
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 fourth consecutive
year. Our 2022 CDP scorecard is
available on our website.
as necessary to reflect changes in the
cost of emissions.
Nearly 90% of our carbon footprint is in
our value chain, accounted for in our
Scope 3 emissions. We are working
with our suppliers and other partners to
better understand our Scope 3
emissions. We do this largely through
the internationally recognised CDP
Supply Chain Programme, and further
integration with our sustainable
sourcing pillar. In the past year we have
re-baselined our entire Scope 3
inventory and recalculated all 15 Scope
3 categories for 2022. For further
details see the Sustainable and
Responsible Sourcing section on
page 60.
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 saving more
greenhouse gas
emissions than we
are generating
More detailed information is
provided in our 2023 ESG
Performance Summary.
www.imperialbrandsplc.com
49
ESG REVIEW continued
50
Imperial Brands | Annual Report and Accounts 2023
CLIMATE CHANGE PERFORMANCEPerformance indicator Unit2017 (base year)202120222023CommentaryOperations with ISO 14001 certification%92788382We have updated the scope of this indicator to ensure we are addressing largest manufacturing sites. For further details see our 2023 Reporting Criteria document.Absolute energy consumption1GWh875729712650AWe set a target to reduce our absolute energy consumption by 25% by 2030 versus a 2017 baseline. We are pleased to report that in FY23 we exceeded this target with a 26% reduction compared to the baseline. We will now set a new target for energy reduction moving forward. Relative energy consumption1KWh/£m net revenue112,80195,74091,36481,128AElectricity from purchased renewable sources1%865296AWe aim to purchase Renewable Energy Certificates (RECs) from within the same market boundary as electricity is being consumed. In markets where RECs are not available within the same market boundary, we purchase from a nearby geographical location.We are regularly reviewing this with the intention to purchase from within the same market boundary once a source becomes available.Energy from renewable sources%542341AThe proportion of energy from renewable sources has increased by 36% since our 2017 baseline year. This is mainly driven by the use of renewable electricity with our RECs scheme. We have set a target to use 100% renewable energy by 2030.Absolute Scope 1 CO2e emissions1Tonnes114,27092,90091,00781,089AOur 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 an 11% decrease in Scope 1 emissions since last year and a 29% reduction from our 2017 baseline year.Absolute Scope 2 CO2e location-based emissions1Tonnes161,360133,292131,236114,059AOur Scope 2 location-based emissions comprise the indirect emissions resulting from the use of purchased electricity, heat and steam at our sites. We have seen a 13% decrease in Scope 2 location-based emissions since last year and a 29% reduction from our 2017 baseline year.Absolute Scope 2 CO2e market-based emissions1Tonnes173,902–84,75918,896AWe 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 78% reduction in Scope 2 market-based emissions compared to last year and an 89% decrease compared to the 2017 baseline year.This significant reduction in Scope 2 market-based emissions reflects the increase in our use of electricity purchased from traceable renewable sources. Total absolute Scope 1 and 2 location-based CO2e missions1Tonnes275,630226,192222,243195,148AWe have seen a 29% decrease in our total Scope 1 and 2 location-based 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. Relative Scope 1 and 2 location-based CO2e emissions1Tonnes/£m net revenue35.529.728.524.4ATotal absolute Scope 1 and 2 market-based CO2e emissions Tonnes288,172–175,76699,985AWe have seen a 65% decrease in our total Scope 1 and Scope 2 market-based emissions from our 2017 baseline year. This has been driven by our increased use of electricity purchased from traceable renewable sources.Relative Scope 1 and 2 market-based CO2e emissions1Tonnes/£m net revenue37.15-22.5512.48AA. Select 2023 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY’s 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 2023 environmental data covers the reporting period Q4 2022 to Q3 2023. This is to allow for data collection, validation and external assurance. We use the industry leading Greenhouse Gases (GHG) Protocol standard to inform our reporting of Scope 1 and 2 emissions. Performance
indicator
Unit
2017
(base year)
2021
2022
2023
Commentary
Total Scope 3
CO2e emissions
Tonnes
981,638
–
– 822,880 In FY23 we recalculated our Scope 3 baseline of 2017 and
calculated our 2022 Scope 3 emissions across all categories. This
recalculation follows the latest methodology outlined in our
Reporting Criteria document, and in accordance with the Global
Greenhouse Gas Protocol.
The resulting data shows a 16% decrease in our total Scope 3
emissions compared to the baseline year.
We have a clear methodology for further improving our data
capture for Scope 3, by transitioning to a more market-based
approach with our partner suppliers and updating using the most
recent emissions factors.
Based on our recalculation, we have set a more ambitious target to
reduce our Scope 3 emissions by 50% by 2030.
Tonnes
16,003
1,837
5,901
18,879A
Business travel is travel undertaken for work or business purposes.
Scope 3 CO2e
emissions:
Business travel1
%
Key suppliers by
spend with
science-based
targets
–
20
25
Logista absolute
Scope 1 and 2
CO2e emissions
Logista absolute
Scope 3 CO2e
emissions
Tonnes
38,554
45,557
47,099
Tonnes
193,611
194,634
189,709
The main driver for the increase in emissions in FY23 is business
travel mileage which increased by approximately 100% compared
to the previous year .
33 We aim for 50% of our suppliers by spend within the Purchased
Goods and Services category to have science-based targets by
2024. Of the suppliers in scope, 33% had science-based targets at
the end of FY23.
We are engaging with our key suppliers directly and via the CDP
Supply Chain Programme to achieve this target.
Logista is managed remotely due to commercial sensitivities and
is responsible for its own data. Logista has provided independently
assured data from 2022 for absolute Scope 1, 2 and 3 emissions.
Data for 2023 is still undergoing independent assurance.
The increase in Scope 1 and 2 emissions seen in 2022 is due to an
increase in transport activity under operational control. The
decrease in Scope 3 emissions is attributed to some divestment
activity and some emissions reduction initiatives implemented
by Logista.
Logista’s 2022 relative Scope 1 and 2 emissions comprise 23 tonnes
(2021: 22 tonnes) of CO2e per £million of 2022 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.
Absolute water
consumption1
m3
Relative water
consumption
m3/£m
net
revenue
1,468,626
1,109,178 1,056,982 999,214A We set a target to reduce our absolute water consumption by 30%
189
146
136
125A
by 2030 versus a 2017 baseline. We are pleased to report that in
FY23 we exceeded this target with a 32% reduction compared to
the baseline. We will now set a new target for water consumption
moving forward.
SCOPE 1 AND 2 EMISSIONS – UK AND GLOBAL1,2,3
Performance
indicator
Scope 1 emissions
Units
tCO2e
Relative Scope 1 emissions
tCO2e / £m net revenue
Scope 2 location-based emissions
tCO2e
Relative Scope 2 location-based emissions
tCO2e / £m net revenue
Scope 2 market-based emissions
tCO2e
Relative Scope 2 market-based emissions
tCO2e / £m net revenue
Total Gross Scope 1 and Scope 2 location-based emissions tCO2e
Relative Scope 1 and Scope 2 location-based
tCO2e / £m net revenue
Total Gross Scope 1 and Scope 2 market-based emissions tCO2e
Relative Scope 1 and Scope 2 market-based
tCO2e / £m net revenue
0.2
872
0.1
0
0
2,713
0.3
1,841
0.2
2023
2022
UK and
offshore
area
Global
(Excluding UK
and offshore
area)
UK and
offshore
area
Global
(Excluding UK
and offshore
area)
1,841
79,248
9.9
113,187
14.1
18,896
2.4
1,751
0.2
903
0.1
310
0.04
87,500
11.2
130,298
16.7
84,209
10.8
192,436
2,654
217,798
24.0
0.3
27.9
98,145
2,061
171,710
12.3
0.3
22.0
Energy consumption
kWh
13,233,516 637,059,838 12,421,624 691,831,110
1. We have provided reporting in compliance with UK Streamlined Energy and Carbon Reporting (SECR) regulations (being the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008, as amended by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and the SECR under the
Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018).
2. For details on the methodology used for SECR calculations, please see our Reporting Criteria document available on our website.
3. Energy efficiency measures taken in FY23 are reported in our 2023 CDP Climate Change disclosures available on the CDP website.
www.imperialbrandsplc.com
51
ESG REVIEW continued
HEALTHIER FUTURES
PACKAGING
AND WASTE
Reduced absolute
waste by
27%
since 2017
We are committed to minimising waste
associated with our products, packaging
and production processes.
Behaviours
Link to SDGs
SDG 12: Ensure
sustainable
consumption and
production patterns
OUR PLAN
(from a 2017 baseline 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.
• 100% of all wood fibre in our
packaging will be sustainably
sourced.
2030
• We aim to reduce waste generated
within our operations by 20%.
• We aim to have a greater than 80%
average packaging recycling
recovery score in the EU and UK.
52
Imperial Brands | Annual Report and Accounts 2023
Governance
• Combustible Product
Strategy Group
• Product Sustainability Forum
Key policies
• Environmental Policy
• Filter Policy
• NGP Policies
ELT sponsors
• Javier Huerta, Chief Supply
Chain Officer
• Aleš Struminský, President,
Europe Region
We recognise the important role we
must play in protecting the natural
environment and we actively work to
minimise our environmental impacts.
Certain resources are finite and, as
such, this presents us opportunities to
explore solutions that support our
business sustainability and protect
the environment.
The specific SDG 12 targets we are
supporting:
SDG 12.2: By 2030, achieve the
sustainable management and efficient
use of natural resources.
In support of this target, we aim to have
100% of all wood fibre in our packaging
from recycled materials or responsibly
managed forests by 2025.
SDG 12.5: By 2030, substantially
reduce waste generation through
prevention, reduction, recycling
and reuse.
In support of this target, we aim to
ensure that all our operations will send
zero waste to landfill by 2025. We also
aim to have 100% of our packaging in
the EU and UK to be reusable, recyclable
or compostable by 2025.
SDG 12.6: Encourage companies,
especially large and transnational
companies, to adopt sustainable
practices and to integrate
sustainability information into
their reporting cycle.
In support of this target, we are
committed to providing detailed ESG
disclosures within our Annual Report
and Accounts and on our corporate
website. We are committed to
partnering with our suppliers directly
and through the CDP Supply Chain
Programme to collaborate with them to
reduce our environmental impact
across the whole of our value chain.
Our operations
We are committed to compliance with
all relevant environmental legislation
applicable to our operations. Reducing
our environmental impact 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 FY23 we continued to use the
Combustible Product Strategy Group
and the Product Sustainability Forum to
discuss existing and upcoming
environmental legislation and policies
and the potential impact they will have
on the business, new product-related
sustainability innovations and
performance against our ESG targets
and goals. These working groups
include representatives from Corporate
and Legal Affairs, ESG, Product
Realisation, Global Supply Chain and
local market representatives to ensure
we have cross-collaboration and
involve the correct subject matter
experts in our decision-making process.
We continue to prepare for upcoming
regulation such as the EU Packaging
and Packaging Waste Directive. These
efforts include re-engineering our
packaging for recyclability and
removing what is not needed. We aim
to use resources efficiently, source
them from sustainably managed
sources and to introduce recycled
materials where possible.
To gain further insights, we have
conducted recycling assessments on
our packaging for products sold in the
EU and UK. These assessments have
been conducted by an external institute
and have allowed us to identify
non-recyclable packaging on which to
focus our improvement efforts. To date,
96% of our packaging formats assessed
are now considered recyclable.
In FY24 we will focus on reducing
further unnecessary packaging and to
make more of our packaging recyclable.
The next step of our zero waste to
landfill programme will be to
concentrate on waste reduction at
source, and to further improve our
internal recycling.
We have made further disclosures on
our efforts to address plastic waste in
our 2023 CDP Water Security
submission which is available on the
CDP website.
For further information on our
policies visit www.imperialbrandsplc.
com/healthier-futures/governance/
policies
ACKNOWLEDGING
THE CHALLENGE
Consumer and product waste
We take our responsibilities in product
development and environmental
impact seriously. With the NGP
business growing, we are faced with
additional waste and recyclability
challenges. We continue to improve the
sustainability and recyclability of NGP
materials and packaging. We are keen
to understand consumer behaviour and
needs related to product waste.
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. See
pages 62-63 for our approach to
human rights.
In FY24, we will continue to implement
a consumer-led, regulatory compliant
packaging strategy, and report on
our progress.
Cigarette butts
Consumer acceptance and emissions
regulation have meant that we are yet
to find an adequate alternative
substitute for the traditional cigarette
filter. We do not make any product or
marketing claims on biodegradability
and/or compostability of filters. We
believe that the most effective
approach to combating littering and
ecotoxicity resulting from the littering
of used filters (cigarette butts) is
through partnership of key
stakeholders, such as tobacco
companies, government, environmental
bodies, businesses and local
communities, educating consumers on
the importance of the proper disposal of
used filters. We recognise the
importance of this issue and continue
to search for alternative materials for
filters which contain single-use
plastics. We participate in different
Extended Producer Responsibility
(EPR) schemes in a number of
locations, both on a voluntary basis and
to fulfil regulatory requirements.
www.imperialbrandsplc.com
53
ESG REVIEW continued
NGP waste
Vaping products: To support our
consumers with the responsible
disposal of our blu products, several
markets have introduced “take-back”
schemes for vaping devices and pods.
In those markets, we have provided
incentives to consumers to return
their empty pods, which enhances
the commercial offering of blu in
addition to achieving our
environmental objectives.
Heated tobacco products: For our
Pulze 2.0 product packaging we have
achieved a 92% reduction in use of
plastic compared to the packaging for
Pulze 1.1.
We continue to focus on packaging
improvements with further solutions
under development.
Oral nicotine delivery: The
sustainability aims are focused on
recyclability improvements, exploring
more sustainable materials for cans/
refilling options and potential returns
schemes are being investigated across
our footprint.
PACKAGING AND WASTE PERFORMANCE
Performance
indicator
Unit
Absolute waste1
Tonnes
Relative waste1
Tonnes/£m
net revenue
2017
(base year)
49,141
6.34
2021
2022
2023
Commentary
41,714
41,969
35,744A
5.48
5.39
4.47A
All waste sent to
landfill1
Tonnes
Relative waste
to landfill1
Tonnes/£m
net revenue
7,200
10,619
8,544
4,442A
0.93
1.40
1.10
0.56A
88
83
85
91A
Our target is to reduce waste by 20% by 2030.
We have exceeded this target with a 27%
reduction in waste compared to the 2017
baseline year.
We will set a new target for waste reduction
moving forward.
Our target is to achieve zero non-hazardous
waste sent to landfill by 2025.
We have seen a 38% decrease in waste sent to
landfill since the 2017 baseline year. This
decrease has been driven by our zero waste to
landfill initiatives across our operations.
A key element of our environmental approach
is to minimise the waste sent to landfill by
reusing waste, recycling, composting and
incineration (with energy recovery).
–
–
–
–
95
–
96 We aim to have 100% of our packaging material
in the EU and the UK to be reusable, recyclable
or compostable by 2025.
A third party assesses the materials for us and
we are on track to achieve this target.
97 We aim to have 100% of all wood fibre in our
packaging2 from sustainable sources by 2025.
We are on track to achieve this target.
Landfill
avoidance rate1
Recyclability
score
Sustainable
sourcing
%
%
%
A. Select 2023 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY’s 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 2023 environmental data covers the reporting period Q4 2022 to Q3 2023. This is to allow for data collection, validation and external assurance.
To note: Absolute waste does not include reused waste.
2. This excludes products from ITG Brands.
54
Imperial Brands | Annual Report and Accounts 2023
POSITIVE CONTRIBUTION TO SOCIETY
FARMER
LIVELIHOODS
AND WELFARE
155,000
people in our leaf supply
chain benefiting from Leaf
Partnership Projects aimed
at improving access to
clean water
We are committed to engaging with our leaf suppliers to
support and develop farming communities and promote
sustainable agriculture.
Behaviours
Link to SDGs
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.
Governance
• Leaf Compliance Working
Group (LCWG)
• Sustainable Tobacco
Programme (STP) Guidance
Key policies
• Human Rights Policy
• Child Labour Policy
• Biodiversity Statement
ELT sponsors
• Javier Huerta,
Chief Supply Chain Officer
• Kim Reed,
President and CEO,
Americas Region
www.imperialbrandsplc.com
55
ESG REVIEW continued
SUSTAINABLE AGRICULTURE
Sustainable agriculture impacts our
people and our planet, providing food
security, establishing livelihoods and
supporting environmental
stewardship. Imperial works hard to
support leaf suppliers’ farmers and
their families. This includes
improving farmer access to basic
needs, a decent standard of living
and income diversification,
enabling them to continue to grow
tobacco sustainably.
We purchase approximately 97% of
our tobacco through both global and
niche suppliers from more than 30
countries worldwide, and only 3%
from our own directly contracted
farms. Therefore, we work
collaboratively with our partners to
enhance standards in our leaf supply
chain both directly with our suppliers
and through partnerships, such as
During the past year we participated in
six independent Supply Chain Impact
Assessments (SCIA) conducted in the
field. The objective of these
assessments was to identify risks
within the leaf supply chain and help
focus suppliers to develop prioritised
action plans. Where appropriate, we
jointly commissioned these
assessments with key stakeholders.
We commissioned our own similar
Human Rights Impact Assessment
(HRIA) within our direct supply chain in
Madagascar. Based on rights holder
interviews and community
engagement, prioritised risks were
identified including fair treatment,
working hours and children working on
family farms. These risks were
investigated to further our
understanding of root causes and
effective solutions. As well as
implementing corrective action plans, a
thorough preventative action plan was
also developed to address all findings
regardless of priority level. We have
worked intensively on the preventative
action plan, which included improving
management and monitoring systems,
the launch of an operational grievance
mechanism, and pilot projects to
improve attendance at schools within
the community. We are also in the
process of supporting the development
of workers’ committees.
The STP is an industry-wide initiative
aimed at enhancing agricultural
supply chain due diligence and
accelerating the positive social and
environmental impact in tobacco-
growing communities. The STP is
independently managed and provides
us with visibility over our leaf 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 validating
these actions both remotely and in
the field. This informs our strategy to
support our suppliers in taking
effective action. All our tobacco leaf
suppliers are expected to participate
in the STP. In 2023 (based on the
2022 tobacco leaf crop year),
93% of our suppliers reported on
their due diligence.
SUPPLY CHAIN IMPACT
ASSESSMENT IN INDONESIA
A supply chain impact
assessment was conducted in
Indonesia in partnership with
other tobacco manufacturers and
included 14 tobacco merchants in
total. A total of 231 rights holders
were engaged with from
tobacco-growing communities to
help identify salient risks. These
included the risk of unsafe use of
pesticides and inconsistent
personal protective equipment
(PPE) standards, poor waste
collection and the potential of
children working on family
farms. Therefore, in addition to
leaf suppliers developing
individual action plans, local
tobacco companies joined
together to form an industry
forum to work collectively on
some of these non-competitive
issues. We have closely followed
the development of these action
plans and forums over the last
year and will continue to stay
informed through dialogue with
our suppliers on their progress.
those created through the Sustainable
Tobacco Programme (STP).
We have a strong governance
structure in place for our tobacco leaf
supply chain. This is overseen by our
Leaf Compliance Working Group
(LCWG) and part of their
responsibility is to maintain effective
governance and response to ESG
risks within the tobacco leaf supply
chain. Our Leaf Compliance and
Response (CARE) Programme
includes our Leaf CARE tool which is
an in-house IT platform to record
potential ESG-related issues arising
in the supply chain and to track the
associated due diligence processes
suppliers have established to respond
to these potential reported issues.
The majority of the data in the Leaf
CARE tool is sourced from the STP. A
third party reviews and substantiates
that information in the STP, before it
is uploaded to our Leaf CARE tool.
In our direct operations in Madagascar,
we have launched interventions
targeted at improving awareness
amongst rights holders. In our
experience, the biggest influencers in
preventing child labour are mothers
and the children themselves – so we
have rolled out posters in schools and
community sessions with groups of
parents. Through these interventions
we have reached 22 schools and just
under 1,000 participants in awareness-
raising sessions in the last year. In our
operations in Laos, several projects are
being trialled, including summer sports,
film, and arts clubs. We are collecting
feedback from the communities on
these interventions to ensure they
remain targeted and effective. This
participatory approach allows us to spot
potential improvements and support
our long-term aim of addressing the
risk of child labour.
Our Leaf Partnership Programme
complements the work our leaf
suppliers are already doing, amplifying
their impact in tobacco-growing
communities, by directly funding
specific projects. These projects range
from enhancing farmers’ businesses to
supporting communities increase
access to basic needs, such as
childcare, education, clean drinking
water, sanitation and hygiene.
In FY23, Imperial provided financial
support for projects in 11 countries, with
more than 100,000 beneficiaries.
56
Imperial Brands | Annual Report and Accounts 2023
increase micro-fauna. 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.
In FY23 we published our
Biodiversity Statement.
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).
155,000 people in our leaf supply chain
benefiting from our Leaf Partnership
Projects aimed at improving access to
clean water
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 2023 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$ 2.78 million.
ACKNOWLEDGING
THE CHALLENGE
Child labour
Like other industries which rely on
agricultural products, the risk of child
labour is highest in the cultivation part
of our supply chain. Addressing issues
such as child labour requires a
multi-stakeholder response; no single
entity can address issues in isolation.
In collaboration with key stakeholders
including the industry, suppliers and
NGOs operating in these communities,
we seek to address child labour through
three main avenues:
1. The Sustainable Tobacco
Programme (STP)
2. Our Leaf Partnership Projects
3. The Eliminating Child Labour in
Tobacco Growing Foundation (ECLT)
ENGAGING SUPPLIERS
We aim to purchase from and
engage leaf suppliers who
support their farmers to achieve a
decent standard of living by:
1. Continuing to enhance due
diligence in our leaf supply
chain, co-ordinated through
our Leaf Compliance and
Reporting e-tool (CARE)
programme.
2. Continuing to set high
expectations for suppliers who
contract with farmers.
3. Increasing our support for
projects that have a direct
impact within the tobacco
communities in our
supply chain.
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.
Imperial has committed to supporting
suppliers and their farmers access
sustainable wood by 2025. The ambition
is for 100% of the wood harvested to be
matched by managed planting.
In 2023, Imperial continued to create
partnerships in those remaining
countries that are working towards
wood sustainability and directly funded
commercial forestry programmes. This
builds on the forestry programme
Imperial directly funded with suppliers
in Africa between 2015 and 2019.
Through the tobacco leaf we purchase,
Imperial also financially supports
national forestry programmes, such as
the Tobacco Afforestation Programme
in Tanzania. Planting trees sustainably
that farmers can access 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.
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 the STP,
such as: the mapping of sensitive areas,
responsible soil management and
integrated pest management (IPM) to
reduce the use of pesticides and
The Sustainable Tobacco
Programme (STP)
The Human and Labour Rights section
of the STP is a critical element for the
respect of human rights and is aligned
with the relevant ILO core conventions
and the principles and guidance
contained within other external
frameworks such as the UN Guiding
Principles on Business and
Human Rights.
Our Leaf Partnership Projects
We work directly with our leaf suppliers
to fund projects in tobacco-growing
communities to help tackle some of the
root causes of child labour.
Eliminating Child Labour in Tobacco
Growing Foundation (ECLT)
We actively support the ECLT and its
aims to tackle the root causes of child
labour by improving access to
education and providing alternatives to
childhood working. It also has an
advocacy role, raising awareness with
governments and communities to
galvanise positive action.
See ECLT website for more
information.
www.imperialbrandsplc.com
57
ESG REVIEW continued
Performance indicator
Percentage of
suppliers’ directly
contracted
farmers growing
complementary crops1
Percentage of
suppliers’ directly
contracted farmers
with access to
initiatives to improve
agricultural
productivity1
Suppliers
participating
in the STP
Tobacco farming
community members
benefiting from new
Imperial Leaf
Partnership Projects
Purchase from leaf
suppliers who are
committed to support
their farmers access a
decent standard of
living by 2040
Percentage of
sustainable wood used
as curing fuel
2021
88
2022
2023
Commentary
94
89 Complementary crops are grown alongside or in rotation with
97
98
tobacco. These crops are grown for household consumption, sale or
as rotational crops to enrich and conserve the soil. Due to the
ever-changing nature of our suppliers’ farmer base, those that grow
complementary crops change. In the next year, we aim to
restructure this KPI to have an even more meaningful impact in our
leaf supply chain.
99 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.
In the next year, we aim to restructure this KPI to have an even
more meaningful impact in our leaf supply chain.
96
93 With a change in our leaf supplier base, the total suppliers
participating in the STP reduced. We have already initiated
discussions with suppliers who do not yet respond to the STP to
encourage their participation in the next cycle.
130,000
84,000
101,410 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 2023 projects.
–
–
80% As part of our ESG journey and restructuring over FY22, this is a
new KPI.
We require our leaf suppliers to be committed to supporting their
farmers access a decent standard of living by having clear written
commitments and/or policies in place to support the commitment.
–
–
96%A
Imperial has committed to supporting suppliers and their farmers
access sustainable wood for use as tobacco curing fuel by 2025. The
ambition is for 100% of the wood harvested to be matched by
managed planting.
Improve access to basic needs for 180,000 farmers and their families by 2030
Childcare and
education project
beneficiaries
Clean water project
beneficiaries
Sanitation and
hygiene project
beneficiaries
–
–
–
–
36,000 Imperial continues to fund projects aimed at addressing key
livelihood and welfare issues in tobacco communities. This number
represents the total number of cumulative active beneficiaries as of
the end of FY23.
–
155,000 Imperial continues to fund projects aimed at addressing key
livelihood and welfare issues in tobacco communities. This number
represents the total number of cumulative active beneficiaries as of
the end of FY23.
–
33,000 Imperial continues to fund projects aimed at addressing key
livelihood and welfare issues in tobacco communities. This number
represents the total number of cumulative active beneficiaries as of
the end of FY23. Sanitation and hygiene projects, which mainly
focus on infrastructure improvement and development, were
impacted by cyclone Freddy in a number of African countries.
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.
A. Data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000
standard. EY’s Assurance Opinion is available on our website.
58
Imperial Brands | Annual Report and Accounts 2023
POSITIVE CONTRIBUTION TO SOCIETY
SUSTAINABLE
AND RESPONSIBLE
SOURCING
Javier Huerta, Chief
Supply Chain Officer, and
Vinay Advani, Head of Leaf
Procurement & Sustainability,
during a visit to a tobacco farm
We have been
recognised by
CDP as a supplier
engagement
leader
for a fourth
consecutive year
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.
Behaviours
Link to SDGs
SDG 12: We aim to
ensure sustainable
consumption and
production patterns
OUR PLAN
To source products and services from
a diverse supply base that matches
our ESG values and ambitions.
Delivered in 2023
• Launched refreshed Supplier Code
of Conduct which has an increased
focus on business integrity, human
rights, diversity, equity and
inclusion and the environment.
• Using Sedex as the third-party
provider to undertake ethical
trading assessment of our partner
suppliers. This will give us further
visibility of our supply chain and
enable us to better manage
ESG risks.
• Building capability. We appointed a
new Head of Procurement Capability
and ESG Lead for Procurement.
Governance
• Sustainable and Responsible
Sourcing Working Group
Key policies
• Supplier Code of Conduct
• Code of Conduct
• Global Procurement Policy
• Human Rights Policy
ELT sponsor
• Javier Huerta,
Chief Supply Chain Officer
2024
• 50% of our suppliers by spend
within the Purchased Goods and
Services category will have science-
based targets by 2024.
• Roll out ethical trading risk
assessment to key strategic
suppliers.
2025
• Confirm longer-term ESG metrics
for our value chain.
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ESG REVIEW continued
2023 performance highlights
In 2023
33%
of our suppliers by spend within
Purchased Goods and Services
had set science-based targets.
We are engaging with our key
suppliers directly and via the
CDP Supply Chain Programme
to achieve this target.
We have refreshed our
Supplier Code
of Conduct,
dividing topics into the following
sections for clarity: Business
Integrity, Human Rights,
Diversity, Equity and Inclusion,
and the Environment.
This is published on our
corporate website.
Using Sedex to obtain ethical
trading risk assessment of our
partner suppliers.
Our 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
• Business Integrity: Our suppliers are
expected to conduct their business in
an ethical and responsible manner
and comply with all applicable laws
and regulations.
• Human Rights & Diversity, Equity and
Inclusion: Our suppliers are expected
to provide a fair and safe workplace,
and demonstrate respect for human
rights, diversity, equity and inclusion.
• Environmental Sustainability: Our
suppliers are expected to adopt
policies and practices that protect the
planet and reduce negative impacts
on the environment.
We expect all our suppliers – new and
existing – to adhere to our updated
version of the Code. But where possible
we want suppliers to go beyond the
expectations outlined in this Code.
Together we must make a positive
social and environmental impact.
The new Code can be found on our
website and a link is included in our
purchase order T&Cs, contracts and
tendering documents. The existing
Code will be “phased out” as the new
Code is communicated to new suppliers
and existing suppliers as and when
Procurement teams engage with them,
prioritising our key partners.
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.
Supply chain due diligence
All our suppliers are required to sign-up
to our Supplier Code of Conduct. We
have regular meetings throughout the
year with all our centrally managed
suppliers where any ESG-related
concerns can be raised. We will cease
our relationship with a supplier if
they continually fail to demonstrate
how they are managing their
ESG responsibilities.
We are using Sedex to encourage our
partner suppliers to undertake an
ethical trading self-assessment. This
not only allows us to identify risks
within our supply chain, but also target
areas of focus to improve on with
our partners.
Tobacco leaf supply due diligence is
covered in the Farmer Livelihoods
and Welfare section on pages 55-58.
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.
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.
Our Supplier Code of Conduct, aligned
to our Code of Conduct, sets out the
behaviours we expect our suppliers
to demonstrate. We launched our
refreshed Supplier Code of Conduct in
September 2023.
We have thousands of suppliers who
connect with every part of our business
– from leaf to consumer. They work
alongside and within our business and
are fundamental to our success. Our
new Code sets out our expectations for
our suppliers and reflects our
commitment to be a socially
responsible, compliant and sustainable
business. It also provides the minimum
standards of behaviour we expect from
our partners, in the following areas:
Using Sedex for suppliers’
ethical trading
risk assessments
We have chosen to use Sedex to
gain supply chain visibility,
assess supply chain risks and
support legislation compliance.
We expect our partner suppliers
to be registered with Sedex (or
equivalent) and have in the first
instance completed a self-
assessment questionnaire across
the following categories: Labour,
Health & Safety, Environment,
and Business Ethics. Thanks to
the insights provided through the
Sedex platform and the
completion of further in-depth
targeted SMETA audits (Sedex
Members Ethical Trade Audits)
where appropriate, we intend to
work with our partner suppliers
to drive improvements and
mitigate risks through our
supply chain.
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Imperial Brands | Annual Report and Accounts 2023
Our Supplier Qualification Programme
is the first screening process for all new
non-tobacco material (NTM) and NGP
suppliers. This involves suppliers
completing a self-assessment which
includes questions on business
conduct, environmental management
and labour practices including
discrimination, child and forced labour,
freedom of association, remuneration,
working hours and health and safety.
Once on board, our Global Quality team
perform their own reviews which may
include the supplier being asked to
provide evidence for their management
of ESG issues, including how the
supplier communicates their own Code
of Conduct and grievance policies
across their operations, and how they
conduct audits and act on findings.
Our logistics and indirect suppliers of
goods and services, including facilities
management, do not undergo the
Supplier Qualification Programme.
Where we have run a tender process,
we request the supplier provides copies
of policies relevant to the services that
they supply, which may include those
addressing the labour practices, forced
labour and child labour (in the case of
service outsourcing or goods
manufacture). We review the policies as
part of the selection process.
In FY23, we continued our membership
of the CDP Supply Chain Programme
and invited suppliers to complete the
questionnaires for CDP Climate, Water
Security and Forests as applicable.
We have been recognised as a Supplier
Engagement Leader by CDP for a fourth
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.
Scope 3 Greenhouse Gases (GHG) emissions 822,880 tCO2e calculated for
2023
and Services (PG&S) which makes up
65% of our total Scope 3 emissions.
We will continue to focus our efforts on
the PG&S category and have set the
following target: We aim for 50% of our
suppliers by spend within the
Purchased Goods and Services category
to have science-based targets by 2024.
Based on our recalculation, we have
now set a more ambitious target to
reduce our Scope 3 emissions by 50% by
2030.
Scope 3 GHG emissions
In FY23 we recalculated our Scope 3
baseline of 2017 and calculated our 2022
Scope 3 emissions across all categories.
This recalculation follows the latest
methodology outlined in our Reporting
Criteria document, and in accordance
with the global Greenhouse Gas
(GHG) Protocol.
See our Reporting Criteria document
available on our website for details.
We have a clear methodology for
further improving our data capture for
Scope 3, by transitioning to a more
market-based approach with our
partner suppliers and updating using
the most recent emissions factors.
During the recalculation we re-assessed
the Scope 3 categories relevant to us
and have determined that our most
material category is Purchased Goods
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61
Purchased goods & services 64.52% Capital Goods 8.33%Upstream Transportation & distribution 7.33%Fuel or energy activities 6.17%EOL treatment of sold products 3.28%Downstream transportation& distribution 3.04%Investments 2.77%Use of sold products 1.44%Employee commuting 1.38%Scope 3: 89%Scope 1: 9%Scope 2: 2% ESG REVIEW continued
SAFE & INCLUSIVE WORKPLACE
HUMAN
RIGHTS
All factories
report against
21
modern slavery
leading indicators
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.
Behaviours
Link to SDGs
SDG 8: We are
committed to decent
work for all and to
sustainable
economic growth.
OUR PLAN
Continue to 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
legal duties to protect and support
our employees.
2023
• Three international modern
slavery audits conducted by
ESG team, following a risk-based
approach while maintaining
a geographical balance.
• Created a Modern Slavery Toolkit
and an escalation process to ensure
all employees equipped with
necessary knowledge.
• Launched new digital human
rights learning programme for
employees globally.
2024
• Continue to strengthen employee
access to Speak Up channels.
• Ongoing due diligence engagement
via our Human Rights Compliance
Working Group.
• Continue to monitor human
rights leading indicators in our
operations and report on number
of audits completed.
• Align our internal due diligence
process to the European Corporate
Sustainability Due Diligence
Directive and other relevant
European and national laws.
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Imperial Brands | Annual Report and Accounts 2023
Governance
• Human Rights Compliance
Working Group
• Leaf Compliance Working Group
Key policies
• Health, Safety and Wellbeing
Policy
• Code of Conduct
• Supplier Code of Conduct
• Human Rights Policy
• Speaking Up Policy
• Fairness at Work Policy
ELT sponsors
• Javier Huerta,
Chief Supply Chain Officer
• Paola Pocci,
President, Africa, Asia,
Australasia and Central &
Eastern Europe Region
2025
• Consistently maintain compliance
with our 21 modern slavery
leading indicators across all
manufacturing sites.
• We aim for all relevant employees
to understand and access
independent Speak Up channels
and remediation processes.
• Continuous monitoring of all our
priority locations against increasing
due diligence requirements.
in the Dominican Republic, Spain and
Madagascar. These audits enabled us to
identify and act on potentially weaker
areas of our due diligence activity and
share best practices with other factories
facing similar challenges. Over the last
two years, we have audited six of our
top eight priority locations.
All our factories report their compliance
against our 21 modern slavery
indicators on a monthly basis. This
ensures that our sites are both
managing the risk of modern slavery
and continually improving transparency
through reporting. At Group level, we
monitor compliance of each site against
our leading indicators and facilitate the
transfer of best practice.
Similarly, as part of our due diligence,
we closely monitored the latest
developments regarding upcoming
legislation, such as the European
directives covering corporate
sustainability reporting and corporate
sustainability due diligence. Our aim is
to be fully prepared for when these
regulations come into effect to avoid
any potential disruptions in our
value chain.
Through collaboration with supply
chain experts, we have improved our
remediation approach. This included
improving how to identify which
human rights issues would require
escalation and to whom, collecting
evidence, and evaluating the success of
our actions.
In FY23, we re-assessed our salient
issues, confirming that we are focusing
on the correct areas, which are: child
labour, modern slavery, occupational
health, safety and wellbeing; fair wages
and decent work; non-discrimination
and harassment and gender equity; and
freedom of association and collective
bargaining. To develop their content,
we collaborated with internal subject
matter experts and aligned our efforts
with the most relevant frameworks and
international standards, like the United
Nations (UN) Guiding Principles on
Business and Human Rights, and the
UN Sustainable Development Goals.
In early 2023, we launched a new digital
learning programme on human rights
for our employees worldwide. We
believe that improving broader
employee understanding of human
rights will further improve our ability to
identify potential abuses we may be
Our human rights ambitions
• Continue to strengthen our due
diligence processes in line with
international frameworks
and legislation.
• Provide further access to our
independent Speaking Up service.
• Assessing salient human rights
issues in our priority locations.
• Training and communications
initiatives to increase awareness
of human rights.
The key human rights issues that
are particularly relevant to our
direct operations
• The potential for modern slavery –
which includes forced labour,
domestic 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.
Alongside prioritising employee health,
safety and wellbeing, as well as
diversity, equity and inclusion, we
believe that respecting and promoting
human rights is essential to creating a
safe and inclusive workplace.
Human rights topics within our value
chain are covered in the Farmer
Livelihoods & Welfare and
Sustainable & Responsible Sourcing
sections, pages 55-61.
In compliance with the UK Modern
Slavery Act, every year since 2016,
Imperial Brands has submitted its
Modern Slavery Statement, where we
outline our commitments for the
upcoming year. You can read our
2022 Modern Slavery Statement on our
website. As part of these commitments,
together with Slave-Free Alliance, of
which Imperial Brands is a founding
member, we developed a modern
slavery toolkit to help our colleagues to
enhance their knowledge about modern
slavery, identify its key indicators and
characteristics, respond appropriately
to potential victims, and to escalate and
report any concerns.
Strengthening our
due diligence processes
As in previous years, in 2023, Group
Internal Audit assessed modern slavery
controls and processes as part of our
wider internal factory audits in six
cases: Tarnowo Factory, Radom
Factory, Wilrijk Factory, Congo Factory,
Madagascar Factory and
Skopje Factory.
The ESG team also conducted three
international modern slavery audits,
which followed a risk-based approach
exposed to in our operations. This
digital training focuses on explaining
what human rights are, our
commitment and role in respecting
and promoting human rights, how to
recognise the main signs of modern
slavery and, finally, how to report
potential instances of human
rights violations, both internally
and externally.
During September, we partnered with
Hope for Justice to host a series of
informative sessions aimed at raising
awareness about modern slavery.
These sessions were conducted in
English, French and Spanish and
covered four continents.
In 2024, we will reinforce our efforts to
reduce the risk of modern slavery and
labour exploitation in our operations.
To achieve this goal, we will closely
monitor the performance of our
21 modern slavery leading indicators
and provide support for the
implementation of action plans in
manufacturing sites that are not yet
fully compliant. We will also introduce
these indicators to a selection of
markets and clusters to expand the
scope of our due diligence efforts.
Additionally, we will conduct three
modern slavery audits based on our
risk assessment approach and continue
to provide human rights-related
training and raise awareness through
regular communication activities.
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.
www.imperialbrandsplc.com
63
ESG REVIEW continued
SAFE & INCLUSIVE WORKPLACE
EMPLOYEE
HEALTH, SAFETY
& WELLBEING
Reduced lost
time accidents by
44%
since 2019
(absolute numbers)
We are committed to achieving world-class occupational
health, safety & wellbeing for all our employees.
Behaviours
Link to SDGs
• SDG 3: Good health and
wellbeing.
• SDG 8: Decent work and
economic growth.
OUR PLAN
(From a 2019 base year)
2024
• Further roll out of behavioural
science in safety
leadership training.
2025
• 75% of fleet vehicles fitted
with an in-vehicle monitoring
system (IVMS).
• Design Behavioural Based Safety
• 60% reduction in fleet
Programme Foundations.
collision rate.
• Launch Group standards for safety
• 100% compliance with the
leadership routines.
• Zero Injury Aspiration campaign
focus on awareness and education.
• Implementation of Wellbeing
Framework and Guidance.
Health and Safety
Framework.
2030
• 75% reduction in lost time
accident rate (LTA).
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Imperial Brands | Annual Report and Accounts 2023
Governance
• Health and Safety Compliance
Working Group
• Wellbeing Working Group
Key policies
• Health, Safety and
Wellbeing Policy
• Health and Safety Framework
• Human Rights Policy
ELT sponsors
• Javier Huerta,
Chief Supply Chain Officer
• Aleš Struminský,
President, Europe Region
• Paola Pocci,
President, Africa, Asia,
Australasia and Central &
Eastern Europe Region
• Kim Reed,
President and CEO,
Americas Region
Commitment
The health, safety and 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, creating a
culture of care.
This includes setting granular long-
term targets alongside a broader Zero
Injury aspiration which is part of our
internal Triple Zero campaign. These
objectives can be achieved when all
colleagues take personal responsibility.
We want to develop a Safety Culture of
Care and in FY23 we reviewed and
updated our Health, Safety and
Wellbeing Policy to ensure safety
responsibilities were clear across all
levels of the business, to link our Zero
Injury aspiration to this policy and to
include wellbeing responsibilities and
guidance for all employees.
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 safely, to measure compliance
against our Health and Safety
framework which is based on a Plan Do
Check Act (PDCA) model. This approach
ensures we focus resources in the
priority areas and can effectively
manage risk across all areas of
the business.
In April 2023, we marked the World Day
for Safety and Health at Work by
publishing our new Health, Safety and
Wellbeing Policy. Through the active
participation of senior leadership and
the ELT sponsors for the Health, Safety
and Wellbeing pillar, we communicated
the Policy and plans across the
business through various channels
and toolkits.
We also reviewed and updated our
Health & Safety Framework which is
based on the PDCA model to provide
more focused guidance to our
employees to ensure consistency in
approach and good governance across
the business, translated into a variety of
local languages.
To build foundations for a Group-wide
behavioural safety programme, which
we plan to pilot in FY24.
In FY23, 45 leaders in our Global Supply
Chain function were trained on a
Behavioural Science Course for
Leadership in Safety, accredited by the
Institution of Occupational Safety and
Health (IOSH). Additionally, 239 leaders
in Europe took part in training on
impactful safety conversations. We
want to prevent accidents occurring
and therefore we need to be able to
better spot and assess risk.
We trained 3,086 employees from our
European manufacturing operations on
dynamic risk assessment, and we are
going to roll out the training for
remaining regions in FY24.
We initiated our Zero Injury Aspiration
campaign to educate employees on
various health and safety risks and
preventative measures. The campaign
includes regular safety One Minute
Lessons, Health & Safety Newsletters
and a Safety Spotlight initiative, to
promote safety and best practices for a
consistent safety culture.
We are improving our processes for
determining the root causes of
incidents, to aid in a more targeted
approach in addressing and educating
our people. In FY24 we will launch
updated Incident Reporting and
Investigation Standards, alongside an
app, for our people to report incidents
which will be linked to a dashboard for
better monitoring.
In FY23, our vehicle collision rate
reduced by 21% through increased
leadership engagement and local
educational campaigns, which
promoted safe driving practices.
Eight of our sites achieved higher levels
of compliance with the Drive Safe
leading indicators, reaching a global
compliance score of 92%. These
indicators set clear expectations and
encourage continuous improvement in
road and driver safety.
Implementing in-vehicle monitoring
systems (IVMS) in five additional
markets proved effective. Notably, Italy
and Taiwan saw a 62% and 51%
reduction in collision rates, respectively,
thanks to the captured data pinpointing
risk-increasing behaviours and
enabling targeted training.
Our commitment remains steadfast as
we strive to achieve our FY25 target of a
60% reduction in the vehicle collision
rate. We will continue enhancing our
vehicle safety initiatives to maintain
momentum and ensure the wellbeing
of our drivers and communities.
Wellbeing
The wellbeing of our employees is of
paramount importance. This was
confirmed as an ESG priority in 2022,
following the refresh of our ESG
strategy and the outcome of a
materiality assessment.
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.
While larger sites have in-house
occupational health professionals,
others rely on third-party healthcare
service providers. Our goal is for a
consistent wellbeing approach across
the organisation, reflecting our
commitment to mental health and
wellbeing, as outlined in our new
Wellbeing Strategy detailed below.
Our Group-wide Wellbeing
Strategy development
We have set an ambition to provide
appropriate and prompt support to our
employees, ensuring their wellbeing
at work and reducing the likelihood
of psychological harm due to
workplace factors.
In FY23 we developed a wellbeing
framework to achieve this, co-created
through an inclusive approach
considering the needs of our people
from responses to key questions in our
employee experience survey and via
employee wellbeing focus groups.
This framework provides a clear
structure and guiding principles for
all wellbeing initiatives across the
organisation. It also allows for flexibility,
enabling individual regions and
functions to adapt practices to suit their
specific needs and cultural differences.
We also benchmarked activities in
wellbeing. By staying informed about
industry trends and best practices,
we were able to learn from successful
initiatives implemented elsewhere
and apply relevant strategies to our
own organisation.
We internally benchmarked 50 Imperial
locations, finding areas for improvement
and wellbeing enhancement.
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65
ESG REVIEW continued
To capture diverse perspectives, we
established a Wellbeing Working Group,
which included representatives from
different functions and regions. This
approach ensured that all areas of the
business were involved during the
wellbeing strategy development and
that the final plan resonated with
various stakeholders.
Looking ahead, we plan to establish
clear metrics and leading indicators for
measuring performance in wellbeing.
By tracking the impact of our
initiatives, we will be able to assess
their effectiveness and identify areas
for improvement. This data-driven
approach ensures that our Wellbeing
strategy remains relevant, impactful
and continually evolving to meet the
needs of our people.
In May 2023, together with our
Disability Employee Resource Group
(ERG), we held two events focused on
the importance of our wellbeing,
specifically targeting anxiety and fear.
An external anxiety specialist delivered
the session and our people were
encouraged to share their experiences
with anxiety in and outside the
workplace, promoting openness and
reducing mental health stigma.
In FY23, 47 employees from nine
factories received mental health
training. As Wellbeing Champions,
they can now better identify the signs
of stress, anxiety and depression in
themselves and others, how to practise
active listening, and to offer support
through local networks.
We will continue to develop our
approach and strategy for wellbeing
in FY24.
Our Wellbeing Plan:
• Develop KPIs to measure
our performance.
• 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.
• Enable local sites to design
and implement initiatives
addressing local wellbeing
needs.
HEALTH AND SAFETY PERFORMANCE
Performance indicator
Unit
2019 (base
year)
2021
2022
2023
Commentary
2
0
1
1
0
0
0
0
0
0 Health and safety remain a priority for all our employees.
1 Regretfully, a contractor fatality occurred in April 2023, at the
external premises of the Skopje Factory, North Macedonia. The
impacted person was an employee of the Government-owned
contractor who was performing a routine waste collection activity.
0 Road safety remains a priority across all our operations.
Employee fatalities1
Contractor
fatalities1
Number
Number
Members of the
public fatalities
involving Imperial
Brands vehicles1
Lost time accidents
(LTAs)1,2
LTA rate1,2
Total number
of accidents1,2
Accident rate1,2
Fleet collision rate
Number
LTAs per
200,000
hours
worked
Total
accidents
per 200,000
hours
worked
Accidents
per million
kilometres
Fleet vehicles fitted
with an in-vehicle
monitoring system
(IVMS)
Compliance with
the Health and
Safety Framework
(Manufacturing)
Compliance with the
Health and Safety
Framework (Sales)
ISO 45001
certification
%
%
%
%
Number
101
65
57
57 There has been no change in the number of lost time accidents
0.40
0.27
0.24
0.30A We have seen an 25% increase in our lost time accident rate
compared to last year. However there has been a 44% decrease in
lost time accidents since the 2019 base year.
Number
850
573
522
3.39
2.36
2.24
compared to last year. The number of LTAs stayed the same as
last year whilst the number of hours worked has reduced, leading
to the 25% increase in LTA rate.
During FY23 we continued to increase the use of leading
indicators to better manage risk throughout our operations.
420 We have seen a 20% decrease in total accidents compared
to last year.
2.24 The total number of accidents compared to last year decreased,
however the number of hours worked has also decreased which
has resulted in the accident rate remaining the same as last year.
5.03
3.95
2.8
2.29A There has been a 18% 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.
–
57.3
46.9 Evidence shows that in-vehicle monitoring systems typically
lead to fuel reduction and improved safety performance and we
will continue to test and extend coverage.
The reduction in percentage is due to an increase in fleet size in
markets without IVMS, and the closure of a market that had fleet
vehicles with IVMS installed.
87
93 We aim to be at 100% compliance with our framework standards
by 2025.
93
94 We aim to be at 100% compliance with our framework standards
by 2025.
–
–
–
–
–
79
74
71
72 Of the factories in scope, 72% have certification for the
international standard for health and safety at work.
A. Select 2023 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY’s 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 2023 financial year.
2. Accidents reported do not include commuting to or from work, or those sustained by third parties such as distributors.
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Imperial Brands | Annual Report and Accounts 2023
SAFE & INCLUSIVE WORKPLACE
DIVERSITY,
EQUITY &
INCLUSION
Scored
92%
on 2022 ShareAction
Workforce
Disclosure
Initiative
We are committed to creating a diverse and inclusive
organisation renowned for celebrating difference, enabling our
people to feel 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.
Behaviours
Link to SDGs
SDG 5: We aim to
achieve gender
equality and a
more inclusive
organisation.
OUR PLAN
2021
• Employee Resource Groups (ERGs)
set up.
Nov 2022
• Board approved a five-year
ambition for DEI.
2023
• Workplace and Workforce pillars
have been the focus.
• Goals set with each Executive
Leadership Team member,
measuring progress on
a quarterly basis.
• Launched a self-declaration
campaign called “I Belong”.
2027
• Target set to increase
representation of women in senior
management from 28.2% in 2022 to
35% by 2027.
Governance
• People and Culture
Leadership Team
• Employee Resource
Groups (ERGs)
Key policies
• Code of Conduct
• Fairness at Work Policy
• Human Rights Policy
• Supplier Code of Conduct
ELT sponsors
• Murray McGowan,
Chief Strategy and
Development Officer
• Alison Clarke, Chief People and
Culture Officer
www.imperialbrandsplc.com
67
We have implemented targeted
candidate attraction campaigns and,
in FY24, will introduce digital tools to
support the removal of gender-specific
language from our recruitment
processes and provide
inclusive recruitment training
for hiring managers.
We have broadened the scope of our
annual Global Talent Review to
increase visibility of talent deeper into
the organisation, identifying diverse
individuals we can support and develop
to realise their full career potential.
We launched a self-declaration
campaign called “I Belong” in July 2023,
to access employee data for areas such
as ethnicity, disability and LGBTQ+ .
Robust data in these areas will inform
future goals and actions.
For the Marketplace pillar we are
assessing our status and the systems
needed to measure diversity of
suppliers as part of our supplier
management system. We will
accelerate work in this area during the
next two fiscal years.
While the full achievement of our DEI
Ambition will take time, we now have
the right plans in plans to accelerate
our progress.
Global Employee Resource
Groups
• Gender ERG
• Ethnicity ERG
• LGBTQ+ ERG
• Disability ERG
ESG REVIEW continued
“We are committed to creating
a truly diverse and inclusive
organisation renowned for
celebrating difference,
enabling our people to feel that
they belong and can be their
authentic selves, best enabling
the performance of every
colleague – benefiting our
consumers, our business and
our people”.
Alison Clarke,
Chief People and Culture Officer
Creating a more diverse and inclusive
organisation is an integral element of
our cultural transformation.
We define diversity as everything that
makes us unique; inclusion as every
individual feeling they belong; and
equity as giving fair treatment and
opportunity to all.
At the centre of our efforts have been
our global Employee Resource Groups
(ERGs) which were set up in 2021. Our
ERGs continue to grow their
membership, inform our DEI priorities,
and raise awareness across the
organisation on key diversity topics.
In November 2022, the Board approved
a five-year DEI Ambition and Strategy.
We have defined three strategic pillars,
each with clear KPIs.
-Our Workplace focuses on our
environment, policies, practices and
behaviours.
-Our Workforce focuses on
representation – the makeup of
our people.
-Our Marketplace focuses on how we
operate with consumers and ensuring
products and services are sourced from
a diverse supplier base.
Our Workplace and Workforce pillars
have been our focus during 2023. Our
approach has been to set both global
and local goals, mindful of local
legislation and culture.
One priority goal for our Workplace
pillar is to improve the inclusivity of
our processes, policies and practices.
We use assessments validated by
independent expert organisations
including the Business Disability
Forum, Stonewall and the Centre for
Global Inclusion. We have assessed
ourselves against criteria set out by
these organisations and have a clear
view of our baseline against
benchmarks on which to improve.
In addition, we measure employee
inclusion through four DEI-related
questions in our annual global
employee experience survey. Our
commitment is to move towards
high-performing benchmarks,
externally validated by our employee
experience provider.
In support of developing an inclusive
culture, we are creating further
interactive training programmes for all
employees, to continue to raise
awareness and understanding of DEI
and create strong allyship. An ally is
someone who is proactive in supporting
the inclusion and causes of an under
represented group whilst not being a
member of that demographic. This
programme will provide awareness and
understanding of allyship and the skills
and actions required to be an effective
ally. The training programmes will be
implemented in the next financial year.
Our goals for our workforce have
initially focused on gender since this is
where we have robust data. We have set
a global goal to increase representation
of women in senior management from
28.2% in 2022 to 35% by end of 2027.
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Imperial Brands | Annual Report and Accounts 2023
www.imperialbrandsplc.com
69
DIVERSITY, EQUITY AND INCLUSION PERFORMANCE1Performance indicator Unit202120222023Commentary Female employees in the workforce2%404039AFemale representation has remained broadly consistent across the last three years. FY23: 6,672 women, 10,412 men, 66 not declared.Female senior management3%–2931AWe are committed to increasing representation of women in senior management (Global Grades 3, 4, 5) and have set a goal of reaching 35% women at this level by the end of FY27.FY23: 186 women, 420 men, 2 not declared.Female Executive Leadership Team (ELT) members%333030AFemale representation on the ELT as at 30 September 2023 (end of FY23) was 30%. There has been no change in the composition of the ELT in FY23.FY23: 3 women, 7 men.Female PLC Board members%224040AFemale representation on the Board has remained at 40%. We are proud to have met the 40% target set by the FTSE Women Leaders Review three years ahead of schedule.FY23: 4 women, 6 men.Ethnic minority background on our Board%102020AOn 30 September 2023 (end of FY23), 20% of the Board members identified as being from an ethnic minority background.FTSE Women Leaders Review Combined Executive Leadership Team & Direct Reports%21.424.326.7AThe FTSE Women Leaders Review is the successor to the Hampton-Alexander Review. It is the UK’s independent, voluntary initiative aimed at increasing the representation of women on FTSE 350 boards and leadership teams. The reporting date is 30 October 2023.Employee turnover rate4%103016Following a spike in FY22 due to divestiture and business transformation, turnover reduced significantly in FY23.A. Select 2023 data has been independently assured by Ernst & Young LLP (EY) under the limited assurance requirements of the ISAE 3000 standard. EY’s 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. Based on employees recorded in Imperial Brands Group Human Resources Information Systems, excluding Logista, contractors and casual labour.3. The proportion of senior management employees (Global Grades 3, 4, 5) recorded as female across Imperial Brands Group, excluding Logista.4. This reflects all employees excluding those employed by ITG Brands and Logista. TCFD
96%
electricity from
purchased
renewable sources
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
tracking and incorporating the
management of the effects of climate
change into its strategies. Imperial
Brands’ scenario analysis was
conducted with a different
methodology to Logista’s as we
separate our business to maintain
commercial sensitivity. With the
support of Logista management, we
have reviewed Logista’s disclosures
and incorporated them into our report.
We have provided updated climate-
related disclosures in the report
below in accordance with the TCFD
framework’s four primary components:
governance, strategy, risk management,
and metrics and targets.
Lukas Paravicini,
Chief Financial Officer
We are now in the
second year of mandatory
reporting against the TCFD
recommendations. In 2021
we made our first voluntary
disclosure in line with the
recommendations, and in
2022 we published our first
detailed disclosures. In 2023,
we have continued to
improve our climate-related
disclosures, recognising
the benefits of this for
both our stakeholders and
our business.
For more information on our
climate change strategy,
please see page 48.
We recognise the importance of
disclosing climate-related risks and
opportunities. We have reported on our
approach to managing and mitigating
climate-related risks for several years,
within both our sustainability reporting
and CDP disclosures. We consider
climate-related risks and opportunities
in our business strategy and financial
planning, considering exposure to these
risks can occur over a range of time
horizons depending on the type of risk.
In the short term, some of our locations
and some of the areas from where we
source our tobacco leaf are at higher
physical risk due to the increased
frequency and intensity of storms,
floods and droughts.
In 2022 we conducted the first phase of
a quantified climate scenario analysis
with 4°C and 1.5°C pathways (RCP 8.5
and RCP 2.6), aligned with the
recommendations of TCFD. This work
was conducted in collaboration with a
third-party supplier and a cross
functional group of subject matter
experts from our ESG, Risk, Finance and
Governance teams.
The scenario analysis takes into
consideration climate-related physical
and transition risks as well as
opportunities for the period until 2050.
Overall, 44 operational sites and nine
leaf sourcing regions, covering 31
countries, were identified for a “deep
dive” risk and opportunity assessment.
Key sites and sourcing regions were
chosen due to their strategic and
financial importance to Imperial Brands
and we used the third-party Climate IQ
tool for our analysis. This tool combines
climate science, macro-economic and
financial information.
In 2023, we began the second phase of
the scenario analyses by taking a
thorough analysis into the local sites
identified as potentially at risk in Phase
1, by reviewing their mitigation plans,
future plans, and helping them identify
local level opportunities. We have also
used this opportunity to provide further
information on how our Spanish
subsidiary, Logista, is governing,
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Imperial Brands | Annual Report and Accounts 2023
COMPLIANCE STATEMENT
In accordance with the LSE Listing Rule
9.8.6(8)R, the index below sets out
whether Imperial has made disclosures
fully or partially consistent with the
TCFD recommendations and
recommended disclosures, and
summarises where the relevant
disclosures are made.
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 some of the TCFD
recommended disclosures. We will
continue to expand on the partially
compliant disclosures in FY24.
In assessing compliance with LSE
Listing Rule 9.8.6(8) R, we took into
consideration the documents referred to
in the guidance notes to the Listing
Rules including the TCFD technical
supplement on the use of scenario
analysis, TCFD Guidance on Metrics,
Targets, and Transition Plans, and the
TCFD Guidance for All Sectors, as well
as considering the updated guidance on
Implementing the Recommendations of
the Task Force on Climate-related
Financial Disclosures published in
October 2021.
TCFD Pillar
TCFD recommended
disclosures
Cross-reference
Compliance
statement
Next steps, other comments or
explanation of partial compliance
Governance
a. Board oversight
Page 72 Compliant We will continue to evolve our governance of Climate
Change, and reflect it in these disclosures.
b. Management’s role
Page 73 Compliant We will continue to evolve our governance of Climate
Change, and reflect it in these disclosures.
Strategy
a. Climate-related risks and
opportunities
b. Impact on the
organisation’s strategy
c. Resilience of the
organisation’s strategy
a. Risk identification and
assessment process
Risk
management
Page 75 Compliant We will continue to evolve by including comments on
specific risk areas, particularly in regard to mitigations
in place.
Page 74 Compliant We will continue to evolve in line with our strategy,
including mitigation and transition plans.
Page 76 Compliant
Based on the 2022 scenario analysis we completed an
internal analysis of our owned operational sites located
in higher physical risk areas as well as an analysis of
our leaf sourcing regions. We have detailed local action
plans as well as business continuity plans (BCPs) in
place to mitigate the risk for each location. We have also
incorporated Logista in our disclosures.
Page 77 Compliant We have put in place local action plans for sites and leaf
sourcing regions identified with a higher physical risk.
We will continue to monitor these regions and evolve
our BCPs as the need arises.
Climate risk management is integrated into our Group
Risk Management framework and we will continue to
monitor this risk and evolve our processes accordingly.
b. Risk management
Page 78 Compliant
process
c. Integration into overall
Page 78 Compliant We will continue to evolve in line with our Group risk
risk management
management evolution.
Metrics and
targets
a. Climate-related metrics
in line with strategy and
risk management process
Page 80 Partially
compliant
We are developing our understanding of how to link our
analysis to specific actions within our strategy.
With the updated analysis, we have gained greater
understanding of how we can utilise our climate
change strategy in order to manage risks and
realise opportunities, particularly those related to
cost avoidance.
In the future, we aim to include metrics on climate-
related opportunities.
We report our Scope 1, 2 and 3 emissions in accordance
with the GHG protocol, and its related risks. We will
continue to explore industry-specific ratios to achieve
full compliance.
b. Scope 1, 2 (and 3)
GHG metrics and the
related risk
Page 80 Partially
compliant
c. Climate-related
targets and performance
against targets
Page 80 Partially
compliant
We are developing our understanding of how to link our
analysis to specific actions within our strategy.
With the updated analysis, we have gained greater
understanding of how we can utilise our climate
change strategy in order to manage risks and
realise opportunities, particularly those related to
cost avoidance.
We aim to incorporate anticipated regulatory
requirements in the future.
www.imperialbrandsplc.com
71
TCFD continued
GOVERNANCE
We have integrated ESG oversight and management, including
climate change, at all levels of the business, as illustrated below.
OUR CLIMATE-RELATED GOVERNANCE
RISK MANAGEMENT STRUCTURE
Board of Directors
Second line
of defence
ESG Committee
Chaired by CEO
Risk
Group Risk
Committee
Chaired by CEO
Oversight: the Board of
Directors has oversight
of our climate-related
risks and opportunities.
The Audit Committee
is a Board-level
committee.
Audit Committee Chaired
by Non-Executive Director
There are two ELT-level committees
responsible for overseeing the climate-
related risk management approach: the
ESG Committee, and the Group Risk
Committee. Both report to the Board,
and provide “top-down” insights on
climate-related risks.
First line
of defence
Planet Strategy
Group
Global Risk & Internal
Control
Group Internal Audit
Environment
Compliance Working
Group
Individual sites/
specific working
groups
Group Internal Audit forms
our third line of defence.
For more information
please see page 100 on
risk management.
Third line
of defence
The second line of defence is held either at
ELT level or functional leadership level
(Planet Strategy Group, see page 73)
depending on the materiality of the risk.
We integrate climate risk and opportunity
into business functions and, as such,
multiple functional meetings report into
ELT-level committees on climate risks
and opportunities.
The first line of defence is assigned
either to members of the Planet Strategy
Group, or to members of the groups
feeding into it, depending on who is
managing the topic operationally.
BOARD OVERSIGHT
The Board of Directors’ main duty is to
safeguard our Company’s long-term
prosperity. The Board considers
climate-related matters through our
ESG strategy and performance, which
includes management of climate risk
and opportunity. It has endorsed all
climate-related targets including the
investments needed to implement
programmes to reduce carbon emissions
and meet our climate action goals.
To ensure the Board has appropriate
oversight of climate-related risks and
opportunities, it endorsed the formation
of a cross-functional ESG Committee
which is chaired by the CEO and reports
to the Board. In FY23 the Board was
updated on climate-related risks and
opportunities three times, following the
ESG Committee meetings in March 2023,
June 2023 and September 2023. The
Board has been updated on performance
against our climate-related targets as
well as our climate transition plan
which includes financial risk and
opportunity, in order to oversee and
monitor progress. In addition, it is kept
up to date on climate-related risks,
opportunities and performance via the
monthly CEO report, and informed of
significant climate-related risks and
opportunities, as required.
The Board considers business plans,
including expenditure on climate-related
matters, such as climate-related capital
expenditure, through reporting from the
ESG Committee, as well as Board-level
consideration and oversight of
(i) enterprise risk appetite, assessment
and management; (ii) longer-term
strategy; and (iii) the annual budget plan.
We 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.
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Imperial Brands | Annual Report and Accounts 2023
Alan Johnson, another of our NEDs,
served from January 2021 to November
2022 as the president and chair of the
Board at the International Federation of
Accountants (IFAC). This organisation
campaigned successfully to establish
the International Sustainability
Standards Board (ISSB), which was
established at COP26 in November 2021.
IFAC is now supporting the new ISSB
and working with regulators across the
world on the assurance of climate-
related disclosures.
MANAGEMENT’S ROLE
In 2023 we have further 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
Committee consists of all members of
the ELT as well as additional senior
management from across the business.
The Chief Financial Officer (CFO) is the
executive level sponsor of the climate
change priority in our ESG Strategy.
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 Corporate FP&A Manager reports
into the Director of Corporate Financial
Planning & Analysis and is responsible
for the long-term financial planning
and alignment of climate-related risks
and opportunities.
In March 2023 we held a Net Zero
Symposium in our London office which
was opened by the CFO and hosted by
our Global ESG Director. As well as the
formal presentations, the event brought
together topic experts and practitioners
from across our Global Supply Chain,
Procurement, Finance, Corporate and
Legal Affairs as well as valued partners
from insurers, advisers, and leaf
suppliers to review progress and to
debate how we could go further, faster,
to decarbonise, building upon the
positive progress we have made to date.
The Group Risk Committee oversees
the risk management approach and
reporting. It provides reporting to the
ELT and the Board regarding its
assessment of risks to the Group and
the effectiveness of the risk
management activities to mitigate
those risks. The Group Risk Committee
provides “top-down” insights to the risk
assessment process as well as
considering emerging risks and themes
identified in the risk assessment
process. The Risk Committee meets at
least three times a year and reviews the
output of the “bottom-up” risk
assessment process twice a year, which
includes climate-related risks. The
Group Risk Committee is an executive-
level committee chaired by the CEO, as
is the ESG Committee.
Please see page 100 for the
governance structure.
The ESG Committee and Group Risk
Committee are informed by a matrix of
supporting functions and working
groups. The Planet Strategy Group
consists of leaders from across the
business, providing coverage of our
eight material ESG topics including
climate change. The Planet Strategy
Group meets on a regular basis and
directly influences the Company’s
detailed ESG strategy. Climate-related
issues in the business are assessed and
managed through the Planet Strategy
Group. The group is chaired by the
Global ESG Director and provides
oversight of ESG risks and
opportunities across the business.
THE BOARD & MANAGEMENT’S ROLE AT LOGISTA
The Sustainability Policy 4/2023 outlines the responsibilities within Logista for the management of sustainability, including
climate-related risks and opportunities. This structure can also be used to explain the relationship between Imperial Brands
and Logista as regards ESG, including climate-related matters:
The Board of Directors approved
the sustainability policy. This body
is ultimately responsible for
supervising the observance of the
Policy, through the Audit, Control
and Sustainability Committee.
The Board of Directors takes into
consideration sustainability issues
with regard to the determination of
the risk control and management
policy, and the supervision of
the internal information and
control systems.
Five employees of Imperial Brands sit
on the Logista Board, the Chief
Strategy and Development Officer, the
Corporate Development Director, the
Group Finance Director, the Director
of Strategy for Global Supply Chain
and the Senior Investor Relations
Manager, all of whom have regard to
Imperials’ climate change strategy.
The Director of Strategy for Global
Supply Chain is also a topic owner for
Climate Change for Imperial. Any
climate related risks raised to the
board of Logista are reported to the
overarching Imperial Board through
these representatives, following the
structure set out above.
The Imperial Brands Global ESG
team, responsible for managing
climate risk and opportunity and the
Group-level TCFD report, have
prepared this disclosure with the
teams responsible for the
management of climate risk
within Logista.
There also close links between the investor relations team at Logista and those at Imperial Brands.
www.imperialbrandsplc.com
73
TCFD continued
STRATEGY
Following an updated materiality
assessment in April 2023, climate
change remains one of our most
important ESG focus areas both from
an internal business perspective and
from an external stakeholder
perspective. Our ESG strategy, which
includes climate change as a priority
topic area, is integral to the delivery of
our business strategy and to the
sustainability of our business as well as
our approach to this TCFD report.
OUR APPROACH
2022
2023
PHASE 1 SCENARIO ANALYSIS
PHASE 2 SCENARIO ANALYSIS
Our process of the assessment of climate-related risks and
opportunities can be described in two phases. Phase 1 is
based on the initial scenario analysis conducted in
collaboration with a third-party supplier in 2022. In this
first phase, we conducted a quantified climate scenario
analysis with 4°C and 1.5°C pathways (RCP 8.5 and RCP 2.6),
aligned with the recommendations of TCFD and the Paris
Agreement, utilising a third-party modelling tool.
In the second phase of the scenario analysis, conducted in
2023, we took a deeper dive into the local sites identified as
potentially at risk in Phase 1, including leaf sourcing
regions. We reviewed their existing mitigation and their
mitigation and adaptation plans and helped them identify
local-level opportunities for continuous improvement in
climate-related risk management. This enabled us to update
the scenario analysis by taking into consideration existing
and planned local risk mitigation and adaptation strategies.
Key outputs
The scenario analysis took into consideration climate-
related physical and transition risks as well as
opportunities in the short, medium and long term for the
period 2022-2050. In line with requirements all analyses
have been considered at least until 2050, with certain
risk types estimated beyond to reflect the increasing
likelihood of climate issues arising over a longer term.
Imperial Brands’ risk time horizon for climate-related
risks covers 10 years, as recommended by CDP1, and is
presented in the table on page 75. In order to more
closely align to this time horizon, we conducted a more
in-depth analysis covering the next 10 years, split into
short (1-3), medium (3-5) and long (5-10) risk horizons.
Imperial Brands’ financial planning period covers three
years and is therefore included in the short-term period.
Key outputs
The insights gained from this activity have been used to
enhance the 2022 disclosures. As an example, as a result
of local knowledge and risk mitigation already actioned,
the financial risk associated with climate impacts
identified in Phase 1 at our site in Spain has been
neutralised in our 2023 analysis.
The Phase 2 analysis also includes an additional
physical risk assessment for our factory “La Romana” in
the Dominican Republic. La Romana is one of our key
strategic sites but was not included in Phase 1 of the
analysis due to the sale of our Premium Cigar business,
and the change in ownership in 2022.
Maximum financial impact
The table on page 75 sets out the different
types of risks and opportunities aligned
to Imperial Brands’ risk framework, and
the associated maximum financial
impact (MFI). MFI is defined as the
accumulated maximum impact quantum
over 10 years between the 1.5°C and 4°C
scenarios. The MFI 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 compared to the total of the
Company asset base. These scenarios are
integrated into our financial models for
goodwill, and going concern, more details
on this can be found in page 200 (Note 11).
In 2023, we undertook an in-depth look
at the highest MFIs, and worked
collaboratively with sites to consider the
local mitigations already in place. In
addition, these sites, selected on a
risk-basis, have produced action plans
to address the risks.
The MFI calculation does not include
inflation, nor does it take into account
the impacts of future government
policies. Risks and opportunities have
been prioritised based on the findings
of the scenario analyses.
Our approach
In 2023, we integrated Logista further
into our disclosures. Imperial Brands’
scenario analysis covers both physical
and transition risk for Imperial Brands
PLC. In 2023, we reviewed Logista’s
approach, undertaken separately with
different methodology, and with the
support of Logista management,
have incorporated their findings
into this report.
Logista quantified the scenario analysis
with 2oC, and 4oC pathways (RCP 4.5 and
RCP 8.5) aligned with the
recommendations of the TCFD and
recommended disclosures. The scenario
analysis takes into consideration
climate-related physical and
transitional risks, as well as
opportunities in the short (0-3 years),
medium (3-5 years) and long term (more
than 5 years). The Logista analysis
assumes IPCC and IEA WEO STEPS2
scenarios, which are taken into account
for the risk and opportunity analysis.
The separate methodology used means
that the numbers cannot be integrated
wholly into Imperial Brands’ analyses,
which are summarised on the next
page, but are reflected in the text.
1. A not-for-profit charity previously known as the
Carbon Disclosure Project https://www.cdp.net/en
2. International Panel on Climate Change,
and International Energy Agency World
Energy Outlook
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Imperial Brands | Annual Report and Accounts 2023
CLIMATE-RELATED RISKS AND OPPORTUNITIES
Maximum
financial
impact (MFI)
calculated
over
timeframe
(£m)
Type of
risk4
Timeframe
Scenario
materiality
Short
(0-2y)
Medium
(3-5y)
Long
(6-10y)
1.5°C
4°C
Net
Zero
by
2040
Physical risks associated with climate change
Chronic
Impact of physical hazards
(e.g. riverine flooding) on key
assets could lead to a decrease
in asset value.
Product
supply
15
Chronic drought risk2 could lead
to a decrease in revenues due to
supply chain disruption and its
effects on production capacity.
Product
supply
nq*
Changes in tobacco crop yield2
resulting from climate change
could lead to a decrease in
revenues due to agricultural
supply chain disruption and its
effects on production capacity.
Product
supply
34
Acute
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.
Product
supply
54
More severe hurricane risk2
could lead to a decrease in
revenues due to supply chain
disruption and its effects on
production capacity.
Product
supply
nq*
Transition risks associated with transitioning to a low-carbon economy
Policy &
legal
Increased costs could result from
emerging regulations such as
carbon taxation1 and the carbon
pricing mechanism, predicted to
begin in 2024.
9
Delivery
of ESG
strategy
Market
Product
Supply
268
Materials costs in NTM and
tobacco leaf could increase due to
increases in the operating costs
of suppliers and raw materials.
This could reduce access to
capital. A key impact is expected
to be from the introduction of
carbon taxation through our
supply chain, predicted to begin
in 2024.
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.
36
Delivery
of ESG
strategy
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
Mitigation through strategy
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 potential yield
for the growing of tobacco due
to changes in temperatures,
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 number
has been updated to include
La Romana assessment which
represents the majority of this
specific MFI.
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. In FY23 the impact of
carbon pricing has been
reassessed to incorporate the
improved ability of the global
economy to adapt to transition,
e.g. through a higher share of
renewable energy.
It is expected that mitigation
will be possible through
partnership with key suppliers
to drive change in the supply
chain before a 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.
*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.
www.imperialbrandsplc.com
75
Mild change5 <0.2%
Moderate change5 0.2%-1%
Significant change5 >1%
TCFD continued
We ensured the range of
potential hazards, from
physical impact to changes
in local or global policy
within transition, were
covered while defining the
assessment’s scope.
Following these analyses,
we believe we are now able
to consider the range of
different possible options in
our operational planning.
For those identified as most likely, or
most material, we are addressing the
risks directly with action plans to
minimise future risk. We believe our
regular reviews and updates of these
analyses to reflect evolving maturities
will help us assess all the possible risks
for impact, to ensure we are able to
perform and maintain operations.
Physical risk
The 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. The
analysis predicts that storms are likely
to increase in severity at a rate of 5% but
despite this it is not likely to result in a
significant financial impact at Group
level over the next decade. As shown in
the table on page 75, 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 1.5°C
scenario, but financial impact can still be
considered insignificant overall. In our
updated analyses, when viewed by
location in the third-party model, our
leased factory in the Dominican
Republic is affected most by physical
risks. The physical risks identified are
mainly as a result of surface water
flooding. Imperial Brands will conduct
further on-site analysis to confirm the
presence and severity of the surface
water risk and to identify potential
mitigation. Physical risks in other
locations were considered immaterial. In
total, we assessed our sites for nine
physical risk types, including soil
movement, coastal inundation and
drought. We are not vertically integrated,
so our tobacco supply chain remains
flexible. While our procurement function
includes support for farmers from the
impacts of climate change, we do not
consider this an asset or supply risk for
most leaf sourcing locations.
In 2022, we reported that the most
material physical risks were associated
with a risk of flooding to our site in
Spain. Based on local assessment of this
site in 2023 we were able to fully
mitigate the risk of flooding at site-level.
This is mainly driven by local
governmental action as well as by an
assessment by our global insurers, FM
Global, who undertook an in-depth
analysis of the local flood risk to confirm
our findings. FM Global is the Group’s
property damage and business
interruption insurer, providing insurance
to more than 1,000 Imperial Brands sites
around the world. They are a location-
specific insurer which means they
assess the risk presented at each site
and assign a premium rate per site.
Other physical climate risks, though not
considered material at Group level, are
being monitored locally as part of
Business Continuity Plans (BCPs). This
confirms that our current approach,
where climate risks are integrated into
local business plans, and do not form a
separate material risk at Group level, will
continue to be most appropriate.
Transition risk
As indicated in the table, increased
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 2% of our NTM and tobacco leaf
spend if no further mitigating action
is 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 is mostly represented by NTM and
tobacco leaf. Our updated scenario
analysis considers an overall reduced
global carbon pricing compared to the
2022 scenario analysis. This is due to the
improved ability of the global economy
to adapt to transition leading to a
smaller degree of sacrifice needed to
decarbonise. This results in a reduced
estimated impact on the costs of
materials due to lower carbon pricing
impacts on production.
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 80. We anticipate
that material costs can be significantly
reduced by meeting our long-term ESG
strategy, particularly as we begin to
76
Imperial Brands | Annual Report and Accounts 2023
LA ROMANA – CASE STUDY
Our La Romana factory in the
Dominican Republic manufactures
machine-made cigars. It was
identified in Phase 2 of our climate
scenario analysis as the site most
exposed to physical climate risk.
This is primarily driven by the risk of
surface water flooding. To mitigate
the risk and prevent local damage
the site has put local action plans
in place.
The action plans address business
interruptions such as local grid
power and water supply
interruptions as well as fires,
and include the following:
• Emergency generators to provide
power at all buildings.
• Osmosis filtered water storage
tanks at all facilities supporting
two large 10,000 and 15,000 gallon
potable water tanks.
• A large 130,000 gallon tank
dedicated for firewater with
independent water pump. It
supplies firewater to hoses inside
each building via a dedicated
supply line.
Additionally, La Romana has built on
its business continuity plan, which
incorporates the following topics:
• Reliance on a 12-week stock of
finished goods at our warehouse
outside the Dominican Republic.
• Short-term relocation of
production capacity to equivalent
manufacturing facilities across
Imperial Brands.
• New production machinery
allowing rapid production
normalisation in case of an
emergency event.
collaborate with partners on Scope 3
emissions. As disclosed to CDP in 2022
and 2023, we are beginning to develop a
decarbonisation transition plan, detailed
in the ESG performance summary on
our website, which will be expanded to
include policy, energy, technology and
other routes to consider as part of our
Net Zero strategy.
Distribution business risks
The inherent physical risk identified
with the highest potential impact for
Logista is “heavy precipitation (rain, hail,
snow or ice)” due to its strategic and
financial impact affecting key
businesses. The value of this risk
following implementation of the
mitigation actions is insignificant at
both Logista and Imperial Brands level1.
Emerging regulation and technology
were highlighted as the most impactful
transition risks, however, these are not
determined to have a material financial
impact or impact on the business,
strategy or financial planning.
Impact of risks in financial reporting
Imperial Brands’ long-term financial
planning covers a three year period.
Based on the outcomes of this report,
increased physical risks and transition
risks associated with climate change are
not significant1 over this time period. We
do not expect the risk associated with
climate change to be material to the
Group, with the largest risk expected to
not exceed £10 million for 2024 (and
£43 million over the three-year period).
This is related to increased operating
costs of NTM and tobacco leaf, with the
Carbon cost is anticipated to increase
from 2024 across our global operations,
primarily as a result of regulation.
Especially when viewed in the 1.5oC
scenario, the total cost estimated for
Scope 1 emissions between 2024-2029
for our operations without mitigation
through our Net Zero Strategy is
£21 million.
We are able to turn this into an
opportunity by realising our Net Zero
strategy, which should result in
considerable future cost avoidance:
implementation of our Net Zero
Strategy could limit cost increases to
£9 million.
The potential cumulative benefit,
excluding cost of investment, to realise
our Net Zero Strategy is up to
£190 million by 2050.
calculation based on the MFI resulting
from the 1.5oC scenario. Additionally, we
intend to allocate capital spend for use
in decarbonisation projects based on a
carbon pricing mechanism in FY24.
Currently, given the risks identified
relate to future operational costs we
have no committed liabilities with third
parties associated with climate impact
which need to be accounted for.
For other financial statement areas that
cover a period beyond the financial
planning of three years and beyond
Imperial Brands’ climate-related risk
time horizon of 10 years, we have
considered the MFI 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
included the Directors’ assessment of
climate change impact in the going
concern (page 111) and viability and
associated disclosures.
Climate-related opportunities
By successfully implementing our 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
decarbonisation glidepath and transition
plan mapping our emissions to achieve
Net Zero which we expand on in Metrics
and Targets on page 80, in our ESG
Review from page 38, and in our ESG
performance summary on our website.
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’s ability to manage or pass
through some or all the costs. If new
climate-related risks and opportunities
are identified, we are committed to
aligning our strategy accordingly and
integrating the respective costs into our
profit and loss.
Following our updated analyses, we
currently have confidence that our
climate change strategy is effectively
managing our climate-related risks and
opportunities, demonstrated by the
progress in both physical and transition
risks. We will continue to develop our
carbon transition plan, bringing more
clarity to the details underpinning our
Net Zero Strategy.
Assumptions
These physical and transition analyses
assume 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 future
government policies or subsidies, or
currently existing mitigation. Material
costs include the costs of physical risk
materialising in the supply chain.
RISK MANAGEMENT
We integrate climate-related risks and
opportunities in our business strategy
and financial planning. We have
assessed both the physical (climatic)
and transitional (technological) risks
Potential carbon cost of Scope 1 emissions in the 1.50C scenario
‘000 GBP
6,000
5,000
4,000
3,000
2,000
1,000
0
2024
2025
2026
2027
2028
2029
Excluding Net Zero Strategy
Net Zero milestones and targets
1. Significance is determined as greater than 1% of net revenue.
www.imperialbrandsplc.com
77
CASE STUDY:
Our Manisa factory, the Philippine
Bobbin Corporation (PBC) and FM
Global identified an elevated risk of
riverine flooding. FM’s assessment
identified that the flood exposure at
this location is the highest 100-year
(high frequency) flood exposure
across Imperial’s locations globally.
They estimated that in a flood event
waters could rise one metre,
resulting in damage to about 30%
of the site and up to six months’
interruption to business. The most
recent loss expectancy estimate was
US$ 24.1 million for the 100-year
flood event.
This finding supported PBC’s
intention to investigate the
installation of a flood wall which FM
have confirmed would all but
eliminate this exposure. Completion
of this additional protective measure
would also be key to achieving FM’s
highest risk category, a Highly
Protected Risk.
TCFD continued
that may impact our business, and have
integrated them into our risk framework.
In assigning significance of climate-
related risks, we refer to the MFI stated
on page 75. Having considered the
analyses we find greater value in
ensuring that climate-related risks and
opportunities are included within our
principal risks, rather than focusing on
climate change as a principal risk in
itself. This assessment by each risk
owner ensures that we appropriately
determine true materiality, and integrate
ownership of the associated climate-
related risks into the wider business.
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 100.
The Group’s formal approach to risk
management includes an update to the
Board on a twice-yearly basis on the
results of the Group risk assessment,
including the Group’s principal risks.
The Group risk management framework
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
and control structures and analyse the
impacts of the risks upon the business in
line with the Board’s risk appetite. The
second line of defence provides support
to the first line of defence in the design
and implementation of local mitigations.
The ESG team is key in assessing
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
Group Internal Audit who provide
independent assurance over the
effectiveness of the design and
operation of the risk management
framework. On an intermittent basis,
we also commission a third party to
perform its own analyses to validate
risks identified by the business.
For this TCFD report we also add a fourth
line of defence, by seeking assurance
against the listing rule by a third party.
Due to the long-term nature of climate-
related risks, and in order to formulate
this TCFD report, a cross functional
project team considered actions relating
to these analyses covering and beyond
the standard risk timeframe we typically
consider for risk and financial planning.
In accordance with the Listing Rules,
we have taken into account the period
2022-2050. This allows us to build on
the risks and materiality developed in
the third-party analyses, and integrate
them into our wider Group risk
management framework.
OUR PLAN
(from a 2017 baseline year)
2023
2024
As explained in the climate change
section, page 48, we are currently
on track vs Our Plan. We continue
to develop our Scope 3 tracking
and reporting.
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.
Recalculation of Scope 31
calculations
and applied for approval by the SBTi
for our new targets in line with the
1.5°C Paris Agreement
Scope 1 & 2 emissions reduction of
65%
included climate metrics in executive
remuneration for the first time
Achieved a reduction in energy
consumption of
26%
Intend to fully assure our
Scope 31 emissions for category 1
Purchased Goods and Services
in 2024
50%
of our suppliers by spend
will set science-based targets
within our Purchased Goods and
Services category
Continue to develop our
decarbonisation plans for sites
78
Imperial Brands | Annual Report and Accounts 2023
Physical risk management
Our insurer, FM Global, conducts an
annual programme of 50 to 60 site visits
concentrating on assessing the perils
insured by FM Global but particularly fire
and natural catastrophe risks. Where
gaps are identified, FM Global provide
recommendations prioritised according
to loss expectancy.
Local flood maps are consulted where
possible in addition to FM Global’s own
global flood mapping to determine
possible flood levels. These levels are
then compared with the elevations on
site and possible loss scenarios are
developed for both 100-year and
500-year return events. Similarly, with
wind exposures, sites in known high
wind zones receive a more thorough
wind evaluation looking at the resilience
of the building envelope in terms of
uplift pressures on roof systems, debris
impact to building walls and impact of
high winds on other items such as dock
doors. FM Global offers practical
recommendations to improve resilience
both through physical improvements
and human element procedures such as
emergency response planning.
As examples of the work done to date, in
the last five years Imperial has
completed over 30 FM Global natural
hazard recommendations. Completed
recommendations include improving
emergency response plans for flood and
wind events at various sites, securing
roof mounted equipment at the Tampa
FL warehouse, and improving roof
flashing and roof coverings at the
Cayey factory.
For all of our sites we also mitigate the
risk of disruption to supply of product by
having local BCPs in place which
includes a list of other Imperial sites
which can take over the manufacture of
product from the high-risk site if
required. The cost implications of this
are factored into the BCP. Actions to
manage risks are prioritised based on
the calculated MFI and the ease/cost of
the risk mitigation strategy.
Transition risk management
The transition risks identified in our
climate scenario analysis are embedded
in the risk framework and are
communicated with the affected sites
and functions; action plans are being
implemented accordingly, particularly
for the primary risks: carbon taxation for
our operations, and material costs
associated with our products and
packaging, identified on page 75.
Our non-vertically integrated leaf supply
chain as well as holding c.12 months of
leaf stock supports us in mitigating
climate-related supply chain
interruption and risk of shortages.
Physical and transition risk within our
supply chain and direct operations
related to climate change are considered
within our principal risks. This helps us
manage and monitor climate risks for
core business decisions.
Please also see our 2023 risk matrix on
page 102 where we demonstrate
climate-related and regulatory risk to be
of high importance to the Group. We
integrate our management of these into
our responsible business functions. In
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 the energy sourced for our
operations from renewable sources,
transitioning away from non-
renewable sources completely
Be Net Zero
In our direct operations (Scope 1 and
2 GHG emissions)
Reduce
• Our absolute Scope 3 GHG
emissions by 50%
• Energy consumption by 25%
the future, Imperial Brands aims to
conduct climate scenario analysis on a
regular basis.
Distribution business risk
management
Our global insurance provider, FM
Global, also acts for Logista, operating in
the same way as disclosed in the section
above. Additionally, Logista states its
methods for managing climate-related
risk with its sustainability policy.
These include the Sustainability
Committee which is responsible for
the preparation and co-ordination of
the sustainability strategy plans in
co-ordination with Logista’s Business
and Corporate Directorates.
The progress of implementation and the
achievement of the climate-related
objectives set and the associated climate
KPIs are reported at least twice a year to
the Sustainability Committee.
The Corporate Finance Directorate is
responsible for implementing
mechanisms to ensure the integrity of
the financial and non-financial
information of the Company and its
subsidiaries, as well as control of the risk
associated with the financial and
non-financial risks.
2040
Our value chain will be
Net Zero
emissions
(absolute Scope 1, 2 and 3 GHG
emissions)
For more information on all our ESG
targets, including waste, please refer
to page 38 or our ESG Performance
Summary on our website.
www.imperialbrandsplc.com
79
TCFD continued
METRICS AND TARGETS
Climate change is our second most
material ESG topic, after consumer
health. As such, we have long monitored
the risks identified for climate change
and put in place intervention or
mitigation measures where necessary.
Our targets on climate change represent
multiple business opportunities: there
are cost and environmental benefits to
energy savings, and to efficiency
programmes, today and in the future.
We are focused on alignment to the UN’s
Sustainable Development Goals, and in
particular support the goals outlined in
goal 7.2, improve energy composition,
and 7.3, reduce energy consumption. As
such, we have had Scope 1, 2 and 3
targets in place since 2019, consistent
with reductions required to limit climate
warming to 2°C, approved by the Science
Based Targets initiative (SBTi). 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. In
FY23, we applied for approval by the
SBTi for our new targets in line with the
1.5°C Paris Agreement. In FY23, we can
report a reduction in energy
consumption of 26%, achieving our 2030
energy consumption reduction target.
For more details on how this
commitment impacts our Climate
Change pillar, please see ‘Our plan’ as
well as our previous year’s
performance on page 48.
For more information on all our ESG
targets, including waste and water,
please see page 38.
In FY23, we have focused on driving
site-level risk and opportunity planning
on a risk-based approach. These views
have been used to enhance our
disclosures, and form the basis of our
continued strategy development. Sites
have been asked to develop local action
and decarbonisation plans, to manage
risk and realise opportunity more
comprehensively. We also understand
that our decarbonisation targets rely on
cultural changes within the business, for
example in evaluating energy sourcing
options, or when looking to drive change
within our value chain.
The analyses indicate that our most
material risks are within transition,
specifically carbon pricing internally,
and carbon pricing externally, realised in
our rising material costs.
Description
Target
Opportunity
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 have reset
our science-based targets for carbon,
increasing our ambition in line with
1.5ºC global warming limits and
currently wait for approval by the SBTi.
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 within Purchased
Goods and Services (PGS) 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 33% of
suppliers by spend have achieved this
target. In pursuit of this target, we have
identified our partner suppliers
contributing 50% by spend of our
Scope 3 category: Purchased Goods
and Services, and will engage with
them in 2024.
In line with our 2025 goal: to source 100% of
our purchased grid electricity from
traceable renewable sources, we have
continued to prioritise decarbonising our
electric supply, reaching 96% renewable
grid electricity in 2023. Reflection of this
performance in our updated analyses
indicated an increased opportunity for cost
avoidance of £190 million by 2050,
assuming we meet our 2030
decarbonisation targets.
In order to further support our Net Zero
strategy, we have developed an internal
carbon budget to incentivise low-carbon
transition projects to improve energy
efficiency and renewable energy transition.
The internal carbon budget is based on our
internal carbon pricing, which we intend to
launch in FY24. This initiative pilots an
approach to more closely link funding with
decarbonisation solutions, and includes an
assessment of climate opportunities.
The updated analysis completed within
FY23 demonstrated the extent to which our
decarbonisation strategy protects against
future costs. The potential cumulative risk
mitigation, excluding any cost of investment,
is up to £450 million to 2050 when compared
with taking no decarbonisation measures in
a 1.5°C scenario.
There is an opportunity to further assess the
resilience of our supply chain to help bring
focus to the business to achieve our Net
Zero target. Achievement of the Scope 3
decarbonisation target will be important to
limit exposure to rising material costs,
which are strongly linked to carbon pricing
within the supply chain. Our first step
towards this has been the enhancement of
the environment-related section in our
Supplier Code of Conduct, which sets out the
minimum requirements of doing business
with us and our request to have suppliers
join us to decarbonise.
We are on track to decarbonise our direct
operations by 2030. In FY23 we can report
an emissions reduction of 65% vs our 2017
baseline. We continue to develop goals for
the different areas of our Scope 1 and
Scope 2 emissions. Our development of
local decarbonisation plans for key sites
and sales fleets continues to drive tangible
action and progress against this goal.
In 2023 we have recalculated our Scope 3
calculations and we intend to fully assure
our Purchased Goods and Services Scope 3
emissions in 2024.
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 50%
by 2030. We have strengthened our climate
dialogue with suppliers within all
procurement areas and are aiming to
continue to do so. This approach benefits
us in various ways such as risk
management, reduction of Scope 3
emissions as well as creating opportunities
such as of cost avoidance (page 77). The
re-calculation of our Scope 3 baseline and
our Scope 3 emissions for 2023 provided
greater clarity of data to drive decisions
going forwards.
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Imperial Brands | Annual Report and Accounts 2023
Logista
Logista is included in Imperial Brands’ Net
Zero Target, as it is included within two
categories of our Scope 3: investments and
downstream transportation.
Logista has set an annual emissions
reduction target of 2.1%. Over 95% of
Logista’s Scope 1, 2 and 3 are included in
this target.
To reinforce this, Logista has implemented
remuneration relating to performance
against its climate change goals. For
example: maintaining its CDP performance
and increasing the distance travelled by
low emissions vehicles by 15%.
Logista is performing an ongoing project to
design an ESG strategic plan, including
climate-related risks and opportunities. As
a result of this project, new targets and
metrics are expected.
For more information on our 2023
performance, and further information on
our current ambitions related to climate
and ESG, please refer to pages 48-51, for
the Scope 3 accounting, our Company
website and our ESG: People and
Performance Summary 2023.
This section contains climate-related
metrics and targets that reflect our
current expectations, assumptions
and best estimates available at the
relevant time.
The data underlying these and market
practice in relation to such disclosures are
likely to evolve over time, owing to several
factors including, but not limited to, the:
• evolving nature and impact of climate
change and related policies, regulations,
standards, classification frameworks and
market developments;
• accuracy and completeness of the data,
methodologies and assumptions
underlying our metrics and targets,
which may vary depending on the scope,
boundary, definition and measurement
of the relevant indicators and activities,
as well as the availability and quality of
external sources and benchmarks;
Carbon transition plan for
our operations
Our methodology for calculating Scope 1, 2
and 3 emissions is compliant with the GHG
Protocol and we disclose our environmental
performance in CDP. Further details around
our methodology can be found in our
Reporting Criteria document. The scope
of targets set includes companies,
entities or groups over which we have
operational control.
In the 1.5oC scenario it is likely carbon taxes
will rise for those using energy sourced
non-renewably. As such, the energy
transition represents an opportunity for
cost avoidance for those who have already
transitioned to renewable energy. In the
analysis, which assumes Imperial Brands
achieves its Net Zero targets, this is
assessed as £21 million (£11 million) by 2030
in the 1.5oC scenario and within the range
£80 million to £260 million (£20 million to
£55 million) across the period to 2050 in
both climate scenarios. The analysis
doesn’t include costs to achieve our Net
Zero targets, such as capex.
In 2023, we also included climate metrics in
executive remuneration for the first time.
Five percent of the bonus opportunity is
split equally between performance on
energy consumption and emissions
reduction. Both of these are set to be in line
with our decarbonisation plan.
In 2024, we will continue to develop our
decarbonisation plans for sites, building out
initiatives to support each site-specific
decarbonisation. In a risk-based approach,
we will also include management of
physical climate risks in this, ensuring that
our sites most at risk of the physical effects
of climate change include mitigation
activities in their decarbonisation plan.
For metrics relating to our ESG strategy,
including waste and water, please see our
ESG section, pages 38-69.
There are three recommended disclosures
in the Metrics and Targets section that we
consider ourselves partially compliant with:
(a) including climate-related opportunity
metrics; (b) as regards industry-specific
GHG ratios; and (c) accounting for
avoided GHG emissions on the entire
product lifecycle.
Our reasons for this are because there are
transitional challenges in obtaining the
relevant data and there is no generally
accepted industry-specific data, though
we continue to monitor developments in
this area.
We aim to expand our disclosures by
including climate-related opportunity
metrics in 2024, and providing accepted
industry-specific GHG efficiency ratios,
once applicable practices are available.
• feasibility and effectiveness of our
strategies, plans and actions to achieve
our metrics and targets, which may
depend on various internal and external
factors, such as our operational
performance, financial resources,
innovation capabilities, organisational
culture, governance and stakeholder
engagement, as well as the co-operation
and alignment of our partners, suppliers,
customers, regulators and peers; and
• potential changes in our business
environment, operations, portfolio and
priorities, which may result from
factors such as market conditions,
regulatory requirements, competitive
pressures, technological
developments, customer needs,
strategic opportunities, and/or
unforeseen events, and which may
require us to adjust, revise or update
our metrics and targets accordingly.
Accordingly, undue reliance should not
be placed on these statements, or this
Annual Report more broadly.
5%
of our executive bonus is awarded
for climate performance
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81
MARKET REVIEW
R E S P O N DIN G
T O A C H A N GIN G
M A R K ET
As the highly regulated
global market for tobacco
transforms into a more
sophisticated and complex
market for nicotine across
multiple categories, Imperial
is leveraging its challenger
mindset to deliver for
consumer needs and
consumer health.
OUR MARKET
The combustible tobacco market still
represents US$ 880 billion, and
cigarettes are the largest category, with
more than 5,200 billion consumed each
year. However, the development and
consumer adoption of next generation
products (NGP) over the past decade
has added complexity, and strong
regional nuance to the overall nicotine
market and its regulation.
We are a consumer-focused business.
Despite the well-known health risks of
smoking, more than 19% of the world’s
adult population still choose to smoke.
Our consumers tell us they value our
products for the moments of relaxation
and pleasure they provide. Many of
these consumers now also tell us that
they are looking for potentially less
harmful alternatives to traditional
combustible products. Our strategy is to
understand the needs of these adult
consumers, and both to invest in
priority combustible markets, while
also building a targeted NGP business.
These market developments are not
without their challenges. The greater
number of nicotine product categories
introduces supply chain complexity –
which Imperial mitigates using a strong
supplier partnership model. It also
introduces regulatory complexity,
which can be harder to mitigate.
However, where regulators allow, the
advent of next generation nicotine
products also provides much greater
consumer choice. With that greater
consumer choice, opportunities are
unlocked for a challenger business
with a strong understanding of
consumer needs.
For example, many consumers also tell
us they have yet to find a perfect
potentially reduced-harm replacement
for cigarettes. This means we are
seeing a growing diversity of behaviour
with consumers using different
products for different moments in their
day. Our strategy prepares us for a
market where multiple nicotine
categories coexist. Thanks to our
focused investments in transformation,
Imperial is now well placed to make a
positive contribution to this wider
market transition.
Differing regional and market
approaches to harm reduction
Regional and market regulators have
diverse policies towards tobacco harm
reduction. Public health bodies agree it
is the smoke created by the burning of
tobacco leaf that contains most of the
harmful chemicals responsible for
smoking-related disease. This is not
always reflected in policy. Some
governments, such as the UK, New
Zealand, and Canada, 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 such
products do not attract users who
would not otherwise have chosen to
consume nicotine. Other governments
do not recognise the benefits of NGP.
This is often due to focusing only on
concern about a youth access "on-
ramp" which is important but which
should not detract from the much
larger – and scientifically substantiated
– value of the "off-ramp" that NGP
can provide to many millions of
existing smokers.
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Imperial Brands | Annual Report and Accounts 2023
While we are supportive of reasonable
excise rates on all products, we believe
NGP which offer potential harm
reduction should be subject to excise
rates at significantly lower levels to
combustible products. We believe
increased affordability will help
encourage smoker transition.
Illicit trade
The prevalence of the illicit trade in
tobacco products means that we face
competition from a 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 products
requires a co-ordinated approach from
government and industry. Imperial
continues to work with enforcement
agencies to reduce this scourge, and to
encourage a rational regulatory
framework for potentially reduced-
harm products that will prevent other
categories of nicotine products being
targeted by criminal organisations.
November to share ideas for
accelerating the spread of some of the
most extreme regulatory proposals for
tobacco: such as Canada's health
warnings printed on individual sticks,
or New Zealand's generational tobacco
ban, a proposal that has also been put
forward in the UK. A plan to prohibit all
but "very low nicotine" cigarettes,
proposed but not yet implemented in
New Zealand and in the US (where it is
less likely in the short to medium term),
will also capture the attention of global
public health departments.
Of course, combustible tobacco is also
heavily taxed, contributing globally
more than US$ 200 billion to
governments each year, and often seen
as a non-controversial source of urgent
additional government funding. Given
the current economic climate, we
anticipate inflationary pressures are
likely to affect the purchasing power of
some consumers. This may mean that
drastic excise rises in the next year
give a higher than usual boost to the
illicit trade – to the extent to which
overall revenues could decline when
rates are increased (the effect of
passing the peak of the Laffer curve).
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
page 47.
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,
and is not embraced by the WHO. This
is unfortunate. Where policies have
been adopted to limit the development
of the nicotine market to potentially
less harmful alternatives, such as
aggressive excise duty or complete
bans, we have seen negative
consequences for both population-level
public health, and the growth of an
illicit trade in NGP. At the extreme end
is the difference between New Zealand,
where the legalisation of vape
coincided with a steep fall in youth
smoking rates, and Australia,
where there has never been a legal
domestic market for NGP, yet a black
market thrives.
The traditional cigarette market has
always had national and regional
variation in consumer preferences on
dimensions such as product strength,
product dimensions, flavourings and
blend. Some of these differences have
been deeply embedded in culture, from
the Indonesia kretek to the mid-century
French Gauloises Brunes. Yet the
regional differences in NGP
consumption are more significant, as
they span product category types and
are driven not only by consumer
preferences, but also by regulation,
public health messaging and excise.
Regulation and excise
The traditional tobacco market remains
heavily regulated. Such 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.
Nationally, countries such as New
Zealand and Australia have unveiled
comprehensive programmes of new
regulation, while other countries such
as the US and Greece have further
developed product-by-product approval
pathways for the marketing of tobacco
and nicotine products. At a regional
level, the EU is re-examining its
Tobacco Products Directive, its Tobacco
Advertising Directive and its Tobacco
Excise Directive. Globally, the 10th
Conference of Parties (COP10) to the
Framework Convention on Tobacco
Control (FCTC) is to meet in Panama in
www.imperialbrandsplc.com
83
OPERATING REVIEW
E U R O P E
R EGIO N
Aleš Struminský
President, Europe Region
AT A GLANCE
HEADLINES
OPERATING REVIEW
To provide a greater focus on
“driving value from our broader
market portfolio”, which is one of
our strategic pillars, we have
transferred the management of
our Central and Eastern Europe
cluster from our Europe region to
the Africa, Asia and Australasia
(AAA) region. Under the
leadership of Paola Pocci, we
have been enhancing our
capabilities and expertise in
managing our smaller markets,
many of which have attractive
margins and the potential to
become platforms for future
growth in combustible tobacco
and NGP. The AAA region will
now be known as AAACE. The
affected markets are Poland,
Czech Republic, Ukraine,
Slovakia, Hungary, Azerbaijan,
Armenia, Georgia, Moldova,
Croatia and Slovenia. The
Americas region is unaffected by
this change.
Tobacco volume
-8.2%
Tobacco & NGP net revenue*
+4.8%
Tobacco net revenue*
+2.8%
NGP net revenue*
+40.4%
Adjusted operating profit*
+2.0%
* Change at constant currency.
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Imperial Brands | Annual Report and Accounts 2023
• Strong financial performance driven
by strong pricing action early in the
year which offset volume declines
• Leveraging our local jewel brand
strategy to drive operational and
financial performance
• Positive NGP net revenue
performance with growth across all
categories driven by product
innovation and new market launches
• Successful launch and roll-out of
all-new vapour device blu 2.0 and
disposable blu bar
• New and improved Pulze 2.0 offering
consumer choice across four markets
• Adjusted operating profit growth
reflects strong combustible
performance and increased
investments behind NGP
Our results in Europe are driven by
strong combustible pricing, which
helped mitigate inflationary headwinds
and support increased investment in
NGP launches. Tobacco volumes were
impacted by macro conditions and
continued pressure on consumer
spending. As expected, the volume
trajectory improved in the second half
of the year. Net revenue benefited from
an acceleration in NGP revenue growth
(year on year up 45.1% in the second
half of the year at constant currency) as
our innovation pipeline supported new
product and market launches alongside
growth in existing markets.
Tobacco volume
Tobacco & NGP net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2023
89.9
3,240
3,020
220
1,482
*2022
97.9
3,039
2,883
156
1,447
Actual
-8.2%
+6.6%
+4.8%
+41.0%
+2.4%
Constant
currency
–
+4.8%
+2.8%
+40.4%
+2.0%
* 2022 figures restated for the transfer of the Central & Eastern Europe cluster from Europe to AAACE.
Strategic initiatives in our priority
markets supported our combustible
tobacco performance. In the UK, after
two years of market share growth, we
raised prices early in the period,
causing our market share to decline as
we balanced market share with value
creation. As anticipated, we
experienced some market share
recovery during the second half of the
year. We remain confident that our
strategic initiatives in the UK, such as
our local jewel brands, Richmond
Embassy and Regal Signature, have
continued to gain traction. Our work to
arrest the long-term share declines in
Germany continues with a refinement
in our investment in brand equity
building initiatives. In Spain, we
achieved strong price increases while
also gaining market share as our local
Priority market
Tobacco share
Germany
• 18.2% (-80bps)
• 13% of Group net revenue
UK
• 41.1% (-50 bps)
• 8% of Group net revenue
Spain
• 28.4% (+10 bps)
• 5% of Group net revenue
jewel brand, Nobel, benefited from new
format launches and we refined our
focus on the key sales channels, for
example vending machines.
Tobacco volumes declined 8.2% with
consumer buying patterns impacted by
cost-of-living pressures. The elevated
excise regimes in markets such as the
UK and France have contributed to
continuing pressure on volumes.
However, volume declines moderated
in the second half of the year in the UK.
Tobacco net revenue was up 2.8% at
constant currency, reflecting strong
price mix of 11.0%, which more than
offset the volume declines.
Our NGP portfolio has delivered
strong net revenue growth, which was
up 40.4% at constant currency with
growth across all three categories.
Performance
We delivered a step-up in new product
and flavour launches following our “test
and learn” validation with consumers
and market pilots in FY22. Our new
consumer-led partnership model on
NGP product innovation delivered a
range of new products in all three
categories: Pulze 2.0 in heated tobacco
(four markets); blu 2.0 (10 markets)
and blu bar (nine markets) in vapour;
and ZoneX (three markets) and
Skruf Modern (Norway) in modern
oral nicotine.
Tobacco and NGP adjusted operating
profit for the year increased 2.0% at
constant currency, mainly reflecting
the strong tobacco performance
together with increased investment in
our NGP product and market launches.
Tobacco market size declined 1.9% in the year with some downtrading, together with
a category shift from cigarettes to fine cut tobacco. Our market share declined
although we continue to refine our investment initiatives with the aim of stabilising
our share over time. As anticipated, it is taking time to address our share performance
after more than a decade of underinvestment and share losses. We remain confident
the investment behind these strategic initiatives will enhance our brand equity and
improve our sales force effectiveness. Our brand portfolio remains well positioned
across the key price segments to appeal to a range of consumer needs, which
includes the launch of Paramount to meet consumer needs in the value segment.
We expanded our vapour offer with the launch of blu 2.0 and blu bar during the year.
Tobacco market size declined 16.9%, driven by the COVID-19 unwind, inflationary
excise increases and manufacturer price increases in the period. We increased prices
in November and again in March to pass on the excise increases. As anticipated, and
after two years of share gains, these price increases caused us to lose share.
However, we recovered some of the market share lost in H1 as we sought to optimise
the balance between managing share and value creation. Our strategic investments
continue to gain traction with our local jewel brand variants of Richmond, Embassy
and Regal Signature performing well – and as we focused on supporting our key
account customers. We grew our NGP contribution in vaping, launching both blu 2.0
and blu bar in the period, supported by innovation of our flavours in both platforms.
Tobacco market size declined 2.6% year on year. We were able to increase prices for
the second year in a row, following several years of stable pricing, while also
continuing to deliver share gains. Our market share increase was driven by
investments in innovation and brand extensions, such as limited-edition packs and
big pack launches for West. We continued to focus on our portfolio of local jewel
brands with the launch of new, high-quality packs for brands such as Nobel. We also
benefited from refocusing our sales force on channels, where we have been under-
represented historically. The launches of blu 2.0 and blu bar have been well received
by consumers and the trade and the blu brand is the joint market-leading brand by
retail sales value as at August 2023.
www.imperialbrandsplc.com
85
OPERATING REVIEW continued
M E RIC A S
R EGIO N
A
AT A GLANCE
HEADLINES
Kim Reed
President and CEO,
Americas Region
We delivered a strong combustible
market share performance in the US
while achieving strong pricing across
our cigarette portfolio. This was offset
by a decline in our mass market cigar
volumes due to a temporary wholesaler
destock after they increased inventories
ahead of Hurricane Ian in September
2022. This contributed to adverse
product mix which has weighed on our
net revenue performance.
Tobacco volumes declined against an
industry volume decline of 8.4% in
cigarettes and a 5.4% fall in industry
mass market cigar volumes. Market
volumes continue to be impacted by
macro-economic pressure on consumer
disposable income. Our cigarette
outperformance reflects the
improvement in our cigarette market
share of 65 basis points to 10.7% – our
fifth consecutive year of market share
growth. Our cigarette volumes also
• Cigarette share growth up 65 basis
points to 10.7% with gains across all
three of our focus price segments
• Investment in strategic
initiatives continues to drive
operational improvements
• Net revenue decline reflects adverse
product mix in mass market
cigars partially offset by strong
cigarette pricing
• Mass market cigar performance
temporarily affected by wholesaler
inventory movements and market
share pressure
• NGP net revenue declined as we
prioritised investment in Europe
pending resolution of the FDA’s
Marketing Denial Orders for myblu,
which was vacated in August 2023
• Adjusted operating profit growth
reflects strong cigarette pricing and
cost initiatives to mitigate the
reduction in volumes
Full year result
Change
bn SE
£m
£m
£m
£m
2023
20.7
2,812
2,778
34
1,257
2022
21.9
2,826
2,784
42
1,179
Actual
-5.5%
-0.5%
-0.2%
-19.0%
+6.6%
Constant
currency
–
-4.7%
-4.5%
-21.4%
+1.9%
Tobacco volume
-5.5%
Tobacco & NGP net revenue*
-4.7%
Tobacco net revenue*
-4.5%
NGP net revenue*
-21.4%
Adjusted operating profit*
+1.9%
* Change at constant currency.
Tobacco volume
Tobacco & NGP net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
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Imperial Brands | Annual Report and Accounts 2023
29 August 2023 by United States Court
of Appeals for the District of Columbia
Circuit to vacate the FDA’s Marketing
Denial Order for our myblu pod-based
vapour portfolio. Our products have
remained in the market throughout the
appeals process. We also completed the
acquisition of a range of nicotine
pouches to facilitate our entry into the
US modern oral market. We plan to
launch this range of 14 product variants
under a new brand, which will leverage
the Company’s existing US sales force.
Adjusted operating profit grew 1.9% at
constant currency, reflecting the strong
cigarette pricing and cost initiatives
to mitigate the reduction in volumes,
as well as a year-on-year benefit
(c. £30 million) from ongoing non-
participating manufacturers’
settlements relating to prior year
disputes under the Master Settlement
Agreement. Although we expect further
settlements over time, we do not
anticipate this level of benefit to be
repeated in the coming financial year.
reflect a slight increase in wholesaler
inventories in the period, which
increased our shipment volumes by
c. 0.2%.
Our market share performance was
driven by three factors: first, the
continued benefit from our investment
in sales execution and brand building;
second, the way we have positioned
our brand portfolio to meet the needs
of consumers, particularly as they
continue to trade down; and third, to a
much smaller extent, the annualisation
of the benefit from our agile response to
capture share arising from KT&G’s exit
in December 2021. We gained or held
share in the three price segments,
where we are focused.
On a constant currency basis, tobacco
net revenue declined by 4.5%, as strong
pricing of around +10% was more than
offset by volumes down -5.5% and
adverse mix of around -9%. The adverse
mix was driven by the performance of
mass market cigars, which accounted
for around -5% of decline. This reflects
the relatively high value, low volume
nature of the category – the revenue
per stick for cigars is around 2.5 times
that for cigarettes. Adverse cigarette
mix accounted for the remaining
around -4% adverse mix driven by
our market share performance in the
deep discount segment and the
successful capture of the KT&G share
following their exit from the market
in December 2021.
Our cigarette share performance partly
reflects our progress in building brand
equity and strengthening our sales
force capabilities. For example, our
brand investment behind KOOL
continues to support share growth in
the premium value segment. We
continue to improve our sales execution
with our increased sales force, setting
our “perfect store” concept as the
standard to achieve across all stores
and working with our key account
customers on joint business planning.
As anticipated our mass market cigar
portfolio improved into the second half
of the year, driven by product
innovation. Over the year, however,
volumes came under pressure driven
by a temporary wholesaler destock,
market share losses and overall market
size declines. The destock followed a
wholesaler inventory build last
September ahead of Hurricane Ian,
which affected Southwest Florida
where our Tampa cigar warehouse is
located. Wholesaler inventories have
now normalised. The overall category
decreased as consumer buying patterns
changed post COVID. Pressure on
consumer spending drove some
downtrading, leading to market share
losses in our premium Backwoods
offering. We believe the outlook for this
category remains positive and we
continue to have a strong brand
presence with Backwoods, a premium
quality iconic heritage brand.
Our NGP net revenue declines
improved into the second half of the
year on a constant currency basis,
declining 21.4% over the full year. The
uncertainty caused by the FDA’s
Marketing Denial Orders (MDOs) issued
in April 2022 for our myblu products
eased into the period end as we
welcomed the unanimous decision on
www.imperialbrandsplc.com
87
OPERATING REVIEW continued
A F RIC A, A SIA
A U S T R A L A SIA
A N D CE N T R A L &
E A S TE R N E U R O PE
Paola Pocci
President, Africa, Asia,
Australasia and Central &
Eastern Europe
AT A GLANCE
HEADLINES
Tobacco volume**
-6.3%
Tobacco & NGP net revenue*,**
+5.3%
Tobacco net revenue*,**
+5.3%
NGP net revenue*
+10.0%
Adjusted operating profit*,**
+6.2%
* Change at constant currency.
** Excluding Russia in prior year.
• Strong financial delivery with pricing
discipline and strategic initiatives
offsetting exit from Russia in 2022
• Region now includes our Central &
Eastern Europe cluster; comparator
figures have been restated
• Positive contribution across all
market clusters with improved
consumer insight driving
local initiatives
• Strong tobacco price mix across
region offset inflationary
input pressures
• Market share growth in
Australia driven by active brand
portfolio management
• NGP net revenue growth with launch
of Pulze 2.0 in Czech Republic, Poland
and Hungary
• Adjusted operating profit delivery
driven by strong tobacco
performance offset by increased
NGP investment
The region delivered a strong
operational and financial performance
which offset the impact of our decision
to exit the Russian market in April
2022. The contribution from Russia in
the prior period is outlined in the table
on the opposite page.
Our results benefited from a strong
focus on pricing discipline across the
region, which offset inflationary
pressures on input costs, our improved
consumer insight and revenue growth
management tools provided by our
Global Consumer Office. Additionally,
we maintained a disciplined and
targeted approach to our investment in
sales execution and marketing in line
with our strategy to revitalise our
priority markets and to drive value from
our broader market portfolio.
The region includes one priority
market, Australia, where we continued
to innovate our product offer enabling
us to deliver an improvement in market
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Imperial Brands | Annual Report and Accounts 2023
Tobacco volume
Tobacco & NGP net revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Full year result
Change
bn SE
£m
£m
£m
£m
2023
87.4
1,960
1,949
11
844
2022
101.1
1,928
1,918
10
815
Actual
-13.6%
+1.7%
+1.6%
+10.0%
+3.6%
Constant
currency
–
+2.3%
+2.2%
+10.0%
+5.5%
Change
Excluding
Russia at cc
-6.3%
+5.3%
+5.3%
+10.0%
+6.2%
* 2022 figures restated for the transfer of the Central & Eastern Europe cluster from Europe to AAA (now known as AAACE). The change excluding Russia removes the FY22
contribution from Russia of 7.8 bn SE volumes, £56 million of net revenue and £5 million of adjusted operating profit. There was £0 million of NGP net revenue in Russia.
share against a highly competitive
market backdrop with record levels of
illicit trade. We refined our approach to
revenue growth management to
optimise value creation across our
portfolio with a clear brand offering at
each of the key price points. This has
supported our decisions on pricing and
product innovation, for example line
extensions of our Lambert & Butler
brand in the lowest pricing segment
enabled us to adopt a clearer pricing
strategy for Parker & Simpson in the
value segment. We also reshaped how
we support our customers to drive
improved availability while enhancing
our financial performance.
As we look to drive value from our
wider market portfolio, we transferred
the management of our Central &
Eastern European markets from Europe
to this region. Given their similar
characteristics, these markets now
benefit from being under this regional
leadership team which has enhanced
capabilities and expertise to manage
our portfolio of smaller markets to
unlock value and become platforms for
future growth.
In our African markets, pricing gains
more than offset weaker volumes as
consumer spending was affected by the
rising cost of living and there was an
increase in illicit trade in some
countries. Our renewed consumer focus
underpins the management of our local
jewel brands, such as Fine in Ivory
Coast and Hamilton in Burkina Faso,
and our international brands, such as
News in Madagascar. With a wide
variety of consumer preferences across
these markets, this insight enables
us to prioritise how we utilise the
diverse brand portfolios for each
country to meet the differing adult
consumer demands.
In the Middle East, markets such as
Kuwait benefited from borders
reopening and we exercised strong
pricing discipline combined with a
more rigorous go-to-market approach.
Our global brand Davidoff resonates
with local consumers and performed
well in Kuwait. Davidoff also has strong
brand loyalty in Taiwan, though
volumes here were impacted by lengthy
local COVID-related travel restrictions
and the competitive dynamic which
made pricing gains tougher.
Pricing was stronger across the
majority of our Central & Eastern
European markets, which more than
offset volume declines to support
financial delivery.
Tobacco volumes declined 13.6%
primarily driven by our exit from
Russia. Excluding Russia, volumes
declined 6.3%. However, strong price
mix (+11.7% ex Russia) more than offset
volume declines to grow tobacco net
revenue by 5.3% ex Russia on a constant
currency basis.
NGP net revenue grew 10.0% in the
period reflecting product and market
launches during the year. Following our
successful trial of our upgraded Pulze
2.0 device, which validated our
consumer proposition, we launched our
new heated tobacco device in Czech
Republic and two additional markets of
Hungary and Poland. This was
supported by an expansion in our iD
stick offering with new flavour and
limited edition crushball launches.
Adjusted operating profit grew 5.5% at
constant currency driven by a strong
tobacco performance in Australia,
Africa and the Middle East. These
more than offset increased NGP
investment to fund new product and
market launches. Excluding Russia,
adjusted operating profit grew 6.2%
at constant currency.
Priority market
Tobacco share
Australia
• 32.1% (+10 bps)
• 4% of Group net revenue
Performance
Market size declined 15.6% with the pressure on consumer affordability as well as
record levels of illicit trade. However, we grew share, revenue and profit in Australia
as we continue to actively manage our portfolio of brands, applying revenue growth
management techniques to optimise the value creation while managing our overall
market share delivery. Our performance benefited from innovation with line
extensions in Lambert & Butler in the fifth price segment, which created a clearer
price segment architecture for our portfolio. This enabled us to deliver strong pricing
with Parker & Simpson. We also launched JPS Evolve for both cigarettes and fine cut.
www.imperialbrandsplc.com
89
OPERATING REVIEW continued
DIS T RIB U TIO N
AT A GLANCE
HEADLINES
Gross profit*
+36.4%
Adjusted operating
profit excluding eliminations*,**
+17.3%
Adjusted operating margin
excluding eliminations*,**
-339bps
Adjusting operating profit
including eliminations*,**
+17.0%
* Change at constant currency.
** Eliminations relate to sales of tobacco and
NGP product to Logista that are still held in
their inventory.
• Gross profit includes contributions
from recent acquisitions
• Acquisitions support strategy to
accelerate growth in European
non-tobacco-related businesses
• Better than expected adjusted
operating profit includes strong
contribution from profit on inventory
vs prior year
Distribution consists of our 50.01% stake
in Logista. Logista is a Spanish-listed
distributor of tobacco and other
convenience products as well as
providing services such as freight,
parcel and pharmaceutical logistics. It
operates an end-to-end distribution
model that covers the full value chain
from collection to point of sale, and
covers over 200,000 points of sale
across Southern Europe.
The results include the incremental
financial contribution from the
acquisitions of Herinvemol S.L., trading
as ‘Transportes El Mosca’, (73.3%) and
Carbó Collbatallé S.L. (100%), which
were not in the prior year period, and
Speedlink Worldwide Express B.V.
(70%), which was included from
February 2022. The acquisitions are in
line with Logista’s strategy to
accelerate growth in European
non-tobacco-related businesses, which
now comprise over 50% of economic
sales. Following the 60% acquisition of
Transportes El Mosca (a Spanish-based
international transportation company)
in October 2022, Logista increased its
stake in the business to 73.3% in August
2023. This is in accordance with the
original deal which enabled Logista to
increase the stake in Transportes El
Mosca to 100% over the three years
from the date of the original deal.
Logista is now the second largest
temperature-controlled transportation
company in Spain, with both maritime
and road transportation assets. Carbó
Collbatallé, acquired in October 2022,
brings specialisation in frozen and
refrigerated transportation in the food
sector in Spain and Speedlink, acquired
in February 2022, a Dutch express,
courier company, expands the B2B
parcel business.
Gross profit – Gross profit at
£1,466 million was 36.4% higher on a
constant currency basis with strong
underlying performance across the
90
Imperial Brands | Annual Report and Accounts 2023
Distribution gross profit*
Adjusted operating profit
Adjusted operating profit margin
Eliminations
Adjusted operating profit (inc. eliminations)
Full year result
Change
£m
£m
%
£m
£m
2023
1,466
306
20.9
(2)
304
2022
1,046
254
24.3
(1)
253
Actual
+40.2%
+20.5%
-341bps
-100.0%
+20.2%
Constant
currency
+36.4%
+17.3%
-339bps
-100.0%
+17.0%
* Distribution gross profit is Distribution revenue less the cost of distributing products. This was previously referred to as Distribution net revenue.
Logista was c.£1.8 billion, with
movements in the cash position during
the 12-month period varying from a
high of c.£2.3 billion to a low of
c.£0.9 billion, primarily due to the
timing of excise duty payments. At
30 September 2023, the loan position
was c.£2.0 billion compared to
c.£2.1 billion at 30 September 2022.
the prior year. This was offset by the
positive performance in convenience
product distribution, driven by the
growth in disposable vaping products.
Operating profit – Adjusted operating
profit margin reduced by 339 basis
points at constant currency as the
acquired businesses diluted Logista’s
strong pre-acquisition margins. After
eliminations, the adjusted operating
profit contribution to the Group
increased 17.0% on a constant currency
basis, driven by the acquired businesses
and a strong contribution from profit on
inventory in Spain and France
following manufacturers’ price
increases in the period. Restructuring
charges of €14 million were included in
adjusted operating profit. This is in line
with our policy on adjusting items
where restructuring charges are now
not recognised as an adjusting item
after FY22.
Cash – In line with the rest of Imperial
Brands, 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
three key regions (Iberia, France and
Italy), further enhanced by the
contribution from acquisitions.
In Iberia, growth in gross profit was
driven in part by tobacco and related
products, with the former benefiting
from manufacturer price increases in
Spain which also led to a higher profit
on inventory than in the prior year. The
transport services recorded a strong
growth year on year, partly as a result
of the integration of the new
acquisitions. In the long-distance
segment, Logista Freight recorded
single digit growth including the
integration of Transportes El Mosca
(100% consolidated with 73.3% stake). In
the industrial parcel segment, Logista
Parcel continued to benefit from
improving demand for its services and
has started to integrate with the Carbó
Collbatallé network. Growth in the
parcel delivery business benefited from
the acquisition of Speedlink (70%) and
from single digit growth in Nacex
business. Pharmaceutical distribution
continues to expand both its customer
base and product offering.
In Italy, gross profit was supported by
good performance in tobacco and NGP
volumes together with strong growth in
convenience products, driven by
disposable vaping products. In July
2023, Logista announced the
acquisition of Gramma Farmaceutici, a
pharmaceutical distribution company
in Italy, representing the first stage of
our expansion into the pharma
segment in Italy.
In France, gross profit was impacted by
tobacco volume declines, following the
excise tax increase mid-year with
subsequent price increases by the
tobacco manufacturers, which led to a
profit on inventory much higher than in
www.imperialbrandsplc.com
91
GROUP FINANCIAL REVIEW
A C C E L E R A TIN G
R ET U R N S
SUMMARY FINANCIAL INFORMATION
Volumes*
-7.1%
Tobacco & NGP net revenue*
+1.4%
led by declines in market size, offset by
market share gains
at constant currency, driven by robust
tobacco price mix and NGP growth
Reported operating profit
Adjusted operating profit*
+26.8%
reflecting impact of exit from Russia in
prior year
+3.9%
at constant currency, driven by tobacco
pricing and Logista, offset by increased
NGP losses
Reported basic EPS
252.4p
an increase of 52.1%
Adjusted operating
cash conversion
92%
2022: 102%
* Excluding Russia.
Adjusted EPS*
278.8p
an increase of 4.3% on a constant
currency basis
Adjusted net debt/EBITDA
1.9x
2022: 2.0x
92
Imperial Brands | Annual Report and Accounts 2023
Lukas Paravicini
Chief Financial Officer
This year’s financial results reflect
the improving returns from our first
year of the growth phase of our
five-year strategy.
On a constant currency basis, tobacco &
NGP net revenue grew 1.4% excluding
Russia, reflecting strong tobacco price
mix and NGP growth. Group adjusted
operating profit rose 3.9%, on a constant
currency basis. Including Russia,
tobacco and NGP net revenue grew 0.7%
and Group adjusted operating profit
rose 3.8% on a constant currency basis.
Reported revenue declined -0.2%
reflecting lower excise partially offset
by higher Logista revenues. Reported
operating profit increased 26.8%
primarily driven by non-recurrence of
exit charges related to the Russian
asset disposal (£399 million) in the
comparator period.
Cash generation remains a key focus
and has supported the delivery of
£2.4 billion of free cash flow, with 92%
adjusted operating cash conversion.
The strong cash generation has enabled
us to invest behind our strategy, return
£2.3 billion to shareholders via dividend
and share buyback and to reduce
reported net debt by £0.1 billion to
£8.4 billion with adjusted net debt/
EBITDA in line with expectations,
reducing by 0.1x to 1.9x in FY23.
On a reported basis, cash flow reduced
year on year due to the £1.0 billion
share repurchase.
The strong free cash flow generation
enables us to invest behind the
strategy, a strengthened balance sheet
and return capital to shareholders.
We have announced a further share
buyback of up to £1.1 billion of shares
during FY24. This is a 10% increase on
last year’s £1.0 billion buyback, where we
repurchased 52,107,043 shares, or 5.5%
of our share capital in FY23. In support
of our progressive dividend policy,
we are also increasing our dividend per
share of 4.0% for FY23.
We anticipate our growth phase will
continue for the remainder of our
five-year strategy as the business
capitalises on the gains and
investments we have previously made.
SUMMARY INCOME STATEMENT
£ million (unless otherwise indicated)
Revenue/net revenue/gross profit*
Tobacco & NGP revenue/net revenue
Distribution revenue/gross profit
Operating profit
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
2023
2022
2023
2022
21,656
10,819
22,795
9,756
8,012
1,466
7,793
1,046
3,106
298
(2)
3,402
(298)
7
3,111
(655)
2,456
252.4
146.82
2,472
212
(1)
2,683
(117)
(15)
2,551
(886)
1,665
165.9
141.17
3,583
306
(2)
3,887
(410)
7
3,484
(781)
2,703
278.8
146.82
3,441
254
(1)
3,694
(326)
9
3,377
(755)
2,622
265.2
141.17
* Reported revenue includes duty, similar items, distribution and sale of peripheral products, which are excluded from net revenue; net revenue comprises reported revenue
less duty and similar items, excluding sale of peripheral products and distribution revenue. Distribution gross profit is Distribution revenue less the cost of distributing
products. This was previously referred to as Distribution net revenue.
Impact of Russia exit
On 20 April 2022, we announced the
transfer of our Russian business to local
investors. This has affected the
year-on-year performance comparison
in these results. We provide below the
contribution from our Russian business
in FY22 for key metrics in order to
facilitate comparison between the two
periods; we have also provided
year-on-year comparisons including
and excluding Russia.
FY22 Russia contribution
Tobacco volume
Tobacco & NGP net
revenue
Tobacco net revenue
NGP net revenue
Adjusted operating profit
Russia
bn SE
7.8
£m
£m
£m
£m
56
56
–
5
Alternative performance measures
(APM)
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
Supplementary Information.
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. This
year, we have included adjusted
performance measures to exclude our
exit from Russia in April 2022.
www.imperialbrandsplc.com
93
GROUP FINANCIAL REVIEW continued
GROUP RESULTS – ADJUSTED CONSTANT CURRENCY ANALYSIS
£ million
(unless otherwise indicated)
Tobacco & NGP net revenue
Full year
ended 30
September
2022
Foreign
exchange
Constant
currency
movement
Full year
ended 30
September
2023
Change
Constant
currency
change
cc change
excluding
Russia*
Europe
Americas
Africa, Asia, Australasia and Central & Eastern Europe
Tobacco & NGP net revenue
Tobacco & NGP adjusted operating profit
Europe
Americas
Africa, Asia, Australasia and Central & Eastern Europe
Tobacco & NGP adjusted operating profit
Distribution
Gross profit
Adjusted operating profit including eliminations
3,039
2,826
1,928
7,793
1,447
1,179
815
3,441
1,046
253
56
120
(12)
164
6
56
(16)
46
40
8
Group adjusted results
Adjusted operating profit
Adjusted net finance costs
Adjusted eps (pence)
* Constant currency movement excluding Russia.
3,694
(326)
265.2
54
(22)
2.5p
145
(134)
44
55
29
22
45
96
380
43
139
(62)
11.1p
3,240
2,812
1,960
8,012
1,482
1,257
844
3,583
6.6%
4.8%
4.8%
(0.5)% (4.7)% (4.7)%
5.3%
2.3%
1.4%
0.7%
1.7%
2.8%
2.4%
6.6%
3.6%
4.1%
2.0%
1.9%
5.5%
2.8%
2.0%
1.9%
6.2%
2.9%
1466
304
40.2% 36.4% 36.4%
20.2% 17.0% 17.0%
3,887
(410)
278.8
5.2%
25.8%
5.1%
3.8%
19.1%
4.2%
3.9%
19.1%
4.3%
Volumes,
bn SE
Tobacco & NGP net revenue
(actual FX rate), £m
Adjusted operating profit
(actual FX rate), £m
44.1%
45.4%
10.5%
Europe
Americas
AAACE
89.9bn SE
20.7bn SE
87.4bn SE
24.5%
35.1%
Europe
Americas
AAACE
7.8%
40.4%
21.7%
38.1%
£3,240m
£2,812m
£1,960m
32.4%
Europe
Americas
AAACE
Distribution
£1,482m
£1,257m
£844m
£304m
94
Imperial Brands | Annual Report and Accounts 2023
SALES PERFORMANCE
Reported revenue
-0.2%
Tobacco & NGP net revenue*
+1.4%
* excluding Russia, at constant currency.
• Reported revenue declined -0.2%
reflecting lower excise due to volume
declines partially offset by higher
Logista revenues.
• Tobacco & NGP net revenue grew
+1.4% at constant currency excluding
Russia, comprising +0.7% from
tobacco and +26.4% from NGP;
including Russia, net revenue grew
by +0.7%.
• Tobacco volume was down -7.1%,
reflecting declines across Europe,
Americas and AAACE as a result of
pressure on consumer spending;
including Russia, tobacco volumes
were down -10.4%.
• Aggregate market share growth in
our top-five priority markets of
+10bps (FY22: +35bps).
• Tobacco price mix was strong at
+7.9% due to positive pricing.
Including our exit from Russia, price
mix was up +10.4%.
• NGP net revenue increased +26.4% at
constant currency, led by product
and market launches in Europe and
AAACE, offsetting continued declines
in the USA.
• Translation FX was favourable at
+2.1% due to average sterling
weakening against the dollar
and euro.
1.4%
2.1%
3.5%
£7,793m
£(56)m
£7,737m
£(538)m
£594m
£55m
£7,848m
£164m
£8,012m
FY22 Tobacco
& NGP net
revenue
Russia
FY22 Tobacco
& NGP net revenue
(ex-Russia)
Tobacco
volume
Tobacco
price/mix
NGP
net revenue
FY23 Constant
currency tobacco &
NGP net revenue
Translational FX
FY23 Tobacco &
NGP net revenue
OPERATING PROFIT
Reported operating profit
+26.8%
Group adjusted operating profit*
+3.9%
* excluding Russia, at constant currency.
• Reported Group operating profit of
£3,402m increased by +26.8% primarily
driven by non-recurrence of exit
charges related to the Russian asset
disposal (£399m) in FY22.
• Adjusted Group operating profit
increased +3.9% at constant currency
and excluding Russia, driven by Logista
performance and strong tobacco
pricing offsetting tobacco volume
declines and increased NGP losses.
Including Russia, Group adjusted
operating profit increased +3.8%.
• Tobacco adjusted operating profit
increased by +4.1% at constant
currency and excluding Russia,
reflecting strong pricing offsetting
volume declines. Including Russia,
tobacco adjusted operating profit rose
+3.9% at constant currency.
• NGP losses increased +48.3% at
constant currency as we increased
investment behind product and
market launches.
• Translation FX of +1.5% reflects
average sterling weakening against
the dollar and euro.
3.9%
1.5%
5.4%
£3,694m
£(5)m
£3,689m
£143m
£(42)m
£43m
£3,833m
£54m
£3,887m
FY22 adjusted
operating profit
Russia
FY22 AOP
(ex-Russia)
Tobacco
performance
NGP losses
Logista and elims
FY23 adjusted
operating profit at
constant currency
Translation FX
FY23 adjusted
operating profit
www.imperialbrandsplc.com
95
GROUP FINANCIAL REVIEW continued
EARNINGS PER SHARE
Reported EPS
+52.1%
Adjusted EPS*
+4.3%
* excluding Russia, at constant currency.
• Reported EPS increased +52.1% to
252.4 pence driven by higher reported
operating profit and a reduction in
tax charge relating to favourable
FX movements.
• Adjusted EPS was 278.8 pence, up
+4.3% at constant currency and
excluding Russia, due to increased
adjusted operating profit and a lower
share count as a result of the share
buyback programme, offset by higher
finance costs and minority interest
costs, the latter reflecting higher
growth at Logista. Including Russia,
adjusted EPS grew +4.2%.
4.3%
0.9%
5.2%
265.2p
(0.4)p
264.8p
15.1p
(6.6)p
(1.9)p
(2.0)p
7.0p
276.3p
2.5p
278.8p
FY22
Adjusted EPS
Russia
FY22
Adjusted EPS
ex-Russia
Operating
profit
Interest
Minorities &
JV
Tax
Number of
shares
FY23
Adjusted
constant
currency EPS
Translation
FX
FY23
Adjusted EPS
Reported
Adjusted
2023
3,402
632
4,034
1
(39)
70
4,066
(347)
(590)
3,129
(254)
–
(407)
(104)
2,364
(183)
(1,312)
(1,006)
–
(137)
2022
2,683
660
3,343
428
–
56
3,827
40
(681)
3,186
(177)
–
(358)
(89)
2,562
14
(1,320)
–
(1)
1,255
2023
3,887
270
4,157
–
–
7
4,164
(347)
(590)
3,227
(254)
(98)
(407)
(104)
2,364
(183)
(1,312)
(1,006)
–
(137)
2022
3,694
244
3,938
–
–
(20)
3,918
40
(681)
3,277
(177)
(91)
(358)
(89)
2,562
14
(1,320)
–
(1)
1,255
SUMMARY CASH FLOW STATEMENT
£ million (unless otherwise indicated)
Group operating profit
Depreciation, amortisation and impairments
EBITDA
Loss on disposal of subsidiary
Profit on disposal of assets
Other non-cash movements
Operating cash flows before movement in working capital
Working capital
Tax cash flow
Cash flows from operating activities
Net capital expenditure
Restructuring
Cash interest
Minority interest dividends
Free cash flow
(Acquisitions)/disposals
Shareholder dividends
Share buyback
Purchase of ESOT shares
Net cash (outflow)/inflow
96
Imperial Brands | Annual Report and Accounts 2023
CASH FLOW
Cash flows from operating activities
were £3,129 million
(2022: £3,186 million).
As anticipated, capital expenditure of
£254 million was also higher than the
prior year (2022: £177 million) and is
anticipated to increase in 2024 to
£ million (unless otherwise indicated)
Free cash flow of £2,364 million
(2022: £2,562 million) was below the
prior year primarily due to the lower
cash flows from operating activities,
the increase in capital expenditure and
increased interest costs due to the
higher cost of debt.
£ million
Restructuring cash cost
Cumulative to date
Anticipated total
The net cash outflow of £137 million
(2022: £1,255 million inflow) reduced
year on year, reflecting the share
buyback programme and higher
acquisition costs compared to the prior
year. Acquisition costs were
£183 million (2022: £14 million income)
and relate to Imperial’s acquisition of a
range of nicotine pouches to be
RETURN ON INVESTED CAPITAL
Return on invested capital (ROIC)
increased by 80 basis points, driven by
an increase in net adjusting operating
profit after tax. ROIC was 18.5%
(2022: 17.7%).
Adjusted operating profit increased by
£193 million. This offset the increase of
£ million
within an expected range of
£300 million to £350 million. The
increased capital expenditure is
supporting projects to drive simplified
and efficient operations in line with our
strategic plan.
Adjusted operating cash conversion was
92% (2022: 102%) on a 12-month basis.
Adjusted operating profit
Cash flow from operating activities post capital expenditure pre interest and tax
Adjusted operating cash conversion
2023
2022
3,887
3,563
92%
3,694
3,781
102%
Restructuring cash costs were
£98 million (2022: £91 million).
We have cash spend from our three
previous restructuring programmes:
Cost Optimisation Programme I
of £24 million (2022: £11 million),
Cost Optimisation Programme II of
£10 million (2022: £19 million) and the
2021 Strategic Review Programme of
£61 million (2022: £56 million) and other
restructuring costs of £3 million.
Together, the total cash spend for all
three restructuring programmes is
anticipated to be £1,558 million, of
which £1,346 million has been spent to
date. The remaining cash spend is
ongoing, although is not expected to be
in excess of the existing provisions.
launched in the US and that we
announced in June and Logista’s
acquisition of Transportes El Mosca
(73.3%) and Carbó Collbatallé S.L. (100%),
all of which completed in the period.
The £1.0 billion share buyback
announced in October 2022 also
completed in the period. We have
£64 million in average annual capital
to drive an improvement in returns.
Our FY23 invested capital has reduced
compared to the prior year mainly due
to the translational FX impact on
intangible assets.
2023
98
1,346
1,558
2022
91
1,248
1,558
announced a further share buyback of
up to £1.1 billion of shares during FY24.
2023
3,402
485
3,887
(871)
3,016
(2,567)
16,944
1,617
15,994
16,304
18.5%
2022
2,683
1,011
3,694
(827)
2,867
(2,823)
17,777
1,659
16,613
16,240
17.7%
www.imperialbrandsplc.com
97
Reported operating profit
Adjusting items (APM section within Supplementary Information)
Adjusted operating profit
Equivalent tax charge
Net adjusted operating profit after tax
Working capital
Intangible assets
Property, plant and equipment
Invested capital
Average annual invested capital
Return on invested capital
GROUP FINANCIAL REVIEW continued
ADJUSTED NET DEBT/EBITDA
Adjusted net debt reduced £28 million
to £8,026 million (2022: £8,054 million)
in the year, as continued strong cash
generation supported additional return
of capital to shareholders via a share
buyback. Adjusted net debt/EBITDA
reduced to 1.9x from 2.0x, in line with
previous guidance.
Reported net debt reduced by
£54 million to £8,438 million
(2022: £8,492 million). Excluding
accrued interest, lease liabilities and the
fair value of interest rate derivatives
providing commercial hedges of
interest risk, Group adjusted net debt
was £8,026 million
(2022: £8,054 million).
£ million
Reported net debt
Accrued interest
Lease liabilities
Fair value of interest rate derivatives
Adjusted net debt
Adjusted EBITDA
Adjusted net debt/EBITDA
2023
(8,438)
125
349
(62)
(8,026)
4157
1.9x
2022
(8,492)
105
248
85
(8,054)
3938
2.0x
RECONCILIATION BETWEEN REPORTED AND ADJUSTED PERFORMANCE MEASURES
Operating profit
Net finance (costs)/income Earnings per share (pence)
£ million unless otherwise indicated
Reported
Russia, Ukraine and associated markets
Amortisation & impairment of acquired intangibles
Restructuring costs
Fair value adjustment and impairment of other financial assets
Loss on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Charges related to legal provisions
Structural changes to defined benefit pension schemes
Brand impairment in equity accounted joint venture
Net fair value and exchange movements on financial instruments
Post-employment benefits net financing income
Tax settlement interest costs
Recognition of deferred tax assets
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
2023
3,402
4
347
–
36
1
–
–
85
12
–
–
–
–
–
–
–
–
–
–
3,887
2022
2,683
399
349
197
37
29
5
(9)
–
4
–
–
–
–
–
–
–
–
–
–
3,694
2023
(298)
–
–
–
–
–
–
–
–
–
–
(149)
(13)
50
–
–
–
–
–
–
(410)
2022
(117)
–
–
–
–
–
–
–
–
–
–
(201)
(8)
–
–
–
–
–
–
–
(326)
2023
252.4
0.4
38.0
–
3.4
0.1
–
–
6.4
1.0
–
(25.8)
(1.4)
5.2
(23.0)
–
22.4
–
–
(0.3)
278.8
2022
165.9
42.2
35.4
15.6
3.9
2.2
0.5
(1.0)
–
0.4
2.5
(1.9)
(0.8)
–
–
10.7
(6.7)
(2.7)
0.8
(1.8)
265.2
Adjusting items
The main reconciling items of the
Group’s reported to adjusted operating
profit are shown above.
In the period to 30 September 2023
adjusting items relate mainly to
amortisation of acquired intangibles of
£347 million (2022: £349 million) and
fair value movements on derivative
financial instruments £(149) million
(2022: £(201) million).
Adjusting items in the prior period
included net charges associated with
Russia, Ukraine and associated markets
which are significantly reduced in the
current year to £4 million
(2022: £399 million).
We have not treated restructuring costs
as adjusting items in the FY23 results.
Restructuring charges of £197 million in
the prior year relate to the 2021
Strategic Review Programme which is
now complete. There will be ongoing
cash spend from past restructuring
programmes.
During the period factory footprint
rationalisation costs were supported by
profit on sale of former operational
sites and have not been included in
adjusted items.
Finance costs
Adjusted net finance costs were higher
at £410 million (2022: £326 million),
reflecting higher interest rates in all
major currencies during the year.
98
Imperial Brands | Annual Report and Accounts 2023
Reported net finance costs were
£298 million (2022: £117 million),
incorporating the impact of net fair
value and foreign exchange gains on
financial instruments of £149 million
(2022: £201 million), post-employment
benefits net financing income of
£11 million (2022: £8 million) and tax
settlement interest costs of £50 million
(2022: nil). The net fair value gains of
£139 million on financial instruments
are primarily due to positive valuation
movement of the Group’s interest rate
derivatives reflecting increasing
market interest rate expectations in
the year.
Dividend payments
The Group paid two interim dividends
of 21.59 pence per share in June and
September 2023.
The Board has approved a further
interim dividend of 51.82 pence per
share and will propose a final dividend
of 51.82 pence per share bringing the
total dividend for the year to 146.82
pence. This represents a 4.0% increase
to the amount of 141.17 pence per share
paid in the prior year and is in line with
the Group’s progressive dividend policy.
The annual dividend represents a
payout ratio of 52.7% with respect to
basic earnings per share.
The third interim dividend will be paid
on 29 December 2023 to shareholders
registered on 24 November 2023.
Subject to AGM approval, the proposed
final dividend will be paid on 28 March
2024 to shareholders registered on
16 February 2024.
Dividend payments
First interim
Second interim
Third interim
Final
Amount (pence)
Ex-date
Record dates
Payment date
21.59
21.59
51.82
51.82
25-May-23
17-Aug-23
23-Nov-23
15-Feb-24
26-May-23
18-Aug-23
24-Nov-23
16-Feb-24
30-Jun-23
29-Sep-23
29-Dec-23
28-Mar-24
The Group remains fully compliant with
all our banking covenants and remains
committed to retaining our investment
grade ratings.
Lukas Paravicini
Chief Financial Officer
Funding/liquidity
During the year, we repaid the
remaining $354 million balance of our
February 2023 $1.0 billion bond and our
€750 million bond in August 2023. We
issued bonds of €950 million in the year
with a coupon of 5.25%, maturing in
February 2031. In September 2023, we
swapped our remaining US dollar bonds
to euro, therefore closing adjusted net
debt was materially all euro. As at
30 September 2023, the Group had
committed financing in place of around
£12.9 billion, which comprised 28% bank
facilities and 72% raised from capital
markets. During the year the maturity
date of €3,125 million of the Group’s
existing syndicated multicurrency
facility was extended to 30 September
2026. Two further tranches of
€184 million each were not extended
and therefore maintain their maturity
dates of 30 September 2025 and
30 March 2026, respectively. The Group
also put in place an additional
£550 million of committed bilateral
bank facilities with maturity dates in
September 2024.
Our all-in cost of debt increased to 4.3%
(2022: 3.5%) due to the refinancing of
naturally maturing cheaper debt at
higher rates and the impact of rising
interest rates on the proportion of our
debt that was not hedged.
Our interest cover decreased to 10.1x
(2022: 12.1x) reflecting the increased
adjusted net finance costs.
Given the rising interest environment,
we expect upward pressure on finance
costs going forward although we have
hedging in place for 80% of our
expected debt in FY24.
Taxation
Our adjusted effective tax rate is 22.4%
(2022: 22.4%) and the reported effective
tax rate is 21.1% (2022: 34.7%). The
adjusted effective tax rate is in line with
the prior year and our previously issued
guidance for year ended 30 September
2023. The adjusted tax rate is lower
than the reported rate due to limited tax
relief arising on foreign exchange gains
that arise on consolidation, the
recognition of deferred tax assets for
intangibles in the Group’s Dutch
business and an increase in uncertain
tax positions in the Group’s French and
German businesses.
We expect our adjusted effective tax
rate for the year ended 30 September
2024 to be around 23%.
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
Cooperation 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
adjusted earnings per share at constant
currency (1.5% and 0.9%, respectively).
Sterling weakened against the US dollar
(4.3%) and weakened against the euro
(2.7%). Other major currencies remained
broadly flat compared to the prior year.
www.imperialbrandsplc.com
99
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 the exposure
to the consequences of uncertainty.
Risk is anything that could disrupt the
achievement of the Group’s strategy
and objectives.
The Board and management have
reviewed the risk landscape (current
and emerging) and related profiling, with
risk mitigations and impacts assessed.
Many of these risks are external and
cannot be fully mitigated, and while the
Group continues to monitor its risk
landscape, there can be no guarantee
RISK CAUSES
As a Group we face a number of 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
across the Group in relation to their
impact on existing risks. 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.
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, delivery of the
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 fast-moving consumer goods
(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
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 Group is exposed to geopolitical
and economic conditions of the
countries and regions in which it
operates, which could impact its
largest markets and may affect
continuity of supply.
Any adverse geopolitical or economic
developments in, or affecting, the
Group’s key countries and regions,
including, but not limited to, increased
international trade tensions or the
outbreak of conflict could impact the
Group and its operations.
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.
100
Imperial Brands | Annual Report and Accounts 2023
most likely causes ensures a timely,
measured and appropriate response.
The Group, along with all other
businesses, has continued to be
impacted by inflationary pressures.
This has resulted in increased
commodity and energy prices as well
as sustained economic pressures on
consumer spending.
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 while remaining
aligned to the Board’s risk appetite.
EMERGING RISKS
As part of the risk assessment performed
by the Group Risk Committee and the
Board, emerging risk topics have been
discussed and considered.
Mass generative AI availability
A risk being considered is that of
widely available, generative artificial
intelligence rapidly surpassing our
organisational ability to understand
and respond to associated risks or
capitalise on its opportunities. The
Group continues to assess this
emerging risk to identify opportunities
and develop mitigations.
Regulatory change
Due to the highly regulated nature of
the industry the Group operates in, new
regulatory change risks are
continuously emerging.
The Group considers any emerging
regulatory change risks beyond the
general three-year risk horizon, so that
mitigations can be developed to
manage the impacts of future changes.
Further regulatory changes are being
considered in the UK, with a generational
smoking ban and further restrictions on
EVP products proposed. The Group is
assessing this emerging risk and
developing appropriate mitigations.
Who is involved?
What activities are completed?
Assessment and evaluation of risks
How do we confirm risks are managed?
Board
• Oversight of the Group’s internal control systems,
• Oversees risk management approach
risk management process and framework
and reporting
”
n
w
o
d
-
p
o
T
“
• Provides operational and strategic risk
perspectives, ensuring these are considered in
Group strategy
• Reviews results of semi-annual risk
assessment, including the Group’s
principal risks
• Sets the Group’s risk appetite annually
• Reviews the Group’s principal risks and
• Discusses and agrees risk appetite for the
Group’s principal risks
considers emerging risks and themes identified
in six-monthly risk assessment process
• Obtains and reviews scope, quality and results
• Oversees risk management approach
of assurance provided by internal and
external audit
• Reviews results of six-monthly risk assessment
and provides assurance over the operation of the
risk management framework
and reporting
• Regularly reviews results of assurance activities
Audit
Committee
ELT
• High-impact risks identified in “bottom-up”
• Reviews results of assurance activities
assessments are consolidated for review by ELT
• Considers emerging risks and themes identified
to ensure effective closure of any
observations raised
in risk assessment process
• Regularly reviews results of Group Controls
Matrix (GCM) internal control testing
Risk
Committee
• Provides “top-down” insights to risk
assessment process
• Considers emerging risks and themes identified
in risk assessment process
• Provides input into development of risk
management activities
• Meets throughout the year to oversee risk
management approach and reporting
• Reviews results of assurance activities to
ensure the effectiveness of risk mitigations
Third Line
• Group Internal Audit performs risk-based,
challenging audits and provides insights and
recommendations to the Audit Committee
and management
• Provides the Board with independent
assurance over the effectiveness of
the design and operation of the
Risk Management Framework
• Provides audit reports and reporting to
management and the Audit Committee
Second Line
• Evaluation of functional risk registers by subject
matter experts, in line with Board risk appetite,
including review of first line risk assessments
• Define and implement policy and risk
management activities aligned to risk appetite
• Provide support to business in design and
• Review and agreement of functional risk
implementation of local mitigations
registers by functional leadership teams, with
minimum six-monthly formal update
• Formal completion of legal and regulatory
disclosures (e.g. ESG-related, TCFD, Human
Rights, Group Science regulatory certifications)
• Monitor effectiveness of mitigations through
Key Risk Indicators/Key Performance
Indicators and assurance activities
• Review results of GCM testing and identify
common themes
• Review results of assurance activities to
ensure effective closure of observations raised
”
p
u
-
m
o
t
t
o
B
“
First Line
• Local ownership and accountability for
• Leadership accountability for risk assessment
completion and continued update of risk register,
with minimum six-monthly formal update
• 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 regular key control testing across
the business – Group Controls Matrix (GCM)
communicates key requirements and
required testing
and mitigation effectiveness
• Regional leadership team oversight and input
• Dedicated Global Business Services (GBS)
Compliance function responsible for
facilitating compliance activities in selected
First Line operations
• Management certification of compliance with
Group policies, GCM financial control
compliance, laws and regulations and
notification of fraud on a six-monthly basis
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 134.
www.imperialbrandsplc.com
101
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.
The risks reported are those currently
considered by the Board to have the
most likely impact on achievement of
the Group’s objectives.
This year the previously reported tax
legislation risk is no longer considered
as a principal risk to the Group, and is
not included below. The People and
Organisation risk has been replaced by
‘Effective management of
organisational transformation’.
Changes have been made to the way in
which some of the remaining principal
risks have been described.
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 impacts:
Focusing on our priority markets
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
MANAGEMENT OF POTENTIAL ADVERSE
REGULATORY CHANGE AND RESPONSE TO
REGULATORY CHANGE
Risk profile:
Strategic impact:
Focusing on our priority markets
Building a targeted NGP business
Regulatory change aimed at further de-normalising the
sale, marketing and consumption of tobacco and nicotine
products adversely impacts the Group’s products, markets,
manufacturing processes, customers and/or consumers
• Pricing pressures resulting from sustained inflationary impact on
consumer spend, triggered by unprecedented increases in prices
for fuel, food and other commodities
• Continued development of EU Excise Directive, which may
include tax across next generation product (NGP) categories,
with new rates to apply from FY27
• The FDA is expected to release final product standards that would
ban menthol cigarettes and characterising flavours in cigars in
the US by the end of 2023, though implementation is unlikely
before FY25, if at all. Legislative proposals restricting flavours at
state and local levels remain of concern. A separate regulatory
proposal to implement a maximum nicotine level in cigarettes
is unlikely to be implemented within the Group’s three-year
risk horizon
• Generational smoking ban and further restrictions on EVP
products proposed in the UK. The proposed generational smoking
ban would have a gradual impact from 2027 onwards
• Wider alignment between Tobacco and NGP regulation could
arise in the EU under reforms to EU Tobacco Products Directive
(EUTPD) and other legislation, and globally as a result of decisions
made at the WHO Conference of Parties
• Single use plastics Extended Producer Responsibility legislation
introduced in the EU and the UK with expected financial impact
from FY24
• Disposable vapes face political pressure in Europe
• Australia’s National Tobacco Strategy seeks to further standardise
product, pack and marketing by 2025
• New Zealand’s law prohibiting all but ”very low nicotine”
cigarettes will be implemented in 2025 and combines with other
generational and retail restrictions
• Heated tobacco characterising flavour ban in Europe
102
Imperial Brands | Annual Report and Accounts 2023
• In markets where consumers are
• Subject matter experts assess global excise
• The development of the Group
increasingly price-conscious, high price
risks and model price elasticity to ensure the
strategy includes analysis of
increases impact product demand and
business plan and strategy are developed and
planned and potential changes
volumes sold
aligned to consumer insights
• Pricing pressures may result from
• The Group’s Revenue Growth Management
significant pressures on consumer
function is responsible for the identification
in product taxation to identify
and ensure investment
opportunities across our range
disposable income, as well as increases
and management of strategic commercial
of products
in taxation further increasing product
opportunities arising from excise change
• Tailored product portfolio
price. This could result in downtrading to
lower price products/categories or an
increase in the attractiveness of illicit
product, impacting sales volumes
• 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
• Tools in use to better model and predict
impacts of excise, inflation and other
consumer pressures
• Pricing strategies regularly reviewed by
regional leadership teams
• 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
offerings at a local level, within
and across categories, allow for
any relative commercial
advantage from excise
mechanisms to be realised
• Opportunity for use of
technology and artificial
intelligence-enabled tools to
analyse, simulate and better
predict price and promotion
moves across our categories
• Regulatory change can restrict product
• A reviewed set of Group public policy
• While stringent regulation
specification (e.g. menthol or other
positions is in place to align with
flavour ban), consumer interaction, and
regulatory developments
• Engagement with regulatory authorities
• 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
opportunities identified
• Legal action can be taken to defend
against or prevent regulatory change where
this impacts legal freedoms
product supply, and place restrictions on
consumers’ ability to enjoy our products
(potentially impacting sales volumes and
market size), and to access potentially
reduced-risk nicotine products
• 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
proves a burden on all firms,
the burden is less on those that
operate from an existing high
baseline of responsibility and
have advanced compliance
systems
• Regulation can benefit
consumers and responsible
market players through
preventing less responsible
companies from discrediting
product categories
• Some global regulators have
adopted a policy of tobacco
harm reduction, which
recognises the reduced risk
that non-combustible nicotine
products offer adult smokers in
comparison to cigarettes and
other traditional combustible
products
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
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 impacts:
Focusing on our priority markets
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
MANAGEMENT OF POTENTIAL ADVERSE
REGULATORY CHANGE AND RESPONSE TO
REGULATORY CHANGE
Risk profile:
Strategic impact:
Focusing on our priority markets
Building a targeted NGP business
Regulatory change aimed at further de-normalising the
sale, marketing and consumption of tobacco and nicotine
products adversely impacts the Group’s products, markets,
manufacturing processes, customers and/or consumers
• Pricing pressures resulting from sustained inflationary impact on
consumer spend, triggered by unprecedented increases in prices
for fuel, food and other commodities
• Continued development of EU Excise Directive, which may
include tax across next generation product (NGP) categories,
with new rates to apply from FY27
• The FDA is expected to release final product standards that would
ban menthol cigarettes and characterising flavours in cigars in
the US by the end of 2023, though implementation is unlikely
before FY25, if at all. Legislative proposals restricting flavours at
state and local levels remain of concern. A separate regulatory
proposal to implement a maximum nicotine level in cigarettes
is unlikely to be implemented within the Group’s three-year
risk horizon
• Generational smoking ban and further restrictions on EVP
products proposed in the UK. The proposed generational smoking
ban would have a gradual impact from 2027 onwards
• Wider alignment between Tobacco and NGP regulation could
arise in the EU under reforms to EU Tobacco Products Directive
(EUTPD) and other legislation, and globally as a result of decisions
made at the WHO Conference of Parties
• Single use plastics Extended Producer Responsibility legislation
introduced in the EU and the UK with expected financial impact
from FY24
• Disposable vapes face political pressure in Europe
• Australia’s National Tobacco Strategy seeks to further standardise
product, pack and marketing by 2025
• New Zealand’s law prohibiting all but ”very low nicotine”
cigarettes will be implemented in 2025 and combines with other
generational and retail restrictions
• Heated tobacco characterising flavour ban in Europe
• In markets where consumers are
• Subject matter experts assess global excise
increasingly price-conscious, high price
increases impact product demand and
volumes sold
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
• Tools in use to better model and predict
impacts of excise, inflation and other
consumer pressures
• Pricing strategies regularly reviewed by
regional leadership teams
• 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
• A reviewed set of Group public policy
positions is in place to align with
regulatory developments
• Engagement with regulatory authorities
• 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
opportunities identified
• Legal action can be taken to defend
against or prevent regulatory change where
this impacts legal freedoms
• Pricing pressures may result from
significant pressures on consumer
disposable income, as well as increases
in taxation further increasing product
price. This could result in downtrading to
lower price products/categories or an
increase in the attractiveness of illicit
product, impacting sales volumes
• 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
• Regulatory change can restrict product
specification (e.g. menthol or other
flavour ban), consumer interaction, and
product supply, and place restrictions on
consumers’ ability to enjoy our products
(potentially impacting sales volumes and
market size), and to access potentially
reduced-risk nicotine products
• 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
• Tailored product portfolio
offerings at a local level, within
and across categories, allow for
any relative commercial
advantage from excise
mechanisms to be realised
• Opportunity for use of
technology and artificial
intelligence-enabled tools to
analyse, simulate and better
predict price and promotion
moves across our categories
• While stringent regulation
proves a burden on all firms,
the burden is less on those that
operate from an existing high
baseline of responsibility and
have advanced compliance
systems
• Regulation can benefit
consumers and responsible
market players through
preventing less responsible
companies from discrediting
product categories
• Some global regulators have
adopted a policy of tobacco
harm reduction, which
recognises the reduced risk
that non-combustible nicotine
products offer adult smokers in
comparison to cigarettes and
other traditional combustible
products
www.imperialbrandsplc.com
103
PRINCIPAL RISKS AND UNCERTAINTIES continued
Principal risk
Change in year
Impact
Mitigation
Opportunity
PRODUCT SUPPLY FAILS TO MEET MARKET
DEMANDS
Risk profile:
Strategic impact:
Focusing on our priority markets
Building a targeted NGP business
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
• Continued global cost inflation, notably in leaf, non-tobacco
materials and conversion costs, has impacted, and will continue
to impact, the cost of goods. The Russian invasion of Ukraine has
continued to impact energy prices in Europe
• Pressures on the Group’s logistics supply chain have eased due to
the relaxation of regional COVID-19 lockdown restrictions
• Geopolitical tensions have continued to increase, with the
potential to impact global supply chains if there are any adverse
developments in, or affecting, the Group’s key countries
and regions
• Continuing frequency of adverse weather globally due to climate
change potentially impacting supply chains, notably cigar
operations in our Caribbean factories and Philippines
MAJOR INCIDENT RESULTING FROM CYBER OR
SIMILAR TECHNOLOGY RISK
Risk profile:
Strategic impact:
Simplified and efficient operations
• The Group continues to operate in an external environment with
heightened geopolitical risk, including in a number of the Group’s
markets and regions, which highlights the continued risk of
corporate cyber-attacks, notably ransomware
• Increasing trend in security incidents reported within our
extended supply chain, emphasising the importance of our
commitment to third-party security controls
• Continued emergence and growth of new low-price tiers across
• If the Group’s product portfolio fails to
• Wide portfolio across all combustible
• Facilitates the development of
many markets
• Continuation of downtrading trend in which consumers become
increasingly value-driven due to inflationary pressures on
disposable income and increasing taxes on tobacco products
• Evolving consumer preferences in NGP categories, including a
shift towards disposable vapes
Cyber-attack or other technology incident results in a major
system outage or loss, theft or corruption of sensitive data.
The criticality of Group systems, notably those which are
Track-and-Trace related, continues to increase, with key
reliance on system availability both internally and through
the supply chain
PRODUCT PORTFOLIO AND INTERACTIONS
WITH CONSUMERS NOT ALIGNED TO
CONSUMER PREFERENCES
Risk profile:
Strategic impact:
Consumer at the centre of the business
Building a targeted NGP business
Product portfolio not aligned to consumer needs or
demands, and/or product development not sufficiently agile
to respond to changes in preferences. Brand strength is not
sufficient to attract or retain customers
104
Imperial Brands | Annual Report and Accounts 2023
• Loss of key manufacturing site or
• Robust demand planning process and supply
• Operations continue to supply
capacity could impact the Group’s ability
chain management aligned to changing
to meet short-term production demands
market environment
• 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 agreed
result in increased cost of goods
continuity measures in the event of machine
• Severe weather episodes could impact
failure or site issue
raw material supply, manufacturing sites
• Supplier agreements, standards and practices
and warehousing, potentially affecting or
include requirement to comply with Group
increasing the cost of short-term supply
policies and Code of Conduct
to markets
markets
• A lack of availability of raw materials
and continuity-related scope
could impact short-term supply to
• Learnings from disruptive crisis events to
date incorporated into strategic and
• Product quality issues could impact
operational processes and plans
• Ongoing supplier reviews include quality, ESG
customer satisfaction, potentially
damaging brand equity and future sales
• Loss of critical systems could impact
• Enterprise Security Office set up to
product supply to distributors or retailers
continually improve approach
• Failure to protect personal data could
• Cyber risk assessment completed, and
result in regulatory breach and related
actions implemented to protect business
meet consumer preferences, then
value tiers
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
reduced demand will result in lower
sales volumes and reduced brand equity
• Failure to identify changes in consumer
trends could result in lost opportunities,
notably in our NGP categories where
innovations are more prevalent
• 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
• Vulnerability scanning in place to ensure
ongoing vulnerability identification
• External penetration testing completed on an
ongoing basis
• Ongoing investment in security
monitoring tools
• Modernisation of critical site network
security controls (e.g. firewalls)
• Crisis management scenario planning and
response activities in place and tested
• NGP launches across categories, including a
• Continued investment in advertising and
disposable device
promotional spend
• Global Consumer Office accountability for
product/brand strategy and initiatives
• Innovations and go-to-market plans
are validated against consumer needs
and preferences
• Excise strategies, marketing guidelines and
product standards developed to support our
consumers and our business
• Consumer panels used to gather
consumer insights
• Brand monitoring, including equity tracking
• Innovation processes develop consumer
products based upon robust analysis, testing
and scientific support
• Formalised and consistent Insights approach
• Consumer Insights Centre of Expertise
established
• Data sources controlled to ensure consistency
and robustness of information and insights
• Intellectual property risks managed by Group
experts and external legal support
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
• Continued modernisation of
the Group’s IT environment
alongside the Group’s security
awareness and culture
programme provide
opportunity to further mitigate
cyber risk exposure
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
• Portfolio strategy workshops in
priority markets to ensure clear
brand roles, with brand
strategies and initiatives in
place to seize opportunities
PRODUCT SUPPLY FAILS TO MEET MARKET
Principal risk
DEMANDS
Risk profile:
Strategic impact:
Focusing on our priority markets
Building a targeted NGP business
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
• Continued global cost inflation, notably in leaf, non-tobacco
materials and conversion costs, has impacted, and will continue
to impact, the cost of goods. The Russian invasion of Ukraine has
continued to impact energy prices in Europe
• Pressures on the Group’s logistics supply chain have eased due to
the relaxation of regional COVID-19 lockdown restrictions
• Geopolitical tensions have continued to increase, with the
potential to impact global supply chains if there are any adverse
developments in, or affecting, the Group’s key countries
and regions
• Continuing frequency of adverse weather globally due to climate
change potentially impacting supply chains, notably cigar
operations in our Caribbean factories and Philippines
MAJOR INCIDENT RESULTING FROM CYBER OR
SIMILAR TECHNOLOGY RISK
Risk profile:
Strategic impact:
Simplified and efficient operations
• The Group continues to operate in an external environment with
heightened geopolitical risk, including in a number of the Group’s
markets and regions, which highlights the continued risk of
corporate cyber-attacks, notably ransomware
• Increasing trend in security incidents reported within our
extended supply chain, emphasising the importance of our
commitment to third-party security controls
Cyber-attack or other technology incident results in a major
system outage or loss, theft or corruption of sensitive data.
The criticality of Group systems, notably those which are
Track-and-Trace related, continues to increase, with key
reliance on system availability both internally and through
the supply chain
PRODUCT PORTFOLIO AND INTERACTIONS
WITH CONSUMERS NOT ALIGNED TO
CONSUMER PREFERENCES
Risk profile:
Strategic impact:
Consumer at the centre of the business
Building a targeted NGP business
Product portfolio not aligned to consumer needs or
demands, and/or product development not sufficiently agile
to respond to changes in preferences. Brand strength is not
sufficient to attract or retain customers
• Continued emergence and growth of new low-price tiers across
many markets
• Continuation of downtrading trend in which consumers become
increasingly value-driven due to inflationary pressures on
disposable income and increasing taxes on tobacco products
• Evolving consumer preferences in NGP categories, including a
shift towards disposable vapes
Change in year
Impact
Mitigation
Opportunity
• Loss of key manufacturing site or
• Robust demand planning process and supply
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
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
result in increased cost of goods
• Severe weather episodes could impact
• Production capacity planning includes 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, ESG
• A lack of availability of raw materials
could impact short-term supply to
markets
• Product quality issues could impact
customer satisfaction, potentially
damaging brand equity and future sales
and continuity-related scope
• Learnings from disruptive crisis events to
date incorporated into strategic and
operational processes and plans
• Loss of critical systems could impact
• Enterprise Security Office set up to
product supply to distributors or retailers
continually improve approach
• 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
• 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 identify changes in consumer
trends could result in lost opportunities,
notably in our NGP categories where
innovations are more prevalent
• 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
• Cyber risk assessment completed, and
actions implemented to protect business
• Vulnerability scanning in place to ensure
ongoing vulnerability identification
• External penetration testing completed on an
ongoing basis
• Ongoing investment in security
monitoring tools
• Modernisation of critical site network
security controls (e.g. firewalls)
• Crisis management scenario planning and
response activities in place and tested
• Wide portfolio across all combustible
value tiers
• NGP launches across categories, including a
disposable device
• Continued investment in advertising and
promotional spend
• Global Consumer Office accountability for
product/brand strategy and initiatives
• Innovations and go-to-market plans
are validated against consumer needs
and preferences
• Excise strategies, marketing guidelines and
product standards developed to support our
consumers and our business
• Consumer panels used to gather
consumer insights
• Brand monitoring, including equity tracking
• Innovation processes develop consumer
products based upon robust analysis, testing
and scientific support
• Formalised and consistent Insights approach
• Consumer Insights Centre of Expertise
established
• Data sources controlled to ensure consistency
and robustness of information and insights
• Intellectual property risks managed by Group
experts and external legal support
• 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
• Continued modernisation of
the Group’s IT environment
alongside the Group’s security
awareness and culture
programme provide
opportunity to further mitigate
cyber risk exposure
• 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
• Portfolio strategy workshops in
priority markets to ensure clear
brand roles, with brand
strategies and initiatives in
place to seize opportunities
www.imperialbrandsplc.com
105
PRINCIPAL RISKS AND UNCERTAINTIES continued
Principal risk
Change in year
Impact
Mitigation
Opportunity
CHANGES IN MARKET ENVIRONMENT
Risk profile:
Strategic impact:
Focusing on our priority markets
Driving value from our broader portfolio
Failure to obtain or effectively respond to commercial
insights and learnings, resulting in loss of market share or
inability to capitalise on commercial opportunities
• Continued 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
• Rapid development and proliferation of new NGP categories such
as disposable vapes
• Continued economic pressure on consumers due to inflationary
pressures and economic uncertainty across our market footprint
DEVELOPMENT OF A SUSTAINABLE HARM-
REDUCTION CATEGORY
Risk profile:
Strategic impact:
Building a targeted NGP business
Failure to develop a portfolio of commercially sustainable,
science-based, potentially reduced harm products, that
meet consumer needs, could impact the Group’s ability to
seize market opportunities and deliver its ESG agenda
• Decision in August 2023 by United States Court of Appeals for the
District of Columbia Circuit to vacate the FDA’s Marketing Denial
Order for our myblu pod-based vapour portfolio
• Continued competitor activity in the NGP market with growth in
category size through new product developments, product launches
and marketing initiatives
• Significant shift towards disposables in vape
• Increasing regulation of NGP, with potential further flavour bans,
disposables bans and plain packaging being considered
DELIVERY OF ESG STRATEGY NOT ALIGNED TO
STAKEHOLDER EXPECTATIONS
• Continued focus on ESG-related matters from investors and
external stakeholders
Risk profile:
Strategic impact:
Focusing on our priority markets
Simplified and efficient operations
Failure to deliver on 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
• New reporting requirements announced, such as the EU
Corporate Sustainability Reporting Directive which will cover all
pillars of environmental, social and governance. In-scope
subsidiaries of the Group will be required to comply with this
by 2025
• Upcoming EU Corporate Sustainability Due Diligence Directive
will introduce further requirements from FY25 to conduct due
diligence throughout our global value chain
• As with all multinationals, the Group continues to face increasing
climatic impacts across its global footprint
• In 2023, a double materiality assessment was performed and
confirmed that the eight focus areas of our ESG strategy remain
priorities for our stakeholders
106
Imperial Brands | Annual Report and Accounts 2023
• Failure to respond to changes in market
• Formalised and consistent Insights approach
• Provides opportunity to align
environment could make the Group’s
products less attractive to consumers,
resulting in reduced sales
• Economic pressure on consumers could
result in reduced spend on tobacco
products and alternatives, reducing
market size
• Market impacts analysed as part of market
size calculations
• Empty Pack Survey collection reporting
completed to provide trend analysis of
illicit impacts
• Excise and price monitoring provides
insights into possible changes in illicit
• Increases in illicit trade impact the
size of the legitimate market, impacting
impacts through widening disparity between
the price of legitimate and illicit product
choices
sales volumes
• 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
• Monitoring of illicit impacts
and product flows provides
opportunity for engagement
with, and support to, regulators
to reduce the illegal trade in
tobacco products
• Failure to accurately predict or identify
• Test-and-learn approach followed across
• Improved ability to meet
current and emerging consumer trends
categories and markets to ensure feedback and
consumer needs and robust
could result in lost opportunities and
learnings captured and responded to
lower volumes should products have
reduced relevance to consumers
• Successful launches of new and updated
heated tobacco, oral nicotine and vape
• The Group’s experience in
• Failure to align NGP portfolio to
products in selected markets, including
combustibles and NGP provides
consumer validation are key
drivers of commercial success
consumer needs and expectations could
launch of blu bar
result in failure to achieve NGP ambition
• Acquisition of US range of nicotine pouches
• Failure to develop NGP categories could
from TJP Labs to facilitate entry into the US
impact achievement of key ESG priorities
modern oral market
• Failure to develop a sustainable
• Dynamic consumer and market analysis
commercial model for all NGP categories
integral to product development and
could result in failure to achieve
go-to-market model
NGP ambition
it with a strong base to
meet the needs of the
wider changing nicotine
market dynamic
• 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
• Engagement with regulatory authorities
• Intellectual property risks managed by
subject matter experts within the Group and
external legal support
• Failure to meet expectations, or to ensure
• ESG strategy, agenda and communications,
• Positive ESG strategies and
at least parity with industry peers, may
including ongoing development and
communications can increase
impact the Group’s reputation as a
materiality assessment, aligned to strategic
the attractiveness of the
sustainable business and adversely
goals and targets
affect stakeholder sentiment
• ESG Committee with executive representation
• Failure to comply with key ESG-related
in place to provide oversight
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
• Investor and stakeholder presentations
ensure alignment with expectations and
transparency on progress of Group actions
• Human Rights Compliance Working Group
meets regularly, specialist human rights
capabilities recruited, Human Rights Policy in
place and Modern Slavery Audits conducted
• Employee engagement or attractiveness
by the ESG function
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
• TCFD disclosures and related actions facilitate
• Investor and wider stakeholder
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
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
• Investments in the NGP business to offer
adult smokers potentially reduced harm
products continue
sentiment is more positive
toward companies with
successful and proven ESG
strategies and initiatives
CHANGES IN MARKET ENVIRONMENT
Risk profile:
Strategic impact:
Focusing on our priority markets
Driving value from our broader portfolio
Failure to obtain or effectively respond to commercial
insights and learnings, resulting in loss of market share or
inability to capitalise on commercial opportunities
• Continued 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
• Rapid development and proliferation of new NGP categories such
as disposable vapes
• Continued economic pressure on consumers due to inflationary
pressures and economic uncertainty across our market footprint
DEVELOPMENT OF A SUSTAINABLE HARM-
REDUCTION CATEGORY
Risk profile:
Strategic impact:
Building a targeted NGP business
Failure to develop a portfolio of commercially sustainable,
science-based, potentially reduced harm products, that
meet consumer needs, could impact the Group’s ability to
seize market opportunities and deliver its ESG agenda
• Decision in August 2023 by United States Court of Appeals for the
District of Columbia Circuit to vacate the FDA’s Marketing Denial
Order for our myblu pod-based vapour portfolio
• Continued competitor activity in the NGP market with growth in
category size through new product developments, product launches
and marketing initiatives
• Significant shift towards disposables in vape
• Increasing regulation of NGP, with potential further flavour bans,
disposables bans and plain packaging being considered
DELIVERY OF ESG STRATEGY NOT ALIGNED TO
STAKEHOLDER EXPECTATIONS
Risk profile:
Strategic impact:
• Continued focus on ESG-related matters from investors and
external stakeholders
• New reporting requirements announced, such as the EU
Corporate Sustainability Reporting Directive which will cover all
pillars of environmental, social and governance. In-scope
subsidiaries of the Group will be required to comply with this
Focusing on our priority markets
Simplified and efficient operations
by 2025
Failure to deliver on the Group’s ESG strategy to external
expectations. The pace of change in external requirements
• Upcoming EU Corporate Sustainability Due Diligence Directive
will introduce further requirements from FY25 to conduct due
diligence throughout our global value chain
and expectations remains significant, with greater focus on
• As with all multinationals, the Group continues to face increasing
integrity and assurance of reporting, and comparison
climatic impacts across its global footprint
cross-industry and between sector peers
• In 2023, a double materiality assessment was performed and
confirmed that the eight focus areas of our ESG strategy remain
priorities for our stakeholders
Principal risk
Change in year
Impact
Mitigation
Opportunity
• Failure to respond to changes in market
environment could make the Group’s
products less attractive to consumers,
resulting in reduced sales
• 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
• Formalised and consistent Insights approach
• Market impacts analysed as part of market
size calculations
• Empty Pack Survey 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
• 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
• Failure to develop a sustainable
commercial model for all NGP categories
could result in failure to achieve
NGP ambition
• 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
• Test-and-learn approach followed across
• Improved ability to meet
categories and markets to ensure feedback and
learnings captured and responded to
• Successful launches of new and updated
heated tobacco, oral nicotine and vape
products in selected markets, including
launch of blu bar
• Acquisition of US range of nicotine pouches
from TJP Labs to facilitate entry into the US
modern oral market
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
• 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
• Engagement with regulatory authorities
• Intellectual property risks managed by
subject matter experts within the Group and
external legal support
• ESG strategy, agenda and communications,
• Positive ESG strategies and
including ongoing development and
materiality assessment, aligned to strategic
goals and targets
• ESG Committee with executive representation
• Failure to comply with key ESG-related
in place to provide oversight
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
• Investor and stakeholder presentations
ensure alignment with expectations and
transparency on progress of Group actions
• Human Rights Compliance Working Group
meets regularly, specialist human rights
capabilities recruited, Human Rights Policy in
place and Modern Slavery Audits conducted
by the ESG function
• 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
• Investments in the NGP business to offer
adult smokers potentially reduced harm
products continue
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
www.imperialbrandsplc.com
107
PRINCIPAL RISKS AND UNCERTAINTIES continued
Principal risk
Change in year
Impact
Mitigation
Opportunity
• Increasing external trend of ESG-related litigation risks with
external focus on human rights issues in international supply
chains, greenwashing claims and shareholder activist claims
ADVERSE JUDGMENT OR IMPACT IN
LITIGATION CASE
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 judgments made in relation to these laws
can lead to dispute or investigation and possible financial
costs or reputational damage
EFFECTIVE MANAGEMENT OF ORGANISATIONAL
TRANSFORMATION
Risk profile:
Strategic impact:
Performance-based culture and capabilities
Simplified and efficient operations
Risk of ineffective design, implementation and benefit
realisation of organisational transformation. Failure to
attract, retain or develop employees with the required
knowledge and experience may impact the Group’s ability
to achieve its strategic objectives
• Significant transformation activity across the Group, including
• If organisational transformation is not
• Transformation Centre of Expertise working
• Improved efficiency/
both ongoing and new programmes
effectively managed, this could result in
in conjunction with Independent Quality
effectiveness of decision-making
disruption to delivery of business
Assurance and Internal Audit to support
across the business given
objectives or higher cost of
implementation than forecast
• High demand for local resources
successful delivery versus agreed milestones
improved data availability and
and to identify/address key programme
more streamlined ways
interdependencies and risks
of working
to support transformation
• Capability requirements evaluated on an
programmes could result in impacts
ongoing basis, with required actions
on employee engagement
• Failure to comply with regulations could
• Internal and external lawyers employed,
result in investigation and the
specialising in the defence of product liability
enforcement of financial penalties or
claims and other litigation. To date, no
regulatory censure
• Investigation or allegations of
wrongdoing can result in significant
tobacco litigation claim brought against the
Group has been successful and/or resulted in
the recovery of damages or settlement monies
management time being required,
• Advice is provided to mitigate the causes of
potentially reducing focus on other
litigation, along with guidance on defence
operational matters
• If any claim against the Group was to be
successful, it might result in a significant
the Group
strategies to direct and manage litigation
risk and monitor potential claims around
liability for damages and could lead to
• The Group’s Code of Conduct and core
further claims
• Regardless of the outcome, the costs of
defending such claims can be substantial
behaviours articulate the way employees are
expected to act, with compliance certified by
management across the business
and may not be fully recoverable
• The Group’s policies and standards mandate
• The reputational damage arising from
investigations or allegations of non-
that employees must comply with legislation
relevant to both a UK-listed company and
compliance could have a greater impact
local law
with external stakeholders than the
• In the event of an investigation (which may
penalties or actions related to the
or may not result in actions), the Group
matter itself
co-operates fully with the relevant authority
and will continue to do so
developed and actioned locally and at Group
level to address short and medium-term
requirements
• Global Talent Acquisition function
established, and annual Talent Review
performed
• Skills and Capability Framework launched
• Change capability embedded into major
change programmes and standardised
approach to change management
being developed
• Specialist Organisation Design and
Effectiveness expertise recruited
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Imperial Brands | Annual Report and Accounts 2023
• Increasing external trend of ESG-related litigation risks with
external focus on human rights issues in international supply
chains, greenwashing claims and shareholder activist claims
ADVERSE JUDGMENT OR IMPACT IN
LITIGATION CASE
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 judgments made in relation to these laws
can lead to dispute or investigation and possible financial
costs or reputational damage
EFFECTIVE MANAGEMENT OF ORGANISATIONAL
• Significant transformation activity across the Group, including
both ongoing and new programmes
TRANSFORMATION
Risk profile:
Strategic impact:
Performance-based culture and capabilities
Simplified and efficient operations
Risk of ineffective design, implementation and benefit
realisation of organisational transformation. Failure to
attract, retain or develop employees with the required
knowledge and experience may impact the Group’s ability
to achieve its strategic objectives
Principal risk
Change in year
Impact
Mitigation
Opportunity
• Failure to comply with regulations could
• Internal and external lawyers employed,
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
• 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
• If organisational transformation is not
effectively managed, this could result in
disruption to delivery of business
objectives or higher cost of
implementation than forecast
• High demand for local resources
to support transformation
programmes could result in impacts
on employee engagement
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
• Transformation Centre of Expertise working
in conjunction with Independent Quality
Assurance and Internal Audit to support
successful delivery versus agreed milestones
and to identify/address key programme
interdependencies and risks
• 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
• Global Talent Acquisition function
established, and annual Talent Review
performed
• Skills and Capability Framework launched
• Change capability embedded into major
change programmes and standardised
approach to change management
being developed
• Specialist Organisation Design and
Effectiveness expertise recruited
• Improved efficiency/
effectiveness of decision-making
across the business given
improved data availability and
more streamlined ways
of working
www.imperialbrandsplc.com
109
• First, the Board considered the period
over which it has a reasonable
expectation that the Group will
continue to operate and meet its
liabilities, considering 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 2026. This reflects the
period used for the Group’s business
plans and has been selected because,
together with the planning process set
out above, it gives management and
the Board sufficient, realistic visibility
on the future in the context of the
industry environment.
The Group’s annual corporate planning
processes include completion of a
strategic review, preparation of a
three-year business plan and a periodic
re-forecast of current-year business
performance and likely landing. 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.
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. 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 the
short-term liquidity of the Group.
The Directors have assessed the
emerging and 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.£500 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 2023.
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,
working capital management,
retrenchment of leases and discussions
with lenders about capital structure.
Under the reverse stress test scenario,
after considering mitigation actions
including reductions of capital
expenditure, dividend payments and
share buyback programme, we have
modelled that a 38% EBITDA reduction
would lead the Group to have sufficient
headroom until April 2024. The Group
believes this reverse stress test
scenario to be remote given the
relatively small impact on our trading
performance and bad debt levels during
the COVID-19 pandemic, as well as the
current political situation in Ukraine. In
this scenario the Group would
implement a number of mitigating
actions including revoking the
uncommitted dividend, pausing the
share buyback and reducing
discretionary spend such as
capital expenditure.
Based on its review of future cash flows
covering the period through to
November 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 30 November 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 to assess its
viability. This review, which is based on
the business plan which was completed
in July 2023, 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 100
to 101.
In addition, we describe in notes 20 to
21 on pages 210 to 220 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
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 conducted a robust assessment of
the emerging and 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 refinanced 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:
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Imperial Brands | Annual Report and Accounts 2023
The use of the strategic plan enables a high level of confidence in assessing viability, even in extreme adverse events, due to a
number of mitigating factors such as:
• Flexibility of cash outflow with respect to the ability to manage dividend returns to investors, capital expenditure projects
planned to take place within the three-year horizon, return of surplus capital to investors via share buyback, plus promotional
marketing programmes.
• The Group has mature business relationships and operates globally within well established markets.
• The Group’s operations are highly cash generative, and the Group has access to the external debt markets to raise
further funding.
RISK IMPACT REVIEW
For each of our principal risks, plausible risk impact scenarios have been assessed together with a multiple risk scenario. The
following table summarises the key scenarios that were considered, both individually and in aggregate:
Risk scenarios modelled
Level of severity reviewed
Link to principal risk
The 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 business plan assumptions or expectations
• Management of potential adverse regulatory change
and response to regulatory change
The value of these combined risks totals
£1.3 billion over the three-year period
under review.
A further worst-case scenario has also
been considered, modelling 15%
reduction on remaining EBITDA after
consideration of the isolated business
risks. The value of this EBITDA modelled
totals £1.9 billion over the three-year
period under review.
• Product supply fails to meet market demands
• Major incident resulting from cyber or similar
technology risk
• Product portfolio and interactions with consumers not
aligned to consumer preferences
• Changes in market environment
• Development of a sustainable harm-reduction category
• Delivery of ESG strategy not aligned to stakeholder
expectations
• Effective management of organisational
transformation
• Adverse judgment or impact in litigation case
• Delivery of ESG strategy not aligned to
stakeholder expectations
The possible costs
associated with legal and
other regulatory
challenges, including
competition enquiries and
tax audits.
Failure to successfully defend existing
and reasonably foreseeable future legal
and regulatory challenges, at the
expected financial exposure.
The value of these combined risks is
c.£0.1 billion.
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.
None of the scenarios reviewed, either individually or in aggregate, would cause Imperial Brands to cease to be viable.
Climate-related risks have been assessed as causes of a number of our underlying risks which are included within the scenario
modelling, including, but not limited to, the failure to supply product due to weather-related impacts on individual factories, the
cost of complying with environmental legislation, and the impact that climate change has upon the supply of raw materials
(notably leaf).
In FY23, we also conducted a quantified climate scenario analysis with 4°C and 1.5°C pathways aligned with the recommendations
of TCFD (Task Force on Climate-related Financial Disclosures) and Paris Agreement. The scenario analysis takes into
consideration climate-related physical and transition risk in the short, medium and long term (up to 2050). The Group does not
consider climate change to be a risk from a viability perspective. The Group holds c.12 months of leaf stock therefore any shortage
or incremental cost caused by a natural event would only impact part of the period under review. Any incremental cost would
have an EBITDA impact lower than that modelled as part of the scenario testing.
CONCLUSION
On the basis of this robust assessment of the emerging and principal risks facing the Group, and on the assumption that they are
managed or mitigated in the ways disclosed, the Board’s review of the business plan and other matters considered and reviewed
during the year, and the results of the sensitivity analysis undertaken and described above, the Board has a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to September 2026.
The Strategic Report was approved by the Board and signed on its behalf.
By order of the Board.
Emily Carey
Company Secretary
13 November 2023
www.imperialbrandsplc.com
111
GOVERNANCE AT A GLANCE
G O V E R N A N C E
STRUCTURE AND CONTENT OF THE
GOVERNANCE REPORT
Governance at a Glance
Chair’s Introduction
Board Leadership
Section 172
Board Statements
People and Governance Committee
Audit Committee
Remuneration Report
Directors’ Report
Directors’ statement
112
114
116
126
128
129
134
142
164
168
GOVERNANCE
The Board confirms that the Group complied with the principles and all relevant
provisions of the UK Corporate Governance Code 2018 (the ”Code”) for the period
under review. The Code is publicly available at www.frc.org.uk.
Board and Committee membership as at 30 September 2023
Board
Audit
Committee
Remuneration
Committee
People &
Governance
Committee
Board nationality
Non-Executive Directors
Thérèse Esperdy (Chair)
Sue Clark (SID)
Diane de Saint Victor
Ngozi Edozien
Andrew Gilchrist2
Alan Johnson
Bob Kunze-Concewitz
Jon Stanton
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
1
1
1
1
British*
American
German
French
Italian*
Swiss
Nigerian
Austrian
1. Denotes Chair
2. Andrew Gilchrist appointed to the Board on 1 March 2023.
* Alan Johnson has dual British-Italian
nationality.
Board and Executive Management Gender Diversity as at 30 September 2023
Men
Women
Prefer not to say
Number of
board
members
Percentage
of the board
Number of senior positions
on the board (CEO, CFO, SID
and Chair)
Number in
executive
management
Percentage of
executive
management
6
4
0
60
40
0
2
2
0
7
4
0
64
36
0
Board and Executive Management Ethnic Diversity as at 30 September 2023
Number of board
members
Percentage of
the board
Number of senior
positions on the board
(CEO, CFO, SID and Chair)
Number in
executive
management
Percentage of
executive
management
White British or other White (including
minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
8
0
0
2
0
0
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Imperial Brands | Annual Report and Accounts 2023
80
0
0
20
0
0
4
0
0
0
0
0
9
0
1
1
0
0
82
0
9
9
0
0
Non-Executive Director skills matrix
Fast-moving
consumer
goods (FMCG)
Innovation
and product
development
Global
business
leadership
Finance and
risk
People and
organisational
transformation
Legal and
regulatory
affairs
Technology
and digital
Environment,
sustainability
and
governance
Thérèse Esperdy
Sue Clark
Diane de Saint
Victor
Ngozi Edozien
Andrew Gilchrist
Alan Johnson
Bob Kunze-
Concewitz
Jon Stanton
Non-Executive Director tenure
As at 30 September 2023
< 1 year
1-2 years
2-3 years
3-4 years
4-5 years
5-6 years
6-7 years
7-8 years
8-9 years
9+ years
Thérèse Esperdy
Sue Clark
Diane de Saint
Victor
Ngozi Edozien
Andrew Gilchrist
Alan Johnson
Bob Kunze-
Concewitz
Jon Stanton
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 142 to 163.
1. BOARD LEADERSHIP AND
COMPANY PURPOSE
3. COMPOSITION, SUCCESSION
AND EVALUATION
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 other stakeholders,
and contributing to wider society.
Read more on pages 17 and 116
to 125.
2. DIVISION OF
RESPONSIBILITIES
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 page 120.
Appointments are subject to a formal,
rigorous and transparent procedure.
Succession plans, designed to promote
diversity, including 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 129 to 133.
4. AUDIT, RISK MANAGEMENT
AND INTERNAL CONTROL
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.
Read more on pages 134 to 141.
www.imperialbrandsplc.com
113
GOVERNANCE CHAIR’S INTRODUCTION
R E A D Y F O R T H E
N E X T P H A SE O F
O U R S T R A TEG Y
DEAR SHAREHOLDER
I am pleased to introduce the
Governance section of this year’s
Annual Report.
The year in review
The Group has maintained momentum
in its delivery against the strategic plan.
We are in the third year of our five-year
strategy and have seen further
improvements in Imperial’s operational
and financial performance, despite the
challenging macro-economic
headwinds over the year.
The Board’s confidence in the sustained
strategic progress of the Group is
reflected by the recent announcement
of a further buyback of up to £1.1
billion-worth of shares from October
2023 to the end of September 2024.
We successfully completed our first
£1 billion share buyback programme in
September 2023.
The Board has been engaged this year,
completing deep dive reviews of our
Tier 1 markets and visiting key regional
clusters. We have spent time with our
refreshed Executive Leadership Team
(ELT) which I believe has contributed to
an open and productive working
relationship. This has enabled us to
constructively challenge, scrutinise and
support as the ELT delivers the strategy
and reacts to external, market and
regulatory changes.
Throughout this period the Board has
continued to fulfil its core role to
oversee the Company’s governance
framework, risk and change
management, financial controls
and culture.
Board succession
In February 2023, Simon Langelier
retired as a Non-Executive Director.
I would like to thank Simon for his
advice and support to the Company
over the past six years.
Recognising Simon’s skills and
experience, we looked to make a new
NED appointment that provided
additional strength in finance and deep
experience in the tobacco sector. I am
delighted that Andrew Gilchrist joined
us as a Non-Executive Director on
1 March 2023 and the Board has already
benefited from his insight and
knowledge in its discussions.
We have continued to enhance the
capability amongst our Directors,
aiming to have the necessary skills,
experience and diversity to deliver the
strategy and strong performance.
I believe the company and our
shareholders are well-served by the
strong mix of geographic, operational,
functional, gender and ethnic diversity
of the Board.
Diversity
Imperial continues to make progress on
diversity, equity and inclusion (DEI). We
remain committed to having a Board
that is diverse in all respects.
Throughout the year and up to the date
of this report our Board has met the UK
Listing Rule targets regarding the
representation of women and ethnic
minorities at Board level.
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Imperial Brands | Annual Report and Accounts 2023
z
I am pleased that across the wider
workforce we continue to progress
against our five-year DEI strategy
and ambitions, reflected in the strong
results in this year’s employee
engagement survey.
Read about our Board’s diversity and
its skills and experience on pages 116
to 119.
Stakeholders
The Group’s success is dependent upon
the Board taking decisions for the benefit
of its shareholders whilst having regard to
all our stakeholders.
The Board’s focus during the year has
been to oversee the continuing
transformation of our business, the
delivery of our strategy and responding to
the challenges of the macro environment.
The Board aims to ensure that Imperial
can have sustainable, long-term success
and we remain mindful of the impact of
decisions made on the Group’s various
stakeholders in line with S172 of the
Companies Act 2006.
Throughout the year the Board has
continued with the workforce
engagement programme, including
“Meet the Board” sessions, informal
events, site visits and engagement on
executive remuneration. The Board has
received updates on the views and
feedback of institutional investors and
has had interaction with consumers to
gauge views on our brands and products.
We remain committed to understanding
the views of all of Imperial’s stakeholders
to inform the decisions that we make.
Further information on our stakeholder
engagement can be found on pages 32
to 36 and in our Section 172 statement
on pages 126 to 128.
Culture
The Board recognises the importance of
culture for the successful delivery of our
strategy. During the year we reflected on
our culture change and people strategies
which aim to create an inclusive and
strong performance culture across
Imperial. We received regular updates on
our transformation programme and the
workstreams focused on talent, diversity
and inclusion.
Board effectiveness
This year we engaged an independent
effectiveness review of the Board and
its Committees. This enabled us to
receive an objective view of the
performance of the Board and reflect
on our progress since the previous
external review in 2021 and the
organisational change programme
which has been underway during
that time.
The review highlighted the cohesion
and diversity of the boardroom, strong
levels of trust and transparency and the
support and challenge of the Board as it
has overseen cultural change and
transformation within the business.
Going forward the review has proposed
areas of focus as we aim to maintain
and enhance our effectiveness.
Details of this year’s evaluation, and
the progress made against last year’s
actions can be found on page 133.
AGM
The 2024 Annual General Meeting will
be held on 31 January 2024. Further
details can be found in the Notice of
Annual General Meeting sent to
shareholders and made available on the
Company’s website.
Closing thoughts
I am mindful of the many individuals
who have contributed to Imperial’s
continued progress over the year.
I would like to thank Stefan and his
team for their leadership and their
achievement in delivering Imperial’s
strategy and transformation; all my
fellow Board members for creating an
open and constructive environment
which allows for debate and different
views to be expressed; and finally
Imperial’s employees who have worked
tirelessly to make the Company what it
is today.
Thérèse Esperdy
Chair
www.imperialbrandsplc.com
115
GOVERNANCE BOARD LEADERSHIP
BOARD OF DIRECTORS
DIV E R S E B O A R D
A S KILLE D A N D
Thérèse Esperdy
Chair P R
Tenure
Appointed to the Board in July 2016 and
became Senior Independent Director in
May 2019 before being appointed Chair in
January 2020.
Nationality
American
Biography
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 experience
Thérèse has enjoyed a distinguished and
lengthy career in banking and
international business. She is an
experienced leader and board member of
multinational companies, bringing insight
and understanding of shareholder views
and the highest standards of corporate
governance. Thérèse continues to play a
pivotal role facilitating constructive
challenge and oversight within the Board.
Outside interests
Senior independent director of National
Grid plc (due to retire on 31 December 2023)
and non-executive director of Moody’s
Corporation.
Find out more at
www.imperialbrandsplc.com/how-we-are-
transforming/our-leadership-team
Committee membership
P People and Governance Committee
A Audit Committee
R Remuneration Committee
Committee Chair
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Imperial Brands | Annual Report and Accounts 2023
Stefan Bomhard
Chief Executive Officer
Tenure
Appointed in July 2020
Nationality
German
Biography
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.
Skills and experience
Stefan brings extensive experience of
consumer companies and retail
transformation from a career in a
variety of leading multinational and
brand-driven businesses. His in-depth
knowledge of marketing and a long
career in brand-building and challenger
businesses makes him uniquely placed
to lead Imperial and deliver its strategy.
Outside interests
Non-executive director of Compass
Group plc.
Sue Clark
Senior Independent Director A P R
Tenure
Appointed Non-Executive Director in
December 2018, Chair of the
Remuneration Committee in February
2019 and Senior Independent Director
in January 2020.
Nationality
British
Biography
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 experience
Sue has had a long career in senior
executive and non-executive roles
across international corporates, notably
in the areas of regulatory affairs and
government relations. This invaluable
perspective has particularly informed
the Board’s discussions on strategy and
ESG. Sue’s experience gives her a deep
understanding of shareholder views
and strong corporate governance,
making her ideally suited in the roles of
Senior Independent Director and Chair
of the Remuneration Committee.
Outside interests
Non-executive director of Britvic plc
(where she chairs the remuneration
committee), non-executive director of
Mondi plc and senior independent
director of easyJet plc.
Lukas Paravicini
Chief Financial Officer
Appointment
Appointed May 2021.
Nationality
Swiss
Biography
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 experience
Lukas brings a breadth of financial, IT
and operational expertise from his
extensive career in consumer
companies, allowing him to provide
insight to the Board on financial and
commercial issues. His wide-ranging
experience allows him to manage a
broad portfolio as CFO, including the
implementation of global shared
services in complex multinational
organisations, technology
transformation and cybersecurity.
Outside interests
Member of The 100 Group of finance
directors of the FTSE 100.
Diane de Saint Victor
Non-Executive Director P R
Appointment
Appointed November 2021.
Nationality
French
Biography
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 and as vice president and
general counsel at SCA Hygiene
Products. Diane spent a decade working
at Honeywell, ultimately holding the
post of vice president and general
counsel international. She started her
career with various legal and
government relations positions at GE.
Previous non-executive director
positions include Barclays plc, Altran,
Natixis and Transocean.
Skills and experience
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.
Outside interests
Non-executive director of WNS
(Holdings) Limited and non-executive
director of C&A AG.
www.imperialbrandsplc.com
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GOVERNANCE BOARD LEADERSHIP continued
Andrew Gilchrist
Non-Executive Director A P
Tenure
Appointed March 2023.
Nationality
American
Biography
Andrew has a proven track record of
business development, strategic
planning and business integration
following two decades of operational
and financial experience in the tobacco
sector. He was Chief Financial Officer
of Reynolds American Inc until its
acquisition by British American
Tobacco (BAT) in 2017. Prior to this,
Andrew held a range of leadership
positions at Reynolds, including Chief
Information Officer, Chief Commercial
Officer and Business Development
Director. Earlier in his career, he
worked for BAT in marketing and
planning roles.
Skills and experience
Andrew has a proven track record in
finance and business transformation
within our industry. His commercial
and financial experience as chief
financial officer of Reynolds American
has given him a breadth of knowledge
into financial, treasury and strategic
matters which has benefited the work
of the Audit Committee as well as
the Board.
Outside interests
None.
Ngozi Edozien
Non-Executive Director A P
Tenure
Appointed November 2021.
Nationality
Nigerian
Biography
Ngozi has over 35 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
allowing her to leverage previous
experience in corporate finance at
JP Morgan.
Previous non-executive director positions
include PZ Cussons and Vlisco plc.
Skills and experience
Ngozi’s 35-year career across finance,
strategy, transformation and business
development allows her to bring
profound insight into regulated,
customer-focused FMCG businesses, an
area of strategic importance to Imperial
Brands. Her expertise in innovation and
strategic change has proved valuable as
the Board oversees the Company’s
transformation programme.
Outside interests
Non-executive director of Guinness
Nigeria (a listed subsidiary of Diageo) and
non-executive director of Bank of Africa
– BMCE Group.
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Imperial Brands | Annual Report and Accounts 2023
Alan Johnson CMG
Non-Executive Director A P
Tenure
Appointed in January 2021.
Nationality
British and Italian
Biography
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.
Previous non-executive director positions
include non-executive director of the UK
Department for International Development
(DFID) where he chaired the audit & risk
assurance committee, president and chair
of the board of the International Federation
of Accountants and chair of the audit
committee of the International Valuation
Standards Council.
Skills and experience
Alan has outstanding financial and
international experience across consumer
goods and retail markets, with exceptional
accounting and regulatory insight gained
from his chairmanship of the International
Federation of Accountants. His skills and
experience bring strength and robustness to
discussions at the Audit Committee and Board.
Outside interests
Non-executive director of DS Smith plc and
of William Grant & Sons Ltd, inaugural chair
of the Stakeholder Advisory Council to the
Audit and Ethics Standards Setting Boards
and Chair of the Good Governance Academy.
Bob Kunze-Concewitz
Non-Executive Director P R
Tenure
Appointed November 2020.
Nationality
Austrian
Biography
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 experience
Bob brings invaluable perspective from
a lifetime career in the global fast-
moving consumer goods sector. His
long-serving role as the CEO of a listed
company, his proven experience of
leveraging brand and marketing
strategies across complex international
markets and his tireless focus on the
consumer has given the Board great
knowledge and experience to draw
upon in its work.
Outside interests
Chief executive officer of Campari
Group (due to retire end April 2024),
non-executive director of Luigi Lavazza
S.p.A. and both a fellow at the Elis
Institute in Rome and vice chairman
of Altagamma, the Italian luxury
goods association.
Jon Stanton
Non-Executive Director A P R
Tenure
Appointed May 2019.
Nationality
British
Biography
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 experience
Jon has a unique and broad skill set
driven by a long and prestigious career
as the CEO of a listed international
company and as an accountancy
partner. This financial experience,
business knowledge and leadership of a
multinational make him a huge asset to
the Board and the Audit Committee
which he chairs.
Outside interests
Chief Executive of The Weir Group plc.
Emily Carey
Company Secretary
Tenure
Appointed May 2023.
Nationality
British
Biography
Emily, a chartered accountant and
company secretary, has enjoyed a
25-year career in finance, regulatory
affairs, compliance, governance and
company secretarial matters, with
significant experience in the oil
and gas and sports betting and
gaming industries.
Prior to joining Imperial, Emily held a
number of roles of increasing seniority
including 14 years at BP plc and three
years at Entain plc where she was
Group Company Secretary.
Simon Langelier also served as a
Non-Executive Director during
the year, standing down from the
Board on 1 February 2023.
www.imperialbrandsplc.com
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GOVERNANCE BOARD LEADERSHIP continued
THE ROLE AND PURPOSE OF THE BOARD AND ITS COMMITTEES
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.
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 is responsible for
its effectiveness and promoting the
highest standards of corporate
governance. Oversees stakeholder
engagement and ensuring the Board as
a whole determines the Group’s
strategy and objectives.
Senior Independent Director
Supports the Chair on governance
issues and acts as an intermediary for
other Directors, and when required,
with shareholders. Leads Non-
Executive Directors in evaluating the
performance of the Chair.
Chief Executive Officer
Delegated responsibility for overall
performance and day-to-day
management of the Group, together
with implementation of the
Group’s strategy.
Chief Financial Officer
Provides financial leadership and
supports the development and
implementation of the Group’s strategy.
Non-Executive Directors
Provide constructive challenge and
monitor performance. Assess the delivery
of the strategy within the risk and
governance framework agreed by the
Board. Review the integrity of the Group’s
financial information, ESG issues and
succession planning of executive
management and set Directors’
remuneration.
Company Secretary
Advises the Board on corporate
governance matters and compliance with
Board procedures and corporate
governance requirements.
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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 2023 on page 112.
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.
This Committee is chaired by Jon Stanton.
See page 134.
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.
See page 142.
Ad hoc committees
Ad hoc committees may be established to review and approve
specific matters or projects.
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 129.
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 13.
The ELT is responsible for overseeing the operational execution and delivery of our strategic and financial plans, as approved by
the Board. 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 13.
www.imperialbrandsplc.com
121
GOVERNANCE BOARD LEADERSHIP continued
The Board delegates certain matters, as follows, to management committees consisting of senior executives:
Treasury Committee
(reporting to the Audit Committee)
Risk Committee
(reporting to the Board and Audit Committee)
OTHER NON-BOARD COMMITTEES
This Committee reviews and approves material banking
and treasury matters, providing second line of defence
oversight of treasury-related risks.
This Committee is chaired by the Chief Financial Officer.
ESG Steering Committee
(reporting to the People and Governance Committee, the
Audit Committee and the Remuneration Committee as well
as the Board)
This Committee defines 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.
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 provides 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.
This Committee is chaired by the Chief Financial Officer.
Board meeting attendance
Name/Meeting
Non-Executive Directors
Thérèse Esperdy (Chair)
Sue Clark (SID)
Diane de Saint Victor
Ngozi Edozien
Alan Johnson
Bob Kunze-Concewitz
Andrew Gilchrist1
Simon Langelier2
Jon Stanton
Executive Directors
Stefan Bomhard (CEO)
Lukas Paravicini (CFO)
1
11/22
2
01/23
3
03/23
4
05/23
5
06/23
6
08/23
7
09/23
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes:
1. Appointed 1 March 2023.
2. Retired 1 February 2023 following the conclusion of the 2023 Annual General Meeting.
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Imperial Brands | Annual Report and Accounts 2023
AREAS OF BOARD FOCUS
The Board’s agenda is structured along
four key focus areas: strategy,
performance, people and governance.
Within these four areas, the Board
considered the following during 2023:
Strategy
Performance
In this third year of Imperial’s five-year
strategy, the Board monitored strategic
progress and engaged with
management on changes in the
external environment, the “Must Win
Battles” in our market categories and
how to adapt to dynamic changes
in NGP.
See pages 16 to 23 for an overview of
our strategic pillars.
The Board reviewed financial,
operational and safety performance
during the year, including full-year
delivery against plan and options for
shareholder distributions.
Imperial’s principal and emerging risks
and the effectiveness of the Group’s
system of internal control and risk
management were reviewed over
the period.
See pages 84 to 99 for the Operating
and Financial Reviews.
Stakeholders: employees, consumers,
suppliers, customers, investors,
regulators
Stakeholders: employees, consumers,
suppliers, customers, investors,
regulators
S172(1) factors: a, b, c, d, e, f
S172(1) factors: a, b, c, d, e, f
See page 126 for definitions of S172
factors.
People
Governance
Advised by the People and Governance
Committee, the Board reviewed key
people priorities, including the Board’s
composition and independence and
progress against the Group’s diversity,
equity and inclusion (DEI) strategy.
Board members engaged directly with
the workforce through various events
in the UK and overseas to allow the
employee voice to be heard and to
inform Board discussions and decisions.
Andrew Gilchrist’s appointment to the
Board was announced in February
2023, with the appointment taking
effect from 1 March 2023.
For further information, please see
the People and Governance
Committee report at pages 129 to 133.
Stakeholders: employees, investors,
regulators
Under the leadership of the Chair
and the People and Governance
Committee, an externally-facilitated
evaluation of the Board was conducted
in 2023.
The last externally facilitated Board
review took place in 2021. In light of
the strategic and operational progress
of the Group and the new senior
leadership and organisation in place, it
was considered that a specialist board
evaluation provider would be best
placed to provide an objective view on
the progress made by the Board over
this period.
For further information on the Board
evaluation, please see page 133.
Stakeholders: employees, investors
S172(1) factors: a, b, c, d, e, f
S172(1) factors: a, b, c, d, e, f
BOARD IN ACTION:
Langenhagen factory visit,
Germany
As part of its review of our European
cluster, the Board visited one of our
largest factories in Langenhagen.
Topics discussed included energy-
saving activities, the apprenticeship
programmes and how the factory is
adapting to deliver new products
alongside our existing ones.
www.imperialbrandsplc.com
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GOVERNANCE BOARD LEADERSHIP continued
BOARD IN ACTION:
Market review: Africa, Asia, Australasia and Central &
Eastern Europe (AAACE)
As part of its programme of deep dive reviews of Imperial’s
markets, the Board visited Morocco in June to better
understand the dynamics, performance and strategy for
the region.
A structured ”listening agenda” was developed for the visit to
enable stakeholder voices to be heard directly by the Board:
Consumers: a consumer immersion event was held whereby
Board members met with a cross-section of consumers to gain
insight on local consumer preferences, choices and moments
with Imperial’s brands.
Retailers: visits to a variety of stores in Casablanca allowed
Directors to better understand our direct and trade
commercial channel stakeholders and how we can work
together effectively.
People: an informal employee event was held, where Directors
could meet a cross-section of our local workforce in small
groups and without a set agenda in order that they could hear
directly from employees across our global organisation.
Local leadership: the Board heard from regional, cluster and
market leaders about key aspects of our business, including
regional and country business reviews.
BOARD ACTIVITIES 2022/23
The topics covered by the Board in its meetings during the financial year are detailed below:
Meeting
Focus area
Discussion points/Decisions made
November 2022
(London, UK)
• FY22 Performance
• GCO
• Approval of the full year announcement, the year-end results presentation
and the Annual Report and Accounts.
• Global Consumer Office (GCO) review, including an update on US NGP Plans,
disposables and innovation pipeline.
• Q1 performance and strategic progress update.
• Global Supply Chain review, including performance, KPIs and strategy.
• NGP update, including potential M&A and partnership opportunities.
• Annual General Meeting preparation.
• Performance
• Strategic progress
• Global Supply Chain
• NGP
• AGM
• Europe regional review
• Cluster review
• German market
engagement
• Risk
• Update on European landscape and Imperial Brands’ performance.
• Background to key European strategic priorities.
• Brand overview within combustibles sector.
• NGP acceleration.
• Risk assessment update.
• Performance
• US regional review
• Digital Transformation
• Future strategic
planning
• Half year performance and announcement, with an update and assessment
on strategic progress.
• Update on US market environment, performance and initiatives.
• Consumer deep dive on US brands.
• Overview of Unify programme, including ambition, achievements to date and
key milestones.
• AAACE regional review • Update on Africa, Asia, Australasia and Central & Eastern Europe (AAACE)
region, including landscape, renewed vision and strategy.
• Overview of performance by region within AAACE cluster.
• Consumer interaction and store visits.
• Performance
• Corporate Affairs
• Q3 update, including operational and financial performance, inflation
management and IR feedback following a US investor event.
• Corporate affairs update, including engagement on electronic vapour
products (“vape”) and the status of single use plastics schemes in Europe.
January 2023
(Bristol, UK)
March 2023
(Hamburg,
Germany)
May 2023
(London, UK)
June 2023
(Casablanca,
Morocco)
August 2023
(virtual, via
Teams)
September 2023
(London, UK)
• Performance
• Business plan
• Capital allocation
• Risk
• Performance and strategic progress update.
• Discussion and approval of the FY24 business plan, including strategic
context within overall delivery of five-year plan, adaptation to changes in the
NGP category and the continued transformation of Imperial’s operating model.
• Consideration of options for capital allocation in FY24.
• Board risk assessment, including risk appetite.
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Imperial Brands | Annual Report and Accounts 2023
Engagement with investors
We value the support of our equity and debt investors and how
our engagement with these important stakeholders can
influence 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
2023, we held around 650 meetings with debt and equity
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 and Asia with
private client brokers and wealth managers and with debt
investors in support of Eurobond issue;
• an investor seminar in New York, USA, “Start with the
Consumer”, to showcase how we have built our consumer-
facing capabilities;
• our AGM, providing an opportunity for the Board to meet
with shareholders, particularly our retail investors;
• shareholder engagement on our proposed executive
Remuneration Policy; and
• ad hoc meetings to maintain an ongoing dialogue with
existing holders and to meet prospective investors.
Imperial’s Chair continued her engagement with the Group’s
largest shareholders through in-person and virtual meetings.
The Board is kept informed of investor engagement
throughout the year, through the IR Board Report which is
presented at every Board meeting. Investor perception is
assessed on an on-going basis through feedback on meetings,
our events and our conference presentations. When appropriate,
this feedback is shared with the Board in the IR Board Report.
Engagement with colleagues
The People and Governance Committee has embraced its
wider role as the workforce champion. Our “Meet the Board”
listening sessions continue to provide an integrated listening
experience between our colleagues and NEDs that is authentic
and inclusive, enabling the Board to gain insights from a
representative cross-section of our global employee
population. 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:
March 2023
Germany
May 2023
UK
June 2023
Morocco
• “Meet the Board” session
• Office drinks
• Dinner with local management
• Factory tour
• Dinner with cross-business talent
• “Meet the Board” session
• Employee reception
• Dinner with local and regional
management
September
2023
UK
• “Meet the Board” session
• Round table session - Reward focus
• Dinner with Global Business Leaders
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(1) statement and
accompanying information on pages 126 to 128.
INVESTOR ENGAGEMENT DURING FY23
October
Results
• Pre-close trading update
February
Conferences
• Consumer Analyst Group of New
June
Conferences
• Paris
November
Results
• FY Results
Roadshows
• UK
• North America
• Private Client/Wealth
Management
December
Roadshows
• Private Client/Wealth
Management
Conferences
• Virtual
January
Engagement
• Chair roadshow
York (CAGNY)
Engagement
• AGM
April
Results
• Pre-close trading update
May
Results
• HY Results
Roadshows
• UK
• North America
• Private Client/Wealth
Management
Conferences
• London
• Virtual
Roadshows
• Asia
• Private Client/Wealth
Management
Engagement
• In-person ”Start with the
Consumer” Seminar, NYC
July - August
Engagement
• Consultation on proposed new
Remuneration Policy
September
Conferences
• Boston
www.imperialbrandsplc.com
125
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(1)
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(1) factors, have been considered in
its decision-making are shown on the
following pages, which together form
our Section 172(1) statement.
The Board recognises its responsibility
to give due regard to the following
matters in arriving at its decisions:
Section 172(1) factors
a
The likely consequences of any
decision in the long term
b
c
d
e
f
The interests of the Company’s
employees
The need to foster business
relationships with suppliers, customers
and others
The impact of the Company’s
operations on the community and
the environment
The desirability of the Company
maintaining a reputation for high
standards of business conduct
The need to act fairly as between
members of the Company
Examples of decisions taken by the Board
and how stakeholder views and inputs, as
well as s. 172(1) factors , 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 2023
BOARD DECISION-MAKING AND
STAKEHOLDER CONSIDERATIONS
Board meetings provide the
opportunity for the Directors
to discharge their duties
under Section 172,
considering stakeholders as
part of their deliberations
and decision-making.
The broad skillset and knowledge base of Board members
promotes and enhances the diversity of thinking during
Board discussions.
The Board meeting calendar is planned by the Chair,
Company Secretary and Chief Executive, with input from
other key parties, such as the CFO, as required.
The Board receives detailed papers in good time ahead of
meetings to enable the time in meetings to be devoted to
discussion, debate and challenge following any presentation
that may also take place. As part of this process, relevant
stakeholder interests are identified in the Board papers.
The Board is responsible for setting the strategic direction
of the Company, as outlined on page 123, and ensuring
stakeholders are treated fairly as part of this is firmly
embedded in the culture of the Company. Decisions are
properly recorded in meeting minutes.
Decisions are cascaded as appropriate and stakeholders
engaged where necessary. Updates are provided to the
Board to allow it to review and monitor impact,
effectiveness and the fulfilment of its duties.
Examples of S172 in practice.
CAPITAL ALLOCATION –
SHARE BUYBACK DECISION
a b e f
During the year the Board
announced an ongoing, multi-year
share buyback programme. This
decision was underpinned by
improving performance and
confidence in being able to continue
generating strong cash flows to
support growing shareholder returns
in the years to come.
S172(1) CONSIDERATIONS AT A GLANCE
Likely long-term
consequences of
the decision
Interests of
our colleagues
Maintaining a
reputation for high
standards of
business conduct
Need to act fairly
between members
Surplus capital returns to shareholders within
five-year strategic plan but leaving sensible headroom
for incremental investment (for example, in NGP)
over and above the business plan and to allow for
downside risk.
Increased confidence and demonstration of
strategic delivery.
Improved performance and confidence in our ability to
continue to generate strong cash flows in the coming
years supports growing shareholder returns through a
progressive dividend.
The Board acted fairly when considering key
stakeholders in its decision-making. Once decisions
were made, clear and transparent reporting on our
plans and progress was undertaken.
www.imperialbrandsplc.com
127
GOVERNANCE SECTION 172 continued
ACQUISITION OF US NICOTINE
POUCHES:
a b c e f
On 23 June 2023, the Board
announced the acquisition of a
range of nicotine pouches from TJP
Labs in order to facilitate its entry
into the US modern oral market.
The transaction enables ITG Brands,
Imperial’s US operation, to offer legal
adult American consumers a diverse
range of 14 product variants in a
pouch which performs strongly in
consumer testing.
Following further consumer testing,
ITG Brands will relaunch this range
in 2024 under a new brand, which
will be supported by the company’s
existing US sales force.
TJP Labs, a Canada-based
manufacturer, will continue to
manufacture the oral nicotine
pouches under contract for
ITG Brands.
The transaction, for an initial
consideration of £65 million with an
additional deferred sum based on
sales volumes over five years, was
consistent with Imperial’s capital
allocation policy to invest in the
business strategy through small
bolt-on transactions. The Company
continues to be committed to an
ongoing multi-year share buyback
(see above).
Imperial already markets modern
oral products in selected European
markets under the Zone X and
Skruf brands.
S172(1) CONSIDERATIONS AT A GLANCE
Likely long-term
consequences of
the decision
Interests of our
colleagues
Facilitates entry in the US Modern Oral Nicotine
category, underpinned by our strategic priority to
build a targeted NGP business.
Builds on our extensive brand development,
marketing and sales execution capabilities in the US.
Fostering business
relationships with
suppliers, customers
and others
The transaction is aligned to our focused, challenger
approach in next generation products, enabling us to
offer our legal adult consumers a wider range of
product options.
Maintaining a
reputation for high
standards of
business conduct
Need to act fairly
between members
A clearly differentiated product within the US market
which tested strongly with consumers.
The Board acted fairly when considering
stakeholders in its decision-making. Once decisions
were made, clear and transparent reporting was
undertaken internally and externally.
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 126.
Throughout this Annual Report we have
included information on how the Board
operates and considers the interests of
stakeholders when making its decisions.
Read more on pages 126 to 128.
Viability statement
On the basis of a robust assessment of
the emerging and principal risks facing
the Group, and the assumption that
they are managed or mitigated in the
ways disclosed on pages 100 to 111, 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 2026.
Read more on page 110.
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Imperial Brands | Annual Report and Accounts 2023
Going concern basis
Having assessed the principal risks
facing the Group, including the global
economic environment, as well as
realisation of other key risks, including
climate change and the impact of the
share buyback, 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
November 2024 and, therefore, concludes
that it is appropriate to prepare the
financial statements on a going concern
basis. The reduction in the period from
the prior year, increased following the
outbreak of the coronavirus to provide
assurance to the market around
corporate liquidity risk, was noted and
determined to be both appropriate and in
line with statutory requirements.
Read more on page 110.
Principal risks and uncertainties
The processes and related reporting
described in the Principal Risks and
Uncertainties section on pages 100 to 111
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 100 to 111.
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,
performance, business model and strategy.
Read more on page 139.
Modern slavery statement
In compliance with the UK Modern
Slavery Act, every year since 2016,
Imperial Brands submits its Modern
Slavery Statement, where we outline our
commitments for the upcoming year.
You can read our 2022 Modern Slavery
Statement on our website. As part of these
commitments, together with Slave-Free
Alliance, of which Imperial Brands is a
founding member, we developed a
modern slavery toolkit to help our
colleagues to enhance their knowledge
about modern slavery, identify its key
indicators and characteristics, respond
appropriately to potential victims, and to
escalate and report any concerns. In 2023,
we created a Modern Slavery Local
Champions Community to ensure our
local champions had all the support they
needed, and we updated our Modern
Slavery Manufacturing Standard.
Read more on page 62 and 63.
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE
PEOPLE AND GOVERNANCE
COMMITTEE
PEOPLE AND GOVERNANCE
COMMITTEE CHAIR’S OVERVIEW
Dear shareholder
I am pleased to introduce the People
and Governance Committee report for
the year.
During the year the Committee has
continued its focus on executive
succession planning, embedding recent
appointments to the Executive
Leadership Team and assessing the
Group’s senior management. We
continued to oversee the development
of a structured framework for talent
management, reflecting on the skillsets
and experience to support the
implementation of the Group’s strategy
and respond to the challenges facing
the business.
In March we appointed Andrew Gilchrist
to the Board as a Non-Executive Director
and a member of the Committee.
Andrew brings deep experience of our
industry as well as finance and planning
from his career at Reynolds American.
Looking forward, we intend to continue
to focus on succession – both for the
Board and executive management –
and the identification and development
of a strong leadership cohort to address
the opportunities presented by
our strategy.
Thérèse Esperdy
Chair of the People and Governance
Committee
Role of the People and Governance Committee
The People and Governance Committee leads the process for appointments to
the Board and executive leadership and reviews employee engagement and
wider culture change activities to ensure they are consistent with the Group’s
purpose, strategy and values. The Committee seeks to ensure that the
composition and structure of the Board remains effective by monitoring the
balance of skills, knowledge, experience and diversity amongst Directors in
support of the strategy. It is also responsible for the social and governance
components of the Company’s ESG agenda.
KEY RESPONSIBILITIES
• Overseeing the development of a
diverse pipeline for succession,
taking into account the challenges
and opportunities facing the
Group, its strategic priorities and
the skills and experience needed
for the future.
• Monitoring employee engagement
through formal and informal
means to ensure workforce views
are understood by the Board.
• Reviewing workforce practices
and policies, including those
which impact talent and
capability and diversity and
inclusion, and ensure these are
consistent with Imperial’s
purpose, strategy and values.
• Assisting the Board in ensuring its
composition is regularly reviewed
and refreshed, taking into account
the length of service of the Board
as a whole, so that it is effective
and able to operate in the best
interests of shareholders.
• Ensuring there is a formal,
rigorous and transparent
procedure for appointments to
the Board.
• Reviewing and developing the
Board’s corporate governance
framework and monitoring its
compliance with corporate
governance standards and
practices while ensuring that it
remains appropriate to the size,
complexity and strategy of
the Group.
Biographical details of the current
members of the Committee are set
out on pages 116 to 119.
The Committee’s terms of
reference can be found on our
website, www.imperialbrandsplc.
com/healthier-futures/
governance/board-committees.
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129
Thérèse Esperdy
Committee Chair
129
STRUCTURE AND CONTENT
OF THE PEOPLE AND
GOVERNANCE COMMITTEE
REPORT
People and Governance
Committee Chair’s
overview
Role of the People and
Governance Committee
About the People and
Governance Committee
People and Governance
Committee activities
in 2022/23
Board diversity
Senior management
gender balance
Board appointments and
independence
Board evaluation
130
130
131
133
130
129
131
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE continued
ABOUT THE PEOPLE AND GOVERNANCE COMMITTEE
Membership and attendance:
Name/Meeting
Thérèse Esperdy (Chair)
Sue Clark (SID)
Diane de Saint Victor
Ngozi Edozien
Andrew Gilchrist1
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier2
Jon Stanton
1
11/22
2
01/23
3
05/23
4
09/23
n/a
n/a
n/a
n/a
1. Appointed 1 March 2023.
2. Retired from the Board at the conclusion of the Annual General Meeting on 1 February 2023.
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
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,
upon appointment.
PEOPLE AND GOVERNANCE
COMMITTEE ACTIVITIES 2022/23
Succession planning
Executive
The Committee reviewed the Group’s
talent model, its development
initiatives and approach to succession
across a band of management grades.
It discussed the pipeline of potential
executive leaders over the short and
longer term, as well as the work
underway to identify the development
needs of future leaders within
the organisation.
Non-Executive
To assist in succession planning for
Non-Executive Director appointments
and Committee membership, the
Committee considered the skills,
experience and tenure of current
Non-Executive Directors and reflected
on how this skillset enabled the Board
to execute the Group’s strategy, fulfil
the tasks and activities of its
Committees and meet future business
and regulatory challenges.
The Committee assessed the
appointment of Andrew Gilchrist
as a Non-Executive Director and
recommended that he join
the Audit and People and
Governance Committees.
Read more about the skills and
experience of our Board on pages 116
to 119.
Employee engagement
The successful delivery of Imperial’s
cultural transformation forms a key
part of the Group’s strategy. During this
critical phase of organisational
transformation, the Board has
determined that all NEDs should have
responsibility for workforce
engagement. The Board considers this
arrangement to be effective because it
allows every Board member to
participate rather than channelling
engagement through a single Director
and insights are heard collectively.
Imperial’s programme for employee
engagement forms part of the remit of
the People and Governance Committee.
The Committee reviews the
mechanism for workforce engagement
on an annual basis and considers the
effectiveness of this approach as part of
the Committee evaluation.
The workforce engagement programme
includes a number of Board-led
activities, including individual and
collective site visits and structured
listening sessions to facilitate two-way
dialogue between employees and Board
members. These are complemented by
insights from employee engagement
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Imperial Brands | Annual Report and Accounts 2023
surveys, updates on the Group’s culture
strategy, people agenda and the
diversity, equity and inclusion strategy.
During the year the Board held two
“Meet the Board” sessions in Germany
and Morocco, and further participated in
dinners and office visits. These sessions
included small groups to allow for
different voices to be heard and with no
set agenda to enable open discussion.
Participants in these sessions represented
a broad cross-section of our workforce.
Diversity
The Committee continued to appraise
appointments to the Board from the
perspective of its commitment to
diversity, particularly with respect to
gender and ethnicity, in its composition
and succession plans. The proportion of
women on the Board at 30 September
2023 remained at 40%.
The proportion of women in our
Executive Leadership Team was 30% for
the year.
Further information on gender
balance amongst the Group’s senior
management can be found on page 69
of the Strategic Report.
The Board currently has two Directors
who identify as being from an ethnic
minority background, meeting the
Parker Review’s current recommendation
of at least one Director. Two members
of our Executive Leadership Team
identify as being from an ethnic
minority background.
During the year, the Committee
reviewed progress against Imperial’s
diversity, equity and inclusion ambition
and five year strategy. Areas
considered by the review included:
• Actions to attract and hire
diverse talent.
• Global and local gender goals.
• Benchmarked measures of
employee inclusion.
• Employee data informing priorities
and enabling the setting of goals in
other areas of representation, with
priority focus on ethnicity.
• The completion of external
assessments to identify priority areas
for policy and practice improvement.
See pages 67 to 69 for more
information about our DEI agenda.
Board gender balance as at
30 September 2023
60%
40%
Male
Female
Board ethnicity as at
30 September 2023
20%
80%
60%
40%
Non-ethnic minority background
Ethnic minority background
80%
20%
Senior management1 and direct
reports gender balance as at
30 September 2023
38%
62%
Male
Female
62%
38%
1. Senior management as defined by the Code.
Board appointments
The Committee utilised an external
search consultant to undertake a
review of candidates for potential
appointment to the Board. Andrew
Gilchrist was interviewed by the
Committee, the Chief Executive and
Chief Financial Officer and the
Committee concluded that Andrew
would be an excellent addition to the
Board as a Non-Executive Director, with
valuable financial and sector knowledge,
and therefore recommended Andrew’s
appointment to the Board. Andrew
Gilchrist was appointed to the Board on
1 March 2023.
Independence
All Directors have a statutory duty to
exercise independent judgement.
Non-Executive Director (NED)
independence has a pivotal role in
bringing constructive challenge and
independent oversight to effective
Board discussion and decision-making.
In accordance with the provisions of
the UK Corporate Governance Code,
the Chair was considered independent
at the time she was appointed to
the Board and to that role, and the
Board considers all other NEDs to
be independent.
Conflicts of interest
Each Director has a statutory duty to
disclose actual or potential conflicts of
interest. 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.
This authorisation process informs the
People and Governance Committee’s
assessment of a Non-Executive
Director’s independence when
proposing that Director for re-election
at the AGM.
Time commitment and
outside appointments
Each NED must be able to devote
sufficient time to the role in order to
discharge their responsibilities
effectively. NED external time
commitments are regularly reviewed to
ensure that they are able to allocate
appropriate time to Imperial.
The Committee is satisfied that the
Chair and each of the NEDs dedicates
sufficient time to fulfil their
Imperial duties.
NEDs are required to consult with the
Chair and Company Secretary before
accepting any other role which may
impact their ability to commit
appropriate time to Imperial. Approval
of any new outside appointment for an
existing NED will consider the time
commitment required, independence
and potential conflicts of interest.
During the year, the Board approved the
appointments of Ngozi Edozien as a
non-executive director of Bank of
Africa and Alan Johnson as inaugural
chair of the Stakeholder Advisory
Council to the Audit and Ethics
Standards Setting Boards.
In accordance with the Code and
subject to the agreement of the Board,
Executive Directors 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 a non-executive director
of Compass Group PLC.
Reappointment of Directors
In accordance with the Code and the
Company’s Articles of Association,
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.
Director induction, training
and development
The Chair is assisted by the Company
Secretary in providing all new Directors
with a comprehensive induction
programme on joining the Board. The
induction programme provides new
Directors with an understanding of
their duties as Directors, the Group, its
businesses and the markets and
regulatory environments in which it
operates. This includes meeting with
senior management and an overview of
the Group’s governance practices.
Non-Executive Directors will have
further content tailored to the Board
Committees that they join. Feedback is
sought from the Director each time a
programme is completed and shared
with the Committee to ensure that our
induction process is continually
updated and improved.
Andrew Gilchrist joined the Board in
March 2023 and received a tailored
induction following his appointment.
This included one-to-one meetings
with our Executive Leadership Team,
business and functional leaders and our
internal and external auditors.
The Chair has overall responsibility for
ensuring that Directors receive suitable
training to enable them to carry out
their duties. Training is provided
through deep dive sessions
(“Neducation”), written content and
presentations , as well as meetings with
Group employees and external advisers.
Directors undertake visits to different
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131
GOVERNANCE PEOPLE AND GOVERNANCE COMMITTEE continued
The feedback confirmed that the
Committee was operating effectively,
having quality interaction and in-depth
discussion with the executive that has
demonstrated progress in the
organisation’s cultural transformation
alongside evolving talent management
and succession planning programmes.
Areas of focus for 2024 include
rebalancing agenda time towards
traditional nomination committee
activities, including succession
planning for the Board.
Imperial sites around the world,
where they meet with colleagues,
management, suppliers and consumers.
You can read more about our
stakeholder engagement in more
detail on pages 32 to 36.
During the year the Board received
training on corporate policy positions
and intellectual property rights and
licensing in NGP.
The Directors have access to
independent professional advice at the
Group’s expense, as well as the advice
and services of the Company Secretary,
who advises the Board on regulatory
and corporate governance matters.
Review of the People and
Governance Committee
For its 2023 evaluation, the Board
initiated an external review using the
firm Independent Board Evaluation
(IBE), covering the Board and its
Committees. The Committee evaluation
was undertaken through meeting
observation, together with a review of
meeting materials and one-to-one
interviews with Committee members
and the Chief People and Culture Officer.
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Imperial Brands | Annual Report and Accounts 2023
BOARD EVALUATION
An evaluation of the Board, its Committees, the Chair and individual Directors is undertaken on an annual basis, assessing the quality
of decision making and discussion by the Board and each Committee and reflecting on the performance of each individual Director.
Actions from the 2022 Board review
The outcomes and actions agreed following last year’s review were a focus for the Board throughout the year. Progress against
these key actions include:
2022 Action
Actions taken during the year
NGP
Prioritising the Board’s focus on NGP
Talent and culture
Building the talent pool, mapping the cultural
transformation within the organisation and
monitoring the progress of Diversity, Equity &
Inclusion initiatives.
Strategic planning
Consider the medium to long-term strategic
direction of the Group.
• Reviewed and developed M&A opportunities within NGP.
• Held discussions over the year on scientific, regulatory and consumer
developments within NGP – both as standalone items and as part of the
CEO’s regular report to the Board.
• Organised a deep dive on NGP intellectual property and licensing.
• Reviewed the talent and capability programme across a spectrum of senior
management levels, including internal progression and new hires.
• Considered the progress in embedding Imperial’s organisational culture
programme, including the development of a Senior People leadership skills
programme (“Connected Leadership”).
• Used KPIs to track the Group’s five-year diversity, equity and inclusion strategy.
• Received regular updates on market and competitor developments.
• Held two deep dives on the approach and planning for the next five-year
strategic plan.
The process below was followed for this external review:
Planning
Briefing
Evaluation
Reporting
Review
Actions
People and
Governance
Committee
agrees evaluation
provider,
following detailed
consideration.
IBE reflects on
feedback from
2021 review to
inform thinking
on key focus
areas for the
evaluation.
IBE discusses
evaluation
process
with Chair.
IBE defines the
scope of the
review, attends
Board and
Committee
meetings and
interviews
individual
directors and
non-Board
contributors.
IBE benchmarks
against best
practice standards
of corporate
governance and
other boards.
Discusses draft
reports with Chair,
Committee Chairs
and Senior
Independent
Director (SID).
Final evaluation
reports discussed
by the Board and
its Committees,
with Chair giving
individual
feedback to each
Director and the
SID facilitating
the Board’s
feedback to
the Chair.
Board and
Committees
agree actions to
take forward.
Actions then
implemented
and monitored
over the year.
2023 BOARD REVIEW
In 2023, the Board initiated an external
evaluation by the firm Independent
Board Evaluation (IBE). IBE externally
facilitated Imperial Brands’ Board
evaluation in 2021 but beyond this there
is no connection between IBE and
either Imperial Brands or its Directors.
The evaluation supported the view that
the Board was performing effectively,
noting the progress made since the
previous review in 2021. The cohesion
and diversity of the boardroom, strong
levels of trust and transparency and the
support and challenge of the Board as it
has overseen cultural change and
transformation within the business
were identified as areas of strength in
the review.
Recommendations were made with the
aim of helping the Board achieve
optimal effectiveness. The Board
agreed to implement actions across the
following areas:
Board agenda and focus
The Board’s focus during 2022-23, has
been on the three areas referred to
above, together with ESG and specific
projects. As Imperial begins to develop
the next strategic plan,their focus will
shift towards more time on long-term
strategy, NGP and risk. We will ensure
increased co-ordination across the
Board and its Committees to ensure
that strategic and operational priorities
dovetail and agendas are linked.
Adding value and optimising challenge
With the Board having satisfied one of
the key recommendations of the 2021
review, namely rebuilding trust and
solidifying its culture both within the
boardroom and with executive
management, there is now opportunity
to review Board meeting structure
and topics to explore strategic ideas
before they are fully developed, find
ways to introduce different styles of
discussion and allow Board members
to bring their experience to the
decision-making process.
Strategy
While delivery of the current strategic
plan has gone well to date, the Board is
mindful that the market, regulatory and
geopolitical landscape remains dynamic
and the parameters for a future strategy
will be different to those of the current
plan. The format of formal and informal
Board time will be re-examined to agree
optimal methods for engaging the Board
on the development of the next five
years of the strategy, including
encouraging strategic debates on
diverse options.
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133
GOVERNANCE AUDIT COMMITTEE
AUDIT
COMMITTEE
Jon Stanton
Committee Chair
135
134
STRUCTURE AND CONTENT
OF THE AUDIT COMMITTEE
REPORT
Audit Committee Chair’s
overview
Role of the Audit
Committee
About the Audit
Committee
Audit Committee’s
activities in 2022/23
Key matters considered
Governance, risk
management and
internal control
Internal audit
External audit
Directors’ statement
140
140
140
141
136
137
135
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 2023,
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.
I would like to express my thanks to
Simon Langelier, who stepped down
from the Board and Audit Committee
during the year, for his most respected
input during his tenure; a warm
welcome goes to Andrew Gilchrist who
joined the Audit Committee this year,
providing extremely valuable sector
and geographical insights to our
discussions in addition to his
financial expertise.
The Committee has spent time during
the year monitoring Imperial’s risk
management, control and financial
governance framework, including a
step-up in our approach to Enterprise
Risk Management and the
enhancement of the surrounding
framework. These are critical as we
enter the fourth year of our five-year
strategy and, as a business, look beyond
that. The Group’s strategic ambitions
remain on track and the Committee
continues its focus to provide the Board
with the necessary assurance in its
delivery of that strategy.
The Committee also received updates
from the Treasury and Tax functions
during the year, both of which have
strengthened the governance
underpinning their activities, which
has been critical as they play their part
in the wider ongoing Finance
Transformation. We also monitored and
received updates on the developments
proposed by what was the Department
for Business, Energy and Industrial
Strategy (BEIS) as part of its ‘Restoring
Trust in Audit and Corporate Governance’
agenda, and the subsequent withdrawal
of draft new reporting regulations.
We will continue to monitor the
proposed wider reforms, as well
as the forthcoming Code changes.
See also the Committee’s focus in
2023 on page 136.
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. Additional Alternative
Performance Measures were adopted in
the year to enable a greater explanation
of the impact of the Company’s Russia
exit; it is anticipated that these will only
be used in respect of this financial year.
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
Committee was also subject to an
external evaluation during the year,
further details of which you can find
below, but I was pleased with the
findings and will work with members to
consider areas for improvement
identified as part of the process.
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 key matters considered
by the Audit Committee set out on page
137 to 139.
Jon Stanton
Chair of the Audit Committee
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Imperial Brands | Annual Report and Accounts 2023
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.
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 position, performance,
business model and strategy
(see page 139).
The terms of reference of the
Audit Committee can be found
on our website.
GOVERNANCE
The Audit Committee consists entirely
of independent Non-Executive
Directors as defined by the Code.
The Audit Committee chair, and both
Alan Johnson and, following his
appointment in March 2023, Andrew
Gilchrist meet the Code’s standard of
having recent and relevant financial
experience. The Board is satisfied that
the Committee as a whole has the
required competence relevant to the
sector in which the Company operates,
supported by the FMCG experience of
Sue Clark, Ngozi Edozien, Andrew
Gilchrist and Alan Johnson.
Biographical details of the current
members of the Audit Committee are
set out on pages 116 to 119. Members of
the Audit Committee are appointed by
the Board following recommendation
by the People and Governance
Committee. Simon Langelier stepped
down as a Director of the Company and,
therefore, as a member of the Audit
Committee in February 2023; Andrew
Gilchrist joined the Committee on
his appointment to the Board in
March 2023.
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
Group Internal Audit 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.
AUDIT COMMITTEE REPORT
1
11/22
2
02/23
3
05/23
4
09/23
Focus in 2023
• Oversight of continuous
n/a
n/a
n/a
n/a
• Group Financial Controller
• Global Tax Director
• Director of Group Internal Audit
• Representatives from EY, our
external auditor
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, and an
uncertain macro environment.
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135
KEY 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 137 to 139.
• 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-
ABOUT THE AUDIT COMMITTEE
Membership* and attendance
Name/Meeting
Jon Stanton (Chair)
Sue Clark (SID)
Ngozi Edozien
Andrew Gilchrist 1
Alan Johnson
Simon Langelier2
* Only members are entitled to attend.
1. Appointed 1 March 2023
2. Retired 1 February 2023
Note: n/a signifies not eligible to attend
Other regular attendees during FY23
• Board Chair
• Chief Executive Officer
• Chief Financial Officer
• Group Finance Director
• Company Secretary
• Deputy Company Secretary, as
Secretary to the Audit Committee
GOVERNANCE AUDIT COMMITTEE continued
• Ensuring reporting and disclosures
are fair, balanced and
understandable, and adequately
reflect developments in our
ESG commitments and FRC
disclosure guidelines.
• Assessment and approval of
alternative performance measures to
facilitate the presentation of results
following the Company’s Russia exit.
• 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.
Looking ahead to 2024
For the coming year, the Committee
will continue to support and monitor
the Finance team’s transformation
programme and the development of the
Group’s risk management framework to
better support delivery of Imperial’s
strategy to enable a more consistent,
effective and transparent approach to
risk and to drive future value.
Regulatory developments will continue
to be in focus with the outcome of
the BEIS proposals to be taken into
consideration, and the enactment
of the FRC’s Standard for Audit
Committees. We will, as always,
challenge ourselves to ensure
our overall reporting continues
to improve, remains appropriate and
takes full account of regulatory and
other developments.
Review of the Audit Committee
An externally facilitated evaluation
of the Board and Committees was
undertaken in 2023, as reported
elsewhere in the Annual Report,
conducted by Independent Board
Evaluation (IBE). IBE has no other link
with the Company or its Directors.
The Audit Committee evaluation was
undertaken through meeting
observation, together with a review of
meeting materials and one-to-one
interviews with Committee members
and the external audit lead partner.
There is a high level of confidence
in the Audit Committee, which
feedback confirms is well-chaired.
The composition facilitates challenge,
evaluation and debate and draws well
on members’ experience, facilitating
good cross-Committee governance. The
main areas to focus on for the Audit
Committee were the continued evolution
of the Group’s risk management and
internal controls programme; and
non-financial/ESG reporting.
AUDIT COMMITTEE’S ACTIVITIES 2022/23
A summary of the topics covered by the Audit Committee in its meetings during the financial year is provided below:
Topic
Matters discussed and decisions taken
Financial
results and
audit
• Finance update, including climate change impact modelling
• Finance Transformation update
• FY22 Results overview and accounting estimates and judgements update and recommendations to
the Board
• Review of HY23 Results, including going concern and accounting estimates and judgements
• Financial controls self-certification and FY22 attestations update
• Confirmed audit/non-audit service fees
• Update on alternative performance measures (APMs)
• FY23 audit plan and update
• External audit effectiveness review, including FY22 learnings to improve ways of working
• Restructuring Policy review
• Recommended reappointment of external auditor to the Board
• Considered audit and non-audit service fees
• Recommended preliminary announcement and Annual Report and Accounts to Board, including the Audit
Committee report and risk management disclosure
• Recommended half year reporting to the Board, including interim dividends
• Recommended final dividend to the Board
• Group Internal Audit update, including FY24 plan and approval of Charter
• Group Internal Audit annual review
• Group Internal Audit updates, including strategy roll-out update
• Engaged senior management for deep dives where issues required greater scrutiny
• Group Treasury update, including risk management
• Tax review including strategy confirmation
• Logista review
• Internal controls and risk management update, allowing confirmation of internal controls and
risk Code compliance
• Enterprise risk management framework update
• Risk and controls assurance – US
• Governance, Risk and Control Operating Model update.
• FRC and BEIS updates
• Reviewed independence of Audit Committee members.
• Committee evaluation
• Update on FY23 Audit Committee planner
• Private discussions with external auditor, Group Internal Audit and CFO
Corporate
reporting
Internal Audit
Functional and
business
reviews
Governance,
risk and control
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Imperial Brands | Annual Report and Accounts 2023
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 and
why it is significant
Use of alternative performance
measures
Non-GAAP or alternative
performance measures (APMs)
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.
How we as an Audit Committee addressed this area
Outcomes
During the year the conclusions of a detailed
review and scrutiny of the proposed use of
APMs in FY23 were presented to the Audit
Committee. The Committee also reviewed and
approved changes to the APMs proposed by
management to provide greater clarity on the
nature and amount of all adjusting items.
Three additional APMs were introduced
at the half year to better enable the
presentation of Group results excluding
Russia and it is anticipated that these
will be discontinued after FY23. The
separation of “NGP Adjusted Operating
Profit” as a standalone metric, being a
derivative of the previously combined
Tobacco and NGP Operating Profit APM,
was approved for the full year, to better
reflect the growing importance of
this market.
No restructuring costs associated with the 2021
strategic review were recognised in FY23, as
previously agreed by the Committee.
No action required.
Production changes at the Company’s Kyiv
factory were considered as an adjusting item
and discussed by the Audit Committee.
Its treatment in this way was
consistent with that of sector peers
and considered appropriate.
The Audit Committee discussed with
management and EY the fair value adjustment
and impairment of other financial assets.
Approved.
Segmental reporting
The accounting standard IFRS 8
Operating Segments requires
alignment of external reporting
segments with the internal
management information provided
to the Chief Operating Decision
Maker within an organisation.
The Group changed its internal management
reporting structuring with effect from 1 October
2022. The change involved the movement of the
Central and Eastern Europe cluster from the
Europe division to Africa, Asia Australasia
(AAA) division The AAA division was
subsequently renamed the AAACE division.
The Audit Committee reviewed the resultant
changes to the external reported operating
segments presented on the new basis at the
Half Year, together with a restatement of the
prior year comparative figures.
The FY23 full year figures are presented
on the same revised basis, also including
a restatement of the comparatives, and
were similarly reviewed.
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137
GOVERNANCE AUDIT COMMITTEE continued
How we as an Audit Committee addressed this area
Outcomes
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.
In addition, CGUGs were reviewed in connection
with the Group reorganisation of the Central
and Eastern Europe cluster into the newly
constituted AAACE division.
The Audit Committee also considered detailed
reporting from, and held discussions with, the
external auditor.
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 received specific progress
reports on French tax litigation, German tax
authority audit into debt and equity allocation
to branches, the recognition and recoverability
of deferred tax in connection with the Group’s
Dutch business and the conclusion of the
transfer pricing audits, including settlement on
UK, German and French transfer pricing audits,
and in light of these considered the
reasonableness of provisions and
reporting disclosures.
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.
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 concluded that
there was no requirement to impair
goodwill and intangibles and that the
disclosure of sensitivities was
appropriate and on this basis the
Committee approved the note
disclosure in the financial
statements.
The Audit Committee continued to
consider the appropriateness of
items treated as adjusting and
concluded that the items satisfied tax
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 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.
Focus area and
why it is significant
Goodwill and intangible asset
impairment reviews
(See note 11 to the financial
statements for further information)
Goodwill and intangible assets form a
major part of the Group’s balance sheet,
and their current valuations must be
supported by future prospects.
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
mainly to two principal matters:
German branch capital structure; and
a French tax authority challenge in
respect of an intra-Group disposal
and financing.
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. A claim arising from specific US
legislation (Helms Burton) remains
ongoing, one element of the US state
settlement agreements remains
unresolved, employment related claims
arising from a number of legacy
disputes is ongoing and the Group
faces one ESG related claim (see notes
24 and 29). The Group is in the process
of appealing three decisions by
national Competition Authorities in
the EU.
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Imperial Brands | Annual Report and Accounts 2023
How we as an Audit Committee addressed this area
Outcomes
Focus area and
why it is significant
Going concern and viability
statement
In the context of
global economic
uncertainty, characterised
by Ukraine and other
conflicts and, amongst
other things, the ongoing
cost-of-living crisis, 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.
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 110. 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 and the impact of the share buyback.
The Audit Committee reviewed these tests on
operating cash flows, the ongoing resilience of
demand and supply, 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 significant oversubscription
to the Group’s debt financing offers, even in
challenging markets.
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.
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.
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 information 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, legal
advisers, 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.
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 November
2024 and make its recommendation to the Board.
The Audit Committee noted that this 12-month
period was a reduction from the prior year, which
had increased following the outbreak of the
coronavirus to provide assurance to the market
around corporate liquidity risk. The Committee
determined this was appropriate given the Group’s
cash flow resilience and strong access to funding
markets when required, and also noted that it was
in line with statutory requirements.
The Audit Committee also considered
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.
The Audit Committee is satisfied that the Group’s
policy was operating effectively. No breaches
were found during the year.
After consideration of the Annual Report against
these criteria the Audit Committee recommended
to the Board, which accepted the recommendation,
that taken as a whole the Annual Report is fair,
balanced and understandable and provides the
information necessary for shareholders to assess
the Company’s position, performance, business
model and strategy.
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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.
The Board has responsibility for the
oversight of the Group’s internal
control systems, risk management
process and framework. The Board
delegates to the Audit Committee the
detailed risk assessment review and
assurance over the operation of the
risk management framework.
The Group’s risk management
approach is described in the Principal
Risks and Uncertainties section on
pages 100 to 111 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 100
to 111.
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 internal control systems,
risk management process and
framework, as well as on the results
of risk assessments and internal
control effectiveness assessments.
The Board and Audit Committee have
been informed of, and looked at, all
significant whistleblowing reports
and reported frauds in the year, and
are comfortable that none of these
gave rise to evidence of systemic
non-compliance with relevant laws
and regulations.
The Audit Committee receives
presentations from the Executive on
their respective functions. 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
the FRC Guidance on Risk
Management, Internal Control and
Related Financial and Business
Reporting and that such systems
were in place throughout the year
and up to the date of the approval of
the financial statements.
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Imperial Brands | Annual Report and Accounts 2023
INTERNAL AUDIT
Group Internal Audit (GIA) is
responsible for providing 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 key
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 also met
independently with the Director
of Internal Audit to discuss
additional insights.
The Audit Committee reviews the
effectiveness of GIA routinely through
post-audit surveys and KPI reporting,
and monitors progress on GIA’s own
strategic priorities through
updates provided.
The Audit Committee also reviewed
and approved the FY24 GIA plan,
including the scope, risk coverage and
resourcing model to deliver it.
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
2023 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 Engagement Letter detailing
the provision of statutory audit and half
year review services in respect of FY23
was considered and approved in the
prior year.
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.
Marcus Butler, our signing Audit
Partner, has just completed his fourth
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 £100,000, and prior approval
by the Audit Committee for allowable
non-audit work that EY may perform.
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
required by law for the auditor to
undertake and/or 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 5%
(2022: 7%) 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 fees
In the current year audit fees were
£9.3 million (2022: £8.2 million)
(see note 4).
Audit quality
The Board and Audit Committee place
great importance on ensuring that the
Group receives a high-standard and
effective external audit and any
recommendation to re-appoint the
auditor is based on continuing
satisfactory performance. 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 FY22 accounts for review.
The Committee also noted that the FRC
rated the majority of audits carried out
by EY as requiring no or only limited
improvements.
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 Company is in compliance with the
requirements of the Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and
Audit Committee Responsibilities)
Order 2014.
The Audit Committee recommended to
the Board that EY should be reappointed
as external auditor at the next AGM.
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 169.
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.
www.imperialbrandsplc.com
141
GOVERNANCE REMUNERATION REPORT
ANNUAL STATEMENT FROM
REMUNERATION COMMITTEE CHAIR
Membership and meeting attendance
Members
11/22
03/23
05/23
09/23
Sue Clark (Chair)
Thérèse Esperdy
Diane de Saint Victor
Bob Kunze-Concewitz
Jon Stanton
Focus in 2023
• Triennial review of the Directors’ Remuneration Policy
• Extensive two-phase investor consultation on Directors’ Remuneration
Policy
• Ensuring remuneration continues to support the Group’s strategy as we
move into the improving delivery phase
• Attraction and retention of high-performing individuals in a competitive
global market place
• Further development and incorporation of ESG strategy into incentive plans
• Review of wider workforce reward considerations in light of ongoing
economic volatility
Looking ahead to 2024
• Ensure remuneration continues to support ongoing delivery of the
Company’s strategic goals
• Review wider workforce reward strategy to ensure alignment with strategy,
purpose and values
• Retention and incentivisation of our international Executive Leadership Team
Sue Clark
Committee Chair
KEY SECTIONS OF THIS
REPORT ARE AS FOLLOWS:
Annual Statement
Remuneration at a glance
Directors’ Remuneration
Policy
142
146
147
Pay arrangements for FY24 153
Annual Report on
Remuneration
Remuneration earned for
FY23
Determination of 2023
Annual Bonus
Executive share ownership
and Directors’ interests
Comparison with
employees’ remuneration
CEO pay ratio
Remuneration Committee
membership and duties
154
154
155
157
159
160
162
DEAR SHAREHOLDER
On behalf of the Board, I am pleased to
present the Directors’ Remuneration
Report for the financial year ended
30 September 2023, which includes:
• The updated Directors’ Remuneration
Policy, to be submitted for
shareholder approval at the AGM on
31 January 2024; and
• The annual Directors’ Remuneration
Report, showing how the current
Policy has been implemented during
FY23 and how, subject to approval,
the new Policy will be implemented
for FY24.
FY23 was the third year of the five-year
strategy launched in 2021, where we
moved from the initial foundation
building phase to a period of improving
financial delivery. Despite ongoing
macroeconomic challenges, the
Company delivered resilient
performance underpinned by targeted
investments in capabilities and people,
improving shareholder returns through
a growing dividend and our ongoing
share buyback programme.
DIRECTORS’ REMUNERATION
POLICY
During the year the Committee
undertook a comprehensive review of
the current Policy which included an
extensive, two-phase investor
engagement process covering over 60%
of our issued share capital, as well as
the Investment Association,
Institutional Shareholder Services and
Glass Lewis. The Policy was last
approved by shareholders at the 2021
AGM with a vote of over 95%.
In reviewing the Policy, the Committee
sought to ensure continued alignment
with the five-year strategy and the
ability to retain and incentivise a world-
class international Executive
Leadership Team. The Committee was
satisfied that the existing framework
142
Imperial Brands | Annual Report and Accounts 2023
remains broadly fit for purpose, having
made a number of best practice
changes in 2021 including aligning
executive pensions with the wider
workforce; introducing post-cessation
shareholding requirements; and
strengthening our malus and
clawback provisions.
No material changes are being made to
the Policy at this time, but instead some
refinements to the framework and
implementation of our incentive
structures are proposed, as described
below. The Committee will continue to
monitor its effectiveness and if
material revisions are required before
the end of the three-year life of the
Policy (e.g. following the end of our
current five-year strategic plan), we
would consult with shareholders
as appropriate.
Performance metrics in
incentive plans
The Committee proposes to make some
refinements to performance metrics for
FY24, to ensure that incentives act as a
driver of progress in the second phase
of our strategy, delivering stronger and
more consistent performance in both
conventional tobacco and next
generation products (NGP), as well as
our commitment to ambitious long-
term sustainability goals.
The key changes to performance
metrics, which formed a significant
part of our discussions with
shareholders, are as follows:
• Introduction of a new free cash flow
metric in the LTIP, aligned to our key
strategic pillar of supporting strong
and sustainable cash generation.
Strong cash generation is a critical
enabler of our four capital allocation
priorities, which are listed in full on
page 12; and include investment
behind the strategy to deliver growth
initiatives and return surplus capital
to shareholders while maintaining
our target leverage. Cumulative free
cash flow will operate alongside ROIC
in the LTIP (with an equal weighting
of 15% each), to ensure continued
focus on capital discipline.
• Increased weighting on NGP under
the Annual Bonus from 5% to 10%, to
reflect accelerated activity across
NGP categories and our focus on
consumer health. We recognise that
consumer health is both a key pillar
of our strategy and our most
important ESG priority. NGP will
continue to be measured by reference
to revenue from our heated tobacco,
vapes and oral nicotine products.
• A move of our existing climate metric
from the Annual Bonus to the LTIP,
reflecting the long-term nature of our
ambitions in this area and with an
increased weighting from 5% to 10%.
• A review of the TSR comparator
group to ensure that the group
constituents remain relevant in
terms of financial size, capitalisation
and correlation, and have an
appropriate business and
geographical mix. Further details of
the updated TSR comparator group
can be found on page 153.
We are committed to reducing our
impact on the climate throughout our
value chain, focusing on both
mitigation and adaptation, with a series
of ambitious intermediate objectives in
place to reduce our carbon footprint, as
set out on page 48. Alongside consumer
health, climate was identified as a key
priority in our ESG materiality
assessment, based on the views of
consumers, customers, employees and
stakeholders. Further details on
proposed weightings for the Annual
Bonus and LTIP for FY24 are set out in
full on page 153.
Operation of Annual Bonus deferral
A key principle of our remuneration
framework is to ensure strong
alignment between executive and
shareholder interests through
encouraging share ownership, as
reflected in a range of features
including bonus deferral, holding
periods and shareholding requirements
of 300% of gross base salary. Bonus
deferral and shareholding requirements
also apply to all of our Executive
Leadership Team below Board level.
Following our Policy review, we are
proposing to introduce flexibility
under the Policy for the Committee
to reduce the level of bonus deferral,
but only where the minimum Executive
Director shareholding has been met.
Any reduction in deferral would be
to a level no lower than 25%. In our
view this is a balanced approach
which continues to meet our high
expectations around building
significant shareholdings, while fairly
recognising the international nature
of our management team and the
global talent market in which we
operate, where the combination
of features described above is
relatively uncommon.
SHAREHOLDER ENGAGEMENT
DURING THE YEAR
We were very grateful for the time
shareholders spent with us in helping
shape our proposed Policy and for the
strong support we received for the
Directors’ Remuneration Report
(97.54%) in 2023. During the year, our
programme of engagement consisted of
two phases: an initial consultation in
March to invite general views on a
range of executive remuneration
topics and our wider strategy, which
helped formulate our initial proposals.
In July, we wrote back to investors
summarising our proposals and held
a number of open and constructive
discussions, leading to refinements
in the final approach.
We received a wide range of views and
the majority of investor feedback was
positive. Some investors did raise a
clear preference for the retention of
ROIC within the LTIP, to ensure a
continued focus on capital discipline
and making investments which will
generate long-term value for investors.
As a result of the feedback received
from investors, we have retained ROIC
with a reduced weighting of 15% and
included cumulative free cash flow
with an equal weighting of 15%. We also
heard a range of differing views on the
appropriate weighting and metric for
our climate measure. On balance, we
decided to retain the proposed climate
weighting of 10% under the LTIP, for the
reasons outlined above.
WORKFORCE ENGAGEMENT
DURING THE YEAR
The Committee was directly involved in
the Board’s work during the year on
workforce engagement which is
described in detail on page 130. 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 specifically
explored the topic of reward, hearing
participant’s views on the alignment of
executive reward and reward for the
wider workforce at Imperial Brands. We
also discussed a range of reward topics
covering ESG, strategy, performance
metrics, policy, corporate governance,
benchmarking and reward alignment
throughout all levels of the Company.
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.
SUPPORTING OUR COLLEAGUES
While in recent months we have seen a
slowing down in the volatility of the
macroeconomic environment across
the globe, the Committee has continued
to monitor the impact of the still very
challenging environment on our
www.imperialbrandsplc.com
143
GOVERNANCE REMUNERATION REPORT continued
workforce. In FY22, we introduced a
number of targeted actions which
supported our colleagues and we have
continued to monitor and, where
appropriate, take action in FY23 in
locations where significant economic
challenges continue to exist.
Annual salary budgets continue to be
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 typically range from
4% to 8% (excluding higher increases
made in countries experiencing
hyperinflation), with average increases
in the UK at 5% for FY24.
The Committee will continue to
monitor and review workforce pay
and policies over the coming year,
to ensure we support our colleagues.
REMUNERATION OUTCOMES
FOR FY23
The FY23 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.
ESG (consumer health and climate)
and strategic objectives formed the
remaining 20% of the bonus at 10%
weightings for each.
Adjusted operating profit performance
with growth of 3.8% at constant
currency was delivered through strong
market share growth and tobacco
pricing. A third consecutive year of
market share growth of +10bps against
FY22 was achieved with performance
mainly driven by the US, Spain and
Australia. Cash generation remained
a key focus and has supported the
delivery of a 92% adjusted operating
cash conversion outcome and this
strong cash generation has enabled
the business to return £2.3 billion to
shareholders via dividends and
share buyback.
Strong performance was achieved
across both ESG measures of consumer
health (NGP net revenue) and climate
change (reduction in energy
consumption and Scope 1 & 2 CO2
emissions). NGP net revenue growth
accelerated during the year, with strong
growth in all categories across Europe,
and delivery of £227 million NGP net
revenue (excluding US and at internal
exchange rates). An 8.8% reduction in
energy consumption and significant
reductions in CO2 emissions were
delivered following a concerted focus
on energy conservation and
energy efficiency.
The market share, NGP revenue and
climate targets were met in full, while
the adjusted operating profit and cash
conversion targets were achieved
in part.
The Executive Directors performed
extremely well against their strategic
objectives which as far as possible have
been set as specific and quantifiable.
For Stefan Bomhard, this included the
launch of blu 2.0 into eight, Pulze into
five and blu bar into eleven markets,
the planned entry into modern oral
nicotine in the US and upper quartile
global colleague engagement scores
during a period of significant change
and transformation. Lukas Paravicini’s
objectives included the setting up of
Finance and IT GBS operations, the
UNIFY programme progressing to time
and budget and material increases in
Finance, IT and Transformation
colleague engagement scores. Further
details are shown on page 155 and 156.
In aggregate, as a percentage of
maximum, Stefan received a bonus of
71.6% and Lukas received a bonus of
70.6%. 50% of the bonus will be deferred
in Imperial Brands shares over three
years. The Committee believes this
outcome reflects fairly the performance
of the business during the year.
No discretion has been applied by
the Committee.
The LTIP award due to vest in February
2024 will vest in part, resulting in 85% of
the total award vesting. No discretion
was applied by the Committee in
respect of the vesting outcome.
IMPLEMENTATION FOR FY24
The Committee reviews remuneration
trends and plans for the wider
workforce each year and this provides
important and relevant context for the
decisions it makes regarding the
Executive Directors and the Executive
Leadership Team.
In reviewing salaries this year, the
Committee has been mindful of the
ongoing global inflationary pressures
that have been impacting many of our
people across the Group.
The annual salary review is effective
from 1 October 2023. As mentioned
earlier, salary increases awarded to
employees typically ranged from 4% to
8% across the markets we operate in
(excluding higher increases made in
countries experiencing hyperinflation).
Our budgeted average increase for the
UK workforce is 5% for FY24.
In setting the salary for the Executive
Directors, the Committee took into
consideration global inflationary
pressures, the approach taken for
colleagues, performance and
contribution, and the impact on
total remuneration.
Stefan was appointed on 1 July 2020
and has provided exceptional
leadership over the first three years of
our transformation strategy. After
careful consideration, the Committee
decided to award a salary increase of
4.5% to Stefan and of 4% to Lukas. The
increases awarded reflect the strong
performance and contribution from
both our Executive Directors during the
year. In taking these decisions, the
Committee considered the comparison
with wider workforce increases, noting
that the increases were, again, below
the average increase for the UK
workforce. Stefan’s new salary is
£1,400,036 pa and Lukas’ new salary
is £789,568 pa.
144
Imperial Brands | Annual Report and Accounts 2023
FY24 is an important year, where we
continue to drive our “accelerating
returns” phase of our strategy. The
Committee considered carefully the
measures and targets for FY24 across
both the Annual Bonus and LTIP, and
has sought to ensure a set of metrics
that balance key financial metrics,
continued growth in NGP and
commitment to our long-term
sustainability goals, to ensure that we
continue to drive and reward the
behaviours that will deliver on the
long-term strategy. However, the
Committee also recognises that we
continue to operate in an uncertain and
challenging macroeconomic and
geopolitical environment.
The Annual Bonus performance
metrics for FY24 will be: organic
adjusted operating profit at constant
currency (40% weighting), market
share growth (15% weighting), cash
conversion (15% weighting), ESG/NGP
consumer health (10% weighting) and
individual/strategic objectives (20%
weighting). The financial targets will be
aligned with the guidance provided at
our Capital Markets Day and in our
latest trading statements.
The FY24 LTIP will be granted in
February 2024. The measures for the
FY24 award will be: organic adjusted
EPS growth at constant currency
(weighting 40%), relative TSR
(weighting 20%), return on invested
capital (weighting 15%), the newly
introduced cumulative free cash flow
measure (weighting 15%), and ESG
climate which has moved from the
Annual Bonus (weighting 10%). The
targets are detailed on page 153.
CHAIR FEES
The Committee reviewed and approved
a 4% fee increase for the Company
Chair. Thérèse Esperdy’s fee will be
£664,280 pa from 1 October 2023.
CONCLUSION
On behalf of the Committee I would
once again like to thank our
shareholders and wider stakeholders
for their engagement during the year.
We believe the proposed new Policy,
and plan for implementation from
FY24, best supports the next phase of
our strategy and the continued
retention and incentivisation of our
international Executive Leadership
Team. Should you have any questions
or feedback, please get in touch with
me at RemcoChair@impbrands.com.
We hope that you will support the
Remuneration Policy and Annual
Remuneration Report at our AGM.
Sue Clark
Chair of the Remuneration Committee
Meetings held in FY23
In FY23, the Committee met on four occasions and the table below summarises the matters discussed:
Nov-22
Mar-23
May-23
Sep-23
Approval of FY22 Bonus out-turn
Approval of 2020-2022 LTIP out-turn
Review of Executive Directors’ remuneration dashboard
Approval of DRR
Review of CEO pay ratio
Approval of FY23 Annual Bonus targets and weightings
Approval of 2023-2025 LTIP targets and weightings
Approval of vesting of Share Matching Scheme and Bonus Matching Plan for
senior management and FY23 grant
Approval of operation of Discretionary Share plan and Sharesave for FY23
Approval of FY23 LTIP grant
Review and approval of Directors’ Remuneration Policy,
including investor consultation
Discussion on workforce remuneration
Review of forecast for Annual Bonus out-turn
Review of forecast for LTIP out-turn
Discussion of FY24 Annual Bonus plan
Discussion of 2024-2026 LTIP plan
Approval of base salaries for Executive Leadership Team and Chair’s fee
Review of the Committee’s terms of reference
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145
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 2024
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
T
C
O
Measuring performance1
Annual Bonus:
• Adjusted operating profit (40%)
• Adjusted operating cash
H
H
N
T
T
I
M
A
E
U
E
B
S
E
U
C
N
R
E
E
R
N
S
T
E
O
conversion (15%)
S
F
S
• Market share growth (15%)
• Strategic/individual (20%)
• Consumer health – NGP (10%)
D
SIM PLIFIE
A N D EFFICIE
O PER
T
N
LTIP:
S
N
TIO
• Adjusted EPS growth (40%)
A
• Return on invested capital (15%)
• Cumulative free cash flow (15%)
• Relative TSR (20%)
• Climate change (10%)
PERFORM A N C E
BASED CUL T U R E
AND CAPABI L T I E S
1. Further details of the above performance measures can be found on page 153.
EXECUTIVE DIRECTORS’ VARIABLE REMUNERATION OUTCOMES FOR 2023
Adjusted operating profit growth at constant currency
40% 26.8%
67%
Maximum
%
of bonus/
LTIP
Out-turn
as a % of
maximum
bonus/ LTIP
% of weighting achieved
Annual
Bonus
Adjusted operating cash conversion
20%
4.8%
24%
Weighted market share growth
20%
20%
ESG – Climate change, consumer health
Strategic/individual – Stefan Bomhard
Strategic/individual – Lukas Paravicini
Total
Stefan Bomhard
Lukas Paravicini
Adjusted EPS growth at constant currency
Net debt/EBITDA
Return on invested capital (ROIC)
Relative TSR
Long-Term
Incentive
Plan
Total
10%
10%
10%
10%
10%
9%
100% 71.6%
100% 70.6%
40%
25%
20%
20%
20%
20%
20%
20%
100%
85%
71.6%
70.6%
62%
100%
100%
100%
90%
100%
100%
100%
85%
TOTAL SINGLE FIGURE IN 2023
Stefan Bomhard
18%
22%
60%
Lukas Paravicini
21%
27%
52%
Fixed pay
Annual Bonus
LTIP
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Imperial Brands | Annual Report and Accounts 2023
(£,000)
Base salary
Benefits and pension
Total fixed pay
Annual Bonus
LTIP
Total remuneration
Stefan
Bomhard
Lukas
Paravicini
1,340
204
1,544
1,919
5,138
8,601
752
109
861
1,062
2,099
4,022
DIRECTORS’ REMUNERATION POLICY
This section of the report sets out the Remuneration Policy for Executive Directors and Non-Executive Directors, which
shareholders will be asked to approve at the 2024 AGM on 31 January 2024, and if approved, will take effect from this date. Until
this time, the Remuneration Policy approved by shareholders on 3 February 2021 will continue to apply.
Over the last 18 months, the Committee has undertaken a comprehensive review of remuneration arrangements, with a particular
focus on alignment to Imperial’s strategy and purpose. A stakeholder consultation process was carried out and input was received
from Remuneration Committee members, the Chair of the Board, other Non-Executive Directors, and the independent external
adviser to the Committee, Deloitte. The Committee also considered input from the Executive Leadership Team and wider
colleagues while ensuring that conflicts of interest were suitably mitigated. The Committee undertook a detailed consultation
process with shareholders in developing the Policy and thanks them for their valuable input.
The Remuneration Committee concluded that the current Policy remains broadly fit for purpose, and therefore only minor
changes to that Policy are proposed.
Bonus deferral – One change to the proposed Policy relates to the operation of bonus deferral. Half of any annual bonus earned
will continue to be deferred into an award of shares which vest after a minimum of three years, with the other half paid in cash, up
until the minimum shareholding guideline of 300% of gross base salary has been met. Once the minimum shareholding guideline
has been met, the Committee may determine that a lower portion of an Annual Bonus is deferred into an award over shares which
vest after a minimum of three years, subject to a minimum deferral of 25%, with the remaining award paid in cash.
The Remuneration Committee intends that the new Policy will operate for three years. If, however, changes are needed over the
three-year life of the Policy, a new Policy would be proposed out of cycle at the 2025 or 2026 AGM or if felt more appropriate at a
separate General Meeting.
Element & purpose
Operation & opportunity
Salary
Attract and retain high-
performing individuals,
reflecting market value of
the role and the Executive
Director’s skills, experience
and performance.
Operation
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 Remuneration Committee considers pay data for UK listed companies closest to the Company
by FTSE ranking (and excluding those in the financial services sector) and other relevant
international comparators of similar size and sector. 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 Remuneration
Committee also considers general increases for the wider workforce, with a focus on increases in
the country in which the Executive Director is based.
Maximum opportunity
To avoid setting expectations of Executive Directors and other employees, there is no maximum
salary or maximum increase in salary under the Policy.
Pension
Provision of market-
competitive pension aligned
to workforce.
Operation
Pension provision for Executive Directors is provided in line with other employees. Executive
Directors are offered membership of the defined contribution plan, and have the option to receive
a cash supplement in lieu of, or a combination thereof.
The Remuneration 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
The maximum pension contribution or allowance for Executive Directors will be aligned with the
workforce (currently 14% of salary).
Benefits
Competitive benefits taking
into account market value of
role and benefits across
the workforce.
Operation
Benefits include provision of a company car (or cash allowance in lieu), health insurance,
life insurance and income protection insurance which are provided directly or through the
Company’s pension scheme. Other benefits, including expatriate or relocation arrangements, may
also be provided on the basis that they are also offered more widely across the Company or are
necessary in order to be competitive locally.
Reasonable business-related expenses will be reimbursed.
Where appropriate, benefits may include any tax payable thereon.
Maximum opportunity
While there is no maximum level of benefits prescribed, they are generally set an appropriate level
reflecting market-competitive data. The value may vary depending on the cost of providing
such provisions.
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147
GOVERNANCE REMUNERATION REPORT continued
Element & purpose
Operation & opportunity
Annual Bonus plan
Incentivise delivery of
Group strategic objectives
and enhance performance.
Operation
The Annual Bonus will be subject to the relevant performance measures set by the
Remuneration 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.
Performance at threshold normally results in zero payment. Payments rise 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, up until the minimum
shareholding guideline of 300% of gross base salary has been met, as determined by the
Remuneration Committee.
Once the minimum shareholding guideline has been met, the Remuneration Committee may
determine that a lower portion of any Annual Bonus is deferred into an award over shares
which vest after a minimum of three years, subject to a minimum deferral of 25% with the
remaining award 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.
Maximum opportunity
200% of base salary.
Long-Term Incentive Plan
Incentivise long-term Group
performance in line with the
Group’s strategic objectives.
Align Executive Directors’
interests with those
of shareholders.
Operation
Awards normally have a performance period of three financial years.
Performance measures may include financial, non-financial or value creation (e.g. TSR)
conditions as determined by the Remuneration 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.
All-employee arrangements
Provision of market-
competitive arrangements
aligned to workforce.
Shareholding guideline
Align Executive Directors’
interests with long-term
interests of shareholders.
Maximum opportunity
Chief Executive Officer: 350% of base salary.
Other Executive Directors: 250% of base salary.
LTIP awards may include additional shares (or, exceptionally, cash) equivalent to the value of
the dividend roll-up, and which may assume dividend reinvestment.
Operation
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 Sharesave Plan for the benefit of its worldwide employees,
and in which Executive Directors are eligible to participate.
Maximum opportunity
In accordance with the limits applicable to the relevant all-employee arrangements.
Operation
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. Executive Directors are required to
continue 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 of cessation) for a period of one year after cessation, with the requirement reducing to
half the shareholding guideline for the second year after cessation.
Progress towards the shareholding guidelines is monitored on an annual basis and the
Remuneration Committee will consider any necessary sanctions required for non-compliance.
Maximum opportunity
No maximum holding but requirement to build to a minimum value broadly equivalent to 300%
of gross base salary.
148
Imperial Brands | Annual Report and Accounts 2023
REMUNERATION COMMITTEE DISCRETIONS RELATING TO VARIABLE PAY SCHEMES
The Remuneration Committee operates each of the Company’s incentive plans for which it has responsibility according to their
respective rules and, where relevant, in accordance with the Listing Rules. The Remuneration Committee has discretion,
consistent with market practice and the framework of this Policy, in respect of:
• participants;
• the timing of grant of an award and/or payment;
• the size of an award (subject to the maxima set out in our Policy);
• the performance measures and targets;
• the determination of vesting and confirmation that the calculation of performance is made in an appropriate manner, with due
consideration of shareholder experience, Company performance and whether and, if so, how adjustments should be made
(subject to the provision that any adjustments to targets set should result in the revised target being no less challenging than
the original target);
• the adjustment up or down including to zero of 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;
• discretion required when dealing with a change of control (including, as appropriate, the testing of any performance conditions
on the occurrence of such events, the application of time pro-rating and the “roll-over” of awards) and any adjustments required
in special circumstances (e.g. rights issues, corporate restructuring events and special dividends);
• determination of a good/bad leaver status for plan purposes based on the rules of the plan and the appropriate treatment
chosen, including the timing of vesting of awards held by good leavers, the application of time pro-rating and any additional
conditions applying to good leavers’ awards;
• whether, and on what basis, dividend roll-up may apply to any award;
• whether recoupment (or “malus” and/or “clawback”) shall apply to awards and, if so, the amount that shall be subject to
recoupment and the method by which it will be applied;
• the method by which awards will be settled in shares (e.g. newly-issued, treasury or market-purchased shares) or (exceptionally)
in cash;
• the method by which any post-vesting holding period and post-cessation holding period shall apply and the extent to which it
may be disapplied in exceptional circumstances (e.g. ill-health); and
• amendments to the terms of the incentive plans, subject to any requirements to obtain shareholder approval for such amendments.
In relation to the Annual Bonus and LTIP awards, the Remuneration Committee retains the ability to adjust the targets set if events
occur which cause it to determine that the conditions are no longer appropriate. Adjustments to LTIP award targets may be made
if an amendment is required so that the conditions achieve their original purpose and are not materially less difficult to satisfy
than was intended. Adjustment may also be made for any changes to accounting policy or accounting standards over the
performance period. Any use of discretion beyond the normal operation of the plan would be justified in the Annual Report on
Remuneration and, if appropriate, be subject to consultation with the Company’s major shareholders. The use of discretion in
relation to the Company’s Sharesave Plan is as permitted under HMRC rules.
Financial targets are normally set based on sliding scales that take account of internal planning and external market expectations
for the Group. Sliding scales may incorporate multiple reference points (e.g. threshold, target, maximum). In relation to strategic
(including NGP) or ESG targets, the structure of the targets may vary based on the nature of the target set. Targets and underpins
may be set which provide for Committee judgement in assessing the extent to which they have been met.
All discretions available under share plan rules will be available under this Policy, except where explicitly limited under
this Policy.
MALUS AND CLAWBACK
The Remuneration Committee believes that it is appropriate for all variable pay awards made by the Company to be subject to
provisions that allow it to recover any value delivered (or which would otherwise be delivered) in connection with any variable
award, including Annual Bonus and LTIP awards, in exceptional circumstances and where it believes that the value of those
variable pay awards is no longer appropriate.
Malus provisions apply before payment and clawback provisions are in place for a period of three years following payment of the
Annual Bonus (or vesting of any element of Annual Bonus deferred into an award over shares) or vesting of any LTIP award.
The malus and clawback provisions can be used in the following circumstances:
• There has been a material misstatement of financial results;
• There has been an error of calculation in the grant or vesting of any award;
• The award holder has committed fraud or misconduct; and
• The award holder has (by act or omission) contributed to:
• serious reputational damage to the Group;
• an instance of corporate failure (e.g. the appointment of a liquidator);
• a material failure of risk management; or
• a material downturn of operational, financial or business performance.
www.imperialbrandsplc.com
149
GOVERNANCE REMUNERATION REPORT continued
PAYMENTS FROM EXISTING AWARDS AND AMENDMENTS TO THE POLICY
Subject to the achievement of applicable performance measures, Executive Directors are eligible to receive payment, and existing
awards may vest, in accordance with the terms of any such award made prior to the approval and implementation of the 2024
Remuneration Policy detailed in this report. Any employee appointed to the Board as an Executive Director will remain eligible to
receive payments, and existing awards may vest, in accordance with the terms of any such payment or award under any of the
Group’s share plans or incentive arrangements made prior to such appointment.
The Committee may make minor amendments to the Policy to aid its operation or implementation without seeking shareholder
approvals (e.g. for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation)
provided that any such change is not to the material advantage of the Director.
PERFORMANCE MEASURE SELECTION
The measures used under the variable reward elements are reviewed annually to ensure they support the Group’s strategy.
Performance targets are set to be stretching yet achievable, taking into account the Group’s strategic priorities and the economic
environment at the time. Further information on the measures and targets for 2024 can be found on pages 153.
DIFFERENCES IN REMUNERATION POLICY FOR EXECUTIVE DIRECTORS AND THE POLICY FOR
OTHER EMPLOYEES
The Remuneration Policy for Executive Directors is designed having regard to the remuneration policy for employees across the
Group. The structure of the Remuneration Policy for Executive Directors and other senior employees is closely aligned. The key
differentiator is the increased emphasis on long-term performance in respect of Executive Directors, with a greater percentage of
their total remuneration being performance related. This includes mandatory three-year deferral of a portion of bonus (typically
50%) and an additional two-year holding period on vested LTIPs, neither of which apply to managers. There are also variations in
the performance metrics which the Remuneration Committee believes are necessary to reflect the different levels of
responsibility.
The Company’s approach to annual salary reviews is consistent across the Group, with consideration given to Company
performance, the scope of the role, level of experience, responsibility, individual performance and pay levels in
comparable companies.
All managers are eligible to participate in an Annual Bonus plan with similar metrics to those used for the Executive Directors.
Senior managers are eligible to participate in the LTIP (c.500 individuals). Where possible, all employees are encouraged to become
shareholders by participating in our Sharesave Plan on the same terms as Executive Directors. Approximately 40% of eligible
employees have taken the opportunity to participate in the Sharesave Plan. Certain managers (c.200 individuals) are eligible to
participate in the legacy Share Matching Scheme although this is closed to new participants. Executive Directors may not
participate in the Share Matching Scheme.
Retirement benefit, typically in the form of a pension, is provided based on local market practice. Other benefits provided reflect
local market practice and legislation.
TOTAL REMUNERATION BY PERFORMANCE SCENARIO FOR 2023/2024 FINANCIAL YEAR
Stefan Bomhard
Lukas Paravicini
£’000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
£11,762
21%
£9,312
53%
42%
£6,232
47%
£1,612
100%
27%
26%
30%
24%
17%
13%
£’000
6,000
5,000
4,000
3,000
2,000
1,000
0
£5,444
18%
£4,457
44%
36%
35%
29%
£3,036
39%
31%
£904
100%
30%
21%
17%
Minimum
Target
Maximum
Max + share
price growth 50%
Minimum
Target
Maximum
Max + share
price growth 50%
Fixed pay
Annual bonus
LTIP
Share price growth
150
Imperial Brands | Annual Report and Accounts 2023
EXECUTIVE DIRECTORS’ SERVICE AGREEMENTS AND LOSS OF OFFICE PAYMENTS
The Company’s policy is that Executive Directors’ service agreements normally continue until their agreed retirement date or such
other date as the parties agree, are terminable on no more than one year’s notice and contain no liquidated damages provisions
nor any other entitlement to the payment of a predetermined amount on termination of employment in any circumstances. The
Company may make payments in lieu of accrued holiday, and in some limited cases career counselling may be provided after the
cessation of employment for a defined period and a contribution may be made towards an individual’s legal fees. The
Remuneration Committee has the authority to enter into settlement agreements with Executive Directors and to pay
compensation to settle potential legal claims where considered in the best interests of all parties. Under the terms of our Articles
of Association, all Executive Directors are subject to annual re-election by shareholders and copies of their service agreements are
available for viewing at the Company’s registered office during normal business hours and both prior to and at the AGM.
Executive Directors’ service agreements contain provisions for payment in lieu of notice in respect of base salary, pension
contributions and a percentage of base salary in respect of other benefits, but these are at the Remuneration Committee’s sole
discretion. The Company is unequivocally against rewards for failure. The circumstances of any termination (including
performance) and an individual’s duty and opportunity to mitigate losses would be taken into account in every case; our policy is
to stop or reduce compensatory payments to former Executive Directors to the extent that they receive remuneration from other
employment during the compensation period and so any such payments would be paid monthly in arrears.
For Executive Directors leaving employment for specified “good leaver” reasons (including death, ill health, disability, the business
or company in which they are employed ceasing to be part of the Group) or in other circumstances and where the Remuneration
Committee permits, Annual Bonus awards will be based on performance, adjusted for time served, and paid at the same time as for
other employees. The Remuneration Committee has discretion to treat any Executive Director leaving for a reason other than the
specified reasons above to be permitted to retain their Annual Bonuses, to adjust the timing and pro-rating to take account of any
prevailing exceptional circumstances.
Any element of an Annual Bonus award which is deferred into shares will ordinarily be forfeited by an Executive Director if such
Executive Director leaves employment prior to the end of the applicable vesting period due to their voluntary resignation or
dismissal for “cause” (for example, dismissal for gross misconduct or bringing the Company into disrepute). An Executive Director
who leaves employment for any other reason will be entitled to retain their deferred bonus awards, which will normally vest at the
normal vesting date.
Under the rules of the LTIP, outstanding awards remain capable of vesting in accordance with their terms if a participant leaves
for the specified “good leaver” reasons as detailed above, or in any other circumstances where permitted by the Remuneration
Committee. In these circumstances awards vest as the Remuneration Committee determines, having regard to the time the award
has been held and the achievement of the performance criteria. Awards will normally vest at the normal vesting date. If the
termination of employment is not for one of the specified good leaver reasons and the Remuneration Committee does not exercise
its discretion to allow an award to vest, awards lapse entirely.
EXECUTIVE DIRECTORS’ SERVICE AGREEMENTS
Executive Director
Date of contract
Expiry date
Compensation on termination following a change of
control
Stefan Bomhard
31 January 2020
Terminable on 12 months’ notice
No provisions
Lukas Paravicini
11 April 2021
Terminable on 12 months’ notice
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.
Copies of Executive Directors’ service agreements are available to view at the Company’s registered office.
RECRUITMENT OF EXECUTIVE DIRECTORS
The remuneration package for any new Executive Director is set in accordance with the terms of the approved Remuneration
Policy in force at the time of appointment. Base salary will be set at an appropriate level, taking into account the experience of the
individual being appointed and the nature of the role. This may include setting the initial base salary below market but with an
expectation that subsequent increases will bring this into line with the desired market rate, in line with their development in the
role. The pension provision offered will be no more than that offered to the wider workforce at the time of appointment. Depending
on the timing of such an appointment within the financial year, it may be necessary for the Remuneration Committee to use
alternative performance measures for the first performance period.
The Remuneration Committee may offer additional cash and/or share-based elements when it considers these to be in the best
interests of the Company and, therefore, shareholders, to buy out remuneration or contractual entitlements which the individual
would forfeit at their current employer. Buyout awards will be based solely on remuneration lost when leaving the former
employer and would reflect the delivery mechanism (i.e. cash, shares or options), time horizons and performance requirements
attaching to that remuneration where possible. Shareholders will be informed of any such awards at the time of appointment.
Ordinarily, any such buyout awards would be delivered as “recruitment awards” under the LTIP rules but the Remuneration
Committee may need to avail itself of the current Listing Rule 9.4.2 R, if required, in order to facilitate the recruitment of the
relevant individual. The Remuneration Committee confirms that this provision would only be used to compensate for
remuneration lost.
In the case of an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out
according to its terms on grant. In addition, any other ongoing remuneration obligations existing prior to appointment may continue.
For external and internal appointments, the Remuneration Committee may agree that the Company will meet certain relocation
expenses, as appropriate and within the limits set by the Remuneration Committee.
www.imperialbrandsplc.com
151
GOVERNANCE REMUNERATION REPORT continued
CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY
We did not consult with employees as part of the process of developing the new Policy. However, in addition to the employee
engagement detailed on pages 33 and 130 we have shared our gender pay report and the CEO pay ratio with employees. As part of
our employee experience survey, we also received feedback on what employees value in terms of their reward package and where
we can improve at the local level.
The Remuneration Committee ensures that it is fully briefed on pay practices across the Company generally, including internal
relativities and participation in all-employee share plans. The Remuneration Committee usually reviews external market data
annually and this is the primary source of remuneration comparison.
CONSIDERATION OF SHAREHOLDER VIEWS
The Remuneration Committee understands that shareholders have diverse views in respect of remuneration, and therefore
engages with the Company’s largest shareholders to ensure it understands the range of views which exist on remuneration issues.
When any material changes are proposed to be made to the Remuneration Policy, the Remuneration Committee Chair will inform
and, where appropriate, consult with major shareholders in advance, and will offer a meeting to discuss these.
The Remuneration Committee actively engaged with shareholders prior to proposing the new Remuneration Policy at its 2024
AGM. As set out in the Chair statement on page 143, in March we undertook an initial consultation with shareholders which helped
formulate the proposals that were sent to shareholders, in July, who together own approximately 61% of the Company. Open and
constructive meetings were held with the shareholders who wanted to discuss the proposals, which led to refinements in the final
approach. We also corresponded with the Investment Association, ISS and Glass Lewis.
The Remuneration Committee also seeks ongoing advice from its external advisers on wider shareholder views, to ensure that it is
kept up to date with any changes in market practice and shareholder sentiment.
Following the extensive consultation undertaken and in consideration of the feedback received, the Remuneration Committee is
proposing limited changes to its existing Policy as it strongly believes that this is the best approach to support the Group’s
strategic aims, motivate management and provide the tools to attract high calibre new talent to the Company and is therefore in
the best interests of shareholders and other stakeholders.
POLICY IN RESPECT OF EXTERNAL BOARD APPOINTMENTS
The Remuneration 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.
POLICY FOR THE CHAIR AND NON-EXECUTIVE DIRECTORS
Strategic purpose
Key features
Fees
Attract and retain high performing
individuals.
Operation
Reviewed, but not necessarily increased, annually by the Board.
Fee increases, if applicable, are normally effective from 1 October.
The Board considers best practice and fee data at comparator companies of
similar scale.
Additional fees may be payable for acting as the Senior Independent Director, as Chair
and/or a member of a Committee or for other additional responsibilities. An allowance
may be 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 by Articles of Association (currently £2.0 million).
Benefits
Reimbursement of business-related
expenses.
Operation
Reimbursement of travel to the Company’s registered office is recognised 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 tax thereon).
Reasonable benefits may be provided from time to time on a case-by-case basis.
Maximum opportunity
Grossed-up costs.
The Chair and Non-Executive Directors are encouraged to establish a holding in Imperial Brands shares of the equivalent of one
year’s base fee.
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Imperial Brands | Annual Report and Accounts 2023
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 31 January 2023. 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.
PAY ARRANGEMENTS FOR FY24
The table below summarises how we intend to apply the main areas of our Directors’ Remuneration Policy for FY24.
Element
Implementation
Salary
Attract and retain high-performing individuals,
reflecting market value of the role and the Executive
Director’s skills, experience and performance.
Stefan Bomhard
Lukas Paravicini
Base salary as at
Oct 22
Oct 23 base
increase%
Base salary as
at Oct 23
£1,339,747
£759,2001
4.5% £1,400,036
£789,568
4%
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.
Where the minimum shareholding guideline of 300%
of gross base salary has been met, the Remuneration
Committee may determine that a lower deferral
percentage be applied subject to a minimum deferral
percentage of 25%.
1. Lukas Paravicini’s base salary was effective from 1 January 2023.
Increases for the workforce typically ranged from 4% to 8%, with average
increases for the UK workforce at 5%.
No change to maximum opportunity
Measures and weightings:
Adjusted operating profit growth at constant currency
Adjusted operating cash conversion
Market share growth
ESG /NGP – consumer health (NGP revenue)
Strategic/individual
40%
15%
15%
10%
20%
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.
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.
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.
Chair and Non-Executive Directors’ fees
Attract and retain high-performing individuals.
Shareholding requirement
Align Executive Directors’ interests with long-term
interests of shareholders.
Performance measure
Weighting
Cut in
Target
Max
Adjusted EPS growth at constant
currency excluding share buybacks1
Return on invested capital (ROIC)
Cumulative free cash flow (CFCF)
Relative TSR against a group of FMCG
companies2
Climate
change
Scope 1 & 2 CO2 emissions
reduction
Energy consumption
reduction
(40%)
(15%)
(15%)
3.9% 4.8%
21.1%
19.1%
£6.7b
£5.9b
(20%) median
N/A
5.8%
21.9%
£7.5b
upper
quartile
(5%)
70%
72%
75%
(5%)
4.5% 6.0%
7.5%
Cut in would deliver a 25% pay out of maximum.
With effect from 1 October 2023:
Chair’s fee will increase by 4% from £638,729 to £664,280 pa.
NED base fee will increase by 4% from £83,945 to £87,305 pa.
Senior Independent Director and chairs of the Remuneration and Audit
Committees’ fees will increase by approximately 3.6% from £27,500
to £28,500 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.
1. The EPS growth target has been set at a moderately lower level than the previous year, primarily due to tax legislation changes.
2. The TSR comparator group comprises the following companies: Altria Group, Anheuser Busch InBev, British American Tobacco, Carlsberg B, Constellation Brands, Diageo,
Heineken, Japan Tobacco, Kimberly-Clark, Kirin Holdings, L’Oreal, Monster Beverage, Pernod Ricard, PepsiCo, Philip Morris International, Procter & Gamble, Reckitt,
The Coca-Cola Company, Unicharm, and Unilever.
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153
GOVERNANCE REMUNERATION REPORT continued
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 2023
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 2023
Single Total Figure of Remuneration for each Director (Audited)
Executive Directors
Stefan Bomhard
Lukas Paravicini
Total
Total
Year
2023
2022
2023
2022
Salary
£’000
1,340
1,301
752
730
Benefits
£’0001
16
17
4
15
Pension
£’0002
188
182
105
102
Total fixed
pay
1,544
1,500
861
847
Annual
bonus
£’0003
1,919
2,185
1,062
1,205
LTIP
£’0004
5,138
1,747
2,099
–
Other
£’0005
–
–
–
566
Total
variable pay
7,057
3,932
3,161
1,771
Total pay
8,601
5,432
4,022
2,618
2023
2022
2,092
2,031
20
32
293
284
2,405
2,347
2,981
3,390
7,237
1,747
–
566
10,218 12,623
8,050
5,703
Notes
1. Stefan Bomhard received an annual car allowance of £15,000. Lukas Paravicini received a car allowance for October and November 2022 before moving to a company car
from December 2022; 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 2023. Half of the gross value is deferred into an award over shares for three years; no further performance conditions apply.
4. LTIP represents the value of the FY21-23 LTIP awards whose performance period ended 30 September 2023. As these awards do not vest until February 2024 they are
based on a share price of £17.74, being the three-month average to 30 September 2023, and an estimate of dividend roll-up based on announced dividend payable on
31 December 2023. Of the FY21-23 LTIP value shown, £640k and £155k relates to share price appreciation for Stefan Bomhard and Lukas Paravicini respectively. The LTIP
value for FY22 has been restated to reflect the actual vesting value as at the vesting date 15 February 2023.
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 Clark3
Diane de Saint Victor4
Ngozi Edozien4,5
Andrew Gilchrist5,6
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier7
Jon Stanton8
Total
Fees £’000
Taxable benefits1
2023
639
144
89
101
59
89
89
30
117
1,357
2022
620
141
77
87
–
87
87
87
114
1,300
2023
20222
50
2
3
-
-
3
3
3
1
65
41
4
5
30
–
5
5
6
2
98
2023
689
146
92
101
59
92
92
33
118
1,422
Total
2022
661
145
82
117
–
92
92
93
116
1,398
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. Taxable benefit figures for 2022 have been restated to include tax gross-up.
3. Includes payments in respect of Senior Independent Director of £27,500 and Chair of the Remuneration Committee fees of £27,500 respectively pa.
4. Diane de Saint Victor and Ngozi Edozien were appointed to the Board on 15 November 2021.
5. Ngozi Edozien’s amount includes a payment of £12,000 (full year) and Andrew Gilchrist’s amount includes a payment of £7,000 (March to September) in respect of a
non-European travel allowance in recognition of the extra time commitment required for travel.
6. Andrew Gilchrist was appointed to the Board on 1 March 2023.
7. Simon Langelier stepped down from the Board on 1 February 2023.
8. Includes payment in respect of chair of the Audit Committee fees of £27,500 pa.
154
Imperial Brands | Annual Report and Accounts 2023
The aggregate remuneration of all Executive and Non-Executive Directors under salary, fees, benefits, cash supplements in lieu of
pensions, Annual Bonus and LTIP was £14,045k (2022 restated: £9,448k).
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 2023 Annual Bonus (Audited)
The 2023 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
Climate change – energy consumption
Climate change – CO2 emissions
Consumer health – NGP net revenue (£m)1
Strategic/individual – Stefan Bomhard
Strategic/individual – Lukas Paravicini
Total bonus Stefan Bomhard
Total bonus Lukas Paravicini
Weighting
40%
20%
20%
2.5%
2.5%
5%
10%
10%
100%
100%
Cut in
0%
90%
-3bps
0.5%
57%
181
–
–
Target
3.5%
95%
+1bps
2.0%
60%
200
–
–
Max
Achievement
5.2%
100%
+5bps
3.5%
63%
221
–
–
3.8%
92%
+10bps
8.8%
65%
227m
100%
90%
Pay-out
26.8%
4.8%
20%
2.5%
2.5%
5%
10%
9%
71.6% of max
70.6% of max
1. Excluding US and at internal exchange rates.
The Committee set the following strategic goals for the Executive Directors:
Strategic/individual
measures and targets
Performance assessment highlighting key achievements
Stefan
Bomhard
• Build a targeted
• Significant percentage of NGP markets (Heated Tobacco and vaping) achieved their launch
NGP business (5%)
objectives, exceeding target set. Overall results exceeded targets in business plan.
• Achieved target to launch blu 2.0 into eight markets.
• blu bar launched into eleven markets.
• Pulze launched into five markets, exceeding target.
• Completed assessment of options and recommendation for progression on US NGP.
• Board agreed recommendation to enter MOND in US and acquisition made and completed
in May 23 with FY24 launch planned.
• Completion of follow up from ELT strategic review on potential future growth options
for Group.
• Lead
• Conducted five Global Business Leaders events, exceeding target. High engagement with
transformation
program (5%)
average participant feedback of 4.3 out of 5.
• Maintained FY22 global pulse survey results around role modelling of new behaviours by
senior leaders (all employees). Results upper quartile against global benchmark on
leadership measure. Global engagement score sustained at 74% exceeding global
benchmark by 1%.
• Continued development of ELT including dedicated sessions for new team members
supporting team integration.
• DEI programme KPIs defined and deployed in business. Meaningful progress on gender and
ethnic diversity. Female representation increased by 12% at ELT-1 level and tracking ahead
of gender goal target glidepath at 29.8%.
• Business case for Novo FY23 delivered.
• Operating model transformation key projects (GBS & Digital Core Transformation) primarily
on time and within budget.
Total payout as a % of maximum bonus: 71.6%
www.imperialbrandsplc.com
155
GOVERNANCE REMUNERATION REPORT continued
Strategic/individual
measures and targets
Performance assessment highlighting key achievements
Lukas
Paravicini
• Continued Company
transformation (5%)
• Completed Finance Transformation in Group and top 5 markets. Set up a 100+ strong GBS,
by transferring activities in line with blueprint and by assessing, appointing and training
the retained organisation.
• In line with Group’s multi-function GBS strategy, fully transferred IT Operations (100+ FTE)
under the remit of the newly created GBS IT.
• GM and Cluster Lead survey in March showed transformation impact well received and
further improvement in results on survey rerun in September.
• Finance, IT and Transformation employee engagement increased to 72% (+8pp vs FY22).
Material increases in key Inclusion metric (81%, +9pp vs FY22) and Wellbeing (72%, +6pp vs
FY22) scores.
• Overall engagement supported by personal people leadership score improving by 5pp
to 79%.
• Explore phase of UNIFY programme completed on time and within budget. Prepared itself
for the Deploy phase for early adopters UK/I and Radom factory.
• UNIFY deploy phase accompanied by a strong business transformation, communication
and change management plan. Programme is well established and well supported in the
organisation at large.
• Drive shareholder
value (5%)
• Global IT and UNIFY capes managed within allocated budget.
• Funding provided proactively, taking advantage of market opportunities to deliver
€950million of new debt financing with 8 years’ maturity.
• Active debt holder engagement increased throughout the year, leveraging in full the best
practices acquired over time in Investors Relations.
Total payout as a % of maximum bonus: 70.6%
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
£2,679
£1,504
Total Annual Bonus £’000
Actual1
£1,919
£1,062
Long-Term Incentive Plan awards vesting (Audited)
Performance awards vesting in February 2024 are based on performance measured over the three-year period ended
30 September 2023.
Measure
Adjusted EPS growth at constant currency (average annual
growth)
Adjusted net debt / EBITDA (for FY23)
Return on invested capital (ROIC) (average annual)
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%
20%
20%
2.00%
2.00
16.60%
3.31%
1.91
17.00%
20%
Median
n/a
4.80%
1.80
17.50%
Upper
quartile
3.4%
1.77
17.56%
2/25
25%
20%
20%
20%
85%
Adjusted EPS excludes the impact of share buybacks and associated financing costs.
The methodology agreed for net debt/EBITDA out-turn included an adjustment for share buybacks to ensure that the measure is
not negatively impacted by cash returned to shareholders. The targets for the adjusted net debt/EBITDA for FY23 assumed a share
buyback in FY23 of £400 million. The out-turn was adjusted to reflect the actual share buyback undertaken in FY23 of £1 billion.
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, 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 2023
No awards to report.
Payments for loss of office and payments to former Directors (Audited)
No payments to report.
156
Imperial Brands | Annual Report and Accounts 2023
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.
Stefan Bomhard
Lukas Paravicini
15 February 2023
15 February 2023
£20.22
£20.22
231,904
90,257
£4,689,099
£1,824,997
Date of grant
Share price1
Number of nil-cost options
Face value
Amount
of base salary
End of performance period
350% 30 September 2025
250% 30 September 2025
1. Valued using the closing share price the trading day prior to grant.
The targets for the above performance awards are as follows:
Measure
Adjusted EPS growth at constant currency
Return on invested capital (ROIC) (average
annual)
Relative TSR
Weight
40%
20%
40%
Minimum performance (25% vesting) Maximum performance (100% vesting)
Target
4.4%
20.2%
Median
Target
6.3% or higher
21.0% or higher
Upper quartile
Adjusted EPS excludes the impact of share buybacks and associated financing costs.
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,
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 2023
and leaving date
Dividends
reinvested post
year end
Executive Directors
Stefan Bomhard
Lukas Paravicini
Non-Executive
Directors
Thérèse Esperdy1
Sue Clark
Diane de Saint Victor
Ngozi Edozien2
Andrew Gilchrist3
Alan Johnson
Bob Kunze-Concewitz
Simon Langelier4
Jon Stanton
Shares held at
30 September
2022
33,349
–
37,787
6,506
252
252
–
586
50,630
26,101
2,820
Owned
outright
19,164
–
61,729
8,040
625
621
3,238
984
50,974
26,168
3,260
Conditional awards and options held at earlier of
30 September 2023 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
Subject to
a holding
period
Owned
outright
61,901
–
1,030
–
755,169
305,800
105,460
40,789
687
–
–
–
–
–
–
–
–
–
–
–
21
3
4
–
8
–
-
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Options
exercised
during the
year
85,079
–
–
–
–
–
–
–
–
–
–
1. Thérèse Esperdy shares are in the form of American Depositary Receipts.
2. Ngozi Edozien’s share amount of 625 includes 353 American Depositary Receipts.
3. Andrew Gilchrist was appointed to the Board on 1 March 2023 and his shares are in the form of American Depositary Receipts.
4. Simon Langelier stepped down from the Board on 1 February 2023.
5. There have been no changes in Director share figures reported in the table above, between 30 September 2023 and the date this report was signed, other than the dividend
reinvestment post year end figures included in the table.
www.imperialbrandsplc.com
157
GOVERNANCE REMUNERATION REPORT continued
Our middle market share price at the close of business on 29 September 2023, being the last trading day of the financial year, was
£16.67 and the range of the middle market price during the year was £16.40 to £21.85.
Full details of the Directors’ share interests are available for inspection in the Register of Directors’ Interests at our
registered office.
EXECUTIVE SHAREHOLDINGS (AUDITED)
Shares held at
start of year1
Shares held at
end of
year1,2
Increase in
shares held
during year
Value of
shares held at
start of year3
£’000
Value of
shares held at
end of year4
£’000
Difference in
value £’000
Shareholding
required
(% salary)
Current
shareholding
(% salary/fees)
Requirement
met5, 6
Executive Directors
Stefan Bomhard5
Lukas Paravicini6
33,349
-
134,955
21,618
101,606
21,618
619
–
2,250
360
1,631
360
300
300
168
47
Yes
Yes
1. Shares held is inclusive of shares owned outright, those vested but subject to a holding period awarded, including shares awarded under the Deferred Share Bonus Plan
being the deferred element of the bonus.
2. Or date of leaving if earlier.
3. Based on a share price of £18.55, being the closing price on 30 September 2022.
4. Based on a share price of £16.67, being the closing price on 30 September 2023.
5. Stefan Bomhard joined the Board on 1 July 2020 and has five years to build to his shareholding requirement.
6. Lukas Paravicini joined the Board on 1 May 2021 and has five years to build to his shareholding requirement.
REVIEW OF PAST PERFORMANCE
The chart below shows the value of £100 invested in the Company on 1 October 2013 compared with the value of £100 invested in
the FTSE 100 Index for each of our financial year-ends to 30 September 2023. 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 performance
Index value
200
150
100
50
30-Sep-13
30-Sep-15
30-Sep-17
30-Sep-19
30-Sep-21
30-Sep-23
Imperial Brands
FTSE 100 Return Index
158
Imperial Brands | Annual Report and Accounts 2023
CHANGE IN CHIEF EXECUTIVE OFFICER REMUNERATION
Total remuneration
£’000
Annual Bonus as a
percentage of
maximum
Shares vesting as a
percentage
of maximum
2023
Stefan
Bomhard
2022
Stefan
Bomhard
2021
Stefan
Bomhard
2020
Stefan
Bomhard
2020
Joerg
Biebernick
2020
Dominic
Brisby
2020
Alison
Cooper
2019
Alison
Cooper
2018
Alison
Cooper
2017
Alison
Cooper
2016
Alison
Cooper
2015
Alison
Cooper
2014
Alison
Cooper
8,601
5,432
3,421
1,104
963
943
448
2,137
3,935
4,657
5,404
3,637
2,686
71.6
84
64.1
401
401
401
401
312
87
60
72
80
69
85
19.83
30.84
nil
nil
nil
nil
nil
20
44.4
45.7
15.8
5.8
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 or below 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 of 5% for FY24
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 continued its “Meet the Board” 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 discuss how the Committee aligns 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:
• Performance metric selection across Annual Bonus and LTIP, and how the metrics selected align with strategy and purpose.
• Total remuneration package and how this aligns for employees throughout all levels of the Company.
• UK Corporate Governance Code and how the decisions taken by the Company are influenced by the UK regulatory environment.
• The role of external benchmarking in remuneration decisions for executives, as well as at other levels of the Company, and the
comparator groups that are considered.
• Alignment of ESG priorities to strategy and remuneration.
The Board continues its commitment to listening to colleagues and appreciates the opportunity to understand what is important
to them, and how their priorities evolve with each year of our “Meet the Board” programme. These views are considered in
decision-making and actions taken in the year.
We look forward to continuing our “Meet the Board” listening sessions on reward in FY24 to ensure that we stay close to the
evolving priorities of our diverse workforce.
www.imperialbrandsplc.com
159
–
–
–
–
–
–
–
–
–
Executive
Director
Stefan Bomhard
(from 1 Jul 20)
Lukas Paravicini
(from 1 May 21)
Non-Executive
Directors
Thérèse Esperdy
Sue Clark
Alan Johnson
(from 1 Jan 21)
Andrew Gilchrist
(from 1 Mar 23)
Bob Kunze-
Concewitz
(from 1 Nov 20)
Jon Stanton
Ngozi Edozien
(from 15 Nov 21)
Diane de Saint
Victor (from
15 Nov 21)
All UK employees
GOVERNANCE REMUNERATION REPORT continued
PERCENTAGE CHANGE IN BOARD REMUNERATION
The table below shows the percentage change in the salary, benefits and Annual Bonus for the Directors, between FY23 and FY22,
as well as the disclosures for FY22, FY21 and FY20.
Salary (%)
Benefits (%)
(%) Salary (%)
2023
Annual Bonus
Year-on-year change in pay for Directors compared with UK employees
2022
Annual
Bonus (%) Salary (%)
Benefits
(%)
Benefits
(%)
2021
Annual
Bonus (%) Salary (%) Benefits (%)
2020
Annual
Bonus (%)
3.0
3.0
(5.9)
(12.2)
2.5
0.0
34.3
58.62
183.32 540.62
(73.3)
(11.9)
140.12
150.02
241.42
–
–
–
–
–
–
–
3.1
2.1
22.0
(50.0)
2.3
(40.0)
–
2.3
2.6
–
(40.0)
(50.0)
16.12
(100.0)
-
-
-
–
-
-
-
15.62
6.6
(40.0)
5.9
-
4.1
2.5
2.2
–
–
11.52
1.8
–
–
2.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24.7
7.0
(100)
(100)
– 353.32
55.4
–
-41.3
-50.0
–
–
–
–
–
17.9
–
(100)
–
–
–
–
–
–
–
–
–
–
187.92
–
–
–
–
0.0
–
–
7.3
–
2.9
–
0.0
–
2.4
–
7.9
–
6.69
–
-5.72
–
32.44
1. A year on year comparison is not possible in the year that a Director joins the Board.
2. Increase reflects first full year.
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.
The pay levels shown for the percentiles reflect remuneration for the 12 months to 30 September 2023.
Financial year
Calculation methodology
P25 (lower quartile) x:1
P50 (median) x:1
P75 (upper quartile) x:1
2023
20221
2021
2020
2019
A
A
A
A
A
151.3
98.0
60.7
50.2
53.0
112.1
75.8
48.4
38.7
36.5
69.5
49.6
31.1
24.4
22.0
Total remuneration
Base salary
Stefan Bomhard
£8,600,605
£1,339,747
P25 (lower quartile)
P50 (median)
P75 (upper quartile)
151.3
31.6
112.1
24.9
69.5
16.7
1. 2022 CEO pay ratios have been updated to reflect the value of the updated 2022 CEO single figure which incorporates long-term incentives based on actual vesting, rather
than the estimate used for the 2022 disclosure.
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 FY23 at each quartile is £42,376 (P25), £53,849 (P50) and £80,078 (P75). The equivalent total pay numbers
are £56,840 (P25), £76,735 (P50) and £123,667 (P75).
The Committee is satisfied that the overall picture presented by the 2023 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.
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Imperial Brands | Annual Report and Accounts 2023
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below shows the expenditure and percentage change in overall spend on employee remuneration, dividends and
share buybacks.
£ million unless otherwise stated
Executive Directors’ total remuneration1,2
Overall expenditure on pay2
Dividend paid in the year
Share buybacks in the year3
2023
13
882
1,312
1,006
2022
8
642
1,320
–
Percentage
change
62.5
37.4
(0.6)
n/a
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. In FY23, expenditure includes £1 billion of share buybacks and £6 million of fees and stamp duty. There were no share buybacks in FY22.
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 2023, 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:
Executive Trust
2001 Trust
SHARE PLAN FLOW RATES
Balance at
01/10/2022
1,504,333
2,157,457
Acquired
during year
Distributed
during year
0
0
(111,230)
(1,981,156)
Balance at
30/09/2023
1,393,103
176,301
Ordinary shares
under award at
30/09/2023 Surplus/(shortfall)
2,326,963
6,370,306
(933,860)
(6,194,005)
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 2023, 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)
EXTERNAL BOARD DIRECTORSHIPS
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)
2.8
1.9
2.3
0.4
0.4
0.3
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 £94,000 fee received from this
position in the financial year.
www.imperialbrandsplc.com
161
GOVERNANCE REMUNERATION REPORT continued
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 116 to 119. 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 146 to 148 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 2023. 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.
162
Imperial Brands | Annual Report and Accounts 2023
Remuneration Committee meetings 2022/23
The Remuneration Committee met for four scheduled meetings during the year. Details of the main activities covered in the
meetings are set out in the Chair’s statement at the beginning of the DRR on page 145.
Other regular attendees include the CEO, Company 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.
Remuneration Committee evaluation 2022/23
For its FY23 evaluation, the Board initiated an external review using the firm Independent Board Evaluation (IBE), covering the
Board and its Committees. The Remuneration Committee evaluation was undertaken through meeting observation, together with
a review of meeting materials and one-to-one interviews with Committee members and the independent remuneration advisors
to the Committee.
The review concluded that the Committee was operating effectively, with a strong chair, cohesive membership and good
participation. The understanding of the UK market and the ability of the Committee to test its thinking prior to reaching
conclusions were positively noted.
Further information on the Board evaluation is on page 133.
Advice provided to the Remuneration Committee
Deloitte LLP was appointed as the independent adviser to the Committee throughout FY23. Deloitte was paid fees of £267,760 for
its services during the year.
Deloitte is a member of the Remuneration Consultants Group and complies with its Code of Conduct which sets out guidelines
to ensure that its advice is independent and free of undue influence. 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 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 £36,000 for these services. Willis Towers Watson also provided actuarial and wider reward-related services to the Company.
Both 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 2023 AGM
At the 2023 AGM there was a vote to approve the Directors’ Remuneration Report. We received a strong vote in favour of our
Directors’ Remuneration Policy at our 2021 AGM.
Resolution
Directors’ Remuneration
Report (2023 AGM)
Directors’ Remuneration
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
709,307,449
97.54
17,905,513
2.46
727,212,962
955,342
728,168,304
Policy (2021 AGM)
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, 2022 and 2023. 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 for the Directors’ Remuneration Policy and our FY24 incentives.
At the 2024 AGM, shareholders will be invited to vote on the 2023 Directors’ Remuneration Report (advisory vote) and 2024
Directors’ Remuneration Policy (binding vote).
Sue Clark
Chair of the Remuneration Committee
www.imperialbrandsplc.com
163
GOVERNANCE DIRECTORS’ REPORT
DIRECTORS’
REPORT
The Directors present their report and
audited financial statements for the year
ended 30 September 2023. This Directors’
Report, together with our Strategic Report,
forms the management report required
under the Disclosure Guidance and
Transparency Rules (DGTR). 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
111 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
information on pages 112 to 141 and the
Directors’ Responsibilities Statement on
page 168 are incorporated into the Directors’
Report by reference. The Directors’ Report,
including the information incorporated by
reference, fulfils the requirements of the
Corporate Governance Statement for the
purposes of the DGTR.
Specifically, the following disclosures and
those referred to under “Other information”
on page 167 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, energy consumption
and energy efficiency action
Going concern statement
Viability statement
Statement of Directors’
responsibilities
Disclosure of information to
the auditor
Financial risk management
Shareholder information
Page
6
50
110
110
168
141
210
263
EQUAL OPPORTUNITIES
We regard equality and fairness as
a fundamental right of all our people.
We aim to create a work environment that
allows equal opportunities so 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 (2022: nil).
POWERS OF DIRECTORS AND
SHARE CAPITAL
The business of Imperial is managed by the
Board which may exercise all the powers
of the Company, subject to the provisions
of the Articles of Association and the
Companies Act 2006. Authority is sought
from shareholders at each Annual General
Meeting to grant the Directors powers,
in line with institutional shareholder
guidelines and relevant legislation, in
relation to the issue and buyback by the
Company of its shares.
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 2023 we held 70,289,137
shares in treasury, which represented
approximately 7.26% 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.
Repurchases of own shares
On 6 October 2022, we announced a
commitment to return surplus capital to
shareholders though regular annual share
buybacks if circumstances were right and
in line with our five-year strategy to deliver
sustainable growth and enhanced
shareholder returns, expected to be in the
region of £1 billion in the financial year
ending 30 September 2023. This programme
completed on 11 September 2023.
At its AGM on 1 February 2023,
the Company obtained shareholder
authorisation for the buyback of up
to 94,200,000 shares (the “2023 Buyback
Authority”), renewing and replacing a
similar authority granted at the AGM held
on 2 February 2022. 52,107,043 ordinary
shares with a nominal value of 10 pence
each were purchased in FY23, of which
33,432,389 were purchased under the 2023
Buyback Authority. The aggregate amount
of consideration paid by Imperial in FY23
was £1,000 million. The 2023 Buyback
Authority will expire at the earlier of the
close of business on 31 March 2024 and the
end of the AGM of the Company to be held
in 2024.
On 5 October 2023, we announced the
commencement of a further £1.1 billion
share buyback programme which is
expected to be completed by 30 September
2024. As at close of business on
10 November 2023, a total of 54.1 million
further shares could still be repurchased
under the 2023 AGM Authority before
it expires.
The Board continues to regard the ability
to repurchase issued shares in suitable
circumstances as an important part
of Imperial’s financial management.
A resolution will be proposed at the
2024 AGM to renew the authority for the
Company to purchase its own shares,
up to specified limits and in line with
institutional shareholder guidelines, for a
further year. The proposal will be described
in more detail in the 2024 Notice of AGM.
For all recent share buyback programmes,
Imperial has entered into irrevocable,
non-discretionary arrangements with a
broker in order to reduce the issued share
capital of the Company.
INSURANCE AND INDEMNITIES
Imperial maintains directors’ and officers’
liability insurance which provides
appropriate cover for legal action brought
against its Directors and Officers. The
Company has also granted indemnities to
each of its Directors to the extent permitted
by law. 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 in force throughout the year and
up to the date of this Annual Report.
164
Imperial Brands | Annual Report and Accounts 2023
Disclosure
Spring Mountain Investments Ltd
BlackRock
Capital Group Companies Inc
FIL Limited
1. Direct holding.
2. Indirect holding.
Number of ordinary shares
at the date of notification
(millions)
Percentage of issued share
capital at the date of
notification
56
53
48
47
6.022
5.621
5.091
4.981
Information provided to the Company under the DGTRs is publicly available via the regulatory information services, and
on our website at https://www.imperialbrandsplc.com/creating-shareholder-value/stock-exchange-announcements.
Ordinary shares
Interim paid – June 2023
21.59p per share
Interim paid – September 2023
21.59p per share
Declared interim – December 2023
51.82p per share
Proposed final – March 2024
51.82p per share
Total ordinary dividends
146.82p per share
(2022: 141.17p)
2023
£ million
2022
£ million
196
195
466
465
202
202
464
457
1,322
1,325
INTEREST IN VOTING RIGHTS
As at 30 September 2023, the Company
has been notified in accordance with
Chapter 5 of the Disclosure Guidance
and Transparency Rules (DGTRs) of the
following interests in our shares. The
Company has not been notified of any
changes to these interests since the
year-end and up to 13 November 2023,
being a date not more than one month
prior to the date of the AGM Notice
of Meeting.
RESULTS AND DIVIDENDS
We include a review of our operational
and financial performance on pages 84
to 99.
The profit attributable to equity holders
of the Company for the financial year
was £2,328 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
2023 were paid on 30 June 2023 and
30 September 2023 respectively.
The third dividend will be paid on
29 December 2023 and, subject to AGM
approval, the final dividend will be paid
on 28 March 2024 to our shareholders
on the Register of Members at the close
of business on 16 February 2024. The
associated ex-dividend date will be
15 February 2024.
Following a review by the Audit
Committee at its meeting in November
2023, which confirmed the accounts
showed distributable reserves sufficient
to support the expected third interim
and final dividends and the interim
dividends in financial year 2024, the
Directors have declared and propose
dividends as follows:
www.imperialbrandsplc.com
165
GOVERNANCE DIRECTORS’ REPORT continued
PENSION FUND
The Group Pensions Committee
provides 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 four credit facility
agreements that provide 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% 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 four credit agreements are:
• 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
€3,493 million for a period of up to
three years with bi-annual six-month
auto-extensions;
• a credit facility agreement dated
September 2023 under which a
certain bank makes available to
Imperial Brands Finance PLC
committed credit facilities of
£250 million until September 2024;
• a credit facility agreement dated
September 2023 under which a certain
bank makes available to Imperial
Brands Finance PLC committed credit
facilities of £200 million until
September 2024; and
• a credit facility agreement dated
September 2023 under which a
certain bank makes available to
Imperial Brands Finance PLC
committed credit facilities of
£100 million until September 2024.
In addition, three deeds of counter-
indemnity each dated April 2023 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 £120 million,
until December 2028.
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
166
Imperial Brands | Annual Report and Accounts 2023
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% guaranteed notes due 2024;
• 26 September 2011 £500 million 5.5%
guaranteed notes due 2026;
• 28 February 2014 €650 million 3.375%
guaranteed notes due 2026;
• 28 February 2014 £500 million 4.875%
guaranteed notes due 2032;
• 27 January 2017 €500 million 1.375%
guaranteed notes due 2025; and
• 12 February 2019 €750 million 2.125%
guaranteed notes due 2027.
The bonds Imperial Brands Finance
Netherlands B.V. issued in such
manner are as follows:
• 18 March 2021 €1,000 million 1.750%
guaranteed notes due 2033;
• 15 February 2023 €600 million 5.250%
guaranteed notes due 2031; and
• 12 September 2023 €350 million
5.250% guaranteed notes due 2031.
Imperial Brands Finance PLC has also
issued bonds in the USA 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% 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% 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.
The bonds issued in such manner are
as follows:
• 21 July 2015 $1,500 million 4.25%
guaranteed notes due 2025;
• 26 July 2019 $1,000 million 3.125%
guaranteed notes due 2024;
• 26 July 2019 $750 million 3.5%
guaranteed notes due 2026;
• 26 July 2019 $1,000 million 3.875%
guaranteed notes due 2029; and
• 27 July 2022 $1,000 million 6.125%
guaranteed notes due 2027.
WAIVER OF DIVIDENDS
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.
2023 ANNUAL GENERAL
MEETING VOTE
At the Annual General Meeting in 2023,
the Company received strong support
for all its resolutions.
POST-YEAR-END EVENTS
Share Buybacks
As noted above, on 5 October 2023 the
Company announced a further share
buyback programme of up to £1.1 billion
of shares in the period from 6 October
2023 to the end of September 2024.
2024 ANNUAL GENERAL MEETING
This year’s AGM will be held at the
Bristol Marriott Royal Hotel on
31 January 2024 at 9.30am.
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.
LISTING RULE 9.8.4
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
146, 148, to
150, 153, 154,
156, 157, 159
and 226 to 229
n/a
n/a
n/a
n/a
n/a
166
n/a
See above
See above
n/a
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, including information on our Directors,
is included in this Directors’ Report by reference;
• future developments in the business are included in the investment case
commencing on page 6;
• information relating to our people, including colleague engagement, is included in
the Stakeholder Engagement section on page 33, our People and Planet agenda on
page 39, Safe and Inclusive workplace on pages 64 to 66 and on pages 123 and 125
in our Governance Report;
• our principal risks are detailed on pages 102 to 109;
• information relating to our sustainability approach that supports our
environmental, social and governance agenda is included on pages 38 to 69;
• responsibilities to a broader stakeholder group, including consumers and
customers, are included on pages 32 to 36, and 126 to 128;
• information on our greenhouse gas emissions is included on page 50; and
• the Directors of the Company are listed on pages 116 to 119.
Our report under the Streamlined Energy and Carbon Reporting requirements can be
found on page 51.
The Strategic Report and this Directors’ Report were approved and signed by order of
the Board.
Emily Carey
Company Secretary
13 November 2023
Imperial Brands PLC
Incorporated and domiciled in England and Wales No: 3236483
www.imperialbrandsplc.com
167
GOVERNANCE DIRECTORS’ REPORT continued
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.
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 in office as at the
date of this report, whose names and
functions are listed on pages 116 to 119,
confirms that, to the best of
their knowledge:
• the Group and Parent Company
financial statements, which have
been prepared in accordance with
UK-adopted International Accounting
Standards 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; and
• 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 they face.
The Directors 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 141.
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.
Emily Carey
Company Secretary
13 November 2023
Imperial Brands PLC
Incorporated and domiciled in England
and Wales
No. 3236483
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Imperial Brands | Annual Report and Accounts 2023
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BRANDS PLC
Opinion
In our opinion:
• Imperial Brands PLC’s (“Imperial Brands”) 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 2023 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 2023 which comprise:
Group
Parent company
Consolidated balance sheet at 30 September 2023
Consolidated income statement for the year then ended
Consolidated statement of comprehensive income for the year then ended
Balance sheet at 30 September 2023
Statement of changes in equity for the year then ended
Related notes I to IX to the financial statements including
a summary of significant accounting policies
Consolidated statement of changes in equity for the year then ended
Consolidated cash flow statement for the year then ended
Related notes 1 to 34 to the financial statements, including a summary of
significant accounting policies and the supplementary information on
pages 235 to 246
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 30 November 2024;
• assessing the appropriateness of the duration of the going concern assessment period to 30 November 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 year end position as at 30 September 2023;
• 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;
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169
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BRANDS PLC continued
• evaluating the amount and timing of identified mitigating actions available to respond to a severe but plausible 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 182.
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. Management considered a severe but plausible downside scenario
corresponding to a 15% permanent reduction in EBITDA, which would result in a minimum level of headroom of £0.5bn in April 2024.
Under the reverse stress test scenario, which includes a permanent reduction in EBITDA of 38%, liquidity is eroded in April 2024. This
scenario is not considered plausible. We have not identified any climate-related risks that would materially impact the group’s forecasts
to 30 November 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 ensure 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
30 November 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 13 components.
• The components where we performed full or specific audit procedures accounted for 84% of Profit before tax on
an absolute basis, 81% of Revenue and 93% of Total assets.
Key audit matters
• Revenue recognition, including management override of controls
• Management override of controls or errors related to KPIs impacting executive remuneration
• Uncertain tax positions
• Litigation
Materiality
• Overall group materiality of £156m 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 18 (2022: 19) components
covering entities within Australia, the Dominican Republic, Germany, Morocco, Poland, Spain, the UK and the USA., which represent the
principal business units within the group.
Of the 18 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 13 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 group financial statements either because of the size of these accounts or their risk profile.
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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 increased our coverage of the total group cash balance as at
30 September 2023 by performing specified procedures over cash balances by obtaining bank confirmation letters for 22 additional
business units in order to reduce the unaudited cash balance below our performance materiality. Of the remaining components that
together represent 16% of the group’s Profit before tax on an absolute basis, none are individually greater than 2% of the group’s Profit before
tax. For these components, we performed other procedures, including analytical review, testing of consolidation journals, intercompany
eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the group
financial statements.
The table below illustrates the coverage obtained from the work performed by our audit teams.
Reporting components
Full scope
Specific scope
Specified procedures
Full, specific, and specified
procedures coverage
Remaining components
Total reporting components
2023
2022
% of group
PBT (on
absolute
basis) 1
7700%%
1144%%
00%%
8844%%
1166%%
110000%%
Number
55
1133
2222
4400
335544
339944
% of group
Revenue
% of group
Assets
Number
6633%%
1188%%
00%%
8811%%
1199%%
110000%%
7799%%
1133%%
11%%
9933%%
77%%
110000%%
5
14
18
37
357
394
% of group
PBT (on
absolute
basis) 1
73%
18%
0%
91%
9%
100%
% of group
Revenue
% of group
Assets
60%
23%
0%
83%
17%
100%
70%
19%
1%
90%
10%
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. As a result, certain components in France and Belgium have moved
from specific scope to review scope, considering within remaining components above, 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 13 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 Brands 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 Brands’ 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 Germany, Morocco, Spain and the USA. 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. 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.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BRANDS PLC continued
Climate change
There has been increasing interest from stakeholders as to how climate change will impact Imperial Brands. The group has determined
that the most significant future impacts from climate change on their operations will be from:
• an increase in material costs due to increases in operating costs of suppliers and raw materials;
• 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 70 to 81 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 unaudited 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, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the group’s business and any consequential
material impact on its financial statements.
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 the impact of climate change on the financial statements 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
page 75 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.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a
key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Revenue recognition, including management
override of controls (2023: £32,475m, 2022:
£32,551m)
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).
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.
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Risk
Our response to the risk
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 139);
accounting policies (note 1); accounting
estimates and judgements (note 2); and
segmental information (note 3) of the
consolidated financial statements.
This provided us with a high level of assurance over £15.9 billion (71%) of Tobacco & NGP
revenue recognised by the group.
For the Distribution component, we performed a combination of tests of controls and
substantive tests of detail to obtain assurance over £9.0 billion (83%) 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.
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.
Management override of controls or
errors related to KPIs impacting
executive remuneration
Manipulation of KPIs impacting remuneration –
there is a risk that management could override
controls in order to manipulate KPIs which have
a bearing on remuneration. In the current year
we have identified the following items as areas
of focus:
• Manipulation of reported margins to
overstate operating profits;
• Incorrect classification of items as adjusting
costs 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;
• Incorrect reporting of ESG metrics on which
aspects of executive remuneration are based.
In respect of our focus on reported margins, we have:
• Inquired of divisional finance leadership to identify any unusual and/or new
arrangements/projects entered into during the current financial year that would be
expected to have an impact upon operating profit margins.
• Used data analytical techniques to identify and investigate unusual trends in
margins in order to identify any unusual movements throughout the year and in
comparison to prior year.
In respect of our focus on the classification of adjusting items, we have:
• Challenged the timing of recognition of one-off costs and whether the classification
of any costs as adjusting is in line with group policy and disclosed appropriately.
• Evaluated the classification of one-off adjustments for indicators of management
bias, in particular whether both income and expense items are treated consistently.
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.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BRANDS PLC continued
Risk
Our response to the risk
Refer to the audit committee report (page 137);
accounting policies (note 1); accounting
estimates and judgements (note 2) of the
consolidated financial statements; and the
supplementary information.
• 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.
In respect of our focus on ESG metrics linked to executive remuneration, we have:
• Conducted in-person and remote site visits to understand local level ESG
performance and data collection processes;
• Obtained an understanding of the process for collecting, collating and reporting the
ESG metrics during the reporting period;
• Performed analytical review procedures to understand the appropriateness of
the data.
• Performed testing, on a sample basis, against underlying source information to check
the accuracy and completeness of the data and the appropriate application of the
ESG criteria.
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 did not identify any unusual trends in reported margin that would indicate manipulation.
We consider that items identified as being adjusted are appropriate and in line with the revised group accounting policy.
Following our procedures performed over working capital metrics, we consider these balances are materially correct.
We did not identify any issues with regards the completeness, accuracy or appropriateness of data used in the application of ESG criteria
related to executive remuneration.
Uncertain tax positions (Provision for uncertain
tax positions – 2023: £189m, 2022: £148m)
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 138);
accounting policies (note 1); accounting
estimates and judgements (note 2); and tax
disclosure (note 7) of the consolidated
financial statements.
We challenged management’s judgements using tax specialists, both domestic and
overseas, to provide technical support regarding developments in the period and to
consider whether the amounts provided reflected an appropriate best estimate of the
expected economic outflow.
The group audit team, including tax specialists, evaluated the tax consequences of the
transactions undertaken in the period. We confirmed that the tax figures appropriately
reflect the transactions and there are no additional material risks for which an
uncertain tax position (UTP) should be recorded.
We challenged whether the tax exposures identified were complete. Our work included
inquiring with management regarding the current status of discussions with tax
authorities, the impact of legislative developments and the review of transfer
pricing policies.
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 our assessment of tax risks and the latest status of tax audits, we conclude that the group’s approach to judgements for uncertain
tax positions is balanced and that the amounts provided are reasonable. We consider the group’s tax disclosures are also appropriate.
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
We evaluated 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 and group General Legal Counsel to discuss the
developments in significant cases.
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Risk
Our response to the risk
We requested, received and read letters received directly from 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.
We evaluated whether any of the fines levied, ongoing litigation cases, whistleblower
reports or reported frauds in the year 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.
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 138);
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 measurement and classification of adjusting items.
This year, the key audit matter has been expanded to focus on
management override of controls or errors related to KPIs
impacting executive remuneration. We remain focussed on the
manipulation of adjusted measures, working capital balances that
impact the adjusted operating cash conversion metric, and the
appropriateness of the classification of items as adjusting. In the
current year we added focus on reported margins and specific ESG
metrics which are also linked to executive remuneration.
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 £156 million (2022:
£126 million), which is 5% of Profit before tax (2022: 5% of Profit
before tax). 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 £210
million (2022: £309 million), which is 2% (2022: 2%) of net assets. In
performing our procedures, materiality was capped at the group
allocated materiality of £35 million (2022: £30 million).
Performance materiality
The application of materiality at the individual account or balance
level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our
assessment of the group’s overall control environment, our
judgement was that performance materiality was 75% (2022: 75%)
of our planning materiality, namely £117 million (2022: £95 million).
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 £23 million to £35 million
(2022: £19 million to £30 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 £8 million (2022:
£6 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.
www.imperialbrandsplc.com
175
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMPERIAL BRANDS PLC continued
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 to 168, 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
176
Imperial Brands | Annual Report and Accounts 2023
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 128;
• 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 110 to 111;
• 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 111;
• Directors’ statement on fair, balanced and understandable set
out on page 128;
• Board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 128;
• The section of the annual report that describes the review of
effectiveness of risk management and internal control systems
set out on page 100 to 101; and;
• The section describing the work of the audit committee set out
on page 135 to 136.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement
set out on page 168, 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 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.
• 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 four years, covering
the years ending 2020 to 2023.
• 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.
Marcus Butler (Senior statutory auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
London
13 November 2023
www.imperialbrandsplc.com
177
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2023
£ 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
Share of profit/(loss) 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 2023
£ 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
Items that may be reclassified to profit and loss
Net actuarial (losses)/gains on retirement benefits
Current tax relating to net actuarial losses on retirement benefits
Deferred tax relating to net actuarial losses/(gains) on retirement benefits
Items that will not be reclassified to profit and loss
Other comprehensive (expense)/income 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
2023
32,475
(14,398)
(11,397)
(25,795)
2022
32,551
(15,644)
(10,869)
(26,513)
6,680
(2,338)
(940)
3,402
907
(1,205)
(298)
7
3,111
(655)
2,456
2,328
128
14
4
7
9
9
252.4
250.8
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
Notes
2023
2,456
2022
1,665
1
23
(508)
–
5
(115)
(618)
(376)
–
135
(241)
(859)
1,597
1,484
113
1,597
841
190
11
148
1,190
76
10
(52)
34
1,224
2,889
2,778
111
2,889
178
Imperial Brands | Annual Report and Accounts 2023
CONSOLIDATED BALANCE SHEET
at 30 September 2023
£ 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
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Derivative financial instruments
Total assets
Current liabilities
Borrowings
Derivative financial instruments
Lease liabilities
Trade and other payables
Current tax liabilities
Provisions
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
2023
2022
11
12
13
14
23
16
20/21
22
15
16
7
17
20/21
19
20/21
13
18
7
24
19
20/21
13
18
22
23
24
25
16,944
1,617
326
55
414
63
824
653
17,777
1,659
228
56
826
67
985
439
20,896
22,037
4,522
2,490
112
1,345
126
8,595
4,140
2,543
334
1,850
54
8,921
29,491
30,958
(1,499)
(174)
(81)
(9,579)
(418)
(148)
(11,899)
(7,882)
(829)
(268)
(27)
(871)
(807)
(266)
(1,011)
(54)
(58)
(9,506)
(307)
(203)
(11,139)
(8,996)
(1,072)
(190)
(10)
(961)
(894)
(223)
(10,950)
(12,346)
(22,849)
(23,485)
6,642
7,473
97
5,843
(674)
755
6,021
621
6,642
103
5,837
(443)
1,363
6,860
613
7,473
The financial statements on pages 178 to 262 were approved by the Board of Directors on 13 November 2023 and signed on its behalf by:
Lukas Paravicini
Director
www.imperialbrandsplc.com
179
CONSOLIDATED FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
£ million
At 1 October 2022
Profit for the year
Exchange movements on retranslation of net assets
Exchange movements on net investment hedges
Exchange movements on quasi-equity loans
Hyperinflation adjustment in the year
Current tax on hedge of net investments and quasi-equity loans
Net actuarial losses on retirement benefits
Deferred tax relating to net actuarial losses on retirement benefits
Other comprehensive expense
Total comprehensive income/(expense)
Transactions with owners
Costs of employees’ services compensated by share schemes
Repurchase of shares
Changes in non-controlling interests
Deferred tax on share-based payments
Registration of put/call option
Dividends paid
Share
premium
and capital
redemption
Retained
earnings
Exchange
translation
reserve
Equity
attributable
to owners
of the
parent
5,837
(443)
– 2,328
–
–
–
–
–
–
–
–
–
–
–
5
–
(376)
135
(236)
– 2,092
–
6
–
–
–
–
41
(1,006)
1
1
(48)
(1,312)
1,363
–
(942)
427
22
–
(115)
–
–
(608)
(608)
–
–
–
–
–
–
6,860
2,328
(942)
427
22
5
(115)
(376)
135
(844)
1,484
41
(1,006)
1
1
(48)
(1,312)
Share
capital
103
–
–
–
–
–
–
–
–
–
–
–
(6)
–
–
–
–
Non-
controlling
interests
Total
equity
613 7,473
128 2,456
(15)
–
–
–
–
–
–
(15)
113
(957)
427
22
5
(115)
(376)
135
(859)
1,597
–
–
(1)
–
–
(104)
41
(1,006)
–
1
(48)
(1,416)
At 30 September 2023
97
5,843
(674)
755
6,021
621 6,642
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
103
–
103
–
5,837
–
5,837
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(788)
22
(766)
1,570
–
–
–
–
11
–
76
10
(52)
45
1,615
29
(3)
2
(1,320)
200
–
200
–
1,518
(649)
(44)
190
–
148
–
–
–
1,163
1,163
–
–
–
–
At 30 September 2022
103
5,837
(443)
1,363
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
588
–
588
95
16
–
–
–
–
–
–
–
–
5,940
22
5,962
1,665
1,534
(649)
(44)
190
11
148
76
10
(52)
16
111
1,224
2,889
–
3
–
(89)
613
29
–
2
(1,409)
7,473
180
Imperial Brands | Annual Report and Accounts 2023
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2023
£ million
2023
2022
Cash flows from operating activities
Operating profit
Dividends received from investments accounted for using the equity method
Depreciation, amortisation and impairment
Profit on disposal of non-current assets
Loss on disposal of subsidiaries
Post-employment benefits
Costs of employees’ services compensated by share schemes
Other non-cash items
Movement in provisions
Operating cash flows before movement in working capital
Increase in inventories
Decrease in trade and other receivables
Increase 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 10/11)
Net cash used in 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
Repurchase of shares
Dividends paid to non-controlling interests
Dividends paid to owners of the parent
Net cash used in financing activities
Net (decrease)/increase 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
3,402
7
632
(39)
1
(29)
31
40
21
4,066
(551)
46
158
(347)
(590)
3,129
10
71
–
(325)
(183)
(427)
(417)
–
(92)
1,462
(1,518)
(64)
(1,006)
(104)
(1,312)
(3,051)
(349)
1,850
(156)
1,345
2,683
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
www.imperialbrandsplc.com
181
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
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.
Alternative performance measures
Information on Alternative Performance Measures (APMs) is
presented within the Supplementary Information section of
this document.
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.
During the period of the COVID-19 pandemic as well as during
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 the short-term liquidity of the Group.
The Directors have assessed the emerging and 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.£500m.
• A rapid and lasting deterioration to the Group’s profitability
because markets become closed to tobacco products or there are
sustained failures to our tobacco manufacturing and supply
chains. These assumed a permanent reduction in profitability of
15 per cent from 1 October 2023.
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, working capital
management, retrenchment of leases, and discussions with
lenders about capital structure.
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Under the reverse stress test scenario, after considering mitigation
actions including reductions of capital expenditure, dividend
payments and share buyback programme, we have modelled that
a 38% EBITDA reduction would lead the Group to have sufficient
headroom until April 2024. The Group believes this reverse stress
test scenario to be remote given the relatively small impact on our
trading performance and bad debt levels during the COVID-19
pandemic, as well as the current political situation in Ukraine.
In this scenario Group would implement a number of mitigating
actions including revoking the uncommitted dividend, pausing the
share buyback and reducing discretionary spend such as capex.
Based on its review of future cash flows covering the period
through to November 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
30 November 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
2023. See note VIII 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.
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 profit of investments accounted for using
the equity method".
Foreign currency
Items included in the financial statements of each Group company
are measured using the currency of the primary economic
environment in which the company operates (the functional
currency).
The income and cash flow statements of Group companies using
non-sterling functional currencies are translated to sterling
(the Group’s presentational currency) at average rates of exchange
in each period. Assets and liabilities of these companies are
translated at rates of exchange ruling at the balance sheet date.
The differences between retained profits and losses translated at
average and closing rates are taken to reserves, as are differences
arising on the retranslation of the net assets at the beginning of
the year.
Transactions in currencies other than a company’s functional
currency are initially recorded at the exchange rate ruling at the
date of the transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the
translation at exchange rates ruling at the balance sheet date of
monetary assets and liabilities denominated in foreign currencies
are recognised in the consolidated income statement with
exchange differences arising on trading transactions being
reported in operating profit, and those arising on financing
transactions being reported in net finance costs unless as a result
of net investment hedging they are reported in other
comprehensive income.
The Group designates as net investment hedges certain external
borrowings and derivatives up to the value of the net assets of
Group companies that use non-sterling functional currencies after
deducting permanent intercompany loans. Gains or losses on
these hedges that are regarded as highly effective are transferred
to other comprehensive income, where they offset gains or losses
on translation of the net investments that are recorded in equity,
in the exchange translation reserve.
The Group’s financial results are principally exposed to euro and
US dollar exchange rates, which are detailed in the table below.
Foreign exchange rate versus GBP
Euro
US dollar
2023
Closing
rate
Average
rate
1.1545
1.2214
1.1487
1.2264
Closing
rate
1.1325
1.1040
2022
Average
rate
1.1807
1.2813
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 with effect
from 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 2022 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 (1 October 2021) 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 and where necessary.
• The financial statements of the Group’s Turkish operations have
been translated into sterling at the closing exchange rate at
30 September 2023.
• 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 TurkStat CPI index was 1,691.04 at 30 September 2023
(1,046.89 at 30 September 2022 and 570.66 at 30 September 2021).
The inflation index for the year is therefore 1.6153 (2022: 1.8345).
The Turkish economy has been designated hyperinflationary
since April 2022, but the impact on the Group’s results
remains immaterial.
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.
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CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
For the Distribution business, revenue comprises the invoiced
value for the sale of goods and services net of sales taxes, rebates
and discounts when goods have been delivered or distribution
services have been provided. The Distribution business only
recognises commission revenue on purchase and sale
transactions in which it acts as a commission agent. Distribution
and marketing commissions are included in revenue. Revenue is
recognised on products on consignment when these are sold by
the consignee.
Payments are made to both direct and indirect customers for rebates,
discounts and other promotional activities. Direct customers are
those to which the Group supplies goods or services. Indirect
customers are other entities within the supply chain to the end
consumer. Rebates and discounts are deducted from revenue.
Where the contract with customers has an entitlement to variable
consideration due to the existence of retrospective rebates and
discounts, revenue is estimated based on the amount of
consideration expected to be received. This estimation is a
determination of the most likely amount to be received using
all known factors including historic experience. Typically there
is a high degree of certainty over the amount of retrospective
rebates/discounts paid due to relatively low year-on-year
variations in the volume and pattern of product sales. As the
provision of distribution services typically involves product
delivery tasks undertaken in a short period of time, revenue and
any associated rebates and discounts relating to these services
do not normally span an accounting year end.
Payments for promotional activities will also be deducted from
revenue where the payments relate to goods or service that are
closely related to or indistinct from associated sales of goods or
services to that customer. The calculated costs are accrued and
accounted for as incurred and matched as a deduction from the
associated revenues (i.e. excluded from revenues reported in the
Group’s consolidated income statement).
Duty and similar items
Duty and similar items includes duty and levies having the
characteristics of duty. In countries where duty is a production tax,
duty is included in revenue and in cost of sales in the consolidated
income statement. Duty is regarded as a sales tax and excluded
from revenue where:
• duty becomes payable to the tax authority when the goods
are sold;
• there is an obligation to change the sales price when a change
in the rate of duty is imposed; and
• there is a requirement to identify the duty separately on sales
information such as invoices.
Payments made in the USA under the Master Settlement
Agreement are recognised in other cost of sales, for further
disclosure see note 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 where we operate using
management’s estimate of the most likely outcome. Where
management determines that a greater than 50% probability exists
that the tax authorities would accept the position taken in the tax
return, amounts are recognised in the consolidated financial
statements on that basis. Where the amount of tax payable or
recoverable is uncertain, the Group recognises a liability or asset
based on either: management’s judgement of the most likely
outcome; or, when there is a wide range of possible outcomes, a
probability weighted average approach. The Group recognises
interest on late paid taxes as part of financing costs. The Group
recognises penalties, if applicable, as part of administrative and
other expenses.
Deferred tax is provided in full on temporary differences between
the carrying amount of assets and liabilities in the financial
statements and the tax base, except if it arises from the initial
recognition of an asset or liability in a transaction, other than a
business combination, that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred tax is
provided on temporary differences arising on investments in
subsidiaries, except where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable
that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets are recognised only to the extent that it
is probable that future taxable profits will be available against
which the assets can be realised. Deferred tax is determined using
the tax rates that have been enacted or substantively enacted at
the balance sheet date, and are expected to apply when the
deferred tax liability is settled or the deferred tax asset is realised.
Dividends
Final dividends are recognised as a liability in the period in which
the dividends are approved by shareholders, whereas interim
dividends are recognised in the period in which the dividends
are paid.
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.
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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.
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
Intellectual property
Supply agreements
Software
Product development
5 – 30 years straight line
3 – 15 years straight line
3 – 10 years straight line
3 – 10 years 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
up to 50 years straight line
straight line/
2 – 20 years
reducing balance
straight line
Fixtures and motor vehicles 2 – 15 years
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 asset
is 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.
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CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
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.
In calculating the present value of lease payments, the Group uses
the incremental borrowing rate, defined as the rate of interest that
a lessee would have to pay to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a
similar value to the right of use asset in a similar economic
environment, at the lease commencement date if the interest
rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased
to reflect the accumulation of interest and reduced for the lease
payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in the
lease term, a change in the in-substance fixed lease payments or a
change in the assessment to purchase the underlying asset.
Lease payments on short-term leases and leases of low value
assets are recognised as expense on a straight line basis over
the lease term in cost of sales or distribution, advertising and
selling costs.
Short term leases, leases of low value assets and practical
expedients applied
The Group has applied a number of practical expedients permitted
by IFRS 16. These include;
• the exclusion of leases where the lease term ends within
12 months of the commencement of the lease or date of initial
application; and
• the exclusion of leases of low value assets, defined as those of
less than US$5,000.
IFRS 16 was applied using the modified retrospective method, to
contracts that were previously identified as operating leases in
accordance with IAS 17 and IFRIC 4. The Group has elected to;
• apply hindsight in determining the lease term if the contract
contains options to extend or terminate the lease;
• exclude initial direct costs from the measurement of the right of
use asset; and
• use a single discount rate to a portfolio of leases with reasonably
similar characteristics.
These elections were only applied on transition to IFRS 16 and
have not been applied to new leases following adoption of
the standard.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the first in first out (FIFO) method.
The cost of finished goods and work in progress comprises raw
materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity). Net realisable
value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling
expenses. Inventory is considered for obsolescence or other
impairment issues and an associated provision is booked
where necessary.
Leaf tobacco inventory which has an operating cycle that exceeds
12 months is classified as a current asset, consistent with
recognised industry practice.
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All actuarial gains and losses, including differences between
actual and expected returns on assets and differences that arise as
a result of changes in actuarial assumptions, are recognised
immediately in full in the statement of comprehensive income for
the period in which they arise. An interest charge is made in the
income statement by applying the rate used to discount the
defined benefit obligations to the net defined benefit liability of
the schemes.
For defined contribution schemes, contributions are recognised as
an employee benefit expense when they are due.
Share-based payments
The Group applies the requirements of IFRS 2 Share-Based
Payment Transactions to both equity-settled and cash-settled
share-based employee compensation schemes. The majority of
the Group’s schemes are equity-settled.
Equity-settled share-based payments are measured at fair value at
the date of grant and are expensed over the vesting period, based
on the number of instruments that are expected to vest. For plans
where vesting conditions are based on total shareholder returns,
the fair value at the date of grant reflects these conditions.
Earnings per share and net revenue vesting conditions are
reflected in the estimate of awards that will eventually vest. For
cash-settled share-based payments, a liability equal to the portion
of the services received is recognised at its current fair value at
each balance sheet date. Where applicable the Group recognises
the impact of revisions to original estimates in the consolidated
income statement, with a corresponding adjustment to equity for
equity-settled schemes and current liabilities for cash-settled
schemes. Fair values are measured using appropriate valuation
models, taking into account the terms and conditions of
the awards.
The Group funds the purchase of shares to satisfy rights to shares
arising under share-based employee compensation schemes.
Shares acquired to satisfy those rights are held in Employee
Share Ownership Trusts. On consolidation, these shares are
accounted for as a deduction from equity attributable to owners of
the parent. When the rights are exercised, equity is increased by
the amount of any proceeds received by the Employee Share
Ownership Trusts.
Treasury shares
When the Company purchases its own equity share capital
(treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes), is deducted
on consolidation from equity attributable to owners of the parent
until the shares are reissued or disposed of. When such shares are
subsequently sold or reissued, any consideration received, net of
any directly attributable incremental transaction costs and the
related income tax effects, increases equity attributable to owners
of the parent. When such shares are cancelled they are transferred
to the capital redemption reserve.
Where the Group enters into a contract with a third party that
contains an obligation to re-purchase its own shares for cash or
another financial asset; a financial liability is recognised for the
present value of the redemption amount. One example is an
obligation under a forward contract to re-purchase shares in
Imperial Brands PLC for cash. The financial liability is recognised
initially at the present value of the redemption amount, and is
reclassified from equity. Subsequently, the financial liability is
measured in accordance with IFRS 9, and is revalued at subsequent
reporting points as appropriate. If the contract expires without
delivery, the carrying amount of the financial liability is
reclassified to equity.
New accounting standards
The following amendments to the accounting standards, issued
by the IASB or International Financial Reporting Standards
Interpretations Committee (IFRS IC) and endorsed for use in the
UK, have been adopted by the Group from 1 October 2022 with no
impact on the Group’s consolidated results, financial position
or disclosures:
• Amendments to IAS 12 International Tax Reform – Pillar Two
model rules. (The Group has applied the mandatory exception
under IAS 12 in relation to recognising and disclosing
information about deferred tax assets and liabilities related to
Pillar Two income taxes.)
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.
2. ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and judgements associated with
accounting entries which will be affected by future events.
Estimates and judgements are continually evaluated based on
historical experience, and other factors, including current
information that helps form a forward-looking view of expected
future outcomes.
Estimates involve the determination of the quantum of accounting
balances to be recognised. Judgements typically involve decisions
such as whether to recognise an asset or liability.
The actual amounts recognised in the future may deviate from
these estimates and judgements.
Estimates
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 statement. 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.
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CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
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 is given in note 7 to these
financial statements.
Other 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 24 and 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.
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.
188
Imperial Brands | Annual Report and Accounts 2023
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 5 out of 12 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 has a designated program 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 don’t 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.
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 accepting 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.
www.imperialbrandsplc.com
189
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
3. SEGMENT INFORMATION
Imperial Brands comprises two distinct businesses – Tobacco & NGP and Distribution. The Tobacco & NGP business comprises the
manufacture, marketing and sale of Tobacco & NGP and Tobacco & NGP-related products, including sales to (but not by) the Distribution
business. The Distribution business comprises the distribution of Tobacco & NGP products for Tobacco & NGP product manufacturers,
including Imperial Brands, as well as a wide range of non-Tobacco & NGP products and services. The Distribution business is run on an
operationally neutral basis ensuring all customers are treated equally, and consequently transactions between the Tobacco & NGP and
Distribution businesses are undertaken on an arm’s length basis reflecting market prices for comparable goods and services.
On 1 October 2022 the Group reorganised the structure of the Europe and AAA regions. The Central and Eastern Europe cluster, which
includes operations in Poland, Czech Republic, Ukraine, Slovakia, Hungary, Azerbaijan, Armenia, Georgia and Slovenia, moved from the
Europe region to the AAA region. The AAA region has been re-named AAACE. The managerial and internal reporting structures of the
regions have been revised to reflect the new structure. Following the introduction of these changes we have revised our segmental
reporting as required under IFRS 8. The comparative figures below have been restated accordingly
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 the Group's 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.
The Group's reportable segments are Europe, Americas, Africa, Asia, Australasia and Central and Eastern Europe (AAACE) and Distribution.
Operating segments are comprised of geographical groupings of business markets. The main Tobacco & NGP business markets within the
Europe, Americas and AAACE reportable segments are:
Europe – United Kingdom, Germany, Spain, France, Italy, Greece, Sweden, Norway, Belgium and the Netherlands.
Americas – United States.
AAACE – Australia, Japan, Saudi Arabia, Taiwan, Poland, Czech Republic, Ukraine, Slovakia, Hungary, Slovenia and our African markets
including Algeria and Morocco.
Tobacco & NGP
£ million unless otherwise indicated
Revenue
Net revenue
Operating profit/(loss)
Adjusted operating profit
Adjusted operating margin %
Distribution
£ million unless otherwise indicated
Revenue
Distribution gross profit
Operating profit
Adjusted operating profit
Adjusted operating margin %
Tobacco
22,114
7,747
3,262
NGP
299
265
(156)
2023
Tobacco &
NGP
22,413
8,012
3,106
3,583
44.7
Tobacco
23,232
7,585
2,599
NGP
224
208
(127)
2023
10,819
1,466
298
306
20.9
2022
Tobacco &
NGP
23,456
7,793
2,472
3,441
44.2
2022
9,756
1,046
212
254
24.3
190
Imperial Brands | Annual Report and Accounts 2023
Revenue
£ million
Tobacco & NGP
Europe
Americas
AAACE
Total Tobacco & NGP
Distribution
Eliminations
Total Group
Total
revenue
11,749
3,700
6,964
22,413
10,819
(757)
2023
External
revenue
10,992
3,700
6,964
21,656
10,819
–
32,475
32,475
Total
revenue
12,052
3,756
7,648
23,456
9,756
(661)
32,551
The eliminations all relate to Tobacco & NGP sales to Distribution.
Tobacco & NGP net revenue
£ million
Europe
Americas
AAACE
Total Tobacco & NGP
Tobacco
3,020
2,778
1,949
7,747
NGP
220
34
11
265
2023
Total
3,240
2,812
1,960
8,012
Tobacco
2,883
2,784
1,918
7,585
NGP
156
42
10
208
Adjusted operating profit and reconciliation to profit before tax
2022
(restated)
External
revenue
11,391
3,756
7,648
22,795
9,756
–
32,551
2022
(restated)
Total
3,039
2,826
1,928
7,793
£ million
Tobacco & NGP
Europe
Americas
AAACE
Total Tobacco & NGP
Distribution
Eliminations
Adjusted operating profit
Russia, Ukraine and associated markets – Tobacco & NGP
Amortisation and impairment of acquired intangibles – Tobacco & NGP
Amortisation of acquired intangibles – Distribution
Restructuring costs – Tobacco & NGP
Fair value adjustment and impairment of other financial assets – Tobacco & NGP
Loss on disposal of subsidiaries – Tobacco & NGP
Loss on disposal of subsidiaries – Distribution
Acquisition and disposal costs – Tobacco & NGP
Excise tax provision – Tobacco & NGP
Charges related to legal provisions – Tobacco & NGP
Structural changes to defined benefit pension schemes – Tobacco & NGP
Operating profit
Net finance costs
Share of profit/(loss) of investments accounted for using the equity method
Profit before tax
2023
2022
(restated)
1,482
1,257
844
3,583
306
(2)
3,887
(4)
(339)
(8)
–
(36)
(1)
–
–
–
(85)
(12)
3,402
(298)
7
3,111
1,447
1,179
815
3,441
254
(1)
3,694
(399)
(323)
(26)
(197)
(37)
(13)
(16)
(5)
9
–
(4)
2,683
(117)
(15)
2,551
www.imperialbrandsplc.com
191
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Other information
£ million
Tobacco & NGP
Europe
Americas
AAACE
Total Tobacco & NGP
Distribution
Total Group
2023
Additions
to property,
plant and
equipment
Depreciation
and
software
amortisation
Additions
to property,
plant and
equipment
2022
(restated)
Depreciation
and
software
amortisation
69
36
46
151
40
191
79
20
41
140
41
181
44
31
41
116
29
145
76
25
52
153
32
185
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
2023
External
revenue
Non-current
assets
3,926
4,142
3,428
3,657
17,322
148
3,245
2,350
5,646
7,553
32,475
18,942
2022
(restated)
Non-current
assets
149
3,280
2,371
6,430
7,490
19,720
External
revenue
4,286
4,238
3,215
3,726
17,086
32,551
Non-current assets comprise intangible assets, property, plant and equipment, right of use assets and investments accounted for using the
equity method. Note the comparative figure has been restated to include right of use assets.
4. PROFIT BEFORE TAX
Profit before tax is stated after charging/(crediting):
£ million
Raw materials and consumables used
Changes in inventories of finished goods – Tobacco & NGP
Changes in inventories of finished goods – Distribution
Depreciation and impairment of fixed assets
Amortisation and impairment of intangible assets and 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 (gains)/losses
Write down of inventories
Profit on disposal of non-current assets
Write back of trade receivables
Analysis of fees payables to Ernst & 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
192
Imperial Brands | Annual Report and Accounts 2023
2023
773
2,630
7,994
153
394
–
4
1
85
(11)
40
39
(5)
2022
857
2,660
7,350
235
406
5
3
2
74
75
20
–
(3)
2023
2022
2.7
6.1
8.8
0.5
9.3
0.5
0.5
9.8
2.2
5.6
7.8
0.4
8.2
0.6
0.6
8.8
5. RESTRUCTURING COSTS
£ million
Employment related
Asset impairments
Other charges
Analysed by workstream:
£ million
2021 Strategic review programme
Other
2023
–
–
–
–
2022
103
70
24
197
Costs
–
–
–
Cash spend
61
37
98
2023
Cumulative
cash spend
165
1,276
1,441
Costs
197
–
197
Cash spend
56
35
91
2022
Cumulative cash
spend
104
1,239
1,343
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.
No accounting charges are now expected to be recognised in relation to historic restructuring programmes, however there remains some
ongoing cash costs to be incurred which are not expected to be in excess of existing provisions.
6. DIRECTORS AND EMPLOYEES
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
2023
882
186
41
31
1,140
2022
642
142
64
29
877
2023
2022
4.7
0.9
0.7
4.8
2.1
7.8
21.0
4.3
0.7
0.7
5.3
5.8
1.5
18.3
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 £39,323,966 (2022: £31,671,710).
Key management compensation1
£ million
Short term employee benefits
Post-employment benefits
Termination payments
Share based payments (in accordance with IAS 24)
2023
17.0
–
2.1
15.0
34.1
2022
17.6
0.1
5.7
3.6
27.0
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 142-163 includes details on salary, benefits, pension and share plans. These disclosures form part of the
financial statements.
www.imperialbrandsplc.com
193
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
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
7. TAX
At 30
September
18,800
6,400
2023
Average
19,100
6,400
25,200
25,500
At 30
September
12,200
4,700
8,300
2023
Average
11,900
5,100
8,500
25,200
25,500
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
The major components of income tax expense for the years ended 30 September 2023 and 2022 are:
£ million
2023
2022
UK current tax
Current year (credited)/charged to the consolidated income statement
Current year charged/(credited) to consolidated other comprehensive income
Total current year UK current tax
Adjustments in respect of prior years charged to the consolidated income statement
Total UK current tax
Overseas current tax
Current year charged to the consolidated income statement
Total current year overseas current tax
Adjustments in respect of prior years charged/(credited) to the consolidated income statement
Total overseas current tax
(55)
115
60
15
75
620
620
233
853
217
(158)
59
149
208
670
670
(116)
554
Total current tax charged to the consolidated statement of other comprehensive income
928
762
£ 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
2023
2022
(55)
15
620
233
813
(158)
655
217
149
670
(116)
920
(34)
886
194
Imperial Brands | Annual Report and Accounts 2023
£ million
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 actuarial gains and losses
Deferred tax on hyperinflation adjustment
Total deferred tax
Total tax credited to consolidated other comprehensive income
£ million
Tax related to items recognised in equity during the year:
Deferred tax on share-based payments
Total tax credited to equity
2023
2022
115
–
115
(135)
1
(134)
(148)
(10)
(158)
52
3
55
(19)
(103)
2023
2022
(1)
(1)
(2)
(2)
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
22.0% (2022: 19.0%) as follows:
£ million
Profit before tax
Tax at the UK corporation tax rate of 22.0% (2022: 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
Remeasurement of previously recognised deferred tax assets
Increase in unrecognised deferred tax assets
Deferred tax on unremitted earnings
Share of (profit)/loss of investments accounted for using the equity method
Non-deductible expenses
(Non-taxable gains)/non-deductible losses on net foreign exchange on financial instruments
Recognition of deferred tax assets
Exempt losses on Russian and associated markets exit
Provision for state aid tax recoverable
Adjustments in respect of prior years
Total tax charged to the consolidated income statement
2023
3,111
684
24
211
–
(6)
1
5
(2)
24
(122)
(212)
–
–
48
655
2022
2,551
484
118
(78)
4
(1)
14
(26)
3
18
145
–
88
101
16
886
Differences in effective tax rates on overseas earnings represents the impact of worldwide profits being taxed at rates different from 22.0%.
The remeasurement of deferred tax balances arising from changes in tax rates for the year is £nil (2022: £4 million).
During the year the Group has increased the provision for deferred tax on unremitted earnings by £5 million (2022: £26 million decrease).
The tax will arise on the distribution of profits through the Group and on planned Group simplification.
www.imperialbrandsplc.com
195
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Movement on the current tax account
£ million
At 1 October
Charged to the consolidated income statement
(Charged)/credited to other comprehensive income
Cash paid
Exchange movements
Balance sheet reclassification
At 30 September
2023
27
(813)
(115)
590
6
(1)
(306)
2022
82
(920)
158
681
(7)
33
27
The cash tax paid in the year is £223 million lower than the current tax charge (2022: £239 million lower). This arises as a result of timing
differences between the accrual of income taxes and the actual payment of cash and the movement in the provision for uncertain
tax positions.
Analysis of current tax account
£ million
Current tax assets
Current tax liabilities
Uncertain tax positions
2023
112
(418)
(306)
2022
334
(307)
27
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 2023 the total value of these provisions excluding compensating assets under mutual agreement procedure was
£261 million (2022: £215 million excluding compensating assets, 2022: £148 million including compensating assets). 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 on the results of the Group.
French tax litigation
The Group has an ongoing challenge from the French tax authorities, which is now in litigation, and could lead to additional liabilities of
£254 million including tax, interest, and penalties. 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 May 2023 the Administrative Tribunal of Montreuil issued its decision,
ruling in favour of the French tax authorities. In July 2023 the Group appealed to the Administrative Court of Appeal of Paris. Whilst the
Group has appealed, in the light of the Administrative Tribunal of Montreuil’s decision, having subsequently reassessed the probability of a
successful appeal, the Group has now determined it is appropriate to increase the provision for uncertain tax positions to £180 million
(2022: £42 million).
State and UK CFC
In 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.
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 that 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, during 2022 the
Group reassessed recoverability of the £101 million previously recorded as a receivable and determined it was appropriate to provide in full.
196
Imperial Brands | Annual Report and Accounts 2023
Transfer pricing
The Group has been subject to tax audits relating to transfer pricing matters in several jurisdictions, principally UK, France and Germany.
The Group estimates the potential gross level of exposure relating to transfer pricing issues is approximately £100 million (2022: £200
million). The Group holds a provision of £68 million excluding compensating assets (2022: £121 million excluding compensating assets,
£54 million including compensating assets) in respect of these items.
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 2022.
Settlement of the German audit was made during 2023. In September 2023 an additional separate transfer pricing audit was opened
by the German tax authorities.
The Group believes 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 concerning 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 was made for £48 million including interest, for which a provision was made in 2022 and has since been settled in 2023.
The Group holds a provision of £nil (2022: £48 million) in respect of this matter.
8. DIVIDENDS
Distributions to ordinary equity holders
£ million
Paid interim of 43.18 pence per share (2022: 42.54 pence, 2021: 42.12 pence)
• Paid June 2021
• Paid September 2021
• Paid December 2021
• Paid June 2022
• Paid September 2022
• Paid December 2022
• Paid June 2023
• Paid September 2023
Interim dividend paid
Proposed third interim of 51.82 pence per share (2022: 49.31 pence, 2021: 48.48 pence)
• To be paid December 2023
Interim dividend proposed
Proposed final of 51.82 pence per share (2022: 49.32 pence, 2021: 48.48 pence)
• Paid March 2022
• Paid March 2023
• To be paid March 2024
Final dividend
Total ordinary share dividends of 146.82 pence per share (2022: 141.17 pence, 2021: 139.08 pence)
2023
2022
2021
–
–
–
–
–
–
196
195
391
466
466
–
–
465
465
1,322
–
–
–
202
202
464
–
–
199
199
458
–
–
–
–
–
868
856
–
–
–
457
–
457
1,325
–
–
458
–
–
458
1,314
The proposed third interim dividend for the year ended 30 September 2023 of 51.82 pence per share amounts to a proposed dividend of
£466 million, which will be paid in December 2023. The proposed final dividend for the year ended 30 September 2023 of 51.82 pence per
share amounts to a proposed dividend payment of £465 million in March 2024 based on the number of shares ranking for dividend at
30 September 2023, and is subject to shareholder approval. If approved, the total dividend paid in respect of 2023 will be £1,322 million
(2022: £1,325 million). The dividend paid during 2023 is £1,312 million (2022: £1,320 million).
www.imperialbrandsplc.com
197
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
9. EARNINGS PER ORDINARY SHARE
Basic earnings per share is based on the profit for the period attributable to the owners of the parent and the weighted average number of
ordinary shares in issue during the period excluding shares held to satisfy the Group’s employee share schemes and shares purchased by
the Company and held as treasury shares. Diluted earnings per share have been calculated by taking into account the weighted average
number of shares that would be issued if rights held under the employee share schemes were exercised. No instruments have been
excluded from the calculation for any period on the grounds that they are anti-dilutive.
£ million
Earnings: basic and diluted – attributable to owners of the Parent Company
Millions of shares
Weighted average number of shares:
Shares for basic earnings per share
Potentially dilutive share options
Shares for diluted earnings per share
Pence
Basic earnings per share
Diluted earnings per share
2023
2,328
2022
1,570
922.5
946.2
5.7
6.8
928.2
953.0
252.4
250.8
165.9
164.7
10. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
Russian associated markets exit
In the prior year a loss on exit from the Russian and associated markets of £423 million was incurred, 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. 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 to be impaired. In addition, certain exit costs are expected to be incurred in the process of ceasing operations. Total impairment and
exit costs of £35 million were recognised in the financial year ending 30 September 2022. There is ongoing work to complete the exit from
the associated markets. In the current year revisions to these exit provisions totalling £14 million have been recognised primarily arising
due to changes in the expected level of exit costs.
Logista
Acquisition of Speedlink Worldwide Express B.V.
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 €20 million (£16 million) which has been paid in cash. There is an intention to purchase the remaining 30% of share capital
over the next two 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 €12 million (£10 million), intangible assets of
€15 million (£13 million) and deferred tax liability of €4 million (£3 million) were recognised on acquisition.
Acquisition of Herinvemol, S.L. (Transportes El Mosca)
On 17 June 2022, the Group's subsidiary Logista announced the acquisition of 60% of the shares of Herinvemol S.L. Herinvemol S.L. is the
parent company of a group of companies over which it holds control, trading as ‘Transportes El Mosca’. This acquisition completed on
28 October 2022.
Transportes El Mosca offers national and international intermodal transport services by road, sea and air, as well as frozen or refrigerated
transport. The main destination markets for the international road transport activity are the United Kingdom, Germany, Portugal, France,
the Netherlands, and Italy, and its clients are mainly producers and large distribution chains in the food sector.
The total purchase consideration for the 60% initial shareholding is €99 million (£86 million) with €1 million (£1 million) remaining as a
current liability as at 30 September 2023. The agreement contemplates cross-call and call options for the remaining 40% exercisable over a
3-year time horizon. At 30 September 2023 goodwill of €39 million (£33 million) has been recognised relating to this acquisition which has
been assigned to the Distribution segment. The valuation of the assets at fair value has been carried out by an independent expert. This
valuation includes, as intangible assets, Customer Relationships for €42 million (£38 million) and Trademarks for €5 million (£4 million).
On 3 August 2023, Logista announced the acquisition of an additional 13.33% of equity for a consideration of €23 million (£20 million),
increasing its total ownership to 73.33%.
At 30 September 2023, Logista has a purchase option for the remaining 26.67%, which is recorded at fair value as a non-current liability for
an amount of €25 million (£22 million) and a current liability for an amount of €25 million (£22 million), with a corresponding adjustment
taken to equity reserves. The equity movement of €56 million (£48 million) is calculated based on the initial valuation of the call options at
fair value of €75 million (£65 million) , reduced by the minority interests arising from the purchase transaction of €17 million (£14 million)
and those arising from the profit for the year generated by the acquired company.
198
Imperial Brands | Annual Report and Accounts 2023
The revenue and net profit that were contributed to the consolidated income statement for the period ended 30 September 2023 totalled
€260 million (£226 million) and €4 million (£3 million), respectively.
The ordinary income and net profit that would have contributed to the consolidated income statement if Transportes El Mosca had been
acquired on 1 October 2022 is not significantly different from the figures indicated in the previous paragraph.
Acquisition of Carbó Collbatallé S.L.
In April 2022, the Group's subsidiary Logista reached an agreement for the acquisition of 100% of the shares of Carbó Collbatallé, a company
that offers transport and logistics services for refrigerated and frozen foods, which carries out its commercial activity mainly in the Spanish
market. This acquisition was completed in October 2022.
The total consideration for the shares acquired was €55 million (£46 million) of which €51 million (£42 million) was paid in cash at the time
of the purchase with €4 million (£4 million) outstanding as at 30 September 2023.
As at 30 September 2023, goodwill of €36 million (£31 million) has been recognised which has been assigned to the Distribution segment.
The valuation of the assets at fair value has been carried out by an independent expert. This valuation includes, as intangible assets,
Customer Relationships for €20 million (£17 million) and Trademarks for €1 million (£1 million).
The revenue and net profit that were contributed to the consolidated income statement for the period ended 30 September 2023 totalled
€63 million (£55 million) and €5 million (£4 million) respectively.
Acquisition of Gramma Farmaceutici, S.R.L.
In July 2023, the Group’s subsidiary Logista acquired 100% of the equity shares of Gramma Farmaceutici, S.R.L., a company specialised in
logistics services for the pharmaceutical industry in Italy. The total purchase price of these shares amounted to €3 million (£3 million), paid
in cash at the time of purchase. The book value of the net assets acquired was €296 thousand (£257 thousand). As at 30 September 2023, the
company has recorded provisional goodwill of €3 million (£3 million) which has been assigned to the Distribution segment.
The revenue and net profit that were contributed to the consolidated income statement for the period ended 30 September 2023 totalled
€2 million (£2 million) and €18 thousand (£16 thousand) respectively. The ordinary income and net profit that would have contributed to the
consolidated income statement if the company had been acquired on 1 October 2022 is not significantly different from the figures indicated
in the previous paragraph.
The amounts of the assets and liabilities arising from the following acquisitions during the year ending 30 September 2023 are as follows:
£ million
Property, plant and equipment and right of use assets
Other intangible assets
Other non-current assets
Trade receivables and other accounts receivable
Cash and other equivalent liquid assets
Other current assets
Deferred tax liabilities
Trade payables and other accounts payable
Other current financial liabilities
Other non-current financial liabilities
Total net assets
Less minority interests
Net assets acquired by the group
Consideration for the acquisition
Goodwill
Carbó
Collbatallé S.L.
Fair value
Hernivemol,
S.L.
(Transportes
El Mosca)
Fair value
Total
Fair value
29
18
–
10
3
1
(5)
(16)
–
(25)
15
–
15
46
31
67
42
1
75
11
2
(10)
(55)
(43)
(23)
67
(14)
53
86
33
96
60
1
85
14
3
(15)
(71)
(43)
(48)
82
(14)
68
132
64
www.imperialbrandsplc.com
199
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
11. INTANGIBLE ASSETS
£ million
Cost
At 1 October 2022
Additions
Acquisitions
Disposals
Reclassifications
Exchange movements
At 30 September 2023
Amortisation and impairment
At 1 October 2022
Amortisation charge for the year
Disposals
Reclassifications
Exchange movements
Accumulated amortisation
Accumulated impairment
At 30 September 2023
Net book value
At 30 September 2023
£ 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
200
Imperial Brands | Annual Report and Accounts 2023
Intellectual property
and product
development
Goodwill
Supply
agreements
Software
Total
2023
14,228
13,871
1,433
522
30,054
–
67
–
–
(510)
13,785
136
5
(115)
(2)
(853)
1
54
–
–
(31)
119
2
(3)
2
256
128
(118)
–
(12)
(1,406)
13,042
1,457
630
28,914
1,587
8,925
1,414
351
12,277
–
–
–
(31)
–
1,556
1,556
352
(109)
(1)
(517)
8,111
539
6
–
–
(31)
1,389
–
34
(3)
1
(8)
374
1
392
(112)
–
(587)
9,874
2,096
8,650
1,389
375
11,970
12,229
4,392
68
255
16,944
Intellectual property
and product
development
Goodwill
Supply
agreements
Software
Total
2022
13,417
12,359
1,387
–
10
–
4
797
14,228
1,542
–
–
–
4
41
–
1,587
1,587
20
–
–
–
1,492
13,871
7,735
331
–
–
–
859
8,386
539
8,925
1
13
–
–
32
451
65
–
(8)
–
14
27,614
86
23
(8)
4
2,335
1,433
522
30,054
1,355
27
–
–
–
32
1,414
–
1,414
308
10,940
35
1
(5)
–
12
350
1
351
393
1
(5)
4
944
10,150
2,127
12,277
12,641
4,946
19
171
17,777
Amortisation and impairment of acquired intangibles excluded from adjusted operating profit amounted to £347 million (2022: £349 million),
this comprises amortisation on intellectual property of £341 million (2022: £323 million) and amortisation on supply agreements of
£6 million (2022: £26 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 acquired as part of the purchase of Altadis, and of Carbó Collbatallé S.L. and
Herinvemol S.L. (Transportes El Mosca) in the current financial year.
Intangible amortisation and impairment are included within administrative and other expenses in the consolidated income statement.
In June 2023 the Group purchased intellectual property relating to tobacco pouches to be marketed within the United States. The purchase
consideration was $130 million (£106 million) comprising $50 million (£41 million) which was paid in cash on completion, deferred
consideration of $31 million (£25 million) expected to be paid in December 2023 and contingent consideration currently estimated at
$49 million (£40 million) payable over a five-year period up until 2028. All deferred and contingent consideration has been discounted at a
rate of 13% and a corresponding consideration liability of $81 million (£66 million) has been recognised. The total initial intangible asset
value recognised was $130 million (£106 million).
Goodwill and intangible asset impairment review
On 1 October 2022 the Group reorganised the Tobacco & NGP business, changing our geographic footprint with the markets comprising our
Central and Eastern Europe cluster moving from our Europe region into the Africa, Asia & Australasia (AAA) region to form the newly
constituted AAACE region. The managerial and internal reporting structures of the business have been revised to reflect the new structure.
Following the introduction of these changes we have revised our segmental reporting as required under IFRS 8. As the Group’s Cash
Generating Unit Groupings (CGUG) that are used for annual goodwill impairment testing are aligned to the region-based segments, where
appropriate, goodwill and other indefinite life intangible assets has been reapportioned across the new CGUG structure on a relative value
basis to reflect the segmental changes.
One of the requirements of IAS 36 is to undertake an impairment test based on the former CGUG prior to reapportioning intangible assets
to new CGUG in the event of a Group reorganisation. The impairment testing which was undertaken as at 1 October 2022 indicated no
impairment. Therefore there was no requirement to impair any goodwill or brand intangible prior to the reallocation to new CGUG.
Our reportable segments have been updated to Americas, Europe, AAACE and Distribution. The Tobacco & NGP operating segments
continue to be comprised of geographical groupings of business markets. The main Tobacco & NGP business markets that have moved
segments as part of this restructuring are Poland, Czech Republic, Ukraine, Slovakia, Hungary, Azerbaijan, Armenia, Georgia, Moldova,
Croatia and Slovenia.
Goodwill is allocated to CGUG that are expected to benefit from the business combination in which the goodwill arose. For the Tobacco &
NGP business, CGUG are based on the markets where the business operates and are grouped in line with the regional 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
AAACE
Tobacco & NGP
Distribution
2023
Intangible
assets with
indefinite
lives
307
–
162
469
–
469
Goodwill
4,123
4,147
2,181
10,451
1,778
12,229
2022 (restated)
Intangible
assets with
indefinite
lives
313
–
165
478
–
478
Goodwill
4,295
4,326
2,277
10,898
1,743
12,641
Goodwill has arisen principally on the acquisitions of Reemtsma in 2002 (all CGUG), Commonwealth Brands in 2007 (USA), Altadis in 2008
(all CGUG) 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 CGUG is based on value-in-use calculations. These calculations use cash flow projections
derived from financial plans of our Tobacco business which are based on detailed bottom-up market-by-market forecasts of projected sales
volumes for each product line. These forecasts reflect, on an individual market basis, numerous assumptions and estimates regarding
anticipated changes in market size, prices and duty regimes, consumer uptrading and downtrading, consumer preferences and other
changes in product mix, based on long-term market trends, market data, anticipated regulatory developments, and management experience
and expectations. We consider that pricing, market size, market shares and cost inflation are the key assumptions used in our plans.
www.imperialbrandsplc.com
201
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Growth rates and discount rates used
The compound annual growth rates implicit in these value-in-use calculations are shown below.
%
Europe
Americas
AAACE
Distribution
Pre-tax
discount rate
Initial
growth rate
Long-term
growth rate
Pre-tax
discount rate
Initial
growth rate
Long-term
growth rate
2023
2022
10.4
8.9
12.5
12.3
4.5
5.8
4.3
5.0
1.0
2.1
2.2
1.6
10.3
8.7
11.1
11.8
4.6
5.2
2.8
3.9
0.6
1.6
1.3
1.5
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 CGUG. 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.
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 was in line with the prior year. The long term growth rate improved by 0.4%. This primarily reflects
improvements in the UK market where the outlook is forecast to be better than prior year forecast and where the long term growth rate was
not capped by the medium term rate.
Americas was broadly in line with the prior year growth assumptions for the initial and medium growth rate. The key changes which
largely offset each other were the 0.5% increase in long-term growth rate and an increased tax rate by 4%.
AAACE's increases in the initial growth rates are driven by improved initial and medium-term forecasts, which are both due to changes in
the growth outlook for a number of key markets including Taiwan, Ivory Coast and Hungary. Improvements in forecast profitability reflect
actions delivered in line with our strategic goals. The long-term growth rate has improved this year, in the prior year this needed to be
capped to the medium-term rate for a number of the key markets.
The Distribution improved initial growth rate reflects stronger business projections compared to prior year.
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
2023. 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.
202
Imperial Brands | Annual Report and Accounts 2023
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 on pages 74-77. The review has concluded that there are
impacts on future cash flows as a result of climate change, with the most significant being relating to NTM and leaf costs due to increases
in the operating costs of suppliers and raw materials. We have factored the additional costs to the Group relating to forecast climate costs
into our discounted cash flow forecasts used for impairment testing valuation purposes. The modelled impact of this for the Group was
£338 million (2022: £726 million). 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 (2022: £nil) 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 2023 and hence no impairment charge has been incurred (2022: £nil).
No impairment charge (2022: £1 million) was incurred in the year relating to software.
12. PROPERTY, PLANT AND EQUIPMENT
£ million
Cost
At 1 October 2022
Additions
Acquisitions
Disposals
Hyperinflation adjustment (note 1)
Exchange movements
At 30 September 2023
Depreciation and impairment
At 1 October 2022
Depreciation charge for the year
Impairment
Disposals
Exchange movements
At 30 September 2023
Net book value
At 30 September 2023
Property
Plant and
equipment
Fixtures
and motor
vehicles
806
3
–
(22)
–
(31)
756
181
17
–
(11)
(10)
177
2,080
130
5
(74)
5
(81)
2,065
1,200
98
6
(60)
(41)
1,203
455
58
9
(24)
–
(14)
484
301
32
–
(15)
(10)
308
2023
Total
3,341
191
14
(120)
5
(126)
3,305
1,682
147
6
(86)
(61)
1,688
579
862
176
1,617
www.imperialbrandsplc.com
203
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
£ million
Cost
At 30 September 2021
Hyperinflation restatement to 1 October 2021
At 1 October 2021
Additions
Disposals
Hyperinflation adjustment (note 1)
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
13. RIGHT OF USE ASSETS AND LEASE LIABILITY
The movements in right of use assets in the year were as follows:
£ million
Net book value
At 1 October 2022
Additions
Acquisitions
Terminations and modifications
Depreciation and impairment
Exchange movements
At 30 September 2023
The movements in lease liabilities in the year were as follows:
£ million
At 1 October 2022
Cash flow
Accretion of interest
New leases, terminations and modifications
Acquisitions
Exchange movements
At 30 September 2023
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
194
74
50
(3)
(53)
(6)
256
3
3
–
–
(4)
–
2
31
37
32
(2)
(28)
(2)
68
2023
Total
228
112
84
(5)
(85)
(8)
326
Lease
Liabilities
248
(92)
10
106
84
(7)
349
The maturity profile and the future minimum lease payments of the carrying amount of the Group's lease liabilities and the contractual
cash flows as at 30 September 2023 is disclosed in Note 20.
204
Imperial Brands | Annual Report and Accounts 2023
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
The movements in right of use assets in the year ending 30 September 2022 were as follows:
£ million
Net book value
At 1 October 2021
Additions
Terminations and modifications
Depreciation
Exchange movements
At 30 September 2022
The movements in lease liabilities in the year ending 30 September 2022 were as follows:
£ million
At 1 October 2021
Cash flow
Accretion of interest
New leases, terminations and modifications
Exchange movements
At 30 September 2022
2023
2022
4
1
85
10
Property
Plant and
equipment
Fixtures
and motor
vehicles
202
57
(13)
(56)
4
194
6
1
–
(4)
–
3
34
11
(2)
(14)
2
31
3
2
74
6
2022
Total
242
69
(15)
(74)
6
228
Lease
Liabilities
251
(68)
6
54
5
248
The maturity profile and the future minimum lease payments of the carrying amount of the Group's lease liabilities and the contractual
cash flows as at 30 September 2022 is disclosed in Note 20.
www.imperialbrandsplc.com
205
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
The principal joint venture during the year was Global Horizon Ventures Limited. In the prior year, 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 on 27 April 2022 these
royalties ceased and, therefore, the Group's share of this intangible asset was fully impaired.
Summarised financial information for the Group’s joint ventures, which are accounted for using the equity method, is shown below:
£ million
Revenue
Profit after tax
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
£ million
Revenue
Profit after tax
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Global Horizon
Ventures
Others
Total
2023
19
13
–
56
56
(7)
–
(7)
49
Global Horizon
Ventures
23
(7)
–
62
62
–
(7)
(7)
55
28
4
7
49
56
(41)
(14)
(55)
1
Others
27
5
6
44
50
(39)
(10)
(49)
1
47
17
7
105
112
(48)
(14)
(62)
50
2022
Total
50
(2)
6
106
112
(39)
(17)
(56)
56
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Imperial Brands | Annual Report and Accounts 2023
Transactions and balances with joint ventures
£ million
Purchases from
Accounts payable to
Movement on investments accounted for using the equity method
£ million
At 1 October
Share of profit/(loss) 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
Foreign exchange losses
At 30 September
15. INVENTORIES
£ million
Raw materials
Work in progress
Finished inventories
Other inventories
2023
2022
4
(2)
11
(3)
2023
2022
56
7
2
–
(2)
(7)
(1)
55
2023
1,159
81
3,106
176
4,522
88
(15)
2
2
(12)
(9)
–
56
2022
910
73
2,969
188
4,140
Other inventories mainly comprise duty-paid tax stamps.
Within finished inventories of £3,106 million (2022: £2,969 million) there is excise duty of £1,192 million (2022: £1,255 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 £337 million
(2022: £114 million) of leaf tobacco held within raw materials will not be utilised within a year of the balance sheet date.
16. TRADE AND OTHER RECEIVABLES
£ million
Trade receivables
Less: loss allowance
Net trade receivables
Other receivables
Prepayments
Trade receivables may be analysed as follows:
£ million
Within credit terms
Past due by less than 3 months
Past due by more than 3 months
Amounts that are impaired
2023
2022
Current Non-current
Current
Non-current
2,211
(63)
2,148
149
193
2,490
3
(3)
–
26
37
63
2,262
(76)
2,186
200
157
2,543
3
(3)
–
37
30
67
2023
2022
Current Non-current
Current
Non-current
1,996
121
31
63
2,211
–
–
–
3
3
2,084
93
9
76
2,262
–
–
–
3
3
www.imperialbrandsplc.com
207
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
The movements in the total loss allowance for receivables can be analysed as follows:
£ million
At 1 October
Net (decrease)/increase in provision
At 30 September
2023
2022
79
(13)
66
71
8
79
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.
17. CASH AND CASH EQUIVALENTS
£ million
Cash at bank and in hand
Short-term deposits and other liquid assets
2023
683
662
1,345
2022
703
1,147
1,850
£135 million (2022: £144 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 three months or less from the date the transfer is requested.
18. TRADE AND OTHER PAYABLES
£ million
Trade payables
Duties payable
Other taxes and social security contributions
Other payables
Accruals
2023
Current Non-current
–
1,507
–
5,297
–
1,375
–
526
27
874
9,579
27
Current
1,345
5,453
1,412
500
796
9,506
2022
Non-current
–
–
–
–
10
10
208
Imperial Brands | Annual Report and Accounts 2023
19. BORROWINGS
The Group’s borrowings held at amortised cost, are as follows:
£ million
Current borrowings
Bank loans and overdrafts
Capital market issuance:
$354 million 3.5% notes due February 2023
€750 million 1.125% notes due August 2023
£600 million 8.125% notes due March 2024
$1,000 million 3.125% notes due July 2024
Total current borrowings
Non-current borrowings
Bank loans
Capital market issuance:
£600 million 8.125% notes due March 2024
$1,000 million 3.125% notes due July 2024
€500 million 1.375% notes due January 2025
$1,500 million 4.25% notes due July 2025
€650 million 3.375% notes due February 2026
$750 million 3.5% notes due July 2026
£500 million 5.5% notes due September 2026
€750 million 2.125% notes due February 2027
$1,000 million 6.125% notes due July 2027
$1,000 million 3.875% notes due July 2029
€950 million 5.25% notes due February 2031
£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
2023
2022
49
27
–
–
627
823
1,499
322
662
–
–
1,011
2
1
–
–
437
1,236
574
617
500
657
822
822
838
505
872
626
910
445
1,367
584
682
500
670
908
909
–
505
889
7,882
9,381
8,996
10,007
9,330
51
9,979
28
Current and non-current borrowings include interest payable of £33 million (2022: £2 million) and £96 million (2022: £104 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 13 February 2023, $354 million (£292 million equivalent) 3.5% notes were repaid. On 15 February 2023, €600 million (£533 million
equivalent) 5.25% notes were issued. On 14 August 2023, €750 million (£646 million equivalent) 1.125% notes were repaid. On 12 September
2023, €350 million (£301 million equivalent) 5.25% notes were issued, supplementary to the 15 February 2023, €600 million issue.
All borrowings are unsecured and the Group has not defaulted on any borrowings during the year (2022: no defaults).
The maturity profile of the Group's bonds and the contractual cash flows as at September 2023 is disclosed in Note 20.
www.imperialbrandsplc.com
209
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Fair value of borrowings
The fair value of borrowings as at 30 September 2023 is estimated to be £8,669 million (2022: £9,030 million). £8,617 million (2022: £9,002 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:
In less than one year
Between one and two years
Between two and five years
2023
Balance sheet
amount
Fair value
Balance sheet
amount
1,632
3,378
4,320
9,330
1,524
2,996
4,097
8,617
1,631
3,250
5,098
9,979
2022
Fair value
1,457
2,777
4,768
9,002
2023
2022
550
159
2,866
3,575
–
–
3,091
3,091
During the year the maturity of €3,125 million of the Group's syndicated multicurrency facility of €3,493 million (2022 €3,500 million) was
extended to 30 September 2026. One syndicate member opted not to extend their participation of €184 million which has a maturity date of
30 September 2025. One syndicate member opted not to extend their participation of €184 million which has a maturity date of 30 March
2026. One syndicate member sold their participation of €125 million and one syndicate member sold their participation of €184 million.
Two syndicate members increased their participations from €125 million to €184 million and a new syndicate member joined with a
participation of €184 million.
During the year three new bilateral facilities for a total £550 million, all maturing in September 2024, were arranged.
20. FINANCIAL RISK FACTORS
Financial risk management
Overview
In the normal course of business, the Group is exposed to financial risks including, but not limited to, market, credit and liquidity risk.
This note explains the Group’s exposure to these risks, how they are measured and assessed, and summarises the policies and processes
used to manage them, including those related to the management of capital.
The Group operates a centralised treasury function which is responsible for the management of the financial risks of the Group, together
with its financing and liquidity requirements. Financial risks comprise, but are not limited to, exposures to funding and liquidity, interest
rate, foreign exchange and counterparty credit risk. The treasury function is also responsible for the financial risk management of the
Group’s global defined benefit pension schemes and management of Group-wide insurance programmes. 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 four times per year and comprises the Chief
Financial Officer, the Director of Treasury, the Group Finance Director, the Chief Legal and Corporate Affairs Officer, the Chief Strategy and
Development Officer and three Group Regional Finance Directors. The Treasury Committee operates in accordance with the terms of
reference set out by the Board and a policy (the Treasury Operations Policy) which sets out the expectations and boundaries to assist in the
effective oversight of treasury activities.
The Board reviews and approves all major treasury decisions.
The Group’s management of financial risks covers the following:
210
Imperial Brands | Annual Report and Accounts 2023
(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 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's currency mix of debt and related derivatives is held with consideration to the currency mix of its net assets and profits, which
are primarily euros and US dollars. The Group issues debt in the most appropriate market or markets at the time of raising new finance and
has a policy of using derivative financial instruments, cross-currency swaps, to change the currency of debt as required. Borrowings
denominated in, or swapped into foreign currencies to match the Group’s investments in overseas subsidiaries are treated as a hedge
against the net investment where appropriate.
Foreign exchange sensitivity analysis
The Group’s sensitivity to foreign exchange rate movements, which impacts the translation of monetary items held by subsidiary
companies in currencies other than their functional currencies, is illustrated on an indicative basis below. The sensitivity analysis has been
prepared on the basis that net debt and the proportion of financial instruments in foreign currencies remain constant, and that there is no
change to the net investment hedge designations in place at 30 September 2023. 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 (2022: 10%)
10% appreciation of sterling against US dollar (2022: 10%)
2023
2022
Increase/
(decrease)
in income
Increase in
income
33
(9)
59
2
An equivalent depreciation of sterling against the above currencies would cause a decrease in income of £41 million and £11 million
increase for euro and US dollar exchange rates respectively (2022: £72 million decrease and £2 million decrease).
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 (2022: 10%)
10% appreciation of sterling against US dollar (202: 10%)
2023
Change in
equity
2022
Change in
equity
1,035
205
621
276
An equivalent depreciation of sterling against the above currencies would result in a change in equity of £(1,265) million and £(250) million
for euro and US dollar exchange rates respectively (2022: £(759) million and £(338) million).
www.imperialbrandsplc.com
211
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
At 30 September 2023, after the effect of derivative financial instruments, approximately 111% of the Group’s net debt was denominated in
euro and non US dollar currencies (2022: 80%) and (11)% in US dollars (2022: 20%).
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 Operations Policy and
Treasury Committee discussions.
As at 30 September 2023, after adjusting for the effect of derivative financial instruments detailed in note 21, approximately 107% (2022: 103%)
of reported net debt was at fixed rates of interest and (7)% (2022: (3)%) 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 100% (2022: 97%) of debt was at fixed rates of interest and 0% (2022: 3%) 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 2023, 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 (2022: £nil).
£ million
Income statement impact of interest rate movements:
+/- 1% increase in euro interest rates (2022: 1%)
+/- 1% increase in US dollar interest rates (2022: 1%)
2023
Change in
income
2022
Change in
income
12
(9)
13
(9)
(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
£4,507 million at 30 September 2023 (2022: £5,151 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 2023 the level of trade receivables that were sold to a
financial institution under a non-recourse factoring arrangement, and subsequently derecognised totalled £570 million (2022: £570 million).
The total value of trade receivables reclassified as fair value was £22 million at 30 September 2023 (2022: £50 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 Operations Policy. 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. During the year the Group terminated one collateralised trade held under an ISDA Credit Support Annex
and as at 30 September 2023 had placed collateral of £nil (2022: £12 million) with a third party in order to manage their counterparty risk on
the Group under derivative financial instruments.
212
Imperial Brands | Annual Report and Accounts 2023
The table below summarises the Group’s largest exposures to financial counterparties as at 30 September 2023. 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
2023
2022
Maximum
exposure to
credit risk
£ million
Maximum
exposure to
credit risk
£ million
311
104
84
83
80
136
135
128
127
114
These exposures are held with counterparties with investment grade credit ratings or in money market funds with a AAA rating.
(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 money market funds and uses foreign exchange contracts to manage short term
liquidity requirements in line with short term cash flow forecasts. As at 30 September 2023, the Group held liquid assets of £1,345 million
(2022: £1,850 million).
The table below summarises the Group’s non derivative financial liabilities by maturity based on their contractual cash flows as at
30 September 2023. 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
2023
51
9,330
1,507
349
11,237
51
10,663
1,507
406
12,627
49
1,767
1,507
82
2
1,951
–
70
–
3,651
–
114
3,405
2,023
3,765
–
3,294
–
140
3,434
2022
Balance sheet
amount
Contractual
cash flows
total
<1 year
Between 1 and
2 years
Between 2 and
5 years
> 5 years
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
5,794
–
2,551
–
85
2,636
www.imperialbrandsplc.com
213
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
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 ratings 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
share buybacks and in on-going discussions with the relevant rating agencies.
As at 30 September 2023 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/F2/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
2023
8,026
6,021
14,047
2022
8,054
6,860
14,914
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 and foreign exchange 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 and losses 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 2023.
The following table sets out the maturity profile of the hedging instruments used in the Group’s net investment hedging strategies:
Total
notional
balance
(3,897)
(5,986)
(541)
<1 year
–
(1,447)
(541)
Maturity
Between 1 and
2 years
Between 2 and
5 years
(433)
(1,214)
–
(2,645)
(1,971)
–
(4,616)
(10,424)
(1,988)
(1,647)
Total
notional
balance
(5,378)
(3,623)
(273)
(9,274)
Maturity
Between 1 and
2 years
Between 2 and
5 years
(906)
(1,475)
–
(2,381)
(3,490)
(1,596)
–
(5,086)
<1 year
(982)
–
(273)
(1,255)
2023
> 5 years
(819)
(1,354)
–
(2,173)
2022
> 5 years
–
(552)
–
(552)
£ million
Bonds
Cross-currency swaps
Foreign exchange swaps
£ million
Bonds
Cross-currency swaps
Foreign exchange swaps
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Imperial Brands | Annual Report and Accounts 2023
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
Foreign exchange swaps
Hedged item:
Investment in a foreign operation
Carrying amount
Notional
balance
3,897
5,986
541
Assets
Liabilities
Balance sheet line item
–
–
1
3,929 Borrowings
249 Derivative financial instruments
– Derivative financial instruments
n/a
10,424
–
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
–
Reconciliation of changes in the value of net investment hedges:
2023
Changes in fair
value used for
calculating
hedge in-
effectiveness
338
75
14
427
2022
Changes in fair
value used for
calculating
hedge in-
effectiveness
(532)
(117)
–
(649)
2023
£ million
Derivatives in net investment hedges of foreign operations
Bonds in net investment hedges of foreign operations
Total
£ million
Derivatives in net investment hedges of foreign operations
Bonds in net investment hedges of foreign operations
Total
At the
beginning of
the year
Income
statement
Other
comprehensive
income
Designations/
(de-designations)
At the end
of the year
(338)
(5,414)
(5,752)
1
(3)
(2)
89
338
427
–
1,150
1,150
(248)
(3,929)
(4,177)
2022
At the
beginning of
the year
Income
statement
Other
comprehensive
income
Designations/
(de-designations)
At the end
of the year
(214)
(5,286)
(5,500)
(7)
(3)
(10)
(117)
(532)
(649)
–
407
407
(338)
(5,414)
(5,752)
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 €3,714 million (£3,217 million equivalent) (2022: €674 million
(£595 million equivalent)) were treated as part of the Group’s net investment in foreign operations at the balance sheet date.
www.imperialbrandsplc.com
215
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Fair value estimation and hierarchy
All financial assets and liabilities are carried on the balance sheet at amortised cost, other than derivative financial instruments 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 £2 million (2022: £3 million) and would have been a £5 million (2022: £8 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, 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
$0.81 per share. Following a two year extension to the repayment date which was agreed in July 2023, repayment of the debenture is now
repayable on 25 September 2026. The debenture is valued as a loan receivable measured on the basis of discounting future cash flows at a
rate of 14% (2022: 14%) plus the application of an expected credit loss provision. At 30 September 2023 the loan was held at a fair value of £nil
(30 September 2022: £17 million) following an increase in the expected credit loss provision to £70 million (30 September 2022: £53 million).
The expected credit loss provision increase reflects changes in the counterparty credit risk.
Netting arrangements of financial instruments
The following tables set out the Group’s financial assets and financial liabilities that are subject to netting and set-off arrangements.
Financial assets and liabilities that are subject to set-off arrangements and disclosed on a net basis in the Group’s balance sheet primarily
relate to collateral in respect of one derivative financial instrument under an ISDA Credit Support Annex.
£ million
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
£ million
Assets
Derivative financial instruments
Liabilities
Derivative financial instruments
Gross
financial
assets/
(liabilities)
Gross
collateral
assets/
(liabilities)
set-off
Net financial
assets/
(liabilities) per
balance sheet
Related
amounts not
set-off in the
balance sheet
2023
Net
950
(1,003)
–
–
950
(817)
133
(1,003)
817
(186)
Gross
financial
assets/
(liabilities)
Gross
collateral
assets/
(liabilities)
set-off
Net financial
assets/
(liabilities) per
balance sheet
Related
amounts not
set-off in the
balance sheet
1,051
(12)
1,039
(948)
2022
Net
91
(1,138)
12
(1,126)
948
(178)
216
Imperial Brands | Annual Report and Accounts 2023
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 assets/(liabilities)
2023
Fair value
through
income
statement
Fair value
through other
comprehensive
income
Assets and
liabilities at
amortised
cost
Total
Current
Non-Current
–
–
949
949
–
–
(754)
–
(754)
195
–
–
1
1
–
–
(249)
–
(249)
(248)
2,323
1,345
–
3,668
(9,381)
(8,705)
–
(349)
2,323
1,345
950
4,618
(9,381)
(8,705)
(1,003)
(349)
2,297
1,345
126
3,768
(1,499)
(8,705)
(174)
(81)
(18,435)
(19,438)
(10,459)
26
–
824
850
(7,882)
–
(829)
(268)
(8,979)
14,767
14,820
(6,691)
8,129
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)
Total
2,423
1,850
1,039
5,312
(10,007)
(8,710)
(1,126)
(248)
(20,091)
(14,779)
2022
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)
Derivatives classified as fair value through other comprehensive income relate to cross currency swaps and foreign exchange swaps
designated as hedges of foreign currency denominated net investments. The Group only designates the undiscounted foreign exchange
spot element of these derivative instruments and the changes in fair value related to this element are posted to other comprehensive
income. Changes in the fair value of these derivative instruments 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 2023 of those bonds included in the above table is £3,929 million (2022: £5,414 million). All of the Group’s net investment
hedges remain effective.
www.imperialbrandsplc.com
217
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
21. DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s derivative financial instruments held at fair value, are as follows.
£ million
Assets
Liabilities Net Fair Value
Assets
Liabilities
Net Fair Value
2023
2022
Current derivative financial instruments:
Interest rate swaps
Foreign exchange contracts
Cross-currency swaps
Total current derivatives
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
Total carrying value of derivative financial instruments
30
12
84
126
126
745
79
824
–
824
950
775
12
163
–
950
(66)
(5)
(103)
(174)
(174)
(652)
(177)
(829)
–
(829)
(36)
7
(19)
(48)
(48)
93
(98)
(5)
–
(5)
6
31
17
54
54
680
305
985
–
985
(1,003)
(53)
1,039
(718)
(5)
(280)
–
(1,003)
57
7
(117)
–
(53)
686
31
322
–
1,039
(36)
(13)
(5)
(54)
(54)
(746)
(338)
(1,084)
12
(1,072)
(1,126)
(782)
(13)
(343)
12
(1,126)
(30)
18
12
–
–
(66)
(33)
(99)
12
(87)
(87)
(96)
18
(21)
12
(87)
1. Collateral deposited against derivative financial liabilities under the terms and conditions of an ISDA Credit Support Annex.
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
reputable 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 £2 million
(2022: £3 million) and would have been a £5 million (2022: £8 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 2023. As at 30 September 2022 collateral transferred to counterparties in respect of derivative financial
liabilities was classified consistently with the related underlying derivative. No collateralised trades are outstanding as at
30 September 2023.
The table below summarises the Group’s derivative financial instruments by maturity based on their remaining contractual cash flows as at
30 September 2023. 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
Balance sheet
amount
57
(110)
–
–
(53)
Contractual
cash flows
total
200
–
17,822
(17,675)
347
<1 year
(3)
–
5,429
(5,374)
52
Between 1 and
2 years
Between 2 and
5 years
34
–
4,010
(3,941)
103
143
–
5,283
(5,247)
179
2023
>5 years
26
–
3,100
(3,113)
13
218
Imperial Brands | Annual Report and Accounts 2023
£ million
Net settled derivatives
Gross settled derivatives
• receipts
• payments
Balance sheet
amount
Contractual
cash flows
total
(84)
(3)
–
–
(87)
(321)
–
9,890
(9,635)
(66)
<1 year
(71)
–
1,934
(1,851)
12
Between 1 and
2 years
Between 2 and
5 years
(64)
–
3,293
(3,201)
28
(101)
–
4,059
(3,944)
14
2022
>5 years
(85)
–
604
(639)
(120)
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 IFRS 9, 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.
As a result of the discontinuation of GBP LIBOR in December 2021 and US$ LIBOR discontinuation in June 2023, the Group amended all
GBP LIBOR derivatives to reference the daily risk free rate of SONIA instead of GBP LIBOR and all US$ LIBOR derivatives were amended to
reference the daily risk free rate of SOFR instead of US$ LIBOR. There are no changes pending for EUR derivatives. These changes did not
impact the Group's commercial hedging strategy and they did not 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 2023, 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 was £8,111 million equivalent (2022: £9,578 million equivalent) with a fair
value of £714 million liability (2022: £755 million liability). The fixed interest rates vary from 1.3% to 7.9% (2022: 1.1% to 7.9%), and the floating
rates are based on EURIBOR, SONIA and SOFR.
As at 30 September 2023, 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 was £11,622 million equivalent (2022:
£11,548 million equivalent) with a fair value of £771 million asset (2022: £671 million asset). The fixed interest rates vary from 3.1% receivable
to 4.0% payable (2022: 0.5% payable to 4.0% payable), and the floating receivable rates reference EURIBOR and SOFR. This includes forward
starting interest rate swaps with a total notional amount of £4,055 million equivalent (2022: £3,353 million equivalent) with tenors between 1
and 10 years, starting between October 2023 and May 2032.
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 is recognised in other comprehensive income.
As at 30 September 2023, the notional amount of cross-currency swaps entered into to convert sterling debt into the desired currency
was £1,600 million (2022: £1,600 million) and the fair value of these swaps was £111 million net liability (2022: £232 million net liability);
the notional amount of cross-currency swaps entered into to convert US dollar debt into the desired currency was $5,250 million
(2022: $2,250 million) and the fair value of these swaps was £6 million net liability (2022: £211 million net asset).
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 2023, the notional amount of these contracts was £2,020 million equivalent (2022: £1,662 million equivalent) and the fair value
of these contracts was a net asset of £7 million (2022: £19 million net asset).
www.imperialbrandsplc.com
219
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Hedges of net investments in foreign operations
As at 30 September 2023, cross currency swaps with a notional amount of €6,910 million (2022: €4,103 million) were designated as hedges of
net investments in foreign operations. During the year, foreign exchange translation gains amounting to £75 million (2022: £105 million
losses) were recognised within exchange movements in other comprehensive income in respect of cross currency swaps designated as
hedges of a net investment in foreign operations. No hedging ineffectiveness occurred during the year (2022: £nil).
As at 30 September 2023, foreign exchange swaps with a notional amount of €624 million (2022: €309 million) were designated as hedges of
net investments in foreign operations. During the year, foreign exchange translation gains amounting to £14 million (2022: £12 million
losses) 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 (2022: £nil).
The movements in other comprehensive income due to net investment hedging in the period were as follows:
2023
338
89
427
2022
(532)
(117)
(649)
Consolidated
income
statement
2023
Consolidated
income
statement
2022
Consolidated
balance
sheet
2023
Consolidated
balance
sheet
2022
164
(9)
6
(3)
158
14
(4)
(17)
41
34
(716)
30
282
186
(895)
(90)
278
185
(218)
(522)
2023
653
(871)
(218)
2023
(522)
158
134
1
(15)
22
4
(218)
Gross
2022
278
25
71
374
2022
439
(961)
(522)
2022
(479)
34
(55)
2
–
(18)
(6)
(522)
Net
2022
75
25
20
120
Gross
2023
235
15
84
334
Net
2023
62
15
24
101
£ million
Foreign exchange gains/(losses) on borrowings
Foreign exchange gains/(losses) on derivative financial instruments
22. DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax relates to the following:
£ million
Temporary differences on depreciation and amortisation
Retirement benefits
Tax credits and losses
Accruals, provisions and other temporary differences
Deferred tax (expense)/benefit
Net deferred tax (liabilities)/assets
Reflected in the consolidated balance sheet as follows
£ million
Deferred tax assets
Deferred tax liabilities
Reconciliation of net deferred tax liabilities
£ million
At 1 October
Credited to the income statement
Credited/(charged) to other comprehensive income
Credited to equity
Acquisitions
Exchange movements
Other movements
As at 30 September
Unrecognised deferred tax assets
£ million
Tax losses
Tax credits
Other temporary differences
220
Imperial Brands | Annual Report and Accounts 2023
Analysis of unrecognised deferred tax assets by expiry date
£ million
Tax losses expiring:
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
2023
Net
2023
–
235
235
15
–
–
15
84
84
–
62
62
15
–
–
15
24
24
Gross
2022
20
258
278
22
1
2
25
71
71
Net
2022
4
71
75
22
1
2
25
20
20
In December 2021, the OECD issued model rules for a new global minimum tax framework (Pillar Two), applicable for multinational
enterprise groups with global revenue over €750 million. The legislation implementing the rules in the UK was substantively enacted on
20 June 2023 and will apply to the Group from the financial year ending 30 September 2025 onwards. The Group has applied the mandatory
exception under IAS 12 in relation to the accounting for deferred tax assets and liabilities arising from the implementation of the Pillar
Two model rules. The Group is reviewing this legislation and monitoring the status of implementation of the model rules outside of the UK
to assess the potential impact.
Included within net deferred tax liabilities are deferred tax assets recognised of £257 million (2022: £257 million) for tax credits arising
in the Group's Spanish business. These tax credits have no time expiry. Utilisation of these tax credits is restricted to 50% of the Spanish
business's 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 £88 million (2022: £55 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 £40 million (2022: £20 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. Based on a range of forecast scenarios modelling sensitivities these deferred tax assets are expected to be recovered
over a period of 20-40 years corresponding to the life of the pension scheme.
Included within net deferred tax liabilities are deferred tax assets recognised for intangibles of £199 million (2022: £nil) arising in the Group's
Dutch business. These deferred tax assets are expected to be recovered 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. The period over
which these deferred tax assets are utilised is sensitive to forecasting assumptions about future growth rates and regulatory changes.
These deferred tax assets are expected to be recovered over a period of 16 years corresponding to the life of the intangibles.
We have reviewed the recoverability of deferred tax assets in overseas territories in light of forecast business performance. In 2023 we have
recognised deferred tax assets of £6 million that were previously unrecognised (2022: recognised deferred tax assets of £1 million that were
previously unrecognised) on the basis that it is more likely than not that these are recoverable (2022: recoverable).
A deferred tax liability of £40 million (2022: £43 million) is recognised in respect of taxation expected to arise on the future distribution of
unremitted earnings totalling £2 billion (2022: £2 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 £1,215 million (2022: £1,244 million) for which a deferred tax liability
of £38 million (2022: £37 million) has not been recognised. 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.
23. RETIREMENT BENEFIT SCHEMES
The Group operates a number of retirement benefit schemes for its employees, including both defined benefit and defined contribution
schemes. The Group’s three principal schemes are defined benefit schemes and are operated by Imperial Tobacco Limited (ITL) in the UK,
Reemtsma Cigarettenfabriken GmbH in Germany and ITG Brands in the USA; these schemes represent 64%, 15% and 9% of the Group’s total
defined benefit obligations (2022: 62%, 15% and 10%) and 22%, 32% and 8% of the current service cost (2022: 31%, 32% and 10%) respectively.
www.imperialbrandsplc.com
221
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Imperial tobacco pension fund
The UK scheme, the Imperial Tobacco Pension Fund ("ITPF"), was closed to future accrual on 30 September 2023. All active members are
now enrolled into the defined contribution scheme as of 1 October 2023 alongside all new employees that have joined since 1 October 2010.
Former active members of the defined benefit section of the ITPF are now deferred members who are able to draw their pension in the
same way as an existing deferred member and are in receipt of annual inflationary increases as existing deferred members. The closure to
future accrual resulted in a curtailment credit of £8.3 million in the 2023 income statement. As part of the agreement with active members
to close to future accrual, the company agreed a compensation package. The main component included a number of payments to members
between October 2023 and October 2025, for which the company has accrued £14.3 million in the 2023 income statement. The ITPF defined
benefit obligation comprises 80% in respect of pensioners and dependants, 20% in respect of deferred members and has a weighted average
maturity of 12 years.
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 assets are held by the trust.
The main risk for the company 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 liquidity to
manage the Liability Driven Investment (LDI) portfolio, credit exposure within investment funds and exposure to the property market.
The ITPF holds a buy-in policy with Standard Life as an asset; this covers around 61% of the pensioner defined benefit obligation. The buy-in
eliminates investment return, longevity, inflation and funding risks in respect of those benefits covered. The ITPF also has access to a loan
facility to provide short-term liquidity to support the LDI portfolio in the event of significant changes in government bond yields.
The main uncertainties affecting the level of benefits payable under the ITPF are future inflation levels, as these impact increases to
pensions, 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 company,
the level of risk in the ITPF, the expected return on assets, the results of the funding assessment on the Technical Provisions basis and the
expected cost of securing benefits if the ITPF were to be wound up.
The latest valuation agreed at 31 March 2022 reported a 118% funding ratio on the Technical Provisions basis. The company and Trustee
agreed to maintain the existing dynamic contribution schedule, which means ITL’s annual contributions will reduce or increase depending
on the ITPF valuation going forward. The level of ITL's annual contribution to the ITPF was nil for the year to 31 March 2023. ITL expect to
pay £8.4 million in contributions to an escrow account for the year to 31 March 2024. 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, a reduced
surety guarantee with a total value of £120 million was agreed (previously £225 million) and a parental guarantee from Imperial Brands PLC
remains in place. In certain circumstances, surplus funds in the defined benefit section of the ITPF may be used to finance defined
contribution section contributions on ITL's behalf with company contributions reduced accordingly.
The IAS 19 measurement of the defined benefit obligation is sensitive to the assumptions made about future inflation as well as the
assumptions made about life expectancy. It is also sensitive to the discount rate, which depends on market yields on sterling denominated
AA corporate bonds. The main differences between the Technical Provisions and IAS 19 assumptions are a more prudent longevity
assumption for Technical Provisions 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 defined benefit obligation may be relatively volatile.
The ITPF has a pension surplus on the IAS 19 measure and, 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 company an ability to receive a refund of surplus assets assuming the full
settlement of liabilities in the event of a 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 the ITPF
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. The RCPP defined benefit obligation comprises 53% in respect of pensioners and dependants,
24% in respect of deferred members and 23% in respect of active members and has a weighted average maturity of 16 years. The RCPP was
closed to new members from 1 January 2020, but existing active members at that date continue to accrue benefits.
The RCPP is unfunded and the company pays benefits as they arise. The RCPP 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 £24 million (2022: £23 million) in
respect of benefits.
The main uncertainties affecting the level of benefits payable under the RCPP are future inflation levels, as these impact increases to
pensions, and the actual longevity of the membership.
The IAS 19 measurement of the defined benefit obligation 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.
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Imperial Brands | Annual Report and Accounts 2023
ITG scheme
The main US pension scheme, held by ITG Brands is the ITG Scheme, is a defined benefit pension plan that is closed to new entrants.
The ITG Scheme defined benefit obligation comprises 83% in respect of pensioners and dependants, 2% in respect of deferred members and
15% in respect of active members and has a weighted average maturity of nine years.
The ITG Scheme is funded and benefits are paid from the ITG Scheme assets. Contributions to the plan are determined based on US
regulatory requirements. ITG Brands made no contributions this year and 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 union negotiations.
The IAS 19 measurement of the defined benefit obligation 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. Some of the plans are funded, with assets backing the obligations held in separate legal vehicles such as trusts, whilst 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 2023 the Group included no new schemes in the IAS 19 position that had not been previously reported in
the IAS 19 position or elsewhere in the financial statements.
The company agreed with the Trustees in Ireland to merge both defined benefit plans into a single trust and with the trustees in New
Zealand to fully close and wind-up the defined benefit plan.
The results of the most recent available actuarial valuations for the various plans have been updated to 30 September 2023 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 income/(costs)
Cost of termination benefits
Net interest (expense)/income on net defined benefit
(liability)/asset
Administration costs paid from plan assets
Cost recognised in the income statement
Remeasurements:
Actuarial loss due to liability experience
Actuarial gain 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
Immaterial benefit plans categorised as an IAS 19 obligation
Exchange movements
Total other
At 30 September
DBO
(3,609)
Assets
3,541
(25)
2
9
(5)
(165)
–
(132)
234
–
–
(6)
–
–
178
(5)
–
–
–
2023
Total
(68)
(25)
(4)
9
(5)
13
(5)
(17)
(132)
234
–
DBO
(5,319)
Assets
5,166
(49)
136
(2)
(10)
(99)
–
(94)
1,659
10
–
(139)
–
–
107
(5)
–
–
–
2022
Total
(153)
(49)
(3)
(2)
(10)
8
(5)
(61)
(94)
1,659
10
–
(478)
(478)
–
(1,499)
(1,499)
–
–
265
–
(8)
64
59
–
(265)
–
–
(47)
(376)
59
–
–
–
59
(8)
17
9
–
(1)
311
–
–
(151)
120
1
(311)
–
–
101
(3,370)
2,977
(393)
(3,609)
3,541
76
120
–
–
–
120
–
(50)
(50)
(68)
www.imperialbrandsplc.com
223
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE 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
RCPP
ITG Scheme
2023
2,142
(2,481)
(339)
6
–
5.6
n/a
3.4
3.4
Male
21.2
21.9
Male
21.1
21.8
496
–
496
8
23
4.2
3.5
2.4
2.4
ITPF
Female
22.5
23.8
ITPF
Female
22.4
23.7
311
(337)
(26)
2
–
5.7
n/a
n/a
2.3
Male
20.8
22.8
Male
20.5
22.6
ITPF
2,229
(2,958)
(729)
15
50
5.3
3.7
3.7
3.7
RCPP
Female
24.2
25.8
RCPP
Female
23.9
25.6
2023
2022
30
16
46
69
16
85
2023
2022
15
20
11
46
2023
414
(807)
(393)
25
39
21
85
2022
826
(894)
(68)
2022
RCPP
ITG Scheme
538
–
538
15
–
3.7
3.7
2.5
2.5
365
(405)
(40)
3
–
5.4
n/a
n/a
2.3
2023
ITG Scheme
Male
Female
19.7
20.8
21.7
22.8
2022
ITG Scheme
Male
Female
19.7
20.9
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 (2022: 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 (2022: 2021) CMI improvement rates with a long-term trend of
1.25% per annum.
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Imperial Brands | Annual Report and Accounts 2023
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
5.6
(4.2)
RCPP
8.1
(5.7)
3.5
4.2
2023
ITG Scheme
4.5
n/a
4.4
ITPF
6.1
(4.9)
3.7
2022
RCPP
ITG Scheme
9.5
(6.3)
4.7
4.9
n/a
4.6
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 £12 million (2022: £22 million).
An approximate split of the major categories of ITPF scheme assets is as follows:
£ million unless otherwise indicated
Bonds – index linked government / LDI funds
Bonds – corporate and other
Property including ground leases
Secured finance and private debt funds
Insurance contract (buy-in policy)
Other – including cash and short-term loan drawings
2023
Percentage
of ITPF
scheme
assets
14.1
–
19.7
25.0
42.1
(0.9)
Fair value
351
–
488
620
1,044
(22)
2,481
100.0
2022
Percentage
of ITPF
scheme
assets
14.0
1.0
20.0
28.0
36.0
1.0
100.0
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.
The majority of the assets are non-quoted. The ITPF holds £nil of self-invested assets (2022: £nil).
An approximate split of the major categories of ITG Scheme assets is as follows:
£ million unless otherwise indicated
Bonds – government, corporate and other
Other – including derivatives, commodities and cash
The majority of the assets are non-quoted.
2023
Percentage
of ITG
Scheme
assets
60.2
39.8
100.0
Fair value
203
134
337
2022
Percentage
of ITG
Scheme
assets
31.9
68.1
100.0
Fair value
129
276
405
www.imperialbrandsplc.com
225
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
24. PROVISIONS
£ million
At 1 October 2022
Additional provisions charged to the consolidated income statement
Amounts used
Unused amounts reversed
Exchange movements
At 30 September 2023
Restructuring
Employment
related
claims
286
–
(100)
–
(6)
180
59
106
(9)
(12)
–
144
Analysed as:
£ million
Current
Non-current
2023
Total
426
146
(127)
(20)
(11)
414
2022
203
223
426
Other
81
40
(18)
(8)
(5)
90
2023
148
266
414
Restructuring provisions relate mainly to our 2021 Strategic review programme and other programmes (see note 5).
The restructuring provision is split between 2021 Strategic review programme of £88 million (2022: £155 million) and other programmes of
£92 million (2022: £131 million).
Employment related claims provisions include £31 million (2022: £37 million) relating to local employment requirements including holiday
pay and £28 million (2022: £21 million) of distribution requirements relating to employment and duty. An amount of £85 million (2022: £nil)
has been provided for employment related claims arising from a number of legacy legal disputes. Although the company continues to
appeal a number of these claims, in the current year the Group has resolved to engage with certain counterparties where a valid claim has
been established. There are uncertainties relating to the estimation and quantification of this provision and amounts may change in the
future, but any provisions are expected to be utilised within the next 2 years.
Other provisions include £38 million (2022: £46 million) relating to various local tax or duty requirements, £9 million (2022: £21 million) of
market exit provisions and £30 million for factory closure provisions (2022: £nil).
The provisions are spread throughout the Group and payment will be dependent on local statutory requirements.
Most of the other provisions will also 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.
25. SHARE CAPITAL
Authorised, issued and fully paid:
1 October
Shares cancelled
30 September
2023
Ordinary shares
10p each
2022
Ordinary shares
10p each
Number
£ million
Number
£ million
1,020,697,237
(52,107,043)
968,590,194
103
(6)
97
1,020,697,237
–
1,020,697,237
103
–
103
During the period a share buy back scheme was initiated and 52,107,043 10p shares were repurchased for a cost of £1,000 million.
Upon completion of the purchase, these shares were cancelled and transferred to the capital redemption reserve. The stamp duty costs
were £5 million and the fees charged for the share repurchase were £1 million.
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.
26. SHARE SCHEMES
The Group operates four types of share-based incentive programmes, designed to incentivise staff and to encourage them to build a stake in
the Group.
Share matching scheme
Awards are made to eligible employees who are invited to invest a proportion of their eligible bonus in shares for a period of three years,
after which matching shares are awarded on a 1:1 ratio, plus dividend equivalents.
Long term incentive plan (LTIP)
Awards of shares under the LTIP are made to the Executive Directors and senior executives at the discretion of the Remuneration
Committee. They vest three years after grant and are subject to performance criteria. Dividend equivalents accrue on vested shares.
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Imperial Brands | Annual Report and Accounts 2023
Sharesave plan
Options are granted to eligible employees who participate in a designated savings scheme for a three year period. Historically they were
also granted for a five year period.
Discretionary share awards plan (DSAP)
Under the DSAP, one-off conditional awards are made to individuals to recognise exceptional contributions within the business. Awards,
which are not subject to performance conditions and under which vested shares do not attract dividend roll-up, will normally vest on the
third anniversary of the date of grant subject to the participant’s continued employment. The limit of an award under the DSAP is capped at
25% 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
2023
2022
2
27
1
1
31
2
25
1
1
29
The awards are predominantly equity settled. The balance sheet liability in respect of cash settled schemes at 30 September 2023 was £3.4
million (2022: £3.6 million).
Reconciliation of movements in awards/options
Thousands of shares unless otherwise indicated
Outstanding at 1 October 2022
Granted
Lapsed/cancelled
Exercised
Outstanding at 30 September 2023
Exercisable at 30 September 2023
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
Share
matching
scheme
awards
486
161
(18)
(176)
453
–
Share
matching
awards
482
192
(23)
(165)
486
–
LTIP
awards
Sharesave
options
DSAP
awards
8,120
3,853
(2,402)
(1,069)
8,502
–
1,934
862
(90)
(1,020)
1,686
264
120
67
(11)
(3)
173
–
LTIP
awards
7,412
2,658
(873)
(1,077)
8,120
–
Sharesave
options
DSAP
awards
2,053
274
(321)
(72)
1,934
151
60
106
(5)
(41)
120
–
2023
Sharesave
weighted
average
exercise
price £
13.21
13.24
12.63
12.38
13.72
12.37
2022
Sharesave
weighted
average
exercise
price £
13.89
14.56
18.11
16.14
13.21
17.45
The weighted average Imperial Brands PLC share price at the date of exercise of awards and options was £18.28 (2022: £16.83). The weighted
average fair value of Sharesave options granted during the year was £3.26 (2022: £3.30).
www.imperialbrandsplc.com
227
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
Summary of awards/options outstanding at 30 September 2023
Thousands of shares unless otherwise indicated
Share Matching Scheme
2021
2022
2023
Total awards outstanding
Long Term Incentive Plan
2021
2022
2023
Total awards outstanding
Sharesave Plan
2020
2021
2022
2023
Total options outstanding
Discretionary Share Awards Plan
2021
2022
2023
Total options outstanding
Number of
awards/options
outstanding
Vesting
period
remaining
in months
Exercise price
of options
outstanding £
181
139
133
453
2,369
2,896
3,237
8,502
264
315
254
855
1,688
5
101
67
173
5
17
29
5
17
29
–
10
22
34
10
15
30
n/a
n/a
n/a
n/a
n/a
n/a
17.45
13.09
14.56
14.29
n/a
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 options. Participants in the LTIP generally have seven years from the end of the vesting period to
exercise their options. 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 Share Awards Plan and one Long Term Incentive Plan with no market
conditions. A summary of the assumptions used in the Black-Scholes model for 2023 and 2022 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 £
Share
Matching
Scheme
4.0
33.1
3.0
8.2
16.04
20.53
n/a
Sharesave
4.4
27.7
3.0
8.2
3.30
17.88
14.29
2023
DSAP
4.1
33.2
3.0
8.2
14.72
18.84
n/a
228
Imperial Brands | Annual Report and Accounts 2023
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
Scheme
Sharesave
1.2–2.2
2.0
35.3–35.5
35.5
3.0
3.0
9.2
9.2
10.35
3.21–3.31
13.65 17.83–18.39
14.56
n/a
2022
DSAP
2.0–2.2
35.5
3.0
9.2
10.35–10.67
13.65–14.08
n/a
Market conditions were incorporated into the Monte Carlo method used in determining the fair value of LTIP awards at grant date.
Assumptions in 2023 and 2022 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
2023
23.3
–
15.9–63.5
21.4
2022
29.6
–
17.0–83.7
24.4
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 2023. 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
2023
3.7
–
(2.1)
1.6
2022
0.9
4.0
(1.2)
3.7
The shares in the Trusts are accounted for on a first in first out basis and comprise nil shares acquired in the open market (2022: nil) and
1.6 million (2022: 3.7 million) treasury shares gifted to the Trusts by the Group. No (2022: 4 million) shares were gifted to the Trusts in the
financial year 2023.
27. TREASURY SHARES
Subject to authorisation by special resolution, the Group may purchase its own shares in accordance with the Companies Act. 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. Shares
purchased under the share buyback programme initiated on 7 October 2022 will be cancelled immediately on completion of the purchase.
There were no movements in treasury shares during the year to 30 September 2023 (2022: reduced by 4.0 million shares).
£ million unless otherwise indicated
At 1 October
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
28. COMMITMENTS
Capital commitments
£ million
Contracted but not provided for:
Property, plant and equipment and software
Millions of
shares
(number)
70.3
–
70.3
7.3
2023
Value
£
2,183
–
2,183
n/a
Millions of
shares
(number)
74.3
(4.0)
70.3
6.9
2022
Value
£
2,183
–
2,183
n/a
2023
2022
97
95
www.imperialbrandsplc.com
229
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
29. CONTINGENT LIABILITIES
The following summary includes updates to matters that have developed since the 2022 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.
Delaware
ITGB is involved in litigation with Reynolds in the Delaware court that has jurisdiction over disputes under the Asset Purchase Agreement
(APA) for the Acquired Brands. The current case in progress involves Reynolds’ claim to indemnity for Florida settlement payments. The
issue in this case is whether ITGB has satisfied its obligations to use “reasonable best efforts” to join the settlement with Florida under the
APA and whether regardless of that “reasonable best efforts” requirement whether ITGB is required to indemnify Reynolds for amounts the
Florida Court may require Reynolds to pay.
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. It further held that as a matter of law the contract provisions were unambiguous
and no evidence was required, and 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 submitted an
agreed schedule to the court to address the issue of damages.
On 23 February 2023 the initial motions on the amount of indemnity due were argued and supplemental briefing requested by the court was
completed on 9 June 2023, with the Court having 90 days to issue its decision. On 2 October 2023 the Court issued an order on damages. The
court rejected ITGB’s claim that no damages could be assessed but declined to decide the amount of damages and other issues until after a
trial. The trial is expected to take place in the first quarter of 2024.
Reynolds’ claim for indemnification in Delaware is limited at most 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. ITGB 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.
Amounts at issue range to US$ 250 million through 2022, plus future payments of US$ 19 million to US$ 32 million annually going forward,
alleged accrued interest of up to US$ 23 million and attorney’s fees of up to US$ 7 million through 2022. Based on the current facts and
circumstances it is currently unclear as to what level of damages will become payable in this case. Due to the inability to determine a
reliable estimate of the amount involved, no provision has been recognised pending the outcome of the trial at which the level of damages
will be decided.
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 circa 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.
Product liability investigations
The Group is currently involved in a number of legal cases in which claimants are seeking damages for alleged smoking and health related
effects. In the opinion of the Group’s lawyers, the Group has meritorious defences to these actions, all of which are being vigorously
contested. Although it is not possible to predict the outcome of the pending litigation, the Directors believe that the pending actions will not
have a material adverse effect upon the results of the operations, cash flow or financial condition of the Group. This assessment of the
probability of economic outflows at the year-end is a judgement which has been taken by management. Consequently, the Group has not
provided for any amounts in respect of these cases in the financial statements. There have been no material updates to matters in any
product liability investigations in the period since the 2023 Annual Report and Accounts.
230
Imperial Brands | Annual Report and Accounts 2023
Competition authority investigations
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. The CNMC considers that this conduct had the effect of restricting competition in the
Spanish tobacco market. Both companies believe that the arguments made by the 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.
Both in the Altadis and Logista appeals, the parties have concluded their submissions to the Court and a judgment is awaited. The judgment
of the Court of First Instance is currently pending, and it is possible it might be served in 2024.
In parallel to the main proceedings against the CNMC decision, on 28 February 2023, the Supreme Court annulled the unannounced
inspection carried out by the CNMC officials on Altadis' premises in February 2017 for lack of consent by Altadis. Therefore, all the
documents and evidence seized by the CNMC during Altadis' inspection have to be returned to the company and should be struck out
from the CNMC decision. It remains to be seen what the impact of this Court decision will be on the main proceedings.
Other litigation
US Helms-Burton litigation
Imperial Brands Plc 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.
On 31 March 2023 the district judge issued an order addressing the magistrate’s recommended ruling and adopting the recommended
ruling in part. In respect of Habanos, the motion to dismiss was granted, without objection from the claimants, on the basis that the federal
court in Florida was an “improper venue” (wrong court). Habanos was therefore dismissed from the case, without prejudice to the claimants’
right to sue it in a proper venue. As to Imperial and the other defendants, the district judge remanded the motion to dismiss back to the
same magistrate for a further review and analysis and a report and recommendation on whether the ruling regarding Habanos should
result in dismissal of all defendants. The magistrate is also permitted to address “other issues if warranted”, including Imperial’s other
arguments for dismissal.
The hearing with the magistrate on further arguments on the motion to dismiss took place on 28 September 2023. The recommended
ruling from the magistrate is now expected by the end of November 2023. The magistrate’s recommendation will not be binding on the
parties, who will be permitted to file objections to the recommendation with the district judge. No provision has been made for potential
liabilities related to this claim.
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 was
postponed pending other case management actions and will be determined at a subsequent case management hearing 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.
www.imperialbrandsplc.com
231
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
30. NET DEBT
The movements in cash and cash equivalents, borrowings, and derivative financial instruments in the year were as follows:
£ million
At 1 October 2022
Reallocation of current borrowings from
non-current borrowings
Cash flow
Change in accrued interest
Change in fair values
New leases, terminations and modifications
Acquisitions
Exchange movements
At 30 September 2023
£ million
At 1 October 2021
Reallocation of current borrowings from
non-current borrowings
Cash flow
Change in accrued interest
Change in fair values
New leases, terminations and modifications
Exchange movements
At 30 September 2022
Current
borrowings
Lease
liabilities
Non-current
borrowings
Derivative
financial
instruments
Liabilities
from financing
activities
Cash
and cash
equivalents
Total
(1,011)
(248)
(8,996)
(87)
(10,342)
1,850
(8,492)
(1,536)
891
2
–
–
–
155
(1,499)
–
92
(10)
–
(106)
(84)
7
1,536
(835)
(24)
–
–
–
437
(349)
(7,882)
–
64
1
139
–
–
(170)
(53)
–
212
(31)
139
(106)
(84)
429
–
(349)
–
–
–
–
(156)
–
(137)
(31)
139
(106)
(84)
273
(9,783)
1,345
(8,438)
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)
1,392
(829)
(16)
–
–
(828)
(248)
(8,996)
–
(94)
(7)
270
–
331
(87)
–
740
29
270
(54)
(667)
–
515
–
–
–
48
(10,342)
1,850
(8,492)
Total
(9,373)
–
1,255
29
270
(54)
(619)
Average reported net debt during the year was £10,072 million (2022: £9,822 million).
Analysis by denomination currency
GBP
177
(1,631)
(1,454)
1,576
122
(43)
EUR
405
(3,417)
(3,012)
(6,016)
(9,028)
(247)
USD
324
(4,319)
(3,995)
4,323
328
(26)
GBP
257
(1,631)
(1,374)
1,561
187
(45)
EUR
216
(3,261)
(3,045)
(3,637)
(6,682)
(148)
USD
971
(5,096)
(4,125)
2,056
(2,069)
(20)
Other
439
(14)
425
–
425
(33)
Other
406
(19)
387
–
387
(35)
2023
Total
1,345
(9,381)
(8,036)
(117)
(8,153)
(349)
64
(8,438)
2022
Total
1,850
(10,007)
(8,157)
(20)
(8,177)
(248)
(67)
(8,492)
£ 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
232
Imperial Brands | Annual Report and Accounts 2023
31. RECONCILIATION OF CASH FLOW TO MOVEMENT IN NET DEBT
£ million
(Decrease)/increase 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
2023
(349)
64
92
(1,462)
1,518
(137)
108
(190)
273
54
(8,492)
(8,438)
2022
515
(94)
68
(1,710)
2,476
1,255
299
(54)
(619)
881
(9,373)
(8,492)
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.
32. NON-CONTROLLING INTERESTS
Material non-controlling interests
Detailed below is the summarised financial information of Logista, being a subsidiary where the non-controlling interest of 49.99% is
considered material to the Group.
Summarised balance sheet
at 30 September
Euro million
Current assets
Current liabilities
Current net liabilities
Non-current assets
Non-current liabilities
Non-current net assets
Net assets
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 (decrease)/increase in cash and cash equivalents
2023
6,246
(6,983)
(737)
1,816
(482)
1,334
597
2023
12,428
274
3
277
2022
6,094
(6,763)
(669)
1,599
(365)
1,234
565
2022
11,464
199
7
206
2023
308
(83)
(250)
(25)
2022
(restated)
642
(389)
(206)
47
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233
CONSOLIDATED FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS continued
33. POST BALANCE SHEET EVENTS
Share Buybacks
On 5 October 2023 Imperial Brands PLC ("the Company") announced the start of an ongoing share buyback programme, to initially
repurchase up to £1.1 billion of shares in the period from 6 October 2023 to 30 September 2024.
34. RELATED UNDERTAKINGS
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, and joint ventures, the
principal activity, the full registered address and the effective percentage of equity owned by Imperial Brands PLC, as at 30 September 2023,
are provided in the entity financial statements of Imperial Brands PLC. There are no material related parties other than Group companies.
234
Imperial Brands | Annual Report and Accounts 2023
SUPPLEMENTARY INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
Use of alternative performance measures
Management believes that non-GAAP or alternative performance measures provide an important comparison of business performance
and reflect the way in which the business is controlled. The alternative 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, alternative performance measures exclude, where applicable, amortisation and impairment of acquired intangibles, profit/loss
on disposal of subsidiaries, Russia, Ukraine and associated markets, restructuring costs, business acquisition and disposal costs, fair value
adjustment and impairment of other financial assets, charges related to legal provisions, structural changes to defined benefit pension
schemes, 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 alternative 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 alternative 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
Russia, Ukraine and associated markets
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment and impairment of other financial assets
Loss on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Charges related to legal provisions
Structural changes to defined benefit pension schemes
Total adjusting administrative and other expenses
Total non-adjusting administrative and other expenses
Administrative and other expenses
Notes
2023
5
(4)
(347)
–
(36)
(1)
–
–
(85)
(12)
(485)
(455)
(940)
2022
(399)
(349)
(197)
(37)
(29)
(5)
9
–
(4)
(1,011)
(323)
(1,334)
Russia, Ukraine and associated markets
In the current year the £4 million adjusted net charge relates to £18 million of costs relating to Ukraine partially offset by £14 million release
of other market exit provisions. The Ukraine costs relates to factory repairs and the redeployment of the production facility to service only
the domestic market. The release of the market exit provisions primarily relates to potential tax liabilities with insufficient certainty over
the quantum of future charges.
In the comparative period, 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.
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235
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 arising on intangibles which are either being amortised or are fully amortised is excluded on the basis
that amortisation of intangibles is not directly related to the operating performance of the business. 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 £392 million (2022: £394 million) of which £347 million (2022: £349 million) relates to
acquired intangibles and is adjusting and £45 million (2022: £45 million) relates to internally generated intangibles and is non adjusting. In
the year to 30 September 2023 adjusting items all relate to amortisation. £339 million (2022: £323 million) is attributable to Tobacco & NGP
and £8 million (2022: £26 million) is attributable to distribution.
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.
No new restructuring programmes were initiated in the current financial year and no charges arose relating to historic restructuring
programmes. As a consequence, no restructuring charge adjustments were made in the calculation of any alternative performance metrics
within the current financial year.
Fair value adjustment and impairment of other financial assets
As the movement in the fair value of loan receivables associated with the investment in Auxly Cannabis Group Inc. has the potential to be
significant and does not show a fair representation of the day-to-day operational performance of the asset, it is treated as an adjusting item.
The fair value adjustment also includes changes in the carrying value of certain financial assets held by ITG Brands.
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 of subsidiaries 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.
Charges related to legal provisions
The adjusting item relates to legal provisions that the Group has provided for (see note 24). These are potential liabilities arising from a
number of legacy legal disputes across the Group that have been in the courts for several years and which the Group have considered as
being unrelated to ongoing business performance and therefore adjusted. The final settlement and agreement of these cases still remain
uncertain but future outflows are still expected.
Structural changes to defined benefit pension schemes
These are non-recurring pension scheme restructuring costs. They comprise £8m of net costs related to the closure of the UK defined
benefit retirement scheme to future accrual and £4m settlement charge on the full closure of the New Zealand defined benefit scheme.
In 2022, there was a charge relating to the restructuring of the Irish defined benefit pension scheme of £4 million.
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Imperial Brands | Annual Report and Accounts 2023
Adjusting items recognised within share of profit/(loss) of investments accounted for using the equity method
£ million
Impairment of intangible assets held by Global Horizon joint venture
Other profits from investments accounted for using the equity method
Share of profits/(losses) of investments accounted for using the equity method
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
Tax on charges relating to legal provisions
Tax on structural changes to defined benefit pension schemes
Tax on fair value adjustment and impairment of other financial assets
Tax on interest settlements
Recognition of deferred tax assets
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
2023
–
7
7
2023
(4)
89
–
–
–
26
3
5
2
212
–
(207)
–
–
(781)
(665)
2022
(24)
9
(15)
2022
15
(183)
–
49
8
–
–
–
–
–
(101)
63
26
(8)
(755)
(886)
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.
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.
Recognition of deferred tax assets
Significant one-off tax charges or credits arising from prior period items, and arising due to a change of facts and circumstances in the
current year, are excluded from the adjusted tax charge. The recognition of deferred tax assets relating to the uplifted value of intangibles in
the Group’s Dutch business are excluded from the adjusted tax charge on this basis.
Provision for state aid tax 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.
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237
SUPPLEMENTARY INFORMATION continued
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.
DEFINITIONS AND RECONCILIATIONS OF ALTERNATIVE PERFORMANCE MEASURES
A) Net revenue Tobacco & NGP and net revenue excluding Russia
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 alternative performance measures on net revenue the Group
treats 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. For the purpose of showing
comparable year-on-year metrics the Group have included a net revenue excluding Russia measure excluding the results of the Russia
business in the comparative figures, following the disposal of that operation in April 2022.
Reconciliation from Tobacco & NGP revenue to Tobacco & NGP net revenue and net revenue excluding Russia
£ million
Revenue
Duty and similar items
Sale of peripheral products
Net Revenue
Russia net revenue
Net revenue excluding Russia
Tobacco
22,114
(14,364)
(3)
7,747
–
7,747
NGP
299
(34)
–
265
–
265
2023
Total
22,413
(14,398)
(3)
8,012
–
8,012
Tobacco
23,232
(15,628)
(19)
7,585
(56)
7,529
NGP
224
(16)
–
208
–
208
2022
Total
23,456
(15,644)
(19)
7,793
(56)
7,737
B) Distribution gross profit
Distribution gross profit comprises the Distribution segment revenue less the cost of distributed products. Management considers this an
important measure in assessing the performance of Distribution operations. Distribution gross profit was previously described as
Distribution net revenue. There has been no change in calculation of this metric.
Reconciliation from distribution revenue to distribution gross profit
£ million
Revenue – Distribution
Cost of sales – Distribution
Distribution gross profit
2023
10,819
(9,353)
1,466
2022
9,756
(8,710)
1,046
C) Adjusted operating profit and adjusted operating profit excluding Russia
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. For the purpose of showing
comparable year-on-year metrics we have included an adjusted operating profit measure excluding the results of the Russia business in
the comparative figures, following the disposal of that operation in April 2022. For the year ending 30 September 2023 the previously
combined adjusted operating profit metric for Tobacco and NGP has been split into its two component parts.
238
Imperial Brands | Annual Report and Accounts 2023
Reconciliation from profit before tax to adjusted operating profit and adjusted operating profit excluding Russia
£ million
Profit before tax
Net finance costs
Share of (profit)/loss of investments accounted for using the equity method
Operating profit
Russia, Ukraine and associated markets
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment and impairment of other financial assets
Loss on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Charges related to legal provisions
Structural changes to defined benefit pension schemes
Total adjustments
Adjusted operating profit
Russia operating profit
Adjusted operating profit excluding Russia
Reconciliation from tobacco & NGP operating profit to adjusted operating profit
£ million
Operating profit/(loss)
Russian, Ukraine and associated markets
Amortisation and impairment of acquired intangibles
Restructuring costs
Loss on disposal of subsidiaries
Fair value adjustment and impairment of other
financial assets
Acquisition and disposal costs
Excise tax provision
Charges related to legal provisions
Structural changes to defined benefit pension schemes
Adjusted operating profit/(loss)
Russia operating profit
Adjusted operating profit/(loss) excluding Russia
Tobacco
3,262
4
334
–
1
20
–
–
85
12
3,718
–
3,718
NGP
(156)
–
5
–
–
16
–
–
–
–
(135)
–
(135)
2023
Total
3,106
4
339
–
1
36
–
–
85
12
3,583
–
3,583
Tobacco
2,599
399
320
197
13
–
5
(9)
–
4
3,528
5
3,523
Reconciliation from distribution operating profit to distribution adjusted operating profit
£ million
Distribution operating profit
Loss on disposal of subsidiaries
Amortisation of acquired intangibles
Distribution adjusted operating profit
2023
3,111
298
(7)
3,402
4
347
–
36
1
–
–
85
12
485
3,887
–
3,887
NGP
(127)
–
3
–
–
37
–
–
–
–
(87)
–
(87)
2023
298
–
8
306
2022
2,551
117
15
2,683
399
349
197
37
29
5
(9)
–
4
1,011
3,694
5
3,689
2022
Total
2,472
399
323
197
13
37
5
(9)
–
4
3,441
–
3,436
2022
212
16
26
254
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.
www.imperialbrandsplc.com
239
SUPPLEMENTARY INFORMATION continued
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 the 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 excludes 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.
Reconciliation from reported net finance costs to adjusted net finance costs
£ million
Reported net finance costs
Fair value gains on derivative financial instruments
Fair value losses on derivative financial instruments
Exchange gains/(losses) on financing activities
Net fair value and exchange gains on financial instruments
Interest income on net defined benefit assets
Interest cost on net defined benefit liabilities
Post-employment benefits net financing income
Tax settlement interest 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
240
Imperial Brands | Annual Report and Accounts 2023
2023
298
707
(568)
10
149
178
(165)
13
(50)
410
(12)
10
412
410
2022
117
1,483
(1,213)
(69)
201
107
(99)
8
–
326
(9)
6
329
326
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.
Reconciliation from reported tax to adjusted 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
Tax on charges relating to legal provisions
Tax on structural changes to defined benefit pension schemes
Tax on fair value adjustment and impairment of other financial assets
Tax on interest settlements
Recognition of deferred tax assets
Provision for state aid recoverable
Uncertain tax positions
Deferred tax on unremitted earnings
Tax on unrecognised losses
Adjusted tax charge
2023
655
(4)
89
–
–
–
26
3
5
2
212
–
(207)
–
–
781
2022
886
15
(183)
–
49
8
–
–
–
–
–
(101)
63
26
(8)
755
G) Adjusted earnings per share and adjusted earnings per share excluding Russia
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. For the purpose of showing comparable year-on-year
metrics we have included an adjusted earnings per share measure excluding Russia which excludes the results of the Russia business in
the comparative figures following the disposal of that operation in April 2022.
www.imperialbrandsplc.com
241
SUPPLEMENTARY INFORMATION continued
Reconciliation from reported to adjusted earnings and earnings per share
£ million unless otherwise indicated
Reported basic
Russia, Ukraine and associated markets
Amortisation and impairment of acquired intangibles
Restructuring costs
Fair value adjustment and impairment of other financial assets
Loss on disposal of subsidiaries
Acquisition and disposal costs
Excise tax provision
Charges related to legal provisions
Structural changes to defined benefit pension schemes
Brand impairment in equity accounted joint venture
Net fair value and exchange movements on financial instruments
Post-employment benefits net financing cost
Tax settlement interest costs
Recognition of deferred tax assets
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
Adjusted diluted
Russia earnings per share
Adjusted excluding Russia
Adjusted diluted excluding Russia
H) Return on invested capital (ROIC)
2023
2022
Earnings
per share
(pence)
Earnings
Earnings
per share
(pence)
Earnings
252.4
0.4
38.0
–
3.4
0.1
–
–
6.4
1.0
–
(25.8)
(1.4)
5.2
(23.0)
–
22.4
–
–
(0.3)
278.8
277.1
–
278.8
277.1
2,328
4
351
–
31
1
–
–
59
9
–
(238)
(13)
48
(212)
–
207
–
–
(3)
2,572
2,572
–
2,572
2,572
165.9
42.2
35.4
15.6
3.9
2.2
0.5
(1.0)
–
0.4
2.5
(1.9)
(0.8)
–
–
10.7
(6.7)
(2.7)
0.8
(1.8)
265.2
263.3
0.4
264.8
262.9
1,570
399
334
148
37
21
5
(9)
–
4
24
(18)
(8)
–
–
101
(63)
(26)
8
(18)
2,509
2,509
4
2,505
2,505
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 section C)
Adjusted operating profit
Equivalent tax charge
Net adjusted operating profit after tax
Working capital
Intangibles
Property, plant and equipment
Invested capital
Average annual invested capital
Return on invested capital (%)
242
Imperial Brands | Annual Report and Accounts 2023
2023
3,402
485
3,887
(871)
3,016
(2,567)
16,944
1,617
15,994
16,304
18.5
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
I) Constant currency
Constant currency removes the effect of exchange rate movements on the translation of the results of our overseas operations. The Group
translates 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 92-99.
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
£ million
Reported net debt
Accrued interest
Lease liabilities
Fair value of interest rate derivatives
Adjusted net debt
2023
(8,438)
125
349
(62)
(8,026)
2022
(8,492)
105
248
85
(8,054)
Average adjusted net debt during the year was £9,574 million (2022: £9,198 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 adjusted operating profit to adjusted EBITDA is shown below.
£ million
Adjusted operating profit (see section C above)
Depreciation, amortisation and impairments
Adjusted EBITDA
2023
3,887
270
4,157
2022
(restated)
3,694
244
3,938
Note the comparative figure has been restated as it previously included a reconciliation from operating profit to EBITDA. This has been
changed to a reconciliation from adjusted operating profit to adjusted EBITDA.
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 unless otherwise stated
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
2023
3,129
590
(254)
98
3,563
3,887
92%
2022
3,186
681
(177)
91
3,781
3,694
102%
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
2023
3,129
(254)
(407)
(104)
2,364
2022
3,186
(177)
(358)
(89)
2,562
www.imperialbrandsplc.com
243
GLOSSARY
Financial terms
Adjusted closing net debt
Adjusted closing net debt is measured at balance sheet foreign exchange rates, with a full
reconciliation shown within section J of the supplementary information.
Adjusted earnings per share
This is an alternative performance measure which is defined within section G of the supplementary
information.
Adjusted earnings per share
excluding Russia
Adjusted EBITDA
This is an alternative performance measure which is defined within section G of the supplementary
information.
Adjusted EBITDA is calculated as adjusted operating profit plus amortisation, depreciation and
impairments.
Adjusted net debt
This is an alternative performance measure which is defined within section J of the supplementary
information.
Adjusted net debt to EBITDA
multiple
Adjusted net finance costs
This is an alternative performance measure. Adjusted net debt is defined within section J of the
supplementary information. EBITDA is defined within section K of the supplementary information.
This is an alternative performance measure which is defined within section E of the
supplementary information.
Adjusted (Non-GAAP)
Adjusted operating cash
conversion
Adjusted operating profit
Non-GAAP measures provide a useful comparison of performance from one period to the next.
This is an alternative performance measure which is defined within section L of the
supplementary information.
This is an alternative performance measure which is defined within section C of the
supplementary information.
Adjusted operating profit
excluding Russia
Adjusted operating profit margin Adjusted operating profit margin is calculated as adjusted operating profit divided by net revenue.
Adjusted tax charge
This is an alternative performance measure which is defined within section F of the
This is an alternative performance measure which is defined within section C of the
supplementary information.
Aggregate priority market share Aggregate weighted market volume share, based on our five priority markets (USA, Germany, UK, Spain
supplementary information.
All in cost of debt
Cash conversion
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.
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.
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.
Dividend per share
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.
EBITDA
GAAP
Market share
Earnings before interest, taxation, depreciation and amortisation.
Generally accepted accounting principles.
Market share data is presented as a 12-month moving average weighted across the markets in
which we operate.
Net debt to EBITDA
Net revenue excluding Russia
Adjusted closing net debt divided by adjusted EBITDA.
This is an alternative performance measure which is defined within section A of the
supplementary information.
Reported (GAAP)
Reported (GAAP) complies with UK-adopted International Accounting Standards and the
relevant legislation.
Return on invested capital
This is an alternative performance measure which is defined within section H of the
Stick equivalent volumes
Tobacco & NGP Net revenue/
Distribution gross profit
Total shareholder return
supplementary information.
Stick equivalent volumes reflect our combined cigarette, fine cut tobacco, cigar and snus volumes but
exclude any NGP volume such as heated tobacco, modern oral nicotine and vapour.
This is an alternative performance measure which is defined within sections A and B of the
supplementary information.
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.
244
Imperial Brands | Annual Report and Accounts 2023
Other
AAACE
CDP
CEO
CFO
CO2E
CSRD
DEI
Distribution
ECLT
EFRAG
ELT
EPR
ERG
ESG
ESRS
EU
EVP
EY
FCT
FDA
FMC
GHG
GRI
GWh / KWh
HRIA
HT
HTP
ILO
IOSH
IPM
ISAE
ISO
IVMS
KPI
LCWG
Leaf CARE
LGBTQ+
LTA
LTIP
MMC
MOND
MPI
MSCI
NGOs
NGP
NGP
NTM
NTM
Africa, Asia and Australasia and Central & Eastern Europe.
Carbon Disclosure Project
Chief Executive Officer
Chief Financial Officer
Carbon Dioxide Equivalent
The Corporate Sustainability Reporting Directive
Diversity, Equity and Inclusion
Logistics Segment
Eliminating Child Labour in Tobacco Growing Foundation
European Financial Reporting Advisory Group
Executive Leadership Team
Extended Producer Responsibility Scheme
Employee Resource Groups
Environmental, Social and Governance
European Sustainability Reporting Standards
European Union
Electronic Vape Products
Ernst & Young LLP
Fine Cut Tobacco
US Food and Drug Administration
Factory Made Cigarettes
Greenhouse Gas
Global Reporting Initiative
Gigawatt-Hour / Kilowatt-Hour
Human Rights Impact Assessment
Heated Tobacco
Heated Tobacco Products
International Labour Organisation
Institution of Occupational Safety and Health
Integrated Pest Management
International Standard for Assurance Engagements
International Organization for Standardization
In Vehicle Monitoring System
Key Performance Indicators
Leaf Compliance Working Group
Leaf Compliance and Response Program
Lesbian, Gay, Bisexual, Transgender, Queer or Questioning, Intersex, Asexual, and More
Lost Time Accident
Long Term Incentive Plans
Mass Market Cigars
Modern Oral Nicotine Delivery
Manufacturer’s Price Increase
Company Name
Non-Government Organisation
Next Generation Products
Next Generation Products
Non-Tobacco Materials
Non Tobacco Materials
www.imperialbrandsplc.com
245
SUPPLEMENTARY INFORMATION continued
GLOSSARY continued
Other
OHSE
OND
PDCA
PG&S
PPE
Priority markets
PSHG
RECs
SASB
SBTi
SCIA
SDGs
SE
SECR
SER
STP
T&Cs
TCFD
Tobacco & NGP
UK
UN SDGs
WDI
Occupational Health Safety and Environment
Oral Nicotine Delivery Category
Plan Do Check Act
Purchased Goods and Services
Personal Protective Equipment
Top 5 combustible markets USA, Germany, UK, Spain and Australia
Product Stewardship and Health Group
Renewable Energy Certificates
Sustainable Accounting Standards Board
Science Based Target Initiatives
Supply Chain Impact Assessments
Sustainable Development Goals
Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and snus volumes
Streamlined Energy and Carbon Reporting
Supplier Engagement Rating
Sustainable Tobacco Programme
Terms and Conditions
Task Force on Climate-Related Financial Disclosures
Tobacco & Next Generation Products
United Kingdom
United Nations Sustainable Development Goals
Workforce Disclosure Initiative
246
Imperial Brands | Annual Report and Accounts 2023
IMPERIAL BRANDS PLC FINANCIALS
IMPERIAL BRANDS PLC BALANCE SHEET
at 30 September 2023
£ 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
Retained earnings – brought forward
Retained earnings – profit for the year
Retained earnings – dividends paid
Retained earnings – repurchase of shares
Total shareholders’ funds
Notes
2023
2022
iii
7,968
7,968
iv
v
vi
2,597
4,744
(74)
2,523
10,491
(39)
4,705
12,673
97
10
5,833
6,733
136
(1,312)
(1,006)
10,491
103
4
5,833
5,047
3,006
(1,320)
–
12,673
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 £136 million (2022: £3,006 million).
The financial statements on pages 247 to 262 were approved by the Board of Directors on 13 November 2023 and signed on its behalf by:
Lukas Paravicini
Director
IMPERIAL BRANDS PLC STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
£ million
At 1 October 2022
Profit for the year
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividends paid
At 30 September 2023
At 1 October 2021
Profit for the year
Total comprehensive income
Transactions with owners
Repurchase of shares
Dividends paid
At 30 September 2022
Total distributable reserves were £4,537 million (2022: £6,720 million).
Share
premium and
capital
redemption
5,837
Share capital
103
–
–
(6)
–
97
–
–
6
–
5,843
103
5,837
–
–
–
–
–
–
–
–
103
5,837
Retained
earnings
6,733
136
136
(1,006)
(1,312)
4,551
5,047
3,006
3,006
–
(1,320)
6,733
Total equity
12,673
136
136
(1,006)
(1,312)
10,491
10,987
3,006
3,006
–
(1,320)
12,673
www.imperialbrandsplc.com
247
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC
I. ACCOUNTING POLICIES
Basis of preparation and statement of compliance with FRS 101
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities are discussed in note 2 of the Group financial statements for the year ended 30 September 2023.
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 financial statements (see pages 187-189).
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 Payment’;
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.
248
Imperial Brands | Annual Report and Accounts 2023
Investments
Investments held as fixed assets comprise the Company’s investment in subsidiaries and are shown at historic purchase cost less any
provision for impairment. An annual review of Investments is performed for indicators of impairment. If indicators of impairment are
identified investments are tested for impairment to ensure that the carrying value of the investment is supported by their
recoverable amount.
Dividends
Final dividends are recognised as a liability in the period in which the dividends are approved by shareholders, whereas interim dividends
are recognised in the period in which the dividends are paid. Dividends receivable are recognised as an asset when they are approved.
Financial instruments
Receivables held under a hold to collect business model are stated at amortised cost.
The calculation of impairment provisions is subject to an expected credit loss model, involving a prediction of future credit losses based on
past loss patterns. The revised approach involves the recognition of provisions relating to potential future impairments, in addition to
impairments that have already occurred. The expected credit loss approach involves modelling of historic loss rates, and consideration of
the level of future credit risk. Expected loss rates are then applied to the gross receivables balance to calculate the impairment provision.
Cash and cash equivalents include cash in hand and deposits held on call, together with other short-term highly liquid investments.
Treasury shares
When the Company purchases its own equity share capital (treasury shares), the consideration paid, including any directly attributable
incremental costs (net of income taxes), is deducted from equity until the shares are reissued or disposed of. When such shares are
subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, increases shareholders’ funds. When such shares are cancelled they are transferred to the capital redemption reserve.
Income taxes
Judgement is involved in determining whether the Company is subject to a tax liability or not in line with tax law. Where liabilities exist,
estimation is often required to determine the potential future tax payments. The Company recognises provisions for tax based on estimates
of the taxes that are likely to become due. Where the final tax outcome is different from the amounts that were initially recorded, such
differences will impact the current income tax and deferred tax provisions in the period in which such determination is made.
New accounting standards
The following amendments to the accounting standards, issued by the IASB or International Financial Reporting Standards Interpretations
Committee (IFRS IC) and endorsed for use in the UK, have been adopted by the Company from 1 October 2022 with no impact on the
Company's results, financial position or disclosures:
• Amendments to IAS 12 International Tax Reform – Pillar Two model rules. (The Company has applied the mandatory exception under
IAS 12 in relation to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.)
II. DIVIDENDS
Distributions to ordinary equity holders
£ million
Paid interim of 43.18 pence per share (2022: 42.54 pence, 2021: 42.12 pence)
• Paid June 2021
• Paid September 2021
• Paid December 2021
• Paid June 2022
• Paid September 2022
• Paid December 2022
• Paid June 2023
• Paid September 2023
Interim dividend paid
Proposed third interim of 51.82 pence per share (2022: 49.31 pence, 2021: 48.48 pence)
• To be paid December 2023
Interim dividend proposed
Proposed final of 51.82 pence per share (2022: 49.32 pence, 2021: 48.48 pence)
• Paid March 2022
• Paid March 2023
• To be paid March 2024
Final dividend
Total ordinary share dividends of 146.82 pence per share (2022: 141.17 pence, 2021: 139.08 pence)
1,322
1,325
2023
2022
2021
–
–
–
–
–
–
196
195
391
–
466
466
–
–
–
465
465
–
–
–
202
202
464
–
–
868
–
–
–
–
–
457
–
457
199
199
458
–
–
–
–
–
856
–
–
–
–
458
–
–
458
1,314
www.imperialbrandsplc.com
249
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
The proposed third interim dividend for the year ended 30 September 2023 of 51.82 pence per share amounts to a proposed dividend of
£466 million, which will be paid in December 2023.
The proposed final dividend for the year ended 30 September 2023 of 51.82 pence per share amounts to a proposed dividend payment of
£465 million in March 2024 based on the number of shares ranking for dividend at 30 September 2023, and is subject to shareholder
approval. If approved, the total dividend paid in respect of 2023 will be £1,322 million (2022: £1,325 million). The dividend paid during 2023 is
£1,312 million (2022: £1,320 million).
III. INVESTMENTS
Cost of shares in imperial tobacco holdings (2007) limited
£ million
At 1 October
At 30 September
The Directors confirm that the carrying value of the investment is supported by its underlying net assets.
A list of the subsidiaries of the Company is shown on pages 252-262.
IV. DEBTORS
£ million
Amounts owed from Group undertakings
2023
7,968
7,968
2022
7,968
7,968
2023
2,597
2022
4,744
Amounts owed from Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable on demand.
V. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
£ million
Amounts owed by Group undertakings
Bank overdrafts
Other creditors
2023
34
2
38
74
2022
35
2
2
39
Amounts owed by Group undertakings are unsecured, interest bearing, have no fixed date for repayment and are repayable on demand.
VI. CALLED UP SHARE CAPITAL
Authorised, issued and fully paid:
1 October
Shares cancelled
30 September
2023
Ordinary shares
10p each
2022
Ordinary shares
10p each
Number
£ million
Number
£ million
1,020,697,237
(52,107,043)
968,590,194
103
(6)
97
1,020,697,237
–
1,020,697,237
103
–
103
During the period a share buy back scheme was initiated and 52,107,043 10p shares were repurchased for a cost of £1,000 million.
Upon completion of the purchase, these shares were cancelled and transferred to the capital redemption reserve. The stamp duty costs
were £5 million and the fees charged for the share repurchase were £1 million.
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.
250
Imperial Brands | Annual Report and Accounts 2023
VII. RESERVES
Treasury shares
Subject to authorisation by special resolution, the Group may purchase its own shares in accordance with the Companies Act. 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. Shares
purchased under the share buyback programme initiated on 7 October 2022 will be cancelled immediately on completion of the purchase.
There were no movements in treasury shares during the year to 30 September 2023 (2022: reduced by 4.0 million shares).
£ million unless otherwise indicated
At 1 October
Gifted to Employee Share Ownership Trusts
At 30 September
Percentage of issued share capital
VIII. GUARANTEES
Millions of
shares
(number)
70.3
–
70.3
7.8
2023
Value
£
2,183
–
2,183
n/a
Millions of
shares
(number)
74.3
(4.0)
70.3
6.9
2022
Value
£
2,183
–
2,183
n/a
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 2023:
• Imperial Tobacco Holdings (2007) Limited
• Imperial Tobacco Ventures Limited
• Rizla UK Limited
• Imperial Tobacco Overseas (Polska) Limited
• La Flor de Copan UK Limited
• Tabacalera de Garcia UK Limited
• Imperial Brands Ventures Limited
• Nerudia Consulting Limited
• 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. As at 30 September 2023, the amount guaranteed is £14,138 million (2022: £14,151 million).
Many of the committed revolving credit facilities remain undrawn as at 30 September 2023 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 Company has also provided a parent guarantee to the Imperial Tobacco Pension Trustees Ltd (including their £300 million revolving
credit facility), the main UK pension scheme.
The Directors have assessed the fair value of the above guarantees and do not consider them to be material. They have therefore not been
recognised on the balance sheet.
IX. RELATED PARTY DISCLOSURES
Details of Directors’ emoluments and interests are provided within the Directors’ Remuneration Report. The Directors Remuneration Report,
on pages 142-163 includes details on salary, benefits, pension and share plans. These disclosures form part of the financial statements.
RELATED UNDERTAKINGS
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, and joint ventures, the
principal activity, the country of incorporation and the effective percentage of equity owned, as at 30 September 2023 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.
www.imperialbrandsplc.com
251
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
SUBSIDIARIES: REGISTERED IN ENGLAND AND WALES, WHOLLY OWNED
Name
Altadis NewCo Limited
Principal activity and registered address
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Attendfriend Limited
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
British Tobacco Company Limited
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Congar International UK Limited
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Brands Enterprise Finance Limited
Provision of treasury services to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Brands Finance PLC
Provision of treasury services to other Group companies
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
121 Winterstoke Road, Bristol, BS3 2LL, England
Provision of finance to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Investments Limited
Dormant
Imperial Tobacco Altadis Limited
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Capital Assets (1)
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Capital Assets (2)
121 Winterstoke Road, Bristol, BS3 2LL, England
Provision of finance to other Group companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Capital Assets (3)
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Capital Assets (4)
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Group Limited
Dormant
Imperial Tobacco Holdings (1) Limited (iv)
Imperial Tobacco Holdings (2007) Limited (iv)
Imperial Tobacco Holdings Limited
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
Imperial Tobacco Initiatives
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Lacroix Limited
Dormant
121 Winterstoke Road, Bristol, BS3 2LL, England
Imperial Tobacco Limited
Manufacture, marketing and sale of tobacco products in the UK
Imperial Tobacco Overseas (Polska) Limited
Imperial Tobacco Overseas Holdings (1) Limited (viii)
Imperial Tobacco Overseas Holdings (2) Limited
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
Imperial Tobacco Overseas Holdings (3) Limited
Dormant
Imperial Tobacco Overseas Holdings (4) Limited
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
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Imperial Brands | Annual Report and Accounts 2023
Name
Imperial Tobacco Overseas Holdings Limited
Imperial Tobacco Overseas Limited (x)
Imperial Tobacco Pension Trustees (Burlington House)
Limited
Imperial Tobacco Pension Trustees Limited (iv)
Imperial Tobacco Ventures Limited
ITG Brands Limited
Principal activity and registered address
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
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Joseph & Henry Wilson Limited
licensing rights for the manufacture and sale of tobacco products
Nerudia Limited
121 Winterstoke Road, Bristol BS3 2LL England
Research and development of e-vapour products
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Nerudia Consulting Limited
Research and development of e-vapour products
La Flor de Copan UK Limited
Wellington House, Physics Road, Speke, Liverpool, L24 9HP, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
Park Lane Tobacco Company Limited
Dormant
Rizla UK Limited
Tabacalera de Garcia UK Limited
121 Winterstoke Road, Bristol, BS3 2LL, England
Entity ceased trading
121 Winterstoke Road, Bristol, BS3 2LL, England
Holding investments in subsidiary companies
121 Winterstoke Road, Bristol, BS3 2LL, England
SUBSIDIARIES: INCORPORATED OVERSEAS, WHOLLY OWNED
Name
1213509 B.C. Limited
Altadis Canarias SAU (ii)
Spain
Country of incorporation
Principal activity and registered address
Canada
Holding investments in subsidiary companies
Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC. V6C 2X8,
Canada
Marketing and sale of tobacco products in the Canary Islands
C/Comandante Azcarraga 5, Madrid, 28016, Spain
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
United States of
America
United Arab Emirates Sales and marketing of tobacco products in the Middle East
Altadis Holdings USA Inc
Altadis Middle East FZCO
Altadis Ocean Indien SAS
Altadis S.A.U.
Altadis Shade Company LLC
Athena IP Vermogensverwaltungs GmbH
Cacique, SA – Comércio, Importaçao e
Exportaçao
Commonwealth Brands Inc
Congar International Corp (Delaware)
Connecticut Shade Corporation
Consolidated Cigar Holdings Inc (vii)
Coralma International SAS
France (La Reunion
Island)
Spain
United States of
America
Germany
Brazil
United States of
America
United States of
America
United States of
America
United States of
America
France
Dunkerquoise des Blends SAS
France
P.O. Box. No. 261718, Jebel Ali Free Zone, Dubai, 261718,
United Arab Emirates
Sales and distribution of tobacco products in la Reunion Island
ZI n° 2 – BP 256 – 97457 Saint Pierre Cedex, La Reunion
Manufacture, sales and distribution of tobacco products in Spain
C/Comandaute Azcarraga 5, Madrid 28016, Spain
Manufacture and sale of tobacco products in the USA
217 Shaker Road, Somers, CT, 06071, USA
Davidoff cigarette trademark owner
Behringstrasse 122 A, 22763, Hamburg
Dormant
Rua Marechal Deodoro, 690 – Centro Arapiraca, Alagoas, Brazil
Manufacture and sale of tobacco products in the USA
714 Green Vally Road Greensboro, NC27408 USA
Manufacturing and distribution of mass market cigars
Road 14, Km. 72.2, Ave. Antonio R. Barcelo, Cayey, DE, PR 00736,
USA
Holding investments in subsidiary companies
714 Green Vally Road Greensboro, NC27408 USA
Holding investments in subsidiary companies
714 Green Vally Road Greensboro, NC27408 USA
Holding investments in subsidiary companies
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Tobacco processing
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
www.imperialbrandsplc.com
253
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Country of incorporation
Principal activity and registered address
Ets L Lacroix Fils NV/SA
Belgium
Fontem (Beijing) Technology Solutions
Limited (i)
People’s Republic of
China
Fontem Canada Limited (vii)
Canada
Fontem US LLC
Fontem Ventures B.V.
United States of
America
The Netherlands
Huotraco International Limited
Cambodia
Imperial Brands Bulgaria EOOD (i)
Bulgaria
Imperial Brands CR s.r.o.
Czech Republic
Imperial Brands Finance Netherlands B.V.
The Netherlands
Imperial Brands Finland Oy
Finland
Imperial Brands Global Duty Free & Export S.L. Spain
Imperial Brands Hellas S.A.
Greece
Imperial Brands Holdings International B.V.
The Netherlands
Imperial Brands Italia S.r.l.
Imperial Brands Japan G.K (v)
Italy
Japan
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
Import and distribution of tobacco and tobacco related products in
Canada
C/O BDO Canada LLP, 6940 Mumford Road, Suite 510, Halifax, NS,
B3L 0B&, 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
Manufacture and sale of tobacco products in Bulgaria
15 Henrih Ibsen str, Floor 4, Office 4, Sofia, 1407, Bulgaria
Sales and marketing of tobacco products in the Czech Republic
Karla Engliše 3201/6, 15 00, Praha 5
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 Azcarraga 5, Madrid 28016, Spain
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
Sales and marketing of tobacco products in Italy
Via Luca Passi 22, Roma, 00166, Italy
Sales and marketing of tobacco products in Japan
Shiodome Shibarikyu Building 21, 1-2-3 Kaigan Minato-ku, Tokyo,
Japan
Imperial Brands La Romana
Dominican Republic Manufacture of cigars in the Dominican Republic
Imperial Brands Luxembourg sarl
Luxembourg
Imperial Brands Malta Limited
Malta
Imperial Brands Norway A.S.
Imperial Brands Portugal, Sociedade
Unipessoal Lda
Imperial Brands Services Polska spolka z.o.o
Norway
Portugal
Poland
Imperial Brands Ventures LLC
Imperial Finance Ireland Limited
United States of
America
Ireland
Imperial Finance Malta Ltd
Malta
Imperial Nominees Limited (ii)
New Zealand
Industrial Free Zone #1, La Romana, Domincan Republic
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-Difiza Civili
Mosta, MST 1741, Malta
Sales and marketing of tobacco products in Norway
Ryensvingen 2-4, 0680, Oslo, Norway
Advertising and support management
144, 7 DT, Avenida da Liberdade, Lisbon, Portugal
Central Manufacturing and Central Supply Chain
Jankowice, Przemyslowa 1, 62-080 Tarnowo Padgorne, 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-Difiza Civili
Mosta, MST 1741, Malta
Trustee Company
Level 24, 157 Lambton Quay, Wellington Central, Wellington 6011,
New Zealand
254
Imperial Brands | Annual Report and Accounts 2023
Name
Country of incorporation
Principal activity and registered address
Imperial Tobacco (Asia) Pte. Ltd
Singapore
Imperial Tobacco Australia Limited
Australia
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
Imperial Tobacco Austria Marketing Service
GmbH
Imperial Tobacco BH doo (i)
Austria
Bosnia-Herzegovina Marketing and distribution of tobacco products in Bosnia
Imperial Tobacco Distribution Romania srl
Romania
Imperial Tobacco EFKA Management GmbH Germany
Imperial Tobacco España, S.L.U.
Imperial Tobacco Estonia OÜ
Spain
Estonia
Imperial Tobacco Holdings (Netherlands) B.V. The Netherlands
Imperial Tobacco Holdings International B.V. The Netherlands
Imperial Tobacco Intellectual Property Limited Ireland
Imperial Tobacco International GmbH
Germany
Imperial Tobacco Ireland Unlimited
Company (v)
Imperial Tobacco Italy S.r.l.
Ireland
Italy
Imperial Tobacco Kyrgyzstan LLC (i)
Kyrgyzstan
Imperial Tobacco La Romana S.A.S.
France
Imperial Tobacco Magyarország
Dohányforgalmázo Kft (Imperial Tobacco
Hungary)
Imperial Tobacco Management
Luxembourg sarl
Imperial Tobacco Marketing Sdn Bhd
Hungary
Luxembourg
Malaysia
Imperial Tobacco New Zealand Limited
New Zealand
Imperial Tobacco Polska Manufacturing SA
Poland
Imperial Tobacco Polska S.A.
Poland
Imperial Tobacco Production Ukraine (i)
Ukraine
Imperial Tobacco SCG doo Beograd (i)
Serbia
Imperial Tobacco Sigara ve Tutunculuck
Sanayi Ve Ticaret A.S.
Turkey
Imperial Tobacco Slovakia A.S.
Slovak Republic
Adema Buce, Sarajevo, 71000, Bosnia & Herzegovina
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
Behringstrasse 122 A, 22763, Hamburg
Holding investments in subsidiary companies
C/Comandaute Azcarraga 5, Madrid 28016, Spain
Dormant
Veskiposti 2, 10138 Tallinn, Tallinn , Estonia
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
Behringstrasse 122 A, 22763, Hamburg
Dormant
6th Floor, 2 Grand Canal Square, Dublin 2, Ireland
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
Manufacture of cigars in the Dominican Republic
320, Rue Saint-Honore, Paris, 75001, France
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 (in liquidation)
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
Manufacture of tobacco products in Poland
Ul. Tytoniowa 2/6, Radom, 26-600, Poland
Manufacture and sale of tobacco products in Poland
Jankowice, ul. Przemyslowa 1, Pl-62-080, Tarnowo-Podgome,
Poland
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
www.imperialbrandsplc.com
255
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
Country of incorporation
Principal activity and registered address
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 SAS (i)
Cote D'Ivoire
Imperial Tobacco Zagreb doo (i)
Croatia
IMPTOB South Africa (Pty) Limited
South Africa
ITG Brands Holdco LLC
ITG Brands LLC
ITG Cigars Inc
ITG Holdings USA Inc (ix)
ITL Pacific (HK) Limited
United States of
America
United States of
America
United States of
America
Hong Kong
Imperial Ventures Malta Limited
Malta
JAW-Invest Oy
Finland
John Player & Sons Limited
Ireland
John Player Ireland Pension Trustee Limited
Ireland
JSNM SARL
MYBLU Spain S.L.
France
Spain
Millennium Tobacco Unlimited Company
Ireland
Newglade International Unlimited Company
Ireland
Petone Vapes Limited
New Zealand
Philippine Bobbin Corporation
Philippines
Real Club de Golf la Herrería S.A.
Spain
Reemtsma Cigarettenfabriken GmbH
Germany
Skruf Snus AB
Sweden
256
Imperial Brands | Annual Report and Accounts 2023
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 (in liquidation)
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
United States of America
Holding investments in subsidiary companies
714 Green Valley Road Greensboro, NC27408 USA
Manufacture and sale of tobacco and tobacco related products
Room 3905-06, 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-Difiza Civili
Mosta, MST 1741, Malta
Trademark owner
Auriga Business Center, Juhana Herttuan puistokatu 21, 20100
Turku, Finland
Sales and marketing of tobacco products in the Republic of
Ireland
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Trustee company (Strike off Listed)
21, Beckett Way, Park West, Nangor Road, Dublin, 12, Ireland
Trademark owner
122 Avenue Charles de Gaulle, Neuilly sur Seine, 92200, France
Marketing and sale of e-vapour products in Spain
CR. Robledo de Chavela, S/N. San Lorenzo del Escorial, Madrid,
28200, Spain
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
Non-trading
Russell McVeagh, Level 24, 157 Lambton Quay,
Wellington Central, Wellington, 6011 , New Zealand
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
Behringstrasse 122 A, 22763 Hamburg, Germany
Manufacture, marketing, sales of tobacco products in Sweden
PO Box 3068, Stockholm, SE-103 61, Sweden
Name
Country of incorporation
Principal activity and registered address
Société Centrafricaine de Cigarettes SA (i)
Société Centrafricaine de Distribution Sarl (i)
Société du Mont Nimba Sarl (i)
Central African
Republic
Central African
Republic
Guinee Conakry
Société Nationale d’Exploitation Industrielle
des Tabacs et Allumettes S.A.S.
France
Société pour le Développement du Tabac en
Afrique S.A.S.
System Designed to Africa Sarl
Tabacalera de Garcia Limited
Tahiti Tabacs SASU
Tobaccor S.A.S. (v)
France
Morocco
Bermuda
France, Papeete
(Tahiti)
France
Tobačna 3DVA, trgovsko podjetje, d.o.o.
Slovenia
Tobačna Grosist d.o.o.
Tobačna Ljubljana d.o.o. (v)
Slovenia
Slovenia
Van Nelle Tabak Nederland B.V. (x)
The Netherlands
Van Nelle Tobacco International Holdings B.V. The Netherlands
Von Erl. Gmbh (i)
Austria
Manufacture and distribution of cigarettes in Central African
Republic
Rue David Dacko, BP 1446, Bangui, Central African Republic
Dormant
Avenue Boganda Pk4, Bangui, Central African Republic
In Liquidation
BP 3391, Conakry, Guinea
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
Holding investments in subsidiary companies
Claredon House, 2 Church Street, Hamilton, HM 11 Bermuda
Distribution of tobacco products in Denmark and Greenland
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
www.imperialbrandsplc.com
257
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
SUBSIDIARIES: INCORPORATED OVERSEAS, PARTLY OWNED
Name
Country of
incorporation
Principal activity and registered address
Be To Be Pharma, S.L.U
Spain
Carbo Collbatalle, S.L.U.
Spain
CDIL – Companhia de
Distribuicao Integral Logista
Portugal, SA.
Portugal
Compagnie Agricole et
Industrielle des Tabacs
Africains S.A.S.
Compagnie Réunionnaise des
Tabacs S.A.S.
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.
Compañía de Distribución
Integral Logista S.A.U.
France
France, St Pierre
(La Reunion Island)
Spain
Spain
Poland
Spain
Distribuidora Valenciana de
Ediciones S.A.U.
Dronas 2002, S.L.U.
Spain
Spain
Gramma Farmaceutici S.r.l
Italy
Imperial Tobacco TKS a.d. (i)
Macedonia
Imperial Tobacco TKS a.d. –
Dege Kosove
Kosovo
Imprimerie Industrielle
Ivoirienne SA (i)
Cote D'Ivoire
La Mancha 2000, S.A., Sociedad
Unipersonal
Logesta Deutschland Gmbh,
Sociedad Unipersonal
Logista France Holding S.A.
Spain
Germany
France
Logista France S.A.S.
France
Logesta Freight France Sarl
France
Logesta Lusa LDA
Portugal
Logista Freight Italia S.R.L
Italy
Distribution of pharmaceuticals
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Transportation of food at a controlled temperature
Zona Franca, Sector E, Calle L, No 6-8. 08040 Barcelona, Spain
Marketing and sale of tobacco and other products, and payment services
in Portugal
Edificio Logista, Rua do Vale da Fote Coberta, 153 E 167, 2890-182,
Alcochete, Portugal
Management company
143 bd Romain Rolland, Cedex 14, Paris, 75685, France
Manufacture of cigarettes
ZI n° 2 – BP 256 – 97457 Saint Pierre Cedex, La Reunion
Distribution of published materials and other products
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo
3, Alcorcor, Madrid, 28922, Spain
Holding investments in subsidiary companies
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Distribution of tobacco products in Poland
Avenida Jerozolimskie 96 – 7ª Planta, Edificio Equator II 133/131, 02-304
Varsaw, Poland
Distribution of tobacco products in Spain
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Distribution of published materials and other products in Valencia
Pedrapiquers 5, Poligono Industrial Vara de Quart, Valencia, 46014, Spain
Industrial parcel and express delivery service
Energía, 25-29; Polígono Industrial Nordeste, Sant Andreu de la Barca,
Barcelona, 08740, Spain
The Logistic, storage and distribution throughout the Italian territory of
pharmaceutical, cosmetics and sanitary products
Via della Mola Saracena snc, 00065, Fiano Romano, Rome, Italy
Manufacture, marketing and distribution of tobacco products in
Macedonia
ul 11, Oktomvri 125, P O Box 37, 1000 Skopje, Macedonia
Manufacture, marketing and distribution of tobacco products in Kosovo
Rrafshi i Kosoves, Nr. 80 (Magjistralja M2: Prishtine-Shkup, km i 2-te
Vetermik) Prishtine, Republic of Kosovo
Printing company
Zone Industrielle du Banco, Lots No 147-149-150, 01 BP 4124,
Yopougon/Abdjan, Cote d'Ivoire
Distribution services
Trigo 39, Poligno Industrial Polvoranca – 28914 Leganes, Madrid, Spain
Long haul transportation in Germany
Pilotystrasse, 4, 80538 München, Germany
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 France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes,
France
Long haul transportation in Portugal
Edifico Logista, Rua do Vale da Fonte Coberta, 153 E 167, 2890-182
Alcochete, Portugal
Long haul transportation in Italy
Via Valadier, 37 – 00193 Roma, Italy
Percentage
owned
50.0
50.0
50.0
99.9
98.9
50.0
50.0
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
258
Imperial Brands | Annual Report and Accounts 2023
Name
Country of
incorporation
Principal activity and registered address
Percentage
owned
Logista Freight Polska S.r.l.
Poland
Logista Freight, S.A.U
Spain
Logista Italia Spa
Italy
Logista Payments, SL
Spain
Logista Pharma S.A.U.
Spain
Logista Pharma Canarias,
S.A.U.
Logista Promotion et Transport
S.A.S.
Spain
France
Logista Regional de
Publicaciones, S.A.U.
Spain
Logista Retail France S.A.S.
France
Logista Retail Italia S.P.A
Italy
Logista Retail S.A.U
Spain
Logista Strator, SLU
Spain
Long haul transportation in Poland
Av. Jerozolimskie 96 – 7ª Planta Edificio Equator II, Varsovia, Poland
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
Provision of financial services
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Distribution of pharmaceuticals
C/ Trigo Núm. 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
Marketing and distribution of tobacco products in France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes,
France
Marketing, distribution and sale to points of sale in Spain.
Avenida de Europa No.2, Edificio Alcor Plaza/Ala Este Planta 4a – Modulo
3, Alcorcor, Madrid, 28922, Spain
Long haul transportation in France
Inmeuble Le Bristol, 27 Avenue des Murs du Parc, 94300 Vincennes,
France
Wholesale to tobacconists in Italy
Via Valadier, 37 – 00193 Roma, Italy
Sale of tobacco products in Spain
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Distribution of POS software
C/ Trigo, 39 – Polígono Industrial Polvoranca, Leganés, Madrid, 28914,
Spain
Logista Transport Europe B.V.
The Netherlands Holding Company
Logista, Transportes,
Transitários e Pharma, Lda.
Portugal
MABUCIG Industries SA
Burkina Faso
MABUCIG SA (Manufacture
Burkinabe de Cigarette)
Burkina Faso
Macotab SAS (Manufacture
Corse des Tabacs)
Manufacture de Cigarettes du
Tchad SA
Midsid – Sociedade
Portuguesa de Distribução,
S.A.U
MTOA SA (i)
France, Bastia
Tchad
Portugal
Senegal
Publicaciones y Libros SA
Spain
Reemtsma Kyrgyzstan OJSC (i) Kyrgyzstan
S3T Pte Ltd (i)
Singapore
SACIMEM SA (i)
Madagascar
SITAB Industries SA (i)
Cote D'Ivoire
Wijkermeerstaat 31. 2131 HB, Hoofddorp, 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
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
Manufacture and sales of cigarettes
Route Nationale 193, Furiani, 20600, France
Manufacture and distribution of cigarettes in Chad
0502 rue 1039, Arrondissement 1, N'DJamena, Chad
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, Alcorcor, 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 Cote D'Ivoire
Rue de I'Industrie – Lot No 19, 01 – BP 607, Bouake, Cote d'Ivoire
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
72.7
72.7
99.9
95.0
50.0
98.3
50.0
99.7
51.0
65.4
75.9
www.imperialbrandsplc.com
259
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
Name
SITAR Holding SAS
Société Africaine d’Impression
Industrielle SA (i)
Société des Cigarettes
Gabonaises SA (i)
Société Industrielle et Agricole
du Tabac Tropical SA (i)
Société Ivoirienne des Tabacs
SA (i) (iii)
Société Marocaine des Tabacs
SA
SOCTAM SA (i)
Country of
incorporation
France (La
Reunion Island)
Senegal
Gabon
Congo
Cote D'Ivoire
Morocco
Madagascar
SOTCHADIS SAS
Chad
Transportes J. Carbo Guijuelo,
S.L.U.
Spain
Principal activity and registered address
Holding investments in subsidiary companiesr
Z.I n2, B.P. 256, 97457 Saint Pierre, IIe de la Reunion, France
Manufacture and distribution of cigarettes in Senegal
route de Bel Air – Km 2200, Dakar, Senegal
In liquidation
2381 bld Léon MBA, BP 2175, Libreville, Gabon
Manufacture and distribution of cigarettes in Congo
Avenue de la Pointe Hollandaise, Mpila, BP 50, Brazzaville, Congo
Manufacture and distribution of cigarettes in Côte d’Ivoire
Cocody-Nord, Quartier Gendarmerie, TF 5937, 01 B.P. 724 Abidjan
Manufacture and distribution of cigarettes in Morocco
87 Rue Hamed El Figuigui , Casablanca, 20500, Morocco
Manufacture and distribution of cigarettes in Mali
15 Rue Geoges V, Mahajanga, Madagascar
Non-trading
502 Rue 1039, BP 852, N'Djamena, Chad
Transportation of food at a controlled temperature
Calle De la Sierra Ventosa, Parcela 38, Pologono Industrial Agroalimentario
de Guijuelo. 37000, Salamanca
ASSOCIATES: INCORPORATED OVERSEAS
Name
24 Hours B.V
Country of
incorporation
Principal activity and registered address
The Netherlands Courier express sector
Albacetrans, S.L.U
Spain
Alcome S.A.S.
France
Azur Finances SA
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
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
Freight forwarding company
Poligono Industrial Campollano, Avenida Sexta, 0.02007 Albacete, Spain
Waste management
88 avenue des Ternes, Paris, 75017, France
Holding investments in subsidiary companies
B.P 1105, Douala, Cameroon
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
Poligno Industrial Pineda, Carretera De Cadiz A, Dos Hermanas KM.547,
Nave B, Sevilla, 41014, Spain
Distribution of published materials and other products in Spain
Francisco Medina y Mendoza, 2, 19171 Cabanillas del Campo, Guadalajara,
Spain
Dormant
B.P 3391, Conakry, Guinea
Entreprises des Tabacs en
Guinée (i)
German-Ex B.V.
Guinée Conakry
The Netherlands Courier express sector
Herinvemol, S.L.
Innoreste, S.L.U
Spain
Spain
Lao Tabacco Limited
Laos
Logista Libros SL
Spain
Mosca China Logistics Ltd
China
Mosca Italia, Srl
Italy
Mosca Maritimo Baleares, S.L.
Spain
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
Freight forwarding company
Carretera De Madrid, KM. 276. 30500 Molina De Segura (Murcia), Spain
Freight forwarding company
Carretera De Madrid-Cartegena, KM. 376. 30500 Molina de Segura (Murcia),
Spain
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
Freight forwarding company
603, no.32, Hong Kong Road, Nanfang district, Qingdao city
Transport activities
Via Luigi Canepa 13, 16165, Genova, Italy
Freight forwarding company
Carretera De Madrid, S/N. 30500 Molina de Segura (Murcia), Spain
260
Imperial Brands | Annual Report and Accounts 2023
Percentage
owned
99.0
99.8
87.8
89.7
74.9
99.9
50.5
95.0
50.0
Percentage
owned
35.01
36.6
24.0
20.0
20.8
35.0
25.0
40.0
34.0
35.0
36.6
36.6
43.7
25.0
30.0
36.6
36.6
Name
Country of
incorporation
Principal activity and registered address
Percentage
owned
Mosca Maritimo, S.L.U.
Spain
Mosca Portugal, Lda
Portugal
Ordimur, S.L.U.
Spain
Promotion et Distribution a
Madagascar (i)
SITABAC S.A
Madagascar
Cameroon
Sociedad Anonima
Distribuidora De Ediciones
Spain
Société Internationale des
Tabacs Malgaches (i)
Société Nationale des Tabacs
et Allumettes du Mali SA (i)
Speedlink Worldwide Express
B.V.
Transportes El Mosca Murcia,
S.A.U.
Madagascar
Mali
Spain
Transportes El Mosca, S.A.U.
Spain
Freight forwarding company
Carretera De Madrid, S/N. 30500 Molina de Segura (Murcia), Spain
Freight forwarding company
Santa Iria, Na Avenida Casal SA Serra No 9, Portugal
Freight forwarding company
Calle Argentina, Margen Izquierda, Poligono Industrial La Serreta, 30500
Molina de Segura, Murcia, 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, Spain
Leaf processing
BP 270, 401 Mahajanga, Madagascar
Manufacture and distribution of cigarettes in Mali
Route Sotuba – Z.I., BP 59, Bamako, Mali
Wijkermeerstraat 31, 2131 HB, Hoofddorp, The Netherlands
Freight forwarding company
Carretera Madrid-Cartagena, KM. 376.30500, Molina de Segura (Murcia),
Spain
Freight forwarding company
Carretera Madrid-Cartagena, KM. 376.30500, Molina de Segura (Murcia),
Spain
36.6
36.6
36.6
33.4
34.5
35.0
47.9
28.0
35.0
36.6
36.6
The Netherlands Courier express sector
JOINT VENTURES: INCORPORATED OVERSEAS
Name
Global Horizon Ventures
Limited
Country of
incorporation
Hong Kong
Intertab SA (i)
Switzerland
West Tobacco Pte Ltd (i)
Singapore
Principal activity and registered address
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
261
IMPERIAL BRANDS PLC FINANCIALS continued
NOTES TO THE FINANCIAL STATEMENTS OF IMPERIAL BRANDS PLC continued
PARTNERSHIPS
The Group also owns the following partnerships:
Name
Fabrica de Tabacos La Flor de
Copan S de R.L. de CV
Country
Honduras
Imperial Tobacco (Efka) GmbH &
Co. KG
Germany
Imperial Tobacco Kazakhstan
LLP (i)
Kazakhstan
ITG Brands Holdpartner LP
United States of
America
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: Behrinstrasse 122 A,, Hamburg,
22763, 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
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). Only applicable to partly owned
entities. Percentage ownership is shown in the tables above.
(v) Holding of two 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
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.
262
Imperial Brands | Annual Report and Accounts 2023
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
AND DIVIDENDS
Half year results are expected to
be announced in May 2024 and the Full
year results in November 2024.
The Annual General Meeting of the
Company will be held on Wednesday
31 January 2024 at 9.30am at the Bristol
Marriott Royal Hotel, College Green
Bristol, BS1 5TA. 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 2023
final dividend, if approved, will be
on 28 March 2024 to shareholders on
the Register of Members at the close
of business on 16 February 2024. The
associated ex-dividend date will be
15 February 2024.
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
+44 (0)371 384 2037*
+44 (0)371 384 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.
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.
For more contacts visit:
https://adr.com/contact/jpmorgan
* Lines are open Monday to Friday 7am to 7pm
(Central Time US).
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.
CORPORATE BROKERS
Morgan Stanley & Co. International Plc
20 Bank Street
Canary Wharf
London
E14 4AD
+44 (0)20 7425 8000
Barclays Bank PLC
1 Churchill Place
Canary Wharf
London E14 5HP
+44 (0)20 7623 2323
AUDITOR
Ernst & Young LLP
1 More London Place
London
SE1 2AF
www.imperialbrandsplc.com
263
CAUTIONARY STATEMENT
Certain statements in this report
constitute or may constitute forward-
looking statements. Any statement in
this report that is not a statement of
historical fact including, without
limitation, those regarding the
Company’s future expectations,
operations, financial performance,
financial condition and business is or
may be a forward-looking statement.
Such forward-looking statements are
subject to risks and uncertainties that
may cause actual results to differ
materially from those projected or
implied in any forward-looking
statement. These risks and
uncertainties include, among other
factors, changing economic, financial,
business or other market conditions.
These and other factors could adversely
affect the outcome and financial effects
of the plans and events described in
this report. As a result, you are
cautioned not to place any reliance on
such forward-looking statements. The
forward-looking statements reflect
knowledge and information available at
the date of this report and the Company
undertakes no obligation to update its
view of such risks and uncertainties or
to update the forward-looking
statements contained herein. Nothing
in this report should be construed as a
profit forecast or profit estimate and no
statement in this report should be
interpreted to mean that the future
earnings per share of the Company for
current or future financial years will
necessarily match or exceed the
historical or published earnings per
share of the Company. This report has
been prepared for, and only for the
members of the Company, as a body,
and no other persons. The Company, its
Directors, employees, agents or advisers
do not accept or assume responsibility
to any other person to whom this report
is shown or into whose hands it may
come, and any such responsibility or
liability is expressly disclaimed.
Printed by Park Communications on FSC® certified paper.
Park works to the EMAS standard and its Environmental Management System is certified to ISO 14001.
This publication has been manufactured using 100% offshore wind electricity sourced from UK wind.
100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any
waste associated with this production will be recycled and the remaining 1% used to generate energy.
This document is printed on Heaven 42 and Max Ultrawhite, both papers are made of material from well-managed,
FSC®-certified forests and other controlled sources. The pulp used in this product is bleached using an elemental
chlorine free (ECF) process.
Designed and produced by Black Sun Global.
264
Imperial Brands | Annual Report and Accounts 2023
A digital version of this Annual Report
is available online: www.imperialbrandsplc.com
Registered Office
Imperial Brands PLC
121 Winterstoke Road
Bristol BS3 2LL
UK
www.imperialbrandsplc.com