Half-Year Results
Tuesday, 12th May 2026
Imperial Brands Half-Year Results
Tuesday, 12th May 2026
Cautionary Statement
Certain statements in this announcement constitute or may constitute
forward-looking statements. Any statement in this announcement 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 announcement. 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 announcement 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
announcement should be construed as a profit forecast or profit estimate and
no statement in this announcement 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 announcement 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
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may come and any such responsibility or liability is expressly disclaimed.
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Introduction
John Crosse
Head of Investor Relations, Imperial Brands
Introduction
Hello, good morning, everyone. Thanks for joining us for our half-year '26 results. Just a few
housekeeping items before we kick off. For those of you in the room, there are no planned fire
alarm tests today. So, if it goes off, it is a real one. You'll see the fire exit is just behind you
there, lit up in green.
Slide - Disclaimer
And finally, I just wanted to draw your attention to the usual disclaimer in our RNS this morning
and in the presentation, which we're just about to go through.
So, without further ado, I'll hand over to Lukas.
Results Overview
Lukas Paravicini
CEO, Imperial Brands
Welcome
Thank you very much, John.
Good morning and a very warm welcome to this results
presentation. Thank you very much for joining us here in the room, and a very warm welcome
to those who join us online.
Slide - Agenda
Today, I'm joined by Murray McGowan, our Chief Financial Officer, and John Crosse, our Director
for Investor Relations. Murray and myself really look forward to presenting the first six months
of our fiscal year '26 and also the first six months of our Evolve 2030 strategy.
I'll start off with a few highlights. Murray will then take the stage and talk us through the
financial performance and our expectation for the full year. I will then come back on stage and
discuss in more detail how we are still delivering strong operational performance, while at the
same time delivering self-help efficiencies and transforming our business to deliver long-term
sustainable growth.
With that, let me start the presentation.
Slide - Another Half of Consistent Delivery
Positive start to FY26 and implementation of 2030 strategy
There are four overarching points which Murray and I want to make in today's presentation.
First, our consistent financial performance continues to deliver growth in net revenue and
adjusted operating profit, driving cash generation of £2.6 billion over the past 12 months. This
is underpinning consistent capital returns, which includes our “evergreen” share buyback.
Second, the progress we have made in the first half means we are well-placed to deliver on our
expectation for the full year, and we confirm the guidance we've previously given.
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Third, our strategic progress and operational delivery continues to be underpinned by our
distinctive challenger approach, which is a source of sustainable competitive advantage. As
you've heard us say before, this challenger mindset is about deep insights into our consumers,
a laser focus on the key drivers of growth and investing in agility, so we can create more
sustainable value in combustibles and build scale in NGP.
Fourth, over the past six months, we have made significant progress in the strategic
transformation of our business. These activities are delivering material efficiencies in the shortterm and building capabilities that will unlock long-term growth, helping us become an even
stronger challenger business.
Slide - Half-Year Delivery Driving Shareholder Returns
So, let's look first at our half-year dashboard.
In the centre, you can see how operating
performance is supporting top-line revenue growth and growth in earnings per share. We are
on target to deliver our full-year objective of at least high single-digit growth in EPS. This is
enabling sustainable capital returns shown on the right. We have announced a 4% increase in
the ordinary dividend, and we are on track with our £1.45 billion share buyback.
Now, I recognise that at the half-year point, the two numbers on the left will be a focus for
some of you. Looking at the market share, the aggregate figure of our five priority markets is
lower. This reflects a deliberate choice to prioritise value over low-return volume. In NGP,
where we have grown share and volumes in all categories, overall revenue growth is below our
full-year guidance of double-digit.
This is due to one-off factors, particularly the timing of
promotions over the year-end in the US, which we do not expect to repeat.
When I come back, we will get into the detail of what sits behind these numbers, and we will
highlight the underlying strengths of our operations and our positive trajectory for the second
half.
Slide - Perform and Transform
Evolving the distinctive challenger approach
While staying focused on delivering our fiscal year '26 commitments, we are also making
purposeful progress on our strategic transformation.
We are performing, and we are
transforming, and we are delivering our in-year plans.
At the same time, we are making
progress on self-help efficiencies and developing the capabilities to enable sustainable longterm growth.
On this slide, you can see how we are moving forward on our strategic priorities across the top
of the wheel, strengthening our combustible business and NGP business. We have also achieved
key milestones in our strategic enablers, which you can see on the bottom half. These are
activities which either immediately and materially reduce our cost base or underpin long-term
growth through improved technology, processes and consumer capabilities. When I come back,
I will get into the detail of the actions we are taking, and how they are already supporting
delivery against the financial commitments we made last year at our Capital Markets Day.
With that, I would like to hand over to Murray for him to take us through the financial
performance and our expectation of the full year. Murray, over to you.
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Financial Review & Outlook
Murray McGowan
CFO, Imperial Brands
Slide - Continued Financial Delivery
Sustaining strong capital returns
Thank you, Lukas and good morning, everyone.
The past six months has been a period of broad-based growth. We delivered growth in our
tobacco and NGP net revenue, growth in combustibles through pricing to offset volume declines,
and growth in NGP through strong volumes and share gains across all three categories,
underpinning improvement in net revenue as we build scale.
Our Group adjusted operating profit growth of 0.6% reflects this, but also some headwinds in
the US and Australia, which I'll come on to later. We've delivered £2.6 billion of free cash flow
on a 12-month basis. Leverage at 2.4x was higher than the full year for the usual seasonal
reasons, but it remains within our target range and flat year-on-year. Overall, we are on track
to deliver against our plan for this fiscal year and meet our capital allocation priorities.
Slide - Tobacco Price Mix Offsetting Volume Declines
Growing tobacco net revenue across all regions
These results are another good illustration of the tobacco value model in action. Strong pricing
across our footprint, shown here in orange, more than offset volume declines, shown in grey,
to deliver low single-digit tobacco net revenue growth in line with guidance. In Europe, our
largest region, pricing of 6% outpaced volume declines. In the US, pricing of 5.7% was driven
by pricing both in the cigarette and mass market cigars portfolios. In AAACE, volume growth
reflects entry into new markets. Excluding Australia, AAACE delivered 6.1% price mix, similar
to Europe and the US.
Slide - Growing Adjusted Operating Profit
Performance to be weighted to the second half as guided
Tobacco operating profit growth was driven by strong performance in Europe, which grew 6.5%,
and in AAACE, excluding Australia, which grew 10.8%. In the US, growth in combustibles was
offset by some one-offs, which I'll cover in the next slide.
Whilst NGP losses increased slightly, this reflects the impact of Zone promotional activity in the
US over the prior year-end, which was more successful than we anticipated and was recorded
in H1. This reduced NGP net revenue and increased NGP losses by around £13 million. Without
this, US NGP net revenue growth would have been positive. At a Group level, NGP net revenue
growth would be double-digit and total NGP losses would have reduced in H1 year-on-year. It
was also pleasing to see Europe NGP make a profitable contribution during the first half.
Adjusted operating profit from Logistics declined, reflecting a reduced profit from tobacco
inventory, which offset underlying growth in the business.
As we said back in November,
performance will be weighted to the second half, and I'll explain some of those drivers next.
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Slide - Adjusted Operating Profit One-offs
Reduced impact in H2 supports improved performance and FY delivery
This slide shows some of the one-offs impacting H1 performance. In combustibles, these were
in the US and in Australia. In the US, tariffs on our mass-market cigars were a drag, but given
the changes to tariffs following the Supreme Court decision in February, this impact will reduce
in H2. We'll also see the full impact of pricing taken on MMC during the course of H1 support
our H2 delivery.
In Australia, we have seen accelerated volume declines of around 50%, which have impacted
on AOP. There'll be less of a drag year-on-year in H2 as we annualise those volume decreases
and expect adjusted operating profit to stabilise. We will also see a benefit from the actions
taken in the first half to resize and refocus our operations in Australia. We're driving growth
through white space market entries, most notably in Syria, which are making a meaningful
contribution, and which will drive further growth in the second half.
In NGP, we had the impact of the promotional activities in the US that I mentioned earlier.
Given our clear focus on modern oral in the US, we've taken the decision to transition out of
the US vapour category. This move will help to reduce NGP losses in H2. As a reminder, our
US vape proposition, our legacy myblu device, first launched almost a decade ago, makes a
small and declining contribution to revenue. So, we expect a stronger NGP performance in H2
in both net revenue and AOP growth.
Altogether, these one-offs had an impact of over £50 million in H1. This will be much reduced
in H2, as I've explained. So, this, combined with usual benefits of price and operational gearing,
means that we are confident of a step-up in performance in H2 and remain committed to our
previous full-year guidance.
Slide - Operating Profit: Adjusting Items
2030 strategy costs and Delaware comprise majority of adjustments
Now, as CFO, I want to ensure we're always transparent about items that we classify as
adjustments. Today, we're disclosing charges related to our 2030 strategy and historical legal
cases. Charges related to our 2030 strategy are in line with guidance that we gave at our
Capital Markets Day back in March 2025 and relate to the rationalisation of our manufacturing
footprint and our transformation programme. This includes our exit from Langenhagen. We'll
start to see the benefits from this and the recently announced sale of our Taiwan factory coming
through in the second half.
We have hit the ground running in our long-term partnership with Capgemini. In the second
half, we'll start to accrue the benefits of this new partnership. Lukas will discuss these in more
detail later. Our transformation is ongoing and remaining costs will be adjusting items in future
years.
We also showed charges related to the settlement of the Delaware case. All historical charges
have been adjusted out. Cash costs will be reflected in our free cash flow in line with the
payment schedule agreed.
As a reminder, that's £150 million in H1 this year, then the
remaining £162 million in roughly equal instalments over the next three years.
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Slide - Delivering Continued EPS Growth
Operating profit growth and share count reduction, offset by interest
Our adjusted EPS reflects our operating profit growth, and the reduced share count due to our
ongoing share buyback. An increase in finance costs was offset by lower tax and minority
interest charges. The adjusted effective tax rate at 23.5% remained flat on the same period a
year ago.
Slide - On Track with FY26 Capital Allocation
Strong free cash flow supporting shareholder returns
Turning to cash and capital allocation. Our operating cash conversion was 98% on a 12-month
basis, reflecting our continued focus on working capital. Our cash flow performance compares
well versus prior years.
Disciplined capital allocation remains a key part of how we create value. Leverage at the halfyear remained flat year-on-year, and we're on track to be around the lower end of our target
range at year-end. We've announced a 4% increase in our ordinary dividend, and we're on
track with our £1.45 billion share buyback.
This is our fourth consecutive year of share
buybacks and brings the total capital return to investors since the programme started to £4.8
billion. Taken alongside dividend payments, total cumulative capital returns from FY21 to halfyear '26 now sit at £11.5 billion. This represents around 77% of our market capitalisation at
the time of Capital Markets Day back in January 2021. To remind you, as we stated at Capital
Markets Day in March 2025, we are committed to an evergreen always-on share buyback
throughout this five-year strategic period.
Slide - Maintaining Full-year Guidance
H2 weighted as previously guided
So, to close my section, we maintain our full-year guidance. We continue to expect full-year
tobacco net revenue growth in the low single digits and double-digit NGP net revenue growth.
Adjusted operating profit growth will be within our mid-term growth range target of 3-5%. We
expect at least high single-digit EPS growth for the full-year period, supported by profit growth
and the ongoing share buyback, all at constant currency. We expect at least £2.2 billion of free
cash flow, including the impact of cash costs related to the Delaware settlement and the
implementation of our 2030 strategy.
On the Middle East, our position is similar to where it was when we issued our trading statement
last month. We have not seen a material impact from the crisis in the Middle East to date.
Clearly, the longer the situation persists, the more likely there could be a meaningful impact on
input costs and consumer demand, including duty-free.
Now, our business has proven its
resilience during past crises. We've managed through them before, and if necessary, we will
take mitigating actions.
At current rates, we expect foreign exchange to be a headwind of 0-1% to operating profit and
EPS growth. As usual, there's a slide in the appendices with guidance on specific items. We
also remain committed to the medium-term guidance we set out at our CMD in March 2025.
This means we remain well-placed to generate long-term value for our shareholders.
Thank you. I'll now hand back to Lukas, who will give an update on operational performance.
Lukas.
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Operational and Strategic Update
Lukas Paravicini
CEO, Imperial Brands
Slide - Our Evolved Strategy
Building on the strong foundations from the last five years
Thank you very much, Murray.
What I want to do in this section is take you through our strategy, shown here on the wheel. I
will explain how, just six months into this five-year strategic period, we've already made rapid
progress. We are performing today. We are delivering significant self-help efficiencies, and we
are transforming to a more efficient way of doing business. We are doing this to unlock longterm growth.
I'm going to start with the segment on the top left and talk about how we are creating
sustainable value in combustibles.
Slide - Balancing Share and Value in Priority Markets
Not all points of market share are equal
Here, we're carefully balancing the triangular equation of price, volume, and share. In each of
our regions, as you saw, pricing has once again more than offset volume declines.
In the
majority of markets, tobacco continues to be affordable. The tobacco value creation model is
working well.
Looking at the left of this slide, we're comfortable with how each of the individual priority
markets has delivered. The US and Spain have been executing with discipline, focussing on
winning the more valuable segments while pricing responsibly in the lower price segments to
maximise sustainable value. Germany has delivered a great performance in what is an intensely
competitive market. And as a reminder, our UK and Australia teams who operate in declining
markets are tasked with prioritising value over volume and share. So, in that context, a 16basis point aggregate share reduction in a given period is consistent with running the business
for sustainable value creation.
Before we move to the right-hand side, let me make a few further points about how we see
market conditions evolving, and the implication for how we approach market share. As we said
at last year's CMD, share is important. We will not return to the period before 2020, when we
were consistently the industry number one share donor. Across all our major markets, pricing
ladders are becoming more stretched. This means the gap in industry gross margin between
the premium segment and the deep discount is growing. It's a simple point, but it's worthwhile
emphasising: not all basis points of market share are equal.
These evolving market dynamics are requiring us as a challenger business to fine-tune how we
manage our portfolio to take a more focused segment-by-segment approach. On the right, you
can see the significant and growing difference in the gross margin per thousand sticks that we
can achieve at the top of the price ladder versus the discount segment. In the US, Germany
and Spain, this widening spread means it is increasingly important for us to double down on
premium segments, while,, of course, maintaining a strong presence at the discount end of the
market.
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So, in each market, we focus on nurturing our premium brands, aiming to grow our share of
that segment. At the same time, we seek to achieve the right balance of price and volume in
the discount segment to deliver sustainable value over the long term for shareholders.
Slide - US: Strong Combustibles Business
High affordability, pricing offsetting volume declines
In line with this approach, in the US we have been operating with discipline in a market which
has seen growth in the deep discount segment and new brand launches. As I mentioned, we
have been successfully defending our premium brands, Kool and Winston, and expanding our
share of that segment. And in deep discount, Crowns continues to take share, but we have
been mindful in balancing price with segment share, given the increased competitive intensity.
We have also launched a new brand, Malibu, which is enabling us to take more pricing on other
brands. It is another lever for us to balance the volume and value equation. Our cigar business
also continues to perform well, with Backwoods gaining segment share and delivering strong
revenue growth.
Slide - Priority Markets: Balancing Value and Share
Market-specific approach
Our other priority markets have been playing the individual roles we ascribed to them in our
2030 strategy. In Germany, the market remains highly attractive, with a good performance in
cigarettes, with growth in both the premium and discount segments. In Spain, which had a low
market volume decline of only 2% in H1, the focus is again on value. The UK is maximising
value in combustibles, while growing share in vape and modern oral, and the Australian team
continue to find opportunities in what, as you all know, is a challenging market.
Slide - NGP: Following a Multi-Category Approach
Building scale across all categories
Now, turning to NGP. Since rebooting our NGP business five years ago, we have established
clearly focused brands and products. Across all three categories, once again, we have grown
share. And as we build scale, we are seeing attractive gross margins. Our approach to market
entry remains consistent. We will enter markets only where the category has been created and
where we have an existing route to market.
Slide - US OND: Investment Driving Category Growth
Zone continues to deliver strong volume and share growth
Our launch into the US OND market is a good example of this challenger approach.
We launched our Zone brands just over two years ago, and we are really pleased with the
performance. This is a fast-growing but still nascent category, which is now around 10% of the
legal nicotine market. The industry is investing significantly to grow the category and build
brands with heightened promotional activity and trialling. This is the normal thing you expect
to see market leaders doing in order to create long-term value. But what this means is in the
short term, volume will grow well ahead of value.
Within this industry context, we are applying our challenger mentality by being choiceful and
agile in our approach. Our focus is on patiently growing volume share by building differentiated
brands through consumer activation, for example, through our NASCAR partnership. In the
first half, we delivered volume growth ahead of the category and grew share to 2.8%, up from
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Imperial Brands Half-Year Results
the same period last year.
Tuesday, 12th May 2026
Net revenue grew by 20%, excluding the impact of the Zone
promotional activity over the year-end that Murray mentioned earlier.
So, a positive
performance in the US.
Slide - Modern Oral: Consumer-led Product Innovation
Growing volume in the US and Europe
We are equally excited about the development of our European modern oral business.
In
Europe, our product portfolio is led by our European variant of Zone and the well-established
Skruf brand. In the first half, we launched an improved pouch format and new flavours in
Sweden. In Norway, Skruf is now the biggest brand. And as you heard and saw at our fullyear results in November, we have also launched Zone in the UK. Here, we have now reached
3% share in the independent channel, where we focused our initial launch, and we are now
rolling it out across national accounts.
Slide - Vapour: blu Brand Trusted by Consumers
Gaining share across footprint driven by blu kits
Now, turning to vapour. In the first half, we saw share growth of 130 basis points across our
footprint. Our investment is focused on Europe, and we are growing share across many of our
major markets in the region. In particular, we saw strong growth in the UK and France, where
our rechargeable blu kits are capturing share. You will remember, both those markets banned
disposable devices last year.
Slide - Heated Tobacco: Showing Consistent Growth
Clear consumer focus
In heated tobacco, we are growing share across all our markets. This broad-based success has
been underpinned by positive consumer response to our Pulze 3.0 device, launched in the
second half of last year. Our iSenzia flavoured herbal sticks continue to perform well. We have
refreshed our range of tobacco-based sticks to ensure it fully addresses the needs of our target
consumer: adult cigarette smokers transitioning into the category. I look forward to providing
you with further updates at our full-year results.
Slide - Consumer-centric Innovation
Leveraging brand building framework to build brand equity
So, I've covered the strategic priorities, how we are driving sustainable value in combustibles
and building scale in NGP. Now, I want to turn to the strategic enablers, the key elements of
our plan that help us deliver consistent top- and bottom-line progress, both now and in the
future.
I believe our distinctive challenger approach to consumer insights, brand building and
innovation is a key source of our success.
Many of you will have heard Paola, our Chief
Consumer Officer, outline our philosophy at last year's CMD. It is about getting as close as
possible to our target consumers, creating differentiated brands which meet their needs, and
then innovating in a focused way to address their pain points. Over the past six months, we
have continued to embed this way of working, and it is delivering measurable progress. And
you can see here on the slide a selection of our most recent brand activities and their positive
impact on our commercial success.
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In combustibles, our Davidoff, West and the DFX line extensions are helping to drive share,
offering greater choice for premium smokers. Innovation in our iconic Backwoods brand with
the True Wraps range is driving share in this emerging high-growth segment. In modern oral,
we have introduced a range of innovations carefully targeted at priority consumer segments.
Slide - Becoming A Data-led & Efficient Organisation
Strong momentum behind our transformation agenda
As I said earlier, we are focused both on self-help activities to drive efficiency and investment
in capabilities to drive revenue growth. In terms of efficiency, on the left, we are well on track
to deliver the £320 million of annual savings by the end of the strategic period, a commitment
we made at the CMD. In particular, we are making good progress on the rationalisation of our
factory footprint. In our Langenhagen factory in Germany, we have now completed the social
plan negotiations with colleague representatives, and we are on track to cease production in
July 2027. Last week, we announced the sale of our factory in Taiwan. This process will also
be complete by next summer. Taken together, these two actions, when completed, will reduce
overheads by £100 million.
Alongside these actions, we continue to drive manufacturing excellence across our remaining
factories, improving quality and delivering further efficiencies of £25 million in fiscal year '26.
At the same time, we are making progress in delivering operational efficiencies with a transfer
of around 400 roles to our new strategic partner, Capgemini.
While efficiency is a necessary element of our transformation, the big differentiator for us is the
development of new capabilities to support long-term revenue growth, shown here on the right.
The Capgemini partnership will accelerate our adoption of technology, simplify our processes,
and provide new consumer capabilities, and in turn, help us capture new commercial
opportunities. The partnership will also support delivery of projects already in flight, such as
the continued rollout of our enterprise platforms, including SAP S/4HANA, Salesforce and Blue
Yonder.
Slide - Another Half of Consistent Delivery
Positive start to FY26 and implementation of 2030 strategy
So, let me now bring everything together.
We have shown how our consistent financial
performance continues to drive strong cash generation, £2.6 billion over the past 12 months,
and this is underpinning consistent capital returns. We have shown that we are well-placed to
deliver our planned step-up in financial performance in the second half, and we remain
committed to the guidance we have previously given. Furthermore, we have shown you the
rapid progress we have made over the past six months in the strategic transformation of our
business. This is delivering material efficiencies in the short term and, more importantly, will
enable more consistent top-line growth, helping us become an even stronger challenger
business.
Slide - Reinforcing an Attractive Investment Case
Global consumer goods business with attractive valuation
We believe this all adds up to an attractive investment proposition.
Operational delivery
translating into revenue growth, profit growth and high single-digit EPS growth, along with
strong cash flows, all enables highly sustainable capital returns, including our always-on
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Tuesday, 12th May 2026
evergreen share buyback. To our shareholders, thank you for your continued support, and
thank you all for listening to this presentation.
This concludes the presentation, and Murray and myself very much look forward to your
questions. I would ask John, please, to moderate and open the Q&A section, please. Thank
you.
Q&A
John Crosse: Thanks, Lukas. Just before we come to questions in the room, if you're watching
us online, hopefully on your screen, you should be able to see where you can type in a question.
That'll come through to me in the room, and we can ask that. Similarly, if you're listening on
the telephone, you should have been given instructions on how to register a question. We'll
give you a reminder as well when we come to the phone lines. So, questions in the room, if
you could give your name and where you're from, just for people listening on the webcast, in
case they can't see. Let's start with Faham in the front row.
Faham Baig (UBS): Thanks, guys, for the presentation. Two for me. If I look at your guidance
historically on EBIT growth, it's been relatively narrow over the last couple of years, whereas
this year, despite seeing the last six months, you've stuck with the 3-5%. I wanted to ask at
this stage whether you think the lower half or the upper half of the guidance is likely, or if you
can't be as detailed, maybe talking about some of the moving parts that could see you at the
upper end or lower end could be quite helpful.
The second question is on market share.
It's a two-part question.
Number one, from an
industry volume standpoint, is the situation in terms of volume declines better than where we've
been in the past, which allows you to accept slight share losses, is the first part of the question.
And the second part of the question is, given this increased focus on more profitable segments,
is it better to look at value share compared to volume share as the key metric going forward?
Thank you.
Lukas Paravicini: Thank you very much, Faham. Let me answer the questions. Hopefully, I
don't forget the latter ones. Let me start with the first one, with the guidance.
Listen, we have given the first guidance at our Capital Markets Day, which is a 3-5% AOP
growth over the next five years. We've reiterated that guidance at the full year. We have
delivered a strong performance at the half-year. We have shown you some of the implications
that go on top of the normal second half phasing, which is due to pricing increase in the second
half, which very nicely showed the over £50 million impact in the first half, which, we believe,
will ease in the second half. We're well on track to deliver the full-year guidance. There's really
not much more I can say. This is our guidance, and we will deliver within that guidance. So,
that's on the guidance.
Market share. Let me separate there also between volume and value share. So, indeed, the
volumes are doing very well. It's another year where our volumes at half-year are only down
1.5%. Obviously, you have different proportions, different mix. You also have heard that we
entered new white spaces, among them Syria, which used to be a big cigarette market and is
doing very well. So, that obviously has an impact. Again, we don't guide on volume share,
and I would always caution that the long-term trend is 3-5% negative. Every year we're doing
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Tuesday, 12th May 2026
better. It's great because to get to our target net revenue of 1-2%, we need to price less and
that is always helpful for the consumer. So, that's good. So, that's on the volume.
Our share discussion and focus on segment is really an evolution. I just want to reiterate how
important share is for any company, but share is one of the metrics we look at next to net
revenue, operating profit and many other metrics we have.
It's really about this careful
triangulation of price, volume and share in an environment where your gross margin has
evolved significantly from the top to the bottom. We will play in all segments because we start
with the consumer. Wherever the consumer is, we will be there. But while we double down on
the top, we'll also make sure that we are pricing responsibly at the bottom. Now, that's what
we're looking at in the market share.
To your question, it is a good question: is value share the better one? Listen, we've done this
now for the last 30 years. Value share has its benefits, has also its downsides, the same as
volume share. In our industry, value share is more difficult to calculate. We don't have the
means and the data to do that. Any focus on value or volume share will always lead to a narrow
view. That's why it is more important for us actually, rather than seeing whether we switch to
value share, to focus on the triangulation of volume, price and share. Sorry for the longer
explanation, but I thought it might be useful.
John Crosse: Thank you. Next one - Pallav
Pallav Mittal (Barclays): Pallav Mittal from Barclays. Two for me, please. Given the new
FDA guidance on enforcement priorities in the US and your plan to exit the blu business, how
should we think about your NGP strategy going forward, specifically in the US? Do you have
any products in the pipeline that you can launch quickly on nicotine pouches or vapour? That's
the first one. And then secondly, on the German market, on the tax environment, there seems
to be – the five-year plan is coming to an end, and there seems to be a plan to increase the
taxes significantly. So, how should we think about your plans in the German market going
forward?
Lukas Paravicini: Thank you very much, Pallav. I'll take the NGP points and then Murray will
answer your questions on the German tax environment.
Firstly, we remain very pleased with the performance of our NGP business. We are here to
build scale in NGP. We have done so over the last five years, building a strong base, and we
have committed to a double-digit growth for the next few years, and we are on track to deliver
on the full year.
Now, specifically in the US, indeed, you have seen recently new FDA guidance; especially,
there's been a flurry of new guidance and comments, especially last week. There was one on
Friday, which we would not want to comment on at this stage because the FDA has committed
to further clarification probably today or throughout these days. So, we will want to wait until
the FDA has made further announcements to that. What is important for us is that, in general,
we welcome scientific-based approaches and approaches that actually allow adult smokers
easier access to responsible products. In that way, we very much welcome the FDA's effort
and genuine interest in reducing the backlog and accelerating the process. That is helpful for
all players and is welcome, especially for our consumers.
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Imperial Brands Half-Year Results
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Now, we are still and remain very excited with the US in terms of OND. We have mentioned to
you that, excluding the promotional activity that Murray mentioned, we have grown 40% in
volume ahead of the category growth. We have grown 20%, and we're committed to the second
half, because we do have grandfathered rights and opportunities in products with stronger
strengths and new flavours. So, we have a pipeline of innovation that will allow us to deliver
on the second half and beyond. So, very excited with that prospect.
And finally, to comment on our vape blu decision, which is very separate to the FDA
announcement. Our myblu product is a ten-year-old product. It's an ageing product, which
probably does not meet the consumer needs of today, has been making a very limited
contribution to the business, and was loss-making. So, that's the reason we have transitioned
out, while we look into what we can do in the future. I will keep you informed of that.
So, that's on the NGP. And Murray, on Germany.
Murray McGowan: Germany. Look for context. So, Germany is a market where it's typically
a very predictable tax environment. So, every five years, the government republishes the tax
plan for the next five years, which makes it, from our perspective, a very well-managed market.
You're right, the government's going through negotiation of the next five-year tax plan. I would
say it's a market where there's always very positive engagement with the industry around the
evolution of that plan. We engage particularly with the finance ministry in Germany.
Now, you would have seen in the press, there were some suggestions recently of an increase
in tax to support people in Germany with some of the rising fuel costs. It's clear that has met
some opposition in terms of the initial proposals and is going through discussions just now. Our
current view is that's highly unlikely to impact this financial year, and any changes may well be
folded into the next five-year tax plan. So, we continue to positively engage with the ministry
around that, but it's still uncertain as to how it will end, but our expectation is anything would
probably be an FY27 and onwards impact.
John Crosse: Okay. Great. Thank you. James, there?
James Edwardes Jones (RBC): Sorry, James Edwardes Jones from RBC. Could I come back
to the market share point, accepting your point that it's actually difficult to calculate value
market share? Do you have some idea of value market share trends in the five priority markets
that you could share with us?
Lukas Paravicini: So, we do – so, it is more complicated than what you would expect, but
obviously, we look at what we can get in terms of data, which we currently are not sharing
externally because we were focussing on the volume share. But I would step back, James,
from that specific volume versus value share. The nature of us looking at share volume and
price, you to some extent do exactly that, actually consider the value of your share point. I
mean, the point I was making before, the reason we are more fine-tuning our approach to
market share, being present in all three segments, but also looking at pricing is because, as I
mentioned before, not every bps of volume share is equal. The way you look at that is through
the gross margin price length, which is nothing other than an alternative way to look at it from
a value share perspective.
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Imperial Brands Half-Year Results
Tuesday, 12th May 2026
John Crosse: Is that it, James? Do you have another one? I thought you said that was the
first one of many. No, it's so unique for a sell-side to ask one single question. I was slightly
taken aback by that. Andrei, do you want to go next?
Andrei Andon (Jefferies): Hi, good morning.
This is Andrei Andon from Jefferies.
Two
questions for me, please. Number one, how do you see the A&P needs of the NGP business
evolving in H2, particularly given the news about the FDA potentially tolerating the sales of
some pouch brands without authorisation in the US market, which could increase the
competitive intensity kind of near- to mid-term?
And then secondly, there's been growing
discussion about US illicit e-vape enforcement improving. Could you perhaps give more colour
on how significant of a tailwind this has been in US combustibles in H1, so for the combustibles
business? And then, do you see this tailwind perhaps persisting into H2?
Lukas Paravicini: Sorry, Andrei, I missed the first part. What were you looking for in the
second half due to the FDA regulation?
Andrei Andon: The A&P needs of the NGP business in the US.
Lukas Paravicini: Excellent. So, as I said before, we welcome in general all the efforts of the
FDA going in the direction of reducing backlog and accelerating the process. Our plans for the
second half, and we are very committed to building long-term, patiently, a business in the US
around the OND, and we're making good progress. You've seen that in the first half. As I
mentioned before, we have plans around strengths and flavours that we are going to support.
Those meet our consumer needs, and we start with the consumer. We focus on the consumer.
In our budget, we have sufficient A&P considered for what we are needing to do in the second
half. And trust me, I mean, you've seen the competitive intensity in the past, which is already
very high. Even then, with our very focused approach on our consumers, we have been able
to continue to expand our share.
The second one is vape and illicit. So, yes, we've always commented that the volumes are
driven by four things in the US, which is mainly your secular exit of the category, your crosscategory exit, so meaning you go from cigarettes to vape or something else, in this case often
illicit vape, your pricing, and macroeconomics impact. We've always highlighted that actually
the bigger impact when the volumes were above 8% would be the decrease of the
macroeconomic impact and separately the illicit, actually both in the same way.
You've seen that our volumes have improved, the industry volumes have improved in the US,
which is great news, which means that we go back to that normality, which some of you doubt
that we will get back to. And if you look at the data underneath it, the two drivers there are
equally, again, the illicit vape and the macroeconomic impact, meaning that we see the
enforcement, while not perfect, while probably not taking away the illicit, has made a dent in
the volume declines. It makes a difference. If you listen to the US government, and you see
the actions, I have no doubt that that will continue in the second half. You've also seen, and I
can't tell you what the impact is of the Middle East crisis on the US consumer sentiment, but
you have seen an increased improvement in the consumer sentiment. In fact, it is remarkable
to see how strong the US economy is still doing after three months of the Middle East crisis.
That trickles down into better volumes as well. We would expect this to continue in the short
term.
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Imperial Brands Half-Year Results
Tuesday, 12th May 2026
John Crosse: Okay. Just going to go to online and then I'll come back into the room. David
Roux from Morgan Stanley has just asked two questions online. The first one is, following on
from that, at what point does the Middle East conflict impact FY26 guidance? Probably one for
you, Murray.
And then the second one is, can you give some more detail about progress
towards getting double duty drawback benefit?
What still needs to happen to become
compliant? How should we think about timing and magnitude?
Lukas Paravicini: Do you want to take the fiscal year '26?
Murray McGowan: Yeah. I'll talk to it. Well, thanks for the question, David. Look, as I said
during the presentation, we haven't seen a meaningful impact of the Middle East crisis to date.
Clearly, if you look out into the future, we see potential impact across the areas. So one would
be input costs. The reality for us during the course of FY26, we expect minimal impact on input
costs, given the amount of fixing we've got in some of our supply coming in for the balance of
the year. If it goes on long term through FY27, actually, we'd expect to see some impact
through that.
Second is duty-free. There are reduced volumes in duty-free in the Middle East airports. So,
clearly, there's fewer people going through that.
From a group perspective, that's largely
manageable as we look across this year.
The third is – and this is the unknown – is the consumer impact. What we haven't seen so far
is a real shift in consumer buying habits. So, with higher gas prices at the pump in the US and
other markets, at some point that could impact the consumer buying habit, whether they buy
less often, whether more move into illicit or whether they buy cheaper products. We haven't
seen it so far. That's the unknown for us at this point in time. So, I can't give you a date, at
which suddenly it becomes a problem for us. I haven't seen the impact so far. We monitor it
very closely, but at this stage, we are confirming our guidance for the full year.
Lukas Paravicini: I think if I may, just before I go to the duty drawback, the Middle East crisis
is one of many crises we are going through again. I think all of our consumer peers will look
at what happens to the consumer sentiment in months to come. Right now, as Murray said,
there's no impact and we are well on track to deliver fiscal year '26. I would also draw your
attention to the past. We will continue to be monitoring the situation. We'll surely not be
complacent. And we will hopefully be as resilient as in the past. Think about Ukraine. Think
about the Red Sea crisis, the hyperinflation. We've been tested, and we have shown that this
industry and this company is resilient to crisis.
So, we'll continue to monitor and react to
whatever comes in the future.
Duty drawback. Duty drawback, with the clarity we have obtained in August, we are working
expeditiously on setting up a duty drawback system, leveraging our global presence. That is
not the challenge. The challenge is to get this done in a way that is approved by the FDA. So,
we need to approve factories or sites abroad for it to be certified to import into the US. We're
well on track, but it takes time. We expect a meaningful contribution of that scheme in fiscal
year '26, most likely towards the second half of – excuse me, thank you for clarifying, '27. I'm
ahead of my time. Fiscal year '27, just to clarify. So most likely in the second half of '27 and
then the full impact in fiscal year '28.
John Crosse: Let's go back in the room. Damian, do you have it?
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Imperial Brands Half-Year Results
Tuesday, 12th May 2026
Damian McNeela (Deutsche Bank): Thank you. Damian McNeela at Deutsche Bank. Two,
please. First one on US vape. You obviously pulled out and you sort of said you're watching
the marketplace. Can you give us some insights into what you're specifically looking for, for
perhaps a market re-entry into US vape? And then secondly, perhaps the category is clearly
growing globally, but you're only in seven markets.
Are you actively looking at additional
markets to roll out Zone or Skruf into, please?
Lukas Paravicini: Thank you, Damian.
Listen, we are a challenger market – we are a
challenger company. And as such, we will always look where we can use the best – where we
get the best return for our investments. Clearly, when you look at NGP, the OND business in
the US is highly attractive, and we're well on track to continue to expand our presence and our
share. When it comes to vape, our biggest markets or regions is Europe, where we have 80%
of our business in NGP, and we're growing rapidly. We expanded vape share by 130 bps this
half-year.
So, in the US, you have one, the PMTA process, which is still a lengthy, costly
experience, and you still have a big illicit market. So, if I have to make choices right now, we
are focussing on the OND markets, where we have products, we have innovation in the pipeline
that we can excite our consumers. We will continue to look at the vape markets and at the
right time, we'll see what we can do to come back.
Pouches. So, you know, the NGP business is an attractive business, but we are very disciplined
in how we look at the NGP business. We will build patience in our business, we have committed
to a double-digit growth, but we are not going to create the market. As much as I understand
the excitement in many markets about pouches, when you look at data, and remember, we are
a consumer-first and data-driven company, the data is showing that the markets are very small.
And hence, as the fourth largest in the industry and a responsible player also in regards to our
shareholders, we will double down on those markets where we have a business or where the
market has been created, and we have a route to market.
We shine our effort in Eastern
Europe, where we have our heated tobacco, we have launched Zone in the UK. We might
launch it in one or two other markets, but it will be a very measured launch, because what we
don’t want, is not to be everywhere a little bit, but we want to double down in those markets
where there is a market, and we have a good understanding of our consumer, and we can reach
them easily.
John Crosse: Okay, thanks. Any other questions in the room? Emma, can we just go quickly
on the phone line. Can you give a reminder for people there who want to register a question
perhaps?
Operator: Thank you. To ask a question, you need to press star one and one on your telephone
and wait for your name to be announced. I'll hand back to you, John.
John Crosse: Thank you. That prompt has reminded Simon at Citi to register. So, Simon, do
you want to go ahead and ask your question?
Simon Hales (Citi): Thanks. Morning. Also, a latecomer to the party. My first question was
just around the AAACE region, really. Could you talk a little bit more about the combustibles
volume performance in the first half, maybe excluding Australia? How much of a volume benefit
did you see from the innovation you've put in there, as well as the new market launches, was
there some pipeline fill? And how do we think about the volume outlook in that region in the
second half of the year for combustibles specifically?
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Imperial Brands Half-Year Results
Tuesday, 12th May 2026
And then secondly, I may have missed it, but you highlighted sort of, Lukas, in your remarks
around the strong start you made on the transformation journey, you've highlighted the factory
closures that are underway. How big, though, were the efficiency savings in the first half?
Should we expect a step-up to those savings rates in the second half of the year? Or is it really
about 2027 is the year that we really see those big benefits starting to flow through?
Lukas Paravicini: Thank you, Simon. And Murray, will you take the volumes in AAACE and
I'll do transformation?
Murray McGowan: Yes, Lukas. On AAACE, I think, Simon, it's important. AAACE has a couple
of different drivers that are really supporting volume performance there. So, clearly, as you
highlight, we've seen a drop in volumes in Australia.
I think it's important to understand
Australia from a group perspective is a very small amount of volume. I think it's less than 2%
of our net revenue sits in Australia. And AAACE has a couple of drivers that are really supporting
volume growth. So, one is Africa has a really good strong performance again. So, we see good
volume performance across that continent.
And then the new market launches. So, Syria will have a meaningful contribution for us, a
meaningful contribution in the first half. And again, will step up in the second half. So, it'll
help push strong performance within AAACE volume as we go into the second half in
combustibles. So, we don't guide on volumes, per se, but I think that trend you see in volume
will continue into the second half for those reasons.
Lukas Paravicini: Thank you very much. And Simon, thank you very much for asking about
the transformation. We are excited about doing two things: performing in the short term but
also making sure that we can continue to perform in the long term by transforming our business.
And you know, it is equally transforming in the short term and the long term.
Short term is we are delivering self-help efficiencies very clearly. I've given you data points
like fiscal year '26, we are looking into our factories, how to run them more efficiently, how to
apply an operating model that really is consistent with what you see out there. It will deliver
£25 million this year and more to come in the following years. We are looking at the factory
footprint. We have exited two entities which will cease production by summer '27. That will
deliver £100 million progressively until we finish those transformations. So, again, we are well
on track and quick out of the blocks when it comes to the £320 million efficiency savings that
we have committed. There's no doubt about that.
But efficiency is important to us, because without efficiency, you cannot really be effective. But
the distinctive thing in our transformation is we don't just stop at the efficiency. We want to
go beyond the efficiencies. Because we believe with our strategic partnership with Capgemini,
efficiency is a given. But what is really more interesting to us is how we can transform the
business to be closer to our consumer, to build on the sales capabilities, tapping into the
knowledge and technology that Capgemini has to grow revenue in the future. And I think that
combination of short-term self-help efficiency, which will be progressively increasing over the
next few years, and that better readiness to deliver also beyond 2030 revenue growth, is really
what is distinctive in this transformation.
John Crosse: Okay. Thanks for that, Simon. Okay. I think there's nothing else online or on
the phone. So, I think I'll bring it to a close. Thanks, everyone, for joining us. Lukas, I'll hand
it back to you.
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Imperial Brands Half-Year Results
Tuesday, 12th May 2026
Lukas Paravicini: Thank you very much. Thank you. I know you've got lots of presentations.
So, I really appreciate you showing up and connecting online and showing interest in our
company.
I hope you have taken three things away from today. One is that we have delivered a good
performance in the first half. We have grown our net revenue, our operating profit, and we
have delivered yet another six months of very strong cash generation. I hope you leave this
room and this online presentation with strong confidence that we are well on track to deliver
on the full-year guidance. And thirdly, I hope you can see that we are not just performing
today. We're making sure that we are transforming for tomorrow. We're delivering self-help
efficiencies in a meaningful way, and we're building the future in a way that we can continue to
drive sustainable growth in the future.
Thank you very much, and I'll keep seeing you soon. Thank you.
[END OF TRANSCRIPT]
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