Annual report 2010 - Imperial Tobacco Group

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Chief Executive’s Review continuedStrategy Performance Governance FinancialsWe delivered a strong fine cut tobacco performance, withexcellent share gains in Central Europe. We grew our netrevenues in the UK, Germany and the Rest of the EU andin Rest of the World region.Our cash conversion was very strong at 97 per cent and wehave reduced our debt by £1.5 billion with closing adjustednet debt of £9.3 billion.Brand EquityDavidoff and West have been effectively positioned tocapitalise on consumer trends, growing volumes by 3per cent and 2 per cent respectively.In Eastern Europe, we have grown volumes of Davidoff by20 per cent with particular success in the growing superslimsand kingsize superslims segments. We continued to growDavidoff’s market share in many markets including inUkraine, Saudi Arabia and Greece.We grew volumes of West in the value cigarette segmentand delivered additional brand innovations with specialisedfilters and variants adding an extra dimension for consumers,resulting in particularly impressive growth in Turkey and Taiwan.Gauloises Blondes has continued to consolidate its positioncelebrating its centenary in 2010 with a series of limitededition packs and new variants which were well receivedby consumers. We have further extended the brand’s reach,with a particular focus on Eastern Europe and notable earlysuccess in the Balkans.Complementing our strategic brands is our versatile portfolioof regional and local cigarette brands with consumer insightsdriving our brand and product portfolio choices at a marketlevel. Our regional value brand JPS was a particular highlightand we have grown volumes by 13 per cent and deliveredsignificant market share growth in a number of our majorEuropean markets including in the UK and Germany andin Australia. Other notable performances include Fine andExcellence in Africa and Maxim in Eastern Europe.Total TobaccoOur total tobacco portfolio provides consumers with acomprehensive range of tobacco products.By anticipating local consumer requirements we grew ourtotal fine cut tobacco volumes by 8.7 per cent on a whitestick equivalent basis. We made very good progress inCentral Europe, with volumes growing strongly by 54 percent across the region and Paramount up by 67 per cent.Another notable success during the year was the launch ofDucados Rubio in Spain, the first expanded make your owntobacco product in the market. Launched in June, it hassince captured 5.8 per cent of the Spanish fine cut tobaccomarket. In addition, we had another excellent performancewith snus in Scandinavia, with volumes up 24 per cent.In cigars, despite the challenging environment we grewsales and profits with the continued recovery of ourHabanos business.Market FootprintOur products are sold in over 160 markets and our balancedgeographic exposure provides opportunities to maximise thepotential of our brands.We drive sales growth across all markets with our globalstrategic brands complemented by our regional and localbrand portfolio. We balance our market share targets withsustainable profit growth in mature markets, while ourinvestment priorities target Eastern Europe, Africa, theMiddle East and Asia to further build our position inemerging markets.We also have an excellent partnership track record, withseveral new partnership agreements signed in the year,building our market footprint. We announced a licenceagreement with KT&G for the manufacture and sale ofDavidoff in South Korea, a manufacture and licenceagreement for West and Davidoff in Mexico and a cigarcollaboration framework agreement in China. In addition,we signed an import and distribution agreement forDavidoff in India.PeopleSince my appointment as Chief Executive in May, I havespent time in each of our regions discussing opportunitiesto further develop and implement our sales growth strategy.The response from our employees has been extremelypositive – with our global team fully aligned behind ourenhanced sales focus.LogisticsIn logistics we delivered another positive result. Our tobaccologistics business performed robustly, with price increasesand effective cost management key to maintaining ourprofit levels in both our tobacco logistics and our otherlogistics businesses.Our Responsible ApproachWe recognise the controversial nature of tobaccoand believe it is essential that tobacco products aremanufactured and sold by legitimate, responsiblebusinesses. Our commitment to managing our businessresponsibly has once again been recognised externallyby Business in the Community, with a gold award rating.More details on our corporate responsibility performanceare included on pages 41 to 52.Outlook: Our Priorities and ChallengesDriving sustainable sales growth is at the heart of ourshareholder value agenda. We will continue to build salesacross our balanced geographic footprint ensuring ourversatile brand and product portfolio remains relevantand appealing to evolving consumer preferences.Our focus on cost and efficiency continues as well aseffectively utilising the cash we generate. We have theassets, the opportunities and most importantly thecapabilities and value creating mindset to succeedand I believe we are well placed to continue to createsustainable value for our shareholders in the years ahead.Alison CooperChief Executive8
Our StrategyWe are focused on delivering sustainablesales growth through the smartleverage of our assets.Delivering sustainableshareholder returnsGrowth driversCostOptimisationSalesGrowthCashUtilisationOur key assetsMarketFootprintTotalTobaccoBrandEquityPeopleConsumerCentricHow we leverage our assetsExecutionExcellenceFutureFoundationsGrowth Drivers Our Key Assets How we Leverageour AssetsThe growth drivers of our businessare sales, cost optimisation andcash utilisation. At the heart of ourstrategy is our topline growth agendacomplemented by our focus onoptimising our costs and utilisingour substantial cash flows to createadditional value for our shareholders.Our growth strategy is about maximisingvalue from our four key assets – ourbrands, our unique total tobaccoproduct portfolio, our extensive marketfootprint and our people. Turn to pages10 to 15 for more detail.Smart leverage of these assets drivessales growth with three particular areasof focus: consumer centricity, executionexcellence and future foundations.Turn to pages 16 to 21 for how weapply these in practice and examplesof our achievements in 2010.9
Page 1 and 2: Imperial Tobacco Group PLCAnnual Re
Page 3 and 4: …to deliver sustainableshareholde
Page 5 and 6: Operational HighlightsDelivering Su
Page 7 and 8: and product portfolio to evolving c
Page 9: In this section9 Strategic Review10
Page 13 and 14: Total Tobacco5 % Our Powerful Brand
Page 15 and 16: Our global strategic cigarette bran
Page 17 and 18: Our global team is fully aligned be
Page 19 and 20: Satisfying consumers and aligning o
Page 21 and 22: We are a responsive business with s
Page 23 and 24: Operating responsibly, combined wit
Page 25 and 26: Our growth drivers of sales growth,
Page 27 and 28: Principal Risks and UncertaintiesA
Page 29 and 30: Competition LawOverviewWe take comp
Page 31 and 32: Reconciliation of Adjusted Performa
Page 33 and 34: Key Performance Indicators (KPIs) 1
Page 35 and 36: Lambert & Butler and Richmond remai
Page 37 and 38: Within this the travel retail marke
Page 39 and 40: OutlookThe strength of our portfoli
Page 41 and 42: Blondes. In the Middle East, we aga
Page 43 and 44: Corporate ResponsibilityOur Corpora
Page 45 and 46: Corporate Responsibility and our St
Page 47 and 48: We have revised our IMS and employe
Page 49 and 50: Environmental Performance 1Absolute
Page 51 and 52: across the business. More informati
Page 53 and 54: Supplier RelationshipsOur main supp
Page 55 and 56: Non-financial performance indicator
Page 57 and 58: “High standards of corporategover
Page 59 and 60: 5. Pierre Jungels, CBE (HON), PHD,
Page 61 and 62:
Management and Corporate StructureB
Page 63 and 64:
Meetings of the Board, Board Commit
Page 65 and 66:
and supplemented by our Non-Executi
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6 Performance evaluation: How do we
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The Board recognises that we operat
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Assurance process for financial rep
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- receiving reports from, and quest
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Directors’ Report: Other Informat
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- state whether IFRSs as adopted by
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We understand that a purported coll
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This Report covers the following:1
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2 Directors’ Emoluments for the Y
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Directors’ Interests in Ordinary
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Executive Directors’ Service Agre
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When setting base salary the Remune
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First ElementFifty per cent of the
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In respect of the October 2007 - Oc
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Any annual bonus earned up to 100 p
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Benefit Trusts have also been provi
Page 99 and 100:
Independent Auditors’ Reportto th
Page 101 and 102:
Consolidated Statement ofComprehens
Page 103 and 104:
Consolidated Statement of Changes i
Page 105 and 106:
Accounting PoliciesBasis of Prepara
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Duty and Similar ItemsDuty and simi
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InventoriesInventories are stated a
Page 111 and 112:
Restructuring CostsSignificant one-
Page 113 and 114:
Property, Plant and Equipment and I
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Tobacco net revenue£ million 2010
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3 Restructuring Costs£ million 201
Page 119 and 120:
Factors affecting the tax charge fo
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9 Intangible Assets2010£ million G
Page 123 and 124:
10 Property, Plant and Equipment201
Page 125 and 126:
13 Trade and Other Receivables2010
Page 127 and 128:
Sensitivity analysisIFRS 7 requires
Page 129 and 130:
At 30 September 2009Balance sheetam
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(iii) Currency analysis and effecti
Page 133 and 134:
(iv) Derivative financial instrumen
Page 135 and 136:
Matures in financial year ending in
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The following tables are provided i
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Matures in financial year ending in
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(vi) Hedge of net investments in fo
Page 143 and 144:
18 Retirement Benefit SchemesThe Gr
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Assumptions regarding future mortal
Page 147 and 148:
21 Share SchemesThe Group recognise
Page 149 and 150:
Year from 1 October 2008 to 30 Sept
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23 CommitmentsCapital commitments£
Page 153 and 154:
27 Reconciliation of Cash Flow to M
Page 155 and 156:
Imperial Tobacco Group PLC Balance
Page 157 and 158:
(iii) Debtors: Amounts Falling Due
Page 159 and 160:
Principal SubsidiariesThe principal
Page 161 and 162:
Shareholder InformationRegistered O
Page 163 and 164:
IndexAAccounting Policies 103Acquis
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Annual report 2010 - Imperial Tobacco Group

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