17 Nov 2020

Full Year Results Statement

TAKING ACTION TO STRENGTHEN PERFORMANCE

Report for the year ended 30 September 2020

Business Highlights

Business overcame the challenges posed by COVID-19; securing the safety and wellbeing of employees and responding to changes in consumer behaviour
Tobacco volumes strong but sub-optimal product and market mix result in weak gross profit contribution
A more disciplined approach in NGP reduced H2 losses after a disappointing H1
Strengthened Executive Team with key external leadership appointments providing fresh skills and perspectives to complement existing experience
Comprehensive strategic review underway with a capital markets update scheduled for 27 January
Completed sale of Premium Cigars business on 29 October 2020; proceeds used to reduce debt

Financial Performance

Group net revenue up +0.8%
Tobacco volume decline of -2.1% reflecting better market size and share trends in several markets
Tobacco net revenue +1.8% but weaker mix impacting gross profit contribution
Moderation of NGP net revenue decline; H1: -43%, H2: -9% with FY down 27%
Adjusted EPS down -5.6% reflecting reduced tobacco profit with COVID-19 and regulatory costs; and losses in NGP
Reported EPS up 49.4% at 158.3p reflecting prior year impairment charge for Premium Cigar sale
Strong cash conversion 127%; 107% excluding timing benefit on duty payments
Annual dividend of 137.7 pence per share reflecting rebased payment announced in May

Financial Summary

Year ended 30 September 2020		Reported¹			Adjusted¹
		2020	2019	Change	2020	2019	Actual	Constant Currency²
Revenue	£m	35,562	31,594	+3.1%	7,985	7,991	-0.1%	+0.8%
Operating profit	£m	2,731	2,197	+24.3%	3,527	3,739	-5.7%	-4.8%
Earnings per share	pence	158.3	106.0	+49.4%	254.4	272.3	-6.6%	-5.6%
Net debt	£m	(11,141)	(11,970)		(10,299)	(11,376)
Dividend per share	pence	137.7	206.6	-33.3%	137.7	206.6	-33.3%	-33.3%

See page 3 for basis of preparation and page 17 for the reconciliation between reported and adjusted measures.
¹ 2019 revenue, operating profit and earnings per share have been restated for change in Auxly treatment
² Constant currency removes effect of exchange rate movements on the translation of the results of our overseas operations.

Stefan Bomhard, Chief Executive

“Although this has been a difficult year, the resilience of our tobacco business and the measures we have taken to improve our NGP operations reinforce my confidence in the future potential of the business. With a more disciplined focus and better execution we can realise significant value for our stakeholders over time.

“My first months have been focused on engaging with employees, consumers and customers and leading the strategic review of the business. What I have seen to date confirms my view of the Group’s solid foundations. I believe there is scope to enhance returns from our tobacco business and opportunities to strengthen our NGP delivery over time. I firmly believe we can make a meaningful contribution to harm reduction within a more disciplined, returns focused framework and we have already taken steps to stem the NGP losses.

“I look forward to providing further details of our renewed focus on value creation at a capital markets event in January and I would like to conclude by recognising the tremendous efforts of our employees in these unprecedented times. The commitment of our people across the business and their willingness to embrace change has been inspiring to see; my thanks to them all.”

Investor Contacts		Media Contacts
Peter Durman	+44 (0)7970 328 903	Alex Parsons	+44 (0)7967 467 241
Matt Sharff	+44 (0)7964 110 921	Simon Evans	+44 (0)7967 467 684
James King	+44 (0)7581 052 880