Imperial Brands Plc – Half-year Report

·     Marketing investment delivering further share growth in Growth Brands and priority markets

·     Total volumes continue to outperform industry; Growth Brand organic volumes up 1.6% and share up 100 bps

·     Significant progress in NGP: roll-out of myblu and proprietary innovation in vapour and heated tobacco

·     Adjusted results reflect difficult prior year trading environment; improving Q2 price/mix supports H2 growth

·     Reported operating profit includes the impact of the administration of the UK distributor Palmer & Harvey

·     Dividend growth of 10%, supported by cash conversion of 111%; expect 95% at FY

·     Strategic focus highlights capital reallocation opportunities, targeting proceeds of up to £2 billion

See page 4 for basis of preparation and page 13 for the reconciliation between reported and adjusted measures.

Adjusted operating profit excludes a one-off impact of £160m in HY18 which resulted from administration of the UK distributor Palmer & Harvey.

Basic EPS reduction is driven by the gains in fair value of derivatives in HY17 and by the administration of the UK distributor Palmer and Harvey in HY18.

¹ Change at constant currency removes the effect of exchange rate movements on the translation of the results of our overseas operations.

“We are on track to deliver on our full year expectations. We are also making good progress delivering on our strategy, focusing on the key products, brands and markets central to delivering growth in Tobacco and Next Generation Products. This clear strategic focus supports active capital allocation, and we are progressing a number of divestment opportunities that will further simplify the business and free up capital. The Board also recognises the importance of the dividend to shareholders and regularly reviews our dividend policy to ensure it is aligned to performance, the balance sheet and investment needs of the business; our strong cash-flows underpin our dividend pay-out and investment in sustainable growth.”

“We continue to make good progress in both tobacco and Next Generation Products (NGP). Investment in our key tobacco brand equities has strengthened our position in our priority markets, with further share gains driven by Growth Brands. Within a tough but improving environment, we exited the first half with much stronger price/mix and expect to convert our improved share into top-line growth in the second half. In NGP our product and market launches are on track. myblu is generating positive trade and consumer feedback and we continue to invest in developing our pipeline of proprietary innovations, including heated tobacco, to enhance the consumer experience and realise our growth ambitions. As we sharpen our focus on the brands, products and markets that are central to our strategy, we are progressing opportunities for divestments, initially targeting proceeds of up to £2 billion within the next 12-24 months. This will further simplify the business, enhance performance and release capital to pay down debt, deliver returns to our shareholders and, where appropriate, invest in our growth agenda.”