IMT Imperial TObacco Imperial Brands Barclays Global Consumer Staples Conference Sept 2016

Quality Revenue, Sustainable Returns
Oliver Tant
Chief Financial Officer
Barclays Global Consumer Staples Conference: September 2016
Disclaimer
Certain statements in this presentation

constitute or may constitute forward-looking
statements.
Any
statement
in
this
presentation that is not a statement of
historical fact including, without limitation,
those regarding the Companys 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 presentation. 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
presentation and the Company undertakes
no obligation to update its view of such risks
and uncertainties or to update the forwardlooking statements contained herein. Nothing
in this presentation should be construed as a
profit forecast or profit estimate and no
statement in this presentation 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 presentation
2 | Barclays Global Consumer Staples Conference | September 2016
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 presentation is shown or into
whose hands it may come and any such
responsibility or liability is expressly
disclaimed. The material in this presentation
is not provided for tobacco product
advertising or promotional purposes. This
material does not constitute and should not
be construed as constituting an offer to sell,
or a solicitation of an offer to buy, any
tobacco products. The Companys products
are sold only in compliance with the laws of
the particular jurisdictions in which they are
sold.
Delivering More Returns

Investment case
Investing for quality growth;

brands, products and markets
with long-term profit potential
Value creation supported by

agility and discipline;
continuous improvement
Strong cash generation
10% dividend growth pa

over medium term
Quality, Agility, Discipline

Consistent themes inform strategic
choices
Sustainability
Driving revenue, margins, cash and dividend growth
Quality
Agility
Brand, product and Simplification and

market choices
continuous
improvement
Discipline
Resource, cost
and cash
optimisation
Our Strategy
Maximise sustainable shareholder returns
Develop Footprint
QUALITY
Strengthen Portfolio
Further simplification
Investment in Growth &
Specialist Brands
E-vapour development
Embed Capital
DISCIPLINE
Discipline
Drive Cost
Optimisation
Opportunities in Growth
Markets
Operating model
Cash conversion
Balanced approach in
Returns Markets
Lean manufacturing
Overhead control
Capital allocation:
investment, dividend
and debt repayment
AGILITY
And for the Next 5 Years

More, more, more, more
Strengthen
Portfolio
More simplification
and focus
Develop
Footprint
More
prioritisation
Drive Cost
Optimisation
More
optimisation
Embed Capital
Discipline
More discipline
Footprint & Portfolio

Focus on strongest markets & biggest
brands
Fewer, bigger, stronger
Markets that matter
Optimise portfolio
Rigorous evaluation
Disciplined & agile approach
Focus on profitable growth
Footprint
Portfolio
Brands
Growth
Brands
Strengthen brands
Build equity
Brands
Developing our Footprint

Majority of revenue from most affordable
markets
210
c.75% revenue in markets with

better than average affordability
180
150
Markets representing > 0.5% of IMB net revenue:

Returns Markets
Growth Markets
120
90
average
60
No presence or revenue < 0.5%
30
0
South Korea
USA
Taiwan
Japan
Austria
Argentina
Germany
Russia
Saudi Arabia
Sweden
Belgium
Italy
Spain
Australia
France
Netherlands
Greece
Slovakia
Norway
Brazil
Czech Rep.
Portugal
Turkey
UK
Poland
Malaysia
Ireland
Vietnam
Ukraine
Egypt
Thailand
Indonesia
Romania
Bulgaria
Morocco
India
Venezuela
Minuets of labour at avg. wage per 20 cigarettes
330
240
Video
Footprint: US
ITG Brands positioned to win
Market Attractiveness
Ability to Win
Stable economy
Highly experienced team
Growing consumer confidence
National sales force building brand equity
Worlds largest profit pool1
Strong cigarette, cigar and E-vapour portfolio
High affordability long term growth

potential
Stable regulatory environment
Premium
Discount
Cigar
E-vapour
1Excludes
China
ITG Brands Snapshot

US profits c. 25% of Group
Cigarettes ~ 85% of net revenue

Focus Brands ~ 70%
Cigars
Focus Brands
Cigars
other brands
Other brands ~ 30%
Cigars ~ 15% of net revenue

Focus Brands ~ 80%
Other brands ~ 20%
Cigarettes
other brands
Cigarettes
2,700 total employees

National sales force ~ 950 people
2 cigarette manufacturing locations ~ Greensboro and Reidsville, NC
Business Performing Strongly

Optimistic about future growth prospects
Looking Forward
To Date
Merger
Start of
increase
in promo
c.90% volume under retailer contracts
One national sales force across portfolio
Focus on visibility and availability
Integration largely complete
Manufacturing transition - smooth progress
Relationship marketing, advertising and

packaging change
Synergies invested in building equity of

Focus brands
Continued brand building activities:
Continue to profitably grow share of Focus

brands
Strengthening our Portfolio

We focus on brands with strongest
equity
Growth Brands
Specialist Brands
Portfolio Development
Improving quality of growth
Growing share of Growth Brands
More revenue from strongest

brands
80
49
46
43
41
51
54
57
59
25
110
40
75
20
FY13
FY14
FY15 HY16
FY13 FY14 FY15 HY16 Target

Portfolio Brands
Growth & Specialist Brands
Brand Simplification Drives Efficiencies

Agile cost base, effective assets more
to go for
# Brands
249
200
125
FY13
FY15
Target
Simplification of portfolio
Remove SKU complexity
Investment in Growth Brands
Footprint optimisation
Complexity reduction
Machine effectiveness &
scalability
Quality & availability
Better fixed cost absorption
Transforming our Operating Model

Simplification supports efficiency &
effectiveness
Our Past
Our Present
Our Future
160 markets
20 clusters
Fewer bigger clusters
5 divisions
3 divisions
Focused market investment
250 brands
5 brand chassis
Stronger portfolio
2 supply functions
1 function
Lean principles
No shared services
3 business services
Global business services
High fixed costs
More variable costs
Even more variable costs
5 manufacturing regions
4 manufacturing regions
Optimised footprint
Inconsistent processes
8 integrated end-to-end processes
Industry leading process execution
Optimising Costs: Footprint

11 closed in recent years continuing to
review
CURRENT
28 Cigarettes & OTP
7 Cigar
4 Processing
2 Papers/Tubes
Cigarettes and Other Tobacco Products

Cigar
Tobacco Processing Operations
Papers/Tubes
Reducing Complexity
Great progress on component reduction
Pack Wrap
Inner Frame
Tear Tape
Adhesive
-18%
-54%
-46%
28%
-49%
weighted average
Tipping Paper
-20%
Plug Wrap
Filter Tow
Cigarette Paper
-32%
-46%
-25%
reduction
Scalability
Building production in key consumer led
growth areas
Big Box
Queen Size
30
Snus
16
2.5
Capacity 000 tns
14
FY15
FY14
FY13
FY12
FY11
FY15
FY14
FY13
FY12
+77%
0.5
2
0
FY11
+226%
FY15
+113%
1.5
FY14
10
FY13
15
10
FY12
20
Capacity Bn SE
Capacity Bn SE
12
FY11
25
Focus Drives Quality

Improved quality fewer complaints
Complaint system
upgrade
+20%
+17%
Production
quality
+10%
Complaints per
100m sticks
World Class = 5
0%
-11%
-10%
Consumer complaints
(volume adjusted)
-20%
FY12
FY13
FY14
FY15
Imperial = 3.4
Focus Drives Availability

World class performance
Availability in market FY16
Supply reliability
100%
100%
99%
95%
98%
90%
97%
85%
80%
96%
FY13
Worst
FY14
Average
FY15
H116
World Class
FY13
Worst
FY14
FY15
Average
H116
World Class
Manufacturing Conversion Costs

Maintaining cost leadership
1.6
1.6
1.6
1.6
143bn SE capacity reduction
s per 000
Overheads lowered by 21%

Lean - Overall Equipment
Effectiveness +9%
Fully offset inflation

FY13
FY14
FY15
Est. FY16
FMC Europe benchmark study -11%
Leaf Costs
Leadership in costs of key input
5.34
Agile Leaf Strategy

5.15
5.07
4.81
4.23
4.33
4.39
3.99
2012
2013
2014
2015
Alliance One average sales price

vs.
Imperial average purchase price (excl. cigar leaf)
Sustainability
Supply Integrity
Cost Leadership
Managing Costs Across the Group

Significant annual savings
Savings across all parts of business

70m
55m
Other
300m
FY15:
85m
Global
procurement
FY14:
60m
FY13:
30m
To date
Back
FY16
To go
By FY18
Changes ensure more efficient cost base
Delivering 300m annual savings
Sales &
Marketing
Manufacturing
& supply chain
Capital Allocation
Focused use of cash
Uses of Cash
Sources of Cash
Cash flow from
operations
Working capital
efficiency
Effective asset
management
Clearly
defined
priorities
Investment in strongest
brands and key markets
Dividend growth of
at least 10% pa
Reduction of net debt
Investment Choices
Investing in predictable, sustainable
returns
Higher risk assets
Returns/opportunity
Probability
Broader range of outcomes

Less stability, less predictable
Higher risk
Disciplined capital allocation

Returns/opportunity
Probability
Narrower outcome range

Stability and predictability
Lower risk
Cash Conversion
Consistent improvement
105%
97%
>90%
91%
Incremental 850m cash

FY13FY15 versus
previous average
86%
82%
Average
2011-13
2013
Key KPI
2014
2015
HY16
Target
Managing Working Capital

Supports better cash generation
Stock
FY13
Debtors
FY15
22% reduction in leaf stock

versus 10% volume decline
FY13
Creditors
FY15
10% reduction in debtor days

over past 2 years
FY14
FY15
Supplier days on renegotiated

indirects improved by c.50%
Net Debt
Capital discipline supports de-leverage
1.0bn
1.1bn
9.1bn
Closing adj.
net debt
FY13
8.1bn
Like-for-like
reduction
Closing adj.
net debt
FY14
Like-for-like
reduction
7.0bn
4.6bn
11.6bn
Adj. net debt

pre-acquisition
cost
USA
acquisition
cost
Closing adj.
net debt
FY15
2.1bn reduction
in like-for-like
debt since FY13
Growing Dividend
Consistent growth over time up more
than 120%
Dividend pence per share
141
128
116
105
95
84
73
63
2008 2009 2010 2011 2012 2013 2014 2015
8th year of >10% growth

12% CAGR since 2008
8bn in declared dividends
Growing Dividend
Growing ahead of peers and FTSE
Dividend growth over past 4 years

10%
9%
8%
7%
7%
6%
5%
4%
4%
1%
Imperial Diageo
Brands
PMI
SAB
Altria
RAI
BAT
Unilever Reckitt
FTSE
% growth is CAGR over last 4 years of dividends up to FY15. FTSE

total dividend payments 2015 62.7bn versus 55.2bn in 2012.
Growing Dividend
Compelling growth and with more cover
16%
14%
DPS 3Yr Fwd. CAGR
12%
10%
8%
6%
4%
FTSE 100
2%
50%
55%
60%
65%
70%
75%
Payout ratio
80%
85%
90%
95%
100%
In Conclusion
Consistent application of strategy
Strengthen
Portfolio
More simplification
and focus
Develop
Footprint
More
prioritisation
Drive Cost
Optimisation
More
optimisation
Embed Capital
Discipline
More discipline
Quality Revenue, Sustainable Returns

Oliver Tant
Chief Financial Officer
Barclays Global Consumer Staples Conference: September 2016

IMT Imperial TObacco Imperial Brands Barclays Global Consumer Staples Conference Sept 2016

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Quality Revenue, Sustainable Returns

Certain statements in this presentation

and financial effects of the plans and events

2 | Barclays Global Consumer Staples Conference | September 2016

has been prepared for, and only for the

Delivering More Returns

Investing for quality growth;

Value creation supported by

Strong cash generation

10% dividend growth pa

3 | Barclays Global Consumer Staples Conference | September 2016

Quality, Agility, Discipline

Brand, product and Simplification and

4 | Barclays Global Consumer Staples Conference | September 2016

Maximise sustainable shareholder returns

5 | Barclays Global Consumer Staples Conference | September 2016

And for the Next 5 Years

Maximise sustainable shareholder returns

6 | Barclays Global Consumer Staples Conference | September 2016

Footprint & Portfolio

Fewer, bigger, stronger

Markets that matter

7 | Barclays Global Consumer Staples Conference | September 2016

Developing our Footprint

c.75% revenue in markets with

Markets representing > 0.5% of IMB net revenue:

No presence or revenue < 0.5%

Minuets of labour at avg. wage per 20 cigarettes

8 | Barclays Global Consumer Staples Conference | September 2016

10 | Barclays Global Consumer Staples Conference | September 2016

Highly experienced team

Growing consumer confidence

National sales force building brand equity

Worlds largest profit pool1

Strong cigarette, cigar and E-vapour portfolio

High affordability long term growth

11 | Barclays Global Consumer Staples Conference | September 2016

ITG Brands Snapshot

Cigarettes ~ 85% of net revenue

Other brands ~ 30%

Cigars ~ 15% of net revenue

2,700 total employees

12 | Barclays Global Consumer Staples Conference | September 2016

Business Performing Strongly

c.90% volume under retailer contracts

One national sales force across portfolio

Focus on visibility and availability

Integration largely complete

Manufacturing transition - smooth progress

Relationship marketing, advertising and

Synergies invested in building equity of

13 | Barclays Global Consumer Staples Conference | September 2016

Continued brand building activities:

Continue to profitably grow share of Focus

Strengthening our Portfolio

14 | Barclays Global Consumer Staples Conference | September 2016

Growing share of Growth Brands

More revenue from strongest

FY13 FY14 FY15 HY16 Target

15 | Barclays Global Consumer Staples Conference | September 2016

Growth & Specialist Brands

Brand Simplification Drives Efficiencies

16 | Barclays Global Consumer Staples Conference | September 2016

Transforming our Operating Model