A New Leader at Imperial Brands

From company sources

Stefan Bomhard has been named to the Board of directors of Imperial Brands as Chief Executive Officer at an undetermined date in the future.

Bomhard has been Chief Executive at Inchcape plc for around five years. Inchcape plc is a global distribution and retail leader in the premium and luxury automotive sectors.

Thérèse Esperdy, Chair of the Board said: “After a thorough search process, which attracted strong, high-caliber interest, the Board is delighted to appoint Bomhard as Chief Executive of Imperial Brands. Bomhard has significant experience across multiple consumer sectors and within large multinational organizations, particularly in brand building and consumer-led sales and marketing.

“He has demonstrated strong strategic and operational leadership and has developed a track record of delivering successful transformational change during his tenure at Inchcape. Bomhard takes on the Chief Executive role at a significant point in Imperial’s development and the Board is confident that his experience and expertise will drive the business forward.”

Bomhard’s initial priorities will be to strengthen performance and enhance shareholder value, she said.

Bomhard said he was “delighted” to be joining Imperial as it’s next chief executive. “I believe the business has a great future, and I’m looking forward to working with the Group’s employees to maximize the opportunities that lie ahead and build a stronger, more sustainable business.”

Bomhard was appointed Chief Executive of Inchcape plc in 2015. Before joining Inchcape, Bomhard was president of Bacardi Limited’s European region and was also responsible for Bacardi’s Global commercial organization and Global Travel Retail.

Bomhard has a PhD in marketing and has accrued significant experience in the consumer and retail sectors during his career. Earlier, he served as Chief Commercial Officer of Cadbury plc after being Chief Operating Officer of Unilever Food Solutions Europe. This followed senior management and sales and marketing roles at Diageo (Burger King) and Procter & Gamble. Bomhard is also a Non-executive Director on the Board of Compass Group PLC.

Alison Cooper stepped down as Chief Executive and from the Board but stayed on until a suitable successor was found. Imperial also announced that Matthew Phillips has stepped down as Chief Development Officer.

Dominic Brisby currently Divisional Director, Americas, Africa, Asia and Australasia, and Joerg Biebernick, Divisional Director, Europe, will assume the roles of Joint Interim Chief Executive Officers, reporting directly to Thérèse Esperdy, Non-Executive Chair of the Board until Bomhard’s appointment.

On behalf of the Board, Thérèse said: “I would like to thank Alison for the enormous contribution she has made to Imperial over her 20-year career with the Company, nine of which have been as Chief Executive. The Board would also like to recognize the continued leadership and commitment she has shown to the business over recent months while the search for her successor was under way.

“I would also like to thank Matthew for the significant contribution he has made during his seven years on the Board and during his 20-year career with Imperial.”

Tobacco trading remains in line with expectations, with a weighting to the second half as previously guided. However, following the U.S. FDA’s ban on certain flavors of cartridge-based vapor devices and weaker than expected consumer demand for vapor, we now expect constant currency full year Group net revenue to be at a similar level to last year and adjusted earnings per share to be slightly lower than last year.

First half adjusted earnings per share is expected to be down c. 10% at constant currency, due to the phasing of inventory write-downs, primarily relating to the U.S. flavor ban.

Regulatory uncertainty and adverse news flow continues to affect demand in the U.S. and Europe. We estimate this will result in significantly lower year-on-year NGP net revenue as well as increased provisions for slow-moving stock. We are implementing a further cost savings program to mitigate some of these short-term headwinds, which will result in a full year net impact on adjusted operating profit of c. £40m. In addition, the FDA ban, which comes into force tomorrow, has resulted in a write-down of our flavored inventory with a first half adjusted operating profit impact of c. £45m; in line with our previous estimates.

We believe that NGP provides consumers with potentially less harmful alternatives to combustible tobacco and offers a significant growth opportunity over the medium term to complement our Tobacco business. We support regulation that enforces higher product and marketing standards, which are critical for creating a stable and orderly vapor market that we can invest behind.

Our tobacco business has had a good start in the first three months of the year with market share growth across the majority of our priority markets. The Europe division has benefited from price/mix gains, which have largely offset weaker volume trends. Our U.S. business remains strong, although financial delivery has been temporarily affected, as anticipated, by wholesaler destocking following the year end price increase. The Africa, Asia and Australasia division has delivered revenue growth reflecting a strong volume performance and the sell-through of the Australian duty paid inventory.

Our effective adjusted tax rate for the year is expected to be around 21% (2019: 19.1%). At current exchange rates, we expect a currency translation headwind on net revenue and adjusted earnings per share of c. 1% at the half year and c. 3% at the full year.

As previously guided, free cash-flow in FY20 will be affected by some oneoff cash outflows in relation to Russian excise tax liabilities (c. £100m) and the final deferred consideration for the Von Erl acquisition (c. £120m).

Negotiations on the potential divestment of our Premium Cigar Division remain ongoing. We continue to consider the potential divestment of other non-core operations.