TIDM94JK
RNS Number : 0329B
Imperial Brands Finance PLC
07 June 2021
Company Number: 03214426
LEI: 2138008L3B3MCG1DFS50
IMPERIAL BRANDS FINANCE PLC
Interim Financial Statements 2021
INTERIM MANAGEMENT REPORT
For the six months ended 31 March 2021
The Directors present their Interim Management Report together
with the condensed unaudited Interim Financial Statements of
Imperial Brands Finance PLC ("the Company") for the six months
ended 31 March 2021.
Business review and performance
The principal activity of the Company is to provide treasury
services to Imperial Brands PLC and its subsidiaries ("the Group").
There have been no changes in the composition of the Company in the
interim period.
The performance of the Company is dependent on external
borrowings and intragroup loans payable and receivable and interest
thereon, together with fair value gains and losses on derivative
financial instruments.
The profit for the six months ended 31 March 2021 was GBP177
million (2020: profit GBP240 million). Total shareholders' funds as
at 31 March 2021 were GBP2,435 million (2020: GBP2,648
million).
The directors do not recommend a dividend for the current
period. There were no aggregate dividends on the ordinary shares
recognised as a charge to shareholders' funds during the six months
ended 31 March 2021 (2020: GBPNil).
Principal risks and uncertainties
The Company is a wholly owned indirect subsidiary of Imperial
Brands PLC, which is the ultimate parent company within the Group,
and the Directors of the Group manage operations at a Group level.
The Company, as the main financing and financial risk management
company for the Group, undertakes transactions to manage the
Group's financial risks, together with its financing and liquidity
requirements.
The principal risks and uncertainties of the Company are
discussed in note 13 of the Company's Annual Report and Accounts
for the year ended 30 September 2020, which does not form part of
this report, but is available at www.imperialbrandsplc.com. These
risks and uncertainties remain materially unchanged as at 31 March
2021.
COVID-19
During the pandemic the impacts of COVID-19 have been well
managed by the Imperial Brands Group to ensure continuity of
operations, with new working practices having evolved and
significant effort provided by our teams across the globe, along
with those of our customers, suppliers, and other stakeholders.
However, the wider socio-economic effects of COVID-19 could impact
the commercial environment into the longer-term, and could result
in the size of the legitimate nicotine market being negatively
impacted by regulatory change, excise tax or increases in other
product taxes, and affordability concerns resulting in consumer
downtrading or increased consumption of illicit product.
Additionally, the impacts on global supply chains, financial
markets, and businesses in commercial distress are being actively
considered and mitigating actions taken across the business. Given
the unprecedented nature of the pandemic and the related
variability of outcomes our ability to accurately predict and
quantify these risks may be reduced in comparison to pre-pandemic
periods.
The Directors recognise that the current environment brings
uncertainty due to the COVID-19 pandemic; however, over the last
year, the Group has effectively managed operations across the
world, and has an established mechanism to operate efficiently
despite the uncertainty, with little impact to date. Consumer sales
have proved to be resilient, and it can be seen that governments
are supportive of ongoing distribution. Consequently, we now do not
perceive the impact of COVID-19 to present a significant risk to
the maintenance of cash flows. This means that the Group continues
to have the ability to pay down debt, maintain covenants, credit
ratings, bank, bond, and investor confidence.
BREXIT
The UK formally exited from the European Union (EU) on 31
January 2020, and entered into a transition trading arrangement
until 31 December 2020. On 30 December 2020 a trade deal was agreed
between the UK and EU. The Company has considered the potential
impacts of the trade deal and does not expect any material adverse
consequences from the UK's exit from the EU.
LIBOR
In response to the planned cessation of LIBOR at the end of
2021, the Company is reviewing recently published ISDA Fallbacks
Protocol. The Company is considering how it will proactively
restructure to the new basis for its floating rate debt and
derivative positions maturing after that date.
Outlook
The business activity is expected to continue at levels similar
to the current level. The Company will continue to manage the
overall liquidity and financial risk management requirements of the
Group as they change over time. The Company will manage the Group's
financing requirement in combination with other Group entities
where it is beneficial to the Group as a whole.
Going concern
The Directors are satisfied that the Company has adequate
resources to meet its operational needs for the foreseeable future
and accordingly they continue to adopt the going concern basis in
preparing these Interim Financial Statements.
Changes in Directorate
On 30 April 2021 T R W Tildesley resigned as a director. On 18
May 2021 O R Tant resigned and on 19 May 2021 L J Paravicini was
appointed as a director.
Directors' responsibility statement
The Board of Directors comprising J M Jones, L J Paravicini and
M A Wall, confirms that:
-- the condensed Interim Financial Statements have been prepared
in accordance with applicable accounting standards and give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company as required by Rule 4.2.4 of the
Disclosure Transparency Rules of the United Kingdom's Financial
Conduct Authority ("the DTRs"); and
-- the Interim Management Report includes a fair review of the
information required by Rule 4.2.7 of the DTRs, namely an
indication of important events that have occurred during the six
months ended 31 March 2021 and their impact on the condensed set of
Interim Financial Statements, and a description of the principal
risks and uncertainties for the remaining six months of the
year.
By order of the Board
J M Jones M A Wall
Director Director
3 June 2021 3 June 2021
INTERIM FINANCIAL STATEMENTS
For the six months ended 31 March 2021
Income Statement
Unaudited Unaudited Audited
Year ended 30
(In GBP million) Notes 6 months ended 31 March 2021 6 months ended 31 March 2020 September 2020
------------------------------ ----- ---------------------------- ---------------------------- ---------------
Other operating income - - 1
Administrative expenses (2) - (4)
Impairment losses (57) - (294)
============================== ===== ============================ ============================ ===============
Operating loss (59) - (297)
Investment income 2 1,886 1,037 1,554
Finance costs 3 (1,595) (741) (1,373)
============================== ===== ============================ ============================ ===============
Profit/(loss) before taxation 232 296 (116)
Taxation 4 (55) (56) (34)
============================== ===== ============================ ============================ ===============
Profit/(loss) for the period 177 240 (150)
============================== ===== ============================ ============================ ===============
All activities derive from continuing operations.
The Company has no other comprehensive income other than that
included above and, therefore, no separate Statement of
Comprehensive Income has been presented.
Balance Sheet
Unaudited Unaudited Audited
(GBP million) Notes 31 March 2021 31 March 2020 30 September 2020
--------------------------------- ----- ------------- ------------- -------------------
Non-current assets
Other receivables 7 198 281 109
Derivative financial instruments 6 480 816 784
================================= ===== ============= ============= ===================
678 1,097 893
================================= ===== ============= ============= ===================
Current assets
Other receivables 7 32,307 33,129 31,983
Current and deferred tax assets - 1 -
Cash and cash equivalents 170 159 911
Derivative financial instruments 6 104 270 51
================================= ===== ============= ============= ===================
32,581 33,559 32,945
================================= ===== ============= ============= ===================
Total assets 33,259 34,656 33,838
================================= ===== ============= ============= ===================
Current liabilities
Borrowings (1,435) (3,371) (1,381)
Derivative financial instruments 6 (1,093) (51) (37)
Trade and other payables (18,614) (16,441) (18,334)
(21,142) (19,863) (19,752)
================================= ===== ============= ============= ===================
Non-current liabilities
Borrowings (8,645) (10,716) (10,209)
Derivative financial instruments 6 (1,037) (1,429) (1,619)
(9,682) (12,145) (11,828)
================================= ===== ============= ============= ===================
Total liabilities (30,824) (32,008) (31,580)
================================= ===== ============= ============= ===================
Net assets 2,435 2,648 2,258
================================= ===== ============= ============= ===================
Equity
Share capital 2,100 2,100 2,100
Retained earnings 335 548 158
Total equity 2,435 2,648 2,258
================================= ===== ============= ============= ===================
Statement of Changes in Equity (unaudited)
Share Retained Total
GBP million capital earnings equity
--------------------------- --------- --------- -------
At 1 October 2020 2,100 158 2,258
=============================== ========= ========= =======
Profit for the period - 177 177
Total comprehensive income - 177 177
At 31 March 2021 2,100 335 2,435
=============================== ========= ========= =======
Unaudited
Share Retained Total
capital earnings equity
At 1 October 2019 2,100 308 2,408
=============================== ========= ========= =======
Profit for the period - 240 240
Total comprehensive income - 240 240
At 31 March 2020 2,100 548 2,648
=============================== ========= ========= =======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 31 March 2021
1. Accounting Policies
These condensed Interim Financial Statements have been prepared
on the going concern basis and in accordance with the United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law) including the Companies
Act 2006 and FRS 101.
Basis of Preparation
The condensed Interim Financial Statements comprise the
unaudited results for the six months ended 31 March 2021 and 31
March 2020, together with the audited results for the year ended 30
September 2020.
The information shown for the year ended 30 September 2020 does
not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006, and is an abridged version of the
Company's Financial Statements for that year. The Auditors' Report
on those Financial Statements was unqualified and did not contain
any statements under section 498 of the Companies Act 2006. The
Financial Statements for the year ended 30 September 2020 were
approved by the Board of Directors on 30 March 2021 and filed with
the Registrar of Companies.
This condensed set of Interim Financial Statements for the six
months ended 31 March 2021 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and FRS 104 'Interim Financial Reporting' ("FRS 104") as
adopted by the Financial Reporting Council ("FRC") using the
recognition and measurement requirements of FRS 100 'Application of
Financial Reporting Requirements' ("FRS 100") and FRS 101 'Reduced
Disclosure Framework' ("FRS 101"). The condensed set of Interim
Financial Statements for the six months ended 31 March 2021 should
be read in conjunction with the Annual Report and Financial
Statements for the year ended 30 September 2020.
The Company has taken advantage of the following disclosure
exemptions under FRS 101 on the basis that the disclosures are
available within the consolidated financial statements of the
ultimate parent company, which is Imperial Brands PLC:
a) the requirement in paragraph 38 of IAS 1 Presentation of
Financial Statements to present comparative information in respect
of paragraph 79(a)(iv) of IAS 1 Presentation of Financial
Statements.
b) the requirements of paragraphs 10(d) and 10(f) of IAS 1 Presentation of Financial Statements.
c) the requirements of IAS 7 Statement of Cash Flows
d) the requirements of paragraph 17 of IAS 24 Related Party Disclosures.
e) the requirements in IAS 24 Related Party Disclosures to
disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which is a
party to the transaction is wholly owned by such a member.
The Imperial Brands PLC consolidated financial statements may be
found in via the investor relations section of the Imperial Brands
PLC website at www.imperialbrandsplc.com/investors .
The Interim Financial Statements have been prepared on an
amortised cost or fair value basis as described in the accounting
policies on derivative financial instruments below
The Company is a wholly owned indirect subsidiary of Imperial
Brands PLC and is included in the consolidated Financial Statements
of Imperial Brands PLC. Consequently, the Company has taken
advantage of the exemption conferred by FRS 101 paragraph 8(h) and
not presented a cash flow statement.
2. Investment income
Unaudited Unaudited Audited
6 months ended 31 March 6 months ended 31 March Year ended 30 September
(In GBP million) 2021 2020 2020
---------------------------- ---------------------------- ---------------------------- ----------------------------
Interest receivable from
Group undertakings 279 451 836
Interest on bank deposits - 3 2
Exchange gains on monetary
assets and liabilities 1,190 14 -
Fair value gains on
external derivative
financial instruments 417 569 660
Fair value gains on
intragroup derivative
financial instruments - - 56
1,886 1,037 1,554
============================ ============================ ============================ ============================
3. Finance costs
Unaudited Unaudited Audited
6 months ended 31 March 6 months ended 31 March Year ended 30 September
(In GBP million) 2021 2020 2020
---------------------------- ---------------------------- ---------------------------- ----------------------------
Interest payable to Group
undertakings 32 75 141
Interest on bank loans and
other loans 182 205 414
Exchange losses on monetary
assets and liabilities - - 233
Fair value losses on
external derivative
financial instruments 327 438 585
Fair value losses on
intragroup derivative
financial instruments 1,054 23 -
1,595 741 1,373
============================ ============================ ============================ ============================
4. Tax on profit
Analysis of charge in the period:
Unaudited Unaudited Audited
6 months ended 31 March 6 months ended 31 March Year ended 30 September
(In GBP million) 2021 2020 2020
---------------------------- ---------------------------- ---------------------------- ----------------------------
UK Corporation tax on
profits for the period 55 56 34
Withholding tax - - 1
Double taxation relief - - (1)
============================ ============================ ============================ ============================
Current tax 55 56 34
============================ ============================ ============================ ============================
Total taxation 55 56 34
============================ ============================ ============================ ============================
5. Fair value of financial assets and liabilities
There are no material differences between the carrying value of
the Company's financial assets and liabilities and their estimated
fair value, with the exception of bonds. The fair value of bonds is
estimated to be GBP10,837 million (2020: GBP12,701 million) and has
been determined by reference to market prices at the balance sheet
date. The carrying value of bonds is GBP10,076 million (2020:
GBP12,621 million). The fair value of all other borrowings is
considered to be equal to their carrying amount.
6. Derivative financial instruments
Unaudited Unaudited Audited
6 months ended 31 March 6 months ended 31 March Year ended 30 September
(In GBP million) 2021 2020 2020
---------------------------- ---------------------------- ---------------------------- ----------------------------
Assets
Interest rate swaps 542 833 823
Foreign exchange contracts 21 150 9
Intragroup forward foreign
currency contracts 17 84 -
Cross currency swaps 4 19 3
============================ ============================ ============================ ============================
Total carrying value of
derivative financial
assets 584 1,086 835
============================ ============================ ============================ ============================
Liabilities
Interest rate swaps (862) (1,151) (1,210)
Foreign exchange contracts (3) (25) (10)
Intragroup forward foreign (1,051) - -
currency contracts
Cross currency swaps (261) (341) (483)
Total carrying value of
derivative financial
liabilities before
collateral (2,177) (1,517) (1,703)
============================ ============================ ============================ ============================
Collateral 47 37 47
============================ ============================ ============================ ============================
Total carrying value of
derivative financial
liabilities (2,130) (1,480) (1,656)
============================ ============================ ============================ ============================
Total carrying value of
derivative financial
instruments (1,546) (394) (821)
============================ ============================ ============================ ============================
Analysed as:
Interest rate swaps (320) (318) (387)
Foreign exchange contracts 18 125 (1)
Intragroup forward foreign
currency contracts (1,033) 84 -
Cross currency swaps (258) (322) (480)
Collateral 47 37 47
============================ ============================ ============================ ============================
Total carrying value of
derivative financial
instruments (1,546) (394) (821)
============================ ============================ ============================ ============================
The Company's derivative financial instruments are held at fair
value. Fair values are determined based on observable market data
such as yield curves and foreign exchange rates to calculate the
present value of future cash flows associated with each derivative
at the balance sheet date, and are consistent with those applied
for the year ended 30 September 2020.
All financial assets and liabilities are carried on the balance
sheet at amortised cost, other than derivative financial
instruments which are carried at fair value. Derivative fair values
are determined based on observable market data such as yield
curves, foreign exchange rates and credit default swap prices to
calculate the present value of future cash flows associated with
each derivative at the balance sheet date (Level 2 classification
hierarchy per IFRS 7). Market data is sourced through Bloomberg and
valuations are validated by reference to counterparty valuations
where appropriate. Some of the Group's derivative financial
instruments contain early termination options and these have been
considered when assessing the element of the fair value related to
credit risk. On this basis the reduction in reported net derivative
liabilities due to credit risk is GBP21 million and would have been
a GBP46 million reduction without considering the early termination
options. There were no changes to the valuation methods or
transfers between hierarchies during the period. With the exception
of capital market issuance, the fair value of all financial assets
and financial liabilities is considered to approximate to their
carrying amount.
7. Other receivables
Unaudited Unaudited Audited
6 months ended 31 March 2021 6 months ended 31 March 2020 Year ended 30 September
2020
(In GBP million) Current Non-Current Current Non-current Current Non-Current
--------------------- ------------ ------------------ ------------ ------------------ ---------- ---------------
Amounts owed by
Group undertakings 32,305 198 33,127 281 31,980 109
Other receivables
and prepayments 2 - 2 - 3 -
===================== ============ ================== ============ ================== ========== ===============
32,307 198 33,129 281 31,983 109
===================== ============ ================== ============ ================== ========== ===============
Amounts owed by Group undertakings are unsecured, both interest
bearing and non-interest bearing and can be either repayable on a
future date to be mutually agreed between the Company and the
counterparty borrower or have fixed repayment dates. At 31 March
2021 GBP29,254 million (2020: GBP29,742 million) of the amounts
owed by Group undertakings is repayable on a mutually agreed future
date (treated as a current receivable) and GBP3,249 million (2020:
GBP3,666 million) were term loans. There were GBP31,869 million
(2020: GBP32,890 million) of interest bearing loans and GBP634
million (2020: GBP518 million) of non-interest bearing loans. Where
loans were subject to interest the rates charged varied from 0.125%
to 5.750% (2020: 0.125% to 6.000%).
The Directors have assessed the extent to which amounts owed by
the Group companies are impaired. For those balances that are
neither overdue nor impaired the Directors have concluded that the
expected credit losses (ECL) that are possible from default events
over the next twelve months are immaterial and consequently no
allowance for impairment has been recognised. For those balances
assessed to be impaired, an expected credit loss adjustment of
GBP351 million (2020: GBPnil) has been recognised to reflect the
credit risk inherent within a number of the current intragroup
loans receivable, as follows:
31 March 2021
------------- -------------- ------------
Gross amount ECL allowance Net balance
Group undertaking loan receivable balances that are not impaired 31,908 - 31,908
Group undertaking loan receivable balances that are impaired 946 (351) 595
============= ============== ============
32,854 (351) 32,503
================================================================== ============= ============== ============
31 March 2020
------------- ------------------ ------------
Gross amount ECL allowance Net balance
Group undertaking loan receivable balances that are not impaired 33,408 - 33,408
Group undertaking loan receivable balances that are impaired - - -
============= ================== ============
33,408 - 33,408
================================================================== ============= ================== ============
30 September 2020
------------- ------------------ ------------
Gross amount ECL allowance Net balance
Group undertaking loan receivable balances that are not impaired 31,465 - 33,465
Group undertaking loan receivable balances that are impaired 918 (294) 624
============= ================== ============
32,383 (294) 32,089
================================================================== ============= ================== ============
8. Related party transactions
The Company has taken advantage of the Group dispensation
permitted under FRS 101 for 100% owned Group subsidiaries, not to
disclose intragroup transactions undertaken during the period.
During the period the Company charged interest and other
expenses to Compañía de Distribución Integral Logista S.A.U. to the
value of EUR1 million (2020: EUR1million). At 31 March 2021, the
Company had an outstanding balance receivable due from Compañía de
Distribucion Integral Logista SAU totalling EUR625 million (2020:
EUR746 million).
During the period the Company was charged interest to the value
of EUR5 million by Logista France SAS (2020: EUR5 million). At 31
March 2021, the Company had an outstanding balance payable to
Logista France SAS totalling EUR1,343 million (2020: EUR1,348
million).
During the period the Company was charged interest to the value
of EUR4 million by Logista Italia SpA (2020: EUR4 million). At 31
March 2021, the Company had an outstanding balance payable to
Logista Italia SpA totalling EUR945 million (2020: EUR1,000
million).
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IR KDLBBFQLLBBL
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