TIDM94JK
RNS Number : 9216M
Imperial Brands Finance PLC
26 May 2022
Company Number: 03214426
LEI: 2138008L3B3MCG1DFS50
IMPERIAL BRANDS FINANCE PLC
Interim Financial Statements 2022
INTERIM MANAGEMENT REPORT
For the six months ended 31 March 2022
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 2022.
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 loss for the six months ended 31 March 2022 was GBP81
million (2021: profit of GBP177 million) and is stated after a
charge of GBP168 million (2021: GBP57 million) arising on an
increase in the expected credit loss provision against the carrying
value of certain loans made to entities within the Imperial Brands
Group. The expected loss provision arises due to increases in the
assessment of credit risk associated with the future repayment of
the loans. The Group disposed of its interests in Russia on 27
April 2022. The transaction included a waiver of two intragroup
loans made to Russian subsidiary companies. The decision to exit
operations in Russia has also had an impact on the recoverability
of a number of other intragroup loans. Intragroup loans to Russian
and a number of other Group entities have subsequently been fully
provided for. The charge arising is not tax deductible and
therefore there is no associated tax credit. Total shareholders'
funds as at 31 March 2022 were GBP2,232 million (2021: GBP2,435
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 2022 (2021: 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 20 of the Company's Annual Report and Accounts
for the year ended 30 September 2021, 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
2022.
COVID-19 and Macro-economic environment
Over the past six months the Group, in common with other
organisations, has had to manage the continuing impacts of
COVID-19, as well as those arising from Russia's invasion of
Ukraine. The wider socio-economic effects of COVID-19 and the
conflict in Ukraine have started to impact businesses and consumers
across all goods and services and could impact the commercial
environment into the longer-term.
The Directors recognise that the current political situation in
Ukraine and Russia brings uncertainty. During the period of the
Covid-19 pandemic, the Group effectively managed operations across
the world, and has proved it has an established mechanism to
operate efficiently despite uncertainty. The Directors consider
that a one-off discrete event with immediate cash outflow is of
greatest concern to the short term liquidity of the Group. The
Directors have assessed the principal risks of the business,
including stress testing a range of different scenarios that may
affect the business. The scenario planning also considered
mitigation actions including reductions to capital expenditure and
dividend payments. There are additional actions that were not
modelled but could be taken including other cost mitigations such
as staff redundancies, retrenchment of leases, and discussions with
lenders about capital structure. Under the worst-case scenario,
where the largest envisaged downside scenarios all take place at
the same time the Group would have sufficient headroom until
February 2023. The Group believes this worst-case scenario to be
highly unlikely given the relatively small impact on trading
performance and bad debt levels during the Covid-19 pandemic. In
addition, the Group has a number of mitigating actions available
that could be implemented should such a scenario arise. This means
that the Group is confident it continues to have the ability to pay
down debt, maintain covenants, credit ratings, bank, bond, and
investor confidence.
LIBOR
Following the announcement of the discontinuation of GBP LIBOR
at the end of 2021 and USD LIBOR discontinuation in 2023, the
Company has amended its bank facility agreement to stop referencing
GBP and USD LIBOR and instead reference the daily risk free rates
of SONIA and SOFR respectively. In the first half of the fiscal
year all GBP LIBOR derivatives have been changed to reference SONIA
instead of GBP LIBOR. All USD LIBOR derivatives will be changed to
reference SOFR instead of USD LIBOR during the remainder of
calendar year 2022. There are no changes pending for EUR
derivatives.
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 1 November 2021 J M Jones resigned as a director. On 18
December 2021 M E Slade was appointed as a director. On 18 February
2022 M A Wall resigned and D M Tillekeratne was appointed as a
director.
Directors' responsibility statement
The Board of Directors comprising L J Paravicini, M E Slade and
D M Tillekeratne, 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 2022 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
M E Slade D M Tillekeratne
Director Director
20 May 2022 20 May 2022
INTERIM FINANCIAL STATEMENTS
For the six months ended 31 March 2022
Income Statement
Unaudited Unaudited Audited
Year ended 30
(In GBP million) Notes 6 months ended 31 March 2022 6 months ended 31 March 2021 September 2021
------------------------------ ----- ---------------------------- ---------------------------- ---------------
Other operating income - - 1
Administrative expenses (1) (2) (1)
Impairment losses (168) (57) (198)
============================== ===== ============================ ============================ ===============
Operating loss (169) (59) (198)
Investment income 2 1,040 1,886 2,034
Finance costs 3 (932) (1,595) (1,721)
============================== ===== ============================ ============================ ===============
(Loss)/profit before taxation (61) 232 115
Tax on profit 4 (20) (55) (60)
============================== ===== ============================ ============================ ===============
(Loss)/profit for the period (81) 177 55
============================== ===== ============================ ============================ ===============
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 2022 31 March 2021 30 September 2021
--------------------------------- ----- ------------- ------------- -------------------
Non-current assets
Other receivables 7 44 198 64
Derivative financial instruments 6 179 480 391
================================= ===== ============= ============= ===================
223 678 455
================================= ===== ============= ============= ===================
Current assets
Other receivables 7 28,446 32,307 33,731
Cash and cash equivalents 23 170 622
Derivative financial instruments 6 93 104 68
================================= ===== ============= ============= ===================
28,562 32,581 34,421
================================= ===== ============= ============= ===================
Total assets 28,785 33,259 34,876
================================= ===== ============= ============= ===================
Current liabilities
Borrowings (1,669) (1,435) (1,056)
Derivative financial instruments 6 (276) (1,093) (62)
Trade and other payables (16,040) (18,614) (21,745)
(17,985) (21,142) (22,863)
================================= ===== ============= ============= ===================
Non-current liabilities
Borrowings (7,139) (8,645) (7,857)
Derivative financial instruments 6 (592) (1,037) (984)
(837) - (859)
(8,568) (9,682) (9,700)
================================= ===== ============= ============= ===================
Total liabilities (26,553) (30,824) (32,563)
================================= ===== ============= ============= ===================
Net assets 2,232 2,435 2,313
================================= ===== ============= ============= ===================
Equity
Share capital 2,100 2,100 2,100
Retained earnings 132 335 213
Total equity 2,232 2,435 2,313
================================= ===== ============= ============= ===================
Statement of Changes in Equity (unaudited)
Share Retained Total
GBP million capital earnings equity
--------------------------- --------- --------- -------
At 1 October 2021 2,100 213 2,313
=============================== ========= ========= =======
Loss for the period - (81) (81)
Total comprehensive loss - (81) (81)
At 31 March 2022 2,100 132 2,232
=============================== ========= ========= =======
Unaudited
Share Retained Total
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
=============================== ========= ========= =======
NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the six months ended 31 March 2022
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 2022 and 31
March 2021, together with the audited results for the year ended 30
September 2021.
The information shown for the year ended 30 September 2021 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 2021 were
approved by the Board of Directors on 28 January 2022 and filed
with the Registrar of Companies.
This condensed set of Interim Financial Statements for the six
months ended 31 March 2022 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 2022 should
be read in conjunction with the Annual Report and Financial
Statements for the year ended 30 September 2021.
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) 2022 2021 2021
---------------------------- ---------------------------- ---------------------------- ----------------------------
Interest receivable from
Group undertakings 252 279 554
Exchange gains on monetary
assets and liabilities 100 1,190 997
Fair value gains on
external derivative
financial instruments 688 417 483
1,040 1,886 2,034
============================ ============================ ============================ ============================
3. Finance costs
Unaudited Unaudited Audited
6 months ended 31 March 6 months ended 31 March Year ended 30 September
(In GBP million) 2022 2021 2021
---------------------------- ---------------------------- ---------------------------- ----------------------------
Interest payable to Group
undertakings 55 32 70
Interest on bank loans and
other loans 148 182 380
Fair value losses on
external derivative
financial instruments 616 327 427
Fair value losses on
intragroup derivative
financial instruments 113 1,054 844
932 1,595 1,721
============================ ============================ ============================ ============================
4. Tax on profit
Analysis of charge in the period:
Unaudited Unaudited Audited
Year ended 30 September
(In GBP million) 6 months ended 31 March 2022 6 months ended 31 March 2021 2021
------------------------------ ----------------------------- ----------------------------- ------------------------
UK Corporation tax on profits
for the period 20 55 60
Withholding tax - - 1
Double taxation relief - - (1)
============================== ============================= ============================= ========================
Current tax 20 55 60
============================== ============================= ============================= ========================
Total taxation 20 55 60
============================== ============================= ============================= ========================
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 GBP7,963 million (2021: GBP10,837 million) and has
been determined by reference to market prices at the balance sheet
date. The carrying value of bonds is GBP7,899 million (2021:
GBP10,076 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
(In GBP million) 6 months ended 31 March 2022 March 2021 Year ended 30 September 2021
------------------------------------------ ----------------------------- ------------ -----------------------------
Assets
Interest rate swaps 190 542 451
Foreign exchange contracts 21 21 4
Intragroup forward foreign currency
contracts 35 17 -
Cross currency swaps 26 4 4
========================================== ============================= ============ =============================
Total carrying value of derivative
financial assets 272 584 459
========================================== ============================= ============ =============================
Liabilities
Interest rate swaps (480) (862) (813)
Foreign exchange contracts (16) (3) (4)
Intragroup forward foreign currency
contracts (227) (1,051) -
Cross currency swaps (179) (261) (266)
Total carrying value of derivative
financial liabilities before collateral (902) (2,177) (1,083)
========================================== ============================= ============ =============================
Collateral 34 47 37
========================================== ============================= ============ =============================
Total carrying value of derivative
financial liabilities (868) (2,130) (1,046)
========================================== ============================= ============ =============================
Total carrying value of derivative
financial instruments (596) (1,546) (587)
========================================== ============================= ============ =============================
Analysed as:
Interest rate swaps (290) (320) (362)
Foreign exchange contracts 5 18 -
Intragroup forward foreign currency
contracts (192) (1,033) -
Cross currency swaps (153) (258) (262)
Collateral 34 47 37
========================================== ============================= ============ =============================
Total carrying value of derivative
financial instruments (596) (1,546) (587)
========================================== ============================= ============ =============================
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 2021.
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 GBP17 million (2021: GBP21
million) and would have been a GBP33 million (2021: 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 2022 6 months ended 31 March 2021 Year ended 30 September
2021
(In GBP million) Current Non-Current Current Non-current Current Non-Current
--------------------- ------------ ------------------ ------------ ------------------ ---------- ---------------
Amounts owed by
Group undertakings 28,442 44 32,305 198 33,724 64
Other receivables
and prepayments 4 - 2 - 7 -
===================== ============ ================== ============ ================== ========== ===============
28,446 44 32,307 198 33,731 64
===================== ============ ================== ============ ================== ========== ===============
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
2022 GBP25,322 million (2021: GBP29,254 million) of the amounts
owed by Group undertakings is repayable on a mutually agreed future
date (treated as a current receivable) and GBP3,164 million (2021:
GBP3,249 million) were term loans. There were GBP27,847 million
(2021: GBP31,869 million) of interest bearing loans and GBP639
million (2021: GBP634 million) of non-interest bearing loans. Where
loans were subject to interest the rates charged varied from 0.125%
to 20.000% (2021: 0.125% to 5.750%).
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
GBP660 million (2021: GBP351 million) has been recognised to
reflect the credit risk inherent within a number of the current
intragroup loans receivable, as follows:
31 March 2022
------------- -------------- ------------
Gross amount ECL allowance Net balance
Group undertaking loan receivable balances that are not impaired 28,207 - 28,207
Group undertaking loan receivable balances that are impaired 939 (660) 279
============= ============== ============
29,146 (660) 28,486
================================================================== ============= ============== ============
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
================================================================== ============= ================== ============
30 September 2021
------------- ------------------ ------------
Gross amount ECL allowance Net balance
Group undertaking loan receivable balances that are not impaired 33,513 - 33,513
Group undertaking loan receivable balances that are impaired 767 (492) 275
============= ================== ============
34,280 (492) 33,788
================================================================== ============= ================== ============
The charge in the period was GBP168 million (2021: GBP57
million). There were loan receivables totalling GBP131 million
included in the ECL provision of GBP660 million that have
subsequently been waived after the interim reporting date as a
result of the disposal of the Group's Russian operations.
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 (2021: EUR1million). At 31 March 2022, the
Company had an outstanding balance receivable due from Compañía de
Distribucion Integral Logista SAU totalling EUR442 million (2021:
EUR625 million).
During the period the Company was charged interest to the value
of EUR5 million by Logista France SAS (2021: EUR5 million). At 31
March 2022, the Company had an outstanding balance payable to
Logista France SAS totalling EUR1,419 million (2021: EUR1,343
million).
During the period the Company was charged interest to the value
of EUR4 million by Logista Italia SpA (2021: EUR4 million). At 31
March 2022, the Company had an outstanding balance payable to
Logista Italia SpA totalling EUR1,124 million (2021: EUR945
million).
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IR VQLBLLELBBBZ
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