Imperial Tobacco Group Plc is a leading international tobacco company. Since the time when Imperial Tobacco Group Plc produced the first cigarette in 1901 there has been dramatic changes to the technology, commerce and society. Over the last 100 years Imperial Tobacco has developed itself as one of the leaders in high quality tobacco products. Imperial Tobacco is operating in more than 160 countries around the world. Imperial Tobacco is the world’s fourth largest international tobacco company, which manufactures markets and sells a comprehensive range of cigarettes, tobaccos, rolling paper, filters tubes and cigars. The company geographic diversity and versatile multi-product portfolio provides business resilience and a strong platform for future growth. The key international brands of the company are Davidoff, Gauloises Blondes, JPs, Fortuna, Gitanes, West, Drum, Golden Virginia and Rizla. The company operates with 58 factories and which are further divided as 33 factories of cigarettes, 22 for other tobacco products and processing factories and 3 factories for paper and tube.
The cigarette volume of the company for the year 2009 was 322.2 bn. As it is a 10% increase from the last year (2008) during which the total cigarette volume of the company was 294.1bn. The fine cut tobacco volume of the company for the year 2009 was 25,950 tonnes which was 850 tonnes more than last year 2008 production of 25,150 tonnes. Imperial tobacco is a diversified tobacco company with a strong presence in both mature and emerging markets. The company is growing their volumes in emerging markets including in Eastern Europe, Africa, the Middle East and Asia which court for 51% for the company overall cigarette volume.
The company divides the globe in six major markets.
The first and most profitable market for imperial tobacco during the year 2008 was United Kingdom. The company reported a net revenue of 893m (2008:£869m) and company adjusted profit from operations was £601m (2008: £584) which compared to the last few years increased pretty sensibly. The company overall cigarette market share was 45.3% and the company continued to increase their share of the economy segment up to 31%. As the company launched JPS silver in November 2008, JPS sliver has delivered the excellent results with the market share price. The UK’s two best selling brands, Lambert and Butler and Richmond continue to hold their 30% of the overall cigarette market. As the UK is profitable market, the company remain focused on balancing their market shares with sustainable profit growth.
The second useful market for the Imperial Tobacco during the year 2009 was Germany. The net revenue for the company 2009 was £826m (2008:£664m) and the adjusted profit from the operations was £403m (2008:£309). As compared to the last year the company increased quite reasonably. The company share price was 27.3% and the JPS delivered a strong performance up to 8.5% (2008: 7.8%). As in the UK, our plan in Germany is to continue to balance market share and profit growth.
Spain is another effective market for the Imperial Tobacco during the last year 2009. The net revenue of the company came out as £610m (2008:£411m) and the adjusted profit from operations was £275m (2008:£150m). Imperial Tobacco got the most important position across all tobacco categories in Spain. The total market share price was 30.6%. In fine cut tobacco, the company consolidated their market leading position growing their volumes by 52%. The company overall market share was 42.6%.
Imperial Tobacco remained quite effective in rest of Europe as well. In 2009, the net revenue of the rest of EU was £1,490m (2008:£1,250m) and adjusted profit from operation was £566m (2008:£494m). In France, the company domestic blonde cigarette market share was up to 23.9% as a good result of good performances from Gauloises, Blondes, Fortuna, JPS and News. Imperial Tobacco is the market leader in Netherlands, and the largest fine cut tobacco in the region. The company grew their share in a number of markets including Austria, Czech Republic, Greece and Portugal. JPS performed well in Ireland, Portugal and Austria. Additional Cigarette brand highlights include Davidoff in Greece and the Czech Republic.
Another useful market for Imperial tobacco is US market. The company Americans net revenue was £861m (2008:542m) with adjusted profit from operations of £288m (2008:£166m). The overall cigarette market share price stable at 4.2%, a pleasing performance given current market challenges. The key brands of Imperial Tobacco in USA are Gold and Sonoma continued to be well positioned in the discount sector with their market shares.
The last market of the Imperial Tobacco is underlined as the Rest of the World. The net revenue of the company was reported as £2,138m (2008:£1,502m) and adjusted profit from operation of £617m (2008:£404m). The cigarette volume for Imperial Tobacco increased in many markets in this region. The company believes this region offers them substantial growth opportunities.
During another successful year for Imperial Tobacco the company have grown profits in their mature markets and made great advances in emerging markets with volume, profit and market share gains. The company increased overall cigarette volumes by 10% to 322bn, including a full year contribution from Altadis and many other brands. The past year 2009 became the year of results and demonstrated the achievement of company’s strategy with constructive progressed across the enlarged group. The company has delivered another strong operational and financial performance, further building on over excellent track record of creating sustainable shareholders value. Imperial Tobacco is sales led business and grows their tobacco net revenues by leveraging their total tobacco portfolio and their balanced geographic footprint. The total sales of imperial tobacco group in the year 2009 was 6.8bn which is 30% increase compared to 5.2bn in the year 2008. There is an excellent performance from the Imperial Tobacco group.
The company increased the gross profit in the year 2009 which was £3,863m as compared to £5,316m in the year of 2008. Similarly the profit from operations increased 59% from £1,471m in 2008 to £2,337m in 2009. The adjusted profit also increased 32% from £2,230m in 2008 to £2,933m in 2009. One of the important improvements in 2009 is the increase in investment income from £543m (2008) to £1,180m. The finance cost of the company in the year 2008 was £2,572m (2008:£1,393m) and the net finance cost in 2009 was £1,392m (2008:£850m). The profit for Imperial Tobacco plc before taxation was £945m in the year 2009 which was 52% an actual increase from the year 2008 when it was £621m.
Imperial Tobacco contains a total of £24,662m (2008:£24,660m) of non-current assets. The additional calculations of intangible assets came out to be £22,357 (2008:£19,817m), property, plant and equipment as £2,010m (2008:£1,820m) and the rest of the non-current assets added up to £295m. There is a huge increase in the non-current assets of the company as compared to the previous years. Property, plant and equipment are shown in the balance sheet at their sequential costs less accumulated reduction and mutilation.
The current assets of the Imperial Tobacco came out to be £7,263m (2008:£6,579m) and the total current assets was £31,925m in the year 2009 which is a massive increase from £29,239m in the year 2008.
Property, Plant and Equipment are initially recognised at fair value. Land is not depreciated. Depreciation is provided on other property, plant and equipment so as to write off the initial cost of each asset to its residual value over its estimated useful life as follows:
* Building up to 50 years
* Plant and equipment 2 to 20 years
* Fixtures and motor vehicles 2 to 14 years
In 2009, the total cost of property, plant and equipment was £2,901m (2008:£2,545m) and the depreciation and impairment cost of 2009 was £891m (2008:£725m).
The current liabilities in 2009 of Imperial Tobacco Plc added up to a total of £11,420m (2008:£9,658m) in which borrowings and trade and other payables played a major role with consuming £2,560m (2008:£2,678m) and £7,451m (2008:£6,183m) correspondingly. The other current liabilities obeyed of the imitative financial instruments, current tax liabilities and provisions spending £564m (2008:£238m), £551m (2008:£370m) and £292m (2008: £187m) respectively.
The non-current liabilities of Imperial Tobacco Plc in the year 2009 were 13,910m (2008:£13,225m). The big role in this category was played by the borrowings as they consumed a total of £25,330m (2008:£22,883m). As it is a substantial increase from the last few years.
Current borrowing and non-current borrowing of the company in the year 2009 include interest payable of £3m (2008:£27m) and £299m (2008:£131m) respectively. In 2009, the total current borrowing of the company was £2,560m (2008:£2,678) and the total non-current borrowing of the company was £12,067m (2008:£12,236m).
The net assets of the company were reported £6,595m in year 2009 which was a reasonable increase of £6,356m from the year 2008. This included share capital, share premium account, retained earnings, exchange translation reserve and finally minority interests.
The current strategy of the company for the next five years is to create sustainable shareholder value by growing their operations both organically and through acquisitions. Imperial tobacco plc approaches their successful completion of their strategy by three core objectives which are:
A· Sales development
A· Cost optimization and efficiency improvements
A· Effective cash management
These are the building blocks of the company business and they are committed to delivering a strong performance each of these areas. As a global tobacco company, the company recognise the importance of manufacturing, marketing and selling their products responsibility. Imperial Tobacco Group Plc has sales in over 160 countries in the globe. Company is growing the business globally through organic growth and acquisition. The company have strong positions in excellent markets like United Kingdom and Germany. The company have now also got a growing presence in the USA. Imperial Tobacco Group Plc is taking positive and prospective steps towards the other potential markets like USA and the rest of the World. The company have a versatile brand that has been improved significantly by the acquisition of Altadis. The company’s strategy is to increase sales growth through investment and innovation, supported by the outstanding trade marketing skills.
Cost optimisation is a hallmark of company business. The company look for maximum returns from their investments and seek efficiency improvements without compromising their focus on quality and innovation. This year the company have delivered integration synergy targets whilst driving business initiatives and improvements across the group.
Imperial Tobacco Plc focuses on reducing cost and improves efficiency to support the sales development as it is a highly cash generated business. The company focus is on managing capital expenditure and working capital, tax and interest costs. Their strategy is to ensure that the cash generated to be used efficiently through acquisitions, organic investment and returning funds benefiting shareholders.
Imperial Tobacco values the shareholders first among our stakeholders. The company business model provides a worthy circle of investment and sustainable growth and has consistently delivered strong returns to their shareholders. The company guarantees a substantial, profitable escalation takes priority over market share and volume growth. The company focus in sales and effective use of high levels of cash generation will ensure that, the company remain on track to create further sustainable shareholders value. After looking at the improvement made by the company we can easily conclude that the management is working really hard. The company operates a number of share-based employee benefit plans. The company is committed to ensuring their employees continue to accomplish their potential and share in the success of the group. The company also gives dividend to their share holders. The total dividend amount recognised as distribution to shareholders in the year 2009 was £640m (2008:£487m).
There is also different kind of risks in every business. Imperial tobacco is also facing big challenges in their business. The Group faces a number of risks, similar to those faced by many multinational companies, which may impact on our financial position or prevent us from achieving our corporate strategy. A detailed assessment of risks within the company operating atmosphere is undertaken by management and is embedded across the group. Each area of the business is required to properly review its major areas of risk and uncertainty so that main risks reviewed at all levels across the group. The company ensures that there are obvious and reliable procedures for monitoring, updating and implementing suitable controls to handle the identified risks. This process is supplemented by the Risk Co-ordination Committee which assists the Chief Executive’s Committee and the Audit Committee in overseeing the management of material risks. The Board has responsibility for the Group’s systems of internal control. The company identify that they operates in the controversial industry because of the health concerns related with the tobacco and smoking. There is strictly banned on smoking in public areas in most of the countries. As the tobacco industry would be facing new challenges in the future. Successful management of these risks is fundamental to their sustainable profitability and future growth.
The most recent share price of Imperial Tobacco Group plc on 20th February 2010 was 2,080.00p. In the previous year the highest share price of the Imperial Tobacco was 1,988.00p and the lowest share price for the company was 1,946.00p. The company is showing a continuous behaviours as you can observe from the values of last year share prices. The company prices stay stable during the worst financial crises. This market keeps the relative behaviour greater 9.1362 than FTSE 100 Index. Volatility has been increasing during last month.
As a further step in ensuring that the company board structure is aligned with the ongoing international development of their enlarged business. The company made considerable progress with the integration of Altadis, including rolling out their international control and group policies and procedure. The company have successfully raised 3.9bn through the capital markets and have no refinancing requirements until July 2012. Imperial Tobacco ongoing management succession planning, their priorities for 2010 include further consolidation of the Altadis business and the continued embedding and improvement of the company processes and interior control in the wider group, including in relation to Occupational Health, Safety and Environmental Process. The company will also focus on further improvement of their risk management and anti-illicit trade processes. The company will also continue drive sales growth, cost optimisation and cash utilisation during the year of 2010. Imperial Tobacco will also support reasonable regulation of tobacco products but will challenge regulation that undermines the principles of adult choice and the freedom of competition.
The company is working on a long term strategy which is very good for business. At this stage after looking at the historical data and upcoming strategy of the company of next terms I decided to hold my shares in the company and desire to buy some more shares as well. I came to the conclusion by taking into account all the analysis that has been done in the report. Considering the next five year strategy of the company shows the constructive approach to and an excellent speed of expanding as well which will benefit the organisation in the long term. As from investor point of view Imperial Tobacco is a very good company to invest in and the mainly benefit of the share holders with a sensible returns.
Ø Imperial Tobacco Group Plc Annual Report and Accounts 2008.
Ø Lecture Notes.
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