TIDM94JK
RNS Number : 1217U
Imperial Brands Finance PLC
31 March 2021
Company Number: 03214426
IMPERIAL BRANDS FINANCE PLC
Annual Report and Financial Statements 2020
STRATEGIC REPORT
For the year ended 30 September 2020
The Directors present their Strategic Report together with the
audited financial statements of Imperial Brands Finance PLC (the
"Company") for the year ended 30 September 2020.
Principal activity and principal risks and uncertainties of the
Company
The principal activity of the Company is to provide treasury
services to Imperial Brands PLC and its subsidiaries (the
"Group").
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. Financial risks comprise, but are not limited to,
market, credit and liquidity risk. A summary of the Company's
policies in respect of foreign exchange, interest, credit and
liquidity risks is included in note 13.
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.
For this reason, the Company's Directors believe that analysis
using key performance indicators for the Company is not necessary
or appropriate for an understanding of the development, performance
or position of the business of the Company. The development,
performance and position of the treasury operations of the Group,
which includes the Company, are discussed in note 21 of the
Imperial Brands PLC Annual Report ("Imperial Brands Annual Report")
which does not form part of this report, but is available at
www.imperialbrandsplc.com. Financial risk management disclosures
can be found in note 13.
COVID-19
Imperial Brands Group continues to be impacted by the global
Coronavirus (COVID-19) pandemic, which resulted in unprecedented
government restrictions on the normal operations of the Group
across many countries. The restrictions put in place initially
resulted in a number of office and factory closures. The Group has
responded by adapting working practices through activities such as
strengthening our IT infrastructure and accelerating the roll-out
of software to facilitate remote team-working, as well as
encouraging a more flexible approach. There have been modifications
to working practices including changing shift patterns to ensure
appropriate infection controls and social distancing for employees
in manufacturing facilities. As a result of this, manufacturing
plants have continued to operate and the Group is able to both
produce and distribute product to customers to meet demand, while
complying with all necessary safety precautions to protect staff
and business partners from the risks arising from the pandemic.
To date, the observable impacts on the Group's activities have
been limited to low level changes in credit risk in the duty free
and travel retail operations area. However there are ongoing risks
arising from the COVID-19 pandemic that may impact the Company
including:
-- Requirements put in place by regulators to manage COVID-19
impacts resulting in increased complexity and cost in relation to
the continued operation of the Company's operations.
-- Additional costs associated with the decision to ensure our
people work in an environment that maintains their safety over and
above regulatory requirements have been incurred during the current
pandemic and these will continue until the risk has resided.
-- The need to raise public finances following the cost of the
COVID-19 pandemic may increase the likelihood of changes in tax
legislation, and/or an increased propensity for regulators to
investigate large companies in the hope of achieving additional tax
revenues and fines. These challenges may result from differences of
opinion or changes in regulator interpretation of tax legislation
in place with which the Company considers itself to be
compliant.
-- There is an increased risk that failure to maintain cash
flows could impact the Group's ability to pay down debt, impacting
covenants, credit ratings, bank, bond, and investor confidence. In
addition a fall in certain of our credit ratings would raise the
cost of our existing committed funding and is likely to raise the
cost of future funding and affect our ability to raise debt.
However, the Company has a strong focus on cash generation
supported by Group guidance and governance processes. Cash flows,
financing requirements and key rating agency metrics are regularly
forecast and updated in line with performance and expectations to
manage future financing needs and optimise cost and availability.
The Group has investment grade credit ratings from the main credit
rating agencies, which supports it to access financing in the
global debt capital markets.
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, after the end of the
accounting period, 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 Fallback
Protocols. 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.
Review of the business
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 financial year was GBP150 million (2019: profit
of GBP109 million). The reason for the loss was due to a charge
arising on recognition of an expected credit loss provision of
GBP294 million against the carrying value of certain of its 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 charge
arising is not tax deductible and therefore there is no associated
tax credit.
Total equity as at 30 September 2020 was GBP2,258 million (2019:
GBP2,408 million).
The aggregate dividends on the ordinary shares recognised as a
charge to shareholders' funds during the year amount to GBPnil
million (2019: GBPnil million).
UK Companies Act: Section 172 (1) statement
The Company is part of the Imperial Brands Group and is
ultimately owned by Imperial Brands PLC. As set out above the
Company's principal activities comprise undertaking transactions to
manage the Group's financial risks, together with its financing and
liquidity requirements. Under Section 172 (1) of the UK Companies
Act 2006 and as part of the Directors' duty to the Company's
shareholders to act as they consider most likely to promote the
success of the Company, the Directors must have regard to the long
term consequences of decisions and the desirability of maintaining
a reputation for high standards of business conduct. The Directors
must also have regard for business relationships with the Company's
wider stakeholders, and the impact of the Company's operations on
the environment and communities in which it operates. Consideration
of these factors and other relevant matters is embedded into board
decision making and risk assessments throughout the year.
The Company's key stakeholders are financial institutions in
which it engages with in relation to the Company's financial
activities and those members of the Imperial Brands Group to which
it provides finance-related services. Primary ways in which the
Company engages with financial institutions are through meetings,
ongoing dialogue and relationship management conducted by the
Imperial Brands Group Treasury and Finance teams. There is regular
engagement with Imperial Brands PLC on finance related matters,
which is taken into account in the Company's decision making.
Primary ways in which the Company engages directly or indirectly,
as part of the Imperial Brands Group, with its key stakeholders are
summarised at pages 14 to 15 of the Imperial Brands Annual Report.
This enables the Directors to maintain an effective understanding
of what matters to those stakeholders and to draw on these
perspectives in Board decision making. During the decision making
process the Directors are made aware of the impact of decisions on
relevant stakeholders and engagement that has occurred with those
stakeholders where applicable.
In accordance with the Imperial Brands Group's overall
governance and internal control framework and in support of the
Company's purpose as part of the Imperial Brands Group, the Company
applies and the Directors have regard to all applicable Imperial
Brands Group policies and procedures, including the Group Statement
of Delegated Authorities, standards of business conduct, health and
safety and environmental policies. Where authority for decision
making is delegated to management under the Group delegated
authority rules, appropriate regard is given to the likely long
term consequences of decisions, the imperative of maintaining high
standards of business conduct, employees' interests, business
relationships with wider stakeholders, the impact of business
operations on the environment and communities, and other relevant
factors. The Imperial Brands Group Statement of Delegated
Authorities is part of the Imperial Brands Group's governance and
internal control framework through which good corporate governance,
risk management and internal control is promoted within the
Imperial Brands Group and does not derogate from any requirement
for Board review, oversight or approval in relation to the
Company's activities.
On behalf of the Board
T R Tildesley
Director
30 March 2021
REPORT OF THE DIRECTORS
For the year ended 30 September 2020
The Directors submit their report together with the Strategic
Report and the audited financial statements of the Company for the
year ended 30 September 2020.
Principal activity and financial risk management
As set out in the Strategic Report, the principal activity of
the Company is to provide treasury services to the Group. The
principal risks and uncertainties facing the Company are outlined
in the Strategic Report, with the management of those risks
discussed in note 13 to the financial statements.
Financial results and dividends
The financial results of the Company for the year are outlined
in the Strategic Report.
The Directors do not recommend the payment of a final dividend
for the year (2019: GBPnil million).
Responsibility statements under the Disclosure and Transparency
Rules
Each of the directors confirm that to the best of their
knowledge:
-- The financial statements, prepared in accordance with
applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice), including
Financial Reporting Standard 101 'Reduced Disclosure Framework'
("FRS101"), give a true and fair view of the assets, liabilities,
financial position and profit of the company, and
-- The Strategic Report and Report of the Directors report
includes a fair review of the development and performance of the
business and the position of the Company together with a
description of the principal risks and uncertainties that it
faces.
Corporate governance
The Company is a wholly owned indirect subsidiary of Imperial
Brands PLC and the Directors of the Group manage corporate
governance at a Group level. The Group's statement on corporate
governance can be found in the corporate governance report in the
Imperial Brands Annual Report, which does not form part of this
report, but is available at www.imperialbrandsplc.com. A
description of the internal control framework is provided in the
Strategic Report with consideration given to the risk management
policies of the Company included in note 13 to the financial
statements. For this reason, the Company's Directors consider
further detail of corporate governance in this report not
necessary.
Financial reporting
The Company has in place internal control and risk management
systems in relation to the Company's financial reporting process
and the process for the preparation of financial statements. These
systems include clearly defined lines of accountability and
delegation of authority, policies and procedures that cover
financial planning and reporting, preparation of monthly management
accounts, review of the disclosures within the report and accounts
to ensure that the disclosures made appropriately reflect the
developments within the Company in the year and meet the
requirement of being fair, balanced and understandable.
The above disclosures are made in accordance with the United
Kingdom Listing Authority Disclosure and Transparency Rules Section
7.2.5, requiring disclosure of internal control and risk compliance
systems.
Insurance
Imperial Brands PLC has purchased Directors' and Officers'
liability insurance that has been in force throughout the financial
year and is currently in force. The Directors of the Company have
the benefit of this insurance, which is a qualifying third party
indemnity provision as defined by the Companies Act 2006.
Future 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.
Board of Directors
The Directors of the Company who were in office during the year
and up to the date of signing the financial statements are:
-- J M Jones
-- O R Tant
-- T R W Tildesley
-- M A Wall
Going concern
The Company has been issued a letter of comfort from its parent
company, Imperial Brands PLC, confirming ongoing financial support
in meeting liabilities as they fall due for a period of 12 months
from the date of approval of the financial statements. Imperial
Brands PLC has undertaken its own assessment of going concern,
which it has confirmed and this is disclosed on page 140 of the
Imperial Brands Annual Report for the year ended 30 September 2020.
The Directors are satisfied that no events took place after the
release of the Imperial Brands PLC Annual Report that give rise to
any uncertainties relating to going concern, and accordingly the
Directors considered it appropriate to rely upon this support in
making their going concern assessment for these financial
statements. The Directors are satisfied that the Company has
adequate resources to meet its operational needs for the
foreseeable future which is at least 12 months from the date of
signing the financial statements and accordingly they continue to
adopt the going concern basis in preparing the financial
statements.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 "Reduced Disclosure
Framework", and applicable law). Under company law, the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors and
applying them consistently;
-- make judgements and accounting estimates that are reasonable
and prudent;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in FRS 101 are insufficient to enable users
to understand the impact of particular transactions, other events
and conditions on the group's financial position and financial
performance;
-- state whether applicable United Kingdom Accounting Standards,
comprising FRS 101, have been followed, subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Disclosure of information to Auditors
Each of the Directors in office as of the date of approval of
this report confirms that:
-- so far as they are aware, there is no relevant audit
information of which the Company's Auditors are unaware; and
-- they have each taken all the steps that they ought to have
taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company's
Auditors are aware of that information.
On behalf of the Board
T R W Tildesley
Director
30 March 2021
FINANCIAL STATEMENTS
For the year ended 30 September 2020
Income Statement
(In GBP million) Notes 2020 2019
------------------------------------- ----- ------- -------
Administrative expenses (4) (3)
Impairment losses (294) -
Other operating income 1 1
===================================== ===== ======= =======
Operating loss 4 (297) (2)
Investment income 5 1,554 1,903
Finance costs 6 (1,373) (1,766)
===================================== ===== ======= =======
(Loss)/profit before taxation (116) 135
Tax on (loss)/profit 8 (34) (26)
===================================== ===== ======= =======
(Loss)/profit for the financial year (150) 109
===================================== ===== ======= =======
The Company has no other comprehensive income other than that
included above and, therefore, a separate statement of
comprehensive income has not been presented.
Balance Sheet
As at 30 September 2020
(In GBP million) Notes 2020 2019
--------------------------------- ----- -------- --------
Non-current assets
Trade and other receivables 10 109 110
Derivative financial instruments 14 784 677
893 787
================================= ===== ======== ========
Current assets
Trade and other receivables 10 31,983 33,238
Cash and cash equivalents 911 1,505
Derivative financial instruments 14 51 137
================================= ===== ======== ========
32,945 34,880
================================= ===== ======== ========
Total assets 33,838 35,667
================================= ===== ======== ========
Current liabilities
Borrowings 12 (1,381) (1,892)
Derivative financial instruments 14 (37) (28)
Trade and other payables 11 (18,334) (18,234)
(19,752) (20,154)
================================= ===== ======== ========
Non-current liabilities
Borrowings 12 (10,209) (11,697)
Derivative financial instruments 14 (1,619) (1,408)
(11,828) (13,105)
================================= ===== ======== ========
Total liabilities (31,580) (33,259)
================================= ===== ======== ========
Net assets 2,258 2,408
================================= ===== ======== ========
Equity
Share capital 15 2,100 2,100
Retained earnings 158 199
Total equity 2,258 2,299
================================= ===== ======== ========
The financial statements were approved by the Board of Directors
on 30 March 2021 and signed on its behalf by:
T R W Tildesley ________________
Director
O R Tant _________________
Director
Company Number: 03214426
Statement of Changes in Equity
For the year ended 30 September 2020
Share Retained Total
(In GBP million) capital earnings equity
--------------------------------------------- -------- --------- -------
At 1 October 2019 2,100 308 2,208
Total comprehensive income
============================================= ======== ========= =======
Profit for the financial year - (150) (150)
------------------------------------------------- -------- --------- -------
Total comprehensive income for the year year - (150) (150)
================================================= ======== ========= =======
At 31 September 2020 2,100 158 2,258
================================================= ======== ========= =======
Share Retained Total
(In GBP million) capital earnings equity
--------------------------------------------- -------- --------- -------
At 1 October 2018 2,100 199 2,299
Total comprehensive income
============================================= ======== ========= =======
Profit for the financial year - 109 109
------------------------------------------------- -------- --------- -------
Total comprehensive income for the year - 109 109
-
--------------------------------------------- -------- --------- -------
At 30 September 2019 2,100 308 2,408
================================================= ======== ========= =======
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 September 2020
1. Authorisation of financial statements and statement of
compliance with FRS101
The principal activity of the Company is to provide treasury
services to the Group. The Company is a public limited company
incorporated and domiciled in England and Wales. The registered
address is 121 Winterstoke Road, Bristol, BS3 2LL. The Company is
classified as a financial institution as defined by FRS 101.
The financial statements of the Company for the year ended 30
September 2020 were authorised for issue by the Board of Directors
on 30 March 2021, and the balance sheet was signed on the Board's
behalf by and T R W Tildesley and O R Tant.
These 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.
The Company has been issued a letter of comfort from its parent
company, Imperial Brands Plc, confirming ongoing financial support
in meeting liabilities as they fall due for a period of 12 months
from the date of approval of the financial statements. Imperial
Brands PLC has undertaken its own assessment of going concern,
which it has confirmed and this is disclosed on page 140 of the
Imperial Brands Annual Report for the year ended 30 September 2020.
The Directors rely upon this support in making their going concern
assessment for these financial statements. The Directors are
satisfied that the Company has adequate resources to meet its
operational needs for the foreseeable future which is at least 12
months from the date of signing the financial statements and
accordingly they continue to adopt the going concern basis in
preparing the financial statements.
The Company's financial statements are presented in pounds
sterling, its functional currency, and all values are rounded to
the nearest million pounds (GBP million) except when otherwise
indicated.
The principal accounting policies adopted by the Company are set
out in note 2.
2. Accounting policies
Basis of preparation of financial statements
The preparation of financial statements in conformity with FRS
101 requires the use of certain critical accounting estimates and
judgements in applying the Company's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial
statements are disclosed in note 3.
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. The
disclosures may be found via the investor relations section of the
Imperial Brands PLC website at www.imperialbrandsplc.com/investors
.
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 financial statements have been prepared on an amortised cost
or fair value basis as described in the accounting policies on
financial instruments below.
New accounting standards and interpretations
There are no new accounting standards that are expected to have
any impact on the financial results of the Company.
Interest
Interest payable and receivable is recognised in the income
statement using the effective interest method.
The principal activity of the Company is to provide treasury
services to the Group. However, the Company has chosen to present
interest receivable and payable below operating profit, including
foreign exchange gains and losses on financing activities, in order
to have a consistent treatment with the format of the consolidated
financial statements of the Group. This is considered appropriate
since the Company undertakes transactions on behalf of the
Group.
2. Accounting policies (continued)
Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into pound sterling at the rates of
exchange ruling at the balance sheet date.
Transactions in currencies other than pound sterling are
initially recorded at the exchange rate ruling at the date of the
transaction. Foreign exchange gains and losses resulting from the
settlement of such transactions are taken to the income
statement.
Taxes
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive
income or directly in shareholders' funds. In this case, the tax is
also recognised in other comprehensive income or directly in the
shareholders' funds, respectively.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustments to tax payable in
respect of previous periods.
Deferred tax is provided in full on temporary differences
between the carrying amount of assets and liabilities in the
financial statements and the tax base, except if it arises from the
initial recognition of an asset or liability in a transaction,
other than a business combination, that at the time of the
transaction affects neither accounting nor taxable profit or
loss.
Deferred tax assets are recognised only to the extent that it is
probable that future taxable profits will be available against
which the assets can be realised. Deferred tax is determined using
the tax rates that have been enacted or substantively enacted at
the balance sheet date, and are expected to apply when the deferred
tax liability is settled or the deferred tax asset is realised.
Deferred tax is determined using tax rates that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred tax asset is realised
or the deferred tax liability is settled. Deferred tax is measured
on a non-discounted basis.
Dividends
Final dividends are recognised as a liability in the period in
which the dividends are approved by shareholders, whereas interim
dividends are recognised in the period in which the dividends are
paid.
Financial instruments
Receivables held under a hold to collect business model are
stated at amortised cost.
The calculation of impairment provisions is subject to an
expected credit loss model, involving a prediction of future credit
losses based on past loss patterns. The approach involves the
recognition of provisions relating to potential future impairments,
in addition to impairments that have already occurred. The expected
credit loss approach involves modelling of historic loss rates
(where applicable) and consideration of the level of future credit
risk. Expected loss rates are then applied to the gross receivables
balance to calculate the impairment provision.
Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions of the
relevant instrument. Financial assets are de-recognised when the
rights to receive benefits have expired or been transferred, and
the Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are de-recognised when the
obligation is extinguished.
Non-derivative financial liabilities are initially recognised at
fair value and are subsequently stated at amortised cost using the
effective interest method under a hold to collect business model.
For borrowings, the carrying value includes accrued interest
payable, as well as unamortised transaction costs. Cash and cash
equivalents include cash in hand and deposits held on call,
together with other short-term highly liquid investments.
The Company transacts both intragroup and external derivative
financial instruments to manage the Company's and the Group's
underlying exposure to foreign exchange and interest rate risks.
The Company does not transact derivative financial instruments for
trading purposes. Derivative financial instruments are initially
recorded at fair value plus any directly attributable transaction
costs. Derivative financial assets and liabilities are included in
the balance sheet at fair value, and include accrued interest
receivable and payable where relevant. The Company has decided (as
permitted under FRS 101) not to hedge account for its derivative
financial instruments and so changes in fair values are recognised
in the income statement in the period in which they arise.
Collateral transferred under the terms and conditions of a
credit support annex document under an International Swaps and
Derivatives Association ("ISDA") agreement in respect of one
derivative is net settled and is, therefore, netted off the
carrying value of the derivative in the balance sheet.
3. Critical accounting estimates and assumptions
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below. There were no critical
judgements involved in the preparation of these financial
statements.
Expected credit loss on other receivables
An expected credit loss provision has been recognised against
the carrying value of certain trade and other receivables. The
provision is a reduction in the carrying value of the asset
involved reflecting an assessment of the level of risk that future
repayment may default. The loans receivable involved are all loans
made to entities within the Imperial Brands Group. The provision
has been calculated based on the size of the loan, the probability
of default (measured through credit default rates or expected
future cashflows) and the loss estimated to arise if a default
occurred (considered with regard to the value of the realisable
assets of the counterparty). The probability of default rates used
vary from 1% up to 75%. The loss given default rates ranged from
nil up to 100% for certain entities where the counterparty has
insufficient assets that could be realised to repay the loan. All
intergroup loans continue to perform at present.
Derivatives
The fair value of derivatives 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.
Those techniques are significantly affected by the assumptions
used, including discount rates, estimates of future cash flows,
exchange rates and interest rates. The valuation of derivatives is
subject to changes in the underlying assumptions used by financial
markets in valuing financial instruments. The impact of changes in
these assumptions can be significant resulting in volatility in
valuations. Further information as to the sensitivity of valuations
is disclosed in note 13.
The categorisation within the fair value hierarchy (i.e. level
1, 2 or 3) of the inputs to the fair value measurements of
derivatives carried at fair value is set out in note 13
4. Operating loss
The operating loss includes an expected credit loss charge on
loans receivable of GBP294 million (2019: GBPnil million). It is
stated after charging auditors' fees of GBP44,716 (2019: GBP43,285)
which were met by Imperial Tobacco Limited ("ITL"), a wholly owned
indirect subsidiary of Imperial Brands PLC. There were no non-audit
fees paid during the year (2019: GBPnil). During the year the
Company's auditors changed from PricewaterhouseCoopers to
Ernst&Young. The Company has also been recharged office rental
costs from another Group company of GBP30,960 (2019:
GBP15,480).
5. Investment income
(In GBP million) 2020 2019
----------------------------------------------------------------- ------ ------
Interest receivable from Group undertakings 836 905
Interest on bank deposits 2 4
Fair value gains on external derivative financial instruments 660 671
Fair value gains on intragroup derivative financial instruments 56 323
1,554 1,903
================================================================= ====== ======
6. Finance costs
(In GBP million) 2020 2019
---------------------------------------------------------------- ------ ------
Interest payable to Group undertakings 141 200
Interest on bank loans and other loans 414 442
Exchange losses on monetary assets and liabilities 233 279
Fair value losses on external derivative financial instruments 585 845
1,373 1,766
================================================================ ====== ======
7. Directors' emoluments and pensions
Employment costs, which do not include pension costs, are paid
by ITL and subsequently recharged to the Company.
The total salary costs recharged in the year was GBP933,467
(2019: GBP645,314) and social security costs of GBP106,539 (2019:
GBP78,626). The average monthly number of employees during the year
was 8 (2019: 10).
The emoluments of the Directors are paid by ITL. The Directors'
services to the Company and to a number of fellow subsidiaries
below the ultimate parent company are of a non-executive nature and
their emoluments and retirement benefits are deemed to be wholly
attributable to their services to ITL and the Group. Accordingly,
no emoluments or retirement benefits are disclosed in these
financial statements.
8. Tax on profit
Analysis of charge in the year:
(In GBP million) 2020 2019
--------------------------------------------------- ----- -----
UK Corporation tax on (loss)/profits for the year 34 26
Withholding tax 1 1
Double taxation relief (1) (1)
==================================================== ===== =====
Current tax 34 26
---------------------------------------------------- ----- -----
Total tax charge 34 26
==================================================== ===== =====
Factors affecting the tax charge for the year
Tax for the year is higher than (2019: equal to) the standard
rate of corporation tax in the UK for the year of 19 per cent
(2019: 19 per cent). The differences are explained as follows:
(In GBP million) 2020 2019
------------------------------------------------------------------- ------ -----
(Loss)/profit before taxation (116) 135
==================================================================== ====== =====
Profit before taxation multiplied by standard rate of corporation
tax in the UK of 19.0% (2019: 19%) (22) 26
Effects of:
Non-deductible expected credit loss provision charge 56 -
Total tax charge 34 26
==================================================================== ====== =====
Movement on current tax account
(In GBP million) 2020 2019
------------------------------------------------ ----- -----
At 1 October 25 -
Charged to the income statement - current year 34 26
Cash paid (26) (1)
At 30 September 33 25
================================================= ===== =====
Factors that may affect future tax charges
The current year tax rate of 19% arises from profits being taxed
at 19% for the year to 30 September 2020.
As announced in the Chancellor's Budget on 3 March 2021, the UK
corporation tax rate is expected to increase to 25% from 1 April
2023.
9. Dividends
'No dividend is proposed for the current year (2019: no dividend).
10. Other receivables
2020 2020 2019 2019
(In GBP million) Current Non-Current Current Non-Current
------------------------------------ -------- ------------ -------- ------------
Amounts owed by Group undertakings 31,980 109 33,234 110
Other receivables and prepayments 3 - 4 -
==================================== ======== ============ ======== ============
31,983 109 33,238 110
==================================== ======== ============ ======== ============
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 30
September 2020 GBP28,652 million (2019: GBP29,737 million) of the
amounts owed by Group undertakings is repayable on a mutually
agreed future date (treated as a current receivable) and GBP3,437
million (2019: GBP3,607 million) were term loans. Within 2019
current receivables there was a euro denominated loan due from
Imperial Tobacco Overseas Holdings Limited Dutch Branch with a
carrying value of GBP902 million. As this loan had no fixed
repayment date and as it was to have been repaid on or before 1
October 2022 it was classified as a current receivable; the loan
was repaid during 2020. There were GBP31,195 million (2019:
GBP29,467 million) of interest bearing loans and GBP894 million
(2019: GBP4,017 million) of non-interest bearing loans. Where loans
were subject to interest the rates charged varied from 0.125% to
5.750% (2019: 0.125% to 12.000%).
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
GBP294 million (2019: GBPnil) has been recognised to reflect the
credit risk inherent within a number of the current intercompany
loans receivable, as follows:
2020
------------- -------------- ------------
Gross amount ECL allowance Net balance
Loan receivable balances that are not impaired 31,465 - 31,465
Loan receivable balances that are impaired 918 294 624
================================================= ============= ============== ============
32,383 294 32,089
================================================ ============= ============== ============
2019
------------- -------------- ------------
Gross amount ECL allowance Net balance
Loan receivable balances that are not impaired 33,344 - 33,344
Loan receivable balances that are impaired - - -
================================================ ============= ============== ============
33,344 - 33,344
================================================ ============= ============== ============
11. Other payables
(In GBP million) 2020 2019
------------------------------------ ------- -------
Amounts owed to Group undertakings 18,301 18,209
Corporation tax payable 33 25
------------------------------------- ------- -------
18,344 18,234
------------------------------------ ------- -------
Amounts owed to Group undertakings are unsecured, both interest
bearing and non-interest bearing and repayable on a future date to
be mutually agreed between the Company and the counterparty lender
(treated as a current liability). At 30 September 2020 all these
loans were recognised as current liabilities (2019: current
liabilities). There were GBP11,747 million (2019: GBP14,378
million) of interest bearing loans and GBP6,552 million (2019:
GBP3,831 million) of non-interest bearing loans. Where loans were
subject to interest the rates charged varied from 0.13% to 4.36%
(2019: 0.24% to 4.36%).
Amounts owed to Group undertakings are not included in the
borrowings analysis in note 12 of the financial statements which
only includes borrowings with external counterparties.
12. Borrowings
The Company's borrowings are held at amortised cost as
follows:
(In GBP million) 2020 2019
------------------------------------------- ------- -------
Current borrowings
Bank loans and overdrafts - 1
Capital market issuance:
European commercial paper - 177
EUR750m 5.0% notes due December 2019 - 692
EUR1,250m 2.95% notes due July 2020 - 1,022
EUR1,000m 2.25% notes due February 2021 925 -
EUR500m 0.5% notes due July 2021 456 -
Total current borrowings 1,381 1,892
============================================ ======= =======
Non-current borrowings
Capital market issuance:
EUR1,000m 2.25% notes due February 2021 - 897
EUR500m 0.5% notes due July 2021 - 443
GBP1,000m 9.0% notes due February 2022 1,056 1,055
$1,250m 3.75% notes due July 2022 980 1,023
$1,000m 3.5% notes due February 2023 782 815
EUR750m 1.25% notes due August 2023 684 664
GBP600m 8.125% notes due March 2024 626 626
$1,000m 3.125% notes due July 2024 782 816
EUR500m 1.375% notes due January 2025 460 446
$1,500m 4.25% notes due July 2025 1,172 1,222
EUR650m 3.375% notes due February 2026 604 587
$750m 3.5% notes due July 2026 586 612
GBP500m 5.5% notes due September 2026 500 500
EUR750m 2.125% notes due February 2027 692 671
$1,000m 3.875% notes due July 2029 781 816
GBP500m 4.875% notes due June 2032 504 504
-------------------------------------------- ------- -------
Total non-current borrowings 10.209 11,697
============================================ ======= =======
Total borrowings 11,590 13,589
============================================ ======= =======
Analysed as:
Capital market issuance 11,590 13,588
Bank loans and overdrafts - 1
============================================ ======= =======
Current and non-current borrowings include interest payable of
GBP13 million (2019: GBP33 million) and GBP151 million (2019:
GBP164 million) respectively as at 30 September.
Interest payable on capital market issuances are at fixed rates
of interest and interest payable on bank loans and overdrafts are
at floating rates of interest.
On 2 December 2019, EUR750 million 5.0% notes were repaid. On 21
July 2020, $1,250 million 2.95% notes were repaid.
All borrowings are unsecured and the Company has not defaulted
on any during the year (2019: no defaults).
Non-current financial liabilities
The maturity profile of non-current financial liabilities
outstanding as at 30 September 2020 (including the impact of
derivative financial instruments detailed in note 14) is as
follows:
2020 2019
------------------ ------------------ -------- ------------------ ----------------- --------
Net derivative Net derivative
financial financial
Borrowings and (assets)/ Borrowings and (assets) /
(In GBP million) overdrafts liabilities Total overdrafts liabilities Total
------------------- ------------------ ------------------ -------- ------------------ ----------------- --------
Amounts expiring:
Between one and
two years 2,036 24 2,059 1,340 (16) 1,324
Between two and
five years 4,506 (31) 4,475 4,999 14 5,013
In five years or
more 3,667 842 4,510 5,358 733 6,091
=================== ================== ================== ======== ================== ================= ========
10,209 835 11,044 11,697 731 12,428
=================== ================== ================== ======== ================== ================= ========
Fair value of borrowings
The fair value of borrowings as at 30 September 2020 is
estimated to be GBP12,434 million (2019: GBP14,275 million).
GBP12,434 million (2019: GBP14,274 million) relates to capital
market issuance and has been determined by reference to market
prices as at the balance sheet date. A comparison of the carrying
amount and fair value of capital market issuance by currency is
provided below. The fair value of all other borrowings is
considered to equal their carrying amount.
2020 2019
--------------------- ----------- --------------------- -----------
(In GBP million) Balance sheet amount Fair value Balance sheet amount Fair value
------------------ --------------------- ----------- --------------------- -----------
GBP 2,686 3,054 2,685 3,168
EUR 3,821 3,943 4,577 4,681
USD 5,083 5,437 6,326 6,425
================== ===================== =========== ===================== ===========
Total bonds 11,590 12,434 13,588 14,274
================== ===================== =========== ===================== ===========
Undrawn borrowing facilities
At 30 September the Company had the following undrawn committed
facilities:
(In GBP million) 2020 2019
---------------------------- ------ ------
Amounts expiring:
In less than one year - 266
Between one and two years 1,551 3,011
Between two and five years 3,193 -
In five years or more - -
4,744 3,277
============================ ====== ======
During the year syndicated borrowing facilities for EUR2,835
million and GBP500 million were cancelled and a new syndicated
multicurrency facility for EUR3,500 million was arranged. During
the year one bilateral facility for EUR300 million was cancelled
and six new bilateral facilities for a total EUR1,700 million were
arranged.
13. Financial risk management
Overview
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. As a result, the Company is exposed to risks
including, but not limited to, market, credit and liquidity risk.
This note explains the Company's exposure to these risks, how they
are measured and assessed, and summarises the policies and
processes used to manage them, including those related to the
management of capital.
The Group's treasury activities are overseen by the Treasury
Committee, which meets when required and comprises the Chief
Financial Officer, the Company Secretary and the Director of
Treasury of Imperial Brands PLC. The Treasury Committee operates in
accordance with the terms of reference set out by the Board of
Directors of Imperial Brands PLC and a framework (the "Treasury
Committee Framework") which sets out the expectations and
boundaries to assist in the effective oversight of treasury
activities. The Director of Treasury reports on a regular basis to
the Treasury Committee.
The Board of Directors of Imperial Brands PLC reviews and
approves all major Treasury decisions. The treasury function does
not operate as a profit centre, nor does it enter into speculative
transactions.
The Company's management of financial risks cover the
following:
(a) Market risk
Price risk
The Company is not exposed to equity securities price risk.
Foreign exchange risk
The Company is exposed to movements in foreign exchange rates
due to the translation of balance sheet items held in
non-functional currencies. The Company's financial results are
principally exposed to fluctuations in euro and US dollar exchange
rates.
Management of the Company's foreign exchange translation risk is
addressed below.
Translation risk
The Company has translation risk on cash, borrowings,
derivatives and intragroup loans held in non-functional currencies.
The Company enters into intragroup derivative contracts to manage
some of the Company's exposure to exchange rate movements.
The Company issues debt in the most appropriate market or
markets at the time of raising new finance and has a policy of
using derivative financial instruments, cross currency swaps, to
change the currency of debt as required.
Foreign exchange sensitivity analysis
The Company's sensitivity to foreign exchange rate movements,
which impacts the translation of monetary items held by the Company
in currencies other than its functional currency, is illustrated on
an indicative basis below. The sensitivity analysis has been
prepared on the basis that the proportion of cash, borrowings,
derivatives and intragroup loans held in non-functional currencies
remains constant.
The Company manages its sensitivity to foreign exchange rates
through the use of intragroup derivative contracts to reduce
foreign exchange gains or losses on the translation of financial
instruments. The sensitivity analysis does not reflect any change
to non-finance costs that may result from changing exchange rates
and ignores any taxation implications and offsetting effects of
movements in the fair value of derivative financial
instruments.
2020 2019
------------------------------- -------------------------------
(In GBP million) Increase/ (decrease) in income Increase/ (decrease) in income
------------------------------------------------- ------------------------------- -------------------------------
Income Statement impact on non-functional
currency foreign exchange exposures:
10% appreciation of euro (2019: 10%) 337 13
10% appreciation of US dollar (2019: 10%) (138) (48)
-------------------------------------------------- ------------------------------- -------------------------------
An equivalent depreciation in the above currencies would cause a
decrease in income of GBP411 million and increase of GBP169 million
for euro and US dollar exchange rates respectively (2019: decrease
of GBP16 million and increase of GBP59 million respectively).
There is no direct net impact on equity (2019: GBPnil).
Interest rate risk
The Company's interest rate risk arises from its borrowings net
of cash and cash equivalents, with the primary exposures arising
from fluctuations in euro and US dollar interest rates. Borrowings
at variable rates expose the Company to cash flow interest rate
risk. Borrowings at fixed rates expose the Company to fair value
interest rate risk.
The Company manages its exposure to interest rate risk on its
borrowings by entering into derivative financial instruments,
interest rate swaps, to achieve an appropriate mix of fixed and
floating interest rate debt in accordance with the Treasury
Committee Framework and Treasury Committee decisions.
As at 30 September 2020, after adjusting for the effect of
derivative financial instruments detailed in note 14, approximately
69% (2019: 57%) of the Company's borrowings were at fixed rates of
interest.
Interest rate sensitivity analysis
The Company's sensitivity to interest rates on its euro and US
dollar monetary items which are primarily external borrowings, cash
and cash equivalents, is illustrated on an indicative basis below.
The impact in the Company's Income Statement reflects the effect on
net finance costs in respect of the Company's net debt and the
fixed to floating rate debt ratio prevailing at 30 September 2020,
ignoring any taxation implications and offsetting effects of
movements in the fair value of derivative financial
instruments.
The sensitivity analysis has been prepared on the basis that net
debt and the derivatives portfolio remain constant and that there
is no direct net impact on equity (2019: GBPnil).
The movement in interest rates is considered reasonable for the
purposes of this analysis and the estimated effect assumes a lower
limit of zero for interest rates where relevant.
(In GBP million) 2020 2019
----------------- -----------------
Change in income Change in income
-------------------------------------------------------- ----------------- -----------------
Income Statement impact of interest rate movements:
+/- 1% increase in euro interest rates (2019: 1%) 30 35
+/- 1% increase in US dollar interest rates (2019: 1%) 8 14
--------------------------------------------------------- ----------------- -----------------
(b) Credit risk
IFRS 9 requires an expected credit loss (ECL) model to be
applied to financial assets. The ECL model requires the Company to
account for expected losses as a result of credit risk on initial
recognition of financial assets and to recognise changes in those
expected credit losses at each reporting date. Allowances are
measured at an amount equal to the lifetime expected credit losses
where the credit risk on the receivables increases significantly
after initial recognition. The Company is exposed to credit risk
arising from loans to entities within the Imperial Brands Group,
cash deposits, derivatives and other amounts due from external
financial counterparties arising on other financial instruments.
The maximum credit risk relating to intergroup loans was GBP32,089
million (2019: GBP33,344 million). The maximum aggregate credit
risk to parties external to the Imperial Brands Group was
considered to be GBP1,777 million at 30 September 2020 (2019:
GBP2,319 million). Intragroup counterparty credit risk may be
mitigated where there is control of a counterparty within the
Group, allowing the Group to facilitate repayment through realising
counterparty assets or through refinancing. At 30 September 2020 an
ECL provision of GBP294 million was recognised relating to the risk
of intergroup loans not being repaid (2019: GBPnil).
Trade and other receivables
Policies are in place to manage the risk associated with the
extension of credit to third parties, including companies within
the Group, to ensure that commercial intent is balanced effectively
with credit risk management. Credit is extended with consideration
to financial risk and creditworthiness. Analysis of trade and other
receivables is provided in note 10.
Financial instruments
In order to manage its credit risk to any one counterparty, the
Company places cash deposits and enters into derivative financial
instruments with a diversified group of financial institutions
carrying suitable credit ratings in line with the Treasury
Committee Framework. Utilisation of counterparty credit limits is
regularly monitored by Treasury and ISDA agreements are in place to
permit the net settlement of assets and liabilities in certain
circumstances. In connection with one ISDA Credit Support Annex the
Company had placed GBP47 million as at 30 September 2020 (2019:
GBP38 million) as collateral with a third party in order to manage
their counterparty risk on the Group under derivative financial
instruments.
The table below summarises the Company's largest exposures to
financial counterparties as at 30 September 2020. At the balance
sheet date management does not expect these counterparties to
default on their current obligations.
2020 2019
------------------- ----------------------------- ------------------ -----------------------------
S&P credit rating Maximum exposure to credit S&P credit rating Maximum exposure to credit
risk risk
GBP million GBP million
--------------- ------------------- ----------------------------- ------------------ -----------------------------
Highest A+ 14 A+ 20
2(nd) highest A 11 AA- 19
3(rd) highest A+ 5 A 12
4(th) highest A+ 2 A 8
5(th) highest - - A 8
=============== =================== ============================= ================== =============================
(c) Liquidity risk
The Company is exposed to liquidity risk, which represents the
risk of having insufficient funds to meet its financing needs. To
manage this risk the Company has a policy of actively maintaining a
mixture of short, medium and long-term committed facilities that
are structured to ensure that the Company has sufficient available
funds to meet the forecast requirements of the Group over the short
to medium term. To prevent over-reliance on individual sources of
liquidity, funding is provided across a range of instruments
including debt capital market issuance, bank bilateral agreements,
bank revolving credit facilities and European commercial paper.
There are no financial covenants in the Company's material short
and long-term borrowings. Certain of these borrowings contain cross
default provisions and negative pledges. The core committed bank
facilities are subject to two financial covenants, these being
minimum interest cover ratio of four times and maximum gearing of
four times (per the definition within the agreement) and are
subject to pari passu ranking and negative pledge covenants. Any
non-compliance with covenants underlying the Company's financing
arrangements could, if not waived, constitute an event of default
with respect to any such arrangements, and any non-compliance with
covenants may, in particular circumstances, lead to an acceleration
of maturity on certain borrowings and the inability to access
committed facilities.
We remain fully compliant with all our banking covenants (2019:
fully compliant).
The Group primarily borrows centrally in order to meet forecast
funding requirements, and the treasury function is in regular
dialogue with subsidiaries in the Group to ensure their liquidity
needs are met. Subsidiaries in the Group are funded by a
combination of share capital and retained earnings, intercompany
loans, and in very limited cases through external local borrowings.
Cash pooling processes are used to centralise surplus cash held by
subsidiaries in the Group where possible in order to minimise
external borrowing requirements and interest costs. Treasury
invests surplus cash in bank deposits and uses foreign exchange
contracts to manage short term liquidity requirements in line with
short term cash flow forecasts. As at 30 September 2020, the
Company held liquid assets of GBP911 million (2019: GBP1,505
million).
The table below summarises the Company's non derivative
financial liabilities by maturity based on their remaining
contractual cash flows as at 30 September 2020. The amounts
disclosed are undiscounted cash flows calculated using spot rates
of exchange prevailing at the relevant balance sheet date.
Contractual cash flows in respect of the Company's derivative
financial instruments are detailed in note 14.
At 30 September
2020
Contractual
Balance sheet cash flows Between 1 and 2 Between 2 and 5
(In GBP million) amount Total < 1 year years years > 5 years
------------------ ----------------- ---------------- ----------- ---------------- ---------------- ------------
Non-derivative
financial
liabilities
Bank loans - - - - - -
Capital market
issuance 11,590 13,302 1,806 2,339 5,165 3,992
Amounts owed to
group
undertakings 18,301 18,301 18,301 - - -
================== ================= ================ =========== ================ ================ ============
Total
non-derivative
financial
liabilities 29,891 31,603 20,107 2,339 5,165 3,992
================== ================= ================ =========== ================ ================ ============
At 30 September
2019
Contractual
Balance sheet cash flows Between 1 and 2 Between 2 and 5
(In GBP million) amount Total < 1 year years years > 5 years
------------------ ----------------- ---------------- ----------- ---------------- ---------------- ------------
Non-derivative
financial
liabilities
Bank loans 1 1 1 - - -
Capital market
issuance 13,588 15,787 2,345 1,773 5,806 5,863
Amounts owed to
group
undertakings 18,208 18,209 18,209 - - -
================== ================= ================ =========== ================ ================ ============
Total
non-derivative
financial
liabilities 31,798 33,997 20,555 1,773 5,806 5,863
================== ================= ================ =========== ================ ================ ============
Amounts owed to the Company by Group undertakings of GBP32,089
million (2019: GBP33,344 million) are excluded from the above
tables, as disclosure of contractual cash flows is only required
for liabilities.
Capital management
The management of the Company's capital structure forms part of
the Group's capital risk management, details of which can be found
in note 21 of the Imperial Brands Annual Report which does not form
part of this report, but is available at www.imperialbrandsplc.com
.
Fair value estimation and hierarchy
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 financial
instruments are valued using techniques based significantly on
observable market data such as yield curves, foreign exchange rates
and credit default swap prices for the Imperial Brands PLC Group as
at the balance sheet date (Level 2 classification hierarchy per
IFRS 7) as detailed in note 14. There were no changes to the
valuation methods or transfers between hierarchies during the year.
With the exception of capital market issuance, the fair value of
all financial assets and financial liabilities is considered
approximate to their carrying amount as outlined in note 14.
Netting arrangements of financial instruments
The following tables set out the Company's financial assets and
financial liabilities that are subject to netting and set-off
arrangements. Financial assets and liabilities that are subject to
set-off arrangements and disclosed on a net basis in the Company's
balance sheet primarily relate to collateral in respect of one
derivative financial instrument under an ISDA credit support annex.
Amounts which do not meet the criteria for offsetting on the
balance sheet but could be settled net in certain circumstances
principally relate to derivative transactions executed under ISDA
agreements where each party has the option to settle amounts on a
net basis in the event of default of the other party.
2020
==============================================================================================
Gross financial Gross financial Net financial Related amounts not Net
assets / assets / assets /liabilities set off in the
(In GBP million) liabilities liabilities set off per balance sheet balance sheet
---------------------- -------------------- -------------------- -------------------- -------------------- ------
Assets
Derivative financial
instruments 882 (47) 835 (828) 7
882 (47) 835 (828) 7
====================== ==================== ==================== ==================== ==================== ======
Liabilities
Derivative financial
instruments (1,703) 47 (1,657) 828 (828)
====================== ==================== ==================== ==================== ==================== ======
(1,703) 47 (1,657) 828 (828)
====================== ==================== ==================== ==================== ==================== ======
2019
==============================================================================================
Gross financial Gross financial Net financial Related amounts not Net
assets / assets / assets /liabilities set off in the
(In GBP million) liabilities liabilities set off per balance sheet balance sheet
---------------------- -------------------- -------------------- -------------------- -------------------- ------
Assets
Derivative financial
instruments 852 (38) 814 (740) 74
852 (38) 814 (740) 74
====================== ==================== ==================== ==================== ==================== ======
Liabilities
Derivative financial
instruments (1,474) 38 (1,436) 740 (696)
====================== ==================== ==================== ==================== ==================== ======
(1,474) 38 (1,436) 740 (696)
====================== ==================== ==================== ==================== ==================== ======
Classification of financial instruments
The following table sets out the Company's accounting
classification of each class of financial assets and
liabilities:
2020
--------------------------- -------------------------- ------------------------- --------- --------- ------------
Fair value through income Assets and liabilities Total Current Non-current
statement at amortised cost
--------------------------- -------------------------- ------------------------- --------- --------- ------------
Trade and other
receivables - 32,092 32,092 31,983 109
Cash and cash equivalents - 911 911 911 -
Derivatives 835 - 835 51 784
Total financial assets 835 33,003 33,838 32,945 893
=========================== ========================== ========================= ========= ========= ============
Borrowings - (11,590) (11,590) (1,381) (10,209)
Trade and other payables - (18,334) (18,334) (18,334) -
Derivatives (1,656) - (1,656) (37) (1,619)
Total financial
liabilities (1,656) (29,924) (31,580) (19,752) (11,828)
=========================== ========================== ========================= ========= ========= ============
Net financial
assets/(liabilities) (821) 3,079 2,258 13,193 (10,935)
=========================== ========================== ========================= ========= ========= ============
2019
--------------------------- -------------------------- ------------------------- --------- --------- ------------
Fair value through income Assets and liabilities Total Current Non-current
statement at amortised cost
--------------------------- -------------------------- ------------------------- --------- --------- ------------
Trade and other
receivables - 33,348 33,348 33,238 110
Cash and cash equivalents - 1,505 1,505 1,505 -
Derivatives 814 - 814 137 677
Total financial assets 814 34,853 35,667 34,880 787
=========================== ========================== ========================= ========= ========= ============
Borrowings - (13,589) (13,589) (1,892) (11,697)
Trade and other payables - (18,234) (18,234) (18,234) -
Derivatives (1,436) - (1,436) (28) (1,408)
Total financial
liabilities (1,436) (31,823) (33,259) (20,154) (13,105)
=========================== ========================== ========================= ========= ========= ============
Net financial
assets/(liabilities) (622) 3,030 2,408 14,726 (12,318)
=========================== ========================== ========================= ========= ========= ============
14. Derivative financial instruments
The Company has the following derivative financial instruments
measured at fair value through profit and loss:
Current derivative financial instruments 2020 2019
---------------------------------------------------------- ------- ------------ ------- ------------
(In GBP million) Assets Liabilities Assets Liabilities
---------------------------------------------------------- ------- ------------ ------- ------------
Interest rate swaps 39 (27) 24 (26)
Foreign exchange contracts 9 (10) 104 (2)
Cross currency swaps 3 - 9 -
Collateral(1) - - - -
========================================================== ======= ============ ======= ============
Total current derivatives 51 (37) 137 (28)
========================================================== ======= ============ ======= ============
Non-current derivative financial instruments
---------------------------------------------------------- ------- ------------ ------- ------------
(In GBP million) Assets Liabilities Assets Liabilities
---------------------------------------------------------- ------- ------------ ------- ------------
Interest rate swaps 784 (1,183) 645 (1,079)
Cross currency swaps - (483) 32 (367)
Collateral(1) - 47 - 38
Total non-current derivatives 784 (1,619) 677 (1,408)
========================================================== ======= ============ ======= ============
Total carrying value of derivative financial instruments 835 (1,656) 814 (1,436)
========================================================== ======= ============ ======= ============
Net liability (821) (622)
========================================================== ======= ============ ======= ============
Analysed as:
---------------------------------------------------------- ------- ------------ ------- ------------
Interest rate swaps 823 (1,210) 669 (1,105)
Foreign exchange contracts 9 (10) 104 (2)
Cross currency swaps 3 (483) 41 (367)
Collateral(1) - 47 - 38
========================================================== ======= ============ ======= ============
Total carrying value of derivative financial instruments 835 (1,656) 814 (1,436)
========================================================== ======= ============ ======= ============
Net liability (821) (622)
========================================================== ======= ============ ======= ============
(1) Collateral deposited against derivative financial
liabilities under the terms and conditions of an ISDA credit
support annex.
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. 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 GBP27m and would have been a GBP76m reduction without
considering the early termination options. The classification of
these derivative assets and liabilities under FRS 101 fair value
hierarchy is provided in note 13.
Maturity of obligations under derivative financial
instruments
Derivative financial instruments have been classified in the
balance sheet as current or non-current on an undiscounted
contractual basis based on spot rates as at the balance sheet date.
For the purposes of the above and following analysis, maturity
dates have been based on the likelihood of any early termination
options being exercised with consideration to counterparty
expectations and market conditions prevailing as at 30 September
2020. Any collateral transferred to counterparties in respect of
derivative financial liabilities has been classified consistently
with the related underlying derivative.
The table below summarises the Company's derivative financial
instruments by maturity based on their remaining contractual cash
flows as at 30 September 2020. The amounts disclosed are the
undiscounted cash flows calculated using spot rates of exchange
prevailing at the relevant balance sheet date. Contractual cash
flows in respect of the Company's non derivative financial
instruments are detailed in note 13.
At 30 September
2020
Contractual
Balance sheet cash flows Between 1 and 2 Between 2 and 5
(In GBP million) amount Total < 1 year years years > 5 years
------------------ ----------------- ---------------- ----------- ---------------- ---------------- ------------
Net settled
derivatives (340) (479) 62 19 (104) (456)
Gross settled (481) - - - -
derivatives -
Receipts - 6,530 2,240 1,084 1,528 1,678
Payments - (6,858) (2,221) (1,153) (1,633) (1,851)
================== ================= ================ =========== ================ ================ ============
(821) (807) 81 (50) (209) (629)
================== ================= ================ =========== ================ ================ ============
At 30 September
2019
Contractual
Balance sheet cash flows Between 1 and 2 Between 2 and 5
(In GBP million) amount Total < 1 year years years > 5 years
------------------ ----------------- ---------------- ----------- ---------------- ---------------- ------------
Net settled
derivatives (398) (616) (30) (37) (210) (339)
Gross settled (224) - - - -
derivatives -
Receipts - 6,852 2,151 165 2,738 1,798
Payments - (6,833) (2,199) (100) (2,701) (1,833)
================== ================= ================ =========== ================ ================ ============
(662) (597) (78) 28 (173) (374)
================== ================= ================ =========== ================ ================ ============
Derivatives as hedging instruments
As outlined in note 13, the Company hedges its underlying
interest rate exposure and foreign currency translation exposure in
an efficient, commercial and structured manner, primarily using
interest rate swaps and cross currency swaps. Foreign exchange
contracts are used to manage the Company's short term liquidity
requirements in line with short term cash flow forecasts as
appropriate. The Company does not apply cash flow or fair value
hedge accounting as permitted under IFRS 9, which results in fair
value gains and losses attributable to derivative financial
instruments being recognised in net finance costs.
The Company has considered the impending requirements to re-base
LIBOR based interest rates to new risk-free based rates. The
Company will be undertaking an exercise, over the course of the
2021 fiscal year, to re-base to risk-free rates all its debt and
interest rate derivative contracts that mature after the end of
September 2021. At present, it is not anticipated that these
changes will impact the Company's commercial hedging strategy, nor
should they have a material financial impact.
Interest rate swaps
To manage interest rate risk on its borrowings, the Company
issues debt in the market or markets that are most appropriate at
the time of raising new finance with regard to currency, interest
denomination and duration, and then uses interest rate swaps and/or
cross currency swaps to re-base the debt into the appropriate
proportions of fixed and floating interest rates where necessary.
Interest rate swaps are also transacted to manage and re-profile
the Company's interest rate risk over the short, medium and long
term in accordance with the Treasury Committee Framework and
Treasury Committee decisions. Fair value movements are recognised
in investment income and finance costs in the relevant reporting
period.
As at 30 September 2020, the notional amount of interest rate
swaps outstanding that were entered into to convert fixed rate
borrowings into floating rates of interest at the time of raising
new finance were GBP11,656 million (2019: GBP13,448 million) with a
fair value of GBP822 million asset (2019: GBP657 million asset).
The fixed interest rates vary from 0.5% to 8.7% (2019: 0.5% to
8.7%), and the floating rates are EURIBOR, GBP LIBOR and USD
LIBOR.
As at 30 September 2020, the notional amount of interest rate
swaps outstanding that were entered into to convert the Group's
debt into the appropriate proportion of fixed and floating rates to
manage and re-profile the Group's interest rate risk were GBP10,311
million (2019: GBP10,024 million) with a fair value of GBP1,163
million liability (2019: GBP1,1055 million liability). The fixed
interest rates vary from 0.5% to 4.4% (2019: 0.8% to 4.4%), and the
floating rates are EURIBOR, GBP LIBOR and USD LIBOR. This includes
forward starting interest rate swaps with a total notional amount
of GBP2,519 million equivalent (2019: GBP2,412 million equivalent)
with tenors between 4 and 12 years, starting between October 2020
and October 2024.
Cross currency swaps
The Company enters into cross currency swaps to covert the
currency of debt into the appropriate currency with consideration
to the underlying assets of the Group as appropriate. Fair value
movements are recognised in investment income and finance costs in
the relevant reporting period.
As at 30 September 2020, the notional amount of cross currency
swaps entered into to convert floating rate sterling debt into the
desired currency at floating rates of interest was GBP2,600 million
(2019: GBP2,600 million) and the fair value of these swaps was
GBP409 million net liability (2019: GBP364 million net liability);
the notional amount of cross currency swaps entered into to convert
floating rate US Dollar debt into the desired currency at floating
rates of interest was $1,750 million (2019: $1,750 million) and the
fair value of these swaps was GBP71 million net liability (2019:
GBP38 million net asset).
Foreign exchange contracts
The Group enters into foreign exchange contracts to manage short
term liquidity requirements in line with cash flow forecasts. As at
30 September 2020, the notional amount of these contracts was
GBP2,126 million (2019: GBP1,087million) and the fair value of
these contracts was a net liability of GBP0.7 million (2019: GBP6
million net asset).
15. Share capital
(In GBP million) 2020 2019
------------------------------------------------------------------ ------ ------
Issued and fully paid
2,100,000,000 ordinary shares of GBP1 each (2019: 2,100,000,000) 2,100 2,100
------------------------------------------------------------------- ------ ------
16. Related party transactions
The Company has taken advantage of the Group exemption under the
terms of FRS 101 from disclosing related party transactions with
entities that are part of the Group since the Company is a wholly
owned indirect subsidiary of Imperial Brands PLC and is included in
the consolidated financial statements of the Group, which are
publicly available.
17. Guarantees
The Company is party to a cross guarantee of its bank accounts
held at HSBC Bank plc against accounts of Imperial Brands PLC and
some of its subsidiary companies. At 30 September 2020, the amount
drawn under this cross guarantee was GBP10 million (2019: GBPnil).
Together with other Group undertakings, the Company guarantees
various borrowings and liabilities of other subsidiary companies
under this arrangement with HSBC Bank plc.
The Company is party to five counter-indemnity deeds, each dated
July 2020, made on substantially the same terms under which certain
insurance companies have made available to Imperial Brands PLC,
Imperial Tobacco Limited and the Company, a surety bond. In each
case issued on a standalone basis but in aggregate forming an
amount of GBP225 million, until January 2026. These surety bonds
provide support to the Imperial Tobacco Pension Trustees Ltd, the
main UK pension scheme.
At 30 September 2020, the contingent liability totalled GBP235
million (2019: GBP600 million).
The Directors have assessed the fair value of the above
guarantees and do not consider them to be material. They have,
therefore, not been recognised on the balance sheet.
18. Number of employees
The average monthly number of employees during the year was 8
(2019: 10).
19. Immediate and ultimate parent undertakings
The ultimate parent undertaking and controlling party of the
Company at 30 September 2020 was Imperial Brands PLC, a company
incorporated in Great Britain and registered in England and Wales.
The smallest and largest group in which the results of the Company
are consolidated is that headed by Imperial Brands PLC, whose
consolidated financial statements may be obtained from The Company
Secretary, Imperial Brands PLC, 121 Winterstoke Road, Bristol, BS3
2LL and are also available in the investors section of the Company
website at www.imperialbrandsplc.com .
The immediate parent undertaking of the Company at 30 September
2020 was Imperial Tobacco Holdings Limited, a company incorporated
in Great Britain and registered in England and Wales.
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END
FR SDASUFEFSEED
(END) Dow Jones Newswires
March 31, 2021 05:33 ET (09:33 GMT)
Imp.br.fin.26 (LSE:94JK)
過去 株価チャート
から 12 2024 まで 1 2025
Imp.br.fin.26 (LSE:94JK)
過去 株価チャート
から 1 2024 まで 1 2025
