2001 final results presentation
6 March 2002
Nigel Northridge and Mark Rolfe
Slide 1 |
(Gallaher) |
Slide 2 |
(Nigel Northridge) Good morning everybody. I want to apologise in advance for a slightly longer presentation than usual. Over the past couple of years, the Group has been transformed by the acquisitions we have made. As a result, at a practical level, comparisons between 2001 and 2000 need careful explanation. That said, our presentation today will demonstrate two important messages: First, our acquisitions are delivering excellent returns; and, Second, underlying organic growth is strong. Before exceptional charges, we are reporting an 8% growth in Group EBITA, a 10% increase in PBTA, and a 12% rise in EPS. Underpinned by Gallaher's robust position in the UK, this is an excellent platform for the Group to continue to develop and grow. Mark will now take you through our financial performance. |
Slide 3 |
(Mark Rolfe) Thank you Nigel - and good morning ladies and gentlemen. It has been an exciting year for the Group. The Austria Tabak and Liggett-Ducat acquisitions have helped transform Gallaher from a UK company into a eurasian challenger. First, a quick summary. Turnover grew by 30.2%, and, more significantly, net turnover was up 65.2%. Before the exceptional charge of £12.3mn - which I shall discuss shortly - we increased EBITA by over £35mn, i.e., 8%, to £480mn. Finally - adjusting for amortisation charges and net exceptional charges - we lifted earnings per share by 12.5%, to 46.1p. |
Slide 4 |
The UK turnover reduction reflects the dynamics of the UK market - declining volumes, downtrading and the impact of government restrictions on forestalling - the ability to earn stock profit over the period surrounding a duty increase. UK net turnover and profits benefited from forestalling in 2000 - and the March 2001 budget was the first one to see the impact of the government's actions to stop this practice. Consequently - as expected - EBITA has fallen by some £40mn. However, a reduction in interest costs associated with the financing of the duty pre-payment has largely offset the resulting decrease in UK EBITA at the pre-tax profit level. The small decrease in UK EBITA margin again reflects the impact of the restrictions, which was largely mitigated by price increases, the attainment of operational efficiencies and cost savings. |
Slide 5 |
The sharp growth in international volume sales - and the 79% rise in total underlying international EBITA - reflects our organic performance, enhanced by the first full year contribution of the fast-growing Liggett-Ducat, and the acquisition of Austria Tabak. The total international margin is impacted by Austria Tabak's lower-margin distribution businesses. |
Slide 6 |
Our organic businesses continued to perform well, demonstrating the success of our strategy to build sales to indigenous smokers in a selection of markets. However, reported EBITA has been adversely affected by a one-off exceptional charge of £12.3mn. This represents full provision against the inventory and receivables associated with a distribution agreement with a distributor for African and Middle East markets. The distributor in question was one of the main ones with whom we had established a strong trading pattern throughout late '99 and 2000. This distributor is currently facing difficulty in obtaining suitable ongoing trade finance. We are still working closely with the distributor to seek a satisfactory resolution - but we have taken the prudent decision to provide in full at this stage. This is a one-off, and, of course, we shall keep you informed of any progress towards financial recovery, which would, of course, be separately identified. Returning to the underlying performance of our organic operations. Price and volume increases in our principal European territories, and volume increases in Kazakhstan - together with operational efficiencies and cost savings - saw underlying EBITA grow by over 16%, overcoming the impact of volume declines elsewhere. Underlying EBITA margin grew to 38.7%. |
Slide 7 |
With the sale of 55.8 billion sticks in the first full year of ownership, Liggett-Ducat's contribution to the Group was: £204mn to net turnover; and, £26.5mn to EBITA. This contribution significantly exceeded even a pro-forma comparison for 2000. This success is best reflected in the EBITA margin, which has grown to 13%. Even after charging over £10mn of goodwill amortisation - Liggett was earnings enhancing in its first full year as part of the Gallaher Group. The strength of L-D's growth is a result of our successful strategy to move the mix of sales up the margin ladder - building on our investment in a national distribution network, and in the factory. |
Slide 8 |
In August we successfully completed the acquisition of some 41% of Austria Tabak, from the Austrian Republic, and launched the public offer of €85 per share for the remaining shares. By the end of September, we had increased our holding to just over 98%, and we are now 100% owners of Austria Tabak. The cost of the acquisition was some £1.2bn, and we assumed net debt of some £123mn. |
Slide 9 |
I referred earlier to the margin impact of AT's distribution businesses - which operate at lower margins than the tobacco division. In general, distribution businesses have much lower margins than the tobacco industry. Historically, however, Austria Tabak's reported distribution margin included duty as a cost of sales, leading to a stated divisional margin of around 2%. Shown here - under international accounting standards - are AT's full year 2000 and 2001 results, with the duty removed from the distribution businesses' turnover, except for at the associates - primarily Lekkerland-Tobaccoland. The impact of not stripping out the duty from cost of sales is even more starkly illustrated when you remove the associates' contributions to turnover and EBITA. The adjusted distribution margin more than doubles to some 8% - which compares favourably in line with industry norms. |
Slide 10 |
Since acquisition, on a fully consolidated basis, Austria Tabak has contributed £40mn to EBITA. The effective contribution at EBITA level fully pro-forma'd for the minority interests - both at the German vending and Group levels - was £30mn. For the full year 2001, under local accounting standards - and before charging the £25mn provision relating to the closure of Malmo - AT's EBITA declined by 6% on 2000. This decline related entirely to a sharp reduction in profits of ATG - the German vending operation. This reduction was, of course, mitigated at the pro-forma EBITA level, through the proportionate decline in profits attributable to the minority shareholders. |
Slide 11 |
The tobacco division achieved profit growth of over 3% in 2001, reflecting the Company's expansion of export volumes, and margin enhancement in its two core markets. At Lekkerland-Tobaccoland, sales growth of 8% was mitigated by a margin decline in 2001, ahead of the implementation of cost savings that will arise from the depot network rationalisation programme. AT's market-leading distribution operation in Austria - TOBA - increased profits. We have completed the contract manufacture negotiations for the majority of the cigarette volume previously manufactured under license by AT in Austria - on slightly more favourable terms than we had assumed when evaluating the acquisition. We have identified initial annual cost savings of some £7mn. The charges associated with achieving these savings were not significant, and we took them as part of usual operating costs in 2001. In 2002, however, I expect that these two factors will be offset by the impact of the difficult conditions in Germany at EBITA, although there will be the net benefits at earnings per share level, which is struck after minorities. |
Slide 12 |
Year-on-year pre-exceptional interest charges were flat. Increased finance costs associated with the acquisition of AT, and the first full year ownership of Liggett-Ducat, were offset by reduced charges relating to the attainment of prior year UK stock profits. Furthermore, our average cost of debt fell to 6.3%, from 6.5% in 2000, as market rates continued to decline. The acquisition of Austria Tabak was principally financed with new bank facilities, which have largely been refinanced. The up-front costs of these new facilities, of £18.5mn, have been treated as exceptional charges. |
Slide 13 |
The tax charge for the year has fallen to £82.1mn. Before all amortisation and exceptional charges, the effective PBTA tax rate was around 24%. I expect this effective rate to move to around 27% in 2002, as we expect to see: some continuing benefit from short-term relief in L-D; and, following the acquisition of AT, we now have the ability to fully utilise current and past low-taxed earnings in Gallaher Dublin; although, an increasing level of non-deductible expenditure, mainly goodwill amortisation, will offset these benefits. |
Slide 14 |
The 12.5% growth in our adjusted EPS, reflects: the strong growth in EBITA - of some 8%; the lower effective tax rate; and, a decline in weighted average number of shares in issue - the net effect of our share repurchase programme in 2000, and the issue of new shares in June 2001. Basic EPS was impacted by some £22mn of additional goodwill amortisation charged to the P and L account in 2001, and the exceptional charges. We are proposing a final dividend of 17.3p per ordinary share, an increase of 7.5% on last year. |
Slide 15 |
Turning to cash flows. Gallaher remains highly cash generative, with a record level of EBITDA, and an improved working capital position, resulting in an EBITDA cash conversion rate of over 100% in 2001. The working capital improvement reflects favourable stock and creditor movements, partly offset by an adverse debtor position. Following the introduction of the restrictions on forestalling, we continued to reduce the level of finished goods held. The cash inflow from higher creditors reflects: higher duty liabilities at the period end; and, a higher level of payables in Austria Tabak, compared with the acquisition balance sheet. TOBA acts as an agent in the distribution of toll cards. Phasing of payments and receipts at the year-end distorted creditors and debtors. The increase in Group debtors, therefore, largely relates to the toll card receivables, as well as the growth in Russia, which saw higher December sales prior to the seasonal slow down. |
Slide 16 |
Year-on-year actual interest payments were marginally lower, with a higher level of accrued payments at the end of 2001 more than compensating for the payment of the exceptional finance charges. Higher tax payments reflect: the inclusion of fourth quarter payments in Austria Tabak; the higher proportion of current year tax payable in the UK under the inland revenues transitional rules; and, a benefit in 2000 from the set-off of advanced corporation tax that did not recur in 2001. Net capital expenditure increased by £39mn - to £118mn - which included £8mn on the purchase of intangible assets, and some £15mn at Austria Tabak since acquisition. |
Slide 17 |
Gallaher's commitment to invest in our business - to improve efficiencies and quality, while maintaining the flexibility to support our sales and marketing requirements - has resulted in the increase in cap-ex last year. In the UK, we continue to install SAP information systems, and have invested in both of our sites, and in our portfolio of kiosks and gantries. In Ireland, we are introducing an ERP system, which will shortly go live, and have also invested in the factory. In Russia, we completed the £40mn investment programme, and in Kazakhstan we have also upgraded the local facilities. As I said, at Austria Tabak, we have spent some £15mn, largely as part of the five-year programme to upgrade the vending machines of ATG. In September, I indicated that we would be investing around £125mn in 2002. Reflecting the needs of our UK locations, and our international growth, including in the CIS - in particular, following our acquisition in Ukraine - I now expect our cap-ex level to be some £10mn higher. |
Slide 18 |
At the year-end we had committed facilities of some £2.9bn, and had total drawn down debt of some £2.6bn. Assisted by having refinanced about £1bn of the acquisition bank debt through recent bond issues, we have a good match of bank and bond debt, with a good range of maturities. Some 70% of our debt was fixed rate at the year-end, helping us manage the level at which EBITA covers net interest. Our target range over the medium-term is between 4½ and 5½ times. After the acquisition of Austria Tabak, Standard and Poor's and Moody's confirmed our credit ratings at investment grade. We remain committed to investment grade status, and are looking to improve our ratings, with an objective of obtaining mid-triple B equivalent from both rating agencies. I'd also just like to take this opportunity to tell you that the introduction of the new pension cost standard, FRS17, is not expected to have a material effect on Gallaher. |
Slide 19 |
Now, let me discuss our continuing operational achievements. Reflecting our on-going success in achieving cost reductions - while remaining mindful of our sales requirements - our UK cigarette factory cut unit costs by 2% in 2001. We expect the rising cost of tobacco - and the impact of EU labelling requirements on non-tobacco materials - to put pressure on our unit costs in the near-term. However, with our enhanced purchasing position - which is providing the more immediate benefits to the Austria Tabak locations - and once the SAP implementation and the full benefits of the supply chain developments feed through, we remain confident about the medium-term outlook. Our UK tobacco factory's unit costs continue to be heavily affected by the sharp growth in smaller-pack-sized UK volumes, and the growing proportion of our total sales accounted for by the Amber Leaf flip top box. However, our tobacco factory lifted overall productivity by 5% in 2001 - a trend which I expect to see continue. We continue to invest in new state-of-the-art machinery in Cardiff, and we are rolling out an enhanced cigar filler product which will reap further cost benefits - beyond the reduction in unit costs we achieved in 2001. Our cigar factory also increased productivity last year - by 6%. |
Slide 20 |
In fact, we lifted productivity across all our sites in 2001. In Ireland, we are upgrading machinery in addition to the ERP implementation - this should lead to further cost and productivity benefits. L-D has reaped the purchasing benefits of its inclusion in the Gallaher Group in 2001 - and the productivity benefits from faster machinery. Clearly, however, there are still significant benefits to come as the disruption caused by the expansion programme begins to lessen. Now the primary line is commissioned, our factory in Kazakhstan can begin to secure further cost savings too. And, Austria Tabak's manufacturing locations also performed well in 2001 - all told, the AT manufacturing division increased productivity by 6%. And now over to Nigel. |
Slide 21 |
(Nigel Northridge) Thank you Mark. After three years of rapid increases, the growth in the level of non-UK duty-paid product being consumed by British smokers appears to have been curtailed. For the full year 2001, the legitimate cigarette market probably declined by around 4% to 5%, and the UK market began stabilising by the year-end. We continue to liaise closely with customs, and their activities are working. There are now 12 mobile scanners operating at ports throughout the country, and increased numbers of uniformed officers conducting checks. The intelligence division is using sophisticated methods to track - and seize - product, eating into the smugglers' margins. The reduction in cross-border travel has also benefited the duty-paid market. I would expect travel levels to increase going forward - however, as customs begin to bite more deeply into the smuggled market, I believe we are past the worst in terms of UK market declines. This is - of course - dependent on the government continuing to recognise that its levels of duty increases play an important role in tackling the issue. |
Slide 22 |
In 2001, the less excessive duty increase also benefited the level of downtrading from the premium sector within the market - although the low-price sector also benefited from switchers from mid-price, and from smokers returning to UK duty-paid purchases. Without the disorder that arises from non-UK duty-paid product, the dynamics of the UK market are reasonably predictable - and, it is that predictability which enables us to plan the business going forward. Benson & Hedges and Silk Cut underpin our commanding lead of the high-margin premium sector - with Bensons maintaining its share of the total market at just below 10% throughout the year. |
Slide 23 |
As is the case with our total brand portfolio, we manage our low-price portfolio to achieve both: a full range of products to meet consumers' needs; and, the best balance between price increases and volumes for the bottom line. In consumer-speak, there are three areas within the low-price sector - quality, but still good value, value for money, and, straight price. Mayfair's reputation continues to strengthen, and its profit contribution improved sharply in 2001. We also invested heavily in advertising and promotion, particularly in the latter part of the year. Dorchester's volumes grew 60%, benefiting from our continued distribution drive, and we launched Sterling. The straight price segment of the market has been satisfied historically through the own-label sector - but this has placed major trade customers with a conundrum. They seek to build a category-management relationship with a preferred supplier - yet, if they have an own-label position, they are a competitor. We developed Sterling as an exclusive brand range for the multiple grocer channel - to replace own-label offerings. This has further cemented our leading preferred-supplier-status position with this channel - already the leading channel for cigarette sales in the UK market. In fact, multiple grocers grew their share of consumer sales to nearly 31% last year, from 28.7% in 2000. |
Slide 24 |
Hamlet continues to lead the UK cigar market, which was broadly stable in volume terms last year. We lifted Hamlet Miniatures volumes by over 15% - extending its number one position in the small-whiff sector. |
Slide 25 |
We lifted handrolling tobacco volumes too - by 27%. And Amber Leaf continued its tremendous performance - with growth of over 40%. |
Slide 26 |
Although delayed - again - we do expect an advertising ban in the UK at some point. In anticipation, we have moved the balance of our total promotional budget away from traditional avenues - press, poster, gift schemes, etc. - into point-of-sale, channel marketing and the sales force. However, with the traditional avenues still available after all, we invested incremental expenditure in 2001 - and intend to do so again this year - primarily on press, poster and direct mail. We anticipate consumer taste preference changes with new brands, and new pack designs - which also position us well to adapt to changes in regulations. We have also established that the changed dynamics of the UK market - with the abolition of forestalling, we no longer have to hold high stock levels - means we can further improve efficiencies. We have begun the process of installing SAP, but to fully reap the benefits of an integrated planning system we are now developing a centralised supply chain function. Initially, this division is focusing on our domestic manufacturing locations, and their support of the markets supplied from the UK. Looking forward, I foresee strong benefits from the full integration of our systems across the whole Group. |
Slide 27 |
Internationally, 2001 has seen exciting developments to the Group. This chart shows the three building blocks of our international operations. The exciting feature of this is not just the geographical reach, but the overlap between all three, which highlights what a compelling platform we have to grow across eurasia. Since January 1st this year, we have fully integrated our organic continental European division and Austria Tabak's tobacco operations into a single business unit. We have also integrated our CIS and central Asian operations. When discussing 2001, however, I shall run through our operations' performances under the - now - historic structures, starting with the organic businesses. |
Slide 28 |
Our core strategy to build local brands for local smokers - in key strategically identified eurasian markets - delivered strong results in 2001. Although total organic volumes were down - sales to indigenous smokers across our selection of established markets were up some 18%, to 12.7 billion cigarettes, accounting for 75% of the total. The biggest single factor in the total volumes decline, was the reduction in volume sales to new emerging markets - by definition, these are not strategically significant. Indeed, they make up a small piece of the jigsaw. The reduction in volumes reflects our focus on a reduced number of distributors in these markets - as I discussed with you last September - and also the problems we have encountered with one particular distributor that Mark referred to earlier. |
Slide 29 |
In Europe, we grew domestic sales to local smokers across our key markets - and established some new positions. Benson & Hedges - gold box and American blend variants - led this growth. Since acquiring the rights to B & H on the continent in 1993, we have more than doubled the brand's total volumes. Our policy of extending our brand portfolios in target markets enhanced our overall performance. |
Slide 30 |
In Ireland, we extended our cigarette market leadership to 49.5% - lifting volumes again. Benson & Hedges achieved the number one slot early in the year, and kept on growing - consolidating its leadership position with over 17% of the market. We expect severe marketing restrictions to be in place soon, but we are confident of our position in Ireland with the two strongest brands - Bensons and Silk Cut. |
Slide 31 |
In France, Austria and Switzerland, we grew in-market sales and market share. In Germany, our in-market performance was impacted by the strong growth in the generic sector last year - more on that later when I turn to Austria Tabak. |
Slide 32 |
We continue to expand in Greece - cigarette in-market sales were up 3%, and handrolling tobacco sales grew sharply. In Italy, Bensons' American has proved immediately successful with local smokers - and we lifted our total in-market sales by over 100%. |
Slide 33 |
We developed new sales to Portugal and Gibraltar, but our key success in Iberia in 2001 was the continuing strength of our operation in Spain. In-market sales rose over 16% - increasing our market share to over 1%. |
Slide 34 |
Sales to the Canary Islands were affected by a decline in tourist travel - and volumes to distributors in BeLux were also down, partly offset by an increase in sales to RMOs and duty free. Going forward, I expect the level of sales in the BeLux region to continue to be influenced by tightened customs' controls operating at UK ports. Although this will impact our near-term overall European growth rates - our strength in domestic markets stands us in good stead for the medium- and long-term. |
Slide 35 |
Sobranie continues to perform strongly in Asia Pacific - with Classic rolling out successfully, on the back of the heritage built in Pinks and Mints, Cocktail and Black Russian. Market research on the new Sobranie Classic packaging continues to be highly encouraging - both in Asia Pacific, and, also now, in the CIS. In this region, duty free is the shop window, and our success in obtaining listings in the prime locations - we added additional sites in Korea, Taiwan, China, Hong Kong, Singapore, Indonesia, the Philippines, Malaysia and Vietnam last year - is enabling us to build further brand equity. In the latter part of the year, we launched Sobranie in two new domestic markets - Pinks and Mints into Singapore, and Classic into Hong Kong and South Korea. Our co-operation with Shanghai Tobacco - underpinned by our agreement to distribute Chunghwa in the UK - positions us well in advance of China's moves to more open trade with the west. |
Slide 36 |
In central Asia, not only did our solid base in Kazakhstan lift domestic sales sharply, but it also began exporting to adjacent markets - in particular, Kyrgyzstan and Mongolia. In total, domestically produced volumes increased 143% in 2001 - leading to an on-shore manufacturing share of 16%. Our share of in-market consumer sales lifted sharply too, led by Sovereign - which increased its national market share to over 9%, and its lead in Almaty to 19% - while State Line and LD have established growing positions. |
Slide 37 |
Our performance in Russia in 2001 slightly exceeded our expectations, partly as a result of the growth of the intermediate sector being stronger than we had originally forecast. We are still assuming, however, that the full return to pre-crisis market dynamics will take until 2008 - we've just achieved the first rung of the ladder a little quicker. Steady as she goes, but so far an excellent performance - and on track. By the way - just to confuse things - Business Analytica has altered its definitions of the sectors. We have provided you with the historic data redefined, as well as 2001 figures, so that you can continue to track our progress going forward. |
Slide 38 |
We've grown our shares of the higher-margin sectors. And this strong performance has been achieved despite our successful implementation of price increases. |
Slide 39 |
On LD - red and blue - the mainstays of the LD house, which more than doubled its volume sales - we took consistent price increases last year. These amounted to a nearly 12% increase in the selling price by the year-end. |
Slide 40 |
Affordable quality / available everywhere is delivering to the bottom line. Our distribution network has been further expanded - and our national coverage is now at 90%. Having taken control of our warehouses - and opened more in the regions - we are going to further extend our reach, and we continue to invest, and to increase our sales force. |
Slide 41 |
In total, we lifted volume sales by 16% in 2001, with the export business from Russia also delivering strong results - in particular, volumes into the Ukraine, Belarus and Armenia. Having developed a strong demand for LD in Ukraine, we bought a factory in Cherkassy in December, and began on-shore production last month. Now, with Austria Tabak within the enlarged Group, we are in a very strong position to look closely at central and eastern Europe. |
Slide 42 |
Which brings me to AT. Excluding the Swedish contract manufactured volumes, Austria Tabak grew its cigarette sales by 10.7% in 2001. Reflecting the continued strength of the own-label sector in Germany - to nearly 16% of the total cigarette market last year - AT's growth in generic cigarette exports to this market continued, with a 25% increase in units sold. The company remained the leading generics' manufacturer, with its share of 39%. In Sweden, AT's own brands maintained their market-leading position, with a 41% share of consumer sales. Exciting developments involving John Silver - and a new brand called Level - are augmenting our portfolio, and providing opportunities throughout Scandinavia. |
Slide 43 |
AT's own brands' market share in Austria stood at 51% in 2001. In Austria, the strategy is to focus marketing and sales effort on key domestic brands, in particular, Memphis and Milde Sorte, and to generate substantial margin from the declining rump brands. Following the recent price increase, we have reduced Memphis' price discount to Marlboro to 11%. |
Slide 44 |
An encouraging feature of AT's performance last year was the sharp increase in its branded cigarettes exports level. This total growth - of 27% - was led by Memphis, Ronson and Nil. And, this growth was across a selection of markets in our target region of eastern Europe. |
Slide 45 |
ATG had a testing year. Throughout 2001, there was a lack of consumer acceptance of the vending pack price increase to DM6 - from DM5 - in November 2000. This - coupled with the continued growth in the generics sector, at the expense of branded cigarettes - led to the fall in profit Mark has already discussed. However, ATG remains the commanding market leader of what is still a substantial channel for cigarette sales in Germany. It is in the strongest position of any of the players in this segment to weather the challenges the vending sector faces. ATG is rationalising its site portfolio ahead of the impending regulations regarding outdoor machines - it has reduced its total number of machines to 207,000 - and has reduced its workforce by 7% since September. It has begun trialling food and pre-paid mobile phone card vending, and is taking the opportunity in the current difficult environment of consolidating its position against its competitors. We expect 2002 to prove testing too, with the German government's implementation of its terrorist tax further impacting the branded cigarette sector - albeit vend and retail prices are now very much in line. The advantage of Austria Tabak's balanced portfolio of operations, coupled with ATG's own actions, should mitigate the difficult operating environment. |
Slide 46 |
TOBA performed well in 2001. Its strategy to expand its product offering to its customers is delivering good growth. The operations in Estonia and Hungary by themselves are not significant profit centres. However, their market-leading distribution positions in these two key markets provides us with strong platforms for our cigarette ambitions in this region. |
Slide 47 |
Lekkerland-Tobaccoland continues to expand its product offering, increasing its sales of non-tobacco products - in particular, phone cards. It is already the market leader in convenience store distribution, and work has begun to rationalise the depot network. |
Slide 48 |
As I referred to earlier, with the significant recent developments of our business - and, in particular, the expansion of our international operations, accelerated with our acquisitions - I have re-organised our commercial divisions. I am very pleased that Neil England joined the board in January. Neil - who has extremely valuable experience at Mars - is responsible for our operations in the UK and Ireland. He also brings excellent knowledge in vending, and has spent time in the CIS - and this will also provide benefits at Group level. As of 1st January, all our continental European operations - organic Gallaher, and Austria Tabak - have been fully integrated. This division is now run out of Vienna, and is headed by Heinz - who I am also very pleased to say joined the Group board in January, as commercial director, Europe. Nigel Simon moved to Vienna last year as deputy director general, Austria Tabak, and is working closely with Heinz. Nigel has assumed line responsibility for the wholesale and distribution businesses - and is also handling the integration process within the Gallaher Group. |
Slide 49 |
With our operations in the CIS performing so strongly - and to ensure that opportunities, both revenue and efficiency, do not slip through the net - Stewart is now responsible for the whole region, not just Russia. Yann, who was in charge of our continental European operations before we acquired Austria Tabak, now heads a global central marketing division - reporting to me. This division will be a valuable resource for all the Group's commercial divisions. We now have an extensive brand portfolio, and with that comes opportunities for organic expansion - and also, we need to be mindful that there also may be opportunities to prioritise our portfolios in certain markets. Before I conclude, I would like to say a few words about Bill Curry. Bill has been with Gallaher all his working life, and he has finally convinced me to accept his long-held desire to retire in his mid-fifties. Bill has played a pivotal role in our operational achievements, and under his direction our domestic manufacturing operations have assumed forefront of Europe status. More recently, Bill has overseen our successful investment programme in Russia. Bill leaves us in May. Nigel Dunlop - who many of you have met on trips to Northern Ireland - is assuming Bill's operational responsibilities, and will report to me. |
Slide 50 |
2001 has been a truly exciting year for Gallaher - our robust UK position continued to underpin substantial international growth, which has been accelerated by our acquisitions. We continue to expand our presence across eurasia - building a balanced portfolio of positions, both in mature markets where we can use our skills in driving cash flow, and in emerging markets with significant growth potential. We continue to use our balance sheet efficiently - but we will not over-stretch ourselves. We will expand our emerging market interests - but we will ground those interests with mature market stability. And, we will continue to review investment opportunities - always bearing in mind the significant potential of our current operations. There remain many pale coloured markets on this map for Gallaher to address - and even the darker coloured ones have further potential. Thanks for your attention. |