Imperial Brands Aktie

Good afternoon, everyone. Thank you for being here. I'm Pallav Mittal, Head of Global Tobacco at Barclays. I'm thrilled to have Lukas Paravicini here with me, CEO of Imperial Brands. Thank you so much, Lukas, for giving us the opportunity to host you.

Without wasting any time, we'll go straight into questions.

Sure.

So Lukas, you have been in the CEO seat for now almost a year. Can you just help us understand how -- what things have worked, what hasn't? What have been your main priorities over the last year or so?

Yes. Firstly, thank you very much for your attendance, and good afternoon to all of you. It's a pleasure to be here and have this fireside chat with Pallav. Indeed, this is my first year as the CEO, and it has been a very interesting to say the least year. I enjoyed it. And I think for me, it is important that whatever I do, I do with passion for the sake of our consumers and our shareholders.

We started off the year also with the evolution of the Strategy 2030. It is a continuation of what we have done with Stefan in the first 5 years. So it was also that opportunity for me to travel the organization, meet more of our people, discuss the strategy. And really what was very pleasing is to see the energy of our talent who are highly motivated to deliver again in these 5 years.

It was also a year where -- let's say at the least, it was quite an interesting year with unfortunately, wars, tariffs, lots of things. You see my gray hair, it is not the first year over the last 40 years, I've never seen an easy year, but this was especially interesting year to say that. So I'm really proud on the organization that, again, we will deliver probably the fourth year in a row of positive net revenue growth of high single-digit EPS on the back of a profit growth. And again, our commitment to a healthy cash flow with -- in our guidance today is above GBP 2.2 billion. So we are fully in line with that guidance, and we stand to that guidance to the full year.

It is also important that not only are we performing and overcoming hurdles here and there, but we're also making sure that while we perform, we transform. And we had a good start to the transformation as well. My work is not just to perform today with the organization to make sure that this organization can perform for the next 10 years and making it future proof. We have announced at the CMD that we are embarking on a transformation that will deliver GBP 320 million of savings, and we are well on track.

We closed Langenhagen -- sorry, we exited Langenhagen. We sold Taiwan. Those are 2 big factories that alone will deliver an annualized savings of GBP 100 million once it is completed in July '27. We have also communicated that by the end of the year, our manufacturing excellence, which is actually focusing on the 7 strategic factories we have, will deliver another benefit of GBP 25 million on an annual basis.

Our joint venture -- excuse me, joint venture -- our partnership with Capgemini is delivering good results as well. We kicked off in February. We already transferred 400 people, and we are progressing nicely on that journey.

I just want to make one point. In a company where every $100 you sell, $50 go straight into profit, savings are very important. As an ex-CFO, as a CEO, I will never leave money on the table. But the real nugget of the transformation is actually the fact that we can improve revenue by focusing on what matters, which is our consumers, by building those capabilities and infusing AI into this equation. Capgemini will be a big partner in that.

All right? I also want to recognize that I'll finish and not all my answers will be as long as this one. I also want to finish to recognize that there's more work to be done. As a CEO, I can be proud of the performance. I can be proud of many things. But when I look at the share price, there's more work to be done to convince the market that whatever you see in the U.S. and Germany, we will deliver, and we look at this beyond this year. And so -- I also need to reconfirm our confidence in what we can deliver going forward.

Right. We'll go into those details around U.S. and Germany in a bit. But if you could just start with, I mean, a key question that people right now have is on market share. So over the last 5 years, Imperial was gaining market share in their priority markets. But in the first half this year, Imperial has lost some market share. So how should we think about market share over the next few years? And how do you think about market share versus, say, value creation?

Yes. A very good question and obviously, a very hot topic over the last few months. I just want to start with one thing and reconfirm that if you're a consumer company, if you start with the consumer, market share will always be important for us, right?

In fact, if you look at the U.S., we gained 185 basis points over the last 5 years. We lost 20 basis points at half year. Why? Because we gained market share at the bottom of the value ladder, been very successful. We've been the sole player there, very successful when KT&G left. But we always knew that at some stage, our competitors will want to participate from the market because right now, some of our competitors, when they down trade, naturally down trade, they will not have an option to serve that consumer. We do. So it was a matter of time for those competitors to come in. That's not a price aggression. That's not being more aggressive. That's just entering a market they were not there.

Also benefiting that our volume declines in the U.S. have improved significantly, and those consumers will come in at the bottom. Guess what? They don't find those products from our competitors. They want to be there. I understand that. So our strategic rationale was, okay, we gained 185 basis points in 1 year to lose 20% to maintain the structure is not such -- much of a bad loss if you then continue going forward. So those decisions were made not just tactically short term. These were made when we look at how we progress in the U.S. over the next few years.

And I remain confident U.S. is an attractive market. It is a market where we have options in all price ladders and where we have just launched Malibu to replace Crown, which has now priced up. We are in 40,000 stores. And we have 50 basis points price share -- share. So I remain confident that the U.S., whilst more competitive, will still be a big, big engine for us going forward.

Right. Just to follow up on that. In the U.S. market, cigarette volumes this year surprisingly have been pretty strong. So it's around minus 5% decline versus minus 8%, minus 9% over the last 3 years. So can you just help investors understand what is driving that cross-category movement, illicit vape crack down? And how are you planning in terms of your Malibu distribution expansion?

Yes. So I think to also -- we always have a lot of comments on the FDA. I also want to appreciate the work they have done in by going in the right direction in the regulation, but also helping the law enforcement agencies to enforce better existing laws and curb the illicit market. You can clearly see that the illicit vape has been retained better in the last few months, and that has had a positive effect.

Remember, the consumers down trade and then they have an option to go into vape, which is a cheaper offer and readily available with attractive products because they're technologically advanced, which we can't compete on the PMTA restrictions.

Now that it is harder to get to the illicit vape, now that the bottom end has attractive offerings on that price point, the consumer doesn't need to leave that category. In fact, they will come back. So we clearly see a correlation between the illicit and/or the better management of the illicit with the volume increase. And for us, we will always be where the consumer is. And so with Malibu, we have now the option to replace what Crown was to play together with our competitors at that bottom end. And as we always do, use the escalator to start -- slowly start to price up again.

Before we move on to some other markets, can you just remind what are the one-offs or the headwinds that we saw in 1H, specifically on tariffs, which won't repeat in the second half because clearly, U.S. is a significant part of the growth story. So just remind us of the one-off, the headwinds that you saw in 1H and what drives the growth in H2 to achieve the full year guidance?

Listen, I can have a long list of things that happened in the first half and the second half from the wars and tariffs. But I think what we said at the half year, there is a significant effect mainly on the tariffs in MMC and the significant effect on the market size reduction in Australia. While Australia will always remain a profitable market, the step down has been significant, very significant, and especially at the first half.

We see that now lapsed. And so you'll see that improve in the second half. The tariffs also has improved. That has gone away or let's put it that way, we have stabilized at the level we -- which is better. And so that will improve. Now naturally, we always had a second half impact because of the way we invest at the beginning of the year and especially on how the pricing comes. So that's why we are confident that we will deliver the guidance for this year.

Right. So moving on to Germany, which is the second largest sort of profit market for you. Over the last couple of years, you have been gaining share, but I think over the last few months, again, IMB has lost some share. So can you just talk a bit about that? What did you change, which was driving the market share gains? And now what has changed again in the market?

Plus, I think there is a big sort of German excise tax coming. So how do you view that? And what the impact could be as we think about 2027?

Yes. So again, I just want to reinforce the importance of market share. But if you look at -- and to your point, sorry, the way we looked at the playbook for all of these markets and not just the top 5, but all the markets is you need to invest in your brand equity. You need to maintain that brand equity and you need to invest in your sales force. You need to professionalize your price sales force. That took longer in Germany. You know the reasons for that, but that ultimately delivered the benefit. That has not changed, that we continue to do that.

But I also want to go back to the point I made before. We don't look at the year only. We look at the longer perspective. Germany lost between 80 to 100 basis points of share every year up to 2 years ago, where these measures kicked in. But like in Spain, where every year, we gain share and then we monetize, we drop share, we gain share, we drop share, you will see the same behavior in Germany. We will -- we gained 40 basis points, and we lost, and we were flat. And so we will continue to be managing that over a longer period of time. That has not changed the importance of market share nor that it is a robust state we are in, in terms of market share in Germany.

Again, the same discussion we had before. We have done extremely well in Paramount. We're doing very well in Gauloises at the top and Davidoff. And so we'll continue to manage those segments in accordance to how we best deliver the value and maintain that share very stable over time.

The excise tax. I think that's been a little bit of sort of a lot of noise around the excise tax. As a Swiss-German, one of the attributes and virtues of Germans are that they are very structured. Germany has a tax calendar, which they issue every 5 years and is valid for the next 5 years. They are very rational on that. The next tax calendar is due on the 1st of January 2027. We knew that 5 years ago.

Now in May, the news came out of that excise tax, and unfortunately, one of a very eager politician who realized that we had -- or Germany had a big gap in their funding, thought it would be a good idea to tax sugar, tobacco and alcohol and front-load the tax so they can get quicker cash.

Now in Europe, sometimes you see these proposals coming out being quite aggressive because that's the way they negotiate to a level that is acceptable. So when they came out with what is a proposal to increase the tax by EUR 2 rather than the sort of EUR 0.40 -- EUR 0.30 to EUR 0.50 every year and start the taxation on the 1st of September, rightly, everybody was concerned.

But we worked on it. We worked with the government. We worked with the ministry. We worked with the industry. Today, there is no tax increase in September. That's off the table. There will be a tax increase in January. The tax increase we're talking now is not EUR 2. It's now EUR 0.50 to EUR 1. I do not know honestly, where we're going to end up. That's still in dispute. There might be a point that they get to EUR 1. It might well be EUR 0.50, which is very close to what we do every year.

As a side effect, they're also going to raise the minimum taxation, which closes the gap between your value price to the private label, which is the only market where there's a private label, and there's a significant gap between those 2 prices. By raising that minimum tax faster, that gap will close. I'll be very transparent. That gap will still be very relevant, but it will close. It will be smaller.

So does that change the fundamental strength and power of Germany? No. Will it have an effect short term on some of the volume if we go up a euro? Most likely, because no consumer is immune to these changes. Will the industry all behave rationally and at some stage, transfer that to the pricing? That's my assumption. So these are things that are part of our life. We manage them. We work through them, but it doesn't undermine the huge size and power of the German market for all the industry, right?

Right. So as we think about next year, are there any other markets which you would just like to flag in terms of any significant excise tax shocks, any particular markets where you operate?

No. So there are probably -- so there are 3 areas. Let me go back 3 areas. You have the European tax, the [ UTP tax, ] or the European tax directive. That's well progressed. I think, again, the original proposal from the European Commission has been worked through, and it is now in a state which is much more acceptable to us.

Like everything, there's a trade-off, some are better, some are worse, but it's something we can live with. It's also something that interesting for us, it is a longer perspective. We can work through that. That gives us a lead time to work through that. And the beauty of European Union is you need everybody to agree. And so that there's a lot of negotiation, but we're getting to a point where I think we are in an acceptable position.

You have Africa, where you obviously have always these changes, et cetera. But again, that is in a manageable situation. Don't get me wrong. Our Corporate Affairs team has a lot of work. I mean they spend a lot of time also explaining to finance ministries that it is not such so easy to increase taxes. You lose them on illicit. And so we actually had a very interesting exchange with -- I think it was the Ivory Coast Ministry where we showed them the Australian case, not to increase taxes. Taxes are part of that, but to increase it in a rational way. So that we work on them to what you shouldn't do and what you can do.

The interesting case is Australia. I mean those who have read the Australian news, we now hear, which you have never heard in the past, the opposition proposing an 80% slash of the illicit -- of the excise tax. Okay. If you're in the opposition and you only have 2 years -- you still have to wait 2 years, you can say a lot of things, but you would never have heard that in the past. And very interesting, illicit enforcement has made a huge impact to the volumes of Australia.

Will it grow again? No. But it will still be a profitable business. And it does show you how important enforcement is and how important reasonable taxation is.

Right. So just to follow up on this, you have touched upon Australia, which I think volumes were down almost 50% in the first half. If I look at U.K., volumes were down almost 15%, 16%. And these are 2 important markets, probably 10% of the total profit pool for you guys. So how should we think about U.K., Australia, Spain, for example, what is your strategy in these markets going forward?

Yes. So -- by the way, just on taxation, you know that the U.K. taxation comes into force on the 1st of October on vape. And so that is 1 more year of taxation I missed to say before. Listen, the beauty of Imperial is that, yes, we have 2 strong engines, Germany and Europe. And they have to hum and they will deliver their share. Then we have another 8 to 9 clusters that we can play with.

Yes, you pin on U.K., I would actually add Benelux to it, which is a smaller market and Australia. Just to give you an idea, Australia is less than 1% of our volume nowadays. It's the smallest of all 11 clusters we have, okay? So -- and it is highly profitable. It's just the smallest.

U.K. is very interesting because, yes, it loses volume, and it might continue to lose volume because of the taxation that comes in next year. But actually, the value we extract from that market is significant. In no means is the profit evolution anywhere close to that volume evolution. And we are growing the NGP business. We are now above 10% in vape, and we have launched ZONE, the pouches very successfully.

But we always knew these markets were tough. For those who remember Stefan and I were here as the CFO, 5 years ago, we told you that the U.K. is not the tobacco model that we could extract value. And over the last 5 years, it still remains one of the top 5 profitable markets. But you also have to reflect on we have another 5 clusters which are growing rapidly, among them, Iberia, huge potential, low affordability -- good affordability, low pricing, quite open regulation still.

You have Africa growing ahead of the group, 10% of the group's AOP. You have Southeast Europe with Italy, Greece, Romania, not just in NGP doing very well, but in tobacco. You have Middle East doing very well, not just because we went back into Syria in January this year, which is actually contributing a significant change or value contribution. So you have quite a few additional clusters, which are very promising.

And so yes, I have U.K., I have Australia. That's not a surprise. We always have them. We have 5 clusters which are doing very well, and we have 2 engines, which are humming well. It's quite a nice portfolio to have.

Right. If I can just ask on your stake on Logista. So you have maintained it at like slightly north of 50% for the last 10 years or so, 12 years or so. Is a stake sale on the table because if I exclude Logista, then probably IMB will be a higher growth company. So is that something that you would consider at some point?

So Logista is a distribution company we have that distributes mainly tobacco -- solely tobacco -- no, excuse me, does tobacco originally in Southern Spain, especially Southern Europe, Spain, France, Italy. And we acquired it through the acquisition of Altadis, which was the Spanish-French combination of the state monopoly.

Since then, Logista has been part of the group. We have control over it. But the real benefit of it is the cash pooling with us. They keep around GBP 2 billion cash with us on an average basis. Just to be honest, people think this is for free. We pay for that cash. Logista is a nice company, they still want some revenue for that. But it obviously has helped in the leverage in the past. It is a very good thing.

And so is it strategic? We've been very transparent over the last 3, 4 years that it is not a strategic investment. Is it a headache right now? Absolutely not. Their share price is growing very nicely. They contribute to the profit, some years better, some years less. They have a very strong management team, and they're diversifying out of tobacco quite nicely. So will we keep them forever? Most likely not. Is this my first priority? Probably not either.

Got it. Moving to NGPs. And if I just start high level, I mean, over the last few months, we have seen a couple of bolt-ons, Black Buffalo in the U.S. and then earlier this week, Helwit in Sweden. So can you just help us understand what is the NGP strategy and what growth expectations should we have over the next few years?

Yes. I mean a lot of people talk about Imperial because it is such an interesting cash return yield proposition, which is right. This is our proposition. And I think the other element to our proposition is that NGP optionality. And I think we are very adamant that we are continuing to work on that pathway to become a relevant player in the NGP, and we do it our way. So we're not going to be the leaders in this domain. We are the fourth largest. We know our place in the industry. But we spend an enormous amount of time with our consumers.

We survey 220,000 consumers on a monthly basis. We meet consumers on a regular basis. Every time I visit a market, I spend an hour with consumers. And so we do understand our consumers well. We innovate for our consumers. We have an interesting innovation pipeline, but we are very disciplined because it is not up to Imperial as the fourth largest to create the market. But when the market is created, when there is an interesting share of the nicotine market in the NGP space, we will enter there if we have a route to market. And we will continue to grow in those markets.

And so you can tell us, yes, we are small and et cetera, but we have grown double digit for the last 3 years. We have grown share in all 3 categories, including last year in all 3 categories of the NGP products. It requires a lot of discipline. Trust me, a lot of our market heads would ask me, "Can we not launch in this country? Can we not launch in this country?" I had a discussion the other day, I think it was Italy. I mean it doesn't matter which market. But we wanted to launch because you see a lot of exposure. You hear a lot of our competitors there. When you look at the data and you see only 2% of the nicotine market being sold in pouches, the rational behavior is you wait until the market is growing.

We will continue to be very rational in our capital allocation, which does not mean that we are not poised to grow double digit and create more market share where the profit pools are where it matters. So that's how we look at NGP, and we will continue to do that.

Right. Starting with the U.S. nicotine pouch market. Clearly, with the FDA guidance in May, the category has become very competitive. We are seeing a lot of innovation, new SKUs coming into the market. How are you thinking about the U.S. nicotine pouch market, long-term sort of growth expectations? And I mean, what is your strategy to gain some market share there?

Like many things in life, when it comes to the U.S., you always talk about the biggest market. There's no doubt. The U.S. market is a highly attractive market when it comes to OND. I would even add that vape in the long term is going to be very attractive in the U.S. Some of our competitors will add another category. We'll see where that ends up. That might be -- very well be.

And so I welcome as anyone in the industry, the FDA's sincere effort to simplify the process of the PMTA. And I think we have come a long way in getting more reasonable regulation that really helps consumers to remain safe, to make the right choices, but also making sure they get the innovation they deserve, to get the experience they deserve. So we very much welcome that.

I'll be very honest. We need to see more follow-through on that. We need to make sure that this is codified in the right way so that it is endurable over time, not that when the next administration comes in, whoever that is, might have a different view and changes back because the PMTA takes up to 4 years. We have to do a lot of studies. So you need to continue that effort to follow through on that effort. And so that is important for us. But clearly, we are going in the right direction.

Now for us, it is interesting. I mean, in ZONE, in the short term, because we have grandfathered rights, we still have an innovation pipeline that we can use, strengths and flavors. This regulation obviously now opens our interest in seeing how quickly can we bring innovation we have in Europe or brands we just acquired in Europe to the U.S. markets. That's something we are looking into it and to see whether this new openness allows us to do this faster than in the past. That would be great. We'll see.

In the short term, in the medium term, we have still enough innovation pipeline to give different experience to our consumers.

Right. And you have, on the vaping side of things, exited the U.S. market and given more enforcement, the FDA guidance change, is it a possibility at some point in the near future, you plan to reenter the market?

And then just to add on to this, what is your strategy with vapes in the European market?

So absolutely. We always said that where -- we follow the consumer. And so if there is a consumer in the U.S. and the vape regulation is improved, the vape illicit market is contained, you might see us come back. And you shouldn't be surprised that we are -- the PMTA take years. So it's highly unlikely to say that we are not working in our innovation center on something.

But the reason we exited vape is independent of any FDA changes. Our vape product we had in the market is 10 years old. If you really respect your consumer, you don't try to lure them into a product that is 10 years old is competing with illicit product that has the latest gadget. So I can't compete with these products. I'm wasting shareholders' money trying to compete on this. I exit the market until I have a better product, until the market is more attractive for us to enter. I mean it is becoming more attractive, but the margins are not anywhere close to where we would like them to see yet.

So as a challenger, where we focus, we have to make the choice that we have a much bigger opportunity on OND. The market is growing fast. We have an innovation pipeline. The margin structure is more attractive. We will focus on that, and we'll see at what stage to say -- you might see us come back to the U.S. market with vape.

Europe is booming. I mean Europe, our vape business is profitable. It's growing. What you see in Europe is more of a switch from disposable to pod-based, which has had an impact on net revenue. But we have a good basis there. We are growing. It is an interesting market for us, and we'll continue to do that.

Right. Going back to the U.S. market, the 2 largest peers are engaging in this double duty drawback mechanism. And Imperial so far hasn't participated in that. So can you just give us an update where you are and when we should expect that benefit to flow into your P&L?

Yes. So I mean, the benefits are all the same for everyone. It's a percentage of your excise tax if you export and import the same quantity. It's a bit of complicated regulation, but it's all the same. So yes, we have always said that we will pursue that opportunity. And we have committed already a few months ago that you will see the duty drawback starts significantly in the second half, and it will obviously complement in fiscal year '28 with a full year of duty drawback, assuming that no changes in the legislation.

And I would also expect that '28 is even an increase because we're going to see how much more we can do. I also -- I get a lot of questions why you're so late and why, et cetera. Listen, guys, we have a setup which we produced our combustible products in the U.S. for the U.S. market. That's historic. It's the way we acquired these products. Some of our competitors, they had for years, factories in Mexico, they could use. So they have that setup. Other competitors had historic credits, which they can use.

You usually would say, okay, you just produce somewhere else and you export/import, you can do that tomorrow. Well, it takes a long time, okay? So we had identified the factory. We identified factory in Morocco. We're going to invest there. We have built the plant -- sorry, not the plant, but we have invested in machinery that takes 6 months to deliver. We need to install them, train the people. And most importantly, we are producing brands in the U.S. for Africa and in Africa for the U.S.

Even though you use the same recipe, everything is the same. It's a natural product. You want to make absolutely sure that the consumer is happy with the product, and they don't perceive a change. So I'm -- we will do everything as fast as we can. But we have to do it right, and we have to take care of our consumer, and we have to make sure we meet all the FDA regulation and the authorizations. So that takes time. But good news is second half, we're definitely going to have the benefit of.

Second half of '27?

Yes, sorry, apologies. Thanks for the clarification.

So if I can -- I think in the interest of time, just one last question. Given the shares are trading at 7x PE, how should we think about share repurchases as we go into 2027? And can you just talk broadly about your capital allocation priorities?

Yes. I mean the silver line for a CEO when you have the share price, perhaps not where I had hoped and expected it to be is you get more shares back for the same money. And so for us, the share buyback is an important lever. And so if you look at our capital allocation, we were always quite transparent, and I think I've been repeating this for the last 5 years. We will firstly invest in our business. Because I can only commit to an evergreen share buyback for this strategic period if we make sure that the underlying engines work. So we have to invest in the business, and that includes GBP 350 million of CapEx. That includes the bolt-on acquisition opportunities, et cetera.

We will always want to be doing share buybacks or capital returns in an environment where our balance sheet is very strong. We are there. We have a leverage, which is at the lower end of 2 to 2.5. (sic) [ 2.0x to 2.5x ] So you wouldn't expect any difference to that. And then it's how we return that excess capital and the excess cash.

We have a loyal base of investors who enjoy a progressive dividend growth, and we will continue to do that. No doubt that in the environment we are today, share buyback has a bigger impact. And so we will continue to do the share buyback. And in fact, I'm not sure you all know that by June this year, we actually retired 20% of our shares if you compare it to where we started in 2021. So -- and we only started the share buyback in '23. So in those 3 years, we retired 20% of share. This year alone, with the share price where it is, we're probably going to do another 6%. So it is material what we are doing, and we'll continue to do that.

We have committed to an evergreen share buyback for the period of this -- for the strategic period. Every year, we will define the value. We have never committed to a progressive value. But what we commit is to a significant, meaningful share buyback, which you have seen over the last few years. We will decide that together with the Board, considering the environment, the cash generation, any potential needs we have. We have to pay Delaware, et cetera. But rest assured that it's not going to be different for next year.

Sure. With that, we are running out of time. Thank you so much, Lukas, for giving us this opportunity.

Thank you very much, Pallav. Thank you very much to you all.

Okay. Thank you for attending this fireside chat this afternoon with Lukas Paravicini, Chief Executive of Imperial; and Murray McGowan, CFO of Imperial Brands. I'm Damian McNeela, research analyst at Deutsche Bank.

So I think, Lukas, if we just start, we're approaching on the year anniversary of you taking over the reins of Chief Exec. Can you perhaps just provide us with some reflections on how you think the last year has gone and where your areas of focus have been, please?

Well, thank you very much for hosting us, Damian, and a very warm welcome to all of you here in the room and online. As you said, it's a fast-paced time. Time passes fast, and there's never a dull moment to start with. I have enjoyed the first 8 months a lot. I've enjoyed traveling a lot to the markets, see our teams, meeting our consumers and sense the energy, the motivation to build on our strong foundations and continue to deliver shareholder value.

We are performing and transforming. So we are performing in the short term. We are delivering. We had a good start to '26. We had a good start to the Strategy 2030. We are delivering operational and financial performance. We have reconfirmed our guidance for a double-digit growth in NGP for the full year. And so our challenger approach remains at the heart of what we do and the source of competitive advantage. And we are transforming, which is really important as well. And the transformation really has 2 legs, which is significant opportunity in self-help efficiencies, and we have committed to GBP 320 million. We're off the track really well. And we're looking at also making sure that we deliver a transformation that allows us to be closer to the consumer, tap into technology, including AI and actually search for that additional revenue, which is really the attractive part of the transformation. The efficiency is the ticket to the game. It's a necessary thing we want to do. No consumer pays for inefficiency, but the added-on capability to use our talents better through technology is really the added benefit.

So really excited with what we have done so far and what we have in front of us.

Yes. Okay. And I think, obviously, the recent interim results, we had the sort of a broader discussion about market share dynamics and the interplay with managing profitability. Is it worth just refreshing us on what the Imperial approach is and how we should think about the recent performance?

Yes. A very good question. And I think as a consumer company, market share is a very important metric. And it has been important in the past. We have reconfirmed the importance of market share at the consumer -- at the Capital Markets Day last year, and it remains very important. And in fact, if you look back by end of '25, we've gained 50 basis points market share in those famous aggregate 5 markets, but we also gained 195 basis points in the U.S.

But also, we are evolving, and we want to fine-tune for the sake of value generation for shareholders, the market share approach, especially in an environment like the U.S. where you have the price ladder expanding significantly. What does that mean? You can make 7x your gross margin at the top versus the bottom segment. It is the extreme, I admit that, and you would look at Spain and Germany, you get 3x that. And that means that volume share, 1 bps volume share is not equal. And hence, we are looking at where do we double down at the top, while we play at the bottom because we have consumers, but we play with a balance of pricing.

So in a given year, we might choose to not gain market share because we don't want to invest in the bottom and rather price. And that's the case in the U.S. We've gained market share segment share in Winston Pool, but we have not doubled down on the bottom. We've gained share, but we have not wanted to invest in the bottom, we rather took price because that is a better value long term. So value share remains important, but not every bps of volume share is equal.

Yes. Yes, that's fair. And then you sort of -- you mentioned the U.S. I mean it's your biggest market. It's a market that's seen quite a lot of shifts over the last 12 to 18 months, consumer, regulation. Can you just give us some insights on how you see U.S. combustibles business at the minute and then perhaps specifically talk about maybe your aspirations in deep discount with Malibu?

Sure. I mean it is fair to say that we've got a portfolio of countries which are very interesting, starting with the U.S. U.S. has always been an interesting market and has been always a well-performing market and it continues to be an affordable market where we have a great offering at any price point. So that has not changed.

And in fact, I would say, compared to a year ago, you have even seen an improvement in the market in terms of volume. I remember lots of discussion a year ago, even 2 years ago about volume decreases in the U.S. being at the high single digits. This time, we are at 5.5%. We've seen better improvement enforcement in vape. We've seen better price elasticity because there has been more activity, more players in the bottom segment. That has had a benefit in our consumer base.

So that has improved. I would also be very clear that as much as perhaps it is not sort of is a bit more chaotic in terms of the announcement of the FDA, if you're fair and you stand back, over the last 8 months, the FDA has gone in the right direction. And it's very clear that they do genuine efforts to reduce the backlog of PMTAs and simplify the process. Do we need more clarity? Do we need more information? Do we need more clarification? Yes. But if you tell me about the context of the U.S., it has always been an affordable. We have a great position, and it has improved in terms of volume and FDA regulation. Within that, we have operated with discipline. We have maintained our share at Kool and Winston at the top, which have gained market segment share.

We have grown market share in Crown, but we have also priced, as I said before, to extract that value that we want. We have launched Malibu, which, to be fair, is not going to be a big brand. We're not going to put a lot of money behind it, but it allows us to have a base at the bottom that now allows us to price all other Crown and Sonoma according to the rhythm of the tobacco industry.

And don't forget, we are very strong in mass market cigars. We have Backwoods, which is an iconic brand, which is gaining segment share again. So really very pleased with the U.S.

Yes. Okay. That's pretty clear. I think Germany is a market that historically in the last 5-year plan, you struggled to recover market share. But the last couple of periods, we've seen good improvement in market share. Can you just talk about what's been happening on the ground to sort of support that improvement in share and how we should think about developments going forward in Germany?

Yes. I think we're really pleased with the performance of the German market. It's a market with very predictable pricing, stable tax excise regime and a very highly affordable market. If I think what we've done, the playbook we've applied in Germany is the same as the playbook we've applied in other markets. We've invested behind our brands. So really pleased with the performance at the top end with likes of Gala and Davidoff. And then Paramount at the lower end, catching those people who want to down trade has performed very well, really capturing some significant volume. We've also invested behind our sales force. So last year, we invested behind the sales force for combustibles. We put more people in behind our NGP business today as well in Germany. So it's a really appealing market for us. But the playbook in Germany is the same as the playbook we apply in the markets. And it's great to see the performance continue of that market after what was a number of years of significant share decline.

Yes. Okay. And if we move to a market that sort of seems to be moving from challenge to challenge in the U.K. It's still a significant profit contributor. How do you still see the attractiveness of the U.K. market given the sort of the regulatory backdrop?

The U.K. is an interesting market for us. It remains one of our top 5 markets. But it's a relatively low volume share now. It's around 3% of volume of the group. It's a market that has seen high excise increases over time. So it's a less affordable market compared to some of the others. But I'm pleased with how our business has performed in that area. The team has done a good job, and we've prioritized value over share.

So again, focusing on our brand investment to support that, but also taking reasonable pricing steps over time. The benefit in the U.K., we have is the ability to offset some of that through our next-generation products business. And we've got a very good position within vaping in the U.K. So it's over 10% share now for our blue product. And we've recently launched into modern oral as well, which is still an early start, but made a really good promising early start for next-generation growth within the U.K. market.

Yes. Okay. And then Spain, the sort of -- you have sort of a mix of international brands and local dual brands. How different is that to other markets you operate in? And how do you manage the interplay of making sure that you deliver your targets from that portfolio?

Yes. I mean the U.K. -- the Spain market is interesting. It's probably one of the most affordable markets we're present in. So price for a pack of cigarettes in Spain, anything from EUR 5 up now versus the U.K. at probably GBP 17 for a pack of cigarette. So a real affordable market. And in the market, we're very choiceful again on brand investment. So we invest behind some of our local jewel brands, the likes of Ducados or some of our more scale brands such as West in Spain.

So we continue to make very choiceful moves across the portfolio to make sure we can optimize value creation in the marketplace, very pleased with the way the business is performing, but it does remain a very, very highly affordable market with very low levels of volume decline over time. So a very attractive market from our perspective.

Yes. And then perhaps the smallest one of the sort of so-called top 5 markets in Australia. It continues to be challenging operating environment, but still very profitable. I mean what steps is the business taking to protect profitability? What is the sort of outlook for Australia, I guess, over the short to medium term?

We've always said that Australia is a difficult market. That's not new. We've -- I started in this group 5 years ago. It was already then a difficult market. We knew that the profit pool would be shrinking. And on the back of the public health bill last year in April, that has accelerated. And we've now reached the flabbergasting 50% market size reduction in the first half. It is yet still a very profitable market, don't get me wrong, but it is becoming a smaller market, much smaller market.

The challenge for us is not the market itself because it is profitable. It's a step down that you have seen in 1 year, which is really the pain for us. Once you go through that, we'll go back to a more normal, smaller market but profitable market. I also would say that I'm really impressed with our team, how they -- in a very difficult market. And remember, you can't go into NGP. It's a forbidden category. So in that environment, our team have done a phenomenal job to extract value, to adapt the operating model. We have gone from a direct model to a hybrid model to an indirect model.

We have reduced our labor force there. So we have adapted well. And I'm sure that in the next 2 years, we will be less talking about Australia. Currently, it is less than 1% of our volume. It's less than 1.5% of our sales. So it's really not something that we're going to be talking too much about, but it will remain a valuable business going forward.

So perhaps then talking -- switching to some of the areas where you might be talking a bit more. You've got a quite a large range of growth markets that you operate in. Is it worth just talking about some of those bigger growth markets specifically and what you're doing in them and the sort of the growth opportunities you see going forward?

Yes. Thanks for addressing that because I think we talk a lot about the 5 markets, and there are still 5 markets because we have committed to the aggregate market share of those 5 markets. But in reality, if you step back, when you look at our strategy, which is a very simple compelling strategy is generate sustainable value out of combustible, grow our NGP business to a meaningful business and then transform the business to generate self-help and future revenue growth. If you go back to the sustainable value generation of combustible, that's applicable to all markets. So we have a very nice portfolio. Yes, we have U.K., which is an interesting NGP market. We have Australia, but we also have U.S., Germany, Spain, highly affordable, highly attractive markets. And we have Africa, for example. It's 10% of our AOP. It's growing ahead of the other -- of the group average. We also have leading position in what we call Middle East, Africa -- sorry, Asia, Middle East. We have a leading position there.

We have leading position in Central Eastern Europe. And we don't talk much about it, and it is on a much smaller basis, don't get me wrong. But Southeast Europe, where we have markets like Italy, Romania, Bulgaria, they have done very well in tobacco. And as I said, starting from a lower base, but they have done very well, gaining share there. And all these markets, be that Central Eastern Europe, Southeast Europe or Europe in general, have huge potential in NGP as well.

And just one sort of like a broader question on the ability of the combustibles business to keep delivering pricing. What's your degree of conviction that you can deliver pricing to offset the volume declines you're seeing in general?

There's one statement only. The tobacco model, excluding U.K. and Australia, as you know, is working very well. And especially where your volume decreases are lower, your pricing need is less. So our target is not an absolute pricing. Our target is a net revenue because the tobacco model works, trading a net revenue that is slightly positive with a volume decrease, and that gives a huge lever on your operating profit. That is a tobacco model. With the affordable we see in Europe, in the U.S., Germany, Spain, with the growth we see in East -- in Africa, that model works very well still.

Okay. And if we move now to have a look at the NGP business. I think growth in the first half was just under 8%. The ambition is to get that to sort of almost double. What are the levers that you're going to be pulling? Or what are the things that are going to help drive that in the second half?

Look, I think you're right. We were 7.5% growth in NGP in the first half, which we've still committed to the double-digit growth for the full year. There's some elements to call out in terms of confidence of getting there. I think, first of all, we did talk at the half year results about a one-off charge that we had to take in the first half, which related to promotional activity over the course of our financial year-end that won't repeat. It's worth saying without that charge, it would have been double-digit growth at the half year and the U.S. would have been very strong net revenue growth in NGP as well.

In terms of -- if I look across the different regions, what the drivers are, U.S., we continue to see good performance in the modern oral business in the U.S. We have a recent acquisition of Black Buffalo, which is a great addition to our NGP portfolio in the U.S. and allow us to go after quite a distinct consumer segment with the products really targeting those users of moist smokeless tobacco today, which will be incremental in the second half.

If we then look at Europe, we're seeing really good performance within vaping as people transition from disposables to pod-like systems. And we've got some great performance within heated tobacco in Southern Europe, particularly Italy, Romania. And in the Nordics as well, we've seen some great performance of Ma oral. And within a race region, that Central and Eastern Europe block, we're seeing good performance of heated tobacco, across likes of Poland, Hungary, Czech. So I'm feeling good about the drivers we've got and the performance of the portfolio as a whole and that we'll deliver against our double-digit commitment for the full year.

Yes. And just sort of the Black Buffalo acquisition, I think it's sort of -- it's a category that not many people are familiar with. perhaps caught people a little bit off side. Can you just sort of talk us through what you saw and what you liked in the acquisition?

I think the acquisition for us, it was absolutely in line with us as a challenger business looking to grow a scale proposition within next-generation products. The reason we like the proposition. So it really targets those users of moist smokeless tobacco in the U.S., so loose tobacco or pouches, but real tobacco inside, but gives them a tobacco-free alternative. And often for those people that use moist smokeless today, modern oral is quite a departure from their habit they're used to, whereas the Black Buffalo proposition really recreates the habit they've got.

We think it's quite a unique brand. The founders of the business did a great job of building a brand that really resonates with the target consumer. And as we tested it with a very broad range of consumers, it tests very well. It tests very well against established brands within the MST category. So we're feeling good about the opportunity to really scale that brand and bring another option for a reduced risk product to consumers in the U.S.

Yes. Okay. Pretty clear. If we then look at the sort of the heated tobacco business that you've got, Pulse has been performing pretty well across a couple of European markets. Can you sort of talk about the specifics of what -- who you're targeting in those markets and what the strategies are to grow it?

Yes, it's a very good question. And I think it is -- so we are quite distinctive in our strategy. We have, as I said before, a clear target to grow double digit our NGP business because we want to build a meaningful business and hopefully, over time, unlock our terminal value. And it is important for our purpose. But we do that with high discipline, high discipline because we recognize as the fourth largest player.

It is not for us to create markets where they do not exist or where we do not have to route to market. So we will continue to be very disciplined because our focus is on our shareholders, on creating a double-digit -- meaningful business that is profitable. And ultimately, we want our fair share in that. But it's also important, if you look to your point, where we are successful, where we are playing, we focus really a lot on our consumer. We will, as a challenger, always start with our consumer.

And that allows us to innovate our products. So don't get me wrong, where we go in a market, we go with everything in a market, and we will bring innovations to the market. Pulse is a very good example where we have innovated again with our latest device, which is called Pulze 3.0 and the sticks that go with it, be that herbal sticks, so we can offer flavors or the tobacco sticks that allows smokers to move further from smoking into the heated tobacco. And that product, because it resonates with the consumer because we start with casino has done extremely well in Italy, in Central and Eastern Europe and also in Greece, where that's a predominant category.

Now perhaps the NGP category that gets the most attention, pouches. So I'll ask the FDA question first is how do you see the changes that the FDA have put forward in terms of the criteria around the PMTA pathway to sort of launching products?

Yes. As I said before, if you step back over the last 8 months, we could see a genuine interest and effort and success in the FDA, not just curbing illicit together with other federal entities and authorities, but also working on the backlogs of the FDA and simplifying the process so that manufacturers like us have a visibility that if we would submit a PMTA, we also see the light of the -- at the end of the day so that we can launch that product.

I think that is very much welcome. It's not just for the pouches. We understand this is a general guidance. Like everything, we are waiting for more clarity. We need more codification. So this can be perpetuated and not reversed in a year's time or in 2 years' time. So I think that welcomes. And it aligns with the interest in this category. It does not allow everybody to play in this category. Let's be clear. It helps the big players like us because you still need a lot of money to go into a PMTA. You still need to do clinical tests rightly so.

They take 12 months at least. You have to submit a lot of documentation. You need resources. But now at least, we know that if we do that, we have a pathway to launch that product, which is very helpful. Now let's be clear, if I go back to the O&D category in the U.S., we are focusing on that category. Black Buffalo will extend, which is part of the Motel nicotine will extend that category for us. We'll also give better presence in the retail outlets. But we have the benefit in that case that we already have a pipeline of innovations that is grandfathered. So we can launch new flavors. We can launch new strengths that we do not require to have a PMTA. So the FDA is more a long-term benefit for us. Short term, we will be able to continue to be successful and build share as we have done in the past in oral nicotine.

Yes. And in terms of -- I think at the pre-close, you made some comments about increased competition in U.S. pouch category. Given the news over the last couple of days with new launches coming into the market, what -- how do you feel about the competitive nature of the U.S. pouch market over the next couple of months?

I think what we need to understand the O&D market or the oral nicotine market, the modern oral nicotine is a nascent category. It's an attractive category from a margin point of view, it's growing fast. So it is quite typical in any consumer business that if you have such a category that the leaders of the segment, the leaders of the market would invest heavily to increase trial, to increase awareness of that category, attracting more consumers.

That's not unusual. And normally, what happens is that your volume growth is ahead of the net revenue growth. And there is no difference today in the R&D. You see volume growth ahead of the net revenue growth. In that environment, we do very well with our innovation and our focus on the consumer, we know best. We're growing share. We're growing 8%, 40% volume with the adjustment of the promotional activity at the year-end, we're growing over 20% of net revenue. So I think it is a category that is in its own dynamic, growing and the innovation that we are seeing will only ferment that.

And when you sort of look at Europe, where obviously, you're performing well with Zone and [ Screwf ] and the U.S. where you're starting to sort of get traction, is there a market where you sort of want to succeed more in? Or is it sort of you want to succeed equally in both those environments?

No, I think we start with the consumer where we are, we will want to win with the consumer. Now again, winning for us means not beating the bigger players. I think that's one thing that we are very clear what is the role of our -- of being the fourth largest. But we want to have our fair share. We want to have an attractive profitable business that is growing at double digit, and we're well on the way to.

Yes. Okay. And then in vapes, you sort of -- you made the decision to pull out of the U.S. Can you just talk about the rationale for doing that and whether you would ever consider going back in? And then secondly, sort of the European performance of vapes has been pretty strong. And can you just talk about how you think about that market going forward, please?

Yes. No, we're really pleased with the performance of vape in Europe. Europe are a key focus for vaping. It's the one where we see the most established markets for vaping, and it's one where the regulation allows us to innovate at pace in the marketplace. Within Europe, you do see a transition, I talked before around from disposables to pod-like devices. So in the U.K. and France, we've seen that transition take place. I think we performed very well through that period. So we've managed to gain share as those transitions have taken place and now double the share in baking in the U.K.

So it remains a really highly attractive category in the U.K. and one we'll continue to invest behind. I think in the U.S., it's quite different. The product that we had on sale or myblu product in the U.S. was a product which has been on sale since 2017, so almost 10 years old now. And it's a product which only went after the lower strength segment of the market. It's around 20% of the vaping market in the U.S. So it was a smaller segment with a better age device up against illicit devices, which are the latest technology.

So for us, it was a small revenue pool, making a small loss. It was in a world of being choice that was a challenger, it was the right decision for us to come out. To your question about going back in, we continue to look at it. I think with greater clarity on the FDA regulation and more certainty in the time line versus what we've seen historically, then for sure, we'd look at that as an opportunity in the future, especially given the strong performance of our baking business in Europe.

Okay. I mean, one of the key attributes that everybody likes about Imperial is cash resilience and the conversion rate. What are the key drivers that you believe sustain that strong cash generation over the medium term?

Yes. You're right. The tobacco model is a very cash-generative model. So the business does create a lot of cash. And we've demonstrated with the robustness of the tobacco pricing model that we can offset volume declines through pricing in the vast majority of our markets. I would say internally, how do we manage to drive this internally? I think cash generation has the same level of focus as P&L management in the business.

So we talk a lot about cash and how we manage cash as a business, whether that's through management of our capital spend in the business. We spent around GBP 350 million a year investing in growth for the business, but also management of working capital. So it gets a lot of time and attention from the team as a whole that allows us to really drive a strong cash conversion for the business, which clearly think is a compelling narrative for our investors as to why the business is an attractive investment.

Yes. And do you have any sort of contingencies in place to sort of defend against, I guess, worsening consumer backdrop or particular geopolitical shocks?

As you expect every year, as we look at cash and the options making around capital allocation, we're very clear. So first and foremost, we'll invest in our business, the GBP 250 million I talked about. Secondly, we maintain a strong balance sheet. So we always keep our net debt-to-EBITDA ratio between 2 and 2.5, so typically the lower end of the full year. We offer a progressive dividend and excess capital, we look to return to our shareholders, and that's an annual discussion with the Board.

So this year, we'll complete a GBP 1.45 billion share buyback. And in those discussions with the Board around our headroom for that, we always consider the unexpected. So are there any potential legal cases on the horizon, any tax settlements potentially on the horizon and also giving yourselves some buffer. So it's always part of that consideration each year with the Board of how we use the cash in the business.

Yes. I think, Lukas, you mentioned earlier GBP 320 million of cash cost savings by 2030. Can you just talk us through the sort of the self-help opportunities that the business has to deliver on those and the confidence that you have in delivering that?

We have a lot of self-confidence on the self-help. So listen, I mean, as I said before, the transformation has 2 legs, which is the self-help and obviously, the revenue growth that we can generate by tapping more in technology and our talent pools by enabling them better. If I start with the efficiency gains, again, we would split that in 2 areas largely, which is your manufacturing footprint and manufacturing excellence.

And again, we have announced the closure of Langenhagen, which is one of our largest and most costly factory. We have just announced the sale of our Taiwan factory. Both of them will be concluded by mid next year. That will generate EUR 100 million savings. That's very simple. It's quite an effective way. But I think it would be false to just think that we can close factories and that's the efficiency gains. Our factories, our strategic factory, where there are quite a few still, they have an opportunity to really step up in their manufacturing excellence, yield management, OEE, labor efficiency, et cetera.

That alone through our manufacturing excellence program with all the people we've brought in to run this now properly has generated or will generate GBP 25 million of savings in '26. So that's on the manufacturing. And I think there's quite a bit more self-help to come. So we're very confident in what we have guided. The other element is more the beyond manufacturing, what we can do there. And there is where I think we knew that if we really want to accelerate the opportunity, we wanted to partner.

And that partner is Capgemini, who has real good experience in terms of industry, also consumer and has done this multiple times. And I think that's where if you step back, if you look at the broader shared services, there's a varied maturity level in terms of just transactional to the high-end, more consumer-centric shared services where you would say large consumer companies. They have gone there in 20 years. We are planning to go there in 2 years because we plan to go there in an end-to-end approach and design.

That's a benefit of us being late to the party, but now getting to a destination where others have taken much longer. And we can work with someone who has done this multiple times and for whom we will become probably the fifth largest customer.

Yes. So I mean, in terms of if we just dig into that sort of Capgemini sort of relationship, I think just under 400 people have moved from Imperial to Capgemini. Sort of what's the sort of short- to medium-term outlook for those sort of more people to do that? And then kind of longer term, what is the opportunity from that relationship with Capgemini?

Again, I'm very excited. And I was -- just last week, I was at the Capital Markets Day of Capgemini because Aiman Ezzat, the CEO of Capgemini interviewed me. And so it's an interesting interview to see what is actually the benefit of working with Capgemini if somebody is interested. But for us, really Capgemini is a partner that allows us to do this at pace.

So you mentioned the 400 people. We signed the contract in February -- by 2 months later, we had 400 roles shifted into Capgemini with a retention rate of 99%. Now that's a start. We'll give you updates whenever we have updates. We also want to be clear we have to go through some process to do that, but you will see more coming in that. We have been very clear that Capgemini will continue to help us in those functions.

Again, what I think is very interesting, though, is what we can do with Capgemini on the revenue growth opportunities is if you think about their technology, they actually consumer insight, which they have gained with other industries. If we can do in silico modeling, if we can do digital twins, that will shorten the innovation cycle that will allow us to get to market faster. That's a significant benefit. We are piloting -- and actually, we have rolled out the pilot now in full of Italy and all of Italy and also in France. an artificial intelligence system that helps our sales force to prepare better their visits.

What have we seen? We have seen a 10% to 15% time efficiency. So they -- by doing that with the artificial intelligence agent that we have implemented, they gain time, but they also gain orders in the sense that the artificial intelligence agent can help prepare the sales speech much better. They understand they can go into the customer conversation much better preparing. There are multiple opportunities there.

We will be very focused on selected opportunities where we have the biggest support of our strategy, the biggest impact, but that will be the -- the equally interesting piece to that relationship with Capgemini. The EUR 320 million, which Capgemini is a big driver of that is the ticket to the game. which is part of what we have committed. The upside is hopefully an equally interesting opportunity.

Okay. That's very clear. And then sort of as we move to the end of the meeting, capital allocation, I think you touched on it before, Murray, lots of conversations around investing in the business for growth. And obviously, you've made the recent acquisition. But can you just sort of provide like the degree of conviction that you've got in the business' ability to deliver on the shareholder returns that you've got in place, cost dividend and obviously, the Evergreen buyback?

We're clear that the share buyback is a great way of us delivering value to our shareholders, and we're very disciplined in the way we get to that figure with the Board described earlier. I would observe if I go back to 2021 when we had a previous Capital Markets Day, since that time between share buyback and dividend, we've delivered around GBP 11.5 billion to our shareholders. So around 77% of our market capitalization at the time.

So quite an outstanding static. As we did the modeling for this 5-year plan looking forward, we're very confident in the cash generation of the business and our ability to sustain an evergreen share buyback through the course of this plan. As I said before, we don't commit to future years as to what the figure is. It will be a meaningful figure. It may not necessarily go up every year, but it will be a very meaningful part of our proposition for shareholders going forward.

Yes. Okay. And under strict instructions from Mr. Cross to get you out of here slightly ahead of schedule.

So you have a busy day.

Yes. So I think with that, I would just like to say thank you very much, Lukas and Murray, for your time. It's been very enlightening. And thank you very much, everybody, for listening.

Thank you very much.

Thank you.

Hello. Good morning, everyone. Thanks for joining us for our half year '26 results. Just a few housekeeping items before we kick off. For those of you in the room, there are no planned fire alarm tests today. So if it goes off, it is a real one, and you'll see the fire exit is just behind you there, lit up in green. And finally, I just wanted to draw your attention to the usual disclaimer in our RNS this morning and in the presentation, which we're just about to go through. So without further ado, I'll hand over to Lukas.

Thank you very much. And good morning, and a very warm welcome to this results presentation. Thank you very much for joining us here in the room, and a very warm welcome to those who join us online. Today, I'm joined by Murray McGowan, our Chief Financial Officer; and John Crosse, our Director for Investor Relations. Murray and myself really look forward to presenting the first 6 months of our fiscal year '26 and also the first 6 months of our Evolve 2030 strategy.

I'll start off with a few highlights. Murray will then take the stage and talk us through the financial performance and our expectations for the full year. I will then come back on stage and discuss in more details how we are delivering strong operational performance, while at the same time, delivering self-help efficiencies and transforming our business to deliver long-term sustainable growth.

With that, let me start the presentation. There are 4 things, overarching point, which Murray and I want to make in today's presentation. First, our consistent financial performance continues to deliver growth in net revenue and adjusted operating profit, driving cash generation of EUR 2.6 billion over the past 12 months. And this is underpinning consistent capital returns, which includes our evergreen share buyback.

Second, the progress we have made in the first half means we are well placed to deliver on our expectation for the full year. And we confirm the guidance we have previously given. Third, our strategic progress and operational delivery continues to be underpinned by our distinctive challenger approach, which is a source of sustainable competitive advantage. As you've heard us say before, this challenger mindset is about deep insights into our consumers, a laser focus on the key drivers of growth and investing in agility, so we can create more sustainable value in combustibles and build scale in NGP.

Fourth, over the past 6 months, we have made significant progress in the strategic transformation of our business. These activities are delivering material efficiencies in the short term and building capabilities that will unlock long-term growth. Helping us become an even stronger challenger business. So let's look first at our half year dashboard.

In the center, you can see how operating performance is supporting top line revenue growth and growth in earnings per share. We are on target to deliver our full year objective of at least high single-digit growth in EPS. This is enabling sustainable capital returns shown on the right. We have announced a 4% increase in the ordinary dividend, and we are on track with our EUR 1.45 billion share buyback.

Now I recognize that at the half year point, the 2 numbers on the left will be a focus for some of you. Looking at the market share, the aggregate figure of our 5 priority markets is lower. And this reflects a deliberate choice to prioritize value over low return volume. And in NGP, where we have grown share and volumes in all categories, overall revenue growth is below our full year guidance of double digit. This is due to one-off factors, particularly the timing of promotions over the year-end in the U.S., which we do not expect to repeat.

When I come back, we will get into the detail of what sits behind these numbers, and we will highlight the underlying strength of our operations and our positive trajectory for the second half. While staying focused on delivering our fiscal year '26 commitment, we're also making purposeful progress on our strategic transformation. We are performing, and we are transforming, and we are delivering our in-year plans. At the same time, we are making progress on self-help efficiencies and developing the capabilities to enable sustainable long-term growth. On this slide, you can see how we are moving forward on our strategic priorities across the top of the wheel, strengthening our combustible business and NGP business.

We have also achieved key milestones in our strategic enablers, which you can see on the bottom half. These are activities which either immediately and materially reduce our cost base or underpin long-term growth through improved technology, processes and consumer capabilities. When I come back, I will get into the detail of the actions we are taking and how they are already supporting delivery against the financial commitments we made last year at our Capital Markets Day.

With that, I would like to hand over to Murray for him to take us through the financial performance and our expectation of the full year. Murray, over to you.

And good morning, everyone. The past 6 months has been a period of broad-based growth. We delivered growth in our tobacco and NGP net revenue, growth in combustibles through pricing to offset volume declines and growth in NGP through strong volumes and share gains across all 3 categories, underpinning improvement in net revenue as we build scale. Our group adjusted operating profit growth of 0.6% reflects this, but also some headwinds at [La Hista] and some one-offs in the U.S. and Australia, which I'll come on to later.

We've delivered GBP 2.6 billion of free cash flow on a 12-month basis. Leverage at 2.4x was higher than the full year for the usual seasonal reasons, but it remains within our target range and flat year-on-year. Overall, we are on track to deliver against our plan for this fiscal year and meet our capital allocation priorities.

These results are another good illustration of the tobacco value model in action. Strong pricing across our footprint shown here in orange, more than offset volume declines shown in gray to deliver low single-digit tobacco net revenue growth in line with guidance. In Europe, our largest region, pricing of 6% outpaced volume declines. In the U.S., price/mix of 5.7% -- sorry, pricing of 5.7% driven by pricing both in cigarettes and mass market -- mass market cigars portfolio, sorry. In AAAACE, volume growth reflects entry into new markets. Excluding Australia, AAACE delivered 6.1% price/mix, similar to Europe and the U.S. Tobacco operating profit growth was driven by strong performance in Europe, which grew 6.5% and in AAAACE, excluding Australia, which grew 10.8%.

In the U.S., growth in combustibles was offset by some one-offs, which I'll cover in the next slide. Whilst NGP losses increased slightly, this reflects the impact of some promotional activity in the U.S. over the prior year-end, which was more successful than we anticipated and was recorded in half 1. This reduced NGP net revenue and increased NGP losses by around GBP 13 million. Without this, U.S. NGP net revenue growth would have been positive.

At a group level, NGP net revenue growth would be double digit and total NGP losses would have reduced in half 1 year-on-year. It was also pleasing to see Europe NGP make a profitable contribution during the first half. Adjusted operating profit from [La Hista] declined, reflecting a reduced profit from tobacco inventory, which offset underlying growth in the business.

As we said back in November, performance will be weighted to the second half, and I'll explain some of those drivers next. This slide shows some of the one-offs impacting half 1 performance. In combustibles, these were in the U.S. and in Australia. In the U.S., tariffs on our mass market cigars were a drag. But given the changes to tariffs following the Supreme Court decision in February, this impact will reduce in half 2. We'll see the full impact of pricing taken on MMC during the course of H1, support our H2 delivery.

In Australia, we have seen accelerated volume declines of around 50%, which have impacted on AOP. There will be less of a drag on year-on-year in half 2 as we annualize those volume decreases and expect adjusted operating profit to stabilize. We will see a benefit from the actions we've taken in the first half to resize and refocus our operations in Australia. We're driving growth through white space market entries, most notably in Serea, which are making a meaningful contribution and which will drive further growth in the second half.

In NGP, we had the impact of the promotional activities in the U.S. that I mentioned earlier. Given our clear focus on modern oral in the U.S., we've taken the decision to transition out of the U.S. vapor category. This move will help to reduce NGP losses in H2. As a reminder, our U.S. vape proposition, our legacy myblu device, first launched almost a decade ago, and it makes a small and declining contribution to revenue.

So we expect a stronger NGP performance in H2 in both net revenue and AOP growth. Altogether, these one-offs have impact of over GBP 50 million in H1. This will be much reduced in H2, as I've explained. So this, combined with the usual benefits of price and operational gearing means that we are confident of a step-up in performance in H2 and remain committed to our previous full year guidance.

Now as CFO, I want to ensure we are always transparent about items that we classify as adjustments. Today, we're disclosing charges related to our 2030 strategy and historical legal cases. Charges related to our 2030 strategy are in line with guidance that we gave at our Capital Markets Day back in March 2025 and relate to the rationalization of our manufacturing footprint and our transformation program. This includes our exit from Langenhagen.

We'll start seeing benefits from this and the recently announced sale of our Taiwan factory coming through in the second half. We have hit the ground running in our long-term partnership with Capgemini. And in the second half, we'll start to accrue the benefits of this new partnership. Lukas will discuss these in more detail later.

Our transformation is ongoing and remaining costs will be adjusting items in future years. We also show charges related to the settlement of the Delaware case. All historical charges have been adjusted out. Cash costs will be reflected in our free cash flow in line with the payment schedule agreed. As a reminder, that's GBP 150 million in half 1 this year, and the remaining GBP 162 million in roughly equal installments over the next 3 years. Our adjusted EPS reflects our operating profit growth and the reduced share count due to our ongoing share buyback. An increase in finance costs was offset by lower tax and minority interest charges.

The adjusted effective tax rate at 23.5% remained flat on the same period a year ago. Turning to cash and capital allocation. Our operating cash conversion was 98% on a 12-month basis, reflecting our continued focus on working capital. And our cash flow performance compares well versus prior years. Disciplined capital allocation remains a key part of how we create value. Leverage at the half year remained flat year-on-year, and we're on track to be around the lower end of our target range at year-end.

We've announced a 4% increase in our ordinary dividend, and we're on track with our GBP 1.45 billion share buyback. Now this is our fourth consecutive year of share buybacks and brings the total capital returned to investors since the program started to GBP 4.8 billion. Taken alongside dividend payments, total cumulative capital returns from FY '21 to half year '26 now sits at GBP 11.5 billion.

This represents around 77% of our market capitalization at the time of our Capital Markets Day back in January 2021. To remind you, as we stated at Capital Markets Day in March 2025, we are committed to an evergreen always-on share buyback throughout this 5-year strategic period. So to close my section, we maintain our full year guidance. We continue to expect full year tobacco net revenue growth in the low single digits and double-digit NGP net revenue growth.

Adjusted operating profit growth will be within our midterm growth range target of 3% to 5%, and we expect at least high single-digit EPS growth for the full year period, supported by profit growth and the ongoing share buyback, all at constant currency. We expect at least GBP 2.2 billion of free cash flow, including the impact of cash costs related to Delaware settlement and the implementation of our 2030 strategy. On the Middle East, our position is similar to where it was when we issued our trading statement last month.

We have not seen a material impact from the crisis in the Middle East to date. Clearly, the longer the situation persists, the more likely there could be a meaningful impact on input costs and consumer demand, including duty-free. Now our business has proven its resilience during past crisis. We've managed through them before, and if necessary, we will take mitigating actions.

At current rates, we expect foreign exchange to be a headwind of 0% to 1% to operating profit and EPS growth. And as usual, there's a slide appendices with guidance on specific items. We also remain committed to the medium-term guidance we set out at our CMD in March 2025. This means we remain well placed to generate long-term value for our shareholders. Thank you. I'll now hand back to Lukas, who will give an update on operational performance. Lukas?

Thank you very much. All right. What I want to do in this section is take you through our strategy, shown here on the wheel. And I will explain how in just 6 months into this 5-year strategic period, we've already made rapid progress. We are performing today. We are delivering significant self-help efficiencies, and we are transforming to unlock long-term growth. I'm going to start with the segment on the top left and talk about how we are creating sustainable value in combustibles. Here, we're carefully balancing the triangular equation of price, volume and share.

In each of our regions, as you saw, pricing has once again more than offset volume declines. In the majority of markets, tobacco continues to be affordable. The tobacco value creation model is working well. And looking at the left of this slide, we're comfortable with how each of the individual priority markets has delivered. The U.S. and Spain have been executing with discipline, focusing on winning the more valuable segments, while pricing responsibly in the lower-price segments to maximize sustainable value.

Germany has delivered a great performance in what is an intensely competitive market. And as a reminder, our U.K. and Australia teams who operate in declining markets are tasked with prioritizing value over volume and share. So in that context, a 60 basis points aggregate share reduction in a given period is consistent with running the business for sustainable value creation. Before we move to the right-hand side, let me make a few further points about how we see market conditions evolving and the implication for how we approach market share.

As we said at the last year's CMD, share is important, and we will not return to the period before 2020, where we were consistently the industry #1 share donor. Across all our major markets, pricing ladders are becoming more stretched. This means the gap in industry gross margins between the premium segment and the deep discount is growing. It's a simple point, but it's worthwhile emphasizing. Not all basis points of market share are equal.

This evolving market dynamics is requiring us as a challenger business to fine-tune how we manage our portfolio to take a more focused segment-by-segment approach. On the right, you can see the significant and growing difference in the gross margin per 1000 stat that we can achieve at the top of the price ladder versus the discount segment. In the U.S., Germany and Spain. This widening spread means it is increasingly important for us to double down on premium segments while, of course, maintaining a strong presence at the discount end of the market.

So in each market, we focus on nurturing our premium brands, aiming to grow our share of that segment. At the same time, we seek to achieve the right balance of price and volume in the discount segment to deliver sustainable value over the long term for shareholders. In line with this approach, in the U.S., we have been operating with discipline in a market which has seen growth in the deep discount segment and new brand launches.

As I mentioned, we have been successfully defending our premium brands, Kool and Winston and expanding share of that segment. And in deep discount, Crowns continues to take share, but we've been mindful in balancing price with segment share, given the increased competitive intensity. We have also launched a new brand, Malibu, which is enabling us to take more pricing on other brands. It is another lever for us to balance the volume and value equation.

Our cigar business also continues to perform well with backwards gaining segment share and delivering strong revenue growth. Our other priority markets have been playing the individual roles we ascribed to them in our 2030 strategy. In Germany, the market remains highly attractive with a good performance in cigarettes with growth in both the premium and discount segments. In Spain, which had a low market volume decline of only 2% in half 1, the focus is again on value. The U.K. is maximizing value in combustibles while growing share in vape and modern oral. And the Australian team continues to find opportunities in what, as you all know, is a challenging market.

Now turning to NGP. Since rebuilding our NGP business 5 years ago, we have established clearly focused brands and products. Across all 3 categories, once again, we have grown share. And as we build scale, we are seeing attractive gross margins. Our approach to market entry remains consistent. We will enter markets only where the category has been created and where we have an existing route to market. And our launch into the U.S. O&D market is a good example of this challenger approach.

We launched our Zone brands just over 2 years ago, and we are really pleased with the performance. This is a fast-growing but still nascent category, which is now around 10% of the legal nicotine market. The industry is investing significantly to grow the category and build brands with heightened promotional activity and trialing. This is a normal thing you expect to see market leaders doing in order to create long-term value. But what this means is in the short term, volume will grow well ahead of value.

Within this industry context, we are applying our challenger mentality by being choiceful and agile in our approach. Our focus is on patiently growing volume share by building differentiated brands through consumer activation, for example, through our [Dascer] partnership. In the first half, we delivered volume growth ahead of the category and grew share to 2.8%, up from the same period last year. Net revenue grew by 20%, excluding the impact of the one promotional activity over the year-end that Murray mentioned earlier.

So a positive performance in the U.S. And we are equally excited about the development of our European modern oral business. In Europe, our product portfolio is led by our European variant of Zone and the well-established Skruf brand. In the first half, we launched an improved pouch format and new flavors in Sweden. In Norway, Skruf is now the biggest brand. And as you heard and saw at our full year results in November, we have also launched Zone in the U.K.

Here, we have now reached 3% share in the independent channel, where we focused our initial launch. And we are now rolling it out across national accounts. Now turning to Vapor. In the first half, we saw share growth of 130 basis points across all our footprint. Our investment is focused on Europe, and we are growing share across many of our major markets in the region. In particular, we saw strong growth in the U.K. and France, where our rechargeable blu kits are capturing share.

You will remember, both those markets banned disposable devices last year. In heated tobacco, we are growing share across all our markets. This broad-based success has been underpinned by positive consumer response to our Pulze 3.0 device launched in the second half of last year. Our iSenzia flavored herbal sticks continue to perform well. And we have refreshed our range of tobacco-based sticks to ensure it fully addresses the needs of our target consumer, adult cigarette smokers transitioning into the category.

And I look forward to providing you with further updates at our full year results. So I've covered the strategic priorities, how we are driving sustainable value in combustibles and building scale in NGP. Now I want to turn to the strategic enablers, the key elements of our plan that help us deliver consistent top and bottom line progress, both now and in the future. I believe our distinctive challenger approach to consumer insights, brand building and innovation is a key source of our success.

Many of you will have heard Paola, our Chief Consumer Officer, outline our philosophy at last year's CMD. It is about getting as close as possible to our target consumers, creating differentiated brands, which meet their needs and then innovating in a focused way to address their pain points. Over the past 6 months, we have continued to embed this way of working and is delivering measurable progress. And you can see here on the slide, a selection of our most recent brand activities and their positive impact on our commercial success.

In combustibles, our Davidoff Rose and DFX line extensions are helping to drive share, offering greater choice for premium smokers. Innovation in our iconic backwards brand with the True wraps range is driving share in this emerging high-growth segment. And in modern oral, we have introduced a range of innovations carefully targeted at priority consumer segments.

As I said earlier, we are focused both on self-help activities to drive efficiency and investment in capability -- sorry, and in investment in capabilities to drive revenue growth. In terms of efficiency, on the left, we are well on track to deliver the GBP 320 million of annual savings by the end of this strategic period, a commitment we made at the CMD. In particular, we are making good progress on the rationalization of our factory footprint.

In our Langenhagen factory in Germany, we have now completed the social plan negotiations with colleague representatives, and we are on track to cease production in July 2027. Last week, we announced the sale of our factory in Taiwan. This process will also be completed by next summer. Taken together, these 2 actions, when completed, will reduce overheads by GBP 100 million.

Alongside these actions, we continue to drive manufacturing excellence across our remaining factories, improving quality and delivering further efficiencies of GBP 25 million in fiscal year '26. And at the same time, we are making progress in delivering operational efficiencies with a transfer of around 400 roles to our new strategic partner, Capgemini.

While efficiency is a necessary element of our transformation, the big differentiator for us is the development of new capabilities to support long-term revenue growth, shown here on the right. The Capgemini partnership will accelerate our adoption of technology, simplify our processes and provide new consumer capabilities and in turn, help us capture new commercial opportunities.

The partnership will also support delivery of projects already in flight, such as the continued rollout of our enterprise platforms, including SAP S/4HANA, Salesforce and Blue Yonder. So let me now bring everything together. We have shown how our consistent financial performance continues to drive strong cash generation, GBP 2.6 billion over the past 12 months. And this is underpinning consistent capital returns.

We have shown that we are well placed to deliver our planned step-up in financial performance in the second half, and we remain committed to the guidance we have previously given. Furthermore, we have shown you the rapid progress we have made over the past 6 months in the strategic transformation of our business. This is delivering material efficiencies in the short term and more importantly, will enable more consistent top line growth, helping us become an even stronger challenger business.

We believe this all adds up to an attractive investment proposition, operational delivery translating into revenue growth, profit growth and high single-digit EPS growth, along with strong cash flows. And all this enables highly sustainable capital returns, including our always-on evergreen share buyback. Our shareholders, thank you for your continued support. And thank you all for listening to this presentation. This concludes the presentation. And Murray and myself, we very much look forward to your questions. And I would ask John, please, to moderate and open the Q&A section, please. Thank you.

Thanks, Lukas. [Operator Instructions] Yes, let's start with Saham in the front row.

Two for me. If I look at your guidance historically on EBIT growth, it's been relatively narrow over the last couple of years, whereas this year, despite seeing the last 6, 7 months, you've stuck with the 3% to 5%. I wanted to ask at this stage whether you think the lower half or the upper half of the guidance is likely? Or if you can't be as detailed, maybe talking about some of the moving parts that could see you at the upper end or lower end could be quite helpful.

The second question is on market share. It's a 2-part question. Number one, from an industry volume standpoint, is the situation in terms of volume declines better than where we've been in the past, which allows you to accept slight share losses is the first part of the question. And the second part of the question is, given this increased focus on more profitable segments, is it better to look at value share compared to volume share as a key metric going forward?

Thank you very much, Saham. Let me answer the questions. I hopefully, I don't forget the last one. Let me start with the first one with the guidance. Listen, we have given the first guidance at our Capital Markets Day, which is a 3% to 5% AOP growth over the next 5 years. We've reiterated that guidance at the full year. We have delivered a strong performance at the half year. We have shown you some of the implications that go on top of the normal second half phasing, which is due to pricing increase in the second half, which very nicely showed the over GBP 50 million impact in the first half, which we believe will ease in the second half. And we're well on track to deliver the full year guidance. There's really not much more I can say.

This is our guidance, and we will deliver within that guidance. So that's on the guidance. Market share. So let me separate there also between volume and sort of value share. So indeed, the volumes are doing very well. It's another year where our volumes at half year are only down 1.5%. Obviously, you have different proportions, different mix. You also have heard that we entered new white spaces among them [cerea], which used to be a big cigarette market and is doing very well. So that obviously has an impact.

Again, we don't guide on volume share, and I would always caution that the long-term trend is 3% to 5% negative. Every year, we're doing better. It's great because to get to our target net revenue of 1% to 2%, we need to price less, and that is always helpful for the consumer. So that's good. So that's on the volume.

Our share discussion and your focus on segment is really an evolution. I just want to reiterate how important share is for any company. But share is one of the metrics we look at next to net revenue, operating profit and many other metrics we have. And it's really about this careful triangulation of price, volume and share in an environment where your gross margin has evolved significantly from the top to the bottom. We will play in all segments because we start with the consumer.

Wherever the consumer is, we will be there. But while we double down on the top, we'll also make sure that we are pricing responsibly at the bottom. Now that's what we're looking at is the market share. To your question, it is a good question, is value share the better one? Listen, we've done this now for the last 30 years. Value share has its benefits, has also its downside, the same as volume share.

In our industry, value share is more difficult to calculate. We don't have the means and the data to do that. But any focus on value or volume share will always lead to a narrow view. That's why it is more important for us actually rather than seeing whether we switch to value share to focus on a triangulation of volume, price and share. Sorry for the longer explanation, but I thought it might be useful.

Pallav.

Pallav Mittal from Barclays. Two for me, please. Given the new FDA guidance on enforcement priorities in the U.S. and your plan to exit the blu business, how should we think about your NGP strategy going forward? Specifically in the U.S., do you have any products in the pipeline that you can launch quickly on nicotine pouches or vapor? That's the first one.

And then secondly, on the German market on the tax environment, there seems to be -- the 5-year plan is coming to an end, and there seems to be a plan to increase the taxes significantly. So how should we think about your plans in the German market going forward?

Thank you very much, Pallav. I'll take the NGP point, and then Mary will answer your questions on the German tax environment. Firstly, we remain very pleased with the performance of our NGP business. We are here to build scale in NGP. We have done so over the last 5 years, building a strong base, and we have committed to a double-digit growth for the next few years. And we are on track to deliver on the full year.

Now specifically in the U.S., indeed, you have seen recently new FDA guidance, especially there's been a flurry of new guidance and comments, especially last week. There was one on Friday, which we would not want to comment at this stage because the FDA has committed to further clarification probably today or throughout these days. So we want to wait until the FDA has made further announcements to that. But what is important for us that in general, we welcome scientific-based approaches and approaches that actually allow adult smokers easier access to responsible products.

And in that way, we very much welcome the FDA's effort and generate interest in reducing the backlog and accelerating the process. That is helpful for all players and is welcome, especially for our consumers. Now we are still and remain very excited with the U.S. in terms of O&D. We have mentioned to you that excluding the promotional activity that Murray mentioned, we have grown 40% in volume ahead of our -- of the category growth. We have grown 20%, and we are committed to the second half because we do have grandfathered rights and opportunities in products with stronger strength and new flavors. So we have a pipeline of innovation that will allow us to deliver on the second half and beyond. So very excited with that prospect.

And finally, to comment on our vape blu decision, which is very separate to the FDA announcement. Our blu myblu product is a 10-year-old product. It's an aging product. which probably does not meet the consumer needs of today has been making a very limited contribution to the business and was loss-making. So that's the reason we have transitioned out while we look into what we can do in the future, and we'll keep you informed of that. So that's on the -- sorry, on the NGP and Germany.

So Germany is a market where it's typically got a very predictable tax environment. So every 5 years, the government republishes the tax plan for the next 5 years, which makes it, from our perspective, very well-managed market. You're right, the market is going through or the government is going through negotiation of the next 5-year tax plan. I would say it's a market where there's always very positive engagement with the industry around the evolution of that plan.

So we engaged particularly with the Finance Ministry in Germany. Now you would have seen in the press, there were some suggestions recently of an increase in tax to support people in Germany with some of the rising fuel costs. It's clear that has met some opposition in terms of the initial proposals and is going through discussions just now. Our current view is that's highly unlikely to impact this financial year and any changes may well be folded into the next 5-year tax plan. So we continue to positively engage with the ministry around that, but it's still uncertain because that will end, but our expectation is anything would probably add FY '27 and onwards impact.

Okay. Great. James there?

Could I -- sorry, James Edward Jones from RBC. Could I come back to the market share point, accepting your point that it's actually difficult to calculate value market share. Do you have some idea of value market share trends in the 5 priority markets that you could share with us?

So we do -- so it is more complicated than what you would expect. But obviously, we look at what we can get in terms of data, which we currently are not sharing externally because we were focusing on the volume share. But I would step back, James, from that specific volume versus value share.

But the nature of us looking at share, volume and price, you, to some extent, do exactly that, actually consider the value of your share point. I mean the point I was making before, the reason we are more fine-tuning our approach to market share being present in all 3 segments, but also looking at pricing is because, as I mentioned before, not every bps of volume share is equal. And the way you look at that is through the gross margin and price lens, which is nothing other than an alternative way to look at it from a value share...

James, do you have another one? I thought you said that was the first one of many. No. Sorry, it's so unique for a sell side to ask one single question. I was trying to take it back by that. James, do you want to go next?

This is Andre Andon from Jefferies. Two questions for me, please. Number one, how do you see the A&P needs of the NGP business evolving in H2, particularly given the news about the FDA potentially tolerating the sale of some pouch brands without authorization in the U.S. market, which could increase the competitive intensity kind of near to midterm?

And then secondly, there's been growing discussion about U.S. illicit e vape enforcement improving. Could you perhaps give more color on how significant of a tailwind this has been in U.S. combustibles in H1, so for the combustibles business? And then do you see this tailwind perhaps persisting into H2?

Sorry, Andrea, I missed the first part. What were you looking for in the second half due to the FDA regulation?

The A&P needs of the NGP business in the U.S.

A&P and NGP.

The A&P. Excellent. So as I said before, we welcome in general, all the efforts of the FDA going in the direction of reducing backlog and accelerating the process. Our plans for the second half. And we are very committed in building long-term patiently a business in the U.S. around the O&D. And we're making good progress. You've seen that in the first half. As I mentioned before, we have plans around strengths and flavors that we are going to support. Those meet our consumer needs, and we start with the consumer. We focus on the consumer.

In our budget, we have sufficient A&P considered for what we are needing to do in the second half. And trust me, I mean, you've seen the competitive intensity in the past, which is already very high. And even then with our very focused approach on our consumers, we have been able to continue to expand our share.

The second one is vape and illicit. So yes, we've always commented that the volumes are driven by 4 things in the U.S. which is mainly your secular exit of the category, your cross category exit. So meaning you go from cigarettes to vape or something else, in this case, often illicit vape, pricing and macroeconomic impact. And we've always highlighted that actually the bigger impact when the volumes were about 7%, 8% decrease was the macroeconomic impact and especially the illicit, actually both in the same way.

And you've seen that our volumes have improved, the industry volumes have improved in the U.S., which is great news, which means that we go back to that normality, which some of you doubted we will get back to. And if you look at the data underneath it, the 2 drivers there are equally, again, vape, the illicit vape and the macroeconomic impact, meaning that we see the enforcement, while not perfect, while probably not taking away the illicit has made a dent in the volumes.

It makes a difference. And if you listen to the U.S. government and you see the actions, I have no doubt that, that will continue in the second half. You've also seen -- and I can't tell you what the impact is on the -- of the Middle East crisis in the U.S. consumer sentiment, but you have seen an increased improvement in the consumer sentiment. In fact, it is remarkable to see how strong the U.S. economy is still doing after 3 months of the Middle East crisis. And that trickles down in better volumes as well. We would expect this to continue in the short term.

Okay. Just going to go to online, and then I'll come back into the room. David Roux from Morgan Stanley has just asked 2 questions online. First one is following on from that, at what point does the Middle East conflict impact FY '26 guidance? Probably one for you, Murray. And then the second one is, can you give some more detail about progress towards getting double duty drawback benefit? What still needs to happen to become compliant? How should we think about timing and magnitude?

Do you want to take the Fiscal '26.. I'll talk to.

Yes. Thanks for the question, David. Look, as I said during the presentation, we haven't seen a meaningful impact of the Middle East crisis to date. Clearly, if you look out into the future, we see potential impact across the areas. So one would be input cost. The reality for us during the course of FY '26, we expect minimal impact on input costs given the amount of fixing we've got in some of our supply coming in for the balance of the year. If it goes on long term through FY '27, naturally, we'd expect to see some impact through that.

Second is duty free. There are reduced volumes in duty-free in the Middle East airports. So clearly, there's less people going through that. From a group perspective, that's largely manageable as we look across this year.

The third is, and this is the unknown is the consumer impact. So what we haven't seen so far is a real shift in consumer buying habits. So with higher gas prices at pump in the U.S. and other markets, at some point, that could impact the consumer buying habit, whether they buy less often, whether more move into illicit or whether they buy cheaper products. We haven't seen it so far. That's the unknown for us at this point in time. So I can't give you a date at which suddenly it becomes a problem for us. I haven't seen the impact so far. We monitor it very closely. But at this stage, we are confirming our guidance for the full year.

I think if I may, just before I go to the duty drawback, the Middle East crisis is one of many crisis we are going through again. And I think all of our consumer peers will look at what happens to the consumer sentiment in months to come. Right now, as Mary said, there's no impact, and we are well on track to deliver the fiscal year '26. And I would also draw your attention on the past.

We will continue to be monitoring the situation. We'll surely not be complacent. And we will hopefully be as resilient as in the past. Think about Ukraine, think about the Red Sea crisis, the hyperinflation, we've been tested, and we have shown that this industry and this company is resilient to crisis. And so we'll continue to monitor and react to whatever comes in the future.

Duty drawback. Duty drawback with the clarity we have obtained in August, we are working expeditiously on setting up a duty drawback system, leveraging our global presence. That is not the challenge. The challenge is to get this done in a way that is approved by the FDA. So we need to approve factories or sites abroad for it to be certified to import into the U.S. We're well on track, but it takes time. We expect a meaningful contribution of that scheme in fiscal year '26. most likely towards the second half of -- excuse me, thank you for clarifying. '27. I'm ahead of my time. Fiscal year '27, just to clarify. So most likely in the second half of '27 and then the full impact in fiscal year '28.

Let's go back in the room. Damian, do you have?

Damian McNeela at Deutsche Bank. Two, please. First one on U.S. vape. I think you sort of -- you obviously pulled out and you sort of said you're watching the marketplace. Can you give us some insights into what you're specifically looking for, for perhaps a market reentry into U.S. vape? And then secondly, perhaps category is clearly growing globally, but you're only in 7 markets. Are you looking at actively at which categories?

Pouches.

Are you actively looking at additional markets to roll out [onus ] Grew into, please?

Thank you, Damian. Listen, we are a challenger market challenger market, this one. We are a challenger company. And as such, we will always look where we can use the best -- where we get the best return for our investments. Clearly, when you look at NGP, the O&D business in the U.S. is highly attractive, and we're well on track to continue to expand our presence and our share. And when it comes to vape, -- our biggest markets or regions is Europe, where we have 80% of our business in NGP, and we're growing rapidly.

We expanded vape share by 130% this year -- this half year. So in the U.S., you have one, the PMTA process, which is still a lengthy, costly experience and you still have a big illicit market. So if I have to make choices right now, we are focusing on the O&D markets where we have products, we have innovation in the pipeline that we can excite our consumers. We will continue to look at the vape markets. And at the right time, we'll see what we can do to come back. Pouches. So NGP business is an attractive business, but we are very disciplined in how we look at the NGP business. We will build patient in our business. We have committed to a double-digit growth, but we are not going to trade the market.

And as much as I understand the excitement in many markets about pouches, when you look at data, and remember, we are a consumer first and data-driven company. The data is showing that the markets are very small. And hence, as the fourth largest in the industry and a responsible player also in regards to our shareholders, we will double down on those markets where we have a business or where the market has been created, and we have a route to market.

We shall no effort in Eastern Europe, where we have our heated tobacco. We have launched Zone in the U.K. We might launch it in 1 or 2 other markets, but it will be a very measured launch because what we want is not to be everywhere a little bit, but we want to double down in those markets where there is a market and we have a good understanding of our consumer, and we can reach them easily.

Okay.

Any other questions in the room?

Should we just go -- Emma, just quickly on the line?

[Operator Instructions]

I hand back to you, John.

Thank you. That prompt has reminded Simon at Citi to register. So Simon, do you want to go ahead and ask your question?

Yes. My first question was just around the AAACE region, really. Could you talk a little bit more about the combustibles volume performance in the first half, maybe excluding Australia? How much of a volume benefit did you see from the innovation you put in there as well as the new market launches versus some pipeline fill? And how do we think about the volume outlook in that region in the second half of the year for combustibles specifically?

And then secondly, I may have missed it, but you highlighted sort of Lukas, your remarks around the strong start you made on the transformation journey. You've highlighted the factory closures that are underway. How big though were the efficiency savings in the first half? Should we expect a step-up to those savings rates in the second half of the year? Or is it really about 2027 is the year that we really see those big benefits starting to flow through?

Thank you, Simon. And Mary, will you take the volumes in ACE and our transformation?

Yes. So on ACE, I think, Simon, it's important a couple of different drivers that are really supporting volume for there. So clearly, as you highlight, we've seen drop in volumes in Australia. I think it's important to Australia from a group perspective is a very small amount of volume. I think it's less than 2% of our net revenue sits in Australia. And there's a couple of drivers that are really supporting volume growth.

So one is Africa has a really good strong performance again. So we see good volume performance across that continent. And then the new market launches. So [Seria] will have a meaningful contribution for us a meaningful contribution in the first half and again, we will step up in the second half. So that will help for strong performance within ACE volume as we go into the second half in combustibles. So we don't guide on volumes per se, but I think that trend you see in volume will continue into the second half for those reasons.

Thank you very much. And Simon, thank you very much for asking about the transformation. We are excited about doing 2 things: performing in the short term, but also making sure that we can continue to perform in the long term by transforming our business. And it is equally transforming in the short term and the long term. Short term is we are delivering self-help efficiencies very clearly. I've given you data points like fiscal year '25, '26. I'm mistaken with the years, apologies for that.

Fiscal year '26, we are looking into our factories, how to run them more efficiently, how to apply an operating model that really is consistent with what you see out there. It will deliver GBP 25 million this year and more to come in the following years. We are looking at the factory footprint. We have exited 2 entities, which will cease production by summer ' 27. That will deliver 100 million progressively until we finish those transformations.

So again, we are well on track and quick out of the blocks when it comes to the 320 million efficiency savings that we have committed. There's no doubt about that. But efficiency is important to us because without efficiency, you cannot really be effective. But the distinctive thing in our transformation is we don't just stop at the efficiency. We want to go beyond the efficiencies because we believe with our strategic partnership with Capgemini, efficiency is a given.

But what is really more interesting to us is how we can transform the business to be closer to our consumer, to build on the sales capabilities, tapping into the knowledge and technology that Capgemini has to grow revenue in the future. And I think that combination of short-term self-help efficiency, which will be progressively increasing over the next few years and that better readiness to deliver also beyond 2030 revenue growth is really what is distinctive in this transformation.

Thanks for that, Simon. Okay. I think there's nothing else online or on the phone. So I think I'll bring it to a close. Thanks, everyone, for joining us. Lukas, I'll hand it back to you.

Thank you, very much. Thank you. And I know this is -- we've got lots of presentations. So I really appreciate you showing up and connecting online and showing interest in our company. And I hope you have taken 3 things away from today. One is that we have delivered a good performance in the first half. We have grown our net revenue, our operating profit, and we have delivered yet another 6 months of very strong cash generation. I hope you leave this room and this online presentation with a strong confidence that we are well on track to deliver on the full year guidance. And thirdly, I hope you can see that we are not just performing today. We're making sure that we are transforming for tomorrow. We are delivering self-help efficiencies in a meaningful way, and we are building the future in a way that we can continue to drive sustainable growth in the future. Thank you very much, and I'll keep seeing you soon. Thank you.

Great. Good afternoon, everyone. Before we begin, I'll just need to read a quick disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So my name is David Roux, and I'm on stage today. We've got Lukas Paravicini, Chief Executive Officer; and Murray McGowan, Chief Financial Officer. Thanks for your time, gentlemen.

Before we get into the thick of the questions, Lukas, perhaps I could just ask you for a brief overview of the business for those less familiar with the story.

Sure. Excellent. Thank you very much, David. Thank you very much for hosting us here. And a very warm welcome to all of you.

Let me just summarize very briefly the compelling investment proposition that Imperial Brands is. It basically builds on 3 pillars. It is foremostly a sustainable value generation on our tobacco business. I think we have shown over the last 5 years that we are well capable of generating value out of our tobacco business without losing share.

I think we have a great footprint in terms of our big markets, the U.S., Germany, which do half of our profit, very affordable, very attractive, including Spain, which is our third largest market. And beyond that footprint, we also have Africa, which today represents 10% of our operating profit, growing nicely. So we have a nice portfolio not too exposed to emerging markets, highly affordable, highly attractive in terms of our proposition.

On top of that, as a second pillar, as a second opportunity to generate value, we have our very distinctive way how we want to build an NGP business, a next-generation product or our reduced harm product. And again, we have built a tremendous foundation. Over the last 5 years, we have doubled our business. We have grown double digit over the last 3 years. And we have grown share in all 3 categories, nicotine pouches, vape and heated tobacco. Again, a great foundation for us to go forward where we have committed over the next 5 years to grow double digit in this big category.

And all this is underpinned with our consumer focus, our challenger mentality in terms of getting closer to our consumer, being a more simplified company and being more data led. And if you look back over the last 3, 4 years, we have changed 82% of our top 300 people that are new in position. Half of them come from fast-moving consumer goods. So we have a unique blend of people that understand our business, the tobacco business, but also bring that consumer insight, which is fundamental when you want to build an NGP Category and extract value.

So a very simple tobacco business, NGP, underpinned by consumer centricity and our people that delivers over the next 5 years net revenue growth of 1% to 2% from tobacco, accelerated by our double digit growth in NGP. It will drive 3% to 5% operating profit and a cash that we guide the market around GBP 2 billion to GBP 3 billion every year. And that delivers ultimately what is our major guidance is the high single digit EPS.

That allows us, in turn, to honor our shareholders by a dividend -- a progressive dividend, but foremostly by an evergreen share buyback over the next 5 years. And just to remember, over the last 5 years, we have delivered more than GBP 11 billion back to return to shareholders. That's, in essence, the investment proposition that Imperial has.

So the new team has been in place formally for just over 2 months now. From the outside in, the transition seems to have been managed pretty smoothly over the past year. What has been the biggest surprise for you over the past few months as you've both taken up the roles of CEO and CFO, respectively? And what are you most excited about in terms of the journey from here?

Let me start and then, Murray, you follow up. I think, to be honest, like most investors, me as an ex-CFO and as CEO, I hate surprises. So there was no surprise in the transition. It's also not a surprise because we've been in the business for 4 or 5 years. So we know the business well and the transition has been very smooth, which is very good. I personally, I'm very proud of what the team has achieved over the last 5 years, and I'm excited with the talent we have. I do believe beyond the strategic pillars of tobacco and NGP, the success is that we really understand our consumer more than anybody else and that we have a unique blend of people.

And what we're looking forward going -- what we want to do going forward is really to unleash the potential by integrating people, process, technology and data much better. And I hope you'll see that in the next 24 to 36 months clearly come through.

Yes. So from my perspective, so I joined Imperial over 5 years ago and have been running the strategy and corporate development for the last 5 years until I stepped into the CFO role. So similarly, no surprises, I'm pleased to say. I think I'm really excited. We created the original strategy that we just finished, the first 5 years just finished. Actually, the last 18 months working closely with our entire exec team on defining the new strategy, which we shared with the markets at Capital Markets Day earlier this year. So what am I most excited about? It's about executing our strategy. I think it's delivering the transformation of the business and executing that strategy to deliver that compelling financial case for investors.

And you've touched on that strategy. I mean you've just recently closed out your first strategic cycle from 2021 through to 2025, and you're now on your 2030 strategy. At the highest level, what's different about Imperial over the next 5 years versus the past 5 years in terms of where the growth comes from and also how you run the business?

I think, again, it is what I said before. It is a combination of a confident evolution in the sense that we will continue to generate value in tobacco. There's no rocket science here. It's very simple. It's hugely cash accretive. We'll continue to do that, and we're good at it now. We'll build the NGP business. There's no change there either.

I think what we want to see a step-up, though, is in our capability in the how we do things to get to those enabling to the strategy. And if you would -- if I may sort of highlight 2 things, it's really becoming the leaders in the consumer intimacy in the industry. We know probably more than anybody else our consumers, and we will continue to double down on that. And as I said before, we have a great opportunity to integrate process, people, technology and data and infuse more about artificial intelligence, having more of our people focusing on the consumer. That's probably where I'm most excited.

And remember, in an organization where our margin structure means that every GBP 100, every $100 we sell, $50 goes straight into profit. It's not about efficiency alone. For me, that is a necessity. It's necessary, but not sufficient. So when we talk about the integration of people, process, technology, it's not just because we want to be more efficient, absolutely. But we also want to be much better prepared to capture more of the revenue. That's really where I'm excited about in the future.

Perhaps we can spend a bit of time on the combustibles part of the business and the market. So globally, industry volume declines are still elevated in some markets such as the U.K. and Australia. But you've seen some significant improvements in tobacco volumes over the past 3 years in general from minus 7% in '23 to minus 4% last year to just better than minus 2% this year. And if you look at the H2 dynamics this year, you're running at almost flat on volumes. How should we think about the longer term tobacco volume trends from here? Is the pre-COVID algo of 3% to 4% still the right framework to consider moving forward?

So I think 2 things. One, we don't guide the markets on volume. What is really important in the tobacco industry is actually that you can price ahead of volume decreases. So what you're looking for is the company or Imperial Brands being capable to price. And this is where we are really good because we have a footprint where our top markets are the most affordable markets. So where the hours you need to work for a pack of cigarettes, how you measure affordability is actually quite low. And that allows us to continue to price ahead of volume. So what is really important is this low single digit net revenue that we can do. And I think we can continue to do that over many years.

Now yes, we had good volumes. I mean if you go back, you mentioned it, 7% decrease 4%, now we are minus 2%. It shows also that the environment, the sustainability of tobacco is probably much longer than most of the people think. We have guided the market this notion that tobacco will disappear tomorrow is not realistic. And you see that in that environment. Now, I would be cautious, even though we don't guide on volumes, to take the latest number as the going forward number. I would always go back to the long-term historic trend, which is probably more the reasonable trend to take.

Okay. On a related note to pricing, which you mentioned, which geographies do you see the biggest opportunities to take further pricing? And how do you manage to extract value from the combustibles businesses while also maintaining the company's focus on at least delivering stable market share year-on-year within your top 5 markets?

I think fundamentally, the tobacco value creation model is still intact. So if I look across the vast majority of our markets, we've got that ability to offset volume decline through pricing to deliver the low single digit net revenue growth in combustibles in line with the guidance we provided.

If you look at our top 5 markets, which is where we talk about aggregate share, 3 of those markets remain very highly affordable markets. So U.S., Spain, Germany, your average worker can afford to buy over 4 packs of cigarettes from an hour work, so highly affordable. And so the model absolutely works in those markets. I think it's fair to say that U.K. and Australia are more challenged, primarily due to high excise in those markets, but we've managed them well for value. I think in Australia, they are approaching a plateau in terms of market size. We've certainly seen very accelerated levels of decline recently. And we will see that through the course of FY '26, but we do believe that will hit a plateau after that point.

I think in the U.K., we've made more focused choice. So in the U.K., you've got both a factory made cigarette and a fine cut tobacco market. We've probably focused more on the factory made cigarette segment of markets, which is where the real value is to be created. And then as you look beyond those top 5, we've got a compelling footprint. Africa is a great example where 10% of our annual operating profit comes from African markets. We've got some great markets there that are performing very well from a volume perspective and from a net revenue growth perspective. So exciting for future potential for us.

And then just zooming into the U.S. combustibles market, I mean, we've seen signs of moderate improvements in volume dynamics in recent months. The industry now running at about a 7.5% decline over the last 3 months, by way of example. At the same time, competitiveness within the discount segments continues. And we've seen your share gains naturally moderate as you've extracted more value from that market. How do you see the U.S. combustibles market sort of going forward from here? And what do you think has driven the modest improvements so far this year in the industry? And is it related to the increased enforcement in the illicit vapes market?

Yes. I mean let me start by saying that our U.S. market is a great market. I think we've just grown last year 4.6% net revenue, underpinned by a strong pricing, which shows the model works and also enhanced by a significant growth in our nicotine pouches, which we launched 18 months ago. So a good market.

And the good market is also because the U.S. remains highly affordable, highly attractive. We have a good offering at all price positions. We have Winston at the top, which we hold share. We have Maverick in the middle. We have also mass market cigars, Backwoods, which is an iconic brand, well curated, which grows nicely. And we have a good brand at the deep discount segment. And so yes, you have seen, obviously, after we've been very agile 2, 3 years ago, capturing a market share in that deep discount. Other companies now coming in there, which we expected. And you see more activities, more promotional activities. But don't forget, the deep discount is still a segment that is growing. We have Crown, which is still the fastest moving brand in that deep discount. And so we are comfortable with where the market is going.

You might not see market share gains. But remember, the market share gain for us was more important 5 years ago to show that we were not the biggest owner of market share. To be honest, whether I do minus 1 bps, plus 1 bps, minus 5 bps, doesn't really change the picture. What we're trying to do is invest in our brand so we can grow our net revenue and generate value for shareholders.

In regards to your illicit questions, we do see the past significant step-up in the FDA and in general. The rhetoric was always there. But we also see now action coming, much more enforcement at the ports, et cetera. We've seen some impact. You referred to the volumes coming down. We've always been quite honest saying that we'll probably see more improvement than deterioration, and this is what happened. I would expect more to come. I would be cautious to believe you could get away with this problem because where there is an illicit market, there will always be players. So I think there's a limit to what people can do, but I'm very happy to see that action is now following words than it is showing sort of the results.

And you gave some interesting detail around the African business at your full-year results, with the combustibles business benefiting from almost 4% volume growth and the region contributing 10% operating profit, as you mentioned, Murray. Can you talk us through the biggest markets there and the go-forward expectations for that business? And are you expecting to bring it into your priority markets over time?

Yes. I think, as you said, it's important. Africa is a cluster of markets rather than an individual market. And it has performed very well. So 10% of operating profit for the group comes from the cluster. I think importantly, for African markets, we take the same playbook activities that we apply in our top 5 markets and we apply it to Africa, whether it's the investment into our sales team, whether it be investment into our brands or investment into innovation to better meet consumer needs.

I would say across the portfolio of markets, there can be volatility from 1 year to the next for individual markets. So we look at the cluster as a whole where we see stability and good long-term growth potential. I think to call out a couple of the markets, particularly last year we saw particularly strong growth in Ivory Coast and Burkina Faso, where we've really invested in brand building equity and see that coming through in terms of consumer performance. Really pleased with how the portfolio is developing there.

And then separately, Morocco, we've done a lot of work around really understanding consumer taste profile. We launched Gauloises Rich Gold this year, so going after their consumer taste segment that was always underserved with their existing portfolio and addressing a gap for consumers. So really pleased with the performance in that market. But it's the consistent playbook that we use in those markets. And as a cluster collectively, we are excited about the growth potential.

Perhaps we can just shift the focus now to NGPs. So you delivered another year of double-digit growth in '25 and have guided to double-digit growth again for '26, which is consistent with your mid-term algo. You've had this impressive growth with Zone in the U.S. last year, but the other 2 geographies delivered less than the double-digit algo. Can you walk us through your outlook for the U.S. on modern oral growth next year, particularly as distribution gains slow and peers increasingly bring in, I wouldn't say, better products, but other products? And the -- also, can you talk us through the broader building blocks you see for delivering on that double-digit growth expectation for next year?

So yes, we'll do that. Murray will take you through a bit more on the details. Let me just step back again because this is obviously our second pillar, which we would like to see growing a meaningful business, as you said. It is a big ambition we have. It's underpinned by that double-digit growth. And it's probably good just to remind ourselves that we have a challenger mentality around that. So our strategy around the NGP is quite specific to Imperial. For one, we follow the consumer. Hence, we have an offering in all categories, okay? Because there is a different consumer in the Nordics to the -- who will use nicotine pouches to vape in the U.K. or heated tobacco in Italy, for example. So we will follow the consumer, and we study the consumer intensively to provide innovative products, and we can build brands based on their understanding and needs.

We are also very choiceful. So we are the fourth largest. We are not here to build the category that is done by our competitors. They do that very well. It is also their role and it requires a lot of money. And so we will go into markets when the nicotine -- or the NGP category is established and we have a route to market. That allows us to be much more efficient with our resources and build a meaningful business around our Imperial strategy. That is different, allows us to build a meaningful business, but it's very mindful in the resources we use. Perhaps do you want to give a bit more details on this?

Yes. If you look across our different geographies, so things Lukas alluded to, in Europe, we primarily focus on vapor within Spain, France, U.K. particularly. We've got heated tobacco, which is really Italy, Central and Eastern Europe. And we just launched modern oral into the U.K., and we've got a good established modern oral business in the Nordics, which we're very pleased with the performance of.

If I go away from Europe, if I look into the U.S., clearly Zone is the one we're excited about. We think we've got a differentiated product. We launched just over 18 months ago. We're now in over 100,000 stores in the U.S. We are around 2.8% share in that period, actually 4% within our footprint. So really pleased with the performance of that product and how it's appealing to our target consumers.

And within AAACE, I think the last year, if we look at AAACE, we did pull out vaping from some of our Central and Eastern European markets, given regulatory change. We're excited about the potential of heated tobacco in those markets. So overall, pleased with the building block as we guided at the Capital Markets Day around the growth expectations. It does vary across categories. I think with vaping as a more mature category, we said around 3% growth outlook. Modern oral, we expected around 10%, heated tobacco around 13%. But we think we got a good platform to drive that growth and deliver well in the double-digit growth commitment that we made to the NGP.

So you recently launched modern oral in the U.K. with your Zone brand. What are your expectations for the business there in terms of like the number of outlets you're targeting by the end of the year, expectations for the brand? And what's your overall view of the market that led you to enter there in the first place?

We're very excited. And I think it is a good example of how we apply our strategy. So we've seen that the category is evolving. It is growing. We have decided to go in there because we also have a good route to market. It's obviously a big market for us. And we do that not following any product or any other products, but actually launching our distinctive product, our Zone product, which is more the Nordic pouch. Has innovation in which we call the perfect pouch. It has a different fiber material inside. It is much more smooth in the mouth.

It gets a better mouthfeel. It gets a much better flavor and nicotine release. So it's an innovative, attractive product, which we have now launched. And clearly, we can leverage our route to market. So our expectation is to quite rapidly distribute those products through all the outlets we are present. But I would be also cautious. This is a third category. You have combustible, obviously, and you have vape. Nicotine pouches will grow, but it will be a smaller category than vape. So as much as we are excited, and we'll put a lot of effort behind it and you'll see significant growth over time, I wouldn't expect too much in the first year.

So shifting to the vaping category. I mean it continues to be one that is impacted by regulation asymmetry. Can you walk us through the latest you've seen in the U.S.? I recognize the vaping business there is small, but are you seeing sustained increases in enforcement against illicit products, which you mentioned briefly earlier? And in Europe, what are some of the disposable bans, particularly in the U.K. had in terms of impact to the market and to your business as you've redeveloped your offering there? And more generally, I mean, where do you expect the vaping category to stay for longer term? And do you think that these issues can ultimately be resolved effectively?

Lots of questions in one. You step back. From a regulation perspective, I think as an industry, we're used to seeing regulation. If you go back for decades, as an industry, we face regulation. So I think we are well positioned to adapt to when you see a change. If you look at the U.S. vapor market, we have seen a step-up in terms of activity on the border, and we've seen some step-up in certain states around enforcement against the illicit vape market. And particularly if you look at the example of, I think, Louisiana and Alabama, where we've really gone aggressively after that illicit vape market, you see rates of decline in the combustibles market, which are less severe than you see on average for the market as a whole. So we welcome that enforcement. We look forward to more. But as of yet, on mass, we've not had a significant shift in the impact.

I think if you go to -- you pick up the example of U.K. and France, both introduced disposable bans this year. I'm really pleased with the way the business dealt with that. So we are very focused on the consumers. So we had a really strong disposable product, and we know one of the key things that attracted our consumer was the flavor delivery that we achieved through that. So we developed a rechargeable pod system, rechargeable blue pod system. We've rolled that into France and into the U.K. It's gone very well with consumers that delivers on that consumer need of wanting flavor delivery. And pleasingly for me, I think we're now -- we've grown share in the U.K. and in France through that change. And we're now a double-digit share -- over 10% share in the U.K. and France and in Spain within the vaping category.

I think there is potentially more on the horizon. So we know the European Parliament's in discussions about the European Tobacco Products Directive, so we are waiting to see what comes from that. But likely that any impact from that would be towards the end of our current 5-year plan. But as I say, we're used to managing regulations, so I'm not concerned at this stage.

Okay. And then just the last pillar of NGP, heated tobacco. From a category perspective, how are you thinking about your position going forward? Do you expect to enter any new Markets over the near to medium term? Or are you happy with your current setup and offering?

I mean, listen, the heated tobacco is one of the 3 categories we are in. As I mentioned before, we follow the consumer. There is a consumer base in some of the markets we are. We have recently launched a new product, which is called Pulze 3.0, which has done very well. We have grown significant market in Italy, which is -- we are very happy about. We're in Eastern European countries. And we're very pleased with that footprint and the products we have launched. And clearly, as we have said before, if there is another market evolving, you might see us going into another market as soon as it is there. And we see other potential markets coming there. So like any other category, we will be consumer-centric, we'll innovate on those products and we'll go in those markets as soon as they pop up. Very happy with that evolution.

Then just tying up the discussion on NGPs. How do you define successful scale in NGP? Is it about profit breakeven, category share or mix? And what are the key milestones you want investors to watch between now and 2030? And then perhaps just to lay in another question to that. I mean if we look at the business, how might the portfolio mix of NGPs look different 5 years from now?

Good. So again, quite a few things in one. Firstly, we are hugely excited with the NGP opportunity and our way of doing -- going after that opportunity. I'm not going to repeat what I said. It is -- our ambition is a meaningful business. A meaningful business means it makes profit. There's no meaningful business, in my mind, which loses money in 2030. And so meaningful business means an underpin of double-digit growth and getting out of losses through scale.

What we have guided the market recently is also about the gross margin the industry can do and how we get closer to those -- to these industry margins by those markets or in those markets where we have reached scale and we have given those markets, and we will give more details on that. So we will continue to build that business because we understand the consumer, we can innovate better, we can build brands around that. I would expect the investors to continue to see us growing double-digit, continue our pathway to profitability, especially increasing more markets, getting to the scale where gross margin is close to the industry standard.

And just spending a bit of time on regulation. I mean regulation in both combustibles and NGPs is a moving target. How are you building regulatory and execution flexibility into the plan? And what are the big regulatory scenarios you stress test the 2030 targets against?

Yes. So as I said before, I think we're very used to working in a regulated environment and then regulating evolving over time -- regulation evolving over time. I think as we talked about during our Capital Markets Day, our next generation products business model is designed to be agile and adaptable. And we do spend a lot of time understanding what's potentially on the horizon and then adapting our innovation to be able to adapt to that. I gave the example before of the change from disposables over to rechargeable pod system, which we were very on the front foot about understanding what was coming, able to innovate against that, really understanding consumer needs and delivered well against it. We do have the European Tobacco Products Directive in discussion. Again, I think that will be towards the tail end of this plan. But I think we've done a good job and demonstrated ability to adapt to these changes well in advance so that when they do come along, we can react well and benefit from those changes.

Yes. And then just on -- I mean, moving on from that on to European regulation, I mean, we've seen the proposed tax directive coming out earlier this year. What are your thoughts on proposals from here? What impact do you expect it to have on the industry, including new categories when implemented?

Yes. I think likewise, the European tax directive, I think there's a challenge here that the initial set of proposals now issued later than originally expected. The challenge is you need to have 27 member states all agree on those proposals. And reactions to that first set of proposals is very clear that they're quite far apart in terms of what's to come. We do welcome reasonable taxation structures that support adult cessation from smoking products over time that's fact-based, but does still support choice for adults. We'll wait and see where those proposals land over time. But as I said, I think we're very good at adapting to these things when they come along. In reality, I suspect we won't really see the final outcome implementation of those until probably the tail end of our current 5-year plan.

Just moving on to capital allocation. And also, perhaps just to start with the cost savings program, at your CMD, you laid out the expectations to deliver another around about GBP 330 million in annualized savings by the end of 2030. You mentioned several initiatives there, delivering sort of an agile day-to-day enterprise alongside manufacturing excellence, et cetera. What are the key risks in delivering against the savings program? I mean how can you mitigate any risk of business disruption as you implement the programs? And can you give us some concrete examples of how those changes will alter decision-making on the ground and ultimately show up in the margins or market share?

Yes. Good. So let me just address that. I think it's good that comes under the title of capital allocation because our first commitment is -- our first priority is to invest in our business. As we said -- we said at the CMD in March, we are going to invest GBP 600 million cash into the business to make it a more agile, data-led consumer-centric organization. And I think I mentioned before that it is important that we focus not just on the efficiency, but also on the effectiveness. I'm not going to repeat that, but it is not just an efficiency gain. So the GBP 320 million you mentioned is a necessity, but it's hopefully not the only thing that we get out of that because we will drive more on the revenue side.

It is important that we also understand that in our eyes, we need to perform. That's no doubt. But we also need to transform. It is our opportunity to leave a company behind that is ready to transform -- to build and grow well beyond 2030. This is what we really want to do. And the way we look at it is -- and this goes also a little bit to your question about risk. What we're trying to do is really going from an amalgamation of individual companies that were acquired over the years to a real united challenger organization. We can do that by leapfrogging. If you look at our peers, and not just in the industry of tobacco, they have gone way further. So we don't have to do this over 10 -- 5 or 10 years. We can do this much faster by learning from the best, by using partners that can help us do that and by actually leapfrogging in technology. So what you will see is over the next 2, 3 years, us moving much faster than that because we learn from others, we use others.

And what are we talking here about? So on one side, on the efficiency side, we just announced the necessary difficult decision to abandon or move away from our Langenhagen factory in Germany. It's the largest factory in Europe. It's the most expensive factory in Europe. That is one way of generating efficiency. But we also will run our factory more efficient. In the U.S., for example, our manufacturing excellence program has delivered for the first time. Our conversion costs to actually go down at the 1,000 per stick metric, which means that actually our costs go faster down than the volume goes down, which is great.

But we're also trying to generate more value. So we had launched a program in Italy where we use an agentic sales coach, so an agentic AI sales coach, which allows our salespeople to go to a store and with the algorithm of artificial intelligence to come up with proposals that are much better and allow us to gain more revenue. You imagine if that algorithm is developed properly using artificial intelligence, what the leverage is if we use -- we can apply this to 5 markets, which do 72% of our profit. That's the way you should think around us transforming the business going forward. And as I said, the risk will be limited because we use partners who have done this in the past or we use technology, which is out there in a very defined way.

You've also put in place an evergreen buyback program through 2030 at your CMD and also reiterated a desire to stay at the lower end of your leverage target of 2x to 2.5x. And also, this is while expecting annual free cash flow of GBP 2.2 billion to GBP 3 billion annually over the next 5 years. As you continue to generate cash and leverage is currently at 2x at the low end of your target, do you anticipate capital return slightly in excess of free cash flow generation over time?

Yes. That could be the case. We've committed to return surplus capital to investors. And in line with our strategy, our commitment externally is to deliver 3% to 5% AOP growth each year, which means our EBITDA will grow. So therefore, the higher EBITDA, even maintaining our 2x to 2.5x net debt to EBITDA leverage, we can raise more debt within that. Look, our ultimate commitment is to return surplus capital to shareholders after we've invested in our business. That would include spend on M&A or spend on transformation whilst maintaining our gearing and paying our dividend.

We always retain some sense of a headroom within the business to manage any litigation risk or tax risk we might face. But we've made that clear commitment that we are out of an evergreen share buyback, so each and every year for the next 5 years to create a meaningful level of share buyback. We'll be guiding the specific quantum of that share buyback each and every year.

So just to tie up capital allocation. So overall, how do you balance capital return priorities, buybacks, progressive dividend with the investment you still need to make in NGP technology and capabilities?

Look, I think we've got a really clear and well understood capital allocation policy that's served us very well for the last 5 years, and we recommitted as part of our Capital Markets Day. Our first priority is to invest in our business. And for us, that means we're investing GBP 300 million, GBP 350 million in capital each year. Whilst our strategy is an organic strategy, we will consider other bolt-on acquisitions where we see opportunities to accelerate our growth. So a great example would be the U.S. modern oral business.

Second, we keep a leverage in that 2x to 2.5x net debt to EBITDA range. For us, being at the lower end of that range really underpins our investment grade credit rating, which I think is an important feature of our business and gives us good access to capital.

Third, we've committed to a progressive dividend. So broadly growing each year in line with underlying earnings. And then fourth is returning surplus capital back to our shareholders. As I said, each year, we'll evaluate what the right level is with the Board, but it will be a meaningful amount each and every year. I would say that we haven't committed to a progressive capital -- sorry, share buyback. So each year, we'll confirm it. But it doesn't necessarily mean it'll increase every year.

Great. So we've got a couple of minutes left. I just want to see if there are any questions from the audience. Just hold on for the mic.

Just back to your NGP business you were talking about, I think, at the results, the potential gross margin. Have you got any markets where you are close to that potential? If you can kind of give us, because we obviously see only profitability on an overall group basis for NGPs. I'm just interested in any more color you have on finance.

Yes, we do. And if you were to go back to the material that we have published on the website, if not, John Crosse can give you the details. We have quite detailed plans in terms of which -- and I'm just sort of trying to talk to you and share that with -- there you go. And so we have given a slide where we actually show on one side, the industry benchmark and which markets we are getting to that benchmark in terms of the growth. So you would have the U.K., Spain and Germany and Greece in vape, which are closer to the 50% gross margin. You would have Czech, Italy and Greece when it comes to heated tobacco, which is getting to the 45%. And you would have the Nordics and Austria in the nicotine pouches, which because they are so mature, they are at the 70%. So we do give those data points.

Great. So we're almost out of time, so just final question. So what do you think the market is currently mispricing about Imperial? And then to lead on from that, what are the 1 to 2 things that could most credibly derail your 2030 plan?

I think the market underestimates the way we could continue to generate value. And I think going back to our value proposition, it's a simple model. We generate cash out of our combustible business that will generate our opportunity to return excess capital to shareholders while we build a meaningful NGP business.

I think I take the comfort in the ELT, our executive lead team, having been now in this industry for 4 years. They know the industry. They have been part of the plans we have crafted for the next 5 years. Their strength and their depth, the rigor with which we have done the plans gives us confidence that there is really not much that can derail us other than the crisis that for sure at some stage will come. But we have shown resilience in the past to deliver that as well.

Lukas, Murray, thank you very much for your time.

David, thank you very much. And thank you, everyone. Thank you.

Good morning, and welcome, everyone, in the room and joining online or on the phones. Thanks for joining us for our FY '25 results.

Just a few housekeeping things before we kick off. There are no planned fire alarm tests today. So if the alarm does go off, for those in the room, it's a real one. And you can see the fire exits just behind you marked in green.

And then finally, just wanted to draw your attention to the usual disclaimer in the presentation. We've got for you this morning.

So without further ado, I would like to hand over to Lukas.

Thank you very much, John. And good morning, and a very warm welcome to all of you here in the room, and a very warm welcome to you all who join us online. Today marks another exciting day on the journey of Imperial Brands.

I'm very pleased to share with you another year of strong performance, and I'm very excited about this being my first time in the role of CEO of the group, a true honor and a true privilege, which I don't take lightly.

I'm joined today by Murray McGowan, our newly appointed Chief Financial Officer; and John Crosse, our Head of Investors Relation.

I'll start off by giving you the highlights of fiscal year '25. Murray will then join us and share more about the financial performance and the outlook for '26. I will then come back, talk a bit more about our operational delivery, our transformation and also to reconfirm our strategic ambition that we set out in March this year. At the end of that, we look very much forward to all your questions. And with that, let me get down to business, and let's start the presentation.

What I really would like to do today is highlight 3 things. First, the quality of our performance during this past fiscal year and how this builds on our growing track record of consistent growth. Second, how our evolved strategy is not just a confident evolution, it is also a step change in our capabilities and a commitment to delivering further significant value to our shareholders. And third, our own personal excitement at the opportunities that lie ahead of us.

Since the half year results in May and the announcement of our new roles, Murray and I have been spending a lot of time with our people across our global businesses. This included face-to-face events in all regions attended by more than 600 of our leaders. We've been discussing our recent achievements, our refreshed strategy and how we can make an even bigger impact over the next 5 years.

What's been really energizing is the sheer enthusiasm of our colleagues about where we are going next. And it has reinforced my belief that we have the right plan and the right people to make the step change we highlighted at the CMD in March. We'll come back to those plans later. But first, let's look at our fiscal year '25 dashboard.

Once again, all the key metrics are delivering in line with our commitments. You can see here how consistent operational delivery is underpinning improvements in our key financial measures and in turn, driving shareholder returns. In combustibles, we maintained share in our priority markets while also delivering another year of strong pricing.

In NGP, we recorded a further year of double-digit revenue growth with share growing in all categories. This progress at an operational level has translated into revenue growth of more than 4% and an improvement of more than 9% in earnings per share. This has also been a year of strong cash flow.

All this has supported material increases in our -- in both our underlying dividend and our ongoing share buyback. During fiscal year '26, we further intend to make total capital returns in excess of GBP 2.7 billion. These results add to our consistent track record of growth. You can see here how each year of incremental improvement adds up to a powerful cumulative effect over the past 5 years, a 48 basis points improvement in aggregate market share.

NGP revenue up 73%, EPS up 1/3, and the GBP 10 billion in capital returns. That's equivalent to 2/3 of our market cap when we started our 2021 strategy. So that's what we have delivered.

Even more important is how we have delivered. As you have heard us say many times, the unifying theme behind our success is our challenger approach. These things is about 3 things: getting really close to our consumer, staying focused on the most important drivers of growth and investing to become more agile.

During the CMD, you've heard us talk in more detail about how we brought to life this challenger idea. For example, investing in new consumer capabilities, prioritizing must-win market battles, developing a high-performance culture, investing in technology and harnessing our self-help opportunities. It was these investments, these changes, which helped us turn around our tobacco business and build an NGP business where we now have attractive products across all consumer categories.

At this point, I would also like to take a moment to thank Stefan, Stefan Bomhard, for his leadership in the turnaround of Imperial Brands over the past 5 years. He leaves behind a strong platform for future growth.

Looking ahead, you'll see us continue to play our important distinctive role as a challenger business in this sector. And as we said at the Capital Market Day, our purpose remains unchanged. We're still going to be forging a path to a healthier future for moments of relaxation and pleasure. In this way, we will continue to deliver strong performance for shareholders.

I will now hand over to Murray. And when I come back, I'll take a closer look into our strategic ambition and how we transform our business to actually achieve them.

Murray, over to you.

Thank you, Lukas, and good morning, everyone. As many of you know, I joined Imperial Brands just over 5 years ago, heading up Strategy and Corporate Development. And in that role back in 2021, I led the development of our previous strategy, which we shared in January '21. And more recently, I led the work to develop our evolved strategy that we shared in March of this year at our Capital Markets Day.

Now I am really honored to have the opportunity to step up to be Chief Financial Officer for Imperial Brands, and I absolutely share Lukas's excitement about the opportunities that we have ahead of us. As I pick up the CFO baton from Lukas, I'm pleased to show you another positive year of financial results and a year of strong delivery.

As Lukas said, we've maintained aggregate share in our 5 priority markets, whilst delivering strong pricing. We have again delivered double-digit net revenue growth in NGP and strong operational performance has enabled us to deliver group adjusted operating profit in line with guidance, up by 4.6%. This, together with the GBP 1.25 billion share buyback, enabled us to deliver high single-digit EPS growth that we committed to. Leverage of 2x is in line with the target of being at the lower end of our 2 to 2.5x range. And this has been driven by cash conversion near the upper end of our 90% to 100% range, delivering robust free cash flow of GBP 2.7 billion.

Turning to volume and price mix at the regional and group level. Once again here, we can see the strength of the tobacco value model in action. Our investment in brand equity and improved sales execution enabled strong pricing across our footprint, shown in orange on the chart. Price/mix has more than offset volume declines shown here in gray to deliver tobacco net revenue growth of 3.7%, a similar rate to last year.

Volume declines in Europe and AACE improved relative to historical rates and strong pricing in Europe helped deliver net revenue growth of 4.2% in this region. In the U.S., we saw strong price/mix of 9.9%, more than offsetting volume declines, which were slightly more moderate than the prior year.

Moving on to adjusted operating profit. Tobacco performance has been the main contributor to group adjusted operating profit growth, supported by NGP and Logista. In tobacco, the strong pricing I just described has driven higher profit. As usual, we benefit from the operational gearing as we move down the P&L.

In NGP, losses remained at a similar level to last year as we increased investment in certain parts of our portfolio, for example, Zone in the U.S. We're making good progress towards building a sustainable and profitable NGP business as we continue to build scale.

Overall, tobacco and NGP adjusted operating profit grew 4.9%. At Logista, performance was behind prior years with growth from tobacco price increases offset by performance in the long-distance transport sector. So overall, I am pleased with the 4.6% growth in group adjusted operating profit.

Now as CFO, I will always be transparent about items that we classify as adjustments. Today, we are disclosing 2 charges related to our 2030 strategy. The first is an impairment charge related to our recent announcement that we will cease production at our Langenhagen factory. The second relates to the initial cost of our wider transformation program. These costs are within the guidance we gave at our Capital Markets Day back in March, and the remaining costs related to transformation will be adjusting items in future years.

Strong adjusted operating profit growth, coupled with the share count reduction has driven earnings per share growth of 9.1%. The increase in tax reflects a slightly higher adjusted effective tax rate at 23.3% with higher net finance costs in line with our guidance. There was a small increase in minority interest, reflecting the strong performance in Africa. These impacts are more than offset by the benefit of the reduced share count. During the year, we repurchased just over 5% of our share capital, bringing the total repurchase since we began the share buyback program in 2022 to 15.8%.

Turning to cash and capital allocation. Our operating cash conversion was 97%, enabling strong free cash flow generation of GBP 2.7 billion. This means that over the past 5 years, we generated cumulative cash of GBP 11.6 billion. Now disciplined capital investment remains a key part of how we create value. And let me assure you that I remain committed to our capital allocation framework as I step into the CFO role.

Our first priority is to invest in the business. As a reminder, our approach is primarily organic. We have committed to invest in transformation, but we will also consider bolt-on acquisitions where they support the delivery of our strategy. Second, we maintain a strong and efficient balance sheet. Third, we deliver progressive dividends. And fourth, we're committed to returning surplus capital to our shareholders.

As we announced on the 7th of October, we've increased our FY '26 share buyback to GBP 1.45 billion. As Lukas said, we've now returned over GBP 10 billion to our shareholders since FY '21. This represents 2/3 of our market value when we launched a previous strategy in January 2021. And going forward, we are committed to an evergreen share buyback throughout the next 5-year strategic period.

Our expectations for the coming year are in line with the medium-term guidance that we set out at the Capital Markets Day in March 2025. We will continue to invest to support low single-digit tobacco and double-digit NGP net revenue growth on a constant currency basis. Given the strong momentum in our NGP business, we'll continue to invest to drive growth while balancing our objective to build a sustainable and profitable business.

Group adjusted operating profit is expected to grow in the 3% to 5% range, driven primarily by the continued profit growth of our combustible business. In line with previous years, because of the phasing of combustible pricing and investment, performance will be weighted to the second half. Free cash flow generation is expected to be at least GBP 2.2 billion after investments in our transformation.

The growth in adjusted operating profit, combined with the ongoing share buyback is expected to deliver at least high single-digit EPS growth, even after slightly increased tax, finance and minority interest costs. At current rates, we expect foreign exchange translation to be a 2% to 2.5% tailwind to profit.

As usual, there is a slide in the appendix with guidance on the specific items. Now, I believe the results we are delivering today demonstrate the strong foundation that we have built that will enable us to continue to deliver over the next 5 years and generate value for our shareholders.

Thank you. I'll now hand back to Lukas.

Thank you very much, Murray. And in this part, I'll start off by giving you a bit more details about our operational delivery and how they underpinned our fiscal year '25 performance. I will then turn back to our strategic ambitions, and I'll explain how in our opinion, the distinctive combination of actually consistent in-year delivery and an accelerated transformation add up to a compelling investment proposition.

So let's start with the tobacco business. We have driven pricing successfully and created significant value. This pricing has been achieved while also maintaining stable share in our priority markets. Our portfolio has been performing in line with our strategic objectives. The times where we were the largest owner of market share have gone for good. Our overarching priority is to balance aggregate share, pricing and long-term brand building to generate sustainable value. In any given year, we may make deliberate decisions in individual markets to monetize share gains made in previous years.

The U.S. and Germany, our 2 largest markets, which together account for about half of our revenue and profits. And we have grouped them on the same slide because they share key characteristics. In both markets, we are benefiting from long-term investments in our sales force, which have improved effectiveness and coverage.

In both markets, we are competing successfully at the premium end with iconic brands like Gauloises and Davidoff in Germany and Winston and Kool in the U.S. In both markets, we are also capitalizing well on our consumer down trading into the discount segment. Both markets continue to be highly affordable for consumers, and we see attractive opportunities for the future.

In Germany, we have continued the improving share trajectory of last year after a decade of share declines. Aligned with our strategy in the U.S., we delivered stable share in what is a highly competitive marketplace. Our U.S. business also has a strong mass market cigar franchise, led by our premium Backwoods brand. And this has continued to grow well over the past year.

Turning to the other key markets. In Spain, we took a conscious choice to monetize share gains over the past 4 years. We see this market as continuing to be highly affordable and attractive over the next 5 years and beyond. As we have always said, the U.K. and Australia both face rising excise rates, leading to growing illicit trades. And we expect these trends to continue into fiscal year '26.

Having spent time in both markets recently, I've been impressed by our team's ability to continue to generate value. In Australia, for the first time, we moved into the #1 position in terms of market share. And in the U.K., the team managed our tobacco business skillfully, while also making good progress building a meaningful NGP franchise. And our Africa cluster contains diverse markets from Morocco in the Northwest to Madagascar in the Indian Ocean and accounts for 10% of our operating -- our tobacco adjusted operating profit.

As you would expect, in any emerging markets business, the performance of individual countries can vary. But in aggregate, these markets have been growing strongly and consistently. And we expect it to become an even more material contributor to the group over the next few years.

So let me talk now about NGP. We continue to see share growth across all categories. In modern oral, we are excited by the significant growth we are delivering with Zone in the U.S. We have established a national share of 2.8%, and the product is now available in 100,000 stores. And we are committed to ongoing investment in building this brand.

In the Nordic markets, we are also growing strongly with Skruf. Here, targeted innovation in flavors and the design of our pouches is paying off with a positive response from consumers. Our vape business is performing well. We're focused on Western Europe where vaping is established as a dominant category. Across our footprint, we are growing share. And in the big 3 European markets, the U.K., France and Spain, we now have well-established double-digit positions. I've been particularly pleased to see the agility with which we adapted to regulatory changes.

Our new pod-based blu Kit ranges was rolled out at pace during the year and has already become the big driver of our growth.

In heated tobacco, we have made further progress. Here, we are growing share in our focused footprint. While it is early days, our new Pulze 3.0 device is winning positive feedback from the trade and consumers. So it's been a strong operational performance, which builds on our solid record. I'm proud of what our teams have achieved over the past 5 years. Their success gives us a firm foundation for the next strategic period.

But I want to be clear, absolutely clear, this management team is not resting on its laurels. As we said at the CMD, we know we need to go further, and we need to go faster. And we are confident we have the right plans to deliver continued strong performance for our shareholders. At one level, our strategy is a confident evolution.

As I said earlier, we will continue to follow the challenger approach, which has underpinned our recent success. Our strategy will further drive significant sustainable value in our combustible business and build an NGP business operating at scale. This is a combination, we believe, create material value for shareholders over the next 5 years. These are the twin priorities, which sit on the top of our strategy wheel.

But this is more, more than just an evolution. Delivering these ambitious priorities will require a further step change in our capabilities. And the 3 elements on the bottom half of our wheel, our strategic enablers explain how we will achieve them.

Taking these elements together, the big opportunity is this. We are a business that was stitched together from many acquisitions over several decades. Over the past few years, we have made progress towards building a consumer-centric, simplified and more joined-up business. And we have assembled a fantastic team of people with a unique blend of broad consumer experience and deep knowledge of our consumer, our markets and our industry. But this journey, this journey remains unfinished.

During the next few years, by investing further in our consumer capabilities, our technology and data and by equipping our people with the right skills, we are setting ourselves up for success. We will, at last, complete our long transition from a loose collection of businesses to become a true challenger business, which leads the industry in consumer intimacy. And we will become an agile, data-led and high-performing organization. And at that moment, we will fully unleash the brilliant talent we have brought together.

An important element of this new team is our 1,000 strong global consumer organization. Our investment in people and capabilities has enabled us to continue deepening our insights into the consumers we need to target. This enables us to build more sharply differentiated brands, which create passion among our consumers and drive material commercial outcomes.

A fresh capability we have added over the past year is our new brand building framework. This adds more rigor to how we identify target consumers, build compelling marketing campaigns and ultimately, deliver share and revenue. An early output of this work has been our new "Touch of Blue" campaign for Gauloises in Germany, which is already helping drive an improvement in the share trend. We are applying the same processes to our NGP business. For example, here, you can see some of the work we are doing with our Zone in the U.S. and blu here in the U.K.

Armed with a clearer view of our target consumers and their needs, we are getting more intentional in how we innovate in tobacco and NGP. For example, by mapping the flavors preferred by our Moroccan consumers, we discovered we were missing an important opportunity.

To meet that need, we launched Gauloises Rich Gold, and it's performing well. In vape, the new blu Kit range I mentioned earlier was in response to our consumers expressing a need for more authentic tasting flavors and a differentiated quality design.

In O&D, in close collaboration with consumers, we've revamped the format, creating a new pouch that delivers superior flavor, faster nicotine release and a smoother mouth feel.

And excitingly, as you will have seen in the area outside this morning, today marks the official launch of our nicotine pouch in the U.K. market under the Zone brand.

And the latest iteration of our Pulze heated tobacco device is another example of highly focused innovation.

We know our consumer wants convenient, all-in-one package, which closely replicates the experience of a cigarette. And the early signs are that this is going to be a winning proposition with our consumers.

Over the past 12 months, we made further progress in transforming the other elements of our business to simplify our organization and become more efficient and data enabled.

Our 5-year program to build a new ERP platform is on track, and we recently went live in our first large production site. We've launched a stronger and more integrated business planning process. We continue to drive efficiency through manufacturing excellence.

And in October, we took the difficult but necessary decision to withdraw from Langenhagen factory in Germany.

We're also continuing to drive sales excellence, investing in technology and the skills of our sales teams to become the trade partner of choice. Right now, it would be fair to say we are still playing catch-up with other consumer businesses, which started transformation years earlier. Over the next strategic period, though, we can accelerate our progress by learning from the journeys taken by our peers. We can leapfrog technologies and we skip unnecessary development steps.

I think of the opportunity as being a little bit like those emerging countries, which successfully jumped from coins and banknotes, straight to mobile wallets. At future results presentations, I look forward to providing more detail of our transformation plans and updating you on the progress we make. As we grow and transform our business, we want to do so in a responsible, sustainable way. We continue to invest in consumer insights and scientific research to develop our understanding of how we are contributing to harm reduction.

Our most recent research looked at the behavior of adult smokers with no plans to quit when introduced to blu vapes. It was very encouraging to see that 6 months into the survey, between 1/3 and 40% of participants had either significantly reduced smoking cigarettes or stopped completely. And we are committed to incorporating these kinds of insights into how we market and develop our future product ranges. Also today, we are announcing further reductions in CO2 and waste.

Now let me draw all these trends together. It's been another year of consistent broad-based growth. Strong foundations are in place for the next 5 years, and we have a clear strategy for value creation. Our focused approach to getting close to our consumers and building differentiated brands works well. We now have a stronger, more sustainable combustible business. And in NGP, competitive products across all categories, and we are building scale and margins. But we are never complacent, and we take absolutely nothing for granted. That said, as we look to fiscal year '26, we feel confident that we can continue to deliver sustainable growth.

At the same time, we are excited about the opportunities to further transform this business to deliver a step-up in our capabilities. It's a transformation that will ensure that we can deliver sustainable growth in the years to 2030 and well beyond.

We think that when you stand back, what we are offering is a highly attractive investment proposition, broad-based operational delivery, which translates into growing revenues and profitability with strong cash generation and significant capital returns at what is still a very attractive valuation.

As we always say, if you are invested in us, we thank you for your support. And if you aren't yet a shareholder, well, we think this is a great time for you to take another look at what we are doing and where we are going next.

Thank you very much. And with that, I would like to ask John to open for our Q&A session.

Great. Thank you, Lukas. I think as usual, we'll start with questions in the room first. We've also got questions on the phone for those of you who joined by telephone and also on the webcast as well. [Operator Instructions]

But as I said, let's take the first question from here in the room. Do you want to go at the front? Can you please state your name and your organization as well, please, just for those listening on the webcast.

It's Faham Baig, UBS. First question, I appreciate Imperial has transitioned away from a share donor. And sorry for being pedantic, but the volume share performance in the U.S. and Germany has turned slightly negative in the scanner data.

And the question is, as competitive activity rises in the deep discount segment, how are you thinking about balancing aggregate share stability versus value delivery?

And the second question on Zone in U.S. nicotine pouches. I appreciate that you've been able to keep share relatively stable as the category has become more price competitive. The question is 2 part. Where do you believe if you stand with Zone's product -- Zone's product quality versus that of incoming launches? And would you maybe look to use some of the duty drawback benefits to reinvest into price?

So those are 3 questions. I'll try to answer them in sequence. Please remind me if I forget one. Let's start with market share. Listen, as you pointed out, I think what you have seen over the last 5 years is that we have clearly moved away from being the biggest donor of market share in the industry, if you go back 5 years to where we are today.

I don't think that has happened by accident. That has happened because we have invested in our capabilities. We have built a muscle. And that capability is all around starting with the consumer, starting with the consumer, understanding our consumer better, hence, being able to build more differentiated brands, invest into better innovation, which you have seen over the last years coming to market.

We have invested in our sales force. We have actually extended sales coverage in Germany and the U.S. We have increased significantly productivity by adding technology to that. And I think we have been very agile in also managing our portfolio of brands and portfolio of markets to always achieve a stable market share across our aggregate 5 markets, which is our goal. And the goal is stable market share. That's what is in our model. And I think we have shown that capability, that agility to balance off well market share and pricing or revenue.

And I'm convinced, I'm confident in those same capabilities that going forward, we can still generate very much value out of our combustible business without losing share. Okay? I'm sorry, that was the first one. I thought it was it. There was sort of relief of that question.

Yes, U.S. Zone. Well, we are really excited about U.S. Zone in the U.S. Actually, our growth has actually accelerated in the second half. And you all know there has been quite a bit of aggressiveness, which we would never follow. And so we are pleased. We gained -- we started 18 months ago. We came from nowhere to 2.8% market share. We're in 100,000 stores. And we have a proposition that our consumers really like. We maintained our market share throughout the summer and throughout September, throughout that competitive pricing. This is a growing category, and it is highly competitive.

We always expected more competition to come in. We are confident in our product proposition, and we are confident in building a significant business in the U.S. continuing to grow at our pace on the long term. So that's the second one.

The third one was duty drawback. Listen, now that we have clarity with duty drawback in the U.S., as you know, in summer, there has been some legislation passed through Congress in the U.S. We have very agilely put ourselves to work. And it is not as easy as -- it's not a thing you do overnight. But as a global organization, we are well placed to take opportunity and benefit of that duty drawback scheme.

We do have to certify certain lines and certain factories abroad for U.S. imports. We do hope -- so it's less a question of if, it's more a question of when. We -- I mean, we -- let's be clear. We hope that this year, we still see a little benefit, but we'll for sure ramp it up next year. So that will come. I think that covered everything.

Next question in the room. Damian, you want to take it down the front.

So Damian McNeela from Deutsche Bank. First question, just following on from Faham's question on Zone. I think you indicated you're in about 100,000 stores. Just can you talk about whether -- what your expectations are for further distribution gains behind Zone for the coming year?

And then just in terms of NGP profitability, it was broadly stable in the year just finished. Given the sort of expectations for sort of relaunch of Zone in U.K. and U.S., how should we think about NGP profitability next year?

And then just the last one on the NGP side. European NGP revenues growth slowed in the second half, obviously, because of lapping launches in the first half. But can you sort of indicate what we should expect in the second half, please? Sorry, for FY '26...

'26. Yes. So let me go back. I'll quickly answer the Zone question. I'll also touch on the NGP in '26, and then Murray will answer the question on the profitability.

So listen, we've been in 100,000 stores. There's a bit more to come there. There's some more distribution we can harness. Ultimately, we want a weighted distribution of north of 85%. Well, there's some to be hold there. But I think that's one element of our growth and our confidence.

The other is that we have a proposition that our consumer, which we target very precisely, does enjoy our products. And there is confidence that by continuing to invest behind the brand, we will be able to continue to grow at our pace that product.

In general, when you go back at NGP and the growth you highlighted or asked for in Europe, I just want to step back again and share our excitement of where we are with NGP. Let me just remind you where we are 5 years ago. Many of you in this room would not give us very much credit for NGP. Since we almost doubled the net revenue, we have a proposition in all 3 categories. Over the last 3 years, we have grown double digit in NGP, and we have grown share in all 3 categories.

And we have committed to build or we have an ambition to build a meaningful business over the next 5 years. And we have underpinned that commitment with a double-digit growth.

Now we've pointed out in the CMD that growth will be different depending on regions and categories. We knew that vape is a category which is more mature, which goes through regulatory changes in the years we are in the middle of. And hence, you will see a different growth rate from O&D -- sorry, nicotine pouches and heated tobacco. But if you look at Europe, the point you make, if you look at '25, our modern oral nicotine pouches in Nordics grew very, very well.

Our heated tobacco in Italy grew very well. But yes, vape is in the middle of a transition from a disposable vape to a rechargeable, reusable pod-based system, which obviously has that effect of slowing down growth.

Okay. Sorry, you wanted -- I keep forgetting that there are other questions.

In terms -- profitability -- as we said in the Capital Markets Day, we're really clear that we want to build a sustainable, scaled next-generation products business that generates both profit and cash and contribution to the group.

What we're not looking to do is set an average time line as to when we'll hit that profitability. As we look at our businesses now, we see opportunities to invest to drive growth, whether it be Zone in the U.S. or Zone in the U.K. or other vaping opportunities or heated tobacco in Southern Eastern Europe. What we do believe is those we can see healthy margins, healthy gross margins across our portfolio of next-generation products.

And if you look in the appendices of the presentation today, we share the margins across each of the different platforms. So we believe the right call for us is to invest to grow and to grow towards profitability. But we are confident that by the time we get to the end of the plan, it will be a good contributor to the group overall.

In terms of your specific question about profitability next year, I wouldn't expect a significant shift in terms of level of profitability for next year. But in the grand scheme of our P&L, we think it's a sensible investment from a shareholder perspective.

[Mariah Deshnov] from Barclays here. Just thinking about your agreement with TJP, does that prevent you at all from launching Skruf as a product in the U.S. if there was interest? And also, if there were to be any PMTAs of any new products in 2026, would that have to be done through TJP or how would that work?

So TJP Labs is our partner. We were very agile a few years ago, and that was a good demonstration on how we look at bolt-on acquisitions, how we move agile when it comes to opportunities and where we want to enter new market. And we have a contract manufacturing agreement with them. We bought the products. So the products are ours. They are under in the PMTA.

So the question whether we want to launch a product that is used on the Skruf in the U.S. has nothing to do with TJ Lab. It has to be with the PMTA process that you would have to require a PMTA. And then that is a more complicated undertaking. So TJ Lab is our contract manufacturer, but has nothing to do with the choices we make on products. And there was -- no, that's it. Yes.

We'll take another question in the room. And then we'll go to the phone lines. There's one waiting.

Bastien Agaud from Bank of America. On the next tobacco product directive, experts say that we should have something probably next year calling for potentially normalization at the European level, whether with some restriction on the flavor. So given the opportunity on the potential geographical expansion, whether with restriction on the flavor, is that an opportunity for you? Or how should we think about it given potentially more country where you can open or whether with more restriction on the flavor? And I'm thinking about modern oral particularly.

So I think I remember when I joined this group, the first thing that I learned is that there is regulation and there's a lot of noise around regulation. But I also learned quite quickly that regulation has been with this industry for the last 30, 40 years. And the industry and ourselves have built a muscle to adapt and live with regulation, which we fully understand and support.

So I think that's the first point. We are a company that is accustomed to operate in a regulated market, and we will adapt, and we have adapted well to that like the others in the industry.

I think the EU TPD that you are referring to is a well-established, long process. We have now finally seen the basics or the proposal. As you know, there's lots of differences around the 29 markets or 27. I'm not sure really how many in the European Union, I apologize for that.

But in the conglomerate of all those markets, there's all different kind of opinions. And so it will take at least to your point, we believe it's a good year for this to harmonize to find a solution. But we know the direction and the direction actually helps us also put a framework.

We've always been in favor of some thoughtful regulation that allows adult smoker to get to those products that help them get off smoking, but also prevent you getting to those same products, which we do not market to. So we'll see what comes out. We are confident that we'll continue to operate well in that framework. And as you said, more regulation that is thoughtful will actually help us going forward.

Great. Thanks, Lukas. We go to the phone lines now. Sharon, do you just want to remind people on the phones again how to register?

[Operator Instructions] I will now hand back to you, John.

Thanks. So we do have some questions in the queue. The first one is David from Morgan Stanley.

David [indiscernible] from Morgan Stanley. I just had one question on cash flow looking forward. How should we think about working capital in '26 and outer years? Should we expect an inflow or outflow?

Thanks for the question, David. Working capital, we try to ensure we maintain a tight control on working capital as a group. In terms of guidance going forward, look, we guide on free cash flow as a business. We're very clear the guidance for the business in the meantime in the medium term is from GBP 2.2 billion up to GBP 3 billion by the end of the strategic period. Working capital, we're not expecting any significant shifts plus or minus during that period of time at this stage. So we don't guide on that. I think the focus more on the free cash flow commitment, so at least GBP 2.2 billion next year.

Great. Thanks, David. We do also have one question that's come through online from [John Guy]. John, I think we've answered that. Your question was around the building blocks of driving double-digit growth in NGP next year. I think we covered that early on. John, do drop us an e-mail and get in touch if you feel you need a bit more detail, but I think we've answered that already.

So come back into the room if there's any other questions in the room. No. Okay. There's no other questions online. So with that, I hand it over to you, Lukas, to wrap up.

Thank you very much. It's been a pleasure to have you here. Thanks for your interest. And again, as I said, we are very excited with not just what we have delivered this year, what we have delivered over the last 5 years. Again, also thanks to Stefan, who is not with us today, but has always been instrumental in delivering the last 5 years.

But also very excited about how we continue our confident evolution in delivering against a good tobacco business, sustainable value there, why we build an NGP business at scale and also very excited how we're going to step up our capability built around getting closer to consumers, invest further in technology to underpin our strategic ambitions. Thank you very much, and hope to see you soon again. Thank you.

Good morning, everyone. Thank you for being here. I'm Gaurav Jain, Barclays, Head of Global Tobacco. I'm thrilled to have the management of Imperial Brands here with me, Stefan Bomhard, CEO of Imperial; Lukas Paravicini, CFO of Imperial; and we also have Murray McGowan here. So as you might know, Stefan will retire from Imperial at the end of this month and Lukas will become the CEO from first of October, and Murray will be the CFO of Imperial from the first of October. So first of all, congratulations, Stefan; congratulations, Lukas, for your roles; congratulations, Murray.

Stefan, like before I ask all the questions. You have had a very interesting journey with Imperial over the last 5 years. You started in July 2020 when the stock was at GBP 12, more or less 4x PE, you are leaving a stock which has done exceptionally well since you joined and the multiple has also moved up, but it's still not like at eye-watering levels. So what -- if you think like -- and you had an Analyst Day in March, you laid out the plans for the next 5 years. But what are you -- what are the things which you think are still left which need to be done and Lukas, please feel free to jump in here as what do you think could be the things which you would like to do over the next 5 years?

Sure. I mean, Gaurav, as you said, I think, look, I'm very pleased what we have achieved as a team in the last 5 years. We've deep involved with Lukas and with Murray as well. But I think -- and I think we as a team are pleased that this has been reflected in the share price as a signal of appreciation of shareholders. At the same time, I think there is a great continued opportunity. And I think that is reflected in the next 5-year program that we shared at the Capital Markets Day in March. And I think what is exciting. I think we've come a long way in the last 5 years, but there's still quite some way to go in the years to come. And one of them is clearly self-help opportunities that we clearly see inside the company.

As we, as a management team, that joined in the last 5 years, at the deeper we understand the business, the more opportunity we have to see. The reality also is, I think, on the NGP side or on the reduced harm product side, as you will recall, that has been a complete reset of our strategy. And I think 5 years ago, there were quite some people when we revealed our strategy over the 5 years, quite some that whether we could compete there. And 5 years later now, I think there is a broad recognition that Imperial can clearly play in this space. And as you will know, at the half year, we report that we're growing market share in all 3 categories. But there's still quite some way to go from a low base.

Yes. So I think as I pass the baton over to Lukas at the end of this month and Lukas to Murray, I think the great news, the business has a much stronger foundation versus where it was in 2020. But I think there's still a lot more potential in this business. And as I switch my position over from the CEO to becoming a shareholder, I'm looking forward for the team to continue to drive this business to its full potential.

I don't think building on the track record that Stefan has just mentioned and highlighted, I think the team is very excited not just with the value creation we have done in the past, but because we believe there is an equal opportunity to value creation for the future for our shareholders. So that's really the focus for us going forward. And in that sense, there is probably a combination of evolution and acceleration, evolution in the sense that we will continue to focus on the consumer. I think that was a guiding principle, which is fundamental to drive Imperial more as a fast moving consumers good, a company that is starting and understanding better than nobody else, our consumers.

On that, we can then deliver against our combustible business, which is our core business and where we can extract further value for the benefit of our shareholders. That's one of the big pillars that we'll continue to drive, and we hope we'll continue to share value for -- create value for shareholders. It is our outspoken desire and commitment to continue to build our NGP business to a meaningful business by growing double-digit over the next 5 years.

That is the other pillar that on top of a well-humming combustibles business will hopefully deliver more value for shareholders. And that all culminates in our ongoing commitment to our capital allocation policy, which have worked really well because it allows us to invest in our business, in our future. We're here for the long-term. It helped us to create a very strong balance sheet, which we intend to maintain. But it robustly allows us to return excess capital to shareholders that we have committed again for the next 5 years to a share buyback in terms of the program, and we'll come back on the [ quantum ] every year.

So -- to your point, that's the evolutionary part. I think the acceleration will be more about how we accelerate the self-help, Stefan mentioned. There is an opportunity for us to exploit much more shared services to focus more our organization, what matters. That's the consumer and the capabilities we need to win with the consumer, but everything else Hopefully, we can use more shared services and for us, very important, the adoption of technology, machine learning, artificial intelligence. So you will see there more of an acceleration in transforming our organization, not just to be able to deliver value in the next 5 years, but beyond that as well.

So Lukas, a question for you because you mentioned NGP, you would want to grow it to double-digit. Now one sort of, if I compare Imperial to your peers, then Imperial clearly has a lower share of NGPs right now. So how do you plan to do that? Like do you plan to do more M&A? Or is it going to be more organic growth that you think you will like to do there?

Good question. Clearly, the evolutionary part here is that our strategies and organic, predominantly the organic strategy, as we have always said. But we also said that we will also want to do some bolt-on acquisitions. When it comes to NGP, that's probably the area where we would see those bolt-on M&As to come through. Now our NGP -- our next-generation products or a reduced harm product, that strategy is based on us actually going in the markets where the market has been established.

We are the fourth largest and we're happy to be the fourth largest. That gives us a bit more freedom to act. But when there is a market established, and when we have a route to market, we will go into those markets and deliver with our innovative products, a value for a certain number of consumers that will actually accelerate the growth in that area. That's our strategy. But we'll continue, to your point, to complement that strategy with bolt-on M&A. That's probably the area where you'll see that, but it's always going to be a bolt-on attitude and strategy.

Okay. And to build on Lukas' point, I think -- the reality is the ambition that we outlined at the Capital Markets Day to grow double-digit in net revenue in new gross products tells you it is an ambition, but the reality is if you look back at the last 2 years, we have delivered that. We have grown double-digit. We have gained market share actually in the last year across all 3 categories. So shareholders, I think, can take comfort what was outlined in the Capital Markets Day, isn't an ambition that the company has no track record.

And I think the key drivers, as you asked, Lukas, about yes, M&A, bolt-on M&A is important, but we shouldn't forget the key investment we have made. We've built in the last 5 years, what we call the global consumer organization have made very significant investments in marketing, very significant investments in our market inside teams that allow us to really understand what consumers want and need in this field of reduced harm products.

Sure. So now let's focus on the existing business, and you have always spoken of your 5 key markets. So let's start with the U.S., which is your largest market, 1/3 of the company. And about 80% of your business is cigarettes, about 20% is cigars. We have seen a lot of changes happening in the U.S. cigarette market over time. Volumes have been weak. You have gained share for a long time, but recently, it seems that your share gains have slowed down in the U.S. as your peers are becoming more aggressive in the deep discount space, including the larger companies, Altria and BAT who haven't really gone down the price ladder, so as much as they have gone down recently. So can you just help us understand what is happening and how you are planning to react what those companies are doing?

Absolutely. I think you rightly referred to, we always look at our top 5 markets, which make more than 70% of our operating profit. And the U.S. is the largest of this one with roughly a bit more like a third of our business. And I think what is exciting, the last 4 years, we have delivered a holding share in these top 5 markets while before the current strategy, we'll be the #1 share donor in these 5 markets. And you're absolutely right. If you look at the last 4 years, our U.S. business has gained market share, yes.

Now to be clear, we -- the ambition in the next 5 years is exactly the same to hold our market share in our top 5 markets. And we've always been very transparent in saying we don't think we'll ever gain market share in all fronts, yes? So we still believe that the U.S. will be a meaningful contributor to our success. But we, as a leadership team and Lukas and Murray going forward, we continuously look at where is the right mix to deliver this overall flatness of the market share.

And you're absolutely right, it's become a more competitive field in the U.S. But to be fair, this is a highly competitive industry. And I think what doesn't go away, Imperial has had for a long period of time, a brand portfolio that offer U.S. consumers different brands at different price points in the U.S. market. That has been a competitive advantage as U.S. consumers as incomes have come under pressure, that Imperial has well-established brands at every single price point.

Okay. And recently, there has been a lot of talk around the double drawback, which is benefiting some of your peers. Can you talk about where you are? And maybe for our audience, can you also just briefly help our audience understand what exactly is it? How does it work? And where do you stand on that?

So the -- what we refer to the duty drawback is a federal -- U.S. federal incentive for export. It basically requires companies to export a certain amount and then import it again could not be the same product or you have to have a factory somewhere in the abroad who could produce products and you can then import it. It also requires it to be brand-based, so you have to have a complete brand, you have to export and then import. You can't just do piecemeal. That incentive has been there was quite disputed, it was clarified in the latest Big And Beautiful bill that the administration brought through Congress a couple of weeks ago or a few weeks ago.

And I think with that clarity, we will be looking into this incentive and see whether we can take opportunity. It takes a few months. It's quite complex because you have to, obviously, in our case, certify external factors or factories abroad through the FDA. Currently, we do not use that incentive. But given the clarity of the law today, we will be looking into this going forward.

And then there is this other dynamic which is happening, which is that your largest -- or the largest company in the U.S., they have decided to launch their nicotine pouch product, which still doesn't have a PMTA. Now you are playing in the nicotine pouch market and you have a 2.7% share, which has been now stable for the last few months. So do you see that as a route through which you would also want to go launch maybe another product and gain market share?

Sure. I think what is important here is we're very happy with the offer we have to U.S. consumers in the modern R&D team space with our own brand, which we launched in February 2024. And in 18 months, actually achieved already a 3% share, from 0% to 3%. And as you refer to 1 competitor publicly announcing launching more moist product versus the base brand, we have that product today in the marketplace.

So we have found an avenue and Lukas touched upon our bolt-on M&A strategy is a primary example where we have been able to bring to U.S. consumers a product that we know has a very significant consumer appeal, but we have been able to do this in the way with respecting the process. So we see less of a need to go outside the process even we have an offer that absolutely respect the process, yes? And assume that we will continue to be innovative in this space going forward.

Sure. Now coming to the cigar business, which is about 20% of your business, COVID created some unusual dynamics. Before COVID that business used to grow on a very steady basis, during COVID that business was, I think, growing 20%, 30% at one time just because everybody was at home and receiving government checks and then spending on combustible products. And then for 2 years, there was a decline. So where do you see the cigar businesses now? And do you think it can again be sort of a secular mid-single-digit, high single-digit kind of growth business for you?

Yes. I mean, obviously, we -- so the mass market cigar is a small business for us in the U.S., but a highly attractive and profitable business where we actually own the most iconic brand called Backwoods, which is very much linked to grassroots music, Afro-American grassroots music. So highly sought after, commands a big price premium. So a very good brand, which we're very proud of and runs really well. It is an important business, and we invest a lot of time to make sure we curate that business, then we make sure it grows.

To your point on the volumes, I think there was indeed volume spike through COVID because obviously, it is also used recreationally a lot of this product. It has naturally come down, but to be fair, it is now at the level of a reduction in volume, which is consistent with the long-term trend. So it's not that it is -- has accelerated like in combustible. It's actually the reduction is way less than it is in combustible. So overall, a positive outlook in a business where we have the lead and a very strong brand.

Sure. So now let's -- so that's the U.S. business. We have spoken of the various elements there, cigarettes, cigars, nicotine pouches. Let's now move internationally. So U.S. was 1/3, Germany is about 17% of EBIT, your second largest market, but you were losing market share forever until the last few months. And now market share is stable. The market itself is very attractive. So how do you see yourself now in Germany going forward? Like do we think these market share trends can stay like this accelerate? Or would you look to take pricing to monetize some of these German market share gains?

Sure. Absolutely. I mean, it's exciting to sit because in the past with sitting here talking about our more than 10 years market share losses, as a German national, I always said, we can fix Germany and it's the same must to win battles. But it was a promise, the greatest is the first time we're together here, we say and we fixed Germany's market share. We're not the #1 share donor in Germany any longer.

In the last fiscal year, we stabilized market share. At the half year for this fiscal year, we reported market share gains, and it's probably fair to assume we will report for the full year market share gains in Germany. It logically triggers the question you ask is, oh, can we please continue to build market share? You will know we are a very prudent company. And I think what doesn't change at all is a principle where we've always said we look at the combination of our top 5 markets together and the ambition that our shareholders can count upon is that we will hold share in these top 5 markets.

So I wouldn't sit here and say, "Oh, I can promise in fiscal year '26. There will be continued market share gains." I think what is fair to say, our investments in the quantity of our sales force in Germany, our investments in the quality and capabilities of our sales force from training and technology support, they're there, yes. And at the same time, the investments in the brand equities of our German brands are there, yes?

But at the same time, Germany is not just an attractive market for Imperial, but it's an important market for our competitors. But I think what's fair to say, I don't think under the leadership of Lukas, Murray and the executive leadership team, we will return to the share losses that we would have seen in Germany over the last 10 years. So we feel very good about the German market, but it is a very attractive market for our competitors as well.

Sure. Now coming to your third key market, which is the U.K., which is -- it used to be a much bigger portion of your profit pool, now it is high single digit. The market has been declining volumes mid-teens probably for the last few years after the COVID boost that had happened. Excise taxes have gone up, the fiscal situation is pretty bad. We can see already in the news lines and U.K. every day right now. There is a budget coming next month, where we'll probably all see whoever is living in U.K. another tax hike and cigarettes are always an easy sector to tax. So why shouldn't we expect that something could happen on the tobacco side of things, which could prolong the pain, which we have had in the U.K.

Listen, I think when you run a multinational and you have a portfolio of markets, you will have markets who do better and markets who have different environments. The one good thing is in our top 5 markets, they are highly profitable. They all have done well. And it actually talks to the effort and the strength of the management team that we actually could still extract value out of the U.K. and Australia.

And in Australia, in a very difficult environment as a regulatory point of view. We maintain market share. It is -- U.S., Germany, Spain, our biggest markets are way more affordable. They are driving and thriving, but doesn't mean that we will drop U.K. and Australia, because they are profitable. And they are consumers who want our products, and we can extract further value for our shareholders from that.

U.K. specifically, is very attractive in the sense of that it is obviously possible to do NGP business, which is different in Australia again. And we have just crossed 10% mark share in our NGP, in our vapor business in the U.K. for the first time at half year. So there is an avenue that we can work through. It's not an easy avenue. I'll be honest with you, and it takes a lot of effort and the government does not often help when it increases excise tax.

What happens in the future? I can't tell you, especially when it comes to budgets in government, but we are prepared for whatever comes. To be clear, I think the U.K. government does understand what a Laffer curve is that actually by increasing further the excise tax beyond the inflation, they would reduce their income. And I think that is well understood. So we'll see what happens and then we'll work with whatever comes.

And just sticking with the U.K., so you highlighted it for NGP market. But I've been surprised that you haven't yet launched your nicotine pouch product in U.K. And what I have heard is that since the disposable e-cigarette ban happened a couple of months ago, the nicotine pouch market has really accelerated in the U.K. So can you just help us understand your -- why you haven't launched your product in the U.K?

I think this -- we -- Stefan, myself are really sort of the expression of [ an and ] company, okay? So we want to grow but we also want to be disciplined with shareholder money. So we have a very clear strategy. They want to build a meaningful NGP business. And our strategy is we go in the market where there is a market existing and then we put our money behind that because we now also understand the consumer, we have good product. And we will continue to look at markets where category comes to the size where it makes sense for us.

And so O&D is a good example where, we have a big business in the Nordics doing extremely well. We have an exciting opportunity in the U.S. And we have lots of our internal market managers who would like to launch O&D because everybody talks about O&D. But when you go to the U.K. and you go beyond London and you looked at the fact, O&D is very small still.

And so the question that becomes not if but when we launch that, and when it makes sense for fourth largest to invest money of shareholders to create return on that. So we understand the excitement. We understand the opportunity, but it is also our strategy to be really measured to find the right time to launch in those categories when the market is there. But we will be watching that very closely.

Sure. And now coming again to the disposable e-cigarette ban, which happened in the U.K., and it's spoken off in a few other countries in EU. So your NGP, it's about 75% is e-cigarettes, 25% is nicotine pouches. So how is that impacting your U.K e-cigarette business?

I think you're absolutely right, Gaurav, is that would have happened in the last 12 months since we sat here with you the last time was at certain European markets, primarily U.K. and France implemented a ban on disposables. However, as this was well flagged, we worked very hard with our R&D centers and our partners to actually allow our consumers and potential consumers to give them an offer that would be a pot-based rechargable system. And the point that Lukas mentioned before, what we're very excited about in the last 12 months, we've more than doubled our market share in the vaping segment that is by far the largest NGP category in the U.K.

And with today, our business is completely based on a pot-based offer with consumers. So we're very happy we have not only been able to take our own consumers that we had before the change into our new offer, but also being able to attract competitive users into what we have to offer. And we have seen a very similar picture in our French operation, yes. So I think what I would take away is regulation will continue to change. But I think we've built now the capability to really understand how do we take our consumers with us because the consumer need for a reduced time product is clearly still there.

Sure. Now coming just to Australia, it has been a challenging market. One of your peers this year did guide down on Australia. Now Australia used to be much bigger for you at one time and it is much smaller. It's, I think, about 4% of your EBIT, at one time it was high single digit. So is it still the right top 5 priority market for you? Or is there something in North Africa, Middle East, I'm sure some of those countries are also now the same size as Australia, which should be now a top 5 market.

I mean listen, it is a fact that Australia is the fifth largest market in profit. And so that's a fact we have there. And so there's -- we don't just stop at the end of those 5 markets. There is a whole range of markets which are hugely interesting and are growing. If you look at our Africa portfolio. You have a number of markets which are growing rapidly. And no doubt, at some stage, some of those markets will or might take over Australia. But right now, Australia is profitable. And I think we have shown that we could actually manage Australia within that very difficult environment and extract value.

And so I think it's -- I don't think it's our role just to say, well, it gets tough in Australia, let's put another market up. And so it's easier for us to show. I think you want to see also how we manage markets, which might be more difficult, and we could still extract value. By the way, Australia is managed as a region. We have New Zealand there, which is equally adamant in reducing tobacco, but where we have grown significantly in the NGP business again. So it is also good for Australian market to test how we can launch NGP, hoping that in Australia at some stage, the politicians will understand that harm reduction actually is helpful. But right now, it is the fifth largest market and will continue there.

Okay. Now coming to your financial framework, which is a key part of Imperial Brands, you laid out targets till 2030, mid-single-digit EBIT growth, continued share repurchases. I think you put out a free cash flow number as well, almost GBP 3 billion in 2030. So all of that will equate to almost a high single digit, low double-digit EPS growth, depending on what's the share price at which you repurchase shares and then you also have a cost efficiency program. So is this cost efficiency program on top of this mid-single-digit growth on EBIT or you will reinvest all those cost savings into the business? How should we think about it?

Yes. I think, I probably need to clarify this is not Christmas in September. I think it's fair, we put out a program there, which is really driving the high single-digit EPS. We're really focusing on delivering that value, which is a combination of us delivering an ongoing EBIT growth between 3% to 5%, but then incrementing it significantly with our share buyback commitment. That will drive that high-single-digit EPS.

You're right. We also in parallel communicated that we want to continue to invest in our company to make sure that we are at the forefront of efficiency and effectiveness, as I mentioned in my opening remarks, that will deliver GBP 320 million annualized savings towards the end of those 2030 period. Hopefully, also will create more effectiveness of the organization. But that money -- that saving is embedded in the guidance we have given because we will use it to increase our NGP business to strengthen our capability around brands and consumer insights and to return excess capital to our shareholders.

Sure. And on your leverage framework, you have said you want to be at 2x and every year EBITDA grows, your leverage will keep coming down because ultimately, your total cash returns, they're not exceeding your free cash flow generation. So is there an opportunity to enhance shareholder returns beyond the free cash flow generation of the business?

So our commitment was always that we would return excess capital, not necessarily free cash flow. And I think you've seen this also this year where we have taken the advantage to normalize our dividend payment throughout the year, which actually meant that this year, we're already returning more than the free cash flow. Again, we have committed to an evergreen share buyback for the next 5 years, and we'll come back at the end of every year with the quantum because we will look at what is headwinds, FX, some headroom we need, et cetera. But the underlying notion is return of excess capital, not necessarily free cash flow alone.

Okay. There has been a topic which has often been discussed, which is that U.K. stocks trade at a significant discount to U.S. stocks. Imperial is clearly a U.K. company, the stock is listed in U.K. But -- and there was a time when nobody wanted to buy tobacco stocks, so there was no point in thinking about moving listed from U.K. to U.S. But given the interest which is there now in U.S. tobacco stocks, and the continued lack of interest in U.K. equities, given all the fiscal issues, is there a point of discussion where you might think about moving your listing from U.K. to U.S.?

Okay. Gaurav, I think it's simple. I mean, ultimately, we're here in the U.S. conference. What we have seen in the last 5 years, a lot of interest from U.S. investors in Imperial stock. We have seen a significant increase in this one. So we do believe irrespective where you're listing is, investors are smart to find the right companies that offers them a growth opportunity. And clearly, Imperial has offered that growth opportunity.

So look, it's -- that wouldn't be the plan to change the listing of the company at the same time as a responsible management team is always going to be one of the subjects that you look at. At the same time, you shouldn't forget there are some very specific legal requirements. And we shouldn't forget that unlike some of our competitors, our U.S. market is an important part of the business, but it is about 1/3 of our business, the majority of this company's total sales still reside in Europe and the rest of the world.

Stefan, if I may, I think 1 thing we have seen also is that our ADR program has gone very well. And for those U.S. investors who have some restrictions or preferences, it is a very good program, and it has grown significantly. So that's another complementary mitigating factor that we put in place.

Sure. Now just coming back to your nicotine pouch business, it's about GBP 100 million. And the reason I'm coming back again and again is that it's clearly a business where your peers are seeing a lot of excitement. What are the other markets you could be looking to launch in the next year? Or is it like -- is there a target that you are, let's say, right now in 10 countries, you want to be in 20 countries by next year or something like that.

Gaurav, I think let me take the opportunity because it's kind of a reflection on 5 years. I think, hopefully, what has become clear to shareholders the last 5 years is we start with the consumer. And I do remember presenting Capital Markets Day with Murray 5 years ago and 5 years ago, the moment -- the flavor of the moment was, it's all about heated tobacco.

Today, we experience here is a very strong feeling, it's all about, modern oral nicotine. I think hopefully, what you have a sense that we, as Imperial, we start with the consumer. And it's exciting to see that consumers are very interested in modern oral nicotine. But Lukas talked about it. We are a very disciplined company. We start with the consumer. We look at what is the market size and if there is a critical mass for modern oral nicotine in a specific country, what you hopefully can see and what investors can see, Imperial has a very competitive offer, having reset its entire NGP product portfolio in the last 5 years.

So I know it's a long run, but the principles are very simple. If a market achieves a certain size or model or nicotine, Imperial will have the right offer. That is, I think, the exciting piece. We have offers in all 3 categories. We'll see where in 5 years' time, the excitement will lie, but I think the offer is there from Imperial to compete and our growth from 0% to 3% market share in the U.S. [ behind zone ] is a good example of what we can achieve.

Sure. Well, with that, I'm out of questions, we have a breakout in the next room. Thank you so much, Stefan. Thank you so much, Lukas. And congratulations on a very deserved retirement. And I think shareholders have had a great run with you. And Lukas, I'm hoping we have the same great run with you as well.

Thank you very much.

Thank you, Gaurav.

Thank you.