Welcome to the Imperial Brands 2018 Interim Results Media Call. Today's conference is being recorded. I will now hand the call over to Ms. Alison Cooper, Chief Executive of Imperial Brands. Please go ahead.
Thank you, and good morning. I'm here with our CFO, Oliver Tant, Chief Development Officer, Matthew Phillips, and after a quick overview of the results, we'll take any questions. We've made further good progress against our strategy in the first half with tobacco highlights, including our growth brands, which again outperformed the market with strong growth in volumes, share, and revenue, driven by JPS, West, Winston, and Gauloises. Our specialist brands also performed well, led by Backwoods, Kool, blu, Rizla, and our premium cigar business. These are quality brands delivering quality growth, and together our growth and specialist brands now account for 65% of the group's tobacco net revenue. We also gained share in many of our priority markets, including the U.K., Germany, France, Russia, and Saudi Arabia. Again, this was driven by the excellent performance of our growth brands.
In next generation products, we're significantly stepping up our presence with the international rollout of our vapor brand, myblu, and the ongoing development of our innovation pipeline. myblu is now available in the U.S.A., U.K., France, Russia, and Germany, with more markets to follow. Feedback from consumers and retailers has been very positive, and we'll shortly be adding to the blu franchise with the launch of blu ACE, a new open system product. We'll also be conducting more comprehensive consumer trials of our heated tobacco products in the coming months. The momentum we're building in tobacco and next generation products reflects continued investment in our most important brands and markets and sharp focus on our strategic priorities.
Applying that sharp focus to our assets has identified a number that are less central to our strategy, which we can exit or divest in order to further simplify the business, enhance performance, and allocate capital effectively. Our recent disposal of a portfolio of other tobacco products in the U.S.A. is a small example of this, and we're progressing other opportunities, initially targeting proceeds of up to GBP 2 billion within the next 12 to 24 months. As you will understand, we're not able to make any further comments on these plans today, but when we're able to, we'll update you further. As I said in my opening, we continue to make good strategic progress.
Our financial results have been held back by the carryover of the tough 2017 trading environment, but the environment is improving, and this will support a considerably stronger revenue and profit performance in the second half. Thank you. I will now take any questions.
Thank you. If you would like to ask a question, please press *1 on your telephone keypad. Please ensure that the mute function is switched off to allow your signal to reach our equipment. Again, that's *1 to ask a question. We will now pause for a moment to allow everyone an opportunity to place their question. We'll now take our first question from Mr. Sam Chambers of Bloomberg. Your line is open. Please go ahead.
Morning, everyone.
Morning.
Morning. I was wondering if you could just talk a bit more about this nicotine salt product that you mentioned the release this morning. Are you confident this can halt the slide you've seen in your U.S. e-cigarette business, in the market share, that is?
Okay. Yes. I'll get Matt to comment in a second as well. I think the important context point from a U.S. perspective is the significant e-vapor opportunity in the U.S. market, there's a Nielsen share measure in the market, which isn't reflective of what's really going on in the market as a whole with the vape shop dynamic, also clearly with the online business in e-vapor as well. myblu has made a very good start in the market. We're very pleased with the positive progress. It's only gone in in recent months, but its initial days, and very positive progress and very good consumer feedback. Nic salts will be an addition. Maybe you want to pick up on that, Matt, in terms of how we see that dynamic developing.
Yeah. I'd just reiterate what Alison has said, really. We've got a fantastic new platform that we launched in the U.S. very recently, and I think that platform will do very well on its own. Nicotine salts is an additional enhancement to that platform, really. It does drive great satisfaction in our view from a smoker perspective. I think it will do very well. Yeah, we're excited about it.
Okay, sure. We can obviously look at the market share figures in different ways, if you have different ones to me, that's fair enough.
Yeah.
Juul has obviously been growing very rapidly.
Yeah.
I was just wondering, the success of that product, how much of a concern is that for you, and is it a sign that in NGP, your business is vulnerable to these disruptors from outside traditional tobacco industry?
I don't view it as a concern at all. The reality of the U.S. market is that because of the regulations that the FDA have bought in 2016, they've had a fairly free run at the market. I think there's a lot we can learn from what's been successful. There's a huge amount of stuff that we're looking at, which is quite different to the way Juul have approached things. Ultimately, we're trying to build, and we're looking to build an absolutely fantastic brand that is backed with great innovations, which consistently improve the consumer experience. Then the way that one engages with consumers on an omni-channel basis is really, really important. We think we've got great opportunities in all three areas of that. We're really excited about the U.S. opportunity.
Yeah. I think one final context point maybe with blu is that we've taken a deliberate decision with blu over the last few years to really wait. The blu PLUS+ product is a great product, but we've been waiting really until we had something we thought was really good from a consumer perspective, a really good consumer experience before we really back that, and that's what we're doing now. In reality, the share, albeit only representing a tiny proportion of the market, is not something that has bothered us to this point. Now we're really rolling out myblu. That will clearly also impact the Nielsen share, as well as all the other aspects of the volume drivers that we have in that market.
Maybe just one final context point on the disruption as well, is that Imperial overall globally has roughly 14% of the world market ex-China. Therefore the opportunity we see in the e-vapor space is very much one that's additive for Imperial because we come from quite a small share position in the world, and that would include in the U.S., where we have just under a 9% share. It's a very positive additive opportunity for us rather than something we look at as a concern around disruption. As Matt said, the consumer experience is developing, the innovation pipeline means we're very excited about what we can do in this space.
Just on that 14% figure, Alison, that's of the e-vapor global market?
No, sorry. That's our tobacco share in terms of our global footprint in tobacco.
Okay.
What I'm trying to highlight there is the fact that we've got 86% of smokers that aren't ours currently, and therefore in terms of the additive opportunity for our business, it's significant.
Okay, I see.
Yeah.
Yeah, no, I understand that. Just one more on a slightly different note, following up on the news from yesterday. Your business in the Middle East has obviously faced a lot of disruption with everything that's been going on there. I was just wondering if you could comment on Trump's decision yesterday to pull the U.S. out of the Iran agreement, whether it was something you were concerned about or how it would affect your business in the Middle East.
Yeah, I don't see any significant impact. We have a business in the Middle East, but in terms of the overall group, it's not that significant. Our most significant market is Saudi Arabia, where we've been performing very well in that market, albeit there's been a number of excise increases there that we've been managing with our portfolio, delivered a very good result in Saudi. I wouldn't see, therefore, for our overall Middle East business, it being, given our footprint and given the relevance to Imperial, it's insignificant.
Okay. Thank you.
Thank you. Again, as a reminder, it's star one on your cellphone keypad to ask a question. There are no further questions at this time.
Well, thank you for joining us this morning, looking forward to the rest of the day in terms of discussing what has been a very good set of results for Imperial, with the progress in both tobacco and next generation products. Have a good day.
Thank you, ladies and gentlemen. That concludes today's call. You may now disconnect.