Imperial Brands PLC (IMB) Earnings Call Transcript & Summary

Good morning, everybody. My name is Gerry Gallagher. I'm one of the consumer team here at Deutsche Bank on the consumer staple side. It's my very great pleasure to introduce you today to the senior management team of Imperial Brands. On my immediate left is Stefan Bomhard, CEO; and on my right is Lukas Paravicini, CFO. We're going to conduct this as a fireside chat format with me asking a series of questions. I'll see if there's anything from the floor. But before we go into the Q&A, Stefan would like to introduce the business with a few words. Stefan?

I mean, Gerry, It's a great opportunity to finally meet in person again, yes, recognize this is the first time of a face-to-face opportunity to speak with you and the with investors as part of the Deutsche Bank conference. But it's also a great time, I guess, we're virtually at the end of -- getting close to the end of our 2-year strengthening period of our 5-year strategic plan. So it's a perfect time to talk about it. And some investors asked us this morning already how do you feel where you are. And I think the exciting thing for us, I'm super happy where we are. I guess, 2 years in or 1.5 years into the strategy, you now can see the strategy start to make a meaningful difference to the performance of Imperial and the transformation of Imperial really, truly being underway. And there are a couple of points I would point out. Number one, we clearly are well on track to fix the performance of our top tobacco markets. Yes, at the half year results that we just very recently published, we're reporting share gains in aggregate for our top 5 markets, which is a very meaningful departure from being the #1 share owner in these markets. At the same time, we're also seeing with the test markets on heated tobacco and the test market of vaping in the U.S. completing successfully, and I think we also know getting across to the public our commitment to NGP, but in a very different way to the past, reflecting our challenger status as the smallest tobacco company in this field, yes. And far less visible to you, a culture change at Imperial. That is a key enabler for our long-term success in our industry is well underway. And finally, that's locally more visible to you, the cash generation, that is a key element of investing in our sector is now constantly delivering, having allowed us to deleverage the company very meaningfully since we started the new strategy that shows our commitment to achieving the right levels of capital returns to our shares. So I stop here, but really happy where we are as part of our 5-year strategic plan.

Well, that was either a very good start or a very bad start. It's very good because you've answered my first 4 questions or very bad because you've answered my first 4 questions. But anyway, let's see how we go from here. So I just want to pick up on this strengthening phase, 2-year strengthening phase, you're 18 months in plus, you're then going to -- sorry, you're then going to go into the acceleration phase. Could you just talk to us what that means on the ground and perhaps from a share -- well, from a more visible perspective to a shareholder at least, what it means in terms of growth and earnings and cash flow for the business?

I think, Gerry, the biggest visible difference is we committed as part of the strengthening phase to deliver a CAGR in that strengthening period of time for our adjusted operating profit of mid-single-digit growth, which is something that Imperial hasn't achieved in the past, yes? And given how well we've gone through our strengthening phase, I feel very confident when you look at the aggregate of the next 3 years that we will achieve that mid-single-digit adjusted operating profit growth. So the benefit for shareholders is going to come through, yes? At the same time, as you talked about capital returns and kind of capital allocation, it's also very clear we're strengthening the business now in a way that allows us to achieve the capital returns that I think make tobacco overall attractive and should make Imperial very attractive, yes? So I think what shareholders will see as we complete the strengthening phase, some good delivery at the bottom line of the business. But at the same time, that bottom line growth and the other actions we've put into place, we will drive a very attractive capital return for our shareholders.

Just picking up on that last point, I'll put you slightly on the spot or Lukas slightly on the spot. Could you give us any more color on where the buyback question kicks in? Not the buyback question, the buyback itself. The question has kicked in already but...

I think, yes, you pointed that properly out that expectation is out there in the market. And I think you should see that always in the conjunction of our capital framework, capital allocation framework, which was launched together with our strategy, and it's an integral part. This is very important. It's an integral part of our strategy. And we look at it as one of the key value drivers. And out of that capital allocation, we have 4 pillars, which is really important to us that we look at them in conjunction. It is, firstly, to make sure that we have sustainable business growth and we invest behind that. And that's what we just said we did in the last 2 years. We also want to make sure that we have a strong balance sheet, and that is important for us so that we can then, in a sustainable and meaningful way, return surplus capital. And we do that through a progressive dividend, which is growing 1% this year and is really considering our underlying business performance, which is important, but also, this is key, is to come to the share buyback that you alluded to. And we are close to that lower end of the leverage that we have pointed out. That leverage is 2 to 2.5x net debt to EBITDA. We had 2.2x last year, had a strong first half. Cash is coming in strongly, so we're not far away from that. And in that sense, we are almost there to complete that capital framework and launch a meaningful and systematic share buyback.

Okay. Thank you for that answer. I've ended up asking my last question second, and I'll now come back to try and answer my questions in the order I have them, which did have some semblance of rationality to it, believe me. So the second question now, the third I just want to come back on looking at big picture strategic stuff. You've talked about the culture of Imperial and you mentioned it at the half year results and wanting to change the culture. This is very difficult from us from the outside to factor in. It's difficult for us to understand. But at the same time, we know it's unbelievably important. So could you talk to us about why you think you needed to change the culture from what to what? And just help us put a little bit more color on what you're doing and what the end game is there?

Sure. And Gerry is right. I think it's one of the more difficult subjects to talk about because there are no numbers or much less numbers than this. But I tell you my experience when it came into the business. And we have an incredible lot of hardworking people inside this government. I want to be very clear, an incredible knowledge about the business and industry. But when I did my initial round with our employees, but also with our [indiscernible] itself, what was striking that our people and our partners all said, "Somewhere, we haven't gotten the culture to win," yes. And I think the reality was we are the smallest company. There are some natural things, a role we should play. We should be the most agile in the industry. We should be the challenge in our industry. That's typically what falls to the smaller players. And that is not the behavior we actually had at this point in time. And people pointed out, we were thinking too much in silos. We were too slow to react, and we were too inward-looking. So now if you ask me what progress have we made? I think number one, our people have embraced that culture change in a way that has amazing , which I think the organization was ready for change, yes? And what is the signals of it? And we've been very deliberate about asking and talking with our people, what do you think needs changing. So we were very deliberate of taking our time to change the purpose and the vision of the company, consulting with lots of people internally and people externally. And I think what is exciting now in the cultural change, I think just that was for me personally one big thing missing, we're a consumer to its company. And I'm sure we'll talk about NGP down the road. We're building new brands, yes. And they have completely new consumer behaviors. And you can only be successful if you really understand what consumers want. And Imperial has been a very successful company in the past, yes. But probably it wasn't terribly consumer-centric, but the industry has changed, and our context has changed and our role in the industry has changed. So the biggest change, I would have said very firstly, when I ended the discussion was all about the numbers. And the consumer was always an after sort. Now interestingly, many of our discussions are now start with the consumer, what would the consumers think about this innovation? Why -- what consumers are we tracking to our brands, yes? So that's a very visible change. I'll give you another example. Virtually in every single Board meeting we have with our Board of Directors, we actually meet with consumers. We haven't had before, we went to some offices where I said, this is the first time the consumers entered our offices since we remember, yes. That's one very visible signal I will give you, yes. And now people love it because, ultimately, they recognize it's the consumer who pays our salary, it's the consumer who actually will give us the right insight how we can win in the marketplace being the smallest player. So hopefully, that gives you some color.

So if I was to characterize that another way, it's not just the what, i.e., the number at the bottom of the P&L., it's the how because the what is a number, but the how is the value, the multiple and maybe you can achieve the same number or even a slightly lower number, but the value attached to it is more, and therefore, the rating of the stock is higher.

Correct. Okay. I fully agree. Okay. And I think on the only point I would have is what is all about the number in the next 12 months. Why I feel so excited in saying 2 years into the strategy, with the progress we've made on the culture? I really feel this is sustainable because we will have missteps as any company will have a misstep. But I believe our ability to pick up ourselves because of the changing culture of the company, I weight that so much higher versus what it would have been 3 years ago.

So that raises another question. I've been in and around Imperial brand since it span out of Hanson in 1996, October 1, I think I'm right in saying. And maybe one of the things that's changed under your stewardship is a recognition of where the business is, what its competitors are capable of, the competitors' relative size, et cetera, et cetera. And therefore, you've laid out a strategy, a part of the strategy is focusing on your 5 main markets, which, what it's worth, I agree with. Turning that around the other way, the risk is we're concentrating on 5 markets. So could you talk about the geographic risk and the product risk within those markets as the world is changing and how you think about that?

Sure. I made one comment upfront because you touched upon it. I love that we have one unfair advantage, yes. And the unfair advantage of coming from outsiders and this all makes it so much easier to challenge the status quo. It's so much harder to challenge the status quo when you come from within. And the second unfair advantage was I have worked for challenger companies before. I've worked for Bacardi, I've worked for Burger King. So I've known what successful challenger companies look at, yes. Now to your question about the focus on the top 5 markets, I think, a, it's a reflection of a challenger company and a smaller company will have a smaller footprint. Now reality is I'm super happy with the footprint we have. And you know this industry well. If I could pick the markets where you want to be overexposed to have U.S. and Germany on that list, and they are market #1 and market #2 for us, they are super attractive markets, yes. So yes, you have more of a profit concentration in Imperial, but I think it's an attractive profit concentration. The other thing, so Lukas, and me and the management team, I think it's inherently an advantage of a challenger company can focus on fewer markets. We could put our hands around 5. They represent 70% of our profits. That's an inherent advantage. That makes us more agile. We need to take the decisions. If these would be markets that I would be concerned about in a big way, that would be disadvantaged. But if you look at these 5, these are combined attractive portfolio. I also want to be very clear and as we're at the early stages of our strategy, we shouldn't forget one of our strategic pillars is also to accelerate the growth in the remainder of our markets. Now logically, given our share performance in our top 5 markets before we start the strategy, a lot of focus and a lot of communication has come on these top 5. We shouldn't forget we're increasingly spending time on our other market as well.

Okay. Before I move perhaps on to other markets. Could you talk a little bit about Germany and Spain, where you've been losing a little bit of share and talk about those 2 markets?

Sure. Very happy. Interesting, I would -- when you look at the recent performance of Germany and Spain, it's different, yes. Germany, when we laid out a strategy 5 years ago -- 2 years ago, we clearly said probably the hardest market to turn our share performance around working Germany. This is the market where we lost the market share the longest, yes. And when we pretty reduced our marketing investments in the most aggressive ways before and it's still a very open market, where market investments still plays a very important role. So it was very clear that turning around market share performance in Germany will probably take longer than any of these, and that's the reality of that, yes. So I'm not surprised where we are there. I think Spain is different, and it's a good opportunity to explain it. We shouldn't forget last year, we gained share in Spain by our rejuvenation and focus on our local brands, brands like Nobel and Ducados and Fortuna. At the beginning of this year, we increased prices, yes, and that was a very deliberate decision that reality in Spain, pricing has been very nonexistent for a long period of time, which reality has decreased the attractiveness of the Spanish market. And when the opportunity presented itself to increase price in the Spanish market, we did that. And we very deliberately took into account our short-term market share loss for a longer-term gain of the attractiveness of the market. So it was a very deliberate choice.

Okay. Can we just follow on from that point on concentration and look at it from a regulatory lens. We've got the debate around mental in the U.S., and we're now hearing that minimally addictive nicotine levels in cigarettes is coming to the fore again. And we've had the change or the proposed -- the paper proposing a lift in the U.K. age to purchase similar to New Zealand. Could you talk about how you see the regulatory environment in your key markets as it stands today?

Sure. When I came into the industry, I've worked in a regulated industry in the alcohol industry before. It's very clear. This is an industry where regulators will continuously change the environment, yes. And what I've seen in my 2 years hasn't been a surprise to me. It's clearly an industry where the ability to operate will be more reduced over time, yes. If I then look at here again, the benefit of focusing on 5 comes through here as well. And if you asked about the U.S., reality is I actually very much appreciate the FDA framework in the U.S. because there are very clear rules about it, yes. There is a clear involve not the industry in the regulation, and there is also a leading process involved, yes. So reality is I feel there is a framework that is well understood by all parties involved, that allows a certain level of predictability about the ultimate outcome. And as you well know very well, it is a multiyear process to allow all the stakeholders to actually have their point of view. So I actually applaud what the U.S. has put into place, yes. And this is our largest market. Therefore, I think it bodes well to have a highly regulated environment with some very clear rules, yes. You asked me about the U.K. We've -- here again, what I do appreciate in the U.K. process specifically, it's one of the governments that has clearly embraced the drive of the need of the regulator supporting the industry and society on its move towards NGP. So to see in this report, again, a focus on vaping as an avenue for reducing harm, we really appreciate that. Now on the rest of the proposals, look, there is quite a number of different proposals from age restrictions, excise increases, retailer regulation, let us see as the government now engages with this and allows us as an industry to engage in what will be the final outcome. But it's a process we're very familiar with.

Okay, which brings me on to a couple of questions around pricing. The first one is you're the #4 player globally. The industry is transitioning from combustibles to reduced-risk products. And historically, the industry has been very disciplined around price increases. To what extent do you need the industry to remain disciplined on price increases? And what are you seeing in the market?

Yes. I mean, Gerry, very difficult. I mean, this is a highly competitive industry. So difficult to comment on pricing in a public forum. Reality is, I think, the observation, all I can do is observe history. This is a highly concentrated industry with a high level of pricing discipline of all the players. So all I can say, past behaviors would suggest certain behaviors in the future. But again, that is down to the other industry players. We are one of the industry players or I can observe when I joined this industry, that was one of the things I looked at, and I found that fascinating the level of rigor and pricing discipline that exists in this industry. But I want to be very clear, having had the benefit of working across different consumer goods sectors, I have not seen a sector as competitive as ours.

That's an interesting comment in itself. I happen to think the industry will remain disciplined on pricing, but time will tell. But one of the ways I could be wrong on that is that the multiple decades, the industry has had positive pricing that has been probably supported over the last decade post the financial crisis around the fact there was no inflation in the world to speak of. Tobacco is a unique category, was able to leverage pricing when everybody else didn't need to. That has now changed possibly for the medium term in terms of inflation. The drawdown on disposable incomes for the consumer is going to become much wider than it has historically. Where do you think the industry pricing goes in that background?

As I said, I won't speculate what pricing the industry will do. All I can give you, Gerry, is reality is, again, if you're consumer-centric, you have to look at pricing as a lens of consumers. And I think reality is, unfortunately, our consumers, all consumers will have to make some hard choices in the next 12 months and potentially longer. The reality is, if you are a smoker, our category is a very important part of your portfolio of products you purchase. And the reality is consumers -- smokers have taken price increases in our industry for a long period of time, while in many other categories, they didn't. So the way I would look at it is from through the eyes of a consumer. And the reality, I think they will make trade-off decisions between buying our -- buying into our category than other categories. The reality is the relatively pricing of our category might actually be more attractive than it would have been in a long period of time because many other categories saw 0% to 1% or 2% inflation than I've seen 7%, 8%, 9%.

Okay. I want to touch on our Next Generation Products, and I'm going to quote from your H1 results where you said successful NGP trials underperformed further rollouts. Now if I think about the history of Imperial, and this is not under your stewardship, so let's just make that clear, but the history of Imperial is littered with comments like that, that haven't really come through. Why is it going to be different this time?

It's different because this comment was made after we've completed very long tests and test markets, not in just one, but several markets for our proposition. That's different. You will find us making these statements only when we have in-market consumer data that validates for Lukas and me and the management team, the consumers appreciate our products, appreciate our marketing and are prepared to pay the price that we're charging them. That's the difference. And therefore, to a certain extent, let me make this comment, I remember when we roll out our strategy, we've got some critical comments about are you really committed to NGP? We're absolutely committed. And the great news is with these half year results, we can give investors and regulators much more visibility about our level of commitment. And what's different is we will qualify with consumers our propositions. And the reality is, given the rate of growth in NGP, yes, we have set time. The exciting piece for me is that if you look across the world, it isn't the perfect solution of NGP outset. So we have time on our side. Now we're not sitting on our hands, but an important piece was we will now qualify our propositions, the products, the marketing mix, the pricing before we actually roll it out in a major way. That's the difference.

And Stefan, I think it is also -- the framework is quite different today, and this is different in the sense that when we have that consumer proposition, test it with the consumer, we will only go to a market in a very disciplined way aligned to our ambition, which means that you will see us in markets where there is an established market in heated tobacco, for example, around 10%, where we have a route to market, which allows us to capture an interesting share of that market, aligned to our ambition and aligned to our capability. And therefore, this is a very disciplined, but yet meaningful rollout of that NGP business, which is very different from the past [indiscernible].

Okay. Today is about -- or the session is about you, not about other people, but you're in an industry with other people in it, and what they do can have an impact on what happens on what you do. So Philip Morris is slated to acquire Swedish Match, which is a transaction I think most people would agree will probably happen. How do you see that transaction impacting your business, particularly in the U.S. but maybe elsewhere with Swedish Match's products into Philip Morris' global distribution channels to the U.S.?

I mean, as you said, the transaction, many people think will go through. We probably join that list, but it hasn't gone through. So it's difficult for me to comment and speculate on what is the likely impact of this acquisition. What I can offer you, Gerry, in simple terms, we've competed with Swedish Match across the world in the last couple of years. And the reality is we compete -- where do we compete with Swedish Match? Whoever is the owner of these assets, yes, reality, we compete in the U.S. in mass market cigars. I think without -- I think those all credit goes to the team, we would become from being the #4 player in mass market cigars become the #2 player in mass market cigars and is a key element of our strategy, especially the investments behind our brand. So I think we feel quite good with the portfolio and the plans we have to compete with a potential new owner of the Swedish Match assets in mass market cigars, yes. On oral nicotine, you will know very well. In the U.S., we do not compete, yes. We believe, for us, the vaping market is a bigger opportunity at this point in time. And we do compete with Swedish Match in oral nicotine in the Nordics, where I think we have happily a good portfolio, have had good market share development. So what we -- the way we actually look at it is, a, I think, 2 years ago, in our Capital Markets Day, we said if you're consumer-centric, you can only come to one conclusion, NGP, that if you look across the world, consumers are making different choices what is their preferred auction of NGP. They're part of the world where it's heated tobacco, is part of the world who likes vaping, and that's part of the world where it's oral nicotine. So in my humble opinion, when I look at it, you see the market-leading company embracing the same point of view, making some significant investment to giving themself a much bigger presence in one of the other NGP categories.

Okay. I just want to touch on mass market cigars. In the U.S., I suspect you make more money out of it than we perhaps realize from the outside, but I'm not expecting you to comment on that. But could you comment on how a proposed flavor ban would impact that business?

I think it's -- it impacts us in the same way other flavor bans have impacted us. I think reality is from our consumer research and have spent a lot of time with our mass market cigar consumers in the U.S. It's very clear. You have consumers who today prefer flavor. But reality is they prefer the brand first. So I think it's fair to say our assessment would be, should the U.S. regulator outlaw flavors in mass market cigars, we do believe and the data would suggest that the majority of these consumers would just switch to nonflavored products. And I think we have a very strong product portfolio in non-flavored variants on our brands, whether that's [indiscernible] or Dutch. So we do believe the majority of the consumers will switch to the rest of our portfolio.

And it's a zero-sum game for the industry, everybody is in the same position.

Exactly. Yes, yes.

Okay. An area of the business historically used to get a lot of focus a few years ago, but less so for a number of years, but maybe should get a bit more focus now if the world is heading in a macro direction, a lot of people think it is, is your fine cut business. Could you talk a little bit about how fine cut sits in the portfolio, perhaps how it could be leveraged in the U.S. or not because of excise, all that sort of stuff?

Okay. Yes. I think we are a consumer-centric business. And therefore, we will always look at what the consumer wants. And therefore, where there is an interest, you will probably see us act in that, and you see that in Europe quite well, where that is an integral part of our offering. And for some consumers, especially those who will look at different price points, it is an interesting proposition. In the U.S., to your point, historically, the consumer had a clear preference to cigarettes. And therefore, we have done a lot of actions behind our cigarettes portfolio in the recent past, starting from having more salespeople to promote our brand, but also investing behind Winston and Kool, our more segment and the same thing in our less-premium, even deep discount. While we don't promote that segment, it is there because the consumer wants it and therefore, we have an offering for that. So we see, currently, the cigarettes market was a lot of opportunity for us in the U.S., and so we will focus on that because that's where the consumer is today.

Okay. All right. I've got a number of other questions, but before I move on, is there any -- anybody got a question from the floor? Okay. I'll carry on. Can you talk a little bit about the dividend? The interim dividend rose very slightly 1%, where we'll work out where the year-end dividend comes when you guys announce it. Or we don't work it out, we've been told. You talked about a progressive dividend policy. Now progressive can mean various things. Is that an absolute rise? Is that -- I wouldn't suggest you should match 8% inflation. But [Audio Gap]

[Audio Gap] the dividend progression to the underlying business performance. And that is really the key essence of this progression. It is linking it to an underlying performance. And so you will see a progression as we will go forward in accelerating our business, but always tied back to that business performance.

Okay. I want to move to ESG. Could you talk a little bit about your interaction with stakeholders. I don't just mean shareholders, I mean, stakeholders from a wider perspective in terms of how you feel the business is making progress in breaking down, if that's the right term, the ESG barrier to your store.

Okay. As we talk about different stakeholders, Gerry, I think number one, the purpose of this company is about forging a path to a healthy future for moments of pleasure and relaxation, yes. So it is really at the core of us wanting to make a positive difference for our consumers, yes. That's at the center. And we've made some significant investment also in infrastructure, brought in our first very senior head of ESG from Unilever. We're clearly recognizing the consumer goods as one of the leading companies. So it is a real commitment from our side. And that commitment and at the same time, we've invested into a global consumer office, which includes all our efforts on reduced time, yes. So it isn't just words. We're really making some very serious investments in this area, yes. To your point, so we're getting our house in the right place. We talked about the reduced time efforts that we now have propositions that are properly tested in all 3 areas of NGP, yes. And Tony Dunnage, who is our Head of ESG, is now working very hard also on the other elements of ESG, whether that is the environmental impact or societal impact, yes. So I think what's different, what we're trying to do is now that we clearly laid out our strategy also with the ESG component that, a, we're working on delivering. We made a new commitment to net-zero in the last 12 months, the first in our industry of this scale, and we're now starting to work for plants internally again. And I think the big question is, as a tobacco company, what can you do? Our observation would be, especially as you now refer to inflation and the overall shareholder perspective. When Lukas and me were out on the road on our half year, I think we see a new level of interest in our industry because I think there is an interest about you can either put our industry in the bucket, I don't want to talk with them or I want to be part of the transition journey of this industry. That's why Lukas and me joined this industry because I think there is a unique opportunity for all of us to make a difference. And I would see a slight shift in sentiment also on the investor base to actually be part of that journey, which I see as a positive thing. That doesn't mean that we'll apply to everybody. basically a group of investors who have a very categorical attitude about not engaging within, and that's fine. Everybody has to make their choices. But what I'm encouraged from the discussions we were having, there is more interest of engaging with the industry on this journey than I would have observed 2 years ago.

Okay. So I want to -- linking that back to the culture point, I mean, culture is people, at the end of the day. And linking it to ESG, the question is, does ESG create you a problem [Audio Gap]

[Audio Gap] this gaining some traction. I want to be very mindful about also management team in the past is very committed. The investment that Imperial made in NGP were driven by that desire to make a difference. Whether they were successful or not, ultimately, it's always easy to judge afterwards, yes. But the commitment from the organization is there, and the thing has made us more attractive to attract the right talent. I'm not sure we would have attracted in the past somebody from Unilever to come in on the ESG area.

Okay. I've got one more question. I'll apologize upfront, but it's your fault. My questions have been slightly all over the place, but that's a function of you asking for my first 4 questions in your opening remarks. I'm going to blame you. And my last question is this. I want to come back to the point around the strengthening phase and the acceleration phase. If I was to characterize that in a slightly different way, was it about the senior team, your 2 cells, the people you brought in changing Imperial, you're 18 months into the 2-year change period, if that's the right word, but you're pretty -- you're getting close to that phase being over, and it's now moving forward about leveraging what you've done in the first 2 years. Is that anywhere near right?

Yes. At the same time, Gerry, I have immediately -- you've been long in business and you've certainly -- it's not a magic moment. On the 1st of October 2022, you're about we're all coming from strengthening into delivery. There's always going to be something that needs fine tuned. But I think what is exciting and a single also from a shareholder perspective. We started off, I still remember in January '21, talking about the transformation of Imperial, and there were some very big elements that we changed. The ability to sit here with you and for you to judge in looking at our results what we have achieved gives me and the team and all Imperial employees a confidence that what we promise to shareholders. What success would look like should be achievable.

Sorry, Gerry, just to build on that, we will be benefiting from the actions that the team have implemented in the recent past. And so when you look at the acceleration from a more technical point of view, you will see us advance on the operational gearing. Our pricing ahead of market volume decreased. You will see the restructuring coming through with GBP 100 million and GBP 150 million that we have promised a year where we are well on track. We advised the market of GBP 90 million this year already that we will complete. But also the ongoing reduction of the NGP losses, which last year were GBP 140 million. It's now close to GBP 100 million will be phased out, if not positive by the end of this year. And then obviously, by us focusing on those top 5 markets we spoke, we have a better market mix in that sense. So there are concrete elements that will actually drive that acceleration in the next phase.

And I'll end by making a statement. It feels a bit like we talked about culture. But because there is no magic button and the button keeps changing because the world keeps changing. You need the culture of the people to be right.

Correct. And if I finish with this one, Gerry, I think what is super exciting. When I came into this company, this is a company full of good people. And it's also a company that historically has performed well under pressure. And we are inherently kind of an organization that has a high level of agility by our small fans. What gives me the excitement, it's about culture. I see that agility now at work. And as the world changes and if we look at what's happening in the world out there on an inflation basis and the political situation, I think that bodes well for Imperial.

Great. That's a great point to end. We're slightly over time. Stefan, Lukas, thank you very much for your time. Thank you, guys.

Thank you, Gerry.