Original Source: FD (FAIR DISCLOSURE) WIRE
GARETH DAVIS, CEO, IMPERIAL TOBACCO GROUP PLC: Good afternoon, ladies and gentlemen, if we can make a start. Firstly, can I welcome you for an hour or two into this tranquil tobacco haven from the sea of volatility you face most of the day. Anyway, welcome to today's presentation and we'll be giving you today a brief trading statement as well as giving you an update on Altadis and an overview of regulatory matters. Now you might like to know that today's presentation is being recorded and it will be available as an audio webcast on our web site along with copies of the slides and script.
As you can see, I am here today with Bob Dyrbus, our Finance Director, and Alison Cooper, our Corporate Development Director, and as usual there will be the opportunity to ask questions at the end of the presentation and afterwards I hope you'll join us for a bite to eat and possibly a drink as well.
In terms of Altadis, I will give you an overview of our progress to date and then hand over to Bob, who will take you through some of the accounting matters and, as Alison holds now Board responsibility for Corporate affairs as part of her Corporate Development brief, she'll give an overview of the regulatory and litigation environment.
But before I give an update on Altadis I can confirm that the Group's anticipated trading performance for the financial year to the 30th of September, 2008 remains in line with management's expectations. The trading trends for Imperial outlined at our AGM six weeks ago continue and the performance of Altadis since completion of the acquisition on the 25th of January has also been in line with our expectations. We will be reporting our Half Year results on Tuesday the 20th of May and we very much look forward to giving you our detailed performance review then.
Turning to Altadis now, it's been a little over 7 weeks since we completed the deal and we've made good progress since then. Following the completion of the squeeze out process last month Altadis shareholders-- sorry, Altadis shares were de-listed and the Company-- that was Freudian wasn't it? And the company became 100% owned subsidiary within the Imperial Tobacco Group. We have an Interim Senior Management structure in place to ensure that we continue to focus on delivering our business results as we work through the integration. The integration itself is being managed by a separate team with representatives from both Imperial and Altadis and it's going very well. We aim to integrate the two businesses as rapidly as possible although, as I have said before, it will be a lengthy and complex process.
Back in July 2007 at the time of our recommended offer we estimated that the enlarged Group would be able to generate annual operational efficiencies of around EUR 300 million by the end of our 2010 financial year, being the second full financial year following the completion. These cost savings are expected to be generated primarily in the areas of production and purchasing, sales and marketing and corporate overheads. Now gaining full access to the Altadis business is providing greater visibility of the level and timing of the cost savings and revenue opportunities. We remain very confident in achieving these operational efficiencies and anticipate being in a position to give you a more detailed update on progress at our Interim Results announcement.
We're continuing the program of non-core asset disposals of EUR 650 million originally announced by Altadis last April. Proceeds of EUR 331 million have been realized to the end of February including the sale of Logista stake in Iberia for EUR 220 million. The remaining unsold assets are mostly surplus properties and we expect the majority of these disposals to be completed by the end of our 2009 financial year. Now the figure of EUR 650 million does not include the sale of Aldeasa. On the 10th of March we announced the sale of Altadis's 49.95% stake in Aldeasa to its joint venture partner Autogrill. The total cash consideration was EUR 275 million, which represents a share of the enterprise value and including Imperial's portion of Aldeasa's net debt it's of EUR 355 million, so this represents a 2007 enterprise value to EBITDA multiple of 9.2 times.
Elsewhere you'll recall that now we've completed the Altadis deal we're required by the European Commission to divest a small number of fine cut tobacco, pipe tobacco and cigar brands in certain European markets. We're making good progress with these and a number of parties have expressed interest and we expect to conclude the sale of these brands in the coming months.
The Altadis cigar business is a great addition to the Imperial family and, as I've said many times before, we didn't anticipate any difficulties regarding Cuba and the Habanos joint venture, so I am therefore pleased to be able to tell you that following a number of very productive meetings the Imperial and its counter party, Cuba Tobacco, have agreed to continue and enhance this mutual collaboration.
Moving on to Logista, Altadis currently owns approximately 59.62% of the entire issued share capital. As you know, under Spanish takeover law we were required to make a tender offer for the outstanding shares or reduce the shareholding to below 30% within three months of completing the deal. After careful consideration we decided to launch an unconditional offer for the outstanding shares held by minority shareholders at a price of EUR 52.50 per share. We filed our offer document for the outstanding minority shares with the CNMV, the Spanish regulator, on the 26th of February. We expect the CNMV to approve our offer document in the next few weeks after which the 15 day offer acceptance period will begin. On the 27th of February Logista announced their results for 2007, slightly ahead of consensus. Earnings per share grew by 26.7% with the benefit of higher interest income following the disposal of their stake in Iberia.
Before handing over to Bob I'd like to take this opportunity to thank the Imperial and Altadis employees for their ongoing commitment and enthusiasm. I've seen it first hand at many of the sites now how quickly employees are developing strong working relationships and this will help accelerate the growth of the enlarged Group. Antonio Vasquez continues to provide me with invaluable support and he's been a pleasure to work with. We will further benefit from the appointment of two non-executive directors of Altadis to the Imperial Tobacco Board, which we expect to announce shortly and, of course, we look forward to welcoming John Dominique Comolli to the Board as our Non-Executive Deputy Chairman on July 15th.
So that concludes my bit, ladies and gentlemen. I hope it's been a useful overview and I'll now hand over to Bob to take you through some really interesting accounting matters.
BOB DYRBUS, FINANCE DIRECTOR, IMPERIAL TOBACCO GROUP PLC: Thank you, Gareth, and good afternoon, ladies and gentlemen. On the consolidation of Altadis's results for the first time there will be a number of one-off acquisition accounting adjustments required under IFRS, which will impact the adjusted profit from operations but have no effect on the underlying business performance or cash flows. Before I take you through the technical details, I would like to start by giving some guidance on how we propose to report our results for the Half Year and also on definition of revenue measures.
We will have a top level segmentation being tobacco and logistics with a separate line for the elimination of inter-Company sales between the two. And to add greater visibility at the Half Year we will also provide a schedule showing the contribution from the standalone Imperial and Altadis businesses as well as eliminations and accounting adjustments. Geographically we'll provide a breakdown of Imperial's operations, as we have done historically, and also for Altadis we thought it would be useful if we used their existing reporting format. However, once the final management structure has been determined this will change and we will provide you with restated comparatives.
There are a couple of points I'd like to draw your attention to. Aldeasa will be treated as an asset held for sale from the 25th of January, the date of completion of the Altadis acquisition. As such, we will not report any revenue or profit from Aldeasa in our Half Year accounts. We will continue to report net revenue for our tobacco business. However, we recognize that economic sales, or as we would refer to them distribution [seize], as used by Altadis historically, is a more appropriate measure for the logistics' business and so we will focus on this non-GAAP measure when discussion its performance.
Moving on to interest and tax, at the time we announced our offer for Altadis last July we indicated that we expected our average all in cost of debt to remain at around 5.5% and we still believe this is the case. It is, however, worth pointing out that since completion on the 25th of January the Altadis acquisition has been wholly debt financed through bank and equity bridge facilities pending …