- Group adjusted operating profit in line with guidance
- Over the past year shares have gained 31%
- Share buyback of £1.25 billion announced
Shares in Imperial Brands (IMB) topped the FTSE leaderboard, gaining 4% to £22.33 after the tobacco maker reported strong growth in NGP (next generation products) and announced £2.8 billion in shareholder returns.
NGP net revenue is expected to grow in the range of 20%-to-30% on a constant currency basis with increases across all three regions.
The company said its results benefited from the launch of innovative products with new formats under the Blu brand, new iSenzia non-tobacco heat sticks and new flavours in the modern oral segment.
Net revenue and growth for tobacco has strengthened, with gains in several priority markets – US, Spain, Australia which broadly offset declines in Germany and the UK.
‘These results are consistent with our medium-term objective to hold or grow aggregate share across these markets. At the same time, we have delivered strong pricing, while industry volume pressures have eased across the majority of our wider market footprint,’ said the company.
ENHANCED SHAREHOLDER RETURNS
Shareholders were rewarded with a 4.5% increase in the full year annual dividend to 153.43p per share, and the announcement of a £1.25 billion share buyback.
The company had previously announced share buybacks of £1 billion, and £1.1 billion.
‘Since October 2022, the company has bought back 106 million shares at an average price of £19.20, with the annualised dividend saving over £160 million per annum and rising, said Rae Maile, analyst at Panmure Liberum.
The tobacco maker said cash dividends of circa £1.5 billion will be payable in full year 2025 as part of a move to four equal quarterly dividend payments in the future.
These benefits to shareholders are in line with the company’s strategy to deliver sustainable growth and enhanced shareholder returns.
Imperial Brands will announce annual results for the year ending 30 September 2024 on 19 November 2024.
REASONABLE TARGETS
‘One of the most material changes in style under this leadership team compared with its predecessors has been the setting of reasonable targets for the business and then delivering upon them.
‘That has happened again this year, and constant currency operating profit growth is expected to be close to the middle of mid-single digit medium term guidance.
‘This is the result of continued strong pricing in cigarettes and reduced losses in NGPs as the company pursues a much more sensible and appropriate business strategy,’ added Panmure Liberum’s Rae Maile.
Russ Mould, investment director at AJ Bell said: ‘The tobacco industry has responded to increased regulatory pressure, particularly in the West, by expanding into next generation products like e-cigarettes and vapes. In this context it’s not a surprise to see the market react positively to Imperial Brands’ latest numbers which show strong growth from this part of the business.
‘This still remains a modest and loss-making part of the wider group but at least investors can look at the trajectory and be encouraged that it might make a meaningful contribution down the line.
‘Like the oil industry, which is finding it difficult to resist the temptation to cash in on its lucrative hydrocarbons-related activity despite a proffered commitment to the energy transition, it will be difficult for Imperial Brands and its peers to move away from their traditional stomping ground given the attractive returns on offer.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Martin Gamble) own shares in AJ Bell.
