- 26% rise in NGP net revenue
- 4.5% rise in full-year dividend
- Total return 45% year-to-date
Shares in Imperial Brands (IMB) climbed 2% to £24.48 in morning trading as the multi-national tobacco company reported a robust set of full-year results despite a big push by governments to curb the number of people smoking and vaping.
The FTSE 100 company, which owns several tobacco brands including Davidoff, West, Golden Virginia and JPS, said revenue was marginally lower at £32.4 billion for the year to 30 September.
However, the company reported a 4.6% increase in net revenue (less duties and sales of peripheral products), a 4.5% rise in operating profit to £3.5 billion and a 26% rise in NGP (next generation product) net revenue to £335 million with growth from all regions and improved gross margins.
In the area of vaping, the company launched new blu formats to meet demand across several markets and said its market share in the area of heated tobacco continued to grow in Europe with products such as Pulze 2.0, iD and iSenzia sticks.
SHAREHOLDER RETURNS
It was good news for Imperial Brands investors and shareholders, with capital returns of circa £2.8 billion underway for full year 2025 thanks to a £1.25 billion share buyback and a 4.5% rise in full year dividend.
Imperial Brands’ chief executive Stefan Bomhard highlighted strong cash flow generation which has ‘supported enhanced shareholder returns.’
Bomhard said: ‘We are on track to deliver five-year capital returns of circa £10 billion, representing 67% of our market capitalisation in January 2021 when we launched our strategy.’
EXPERT VIEW
Chris Beckett, head of equity research at Quilter Cheviot commented: ‘The core business is performing well, with key markets like the US and Spain improving and Germany stabilising. Most markets are gaining share, with the UK being an exception. Revenue is up 5%, profits are also up 5%, and earnings have grown a remarkable 11%. The guidance for high single-digit earnings growth underlines the company’s steady trajectory.
‘Imperial's business model remains straightforward but effective: raise prices to counter volume declines, pursue efficiencies, reinvest in next-generation products like heated tobacco and vapes, and return surplus cash to shareholders.
Despite being somewhat of a laggard in next-generation products compared to peers, sales in this category have grown 26%, as the management team takes a more measured and focused approach, aiming to reduce losses.
The stock has performed strongly this year, with capital returns up 37%, adding to an 8% dividend yield. This amounts to an impressive 45% total return year to date, representing a significant recovery from prior valuation declines. ‘Even after this rally, the stock remains attractively valued at around seven times earnings’, added Beckett.
