ii view: Imperial Brands has news on its dividend

Full-year results to 30 September

• Net revenue up 4.6% to £8.16 billion
• Adjusted operating profit up 4.6% to £3.91 billion
• Net debt down 4% to £7.74 billion
• Final dividend of 54.26 pence per share
• Total dividend for the year up 4.5% to 153.42p per share

Guidance:

• Expects growth in full-year 2025 currency adjusted net revenue growth of low single digit
• Expects growth in full-year 2025 currency adjusted operating profit of mid single digit
• On track for share buybacks of £1.25 billion over FY 2025, up 13.6% from 2024

Chief executive Stefan Bomhard said:

"As we enter the final year of our current strategy, the investment we have made in consumer capabilities, cultural transformation and agile ways of working has supported another year of accelerated financial delivery and growing capital returns.”

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ii round-up:

Imperial Brands (LSE:IMB) is a UK, Bristol headquartered tobacco manufacturer operating globally and employing over 25,000 people. 

Its cigarette or combustible brands include JPS, West, Winston, Davidoff and Kool. 

Its portfolio of potentially less harmful Next Generation Products (NGP) spans the three categories of vapour, heated tobacco, and oral nicotine with blu, Pulze and Zone X three of its brands.

For a round-up of these latest results announced on the 19 November, please click here.

ii view:

Separated out of conglomerate Hanson in 1996, Imperial Brands today competes against rivals including British American Tobacco (LSE:BATS), Philip Morris International Inc (NYSE:PM), and Altria Group Inc (NYSE:MO). Cigarette or combustible products continue to generate most revenues at 92%, with NGP the balance of 8%. The company’s products are sold in over 120 countries. Europe generates its biggest chunk of operating profit at 39%, followed by the Americas at 32%, Africa, Asia, Australasia, and Central Eastern Europe (AAACE) 21% and group distribution the balance of 8%. 

Goals being pursued under a five-year strategic plan begun in early 2021 include increasing its focus on its top five tobacco markets and including the UK, Germany, and USA as well as simplifying the organisation and targeting cost savings. An update on strategic goals is expected at a Capital Markets Day on 26 March. 

For investors, a move by the UK government to implement a phased banning of combustible sales in what is a core group market cannot be overlooked. Potential for similar moves in other markets appear likely. Fears about the exact long-term impact of NGP products on users’ health persist, while NGP sales of 8% of total revenues compare to smokeless sales of more than 17% at rival BATs.  

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On the upside, high cash generation continues to underpin shareholder returns with cumulative capital returns from fiscal year 2021 to 2025 on track to hit £10 billion, or 67% of its stock market value as of January 2021. A five-year performance improvement programme is ongoing. NGP revenues rose 26% during this latest period, with related adjusted losses reducing 43% to £79 million, while a move to four equal quarterly dividend payments is being made from 2025. 

On balance, ethical issues will continue to leave Imperial and the wider industry off limits for many investors. That said, potential global moves by governments to ban combustibles could see the industry undergo another round of consolidation, while a forecast dividend yield of over 6% will likely attract income investors.  

Positives

• Five-year strategic plan being pursued
• Attractive dividend yield (not guaranteed)

Negatives

• Health concerns for NGP products
• Ethical concerns leave many funds unable to invest

The average rating of stock market analysts:

Buy