Tobbaco sales help Imperial Brands post FY profit rise

Imperial Brands reported a rise in annual sales, driven by a demand for tobacco which offset a drop in its e-cigarette business, and forecast profit growth in 2021.

The maker of Gauloises and JPS cigarettes said full-year adjusted group revenue rose 0.8% to £8bn. On a reported basis, revenue rose 3.1% to £32.56bn.

Imperial forecast low to mid-single digit growth in organic adjusted operating profit for 2021, excluding the impact of the sale of its premium cigar business as it moderated losses from its new products division.

Pre-tax profit rose to £2.17bn for the year to September 30, from £1.69bn last year. The board declared a final dividend of 48.01p a share, for a full-year payout of 137.71p, down 33.3%.

It said a temporary benefit to the legal tobacco market from the coronavirus pandemic, which has cut the presence of smuggled cigarettes, was expected to unwind, with sector volumes reverting to more normal decline rates, though the duty free channel was likely to stay depressed for much of the year.

"Tobacco pricing is expected to remain strong although with some ongoing mix headwinds and with lower stock profits," Imperial added.

So-called "next generation products" business fell by 27%, after vaping-related illnesses and deaths in the US combined with and a ban in the countrey on flavors of certain e-cigarettes.

The company pulled financial guidance ahead of a strategic review that is underway, and expected to provide more information at a capital markets update scheduled for January 27.

AJ Bell investment manager Russ Mould said the absence of any further profit warning, "a dividend that meets (lowered) expectations and improved cash flow all offer hopes of a better times ahead ... especially as debt is coming down and the results of a strategic review are due in January".

“Less debt means less risk, less risk can mean a higher rating for the stock and if nothing else it means lower interest payments and more cash available for investment in the core business proposition or dividends," he said.