Imperial Brands’ sales flatlined in the first half as the cigarette manufacturer behind brands including Gauloises and Rizla saw price growth offset a volume decline.
The Rizla-maker’s adjusted operating profits increased by 3.8 per cent on a constant currency basis to £3.89billion in the year ending September, thanks to an 11 per cent hike in tobacco prices.
Earnings were additionally boosted by its Spanish distribution business, Logista, completing acquisitions that helped expand its reach across the European non-tobacco transport sector.
Results: Gauloises owner Imperial Brands revealed adjusted operating profits increased by 3.8 per cent on a constant currency basis to £3.89billion in the year ending September
Meanwhile, reported operating profits jumped by over a quarter to £3.4billion thanks to the non-repeat of exit charges from selling its Russian business to local investors.
Yet Imperial’s total turnover dipped 0.2 per cent to £32.5billion even though higher cigarette prices helped offset volume declines caused by its departure from Russia and wholesalers temporarily destocking mass market cigars.
Demand for ‘next-generation products’ also climbed significantly following multiple product and market launches of brands like Pulze 2.0.
Under a five-year strategy, the Bristol-based group is seeking to reduce its reliance on tobacco in favour of non-combustible products like vapes, heated tobacco and nicotine pouches.
Because of investment in its NGP brands, Imperial warned its performance in the coming financial year would be weighted towards the second half.
Revenues are anticipated to rise by ‘low-single-digit’ levels, while the increase in adjusted operating profits is forecast to be ‘close to the middle of our mid-single digit range.’
Stefan Bomhard, chief executive of Imperial, said: ‘Looking ahead, we expect the continuing benefits of our transformation to enable a further acceleration in our adjusted operating profit growth in the final two years of our five-year strategy.’
Following the result, the FTSE 100 group has declared a 4 per cent bump in its dividend to 146.8p per share.
This comes on top of a £1.1billion share buyback programme announced last month.
Adam Vettese, an analyst at investment platform eToro, remarked: ‘If there is any concern on the horizon for the firm as it continues its strategic product shift, then it comes with political risks.’
He pointed to the UK Government’s plan to phase out legal smoking in Britain, a measure that will effectively criminalise anyone born after 2009 from being sold tobacco products.
The proposal echoes one introduced late last year by New Zealand, which has some of the world’s harshest tobacco laws.
Vettese added: ‘While these [restrictions] won’t necessarily kill the firm’s market, it will make it more difficult to operate within.’
Imperial Brands shares were 0.5 per cent, or 9p, down at £17.79 on early Tuesday afternoon, meaning they have fallen by around 15 per cent since the year started.
