Imperial Brands launches £1bn share buyback

Tobacco group Imperial Brands has unveiled a £1billion share buyback as it confirmed to investors that current year trading was in line with expectations.

Imperial Brands said tobacco net revenue growth improved in the second half, when compared against the first, driven by a stronger price mix.

The company’s total capital returns for the full year, including dividends and share buy-backs, are expected to top £2.3billion, representing around 13 per cent of its current market value. 

Immediate launch: Tobacco group Imperial Brands unveiled a £1billion share buyback today

Stefan Bomhard, chief executive of Imperial Brands, said: ‘The launch of our new buyback programme is an important milestone in our five-year strategy announced in January 2021.’

Imperial Brands shares rose today and were up 3.82 per cent or 72.50p to 1,969.50p this morning, having risen by around 30 per cent in the last year.  

Imperial Brands expects full-year net revenue and group adjusted operating profit to both rise by around 1 per cent at constant currency rates, and the group has forecast low single-digit constant currency net revenue growth over the next three years.

Operating profit growth, adjusted at constant currencies, is expected to accelerate to deliver a mid-single digit compound average growth rate over three years.

Gearing levels are expected to remain at the lower end of the group’s EBITDA range of 2-2.5 times, while capex is seen around £300million to £350million per year.

The business has been bolstering its next-generation products and moving away from traditional tobacco products.  

Bomhard said: ‘Over the past two years, increased investment and a more consumer-centric approach have improved delivery in both our priority combustible markets and next generation product operations. Disciplined capital allocation has strengthened our balance sheet to reach our target leverage levels.

‘Today’s announcement is underpinned by this improving performance and our confidence in being able to continue generating strong cash flows to support growing shareholder returns in the years to come. We are committed to a progressive dividend and an ongoing buyback programme to meaningfully reduce the capital base over time.’

Richard Hunter, head of markets at Interactive Investor, said: ‘The company is well on track on a five-year plan which now moves into the growth phase, with the strengthening phase complete. In the meantime, the adjustments to the overall financial strength of the group are already washing through in terms of increased profit and shareholder returns.

‘The share price has reacted positively to the company’s return to favour, having risen by 22 per cent over the last year, as compared to a marginal gain of 0.8 per cent for the wider FTSE 100. 

‘Alongside a generous dividend yield, the total return has been significant and with the current outlook providing the possibility of more of the same, the market consensus of the shares as a strong buy reflects such prospects.’

Matt Britzman, an equity analyst at Hargreaves Lansdown, said: ‘News of a fresh £1billion buyback at Imperial Brands will be welcomed by investors and is the culmination of work done over the last two years to get a tight grip on capital allocation and increase focus into core business areas. 

‘The two year ‘strengthening’ phase has just come to an end looks to have yielded some results, with leverage back at levels supportive of increased shareholder returns. Markets were unsurprisingly happy to hear the news, given shareholder returns for tobacco companies are really the only material case for investing for now’

This post first appeared on Dailymail.co.uk