Imperial Brands shareholder returns reach £2.8bn as tobacco prices rise

Imperial Brands will increase shareholder returns to £2.8 billion next year after continuing to generate huge amounts of cash through price increases.

The FTSE 100 company that makes JPS and L&B cigarettes reported trading in line with expectations.

The Bristol-based company said that it achieved revenue growth for its tobacco business and its smaller ecigarettes businesses, where operating losses further decreased, as well as a “stable” overall market share across its five priority markets.

Imperial expects to increase its share purchase by 13,6% to 1,25 billion pounds sterling next year. This represents about 7% of Imperial’s market capitalisation at the London Stock Exchange.

Imperial announced that it is on track to return £3,35 billion, since it began a share-buyback program in 2022.

It announced a total of 153.43p for the 2024 financial period, an increase of 4.5% year-on year. Imperial announced that it would return £2.8 billion in dividends to its shareholders, an increase of £2.4 billion.

The company also plans to switch to quarterly dividends in 2026. This, it says, will result in a more consistent cash return to shareholders throughout the entire year. It is enabled by “strong visibility” cash flow.

Imperial said that the dividend and buyback increases were part of Imperial’s strategy to return surplus capital to its shareholders after investing in the business, and to maintain leverage at the lower end its net debt-to-earnings range of 2 to 2.5 times.

Imperial shares responded positively to Tuesday’s update, rising 4.1 percent to £22.36 at the close. Imperial is now the biggest riser in the FTSE 100. The shares are up 22 percent this year and outperform the wider index which is only up 6 percent.

Stefan Bomhard is Imperial’s CEO since 2020. He has entered the final year of his five-year strategy, which focuses on increasing cigarette sales in five key tobacco markets. However, he will be more cautious about investing in new products such as Blu ecigarettes.

To offset the pressure on sales volume and increased regulations, the tobacco industry continues to generate huge amounts of money by increasing prices.

The UK government has included a Tobacco and Vapes Bill into the King’s Speech of July. This bill would gradually raise the age that people can purchase cigarettes, until they are prohibited. It also imposes limits on the marketing and sale of vapes. The Prime Minister has not excluded a smoking ban for outdoor spaces like pub gardens, university and hospital campuses, sports grounds, etc.

Imperial reported that it gained market share for tobacco in the US, Spain, and Australia. This was offset by declines in Germany, and the UK. Imperial stated this was “consistent” with its medium-term goal to maintain or increase aggregate share across all these markets.

The iSenzia brand, which is a non-tobacco product, should have helped to increase the revenue from its next-generation products business by 20-30%. The launch of Zone pouches has allowed it to enter the US market for oral nicotine.

Imperial said it was on track to meet its full-year guidance, “with an acceleration”, in terms of tobacco and next-generation products net revenue growth over last year. It also added that group-adjusted operational profit growth would be “close to our mid-single-digit range”.