Writedowns at the Spanish business, amid weak conditions there, hit full-year figures at Imperial Tobacco (IMT). But the maker of Gauloises cigarettes and Golden Virginia rolling tobacco reported a solid enough underlying performance, with adjusted pre-tax profit having risen 3 per cent to £2.63bn, as price increases offset ongoing volume declines. That leaves the shares looking solidly defensive - although stability and income, rather than growth prospects, remain Imperial's key attractions.
That £1.2bn writedown was related to the carrying value of intangible assets in Spain, acquired with the takeover of Altadis - Spain's worsening economic situation forced a revaluation of these under international accounting rules. The company still has Spanish intangible assets on its balance sheet of about £1.6bn.
Operationally, meanwhile, the group's ability to raise prices in key markets underpinned its performance. Indeed, strip-out Imperial's logistics business and tobacco net revenue grew 4 per cent on a constant currency basis to £7bn, with divisional operating profit having risen by the same percentage to £2.98bn - despite a 2.7 per cent decline in overall cigarette volumes. This volume slippage is partly a historic trend, but also reflected operational problems in Poland and the Ukraine, along with the effect of sanctions against Syria.
An improved sales mix also helped, with premium brands such as Gauloises Blondes, Davidoff and West now generating up to 30 per cent of tobacco sales. Premium cigars are another growth area, with volumes here having increased 11 per cent in the period. Imperial benefited from the popularity of fine cut tobacco, too - which is traditionally seen as cheaper alternative to prepared cigarettes. Fine cut volumes bucked the trend of general decline to rise by 0.5 per cent - to a stick equivalent of 44.1bn.
Broker Investec Securities expects adjusted pre-tax profit of £2.82bn for 2013, giving adjusted EPS of 214.9p (from 201p in 2012).
IMPERIAL TOBACCO (IMT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,373p | MARKET VALUE: | £23.4bn | |
| TOUCH: | 2,373-2,375p | 12-MONTH HIGH: | 2,629p | LOW: 2,207p |
| DIVIDEND YIELD: | 4.5% | PE RATIO: | 35 | |
| NET ASSET VALUE: | 611p* | NET DEBT: | 147% | |
| Year to 30 Sep | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 20.5 | 0.62 | 50.6 | 63.1 |
| 2009 | 26.5 | 0.95 | 65.5 | 73.0 |
| 2010 | 28.2 | 2.12 | 149 | 84.3 |
| 2011 | 29.2 | 2.15 | 177 | 95.1 |
| 2012 | 28.6 | 1.08 | 68.1 | 105.6 |
| % change | -2 | -50 | -62 | +11 |
Ex-div: 16 Jan Payment: 18 Feb *Includes intangible assets of £17.6bn, or 1,782p a share | ||||
