It has never been much fun being a tobacco-based company almost exclusively operating in developed markets where smoking is in long-term decline. However, Imperial Tobacco (IMT), which makes Gauloises and Lambert & Butler cigarettes, again showed how to defend profits in such unpromising circumstances: management found another £30m of cost savings during the year from a mixture of streamlining back-office functions, pricing and product changes. However, underlying operating profits were largely flat at £3.18bn, and the company signalled its intention to break into the lucrative electronic cigarette market next year as a way of boosting growth.
Imperial still managed to outperform the wider market, with cigarettes experiencing a volume decline of 2 per cent, half that of the tobacco industry. That was largely down to market share gains for the company's major brands, which account for about 40 per cent of volumes and helped to offset weakness in eastern european markets, where illicit smuggling has become an increasingly endemic problem. However, the most significant announcement was that Imperial's standalone subsidiary, Fontem Ventures, will be launching its own brand of electronic cigarettes next year as Imperial tries to catch up on the vapour cigarette boom. To speed up the process, the company acquired the products and expertise of Dragonite International.
Investec forecasts current year underlying EPS of 220p, up from 210p in 2013, subject to review post results.
IMPERIAL TOBACCO (IMT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,377p | MARKET VALUE: | £23bn | |
| TOUCH: | 2,376-2,378p | 12-MONTH HIGH: | 2,545p | LOW: 2,106p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 577p* | NET DEBT: | 169% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 26.5 | 0.95 | 65 | 73 |
| 2010 | 28.2 | 2.12 | 149 | 84 |
| 2011 | 29.2 | 2.15 | 177 | 95 |
| 2012 | 28.5 | 1.08 | 68 | 106 |
| 2013 | 28.2 | 1.26 | 96 | 116 |
| % change | -1 | +17 | +41 | +10 |
Ex-div:15 Jan Payment:17 Feb *Includes intangible assets of £17.4bn, or 1,793p a share | ||||
