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Imperial Brands to focus on next generation products

The company is planning to focus on next generation products, including launching new vapor devices and trialling tobacco heating products
November 7, 2017

Imperial Brands' (IMB) management is making next generation products (NGPs), specifically vaporisers, the main focus for the year ahead. Around £300m has already been invested in this area, followed in quick succession by the £107m acquisition of UK maker of nicotine liquids for e-cigarettes Nerudia. A slew of new vapour products are slated for launch, including 20 new flavours, with a target of selling into 20 different markets by the end of the 2019 financial year. That compares with just four markets at the end of this last financial year.

IC TIP: Buy at 3,151p

The shift to alternative products should help make up for the falling number of traditional cigarettes sold. Total tobacco volumes fell 4.1 per cent to 256.2m, with net revenue down 2.6 per cent at constant currency to £7.8bn. But the strategy to encourage remaining smokers to buy more premium brands appears to be working, with growth and specialist brand revenue up 2.2 per cent, and now representing around 63 per cent of all tobacco net sales.

Analysts at Whitman Howard expect EPS of 275p in the year to March 2018, compared with 267p in FY2017.

IMPERIAL BRANDS (IMB)  
ORD PRICE:3,151pMARKET VALUE:£30.1bn
TOUCH:3,150-3,151p12-MONTH HIGH:3,956pLOW:3,019p
DIVIDEND YIELD:5.4%PE RATIO:21
NET ASSET VALUE:595p*NET DEBT:195%
Year to 30 SeptTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
201328.21.2696.0116
201426.51.53149128
201525.31.76177141
201627.60.9166.1155
201730.21.86148171
% change+9+105+123+10
Ex-div:**   
Payment:**   

*Includes intangible assets of £19.8bn, or 2,069p a share

**Two quarterly dividend payments due on 29 Dec (ex-div: 16 Nov) and 29 Mar (ex-div: 22 Feb)