Imperial Brands' (IMB) chief executive Alison Cooper cited the reduction in the number of brands in the product portfolio as a “key element” of corporate strategy during the period under review. It now appears the global tobacco group is taking this one step further. Ms Cooper said a number of “divestment opportunities” have been identified. Commercial confidentiality means she couldn’t give precise details, but the sales are expected to generate around £2bn over the next 12 to 24 months, and it wouldn't be unreasonable to assume that the 'for sale' assets are from the traditional end of the business considering the focus on 'next generation products' (NGP). Management is planning to use these funds to pay down debt and return money to shareholders, as well as investments to further innovation in non-traditional products (aimed at smokers who want to keep on puffing away, but without the smoke).
The simplification process has increased the focus on what are dubbed the “growth brands” within the cigarette business, such as Davidoff and Gauloises Blondes. Although the strategy hasn't arrested the structural decline in cigarette sales, it has resulted in a slower rate of decline than the wider industry. Total tobacco volumes contracted by 2.1 per cent from the 2017 half-year, in contrast to a 6.3 per cent increase (and rising market share) for the growth brands.
What didn’t help the tobacco business was the collapse of one of Imperial Brands’ distributors, Palmer & Harvey. Imperial Brands committed funds during the period in an attempt to salvage the business, but to no avail. The collapse precipitated a one-off impact of £160m, and fed through to a 7.6 per cent decline in operating profit to £833m.
Analysts at Investec expect pre-tax profit of £3.31bn in the year to September 2018, giving EPS of 271p, compared with £3.26bn and 266p in FY2017.
| IMPERIAL BRANDS (IMB) | ||||
| ORD PRICE: | 2,730p | MARKET VALUE: | £26bn | |
| TOUCH: | 2,730-2,731p | 12-MONTH HIGH: | 3,739p | LOW: 2,298p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 507p* | NET DEBT: | £13.0bn | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 14.3 | 804 | 70.7 | 51.7 |
| 2018 | 14.3 | 600 | 51.7 | 56.9 |
| % change | - | -25 | -27 | +10 |
| Ex-div**: | 24 May/23 Aug | |||
| Payment**: | 29 Jun/28 Sep | |||
| *Includes intangible assets of £18.9bn, or 1,979p a share **Half-year dividend will be split between two payments | ||||
