- FY24 buyback 10% higher than FY23
- Shares rebound by 3% on announcement
- FY24 capital return to exceed £2.4 billion
Shares in Imperial Brands (IMB) rallied 3% to £16.30 as the tobacco company said it was ‘on track’ to deliver results for the 2023 financial year in line with its guidance and announced a further £1.1 billion share buyback for the 2024 financial year.
Imperial, which has an array of iconic brands including Davidoff, Gauloises and Winston, said ‘strong tobacco pricing’ and ‘momentum behind next generation products’ (NGP) had driven net revenue growth across all categories.
BRAND STRENGTH DRIVING GROWTH
Imperial said it expected tobacco and NGP revenue for the year ended 30 September to grow by low single digits and group adjusted operating profit growth to accelerate to the ‘lower end of their mid-single digit range’.
‘Focused investment in our priority combustible markets is expected to deliver a further modest gain in the aggregate share for our top-five markets at the full year', commented the firm.
‘This will complete three consecutive years of improved market share performance following several years of decline. Like the first half, the US, Spain and Australia are expected to show market share growth, more than offsetting declines in Germany and the UK.
‘This positive aggregate share performance has been achieved while delivering strong pricing across all five markets, and reflects the strengthened equity of our brands and our improved resilience as a result of our recent targeted investments.’
Meanwhile, full-year NGP revenue growth accelerated in the second half of the year, driven by strong growth in Europe, and the firm delivered ‘a step-up in product and market launches’ across all categories, vape, heated tobacco and oral nicotine, during the course of the year.
SHAREHOLDER RETURNS TO TOP £2.4 BILLION
The company promised a £1.1 billion share buyback for the 2024 financial year, a 10% increase on the £1 billion buyback for the last financial year when it repurchased 52,107,043 shares or 5.5% of its equity capital.
Imperial said the increase reflected ‘confidence in our strategy and cash generation’ and as well as a commitment to greater shareholder returns.
‘We expect our capital returns to shareholders will exceed £2.4 billion in the coming fiscal year, representing around 17% of our current market capitalisation,’ said Imperial.
Tobacco shares knocked after prime minister Rishi Sunak announces smoking crackdown
Imperial shares, along with those of rival British American Tobacco (BATS), were negatively impacted this week by prime minister Rishi Sunak’s announcement of a possible crackdown on the legal age of smoking and a review of vaping products.
Russ Mould, investment director at AJ Bell, said: ‘The UK is already one of the company’s weak spots, so political intervention will only add to its problems. However, this is a global business, and the company says the US, Spain and Australia remain key opportunities to offset weakness elsewhere.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell. Ian Conway also owns shares in British American Tobacco.
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