Imperial Brands – Smoke, But Still No Fire

Updated on

Imperial Brands PLC (LON:IMB) has reported interim results that show underlying growth in earnings per share of 6.9%, a drop in net debt of over £3bn and a 1% increase to the quarter’s dividend, taking it to 42.12p.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2021 hedge fund letters, conferences and more

The shares reacted to the results with a rise of 2%.

Imperial Brands Q1 Earnings

Commenting on the numbers, Steve Clayton, fund manager of the HL Select UK Income Shares fund, which has a position in Imperial said:

“Imperial are generating plenty of smoke, but still without any real fire. The numbers were solid enough, but despite the reported growth, the underlying performance of the tobacco business was actually a small decline in profitability. What went well was pricing; Imperial saw price growth of 5.3%, and with premium cigars performing well, there was a product mix benefit of another 1.2% on top.Imperial succeeded in steadying its market share in its five priority markets of the US, UK, Germany, Spain and Australia. Losses in the Next Generation Products arm fell, as Imperial took action to steady that ship.

The weaker news came from destocking by US wholesalers which cost £49m and a £42m charge against ongoing litigation by some US States.

Reported operating profits more than doubled to £1.7bn, but this was flattered by a gain on the sale of the Premium Cigar division and lower amortisation.

Imperial have put a lot of time and energy in trying to regroup and remould themselves to create a viable path to growth. Now it is time to put the new strategy to the test. Focusing on the five top markets should boost efficiency of operation, and upcoming trials of new heated tobacco products could show the way forward for Imperial’s badly underperforming NGP division. So far though, it’s smoke without fire and we’ve yet to see definitive progress. But over £3bn of debt reduction speaks loud and clear – Imperial is addressing its challenges from a position of strength. With a dividend yield approaching 9%, if Imperial can return to reliable growth then investors could be well rewarded.”

About us

Over 1.6 million clients trust us with £132.9 billion (as at 30 April 2021), making us the UK’s largest digital wealth management service. More than 98% of client activity is done through our digital channels and over 600,000 access our mobile app each month.

Our purpose is to empower people to save and invest with confidence and help them build their financial resilience over the long-term. We provide a lifelong, secure home for people’s savings and investments that offers great value and an incredible service making their financial life easy.

Clients rate our service highly, 90% say we are good, very good or excellent. Our expert research has been helping investors for almost 40 years through thick and thin.

In 2018, we also launched Active Savings, an online cash savings platform that lets savers move money easily between partner banks and building societies to help their money work harder without the hassle.

Find out more about HL and our history, what it’s like to work with us, and how we support our community, including our response to the COVID-19 pandemic.

Press centre:

Investor relations: