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.
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.”
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