TOP NEWS: Imperial Brands Profit Up After Prior Year Impairment

(Alliance News) - Imperial Brands PLC on Tuesday reported sharply higher profit in its recently ...

Alliance News 17 November, 2020 | 9:12AM
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(Alliance News) - Imperial Brands PLC on Tuesday reported sharply higher profit in its recently ended financial year, amid higher revenue and a prior year Premium Cigar division impairment.

FTSE 100-listed tobacco firm Imperial Brands said revenue in the financial year to September 30 rose 3.1% to GBP32.56 billion, and pretax profit increased 28% to GBP2.17 billion from GBP1.69 billion.

The company reported a GBP147 million impairment of goodwill and equity investments in its Premium Cigar division in financial 2019, with no such impairment in financial 2020. The Premium Cigars business was sold back in October, with proceeds used to reduce debt.

Adjusted pretax profit was GBP3.14 billion, down 6.0% from GBP3.34 billion the year before. Net revenue was GBP7.99 billion, down 0.1% at actual currency from an adjusted GBP8.00 billion in financial 2019, but up 0.8% at constant currency.

Revenue growth was supported by moderated tobacco volume declines, Imperial said, as well as share gains and a stronger second half price mix. Tobacco volumes were down 2.1% with "better market size trends" in several markets.

The performance from Next Generation Products - which includes products such as vapes - was "disappointing", Imperial said. It did note, however, a moderation in NGP net revenue decline over the year, with the first half down 43% and the second half down 9%, leaving the total down 27% for the year as a whole.

Imperial's dividend was chopped by a third to 137.7 pence from 206.6p, in line with a rebasing set out in May.

"Although this has been a difficult year, the resilience of our tobacco business and the measures we have taken to improve our NGP operations reinforce my confidence in the future potential of the business. With a more disciplined focus and better execution we can realise significant value for our stakeholders over time," said Chief Executive Stefan Bomhard.

Bomhard - formerly boss at car dealer Inchcape PLC - was appointed to Imperial Brands on July 1, succeeding Alison Cooper.

Following a "difficult" year, Imperial expects to deliver a stronger financial performance in the 2021 financial year. This includes low to mid-single digit growth in organic adjusted operating profit, at constant currency, excluding the impact of the disposal of the Premium Cigar business.

The company expects tobacco pricing to stay strong, but with "some ongoing mix headwinds and with lower stock profits". It expects the temporary Covid-19 benefit to duty-paid market size will unwind and that sector volumes will revert to more normal decline rates, with the duty free channel expected to stay depressed for much of financial 20201.

Operating costs in the new financial year, Imperial said, "will continue to reflect somewhat higher regulatory costs and further manufacturing inefficiencies caused by Covid-19 related disruption to our working practices."

For NGP, a moderated level of loss is predicted to continue in the coming year. It also expects an approximately 2% earnings hit from a higher tax rate, though constant currency earnings per share is expected to be slightly ahead. In financial 2020, adjusted EPS fell 5.6% at constant currency - this adjusted figure excludes acquisition and disposal costs, restructuring costs, and other factors.

Shares in Imperial Brands were up 2.4% at 1,436.00p in London on Tuesday morning.

By Anna Farley; annafarley@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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