Tobacco giant Imperial Brands has forecast continued profit and revenue growth after reporting increased market share and growing momentum for its smoking alternative products, such as vapes.
The maker of Gauloises and Davidoff cigarettes, which has its global headquarters in Bristol, recorded revenue of £32.4bn for its financial year to September, broadly flat with the previous 12 months. The FTSE firm posted an adjusted operating profit of £3.8bn, a 5% rise on the prior period.
Like this story? Why not sign up to get the latest South West business news straight to your inbox.
The company is three years into a five-year transformation strategy, and the board said it had seen aggregate growth for its traditional range of cigarettes and roll-ups across its five top priority markets this year, accounting for 70% of its operating profit, amid rising tobacco prices. Gains in the US, Australia and Spain offset declines in Germany and the UK.
Imperial said strong tobacco pricing across all key markets had mitigated 10.4% decline in volume, driven by the firm’s exit from Russia and weakness in the US mass market cigars market.
The board said the firm’s five-year plan was “strengthening” its finances, despite “challenging” economic headwinds, and forecast “low-single-digit” revenue growth in the coming year, with adjusted operating profit estimated to be “close to the middle of our mid-single digit range”. Bosses said this growth would be weighted to the second half of next due to pricing adjustments and investment in its new smoking alternatives line.
Chief executive Stefan Bomhard said: "Looking ahead, we expect the continuing benefits of our transformation to enable a further acceleration in our adjusted operating profit growth in the final two years of our five-year strategy. We look forward to building on our growing operational track record to deliver sustainable returns to shareholders and play a positive, distinctive role in this industry's transition to a healthier future."
Meanwhile the group saw a 26% lift in net revenue generated by its ‘next generation’ line of vapes, heated tobacco and oral nicotine.
Derren Nathan, head of equity research at Bristol-based financial services firm Hargreaves Lansdown, said: “Whilst some smokers may be quitting nicotine altogether, one area of the market certainly not in decline is next generation products (NGP) like vapes, heated and oral tobacco, where Imperial grew revenue by 26.4% with an especially impressive showing in Europe. For now though it’s still a small part of the picture. The five-year plan seems very much on track and Imperial are expecting another year of modest growth.”
Imperial increased its annual dividend by 4% to 146.8p per share.
The tobacco industry has been under pressure recently in the UK, with the Government looking to launch an escalating smoking age limit and bigger restrictions on vaping products. Shares in Imperial and its competitors slipped after Prime Minister Rishi Sunak announced the plans in October, and bosses at the company warned the move could cause “significant unintended consequences”.
Shortly after Mr Sunak’s speech at the Conservative Party conference, a spokesman for Imperial said: “On vaping, we will continue to engage with the Government to create effective policies which prevent youth access and build trust in the category as a potentially less risky alternative for existing adult smokers.”
