Imperial Brands shares rise on strong FY24 update by Investing.com

Investing.com — Shares of Imperial Brands (LON: ) rose on Tuesday after the company’s pre-quarter trading update confirmed that it is on track to meet its full-year guidance while boosting shareholder returns for FY25.

At 4:43 am (0843 GMT), Imperial Brands was trading 3.9% higher at £2,231.

The tobacco giant saw growth in both its traditional tobacco business and its high-end product segment, with strong revenue performance and an increase in operating profit.

“We are reassured by Imperial Brands’ line performance, with FY24 guidance reiterated as expected and increased shareholder returns for FY25. Meanwhile, FX guidance is slightly more negative than consensus currently expects,” analysts at RBC Capital Markets said in a note.

The company’s trading update, ahead of annual results due in November, reassured investors that it is continuing to deliver on its five-year transformation strategy.

Imperial Brands reported stable aggregate market share across its five priority markets, which include the US, Spain and Australia, with solid pricing power offsetting volume pressures.

Additionally, gains in those markets offset declines in Germany and the UK, helping the company maintain its market position.

Imperial Brands also saw marked improvement in its NGP segment, with net income expected to grow between 20-30% at constant currency.

The company has invested in innovative products such as new formats under the blu brand, iSenzia smokeless thermal sticks and new flavors in its modern oral offerings.

In addition, the launch of Zone oral nicotine pouches in the US was well received, supporting the company’s efforts to expand in this category.

A key takeaway for shareholders was the announcement of increased capital returns for FY25. Imperial Brands revealed plans for a £1.25bn share buyback, up 13.6% on the previous year and approx. 7% of its current share capital.

This, together with a planned dividend payout of £1.5 billion, reflects the company’s confidence in its financial performance and its commitment to increasing shareholder returns.

The dividend was also increased by 4.5% to 153.43 pence per share.

Another change is the move to a quarterly dividend payment structure, starting from FY26. In FY25, to establish this new schedule, Imperial will issue two interim dividends of 40.08 pence per share in June and September, providing a smoother cash flow to investors.

This change, the company explained, will help reduce leverage fluctuations throughout the year.

Imperial Brands’ update also signaled that adjusted operating profit improved in the second half of the fiscal year, supported by strong results across all regions. This included a recovery in the AAACE region, where shipping times affected the first half of the year.

The company continues to benefit from its 50.01% stake in Spain-based distribution business Logista, which helped boost its bottom line.

Despite these positives, the company reported a slight headwind from foreign exchange rates, with a 2.5-3.0% impact on full-year net revenues from tobacco and NGP and an effect of 4, 0% on adjusted operating profit.

However, its overall performance remains strong, with adjusted operating cash conversion remaining robust and leverage expected to remain at the lower end of the company’s 2.0-2.5 range for net debt to EBITDA.