Imperial Brands results reveal resilient first-half performance

• The Golden Virginia owner reported half-year net revenue tipped up to £15.4bn
• Imperial’s revenues from tobacco dropped following a decline in volume sales
• Sales of the FTSE 100 firm’s ‘next-generation’ products rose by around a fifth 

Imperial Brands has hailed a robust start to the year following a strong performance from a logistics business in which it holds a majority stake.

The Gauloises Blondes and Golden Virginia owner reported net revenue tipped up to £15.4billion for the six months ending March, although it declined by 1 per cent on a constant currency basis.

Trading was supported by turnover in its Logista distribution arm increasing by 21 per cent to £5.2billion, on the back of acquisitions made last year to help boost its presence in the European non-tobacco transportation market.

This offset declining tobacco revenues caused by falling volume sales, especially of mass-market cigars in the Americas region, and consumer buying patterns reverting to normal levels across Europe.

However, higher tobacco prices and market share growth in the United States, Australia and Spain – three of its five priority markets – slowed the drop in demand.

Meanwhile, sales of ‘next-generation’ products, for example vaping devices, rose by around a fifth, even though US trade has been negatively impacted by regulators cracking down on e-cigarettes and vaping products.

Imperial saw strong interest in its heated tobacco device Pulze 2.0 across multiple European countries and ‘early success’ in selling its blu bar disposable vape pens to adult smokers and vapers. 

Operating profit jumped by more than a quarter to £1.17billion, primarily because the group incurred charges of £201million in the previous period from exiting Russia following the escalation of the Ukraine war.

Chief executive Stefan Bomhard said: ‘Business performance for the first half of fiscal year 2023 was resilient, despite temporarily increased volume declines against a strong comparator.’ 

He added that the FTSE 100 firm was progressing well on its five-year strategic plan and on track to meet its annual guidance and expectations.

At constant currency levels, Imperial anticipates adjusted operating profits will be at the bottom end of a mid-single-digit range, buoyed by rising prices, a better geographic mix and growth from Logista.

Chris Beckett, head of equity research at Quilter Cheviot, said ‘Imperial’s results this morning are a good reminder, for those without ethical investment considerations, of the attractions of a tobacco stock – low valuation, strong cash flow, a high dividend yield and share buybacks.’

Beckett further commented: ‘While the traditional cigarette market is in decline, Imperial has taken advantage of rising prices to grow that business’ market share over the last six months.’

Imperial Brands shares were 0.8 per cent lower at 1,857.5p on early Tuesday afternoon but have grown by approximately 9 per cent in the past 12 months.