19 November 2024
If you are covering Imperial Brands’ latest results, please see the following comment from Chris Beckett, head of equity research at Quilter Cheviot:
"Imperial Brands has delivered a robust set of results, reinforcing the resilience of its business model despite operating in a declining industry. Building on the positive pre-close update from 8 October, today's announcement adds further detail to its steady progress. Like any traditional tobacco company, Imperial faces falling cigarette volumes but continues to offset this with price increases, achieving revenue growth even as the broader market contracts.
"The core business is performing well, with key markets like the US and Spain improving and Germany stabilising. Most markets are gaining share, with the UK being an exception. Revenue is up 5%, profits are also up 5%, and earnings have grown a remarkable 11%. The guidance for high single-digit earnings growth underlines the company’s steady trajectory.
"Imperial's business model remains straightforward but effective: raise prices to counter volume declines, pursue efficiencies, reinvest in next-generation products like heated tobacco and vapes, and return surplus cash to shareholders. Despite being somewhat of a laggard in next-generation products compared to peers, sales in this category have grown 26%, as the management team takes a more measured and focused approach, aiming to reduce losses.
"The stock has performed strongly this year, with capital returns up 37%, adding to an 8% dividend yield. This amounts to an impressive 45% total return year to date, representing a significant recovery from prior valuation declines. Even after this rally, the stock remains attractively valued at around 7x earnings.
"With a management team now four years into their tenure, Imperial’s strategy appears to be working well and its share price nudged higher again this morning."
