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Imperial Brands sees lower first-half profits but increased e-vapour sales
Imperial Brands snuffed out hopes of a strong first-half result, with revenues hit by new tobacco laws in the UK and an adverse sales mix, but said it was "significantly stepping up" its activities in vaping and ecigarettes.
Underlying first half operating profit will flat compared to last year but will be hit by a currency headwind from the recovery in the pound, a £160m write-off from the collapse of wholesaler Palmer & Harvey and lower intellectual property licensing income from the Fontem e-vapour products joint venture.
But management expect full year adjusted operating profits, if ignoring the P&H write-off, to be weighted even more to the second half than last year's 46%-54% split on a constant currency basis.
Reported net revenue and adjusted profit will be hit by a 3.5% sterling translation headwind strengthening for the 3.5% at first half and 2.5-3.0% for the full year, based on current rates.
But Imperial's all-important dividend is still on track to meet the 10% growth target, with cash generation said to remain strong.
As chief executive Alison Cooper said at November's final results, the other chief medium-term targets are to deliver constant currency revenue and earnings per share growth. Cooper also said the FTSE 100 company would invest £300m in 'next generation' products in 2018 and take "decisive cost action".
On Wednesday, in a statement ahead of the company's annual shareholder meeting, Imperial said it was "prioritising e-vapour growth" by further developing its Blu brand, which is currently available in the USA, UK, Italy and France.
A new pod system, 'myblu', has been launched in the US, which Imperial said it "part of a significant portfolio development, improving the consumer experience and therefore conversion potential". Rather than the Blu's single-use ecigarettes, myblu users can top up their device with pods of eliquid, which is the fastest growing vaping segment in the US.
Imperial is launching the system in France, UK, Russia and Italy and, by the end of the financial year, the new system will be available in at least 10 markets, with this figure set to double in the 2019 financial year.
"The innovation strengths of our recently acquired business, Nerudia, are already adding to our exciting pipeline of developments that will continue to improve our consumer offering," Imperial added.