Interactive Investor

ii view: Imperial Brands sticks with forecasts despite Russia exit

13th April 2023 12:07

by Keith Bowman from interactive investor

Share on

This tobacco giant is down year-to-date but offers an attractive dividend yield. Buy, sell, or hold?


First-half trading update

ii round-up:

Tobacco company Imperial Brands (LSE:IMB) today detailed its expectations for full-year sales and profit to meet its prior forecasts, as it continued to battle tough comparatives from the pandemic as well as previously exiting Russia. 

Excluding lost Russian sales, currency adjusted first half revenues are expected to prove similar to that achieved last year. That's marginally lower than City forecasts for a slight gain, but with currency adjusted sales over the full year still forecast to grow by a low single-digit amount.   

Shares in the FTSE 100 company fell by just over 1% in UK trading having come into this latest announcement down 9% year-to-date. That’s similar to larger rival British American Tobacco (LSE:BATS) and in contrast to a near 5% gain for the FTSE 100 index itself. 

Imperial, whose brands include JPS and Davidoff, also expects adjusted operating profit for the first half to prove similar to last year’s, hindered by Russia, tough Covid comparatives and ongoing investment costs for its Next Generation Products (NGP) such as vapes.

In early 2021, the Bristol headquartered company detailed new five-year strategic goals, including a heightened focus on its top five tobacco markets generating around 70% of its combustible operating profit and taking a more disciplined approach to its NGP products.

Growing or stable market shares for its combustible products across the US, Spain and Australia helped offset declines in Germany and the UK. Net revenue growth for NGP was aided by product launches under its Pulze and Blu brands. 

First-half results are scheduled for 16 May.

ii view:

Separated out of conglomerate Hanson in 1996, Imperial today operates in over 150 countries. Its cigarette or combustible brands include Gauloises, West, Nobel and L&B. Its portfolio of potentially less harmful Next Generation Products (NGP) spans the three categories of vapour, heated tobacco, and oral nicotine with brand names including blu, Pulse, iD, and Zone X. 

For investors, moves by Imperial and its rivals towards NGP have been hindered since 2019 by concerns about safety. The use of flavourings to enhance consumer enjoyment, and even possibly encourage new users, has also brought the industry under the spotlight. The potential for plain packaging in more markets remains, while a previous cutting of the dividend also proved disappointing given the sector’s reputation for perceived dividend dependability. 

On the upside, a five-year strategy to transform and improve performance is ongoing and management still expects operating profit growth to accelerate over the next three years. Losses for its NGP business had previously reduced, while its ratio of net debt to adjusted profit (EBITDA) is expected to remain at the lower end of management’s targeted 2 to 2.5 times range over the current full year. 

For now, and while ethical issues will continue to deter many investors, a forecast dividend yield of over 7% is likely to retain existing income investors and attract new ones.


  • Five-year strategic plan being pursued
  • £473 million of a £1 billion share buyback programme remains


  • Health concerns for NGP products
  • Ethical concerns leave many funds unable to invest

The average rating of stock market analysts:


These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox