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FTSE: Imperial Brands climbs 4% after launching £1bn share buyback

A woman poses with a cigarette in front of Imperial Brands logo
Imperial Brands, which owns the Gauloises, Rizla, and JPS brands, rose to the top of London’s blue chip index as it reiterated its previous guidance. Photo: Dado Ruvic/Reuters

Imperial Brands (IMB.L) found favour with investors on Thursday, climbing more than 4% on the day, after it announced it was launching a £1bn ($1.13bn) share buyback.

The tobacco firm will repurchase as much as 5.3% of its stock in a year-long programme starting from Friday, a move that has become possible now the company’s debt is in the lower end of a target range.

It is its first buyback programme in two years, and comes hot on the heels of a £2bn package launched by rival British American Tobacco (BATS.L) earlier this year.

Imperial, which owns the Gauloises, Rizla, and JPS brands, rose to the top of London’s blue chip index as it reiterated its previous guidance, and said it expects full-year revenue and operating profit to both grow by around 1%.

It earns around 70% of its profits from traditional cigarettes in its five top markets, however, it is trying to cut losses from its vaping and smoking alternative products.

“As expected, the recovery of international travel has, over the course of the year, led to a return to pre-COVID purchasing patterns,” Imperial said, putting extra emphasis on the rollout and expansion of next generation products.

“This has led to increased volume declines, particularly in Northern Europe, partly offset by volume growth in Southern Europe and Duty Free.”

Operating profit growth, adjusted at constant currencies, is now expected to accelerate to deliver a mid-single digit compound average growth rate over the three years.

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Matt Britzman, equity analyst at Hargreaves Lansdown said: “News of a fresh £1bn buyback at Imperial Brands will be welcomed by investors and is the culmination of work done over the last two years to get a tight grip on capital allocation and increase focus into core business areas.

“Markets were unsurprisingly happy to hear the news, given shareholder returns for tobacco companies are really the only material case for investing for now.”

He added: “Having scrapped most of its projects over the last few years, new endeavours now look to be showing signs of promise, though its early days and Imperial still has some catching up to do on peers like British American Tobacco.”

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