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Imperial Brands share price surges as e-cigarettes boost tobacco giant

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Imperial Brands said it remains on track to deliver full-year net revenue growth as next-gen products help offset falling tobacco sales. Photo: Nick Ansell/PA
Imperial Brands said it remains on track to deliver full-year net revenue growth as next-gen products help offset falling tobacco sales. Photo: Nick Ansell/PA

Imperial Brands (IMB.L) hailed a strong half-year performance on Tuesday as next-gen product sales help make up for lower tobacco volumes.

The Rizla-maker said it was "pleased" with its performance in the first half of its financial year, as it was able to raise its interim dividend but saw a sharp drop in profit.

The FTSE (^FTSE) tobacco group, which makes Gauloises, West cigarettes, also saw losses narrow in its e-cigarettes business as demand for e-cigarettes and heated tobacco products grew.

Revenue in the six months to 31 March, grew 0.3% to £3.5bn. Tobacco revenue was up 0.1% as higher prices were able to offset a 0.7% decline in volumes.

Sales of its next generation products, which include Pulze heated tobacco and blu e-cigarettes, saw a 8.7% rise to £101m ($129m), driven by a strong performance in Europe.

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"These results provide further evidence that we have achieved the stabilisation of our core combustible business," said CEO Stefan Bomhard. "During the first half of the year, we increased aggregate market share in the five priority markets which account for around 70% of our operating profit, while maintaining pricing discipline."

"This strong performance is an outcome of our tighter performance management and disciplined investment in sales execution and brand building."

Bomhard laid out a turnaround plan in 2021 focused on its five top markets and expanding after years of slow growth and market share losses, focussing on its five top markets and expanding NGP deemed less harmful to health.

Its core markets in the US, UK, Germany, Spain and Australia account for over 70% of the firm's revenue.

The tobacco giant was the biggest riser on London's bluechip index as shares soared 6.9% following the update on Tuesday morning.

Tuesday's results have boosted the company's shares to a more than two-year high.

Investors seem "relieved that the firm is on track to hit its full year guidance figures, as it proceeds in its five year strategy to shift to tobacco alternatives," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

It reported that adjusted and reported net debt were both reduced by £1.2bn (12-month basis), driven by free cash flow

Imperial Brands said it remains on track to deliver full-year net revenue growth of around 0-1% and underlying operating profit growth of 1%.

The board announced an interim dividend of 42.54p, 1% higher than last year.

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Despite the announcement, Imperial said its Russia exit took a £225m chunk out of its pre-tax profit, pushing it down by 39% to less than £1.3bn in the first six months of the financial year.

Russ Mould, investment director at AJ Bell, said: "Imperial Brands’ sales may have been flat in the first half but, if you put to one side the impact of its exit from Russia, it is notable that profit is up.

"Imperial has also been able to push through price increases and is generating mountains of cash.

"At times last year it felt like investors were going to ditch their tobacco habit entirely as ESG considerations were at the fore.

"However, the cigarette makers are proving hard to stub out in an environment where their pricing power and resilient demand provides a useful hedge against inflation."

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