5th Oct 2023 10:45
(Alliance News) - Imperial Brands shares pushed higher on Thursday morning after the cigarette maker announced a GBP1.1 billion buyback and said that it expects to deliver full-year trading in line with expectations.
Shares were up 3.5% at 1,635.00 pence in London on Thursday morning.
The Bristol-based tobacco company said that, on a constant currency basis and including Russia, tobacco and next-generation products net revenue grew by a low single-digit percentage in the financial year that ended September 30.
Meanwhile, Imperial said its adjusted operating profit growth is expected to have accelerated to the "lower end" of its mid-single digit range.
The company also noted that tobacco net revenue growth improved in the second half of the year, as "continued strong pricing" helped to offset the relatively higher volume declines against historic averages.
Imperial had said in May that it was anticipating low single-digit constant currency tobacco net revenue growth.
Russ Mould, investment director at AJ Bell, said the trading update helped the stock claw back some of the losses it experienced on Wednesday when UK Prime Minister Rishi Sunak outlined plans to clamp down on smoking and vaping.
Sunak said on Wednesday that the legal age for buying tobacco in the UK should rise every year to stop youngsters taking up smoking, as he also pledged to crack down on the sale of disposable vapes to children.
The prime minister said more must be done to "try and stop teenagers taking up cigarettes in the first place" as he set out plans to introduce a new law banning tobacco sales to anybody born on or after January 1, 2009.
He told the Conservative party conference in Manchester that "a 14-year-old today will never legally be sold a cigarette", under new legislation for England.
AJ Bell's Mould said the plans would only add to Imperial's problems, as the UK is already one of the company's weak spots.
Richard Hunter, head of markets at interactive investors, shared his concern: "[Sunak's plans] adds to the burden of regulatory censure which has plagued the sector over recent years, a general decline in traditional tobacco products sales as health issues come to the fore and a reluctance among some investors to invest in tobacco companies at all on ethical grounds."
"Imperial Brands continues to grind out growth, but the scale of the challenges facing the sector shows little sign of abating."
Despite the regulatory clouds over the sector, Imperial shares have lost 14% over the past 12 months, compared to a 24% decline for rival British American Tobacco PLC.
Further, ii's Hunter said that the market consensus of the shares as a 'buy' suggests a "dogged resistance" to the current market challenges, based on the prospects for a burgeoning next generation product market and "ample" shareholder return rewards.
On Thursday, Imperial announced a buyback of up to GBP1.1 billion shares, starting from Friday and running to September 2024. This represented a 10% increase on last year's GBP1 billion buyback, when the company repurchased 52.1 million shares, or 5.5%, of its share capital.
Hunter noted the programme comes alongside a "punchy" dividend yield of 9% which should be "sufficient" to "attract the attention of income seeking investors."
By Heather Rydings, Alliance News senior economics reporter
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