19th May 2020 08:29
(Alliance News) - Tobacco company Imperial Brands PLC on Tuesday cut its dividend after reporting a drop in interim profit and warned that the Covid-19 pandemic is expected to have a "more pronounced" impact in the second half of financial 2021.
Shares in the company were down 7.8% at 1,524.00 pence each in London on Tuesday morning.
Joint Interim Chief Executives Dominic Brisby and Joerg Biebernick said: "While we delivered against our revised expectations, we are disappointed with these results, and we remain fully focused on all opportunities to strengthen performance.
"Overall, Covid-19 has so far had only a small impact on trading but we expect this to be more pronounced in the second half due to continued pressures on our duty free and travel retail business, changes in consumption patterns including downtrading and a reversal of some first half inventory build".
For the half-year ended March 31, the Davidoff cigarette maker's revenue rose 2.0% to GBP14.67 billion from GBP14.39 billion last year, but pretax profit fell 23% to GBP785 million from GBP1.02 billion. Operating profit fell 20% to GBP925 million.
The FTSE 100-listed company said first-half results were affected by lower sales of next generation products like e-cigarettes, write-downs and impairments totalling GBP95 million.
First half revenue from next generation products division plummeted 44% to GBP83 million from GBP148 million a year ago. Revenue from core tobacco products remained flat at GBP3.51 billion.
"We have reduced our NGP spend following the poor returns on investment last year and this, together with recent weaknesses in the vapour category, has resulted in lower NGP revenue," said Brisby and Biebernick.
Imperial Brands, which also owns cigarette brands like Winston and Gauloises, cut its interim dividend by 33% to 41.70p from 62.56p last year.
It said that the pace of debt reduction has not been "as fast as we would have liked in recent years". Accordingly, the company decided to rebase the dividend by a third to provide increased financial flexibility, with the priority of accelerating debt reduction to the lower end of the existing 2 to 2.5 times target range, which is predicted to be achieved by the end of 2022.
The company's reported net debt increased by GBP763 million to GBP14.14 billion at March 31.
Looking ahead, Imperial Brands expects coronavirus-related factors to have a low single-digit impact on annual earnings per share in addition to current market expectations of a 2% fall in constant currency EPS. First half diluted EPS fell to 55.5p from 71.0p a year ago.
By Tapan Panchal; [email protected]
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