8th Oct 2020 09:45
(Alliance News) - Imperial Brands PLC on Thursday said its traditional tobacco business performed well in financial 2020 but trading in the Next Generation products division was "disappointing".
The FTSE 100-listed tobacco company expects tobacco net revenue to increase by around 1% year-on-year at constant currency for the in the year ended September 30, despite an uncertain and disrupted trading environment.
Net revenue for its Next Generation products - which includes products such as Imperial Brands' Blu e-cigarette - is estimated to be around 30% lower year-on-year, however.
"Trading has been disappointing, albeit in line with our revised expectations with the level of underlying losses reduced in the second half as we curtailed expenditure," Imperial noted of the Next Generation performance.
Imperial said it experienced increased overall demand in its tobacco business as consumers allocated more of their spend to tobacco, resulting in better than expected volumes.
The Bristol-based company added group net revenue is expected to be flat on the GBP31.59 billion recorded for financial 2019, but warned it incurred some additional manufacturing costs caused by the Covid-related restrictions. It also increased its provisions - mainly in respect of stock and debtor positions - and as a result, expects constant currency earnings per share to be down by around 6%, in line with current market forecasts.
Adjusted earnings per share for financial 2019 was 273.3 pence and basic earnings per share was 106.0p.
William Ryder, equity analyst at Hargreaves Lansdown said the company's forecast to grow full-year tobacco revenue would actually "be a minor achievement considering the weakness in duty free sales following the collapse of international travel".
"The news around Next Generation products is disappointing, but unfortunately not too surprising. Imperial has pulled back on investment and sales have taken a hit. We think there will still be a future in Next Generation products and doubt they were just a fad, but the industry has had to scale back its expectations from a few years ago. It doesn’t look like vaping will be driving massive growth any time soon," Ryder added.
Separately, Imperial said the divestment of its Premium Cigars business is on track to complete on October 29 with the second non-refundable down payment of EUR85.7 million having been received.
Last week, Imperial said the sale completion had been "slightly delayed" to October 29 due to Covid-19. The FTSE 100-listed firm - which owns the Davidoff and Winston cigarette brands - agreed the sale back in April.
Gemstone Investment Holding Ltd is to buy Premium Cigar USA for EUR185 million with Allied Cigar Corp SL acquiring the company's Rest of the World cigars business for EUR1.04 billion.
The stock was trading 1.0% higher at 1,377.00 pence each on Thursday morning in London. Shares have fallen 26% in the year-to-date.
By Ife Taiwo and Tapan Panchal
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