Tobacco and vape firm Imperial Brands (IMB) posted in-line H1 results and maintained its FY26 financial guidance. CEO Lukas Paravini said the firm had seen ‘no material impact’ from the Middle East conflict but was monitoring events.
Guidance maintained
For the six months to March, Imperial reported tobacco and NGP (new generation product) revenue of £3.73 billion. That was marginally ahead of the consensus of £3.68 billion as compiled by the company.
Tobacco revenue rose 1.5%, with higher prices offsetting lower volumes, while NGP revenue rose 7.5%. New product sales jumped 60% in AAACE (Asia, Africa and Central Europe) while sales in Europe showed a 15% increase.
Adjusted operating profit rose 0.6% to £1.64 billion, slightly below the £1.66 billion consensus. On a reported basis, profits were down 36% due to a US court settlement and investments in the firm’s 2030 Strategy.
Adjusted EPS rose 3.1% to 127.7p, also marginally below the consensus of 128.3p, but the dividend was raised 4% to 83.4p. Free cash flow on a 12-month rolling basis reached £2.6 billion with 98% cash conversion.
‘While tensions in the Middle East have led to a more uncertain macroeconomic environment, we continue to be confident of delivering a step-up in adjusted operating profit growth in line with our full year guidance,’ commented the CEO.
Imperial Brands is a popular income stock thanks to its 6%-plus dividend yield, and most investors will be quite happy with today’s update. Higher prices for tobacco products continue to offset weaker volumes, and NGP revenue is growing steadily.
So far, the Middle East turmoil hasn’t affected demand, but it remains a risk, particularly for duty-free sales. However, that doesn’t explain the weakness in the shares, which have been trading close to 12-month lows.
We appreciate some investors won’t touch tobacco stocks due to ethical reasons, regardless of valuation. That said, Imperial looks cheap on a long-term cyclically-adjusted PE basis so holders should keep compounding their dividends.
Read the press release here:
https://www.imperialbrandsplc.com/investor-hub/results-reports-and-presentations
