Tobacco giant Imperial brands has reported that its operating profits grew by 27% last year to £1.53bn.
The Bristol-based company has released its half year results, where it also reported revenues of £15.4bn. It said that the increase in operation profit "reflected the fact that charges in relation to exiting Russia last year were not repeated".
Imperial noted that it is in the middle of a five year restructuring programme and said that it is on course to make savings of £150m a year by the end of 2023. The company also said that it has seen a return to pre-Covid buying patterns.
Imperial Brands chief executive, Stefan Bomhard said: “We are now in the third year of our five-year strategy, and this means we are moving from the initial foundation building phase to a period of improving financial delivery. We remain strongly committed to an ongoing programme of shareholder returns and will complete our initial £1bn buyback during the second half.
Read more: Tobacco giant Imperial Brands on track for ‘similar’ results after Russia exit
“Business performance for the first half of fiscal year 2023 was resilient, despite temporarily increased volume declines against a strong comparator. As expected, this reflects a return to pre-COVID buying patterns as well as our decision to exit Russia last year. In tobacco, we have delivered further share gains in aggregate across our portfolio of top five markets, while also achieving strong pricing to help mitigate the volume declines.
"We have now recorded stable or growing aggregate market share in these markets in each of the last four six-month periods after many years of sharp declines. In NGP, we have delivered a step-up in innovation with new product and market launches in all three categories: vapour, heated tobacco and modern oral."
Bristol-based British financial service company Hargreaves Lansdown has looked over Imperial's half year results and noted that although the group had "robust" pricing, growth was held back by the exit from Russia and a 6.8% decline in volumes across the rest of Imperial’s markets.
The financial company said that as a result, underlying operating profit for the first half was "broadly flat", up just 0.8% to £1.7bn, "ignoring the effect of exchange rates". This was in-line with previous guidance.
Derren Nathan, head of equity research at Hargreaves Lansdown commented: "Sales of Next Generation Products (NGP) such as vapes are accelerating but it’s still a small part of Imperial’s mix and losses have widened too. The focus on Europe for these products seems to be paying off for now, with US regulators taking a tougher stance. Total underlying NGP revenue growth was 19.8% with Europe up 35.1%.
"There’s no guarantee that will go on indefinitely though and there is a growing pressure on companies to market these products responsibly. Growth in nicotine fuelled businesses may still prove hard to come buy and that’s reflected in the single digit earnings multiple. But with an 8% yield the stock still has it’s attractions. With that in mind it was a little disappointing to see a free cash outflow, but that should reverse in the second half as Imperial runs down inventory levels.”
Mr Bomhard added: “We remain on track to deliver the acceleration in adjusted operating profit growth in the second half in line with our guidance and expectations. I am confident the actions we have taken are creating a stronger, more resilient business capable of driving shareholder returns through a growing dividend and an ongoing share buyback.”
Imperial remains confident in its ability to navigate the current macro-economic challenges and said that it is "well placed" to generate long-term value for shareholders.
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