Tobacco giant Imperial Brands reported better-than-expected revenue and profit in its preliminary results today as it announced plans to invest heavily in vaping.
The company also boosted its dividend by 10 per cent to take its full-year dividend to 187.79p, equivalent to a seven per cent yield on the current share price.
Revenue grew 0.9 per cent to £30.5bn from £30.2bn and operating profit was up 5.7 per cent to £2.4bn from £2.28bn.
The company also said it would invest heavily in vaping this year with the aim of moving smokers away from traditional cigarettes to electronic forms.
Chief development officer Matthew Phillips told City A.M.: “We doubled the revenue of our next generation products business this year, we have an annualised exit rate of £300m and we have an ambition to try and get towards £1.5bn at the upper end in a couple of years time.”
Imperial Brands launched a new e-cigarette range, myblu, which uses a liquid nicotine pod system, earlier this year.
Phillips said: “We are very encouraged by the progress that myblu is making and we have announced another £100m behind the brand in the first half of the financial year.”
Senior market analyst at City Index Fiona Cincotta said: “Vaping revenues are growing in line with management expectations in a market that still holds much promise for Imperial Brands. Winning new vaping customers won't be easy if pure-play competitors continue to land plum distribution deals, such as the one Juul signed with Sainsbury's last week.
"That said, a new regulatory crackdown on marketing of vaping products to children is playing into the hands of big tobacco companies, hedged with a more diverse product offering that still includes popular traditional cigarette brands.”
Steve Clayton, manager of the HL Select UK Income Shares fund, which has a position in Imperial said: “These numbers show Imperial’s strategy to drive value from its tobacco brands portfolio, while growing its next generation, potentially reduced risk product range is paying off.”