Imperial Brands plans £1bn share buyback to help investors cash in on growth
Imperial Brands announced that it has launched a £1bn buyback programme to reward loyal investors, which have helped the firm climb towards the top of the FTSE 100.
The cigarette giant, which makes brands like Rizla and JPS, said it would repurchase as much as 5.3 per cent of its stock in a year-long programme: a move which it said was the culmination of a two-year ‘strengthening’ phase, as it moves to the next three-year ‘improving returns’ phase.
With shares up 4.2 per cent to £19.76 in early morning trading , “markets were unsurprisingly happy to hear the news, given shareholder returns for tobacco companies are really the only material case for investing for now,” equity Analyst at Hargreaves Lansdown Matt Britzman explained.
The cigarette giant ranks as the 10 best performing stocks on the blue-chip index, with investors piling towards Big Tobacco.
“Today’s announcement is underpinned by this improving performance and our confidence in being able to continue generating strong cash flows to support growing shareholder returns in the years to come. We are committed to a progressive dividend and an ongoing buyback programme to meaningfully reduce the capital base over time,” chief Stefan Bomhard said.
However, Britzman said Imperial still had “some catching up to do on peers like British American Tobacco,’ who have doubled-down on their vape and heated tobacco products, making up 14.6 per cent of revenue in 2021.
For tobacco alternatives, Imperial said further share gains have been made with Pulze and iD, its heated tobacco offering, in Greece and the Czech Republic, and in the past month it launched in Italy, Europe’s largest heated tobacco market.
Imperial said trading was in line with expectations, and the growth rate of tobacco net revenue improved in the second half of the year compared with the first, with the return of international travel denting traditional tobacco volumes.
“As expected, the recovery of international travel has, over the course of the year, led to a return to pre-COVID purchasing patterns,” the firm said in an update this morning. “This has led to increased volume declines, particularly in Northern Europe, partly offset by volume growth in Southern Europe and Duty Free.”