British tobacco company Imperial Brands PLC (LON:IMB) maintained its full year guidance for profit and revenue despite the impact of tighter regulation and the collapse of UK wholesaler Palmer & Harvey.
Palmer & Harvey, one of the UK's largest cigarette supplier, went into administration last November after unsuccessful attempts to restructure the business in the face of challenging trading conditions.
Imperial said reported operating profit will take a write-off of up to £160mln as a result of Palmer & Harvey's demise.
The company said its performance will be weighted towards the second half, thanks to improved prices and mix in tobacco and an increasing contribution from its e-vapour products.
READ: Imperial Brands shares flick higher on plans to expand vaping products amid falling tobacco sales
Imperial said the first six months of the year will reflect some negative prices and mix after new rules imposed by the European Union.
Under the new rules, tobacco manufacturers are now only allowed to produce cigarettes in standardised packaging and must contain less than 20 sticks per pack.
Imperial extends e-vapour products into new markets
With stricter regulation and consumers becoming more health conscious, Imperial said it is focusing on expanding its presence in vaping.
“We are significantly stepping up our level of activity in Next Generation Products, with multiple launches in the next few months,” it said.
Imperial plans to extend its electronic cigarette liquidpod, myblu, into new markets after recently launching the product in the US, where it has generated a positive response.
It is also finalising launches in France, UK, Russia and Italy. Myblu will be available in at least 10 markets by the end of the 2018 financial year and this figure is set to double the following year.
Imperial said a stronger pound is expected to result in a positive impact on net revenue and adjusted profit of about 3.5% at the half year and 2.5-3.0% at the full year.
"Cash generation remains strong underpinning our 10% dividend growth," it said.