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Imperial Brands upbeat on revenue outlook as myblu gains traction

Imperial has invested £100mln in myblu in recent months which has helped to drive growth in the US, Europe and Japan, although the investment will hold back first-half profits

Earnings could grow by as much as 8% this year

Imperial Brands PLC (LON:IMB) has hinted that it could beat revenue forecasts this year as its myblu vape pens continue to gain traction.

The FTSE 100 tobacco giant had previously guided for net revenue growth of 1-4% in its current financial year to the end of September.

READ: Imperial Brands looks for new chairman

But in a trading update ahead of its interim results, it said it is on track to deliver net revenue growth “at, or above, the upper end” of its forecasts.

Earnings per share growth are expected within the 4-8% range it had previously set out.

Imperial said its traditional Tobacco division is on course to deliver “modest revenue growth” this year, with price rises offsetting falling sales.

As fewer people take up smoking cigarettes and cigars, the company has been investing heavily into its next-generation products.

One of those is myblu, which has built “strong retail share positions” in Europe and in Japan, while it has also achieved “good year-on-year revenue growth” in the US.

US uncertainty

That was despite the uncertainty created by the US Food and Drug Administration which has been cracking down on the use of tobacco products among teenagers.

FDA chief Scott Gottlieb, who is due to step aside next month, had suggested that flavoured e-cigarettes could be banned altogether.

Imperial has poured £100mln into myblu over the past few months which it warned will hold back first-half operating profits, although it expects a stronger second half.

First-half earnings per share will also take a knock from the reduction of the company’s Logista stake and last year's divestment of its Other Tobacco Products business.

There will be a slight tailwind from currency movements though, which should boost first-half earnings by 2%.

‘Solid performance’

“Imperial has seen robust trading in the core tobacco business and strong growth in its Next Generation portfolio of e-cigarettes,” said Hargreaves Lansdown fund manager Steve Clayton.

“All in all, this looks a solid performance and Imperial’s policy of raising the dividend by 10% per annum looks unlikely to change.

“With a current forecast yield of 8% the income attractions of the stock are clear.”

Shares were down 0.8% to 2,552p in early deals on Wednesday morning.

Quick facts: Imperial Brands

Price: 1506.5 GBX

Market: LSE
Market Cap: £14.26 billion

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