Imperial Brands PLC (LSE:IMB) revealed a 15% decline in profits for the past year due to its exit from Russia but delivered a 1.5% increase in the annual dividend and promised to keep increasing shareholder returns in future.
The cigarette maker said profit growth will initially be flat in the new year as it continues to invest heavily in its vaping and other next-generation products (NGPs).
For the year to 30 September 2022, it reported group revenue of £32.6bn, down 0.7%, with the blame placed on a weaker euro offsetting a 6% rise in the tobacco price mix and an 11% rise in NGP sales after various product launches, including its heated tobacco products - Pulze and iD – being made available in five European markets.
Operating profits fell 15% to £2.7bn because of almost £400mln charges related to the exit from Russia and the fact that profits were boosted the previous year by the disposal of its Premium Cigar division.
Earnings per share tumbled to 165.9p from 299.9p a year earlier to reflect the lower profit and lower finance income as unhedged currency exposures were reduced on financial instruments, partly offset by a higher reported tax rate.
Free cash flow swelled 68% to £2.6bn, which will fund the second half of the £1bn share buyback announced in October, due to be completed by September 2023, while the annual dividend was upped to 141.17p per share.
Chief executive Stefan Bomhard said the additional investment in the past two years “built strong foundations for the next three-year phase of our plan to deliver improving returns”, where he added that he continues to expect low single-digit net revenue growth with adjusted operating profit growth accelerating to deliver mid-single digit compound annual growth, all at constant currencies.
Adjusted operating profit growth is expected to increase over the three years but performance in the new year will be weighted to the second half as more NGP investment is made in the first, along with the impact of the exit from Russia.
“As a result, the first half adjusted operating profit is expected to be at a similar level to last year, at constant currency,” Bomhard said, while a 5%-6% tailwind is expected from currency rates on net revenue, adjusted operating profit and earnings per share, based on current rates.