Tobacco price rises push Imperial’s shareholder returns to £2.8bn

Imperial Brands is to increase shareholder returns next year to £2.8 billion after continuing to generate large amounts of cash from price rises.
In a trading update for the year to the end of September, before its full-year results next month, the FTSE 100 maker of L&B and JPS cigarettes said trading had been in line with the board’s expectations.
The company, based in Bristol, said it had achieved revenue growth in its core tobacco and smaller e-cigarettes business, where operating losses fell further, as well as “stable” aggregate market share in its five priority markets.
Thanks to this trading, Imperial plans to increase its share buyback by 13.6 per cent to £1.25 billion next year, representing about 7 per cent of its market capitalisation on the London Stock Exchange.
Imperial said it was therefore on course to return £3.35 billion since it started a share buyback programme in 2022.
It declared a total dividend for its 2024 financial year of 153.43p per share, an increase of 4.5 per cent year-on-year. Combined, Imperial said it would be returning £2.8 billion to shareholders next year, up from £2.4 billion.
It also plans to move to quarterly dividend payments from 2026, which it said would result in more consistent cash returns to shareholders throughout the year and was enabled by its “strong visibility” of cash flow.
Imperial said the dividend and buyback increase were part of its strategy of returning surplus capital to shareholders after investment in the business and maintaining leverage at the lower end of its net debt to earnings range of two to 2.5 times.
Shares in Imperial responded positively to the update on Tuesday, rallying 4.4 per cent to £22.42½ by the afternoon, making it the largest riser on the FTSE 100. The shares have risen about 22 per cent this year, outperforming the wider index, which is up about 6 per cent.
Stefan Bomhard, Imperial’s chief executive since 2020, is entering the final year of a five-year strategy focused on expanding cigarette sales and five core tobacco markets, while taking a more cautious approach to investment in next-generation products, such as its Blu e-cigarette brand.
The tobacco industry continues to generate large amounts of cash by raising prices to offset pressure on sales volumes and increased regulation.
In the UK the government included a Tobacco and Vapes Bill in July’s King’s Speech that would gradually increase the age at which people can buy cigarettes until they are banned, and impose limits on the sale and marketing of vapes. The prime minister has not ruled out a smoking ban in outdoor spaces such as pub gardens, hospital and university campuses, and sports grounds.
Imperial said it had gained tobacco market share in the US, Spain and Australia, offsetting declines in Germany and the UK, which it said was “consistent with our medium-term objective to hold or grow aggregate share across these markets”.
Revenue from its so-called next generation products business is expected to have increased by between 20 per cent and 30 per cent, helped by its iSenzia non-tobacco brand. It has also entered the US oral nicotine market through the launch of its Zone pouches.
Imperial added that it was on course to hit full-year guidance “with an acceleration” in tobacco and next-generation product net revenue growth versus last year and group-adjusted operating profit growth “close to the middle of our mid-single digit range”.