Tobacco giant Imperial Brands has launched a £1bn share buyback programme after reporting to investors that trading for 2022 is in line with expectations.
The Bristol-headquartered company said on Thursday (October 6) total capital returns, including ordinary dividends and share buybacks, were expected to exceed £2.3bn in 2023, representing around 13% of current market capitalisation. The business also said progress with its next generation product launches had supported further market roll-outs.
In line with previous guidance, full-year net revenue and underlying operating profit are both expected to grow by around 1%, ignoring the effect of exchange rates.
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Stefan Bomhard, Imperial Brands chief executive, said the launch of the new buyback programme was an "important milestone" in the company's five-year strategy announced in January 2021.
"Over the past two years, increased investment and a more consumer-centric approach have improved delivery in both our priority combustible markets and next generation product operations," he said. "Disciplined capital allocation has strengthened our balance sheet to reach our target leverage levels."
Shares rose 3.6% on the news.
He added: "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."
Matt Britzman, equity analyst at Bristol-based Hargreaves Lansdown, said news of the fresh £1bn buyback at Imperial Brands would be welcomed by investors.
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"The two year ‘strengthening’ phase has just come to an end looks to have yielded some results, with leverage back at levels supportive of increased shareholder returns," he said. "Markets were unsurprisingly happy to hear the news, given shareholder returns for tobacco companies are really the only material case for investing for now."
Mr Britzman said the return of international travel had "dented" traditional tobacco volumes, which had put "extra emphasis" on the roll-out of the company's next generation products.
He added: "It was largely expected as smokers forgo churning cigarettes at home to get out and about. That puts extra emphasis on the roll-out and expansion of next generation products, an area Imperial’s lagged some of its peers in recent years. Having scrapped most of its projects over the last few years new endeavours now look to be showing signs of promise, though its early days and Imperial still has some catching up to do on peers like British American Tobacco.”
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