We recommended shares in tobacco and ‘next generation’ products smoking company Imperial Brands (IMB) amidst the market instability in early April – noting trading performance resilience although we regarded a dividend cut as almost inevitable. The company has now announced results for its half-year ended 31st March 2020 – and there’s subsequently been a new addition to the shareholder list...
Tobacco net revenue was slightly up, but overall net revenue slightly down following disappointing ‘next generation’ products performance. Adjusted operating profit was down to £1.5 billion and adjusted earnings per share to 103p – from a corresponding prior year period 115.6p. Net debt was up to £13.5 billion, though the company emphasising “deleveraging… a key priority”. Indeed steps are being taken with a €1.2 billion sale of its premium cigar business now agreed and an interim dividend per share of 41.70p (to be paid in two payments of 20.85p per share on 30th June and 30th September, with ex-dividend dates of 28th May and 20th August respectively), down from 62.56p. The company notes this “to accelerate debt repayment, while retaining a progressive dividend policy, growing annually from the rebased level”.
Total dividends last year were 206.6p per share, but even 137.7p equates to a yield of more than 8.8% currently. There are challenges – the company noting, for example, “pressures on our duty free and travel retail business, changes in consumption patterns including downtrading” but also “action to improve returns and improve the sustainability of our NGP business”.
With also inherent demand defensiveness, we continue to consider that, say, a 6.5% sustainable-looking dividend yield fairer – that currently suggesting a more than 2100p share price. As such at anywhere around current levels, the shares are still an Income buy.
This first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website for a new share tip from Tom & Steve THIS AFTERNOON and a new shorting piece this week too click HERE
Filed under: Imperial Brands, shareshow, Martin Hughes, easyJet, Xtract Resources, N50 website
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