Imperial sees revenues and profits fall in first half

Strong sales growth from Imperial Tobacco's key strategic brands wasn't enough to prevent a fall in group revenue in the first half, as its performance was hit by issues in Europe, Russia and the US.

Strong sales growth from Imperial Tobacco's key strategic brands wasn't enough to prevent a fall in group revenue in the first half, as its performance was hit by issues in Europe, Russia and the US.

Total revenue in the six months to March 31st fell by 4.2% from £13.96bn to £13.38bn as stick equivalent volumes fell 5.9% from 159.1bn to 149.7bn. Adjusted tobacco net revenue was down 3.1% at £3.28bn.

Nevertheless, the company's strategic brands of Davidoff, Gauloises Blondes, West and JPS generate high returns and performed well in the first half with net revenue up 5.0% and volumes 1.0% higher.

Imperial is continuing to have a tough time in Europe, especially Spain, where market sizes have shrunk "considerably" in the first half due to austerity, rising unemployment and increases in illicit trade.

Germany however remains resilient, while tobacco revenues in the UK were marginally lower though the company said this was a good result.

A revised pricing strategy in the States and reduced trade stock levels saw tobacco revenues fall, while a new excise structure and increased investment in Russia had a negative effect.

Meanwhile, operating profit fell 9.7% from £1.33bn to £1.20bn and earnings per share slumped 22.7% from 82.5p to 63.8p.

Despite the weakness, the company declared an interim dividend of 35.2p per share, up 11% on the year before, in line with its medium-term target for at least 10% dividend growth.

"Resilience""Our focus on quality growth has delivered further volume and revenue gains from our key strategic brands and fine cut tobaccos and good results in a number of markets across our footprint," said Chief Executive Alison Cooper.

"The resilience we're showing in a deteriorating EU environment demonstrates the strength and versatility of our unique total tobacco portfolio. Further afield, excise-driven market dynamics in Russia and our transition to a new pricing strategy in the USA slowed our revenue and profit momentum in non-EU territories, masking the good growth we're generating in Asia-Pacific and Africa and the Middle East."

Cooper said that Imperial is still working on its cost optimisation programme to save £300m per annum from September 2018 through simplifying product costs and cutting overheads. Around £30m of this will be realised in the second half.

"We're focused on leveraging our portfolio to drive quality growth across our footprint and the initial £30m savings from our cost optimisation programme will support our earnings delivery in the second half," the firm said.

Recommended

The top funds to invest in now
Funds

The top funds to invest in now

As market volatility continues, here are the top funds, stocks and investment trusts investors are putting their money into, according to one investme…
2 Dec 2022
7 sin stocks to buy yielding up to 8%!
Share tips

7 sin stocks to buy yielding up to 8%!

Sin stocks don’t have the best reputation, but when it comes to investment returns, they’re certainly worth a closer look.
2 Dec 2022
Share tips of the week – 2 December
Share tips

Share tips of the week – 2 December

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
2 Dec 2022
3 emerging-market stocks to watch
Share tips

3 emerging-market stocks to watch

The top emerging-market stocks to keep an eye on, according to Union Bancaire Privée’s Eli Koen.
1 Dec 2022

Most Popular

Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
Radiator vs electric heater – which is cheaper?
Personal finance

Radiator vs electric heater – which is cheaper?

We compare the costs, pros and cons of radiators and electric heaters and see which one will help keep your energy bill as low as possible.
28 Nov 2022
State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments
State pensions

State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments

LCP launches Mothers Missing Millions campaign amid DWP state pension errors.
3 Dec 2022