Imperial Brands’ sales go up in steam

Concern that vaping could cause lung-related illnesses and is promoting smoking among children is causing consumers to have second thoughts and has sparked a profit warning at Imperial Brands.

SAFRICA-LIFESTYLE-LEISURE-SMOKING-VAPE

Vaping: not big and not clever

AFP/Getty Images

"Investors' hopes for a new lease of life for nicotine have vanished in a cloud of steam," says Karen Kwok for Breakingviews. Growing concern in America that vaping could cause lung-related illnesses and is promoting a smoking "epidemic" among children is causing consumers to have second thoughts. Hence this week's profit warning at Imperial Brands, which wiped 13% off the stock.

The vaping revolution was supposed to be a way for "the deathstick business" to reinvent itself, says Nils Pratley in The Guardian. But talk of unexplained illnesses and a regulatory clampdown mean that the "strategic fog" is thickening. A £100m cut to revenue forecasts this year doesn't sound like much in the context of £7.5bn in overall group revenues, but it raises difficult questions about the future of the industry.

Shares in the firm have halved over the last three years. Yet tobacco investors are largely in it for the generous dividends. Imperial's shareholders have collected about £10bn in payouts in the last nine years.

The slump leaves the shares on a 10% dividend yield, notes Jim Armitage in The Evening Standard. Yet management has already said that future payouts will be less generous, and the latest warning raises the prospect of an outright cut.

Was it wise to invest millions in "next-generation" products for which "sales are falling, competition is tough and regulations unpredictable"? Perhaps the firm should just have stuck to selling old-fashioned fags, "paying the big divis" and letting the business "gently decline".

Recommended

Shareholder capitalism: the world’s most powerful asset manager wants you to have your say
ESG investing

Shareholder capitalism: the world’s most powerful asset manager wants you to have your say

Under shareholder capitalism, the owners of the companies the big fund managers invest in are us – yet our voice is rarely heard. Now one asset manage…
26 Jan 2022
Julian Brigden: markets are at a huge inflexion point
Investment strategy

Julian Brigden: markets are at a huge inflexion point

Merryn talks to Julian Brigden of Macro Intelligence 2 Partners about the unwinding of the US stockmarket's super-bubble, and the risks and opportunit…
25 Jan 2022
Has growth investing had its day? Don’t be so sure
Growth investing

Has growth investing had its day? Don’t be so sure

Markets – and “jam tomorrow” growth stocks in particular – continue to crash, with some analysts forecasting a 50% drop or more. But, says Max King, a…
25 Jan 2022
Tech stock carnage: do you think Apple, Amazon and Alphabet will save you? Think again
Tech stocks

Tech stock carnage: do you think Apple, Amazon and Alphabet will save you? Think again

As tech stocks continued to slide, there is a view that you can escape all the carnage by holding really high quality profitable stocks. That view is …
24 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022