Imperial Brands’ sales go up in steam

A woman vaping © GUILLEM SARTORIO/AFP/Getty Images
Vaping: not big and not clever

“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”.