Imperial Brands launches new buyback, backs guide despite volume drop

Imperial Brands PLC on Thursday unveiled plans to repurchase a further £1.5 billion in shares, following an optimistic trading update which reaffirmed annual guidance, despite group-level volume declines.

Shares in the Bristol, England-based tobacco company were up 3.4% to 2,573.00 pence each on Thursday morning in London, though the stock has fallen 18% over the past year.

The firm, whose stable of brands includes Davidoff and Gauloises cigarettes, Rizla rolling paper and blu e-cigarettes, is eyeing a new £1.5 billion buyback scheme, which it intends to complete by October 29, 2027.

Imperial Brands has already entered an agreement with HSBC Bank PLC to begin the first tranche, worth £750 million, on Thursday, ending by May 4.

"This is part of the company's commitment to an ongoing, evergreen buyback programme to 2030 that will deliver a material reduction in the capital base over time," Imperial Brands said.

The announcement was accompanied by an upbeat trading statement, in which the company hailed the "strong momentum behind our transformation".

Imperial Brands reported that it is tracking in line with guidance for the year ended in September. It expects to post a "sixth consecutive year of tobacco net revenue growth" at constant exchange rates, alongside double-digit growth in 'Next Generation Products' which include its vaping and heated tobacco range.

The company pointed to "robust pricing and share gains in our target segments in US and Germany" but also acknowledged low-single-digit volume declines for the group as a whole.

Adjusted operating profit growth is expected to be within the company's 3% to 5% target range, supporting a high-single-digit boost to adjusted earnings per share. The company described adjusted operating cash conversion as "strong" and expects annual free cash flow to be more than £2.2 billion.

It sees the foreign exchange impact on net revenue and adjusted operating profit ranging from flat to a tailwind of 0.5%. It sees currency effects on earnings per share ranging from flat to a headwind of 0.5%.

Leverage is expected to be at the lower end of the company's target range, which is 2.0 times to 2.5x net debt to earnings before interest, tax, depreciation and amortisation.

"We are seeing strong momentum in heated tobacco with Pulze 3.0 and new iD sticks, in vape, our blu kit range continues to perform well and in modern oral our existing portfolio of growing brands, including Zone and Skruf, has been enhanced by the acquisitions of Black Buffalo in the US and Helwit in Sweden," Imperial Brands said on Thursday.

"We have strong momentum behind our transformation towards becoming a more consumer-centric, data -led, agile and efficient challenger."

The company anticipates that it will reach at least £320 million in savings by 2030, supporting a future overhead reduction of £100 million.

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