Imperial Brands profits dip at half-year stage as company builds out NGP

Imperial Brands posted a dip in profits for the front half of the year as it continued to build-out its portfolio of next generation products as sales of its traditional wares continued to shrink, in line with the trend in place across the broader sector.

For the six months ending on 31 March, the tobacco giant posted a 2.5% increase in adjusted net revenues at constant currencies to reach £3.66bn, but on the same basis total operating profits declined by 2.3% to £1.62bn.

Adjusted operating profits from tobacco and next generation products fell 1.8% to £1.54bn, impacted in part by £94m of gross investment in NGP but with FX tailwinds adding 2.1%.

The net impact of NGP investment was pegged at -£65m with distribution costs subtracting a further -£10m from the company's bottom line at the operating level.

Earnings per share of 115.6p meanwhile were 1% higher than in the year-earlier period.

Withing tobacco, Imperial's so-called asset brand net revenues, which encompass its core growth and specialist brands, jumped by 7.8% to £2.37bn.

For the company's tobacco arm as a whole, a 6.5% jump in prices helped offset a 6.9% decline in volumes, although the company said that were it not for the timing of shipments the underlying decline of 4.5% was in line with the broader industry.

Tobacco margins improved by 90 basis points and by 200bp when adjusted for the profit made on the sale of its OTP business, while the company's share of the US cigarette market growing for the first time.

NGP net revenues were up 2.9%.

Net debt increased by 2.1% to $12.96bn.

Management reiterated its forecasts for full-year revenues, profits and cash generation, telling shareholders that strong price/mix and margin progression in tobacco, as well as the momentum in 'blu', underpinned its expectations for a "strong" second half.

The former were now seen rising at or above the company's 1-4% guidance range, helped by "consistent" growth in sales of tobacco and so-called next generation products.

The company also stuck to its medium-term guidance for earnings per share.

The interim dividend was upped by 10% to 62.56p per share.