Imperial Tobacco shares dip despite sales boost

Shares in Imperial Tobacco (IMT.L) dipped today as the world's fourth-largest cigarette maker signalled dividend growth may moderate after it met forecasts with a 14 per cent rise in half-year earnings.

The British maker of Lambert & Butler, West and Gauloises cigarettes said it retains its policy to pay out 50 per cent of earnings as dividend, but in the near-term this may moderate due to the cost of restructuring at its recent Altadis acquisition.

Imperial shares slipped as much as 6.5 per cent before trading off 5.3 percent at 15.45 pounds by 0922 GMT to be the FTSE 100 Index's FTSE biggest faller as analysts moved to cut their forecasts for the group's full-year dividend.

"Management is guiding towards a temporarily lower dividend payout to take into account Altadis cash restructuring costs," said analyst Eileen Khoo at brokers Morgan Stanley.

Fellow analyst Julian Hardwick at brokers RBS said this should imply a full-year dividend of around 70 pence a share against the 80.5p he had initially forecast.

Analysts said the move reflects management caution given the difficult environment and credit markets after paying 12.6 billion euros ($17.18 billion) for the Franco-Spanish group Altadis in January 2008 funded by a 4.9 billion pounds ($7.43 billion) rights issue and debt.

Imperial announced a flat dividend of 21p in line with its policy of paying out a third of last year's 63.1p annual dividend, but its dividend payout ratio is set to dip to around 44 percent from its long-term plan of 50 percent.

"In the near term, there may be some disappointment over the dividend, but we expect the focus to turn rapidly to the strong trading performance," said RBS's Hardwick.

The group posted adjusted earnings per share for the half-year to end-March of 71.8p a share ($1.09) largely in line with forecasts ranging from 69.4p to 72.4p and a consensus of 70.8p, with its earnings boosted by the acquisition of Altadis and the translation effect of the weak pound.

Chief Executive Gareth Davis said underlying profits rose 6 percent in the half-year and he expected "slightly stronger growth" in the second half helped by the late timing of the UK spring budget, downtrading to its value brands and as cigarette users move outside and smoke more in the summer months.

The UK financial budget on April 22, meant that pre-buying before the anticipated duty rise took place in early April and hence in Imperial's second-half, and not in its first-half when the budget is more traditionally held in March.

Davis said Imperial was well placed due to tobacco's resilience in a downturn, the range of its cheaper value brands and the growth in emerging markets which had helped to offset sluggish mature markets in Western Europe.

"Hopefully we will get out of this recession soon, but until then tobacco looks a pretty good place to be," he said on a conference call after first-half results.

Davis was comfortable with analysts consensus earnings forecast of 161p for its year to end-September, while remaining on track to deliver the cost savings from its Altadis deal which made Imperial the No. 2 player in Western Europe after Marlboro-maker Philip Morris International (PMI) (PM.N).

Analysts added Imperial's earnings reflected results from bigger rivals PMI and British American Tobacco (BATS.L) which both showed weak volumes offset by price rises.

Imperial said its cigarette volumes jumped 25 percent to 151.5 billion sticks, boosted by Altadis, with tobacco net revenues up 54 percent to 12.42 billion pounds, and operating profits up 49 per cent to 1.37 billion pounds. ($1=.6586 pounds) ($1=.7336 euros)

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power