Imperial Brands Ltd. recently announced its financial results for the fiscal year, showcasing steady performance with no significant surprises. The company’s underlying revenue increased by 4.1%, reaching £8.3 billion. This growth was supported by strong pricing strategies, which more than compensated for a tobacco volume decline of 1.7%.
Growth in Next Generation Products
Sales of Next Generation Products (NGP) surged by 13.7%, reflecting a growing interest among consumers in alternatives to traditional tobacco. The company’s underlying operating profit rose by 4.6% to £4.0 billion, aligning with prior expectations. Free cash flow also saw an impressive increase of 12.9%, totaling £2.7 billion, aided by a one-time tax repayment.
Future Projections
For the upcoming fiscal year, Imperial Brands anticipates free cash flow of at least £2.2 billion. This forecast is underpinned by low single-digit net revenue growth in tobacco and a double-digit increase in NGP. The company projects a 3-5% rise in underlying operating profit for the next year.
Dividend and Buyback Strategy
- The full-year dividend has been increased by 4.5%, reaching 160.32p per share.
- Share buybacks are set to increase from £1.25 billion to £1.45 billion.
Following these announcements, Imperial Brands shares rose by 2.7% in early trading. Investors interpreted the company’s performance in 2025 as resilient and well-positioned for continued success in 2026.
Market Challenges and Focus
Despite a solid performance, Imperial anticipates potential challenges ahead. The company aims to capture market share in key tobacco markets while navigating regulatory pressures and shifting consumer preferences toward healthier alternatives.
Performance of Next Generation Products
Although the NGP segment is still relatively minor, contributing just over 3% to net revenue in 2023, the company is optimistic about its growth potential. Imperial Brands continues to refine its approach to NGPs, including products like heated tobacco and vapes.
Investor Sentiment and Valuation
The company has impressed investors with its cash generation, which supports shareholder distributions and investments in new product development. However, enhancing the valuation increases pressure on Imperial to deliver consistent profit growth.
| Key Metrics | Current Value | Ten-Year Average |
|---|---|---|
| Forward Price/Earnings Ratio (next 12 months) | 9.1 | 8.6 |
| Prospective Dividend Yield (next 12 months) | 5.4% | 7.8% |
In summary, while Imperial Brands has demonstrated a steady performance and offers attractive shareholder distributions, the company must adapt to changing market dynamics and address the risks related to Next Generation Products and ESG factors to sustain future growth.
