Imperial Brands has reiterated its full-year guidance after reporting a solid start to the financial year, with pricing in tobacco and continued growth in next generation products helping offset ongoing volume decline.
In a trading update, the group said it expects tobacco and next generation product net revenue to rise by a low single-digit percentage in the first half, with adjusted operating profit set to come in slightly ahead of the same period last year.
The business said performance would be weighted towards the second half, in line with previous guidance, and remains on track to deliver at least high single-digit earnings per share growth and at least £2.2bn in free cash flow for the full year.
Imperial continues to expect low single-digit growth in tobacco net revenue for the year, alongside double-digit growth in next generation products, with group adjusted operating profit forecast to increase by between three and five per cent at constant currency.
The company said tobacco performance in the first half had been driven by robust pricing, despite a low single-digit decline in combustible volumes.
It also pointed to further momentum in next generation products, with mid-to-high single-digit net revenue growth expected in the first half, including double-digit growth across its Europe and AAACE regions.
Imperial said heated tobacco had performed strongly, particularly through Pulze 3.0 in Italy and Greece, while its blu vape range and modern oral brands including Skruf and Zone also contributed to growth.
The group added that, while market share remains important, it is continuing to prioritise profitability and longer-term value creation. As a result, it expects a modest reduction in aggregate share across its top five markets in the first half.
In the US, Imperial said Zone had maintained volume share, although heightened promotional activity meant next generation product net revenue would be lower than the same period last year.
It expects growth in both tobacco and next generation products in the market to accelerate in the second half, supported by pricing, the March launch of Malibu cigarettes and new flavour launches for Zone.
The business also said it had completed £0.7bn of its planned £1.45bn share buyback for the year, as part of its longer-term ‘evergreen’ buyback programme through to 2030.
Alongside the financial update, Imperial said it had made a positive start to its wider 2030 transformation plan, which is aimed at making the business more consumer-centric, data-led and efficient.
That work includes a long-term partnership with Capgemini, further supply chain initiatives and continued rollout of enterprise IT systems.
The company noted that the conflict in the Middle East had created a more uncertain geopolitical and macroeconomic backdrop, although it said there had been no material impact on the business so far.
Commenting on the update, Freetrade analyst Duncan Ferris said: “Imperial Brands is in a strange space, serving a declining market as the number of smokers worldwide continues to fall.
“Today’s reiteration of full-year guidance demonstrates the company’s ability to deliver on the first of these goals, with tobacco price increases driving steady revenue growth despite volume decline.
“Ultimately, for Imperial Brands to be a sustainable long-term play, its next generation products will need to make steps toward significant profitability as combustible volume continues to decline. At present, though the revenue of products like heated tobacco is dwarfed by the core business, continued double-digit net revenue growth is an encouraging sign.”
Imperial Brands will publish its interim results for the six months to 31 March on 12 May.
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