Imperial Brands: FY21 Results Gave Little Support To Buy Case

(Preview) Company Upate (IMB LN) (Neutral)

Summary

• FY21 results had little evidence that the turnaround is working, which outweighs the appeal of a 6.4x P/E and an 8.9% Dividend Yield.

• Organic Adjusted EBIT growth was 4.8%, but only 3.5% excluding lower Next Generation Products investments and other one-offs.

• That 3.5% EBIT growth may not last, having been helped by COVID and dependent on the U.S. market (including mass-market cigars).

• COVID-19's boost to tobacco volumes is now reversing, and mass-market cigars face some headwinds. FY22 guidance had little earnings growth.

• Despite leverage falling to 2.2x and within the 2.0-2.5x target range, the dividend was raised just 1% and buybacks were not resumed.

Introduction

Imperial Brands PLC stock fell 1.8% in London today (November 16) after the company released FY21 (ending 30 September) results.

We have had a Neutral rating on Imperial Brands (referred here as "IMB") since we initiated our coverage in July 2019. Since then IMB stock trading in London has fallen 18.9% in GBP (and still 0…