Imperial Brands: FY22 Results May Be The Calm Before The Storm

(Preview) Company Update (IMB LN) (Neutral)

Summary

• Imperial Brands stock has a superficially "cheap" 7.7x P/E and a 7.0% Dividend Yield, but FY22 results on Tuesday had few positives.

• EPS grew 6.8% but mostly due to lower debt and currency. EBIT rose 1.8%, excluding currency mostly due to litigation charges.

• Group Tobacco EBIT fell as “investments” more than offset “underlying" growth. EBIT fell in Europe for the third time in four years.

• The company's Next Generation Products have low market share. Investments will now increase, pushing up losses in FY23.

• Imperial Brands is not future-proof. The chances of substantial profit declines in future years are too real. Avoid.

Introduction

Imperial Brands PLC ("IMB") released FY22 (ending September 2022) results on Tuesday. IMB shares finished the day in London down 0.8% (in U.K. pounds).

IMB’s FY22 results provided little evidence of operational improvement. Adjusted EPS rose 6.8% year-on-year, but mostly due to lower debt and currency. Adjusted EBIT rose 1.8% excluding currency, but mostl…