Imperial Brands Share Discussion Threads

[fenners66] 29/1/2021 14:42

Not checked your figures Tourist2020, but have to say if they are correct I am absolutely shocked !

If those % are anything like correct one has to question what the heck has been going on for so long ?

Many companies are active in the market re-financing debt every few years, makes my blood boil seeing all the finance costs charged as exceptionals when they never run bonds to term so they happen Every year - what can be exceptional about that ?! - but if the alternative is to not pay back such expensive debt and let it bleed the cash dry - that is even Worse.

I suppose it depends on how the debt was structured and whether they even could pay it off early with any gains - but once again someone should have taken the blame for an appalling set up in the first place if that was the case...

[tourist2020] 29/1/2021 14:24

IMB made an Operating Profit of 2.730k in 2020 and Finance Costs of 1.380k. In round numbers they are paying half their operating profit in Finance Costs and, based on the year end gross debt of around 12 bn they have finance costs over 10% of debt. That´s mouthwateringly high so for me the strategy of reducing debt and obtaing Investment Grade rating is a no brainer.

There is 1 bn of debt that falls due in Feb 22 which carries a hefty 9% coupon. Would be good to redeem that early imho.

Reducing from Gross Debt of 12 bn at 10% to 10 bn at 7% (say) brings another 50m of Net Profit Before Tax - a 2,5% increase. Looking forward to a more active Finance Director coming on board.

[creditcrunchies] 29/1/2021 13:48

who is it that goes through every post here and click on the red thumbs down?

[spud] 29/1/2021 11:12

kiwi - Yes, a good post by fenners. I guess the proof of the pudding ect ect.....

spud

[minerve 2] 29/1/2021 10:57

Dartboard

Real increased EPS also benefits shareholders. In a mature market with declining tobacco volumes you need to start reducing your share numbers at some point if NGP doesn't take up the slack.

As far as your own position is concerned they are already delivering you a c10% dividend which you can use for income/diversification, share buybacks would be on top of that if we assume sales don't fall off a cliff.

I agree with the current strategy. You will be lucky to find a remuneration package that can't be manipulated by financial engineering on EPS. Berkshire Hathaway's wholly owned subsidiaries is the gem where executive remuneration packages are truly written to be in line with shareholders. Share options are also widely used and these are also not particularly aligned with shareholders because there is no executive downside risk.

[fenners66] 29/1/2021 10:50

Holding the stock for income and investing that elsewhere - just look at the last 5 years - is also about divesting and spreading risk.
Theory says do not have all eggs in one basket - even if its the best basket and over the last 5 years IMP have been breaking eggs.

I want both
Income so I can live
and shares that go up year after year so I can join in the gains.

There is no point in selling shares for income that are going to be 500 % higher in 5 years time.

[dartboard1] 29/1/2021 10:45

Looking at the REM package ... 30% of LTIP is earned through EPS growth...

[dartboard1] 29/1/2021 10:42

Again, agree with the theory... yes. If they're only used to buy the stock when it's under valued and they don't have better options like capex (imperial have FA capex so no). Generally mgmt are compensated via EPS growth.. what's the easiest way to grow EPS? Reduce S. Call me cynical. For the time being good to see they will be paying down debt first. Not 100% fair to say I have to favour buybacks or sell and go elsewhere. Think I'm allowed to hold it, take the dividends and use them to top up other holdinfs

[minerve 2] 29/1/2021 10:33

Dartboard1 28 Jan '21 - 18:22 - 5991 of 5998

"Agree on buybacks... in theory they’re more efficient (tax, etc) ... in practice, they’re generally used to hide management and employee issued shares"

Yes, but that is like saying cars are used for bank robberies!

Choose the right company and good management and share buybacks are one of the best ways to use surplus cashflow when the criteria is right. Next is a good example.

"I’ll take the dividend and decide where it goes myself"

Which implies you have better opportunities to invest the money than Imperial Brands does. If you have, why are you bothering with Imperial Brands at all?

[topazfrenzy] 29/1/2021 08:17

I'll be getting 12% divis at this rate, and sooner than expected lol

[topazfrenzy] 29/1/2021 08:14

Thank you for the cheap shares first thing!

Added another 200 to my long term fund ..

[muscletrade] 29/1/2021 07:43

@philandera your "Citi also saying 2023 before any chance of buybacks".

It's pretty much what CEO said during the webcast although he never put a date on it. What he actually said was that excess capital would be returned (buybacks and/or special divs) once they had reduced debt enough to achieve investment grade status. My view is they would not be able to get there until 2023.

[kiwi2007] 28/1/2021 22:41

If you wonder why this is going down....read..

fenners6628 Jan '21 - 09:24 - 5973 of 5994

Excellent, well written post which gets right to the nitty gritty.

[spud] 28/1/2021 19:57

Phil - They say there's no such thing as bad publicity! Ummmm errrr....spud

[minerve 2] 28/1/2021 18:48

Spud

You do know your reasoning goes against that of the world's greatest investor Warren Buffett.

Nevertheless, I respect your right to your point of view.

[lendmeafiver] 28/1/2021 18:38

Blimey, how can anyone seriously argue that the old board of directors was underpaid.....

[dartboard1] 28/1/2021 18:22

Agree on buybacks... in theory they're more efficient (tax, etc) ... in practice, they're generally used to hide management and employee issued sharesI'll take the dividend and decide where it goes myself

[philanderer] 28/1/2021 18:20

Cigarette giant Imperial Brands lights up fresh investor pay row

ISS says Imperial has not explained why its CEO is paid 13% more than his predecessor in a report seen by Sky News.

[spud] 28/1/2021 17:57

Sorry Minerve but you'll never convince me on the benefits of buybacks. It takes forever to make a dent in the issued share cap (unless it's a small cap) that you'll never see the benefit. If you have to buyback shares, let the stockholders do it for you by way of specials. IMB has bought its own shares back and look at where they are now compared with where they were before! Far better to invest the money in great people who can make a positive contribution to the bottom line and thereby grow the value of the Company imo. spud

[irenekent] 28/1/2021 17:55

Maybe it will be hit by hedgefunds shorting it. Then the Reddit mob can move in and send it to £200 a share!

[philanderer] 28/1/2021 17:41

Just as lonrho said, the FT quoting Jefferies saying it's the disappointment about buybacks hitting the share price .. Citi also saying 2023 before any chace of buybacks.

[minerve 2] 28/1/2021 17:32

Spud

Pretend you owned a garage with another partner, say 50:50. It's valued at £250K. Your partnered is bored and wants to move on and offers his half to you for £90K.

All things being equal, would you refuse?

Of course you wouldn't.

[spud] 28/1/2021 17:18

Buybacks? Isn't that something companies do with surplus cash when they've run out of ideas?spud

[lonrho] 28/1/2021 17:07

Apparently its disappointment with lack of immediate buybacks in capital markets day yesterday.

[lonrho] 28/1/2021 17:07

Apparently its disappointment with lack of immediate buybacks in capital markets day yesterday.