Imperial Brands Share Discussion Threads

[fenners66] 26/7/2022 19:38

Wow, let me take some time to digest that ...

But first

"Optimal debt is not zero"

Lets assume that is net debt .

then the question is Why ?

[marktime1231] 26/7/2022 18:55

Optimal debt is not zero, but assuming IMB do clear the balance to a positive working net cash position then what? Net debt is already down to about a quarter of annual revenue. Zero is extreme, so how about suggesting a realistic target level, one which is a reasonable compromise. If we are not already there. We may be approaching 2 × ebitda by this year end.

We could of course get to near zero debt very quickly. Suspend the dividend for 4 years and zero expenditure. Should improve share value by about £10 each too. No? Actually hell no!

Back to the maths. Buying back shares which are priced at a 50% discount and which are yielding 7.5% is a much better return for shareholders than reducing debt which still only costs around 4% on average.

I conceded recently that the cost of refinancing older debt has worryingly gone up to 5.5% and heading higher, so the difference between debt reduction and buybacks has narrowed. In which case if IMB wants to prioritise reducing debt for another year then fair enough. But it will disappoint institutional shareholders and market commentators who want a buyback and it will keep the share price subdued. And the maths is clear, the more efficient return is to buy back shares while they trade under £25.

[spud] 26/7/2022 13:48

They bought back about £1.6 billion worth of shares when they were about 28 quid average. That went well. Not. spud

[fenners66] 26/7/2022 13:08

mark - until zero

This is a declining business.
It is likely going to need less capacity in the future.
Its mature markets are going to be outside of its control in the near future, so there should be less
operating demand for cash.
Paying off the loans therefore Will increase earnings - by not incurring all the interest and fees associated with debt.

Those higher earnings can be paid out to shareholders - you know the Owners - as a return for holding the shares
not paid to rats to sell the shares.

Its all jam tomorrow with buybacks - they could pay a higher dividend to shareholders now - but with buybacks
you "may" get higher EPS , you "may" get a higher dividend in the future , everything being equal.

But a business in decline is never going to have everything remaining equal.

So reduce debt , increase actual profit , pay dividends.

[tuftymatt] 26/7/2022 12:23

Looks like a little pause here before another go at 1900.

[marktime1231] 26/7/2022 12:06

The board will issue themselves shares whether you have a buyback programme or not.

Pay down debt until?

[spud] 26/7/2022 11:22

Pay down debt - End of.

spud

[saltaire111] 26/7/2022 09:56

The worst aspect of buybacks is that the directors, having bought back shares, then issue themselves, and senior staff, restricted stock units each year that are worth £millions to them personally - basically cycling money from the company’s shareholders into their pockets. It is disgusting.

Rather than buying back shares, they should lay down debt. But that doesn’t directly benefit them.

Salty.

[fenners66] 22/7/2022 18:02

I wish someone would tell us what this $1bn financing will actually cost.

The true cost is to some extent hidden.

Ok the interest cost , a higher rate
but also the administration costs of the fund raise and the termination.
I assume the termination is prior to the original end date and therefore the new funds will overlap in time
thus incur double interest for that period.
The original bond holders are not going to terminate early without expecting either most or all of the interest
to the original end date.

Then there is the opportunity cost (very rarely referenced but I did see one company report alluding to recently)
of paying a higher interest rate on all borrowings simply because there is this "extra" what $2bn + of borrowings due to the buybacks.

By way of example check out say the interest rate on a 95% mortgage vs a 75% mortgage....

Q "But all that extra profit incurs extra tax ... borrowing is more efficient "
absolute BS
Maybe they should turn themselves into a loss making business and pay no tax then !

If you want to have a high rated share price - get a high rated , debt free , cash rich (it can be used for cheap acquisitions when everyone else goes bust ) as Profitable as possible business.

And forget all about the buying back shares to hope to get higher EPS (all things being equal) BS

[spud] 22/7/2022 14:41

Over the past decade, through share buy-backs, the company brought down its outstanding shares from 1,00 billion to 945.7 million shares. In total, 55.51 million shares that have been bought back amount to roughly 0.60% in terms of buybacks per year, which means that the buy-back programs up until now can be considered "token" at best.

About £1.7b in cash terms. What a waste!

spud

[fenners66] 22/7/2022 13:38

And how much have they spent on buybacks already ?

[marktime1231] 22/7/2022 12:18

Aha. For a moment I thought IMB were fund raising. Actually it is refinancing old term debt at 3.5% with new debt at US Treasury + 3.2%. So it will cost an extra $20-25M or so a year to borrow that $1B, an extra $250-300M pa if all IMB debt was refinanced on similar terms. The deal sounds pretty expensive considering IMB is supposed to be a safe borrower. I wonder whether BAT with its even bigger debt mountain is also in tough negotiations.

Just goes to show the importance of IMB getting its debt down as fast as possible, Looney right to be directing surplus cash in that direction then. In which circumstances I am happy to defer my prayer for an early start to a buyback programme.

[spud] 22/7/2022 12:00

Imperial Brands lights up market with US$1bn bond



Imperial Brands hit the US bond market on Wednesday with a rare offering from the tobacco sector, which has underperformed the broader market amid concerns about geopolitical and regulatory headwinds.

The British tobacco company launched a US$1bn long five-year senior unsecured note offering at US Treasuries plus 320bp, seeing 30bp of price progression from initial marketing. At those levels, the new notes are set to become the highest coupon bond in its US dollar debt stack. BofA Securities, HSBC, Mizuho, Standard Chartered and Wells Fargo are arranging the offering.

The capital raise is expected to fund a tender offer for its outstanding US$1bn 3.5% 2023 senior notes.

spud

[irenekent] 20/7/2022 08:13

Makes a changeto see my re-invested dividend showing a profit. They normally manage to buy the new shares at the highest price of the previous month. Maybe this company has bottomed out finally.

[tuftymatt] 19/7/2022 13:17

Yeah this is great to see.
I looked at BATS a few weeks back but didn't jump in. Could have got a quick 6% rise but hey at least this is doing the business 👍🏻

[philanderer] 19/7/2022 12:16

IMB and BATS both going well today :-)

[redbaron10] 19/7/2022 12:14

New 52 week high.....not many shares can match that at the moment

[f56] 18/7/2022 17:52

I love this share. Smoking will always be a great brand - in one form or another.

[tuftymatt] 11/7/2022 09:06

Took a few more this morning.

[tuftymatt] 07/7/2022 12:05

Cheers for that spud and it's a valid view based on what's happened in the past.

It's clear the business is getting it's house in order, and that's reflected in the share price since the 2020 low. I am new here this year and will add on dips below £18 as I think the divi is solid for now and the share price will push on too.

[spud] 07/7/2022 11:30

Imperial Brands has an 8.3% dividend yield – but what’s the catch?



spud

[redbaron10] 01/7/2022 11:22

To be honest not a lot else is working in this market apart from dividend plays.Even there though the commodity high dividend paying shares like Rio,Fags and Anglo are rolling over a degree with recession fears.Whether their relatively high dividends are guaranteed going forward is questionable if the global economy slows.Big oil,staples and tobacco appear the safer bet for now until inflation is tamed.

[tuftymatt] 30/6/2022 13:30

A 40p or so drop today but 21ish banked so not bad at all.
Will look to add at sub £18 I think as this looks as nice a safe play as you can hope for right now I think.

[marktime1231] 30/6/2022 13:07

Thanks for the "small" divi today, cheer on a gloomy day

[1viky] 29/6/2022 15:39

Same here. Doing well. I was 100% in IMB. Lately reduced to only 25 % of holdings.