Imperial Brands Share Discussion Threads

[redbaron10] 22/8/2022 15:00

Strong dollar.Hope it continues.Up we go.

[huckers] 20/8/2022 12:44

Agreed. These are the luxuries that are last to be culled in hard times. I also doubt many governments will look to enact further anti-tobacco legislation as they are in need of the tax revenue it brings in.

[scobak] 20/8/2022 08:41

It is the sin products - tobacco and booze that will be the last to suffer. (just after takeaways and taxis)

[lendmeafiver] 18/8/2022 16:09

I’m not entirely convinced that such a significant cost of living crisis this winter won’t reduce cigarette demand to some degree anyway.

[marktime1231] 18/8/2022 13:53

Wow. Spud called them up and said he wouldn't mind a buyback after all, ok maybe not! I have looked at the trades and maybe someone is accumulating a stake but I can't see an obvious pattern. The idea that a few more people have decided to hedge against double digit inflation sounds right.

And maybe because IMB looks even cheaper in $ because of the exchange rate shift?

Liking the idea that interest in the run up to the big dividend cycle might see the share price back towards a three year high of £22.

Content to recall an exchange here on 7 January.

[tuftymatt] 18/8/2022 08:34

Nice to see it positive this morning. Not expected and to hold £19 would be a big tick.

[dmore2] 18/8/2022 08:21

classic bear trap 21.8 nxt stop

[redbaron10] 18/8/2022 08:20

Possibly the 10.1% domestic inflation rate yesterday has made investors re-evaluate the usefulness of high dividend paying shares like this in their portfolios to partly offset the corrosive power of inflation on savings and the value of the pound in your pocket.Nice rise on ex-div day for whatever reason.

[fenners66] 16/8/2022 10:03

99% of retail shareholders , i.e people.
Unfortunately , its more like 99% of shares owned by institutions , "managing " the peoples' money and they would rather have the liquidity of buybacks so they can get on with playing the game.
After all up /down they get paid , what do they really care if the underlying investor gains or not ?

I cite Neil Woodford for example, who after freezing everyone's funds still made sure to draw his salary.

[spud] 16/8/2022 09:40

But the best of it is when they have the gall to state that they are returning money to shareholders via BBs. Give the shareholders a vote on whether they would prefer the buyback value divided by the number of issued shares to be returned direct to their accounts or buybacks. But they won't because we all know that 99.999999% would vote for the former.ENCspud

[tuftymatt] 16/8/2022 09:21

I couldn't agree more fenners 👍🏻
The problem is the BOD's in this and many other companies seem so willing to do buybacks. They argue it's best for the long term, especially this year when markets are low, but we all know it suits their own short term positions in terms of job / bonus etc.

Shareholders now would sooner see debt reduction and a special divi as against a buy back which may just be money down the drain for current holders.

[fenners66] 16/8/2022 09:17

I don't think the nuance of my point is getting across.

First , its a high yielding investment , we all want those. It has a sustainable and thanks to the new CEO, growing dividend.
However it does come with the risk that its Western markets call time on new smokers, thus consigning it to decline.
That is important because the argument in support of debt , is always borrow more to leverage growth.

If the standpoint is that industry is going to decline there is no long term growth to support the debt argument.
Thus pay down debt and improve profitability (and dividends).

Are emerging markets really going to take up future slack when tobacco is too dangerous for the West?
Especially as the first country to ban youngsters from ever smoking legally is New Zealand ?

Paying down debt , concentrating on efficiencies within the business lower long term production will need less plant will see the dividend sustained for the long term. Then build a cash surplus - because sooner or later there will need to be industry consolidation to protect volume to retain efficiency. Being the hunter not the prey is an option.

Buying back shares is for the promise of jam tomorrow , all other things being equal or better. A growing company's earnings spread over fewer shares , not just for 1 year , but for the 10 years or more that it takes for the money paid per share to ever be recouped as higher later dividends.

Looking that far into the future in a declining industry , all things will not be equal . So we will be unlikely to ever see the funds equivalent given to actual shareholders in the future.

Hence pay debt , reduce costs, increase profits , pay more dividends.

[tuftymatt] 16/8/2022 09:05

Yeah really positive. Such a great defensive hold this one 👍🏻

[redbaron10] 16/8/2022 08:26

Good to see £19 again.About time.

[acsatix] 11/8/2022 20:48

@fenner “ but the long term future is terminal decline for tobacco.”

Whatever happens it will be after I am dead so really cannot care less. Long term is probably 20 years from now or more.

[medieval blacksmith] 11/8/2022 16:51

Terminal decline for tobacco doesn't mean it is a bad investment. It is all about money put forward versus the expected return in cashflows. Tobacco still has a very long way to go worldwide if not in volumes but certainly in margin. NGP (not vapes) have very attractive margins over and above FMC. IMB is playing second fiddle to the other leaders PM and BAT. It simply can't compete and create new markets like the other two. Many countries - certainly developing - are not going to go down the woke avenues the West are currently going down because their governments rely way too much on tobacco revenue. Even in the West the numpties will realise that over regulation will lead to black market cigarettes filled with rat poison and the likes. That will really go down well at hospital A&Es for sure. There is too much wishful thinking going on ATM and many of the main protagonists fail to fully understand the 'human condition'. People like 'vice'. Always have done, always will.

[jrphoenixw2] 09/8/2022 23:11

BRK having large sums of cash is not a surprise. But is it vast on average for them. Still Wall Street is high and BRK take a long-term view, so why might one imagine they'd do other than wait, however long it takes, to be picking up bargains again? THAT is how he's done so well, taking a very long view, which very few others do.

And re another comment re: no more tobacco market to expand into; that writer must be kidding. Have they never been outside the G7 and witnessed countries with fast growing wealth and an asprational new middle class where IMB's western brands are attractive?

[fenners66] 08/8/2022 10:15

Berkshire Hathaway , Buffett's company often cited as the justification for buybacks , has $105Bn Cash on its balance sheet, as reported today.

"Cash is king"

I still contend net debt of Zero can be optimum.

Already said as the industry contracts there will eventually be distress level consolidation, so build a war chest and be ready.
Buying back shares over the long term with declining business is going to prove to be a waste, but the company can continue to pay a strong dividend for years to come.

I already noted the circumstances here in my above posts , this is a business in decline. The market for cigarettes will continue to erode, no doubt about that , therefore there is no production capacity to expand into.

As for questioning whether any of us can know any better than the CEOs ?
Yes, since this CEO has already said , forget expansion into new products and concentrate on efficiencies in the core business and reducing debt. He is saying the previous management made errors.

Aside from still spending some cash on buybacks he is doing what I would and saving £Bns in the process.

Share price rising from 12 to 18 is a measure of others agreeing.

As for an idea that £25 is somehow returnable - if it was it would have done it already.
Wait for a European country to announce no more smokers who are say 16 and below now and the writing is on the wall.

That should be accompanied by the legislation for vapes, they are addictive nicotine as well (though may not be as it's not as obvious).

I'm just being realistic here , have no problem investing in tobacco , it pays a great return and IMB also have their distribution company , but the long term future is terminal decline for tobacco.

[al101uk] 27/7/2022 00:11

Explains far better than I can...



Although with a US bias.

[al101uk] 27/7/2022 00:03

To try and answer the question in a different way, the debt is spent on projects that have an expected return, that return should be higher than the cost of the debt. Hence taking on the debt is sensible because it has a positive expected return.

That doesn't necasarily mean a jump in profits, it could be that if the money wasn't spent then profits would have fallen at a faster rate.

So if the company can spend all of it's cash, plus have a requirement for more to re-invest, it has a choice between raising debt or equity. Debt is the normal choice for a company with a relatively secure stable income.

Paying out dividends, forgoes spending that cash on projects with an expected positive return.

The question isn't pay down debt, waste money on a declining company or pay dividends.

Rather it's invest in future returns by raising debt, equity placings or cutting dividends. The alternative is to see the company in terminal decline much faster than would otherwise have been the case.

UNLESS you think the company are botching their capital allocation in a major way, in which case you should probably be selling your equity.

As long as the debt is managable and what it was spent on is delivering something near the expected return, there is no issue with carring debt at whatever level the company sees fit.

Management aren't trying to maximise dividend returns, they are trying maximise total returns.

[marktime1231] 26/7/2022 21:52

Not that what we think matters much, we are piffling shareholders and shouldn't be pretending we know better and to tell the company how to run things. It is an old debate and we have had it several times, all views are valid etc but at the end of the day Bomhard will do what is best from where he sits. I will be content either way. But it is interesting to try and work out which way IMB will go, and how that will secure future share price and dividend income. As someone who has rebuilt a stake in the last few years I am happy with the share price recovery from the £12s to the £18s. The rebased income is still top drawer. And there is more likely thsn not a long way to go for tobacco yet.

[dartboard1] 26/7/2022 20:06

Agree- bring it down to a manageable / sensible level for the re-sized business going forward... but surely fenners would then want cash back via dividends and buybacks that increase the abililty to pay dividends in the future when there's less EBIT and the same share count, rather than paying out bond holders in full down to nil... remember interest is tax deductible also.

[lendmeafiver] 26/7/2022 19:55

Fully understand the cost of debt vs cost of equity logic, but if EBIT dramatically reduces over say the next 5 years due to increased regulation, your optimal debt level will also have to significantly reduce or the cost of debt will cripple the company, a prudent approach would be to take the debt right down well below the x3 debt/EBITDA that I believe is the current target, this will also reduce the company cost of debt. The fact the market is pricing the current raise higher than previously is a small warning in my view.

[fenners66] 26/7/2022 19:53

No it is not.

Paying a return to shareholders , the owners, or paying interest to bond holders; if it was a small business, as the owner which would you do ?

There is no "Cost" to paying the owners their money - Simple.

[dartboard1] 26/7/2022 19:41

Cost of debt v cost of equity ... simple