Imperial Brands Share Discussion Threads

[kiwi2007] 18/5/2023 22:10

Financial Times ... May 16th.

...... BAT’s heavy focus on ESG — its argument is that it is leading the transition from tobacco to safer nicotine — has not lit up markets for some time.

.......The strategy has failed to ignite investor enthusiasm. Since its launch in March 2020, BAT shares have risen 7 per cent, versus a 50 per cent rise in the FTSE 100 index. Rival UK-listed group Imperial Brands — which in 2021 pivoted back to cigarettes — has gained 44 per cent over the same period.

.......There have been other disappointments. In February, BAT decided not to launch a new share buyback programme. Marroco could score an early win by reversing that decision. Shareholders hoping for a change of direction akin to Imperial Brands — will be disappointed, though.

[spud] 18/5/2023 18:44

Yes it’s providing a nice disposal route for those with mega holdings - You buy back 300k per day and I’ll sell you 350k!

spud

[fenners66] 18/5/2023 16:51

I.E we can prove a case for reducing the debt and paying a higher dividend.
The share price has proven that the last 6 months of buyback have not delivered an increase in the share price.
The investment (ESG) environment thinks IMB is Millwall FC - ( No one likes us!)

The shares have clearly been sold instead of increased demand.
The next govt may increase more bans on smoking and this may take hold anywhere in the near future.

Pay off the debt and pay more dividends whilst it lasts....

[fenners66] 18/5/2023 16:48

But then I read further down the accounts and found this :-

"fenners66
15 Nov '22 - 08:47 - 7904 of 8129 Edit

Got down to the borrowings note
"GBP600 million 8.125% notes due March 2024 £ 626m

So its worse than I thought as when we looked months ago , hoping these borrowings would have been redeemed this year

So 626m at 8.125% = £50.8m
+
£374m at 6.125% = £22.9m

less tax

Would mean reducing that debt instead of the BB saves a Net £57.4m
2.4x the increase in dividends

[fenners66] 18/5/2023 16:47

I guess that this falls on deaf ears but to go back to a previous post to illustrate this is not just moaning - there are facts and figures to support..

fenners66
15 Nov '22 - 08:31 - 7900 of 8129 Edit


Dividends
"If approved, the total dividend paid in respect of 2022 will be GBP1,338 million (2021: GBP1,314 million).

So planning an increase of £24m

But also planning a share buyback of £1bn

Meanwhile in the borrowings...

"We issued a $1 billion bond in the year with a coupon of 6.125%, maturing in July 2027."
and
"We expect our adjusted effective tax rate for the year ended 30 September 2023 to be around 22%."

So given that the BB supporters will quote the interest cost net of tax relief

Interest £61.25m less tax $13.5m = Cost £47.75m

i.e.

Instead of the buyback that cash could be used to reduce the debt and save a NET £48m which could be distributed to shareholders - which is TWICE the planned increase in the dividend.

[fenners66] 18/5/2023 16:45

I saw that Diane Abbott interview ...

[fenners66] 18/5/2023 16:42

So Diane , how many shares are you buying back ?

1000.
Really ?

No err, 1,000,000

Really does not seem many ?

No, err, I have the figures right here, err.
400 Billion

Oh 400bn and how much is that going to cost ?
£1m a year for the first 2 years , then its done....

So you are only paying £0.0005 per share ?

No we are paying £50k per share....

[action] 18/5/2023 16:26

so long they pay int less on their loan but more on divi yield on their shares.

[spud] 18/5/2023 15:49

Borrowing money to buy back shares in a high interest rate environment!

Isn't that something a certain Diane Abbott would advocate?

spud

[fenners66] 18/5/2023 13:00

Or (as a shareholder ) how much actual cash in my pocket would I benefit from the company buying shares at say £21.50 each while they have declined consistently down to £18?

So paying £3.50 over the odds....


Oh yes as a shareholder I might buy shares when they were cheap and hold and buy more when they are cheap again.... after all its how one beats the market , right ?

[fenners66] 18/5/2023 12:57

kiwi2007 - Lets say I'm a shareholder , how much of this so called "tax - efficient " return did I get ?

[fenners66] 18/5/2023 12:55

so marktime1231 you are proposing (what we all know) that buybacks do not have a lasting effect on share prices.

Demand volume on any given day if greater than supply has an effect on the share price at that time.

Outside of the supply and demand fluctuations - fundamentals , markets in general, market specific sentiment and results have an impact on demand for the share and therefore share price.

So good we are agreed , forget all about share prices going up because of buybacks.

Concentrate on what attracts people to want to buy more of the shares. The key words are
BUY MORE because once they have bought them they no longer impact the price ,its the demand for more that matters.

Which conversely is the the opposite to buybacks which is fulfilling the wish to own less shares.

You are correct scobak - we can prove the maths of impact on debt , interest cost ,profits and of returns to actual shareholders and they still will take the sentiment of buybacks instead.

[twdlw] 18/5/2023 11:36

kiwi 2007: "buy backs are tax efficient" if the government applied a tax to buybacks as you would to normal share buying then that would ... hopefully... discourage companies from buybacks and instead using the capital better eg. pay debt, invest or up the dividend.

[spud] 18/5/2023 11:18

Let's face it, all who are invested here are invested for the dividend, not for more tax efficient buybacks.

It's like saying, lets all invest in loss making poorly run companies so we don't have to pay tax!

spud

[kiwi2007] 18/5/2023 11:10

Buybacks are clearly a more tax-efficient way to return capital to shareholders than increasing dividends because the investor doesn't incur any additional tax on the buyback sale process. Tax is only applicable on the actual sale of shares, whereas dividends attract tax.

[scobak] 18/5/2023 08:26

The sad thing is though Spud that although most of us are singing from the same hymn sheet there are many who believe this rubbish re buybacks as you can see from previous comments. I can't see them changing their minds and seeing what the rest of us can see any more than I can see Donald Trump voting for Joe Biden.

[spud] 17/5/2023 22:38

I'm afraid it's this ridiculous fixation on buybacks at any cost. The Market expects it and the BOD's bonus is reliant on it. It's obvious to anyone with an ounce of fiscal savvy that in a rising interest rate environment, the most prudent approach is to pay down debt. But as we know, appointments only last about 5 years so they have to rape the @rse out of it before moving on. Q.E.D..spud

[fenners66] 17/5/2023 22:11

Working capital movements....

Stock £+885m
Debtors £+126m
Trade Creds Down £582m

So that's most of the move
Wtf are they doing ?
This looks like basic cash management....

[fenners66] 17/5/2023 22:03

Looking at the debt its pretty obvious that spending £500m on buybacks has come directly from borrowings.

Also the working capital movement is massive -£1626m that needs some explaining (not found it yet)

The impact :-

" Finance costs

Adjusted net finance costs were higher at GBP199 million (2022: GBP165 million), primarily reflecting the increase in EUR, USD and GBP interest rates, which have impacted the rates achieved on bonds issued within the last year, as well as those paid in relation to derivatives and the factoring programme"

"Our all-in cost of debt increased to 4.1% (2022: 3.5%) due to interest rate rises resulting in a need to refinance at a higher cost of debt.

Our interest cover reduced to 9.3x (2022: 10.8x) reflecting the higher adjusted net finance costs.

Given the rising interest environment, we expect upward pressure on finance cost going forward, although we have hedging in place for 87% of our expected debt for the remainder of FY23. "


So why the F are they still buying back shares?

Interest rates on debt rising
Debt rising
Higher % of gearing and lower interest cover - leads to higher interest rates being applied to the next debt rollover

It's not rocket science - they talk about the average cost of debt - but look at the detailed final accounts it hides some very expensive debt - which is why it should have been paid off instead of buybacks and the interest saving could be the dividend increase and more....

[fenners66] 17/5/2023 21:33

T 34 No idea how much you follow the numbers , what you understand and what you don't ...but

" To aid understanding of our results, we use 'adjusted' (non-GAAP) measures to provide a consistent comparison of performance from one period to the next. Reconciliations between adjusted and reported (GAAP) measures and further definitions of adjusted measures are provided in the supplementary information section."

"-- Adjusted EPS fell -1.7% driven by higher finance costs, increased minority interests caused by growth at Logista and a slightly higher tax rate partially offset by reduced share count; excluding Russia adjusted EPS fell -1.2% "

Mostly companies use "adjusted " figures to make their results look better. Something along the lines of we would have lost £X but when we adjust out all the loss making items - ignore them because we think they are one offs - hey presto we have made a profit £Y.

So given that backdrop if the adjusted figure is actually worse - FELL -1.7% - then it has to be recognised.

[spud] 17/5/2023 17:37

twdlw - I'm selling it down monthly and yes you're correct, there are loads of financials offering a better return with less end of life risk.

spud

[t 34] 17/5/2023 17:20

Reported eps up 11%

[f56] 17/5/2023 17:19

Why not try IEP in America. Can’t see Icahn going down without a fight!

[twdlw] 17/5/2023 16:58

With a dividend yield of just under 8% and no prospect for growth, I'm thinking of selling up and investing elsewhere. Some of the financials have a similar yield.