Imperial Brands Share Discussion Threads

[marktime1231] 14/3/2024 13:20

A final observation on this since we ought to get back on to IMB.

BATs disposal of its ITC stake was at a 7% discount to the market price, which has held firm. Net proceeds of about £1,560M and the effect of promising to put it towards buybacks over two years has caused a 4% jump in share price which has stuck so far.

Altria also at it, disposing around $2B of its ABInBev stock it says primarily for additional share repurchases. Except in this case Altria is so far unmoved, perhaps waiting for a firm buyback announcement, while ABI has tumbled 4%.

[marktime1231] 12/3/2024 12:44

Further evidence about the effect of buybacks from BAT which surprised me a little. Not surprised that they are selling off the limited amount of ITC stock which they are free to divest, but I am surprised that they have committed all the proceeds to a buyback. Those of you fundamentally opposed will no doubt be furious, but somewhat cheered by the share price response.

It smacks of desperation by Marroco, trying to stop the rot in BATs share price and respond to IMB / market pressure. But it has done the trick, a 3-4% rise since the rumour was outed yesterday afternoon, I suspect 3% will stick for a while. How is the ITC share price responding, where BAT will retain a 25.5% stake, and how much does this reduce future income / cash flow / profit by?

Total proceeds of about £1,700M from a 3.5% ITC stake sale? £700M immediately committed to buybacks and it reads like the remaining £1B next year. Equivalent to about 3% of BAT mkt cap. Which is pee-ing in to the wind compared to IMBs programme.

Which leaves BAT looking to free cash flow to continue to pay down debt to its modest target range of 2-2.5x ebitda. Which means it has to direct most of it to debt reduction for another 3 years or so. Not much for real dividend improvement nor for sustainable buybacks unless its finds other family silver to sell off.

I remain much happier invested in IMB rather than BAT.

[marktime1231] 11/3/2024 12:54

Further direct evidence of the effect of buybacks on the share price of an unloved underpriced stock in a mature contracting market. The announcement that the second tranche has been brought forward a few weeks and the job given to Barclays Capital instead of MoSt. We already knew this was coming but we still got an immediate 2.5% kick up this morning, on a day when BAT is down because that is the general direction and because BAT still needs to prioritise debt reduction before it can sustain a buyback programme of its own.

QED

You might extrapolate further by observing that BAT is down 25% over a year whereas IMB is down "just" 15%, those trends the consequence of the regulatory and economic backdrop.

If you do not understand this, do not want to understand this, you never will.

FYI the rns reports on share transactions at the end of each tranche provide a progress report:

Oct 2022 tvr 950.1 million. The first buyback year removed 52.1 million shares, the first 6 months of the current programme removed another 30.3 million. I think the average buyback price has been in the low 18s.

As Bomhard set out in his strategic plan the benefit of stronger finances and capital reduction is now beginning to filter through with a 5% dividend improvement, despite flat to slowly declining revenues.

[tuftymatt] 11/3/2024 09:15

Will it be enough to draw a support line at circa 1700??

Good luck all 👍🏻

[jrphoenixw2] 11/3/2024 08:59

Nice if they disclosed how much the 1st $500m buy-back reduced the share cap

[philanderer] 09/3/2024 00:17

Citi analysts have identified the U.K. government’s new excise tax on vaping products as an encouraging development for BAT and Imperial Brands, reports Proactive.

Chancellor Jeremy Hunt confirmed in his Spring Budget speech that vaping products would be subject to a new tax from October 2026. According to media reports, this move is designed to maintain a financial incentive for choosing vaping over smoking, complemented by a concurrent increase in tobacco duty.

The taxation framework will be based on nicotine content, with a three-tiered system imposing charges ranging from £1 ($1.28) per 10 mL to £3 per 10 mL in addition to the current 20 percent VAT.

This structured approach aims to regulate the vaping market further and aligns with the government’s health strategy by providing a less harmful alternative to traditional smoking.

Citi’s short research note said: “Although [Wednesday’s] confirmation of the planned levy on vaping comes as little surprise, we believe that alongside the proposed ban on disposable vapes from April 25, the regulatory risk/reward is skewing to the upside for both BAT and Imperial.”

[tuftymatt] 06/3/2024 19:42

Yes and with vaping tax not until 10.26, if at all, I think it's time to look at adding again to both IMB and BATS.

Good luck all 👍🏻

[cassini] 06/3/2024 08:49

ditto.

18 months ago I wrote and told my MP I'd sit on my hands at the next GE as huge problems weren't being addressed by him and his party.

He in return offered a meaningless platitude, which I thought summed up the whole problem with him and his ilk...

He's got his gong, big house and big pension, what does he care?

[18bt] 06/3/2024 07:29

Knocker - I’m in the same camp, but interesting that you only mention 2 parties - the LDems, SNP, Greens, Plaid and Reform seem to have no better ideas.

[1knocker] 05/3/2024 16:25

For the first time in my life, having voted in every general election since I got the vote, I shall be spoiling my ballot paper this time, with the words 'None of the above'.

Both parties need to see that they have nothing to offer in the eyes of the electorate, even on a 'not as bad as the other lot' basis.

If any company selected its employees the way Lab and Con select candidates for Parliament, it would be out of business within months. There is not the talent to fill even cabinet and opposition front bench posts adequately, let alone the hundreds of lesser ministerial posts.

[spud] 05/3/2024 15:26

The Tories have just totally lost the plot. Unfortunately, these's no viable alternative so I guess it's ballot spoiling time.

spud

[montyhedge] 05/3/2024 14:56

https://www.ukvia.co.uk/vape-tax-illogical-taxing-e-cigarettes-makes-no-sense-as-they-help-people-quit-smoking-experts-warn/

[montyhedge] 05/3/2024 14:55

A vaping tax would raise 40 million pounds only but upset 2.9 million vapers I take are voters. Tories are living in a different world.

[spud] 05/3/2024 14:51

It's beyond me why IMB don't have 4 equal dividends pa. Surely it would help even out the price fluctuations.

spud

[fenners66] 05/3/2024 14:07

So looking at the last full year report they have handily added some charts showing for example the impact yr on yr for earnings per share....

Here we see that EPS rose 7.0p from the reduction in shares...
but also EPS fell 6.6p from the increase in Interest.

The problem with debt is cost is made up of
1, the interest rate some has risen not all is fixed - "interest payable on bank loans and overdrafts are at floating
rates" at the balance sheet date (usually managed down) that was £100m
2, the quantum , it would have been much lower without the buyback
3, the rollover costs of just remaining the same as debt rolled over incures more charges and usually an early redemption fee - lots of companies add this to exceptionals even when they have done it every year for a decade...
4, the higher cost of ALL debt because they have more than they could have had - like getting a mortgage with a 60% LTV vs 95% LTV.

As for other debt aside from the 8.125% they also have

Bonds:
27 July 2022 $1,000 million 6.125%
guaranteed notes due 2027


"The fair value of borrowings as at 30 September 2023 is estimated to be £8,669 million (2022: £9,030 million"

Sure they paid a bit off - but then new reissued during the year at much higher rates.

[louis brandeis] 05/3/2024 12:48

Yes BAT debt too high and will rerate once it is in position to buyback - which is big tobacco's weapon against a mature market. I benefitted from BAT debt in that I was a Reynolds shareholder at the time of buyout. I do hold some BAT stock but nowhere near as much as I do IMB.

[marktime1231] 05/3/2024 12:21

Yes when talking about group debt it can be illuminating to look at the individual parcels of debt, their dates and coupon and native currency or location, to work out what is worth repaying and when. There is no point, obviously, in paying off a chunk with a 3% long term interest rate when the cost of new money is 6%.

I guess that £600M could be rolled over at the same rate or prospectively cheaper in the US, but it is the one slice which I agreed merited early redemption. Thereafter as someone rightly said the remaining debt is so cheap it is worth keeping because IMB can make more money or provide better returns by using the free cash for other purposes.

For example the excellent buyback programme, regarding which on 29 Feb:

"These purchases are the last purchases to be made under the first £550 million tranche (the "First Tranche") announced on 06 October 2023, part of the £1.1 billion share buyback programme announced on 05 October 2023; accordingly, the First Tranche of the programme has been completed in accordance with its terms. Under the First Tranche, the Company repurchased 30,317,505 shares of 10 pence each at an average price of 1,814.13 pence per share."

MoSt went too fast at the first tranche which runs until 28 March. I expect the second tranche will begin in early April. Which means the share price will be unsupported for a month, watch for a bargain opportunity.

[huckers] 05/3/2024 10:10

Debt has been brought down overall. And the most expensive debt they have matures on the 15th of this month: £600m at an 8.125% coupon. The most recent debt issued has been at an average of 3.75%, which is at or just a fraction below their average for the whole debt pile.

[fenners66] 05/3/2024 09:55

Probably - they like all deluded management they will start it again when the share price is much higher - buy high sell low - that's what benefits their mates and paymasters the institutions.

So much for enhancing the share price through buybacks - back some time in this thread I did some calcs that showed that paying off the more expensive debt would have delivered more EPS and better future cash flow than the buyback.
Couple that with the enterprise value only remaining the same would be a potential increase in the share price.

Instead we have more debt , more finance cost and a lower share price !

But happy with their liquidity institutions.

[acsatix] 05/3/2024 08:34

Has buyback been paused here?

[pete160] 02/3/2024 22:52

I would argue that not all debt is bad.If you are a company like BAT or IMB with good long term revenue prospects (which rise by at least inflation each year) and took the opportunity to fix for 10, 20, 30 years at rock bottom rates, you can sit back and let inflation take care of the 'real' cost of the debt.