Imperial Brands FY25 EPS falls 16.5% as strategy costs weigh on results

Investing.com -- Imperial Brands (LON:IMB) on Tuesday reported a 16.5% drop in reported earnings per share for the year ended Sept. 30, as higher tax charges and costs linked to the company’s 2030 strategy weighed on results, even as adjusted measures improved. 

The tobacco and next-generation products group reported EPS fell to 251.1 pence, while adjusted earnings per share rose 9.1% on the back of profit growth and a reduced share count.

The company posted a 0.7% decline in reported revenue to £32.17 billion, attributing the decrease to lower tobacco revenue tied to volume declines and foreign-exchange movements. 

Growth in next-generation products (NGP) and the group’s distribution arm partly offset the fall. Tobacco and NGP net revenue increased 4.1% at constant currency, supported by a 5.4% price mix across regions and continued gains in smokeless products.

Group adjusted operating profit rose 4.6%, driven by higher profitability in combustibles and improved NGP performance. 

Reported operating profit declined 1.8%, reflecting what the company described as “impairment costs related to the implementation of our 2030 Strategy.” NGP adjusted losses narrowed to £76 million from £79 million the year prior.

Tobacco volumes fell 1.7% to 186.9 billion stick equivalents. Market share was broadly stable across priority markets, with a 45-basis-point gain in Germany and a marginal 1-basis-point decline in the United States. 

Share declined 85 basis points in the United Kingdom and 45 basis points in Spain, which Imperial said reflected a focus on value growth. 

Australia recorded a 20-basis-point increase as the company adjusted to regulatory changes. “Continued strong tobacco pricing across all three regions” supported revenue despite the volume drop.

Next-generation products recorded another year of double-digit expansion, with NGP net revenue rising 13.7% to £368 million. 

The company cited gains across vapour, modern oral nicotine and heated tobacco, supported by new product launches and increased distribution. 

Vapour brand blu achieved what the company described as “positive share performance” in Europe, and Imperial pointed to “positive consumer feedback” for the latest Pulze heated-tobacco device and new modern oral products. Over five years, cumulative NGP net revenue growth reached 83%.

Imperial reported £2.7 billion in free cash flow, supported by its combustibles business and a one-off tax repayment. Adjusted net debt rose to £8.4 billion from £7.7 billion. 

The dividend increased 4.5% to 160.32 pence per share, consistent with its stated progressive policy. 

The company completed a £1.25 billion share buyback and began a £1.45 billion programme for fiscal 2026, bringing total capital returns over five years to £10 billion.

“Our consistently strong operational and financial delivery provides a firm platform on which to build as we embark on the next phase of our strategy,” chief executive Lukas Paravicini said in a statement.

“During the next strategic period, we will evolve the distinctive challenger approach which has underpinned our recent success. This means we will continue to invest in consumer insights, innovation and marketing capabilities,” Paravicini added.

For fiscal 2026, Imperial expects low-single-digit tobacco growth and double-digit NGP growth at constant currency. 

It forecast adjusted operating profit growth of 3% to 5% and free cash flow of at least £2.2 billion after strategy costs, with foreign-exchange translation expected to be a tailwind of 2% to 2.5% to key financial measures.