IMBBY Imperial Brands PLC (QX)

--Imperial Brands to return excess capital to shareholders via share buybacks, special dividends

--Targeting GBP100 million-GBP150 million annual cost savings by end fiscal 2023

--Company expects revenue to grow 1%-2% between fiscal 2020 and fiscal 2025

By Jaime Llinares Taboada and Ian Walker

Imperial Brands PLC on Wednesday unveiled a new strategy to improve profits and progressively increase the dividend until 2025 by cutting costs and focusing on its core businesses.

The FTSE 100 tobacco company added that it will return any excess capital to shareholders once its targets have been achieved via share buybacks and/or special dividends.

The company--which houses the Davidoff, Gauloises and JPS cigarette brands as well as a number of vapor and heated tobacco products--is proposing to reorganize and simplify the business by focusing its top markets--U.S., Germany, U.K., Australia and Spain--and brands.

As part of this, the company plans to reset its NGP, or new generation product, strategy to focus investment on heated tobacco opportunities in Europe, and vapor in the U.S.

The group is aiming to generate annualized savings of 100 million to 150 million pounds ($137.3 million-$206.0 million) by the end of fiscal 2023, which would be partly used to increase investments in core capabilities such as sales and marketing by GBP50 million-GBP60 million.

It expects to book GBP245 million to GBP275 million costs as part of its plan, most of which will be spent during fiscal 2022.

As a result, Imperial Brands expects revenue to grow by 1%-2% between fiscal 2020 and fiscal 2025.

The company said that its outlook for fiscal 2021 remains unchanged from that provided in November, when it guided for low-to-mid-single-digit growth in organic adjusted operating profit.

Imperial said Wednesday that adjusted operating profit is expected to be flat in fiscal 2022 compared with fiscal 2021 on a constant currency basis, then improve to mid-single-digit organic growth between fiscal 2023 and 2025.

In addition, the company promised to annually increase the dividend from the current rebased level--taking into account underlying business performance--and said it will consider surplus capital returns to shareholders once the leverage target of 2.0-2.5 times net-debt-to-Ebitda ratio is achieved.

"Our new detailed five-year plan sets out clear strategic priorities, which will drive targeted investment behind those markets and brands with the greatest opportunities for value creation," Chief Executive Stefan Bomhard said.

He added that a focus on the consumer and reshaping of the company's culture will "create an agile, collaborative and performance-based business that will deliver a stronger, more-consistent performance."

Shares at 1400 GMT were down 83.5 pence, or 5.1%, at 1,542.0 pence.

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT and Ian Walker at ian.walker@wsj.com.

(END) Dow Jones Newswires

January 27, 2021 09:34 ET (14:34 GMT)

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