The FTSE 100 cigarette maker revealed it expects revenue in the year to end-September will be flat and that adjusted earnings per share will be “slightly lower” than last year.
This comes after a bad year for the maker of Lambert & Butler and Gauloises cigarettes and the Blu vaping brand, which saw a dividend "rebasing" in July, a big profit warning in September and then a “reset” of its plans as November’s annual results showed how earnings had been vaporised.
At that point, chief executive Alison Cooper, who has since stepped down, set guidance for “low single digit” growth for revenue and earnings per share.
But on Wednesday, ahead of its annual shareholder meeting, the tobacco giant said “regulatory uncertainty and adverse news flow” were affecting demand for e-cigarettes in the US and Europe.
Management, currently led by two divisional directors until newly appointed chief executive Stefan Bomhard - whose poaching from Inchcape PLC (LON:INCH) was only announced on Monday - arrives, estimated this will result in “significantly lower” year-on-year net revenue from vapour and other ‘next generation products’ as well as increased provisions for slow-moving stock.
Imperial, which said it remains in talks about selling its cigar division and is considering other potential non-core divestments, has implemented new cost-savings measures, though these will result in around a £40mln full-year net impact on adjusted operating profit.
On top of that, Imperial’s profits have taken another £45mln hit from writing down its inventory due to the ban from the US Food & Drug Administration that comes into force on Thursday, with earnings also expected to be hit by an additional 3% currency hit.
Analysts at broker Liberum said it was a "prudent" AGM statement, as directors were "taking the hit" that had been previously discussed on conference calls with analysts.
The analysts noted that as a result of that call the City's consensus forecast had already pencilled in a 1.24% decline for Imperial’s adjusted EPS, so with the guidance for an additional forex headwind, they saw a further 2.75% downgrade as likely.
On the cigar sale talks, Liberum added: "While this disposal is overdue and seemed likely to complete late last year, we understand Imperial is managing this process to ensure they get full and fair value for the asset."
Imperial shares lost 7.7% to 1,803.60p in afternoon trading.
Russ Mould, AJ Bell investment director said: “Shareholders will doubtless feel very, very uncomfortable holding the stock yet British American Tobacco entered 2019 under a similar cloud and its shares have advanced by nearly a quarter in the past 12 months.”
He added: “After two dud trading updates, the abandonment of the dividend growth target and a change in both chairman and CEO it may now take much for Imperial to surprise on the upside – if ESG fund flows give the new boss chance to prove himself, as they are moving even faster than consumers’ tastes.”
-- Adds further analyst comment, updates share price --