Key Highlights
- Imperial Brands reported mid-single digit growth in operating profits for the fiscal year 2025.
- The company saw an increase in free cash flow of 12.9% to £2.7 billion, primarily driven by a one-off tax repayment.
- Underlying operating profit increased 4.6%, meeting previous guidance, and the full-year dividend was raised by 4.5%.
- Tobacco volume declined by 1.7%, but strong pricing offset this, while Next Generation Products (NGP) sales rose by 13.7%.
Imperial Brands: Resilient Performance in 2025
Imperial Brands, a leading player in the tobacco industry, has reported its fiscal year (FY) results for 2025, revealing a resilient performance despite challenging market conditions. According to Derren Nathan from Hargreaves Lansdown, Imperial Brands delivered mid-single digit growth in operating profits and provided a supportive backdrop for increased shareholder payouts.
Financial Performance
The company reported an underlying revenue growth of 4.1% to £8.3 billion. This was largely driven by strong pricing strategies that mitigated the moderating tobacco volume declines of 1.7%. Additionally, sales of Next Generation Products (NGPs) saw a significant increase of 13.7%, highlighting the growing importance of these products in Imperial Brands’ portfolio.
Underlying operating profit increased by 4.6% to £4 billion, aligning with previous guidance.
Free cash flow also showed robust growth, rising by 12.9% to £2.7 billion, largely due to a one-off tax repayment. For the fiscal year ending in 2025, Imperial Brands expects free cash flow to be at least £2.2 billion.
Strategic Focus and Future Outlook
The company’s strategic focus on gaining share of key tobacco markets has shown promise, despite facing volume pressures. Imperial Brands continues to leverage the addictive nature of its products while investing in its brands to maintain price hikes in major markets. The expectation is that further price increases are possible.
While NGPs have started showing promising results, they remain a relatively small part of the business and have yet to turn profitable.
For several years, Imperial Brands anticipates high double-digit net revenue growth from these products, but their viability as a replacement for the shrinking tobacco business is uncertain until sustainable profit margins are demonstrated.
Imperial’s cash generation has been consistent, supporting generous shareholder distributions and investment in new products while keeping net debt within its target range. The full-year dividend was increased by 4.5% to 160.32 pence per share, reflecting the company’s commitment to rewarding shareholders.
Regulatory Pressures and ESG Considerations
The tobacco industry continues to face regulatory pressures and changing consumer preferences towards healthier lifestyles. Imperial Brands is investing in Next Generation Products (NGPs) as part of its strategy to adapt to these challenges, but these products are still under scrutiny from regulators.
While Imperial’s overall ESG management is strong according to Sustainalytics data, concerns remain regarding the company’s commitment to offering less harmful products. Next-gen products made up just over 3% of net revenue in 2023, indicating that their impact on the business remains limited. The company also faces controversies related to ethical issues and marketing practices.
Conclusion
Despite the challenges, Imperial Brands has demonstrated resilience in its latest financial results. However, the company anticipates a slow start in 2026 and needs to increase its pace of growth. With the new CEO Lukas Paravicini continuing previous management strategies, there are no immediate catalysts for significant change. The company’s ability to sustain profit growth will be crucial in maintaining investor sentiment.
