* COVID impact to hit full-year EPS by low-single-digits
* Dividend cut by a third
* Shares down 8%, top loser on FTSE
(Adds details on dividend, outlook, CEO quote, shares)
By Siddharth Cavale
May 19 (Reuters) - Imperial Brands Plc, maker of
Winston and Gauloises cigarettes, said on Tuesday it will cut
its annual dividend by a third as it expects the coronavirus to
hit travel and spending in coming months.
Imperial is the fifth-highest yielding dividend stock on
Britain's FTSE 100 and news that it was slashing its
payout sent its shares tumbling 8% in morning trade, the FTSE's
top loser.
While the company joins a crowd of FTSE 100 companies that
have cut dividends in recent months, including Barclays PLC
, WPP, Whitbread and Glencore,
it is the first tobacco maker to do so.
"Despite the tougher times faced by the industry in recent
years, the likes of Imperial were still seen as dependable
dividend payers, and this morning’s rebasing of the dividend is
yet another blow for income investors,” said Helal Miah,
Investment Research Analyst at The Share Centre.
Imperial said the coronavirus pandemic had no "material
impact" on its business in the first half of its financial year,
which began on Oct.1, largely due to widespread lockdowns being
implemented only in late March and consumers stockpiling
cigarettes.
However, with curbs on travel globally expected to continue
for the rest of the year and consumers buying fewer cigarettes
as they run through their stocks, Imperial said the second half
impact on earnings per share would be more pronounced.
It now expects coronavirus-related factors to reduce
earnings per share by 1-3% for the financial year ending in
Sept. 2020, also taking into account a rise in demand for
cheaper cigarettes as economies go into recession.
The UK-based company, however, argued it was better placed
than rivals in a downtrading scenario as it sells more discount
and deep discount brands than premium products.
This helped it gain market share in seven out of its 10 core
markets, including in markets where it has not grown for many
years such as Spain and the United States in the first half of
the year, joint CEO Dominic Brisby said on a call with
journalists.
"Imperial as a company has been particularly good at
managing down trading and ...discount and low-priced brands in
the tobacco category," Brisby said.
Imperial, whose shares had already fallen 16% this year
before Tuesday's slide, also said that it would be reducing
marketing spending on its next generation products -
e-cigarettes and heat not burn products - that were once
considered the next frontier for the tobacco industry.
The company, which makes the blu e-cigarettes, said it would
now reduce spending on out-of-home media and radio and TV, after
making significant investments in these areas in several markets
last year.
"While these can be very effective in building brands, they
haven't generally returned the rapid return on investment we
required this year," Brisby said.
Imperial will cut its annual dividend to 137.7 pence per
share from 206.57 last year, to preserve cash and help pay off
its debt pile of 14 billion pounds. This comes after it sold its
premium cigar business to a consortium of investors for 1.2
billion pounds in April.
Overall, group tobacco and next generation products revenues
fell 0.9% on a constant-currency basis to 3.59 billion pounds
($4.40 billion) in the first half of the year. Analysts on
average were expecting 3.6 billion pounds, according to a
company supplied consensus.
($1 = 0.8159 pounds)
(Reporting by Siddharth Cavale in Bengaluru; Editing by Bernard
Orr and Susan Fenton)
Whitbread (WTB)
Barclays (BARC)
Glencore (GLEN)
WPP (WPP)