Two disappointing giants of the FTSE 100 report results on Tuesday, Vodafone and Imperial Brands, with their shares down 45% and 54% over the past five years.
Imperial Brands PLC (LSE:IMB), although it cunningly removed the word ‘tobacco’ from its name a few years back, was not able to fool investors and its mediocre share price performance this year could be down to investors paying more heed to environmental, social and governance (ESG) issues.
However, as with the oil and gas giants, everyone still knows what the underlying business does, no matter how hard the PR engine works, which is why there are still some hard-nosed investors on board who do not care about ESG, including secretive ‘vulture fund’ billionaire Kenneth Dart.
For those who want to see hard numbers, City analysts are expecting volumes to be down 3.3% from 2020 for the year to September, resulting in sales falling to GBP7.7bn from GBP8bn last year, including sales of ‘next-generation products’ (vaping and other ways of not burning tobacco) of around GBP203mln.
Adjusted operating profit is predicted to come in at GBP3.3bn versus GBP3.5bn a year ago.
But even though cash flow in the first half was weaker than it had been the year before, after the exit of distribution business Logista, the John Player and Gauloises maker remains highly cash-generative and the dividend is seen rising to 140p per share, from 137.7p.
“Shareholders will also look to the cash flow statement as it is cash that funds the all-important dividend, which currently equates to yield of 9%,” said analyst Russ Mould at AJ Bell.
Vodafone still moving sideways
Vodafone PLC’s interims come with the shares little better than they were at the depths of the coronavirus pandemic and half the level at the start of 2018.
Whatever the company says, be that May’s full-year results where the telecoms group targeted mid-single digit percentage growth in earnings and cash flow, a minimum dividend of EUR0.09 a share and major reshaping plans, it failed to move the dial.
July’s first-quarter update also underwhelmed even though results came in ahead of market expectations.
Analysts at Barclays said investors seem to be overly focused on worries about Spain and Italy, along with debates about free cash flow, even though these areas only account for 15% of the business.
The major part of the group, is infrastructure, B2B, emerging markets and German consumer, where Barclays believes the outlook is much more constructive.
“We would expect Vodafone to move gradually towards this way of reporting,” which the analysts believe could “finally” unlock value in the sum of Vodafone’s parts, which they see adding up to at least 165p per share.
Tuesday 16 November
Finals: Focusrite PLC, Imperial Brands plc, Revolution Bars Group PLC
Interims: Gear4music plc, Homeserve PLC, Intermediate Capital Group PLC, Mckay Securities (LSE:MCKS) plc, Ninety One PLC (LSE:N91), Premier Foods plc, Vodafone Group PLC
AGMs: Craneware plc, Dunelm Group PLC, New Star Investment Trust plc,
Economic data: Employment rate (UK), Claimant Count Rate (UK), GDP (Preliminary) (EU), Industrial production (US), Import and export price indices (US), Capacity utilisation (US), Business Inventories (US)
