Imperial Brands (IMB)

[Alaric]

Which says to me they've been increasing their divs. without the necessary reserves. T

That could explain the price drop. If "the market" notices that part of the dividend is in effect a return of retained earnings, it's liable to mark down the price by the amount of capital returned.

It used to be the theory that once tobacco advertising and sponsorship were banned, there was nothing to spend the profits on, so they were distributed as dividends. Maybe the story now is that their market has shrunk considerably and with it their profits and if the USA is concerned about deaths from vaping, that development direction might not be going anywhere.

[scrumpyjack]

I’ve never invested directly in tobacco shares partly because I did not feel comfortable investing in companies whose products cause cancer but also because I felt that at some point they would be brought down by a US court decision. That risk still very much exists and it would only take one.

Looking at IMB’s last set of accounts I see they too go in for the absurdity of focusing solely on ‘adjusted’ profits which conveniently are nearly twice the actual profit. Actual profit has not covered the dividend for a while.

Also a bit absurd the way the accounts blather on about how green they are trying to be, whilst not mentioning the inconvenient truth that their addictive products kill many of their customers.

I will continue to steer well clear.

[TheMotorcycleBoy]

Which says to me they've been increasing their divs. without the necessary reserves. T

That could explain the price drop. If "the market" notices that part of the dividend is in effect a return of retained earnings, it's liable to mark down the price by the amount of capital returned.

It used to be the theory that once tobacco advertising and sponsorship were banned, there was nothing to spend the profits on, so they were distributed as dividends. Maybe the story now is that their market has shrunk considerably and with it their profits and if the USA is concerned about deaths from vaping, that development direction might not be going anywhere.

TBH, The -ve retained earnings has been the case for yonks. My analysis periods start at FY2013. Here's a quick snap shot of some my FA. Figures generally in £M:


Apologies for my lack of propriety what with me lobbing these in the "news" board,
Matt

[dspp]

Apologies for my lack of propriety what with me lobbing these in the "news" board,
Matt

Company Share news (LSE Main Market): "Share latest information on individual companies and hot news discussions. LSE Main Market companies only"

You are discussing the circumstances behind "hot news" which seems to absolutely fine by me. Nothing to apologise about as far as I can see. A good set of numerical data, well presented.

Regards,
dspp

[idpickering]

Well my fellow Lemons, now you've had a sleep on this, what are your plans regarding your IMB holdings? Disappointing though the fall in sp yesterday was, I'm not going to panic, and am going to just hang onto my IMB shares. I hold them in my HYP, and I had reached my spend ceiling on them, so am not keen to spend yet more on them. Funnily enough, today a large dollop of cash from dividends received this month gets invested in my ISA, and I toyed with buying more IMB, but have held back from that. It was hard to not just buy more IMB I can tell you!

Ian.

[TheMotorcycleBoy]

Well my fellow Lemons, now you've had a sleep on this, what are your plans regarding your IMB holdings? Disappointing though the fall in sp yesterday was, I'm not going to panic, and am going to just hang onto my IMB shares. I hold them in my HYP, and I had reached my spend ceiling on them, so am not keen to spend yet more on them. Funnily enough, today a large dollop of cash from dividends received this month gets invested in my ISA, and I toyed with buying more IMB, but have held back from that. It was hard to not just buy more IMB I can tell you!

Ian.

I set a stop loss to sell 50% of our remaining shares if the SP falls below £16.35.

I calculated as follows, that our remaining IMB were purchased at an average price of £27.26 (yeah, I know, but bear in mind, we only started this investing lark back in March 2018), and then I observed that if they fall to £16.35 then that position is now down by 40%. For a share with dubious growth characteristics, frowned upon management, and an ability (I did quickly squint at their c/f and b/s of 2017/2018 and I'm not 100% sure why *) to bleed cash, I think that is reasonable portfolio management.

As cited earlier I would really like to have diversity in our folis, and being ex smoker (from several decades past!) I'm aware however "evil" (to some) nicotine addiction is perceived, there will likely always be a demand for IMB products. How well their medicinal cannabis ventures pan out is another matter? How large is it in their portfolio? Risks - i.e. use of medicinal cannabis is still unproven in terms of mental health.

So our stop loss configuration is really defensive, we are not HYPers, appreciate the diversification of having IMB, but need to manage our money. (FWIW, we lost out on a couple of aims of late, Burford Capital BUR, we sold out, and Advanced Medical Solutions AMS, we cut 70% back).

Matt

[*] It looked like from 2017 to 2018 they should have actually added a small amount of cash to their Retained profits. Perhaps they've lost absorbed this in a hedging/currency loss. Not quite sure.

[idpickering]

I calculated as follows, that our remaining IMB were purchased at an average price of £27.26 (yeah, I know, but bear in mind, we only started this investing lark back in March 2018), and then I observed that if they fall to £16.35 then that position is now down by 40%. For a share with dubious growth characteristics, frowned upon management, and an ability (I did quickly squint at their c/f and b/s of 2017/2018 and I'm not 100% sure why *) to bleed cash, I think that is reasonable portfolio management.

As cited earlier I would really like to have diversity in our folis, and being ex smoker (from several decades past!) I'm aware however "evil" (to some) nicotine addiction is perceived, there will likely always be a demand for IMB products. How well their medicinal cannabis ventures pan out is another matter? How large is it in their portfolio? Risks - i.e. use of medicinal cannabis is still unproven in terms of mental health.

So our stop loss configuration is really defensive, we are not HYPers, appreciate the diversification of having IMB, but need to manage our money. (FWIW, we lost out on a couple of aims of late, Burford Capital BUR, we sold out, and Advanced Medical Solutions AMS, we cut 70% back).

Matt

[*] It looked like from 2017 to 2018 they should have actually added a small amount of cash to their Retained profits. Perhaps they've lost absorbed this in a hedging/currency loss. Not quite sure.

Thank you for your well considered reply Matt. I've never set a stop-loss in my life, but either way, I'm not keen to make that 13% drop yesterday, and my now 31% 'loss' on my IMB investment a reality by selling out. It ain't pretty to look at that loss in my HYP, but it's certainly a useful reminder that nothing is certain in investing. I'm not one for jumping in and out of shares on a whim if I can help it. Only a major change in the IMB dividend policy will change my stance I think. IMB is one of 29 different shares in the HYP covering some 18 sectors or so.

Ian.

[TheMotorcycleBoy]

I calculated as follows, that our remaining IMB were purchased at an average price of £27.26 (yeah, I know, but bear in mind, we only started this investing lark back in March 2018), and then I observed that if they fall to £16.35 then that position is now down by 40%. For a share with dubious growth characteristics, frowned upon management, and an ability (I did quickly squint at their c/f and b/s of 2017/2018 and I'm not 100% sure why *) to bleed cash, I think that is reasonable portfolio management.

As cited earlier I would really like to have diversity in our folis, and being ex smoker (from several decades past!) I'm aware however "evil" (to some) nicotine addiction is perceived, there will likely always be a demand for IMB products. How well their medicinal cannabis ventures pan out is another matter? How large is it in their portfolio? Risks - i.e. use of medicinal cannabis is still unproven in terms of mental health.

So our stop loss configuration is really defensive, we are not HYPers, appreciate the diversification of having IMB, but need to manage our money. (FWIW, we lost out on a couple of aims of late, Burford Capital BUR, we sold out, and Advanced Medical Solutions AMS, we cut 70% back).

Matt

[*] It looked like from 2017 to 2018 they should have actually added a small amount of cash to their Retained profits. Perhaps they've lost absorbed this in a hedging/currency loss. Not quite sure.

Thank you for your well considered reply Matt. I've never set a stop-loss in my life, but either way, I'm not keen to make that 13% drop yesterday, and my now 31% 'loss' on my IMB investment a reality by selling out. It ain't pretty to look at that loss in my HYP, but it's certainly a useful reminder that nothing is certain in investing. I'm not one for jumping in and out of shares on a whim if I can help it. Only a major change in the IMB dividend policy will change my stance I think. IMB is one of 29 different shares in the HYP covering some 18 sectors or so.

Ian.

I guess at this stage we've got to hope that it was oversold yesterday, and perhaps that Alice Cooper will step down and we get someone in who can steer the company more positively. Maybe?

Matt

PS The long term future of their divs, should prob. be considered too, but we should perhaps do that on another board.

[OLTB]

perhaps that Alice Cooper will step down and we get someone in who can steer the company more positively. Maybe?

Certainly some people think she's been Poison

Cheers, OLTB.

[tjh290633]

I think that the falls yesterday in both IMB and PSON were vastly overdone. The problem with setting a stop loss is that you may be taken out inadvertently by a fat finger episode, or something similar.

As far as IMB are concerned, my cost is negative because I first got them by the Hanson demerger, and have had so much capital returned that it exceeds my outlay. They have neither stopped nor reduced their dividend, so there is no reason to sell on that score. Surprisingly, yesterday BATS fell in sympathy with IMB at the open, but recovered steadily through the day.

I see that IMB fell a little more this morning, so knees are still jerking.

TJH

[monabri]

I think that the falls yesterday in both IMB and PSON were vastly overdone. The problem with setting a stop loss is that you may be taken out inadvertently by a fat finger episode, or something similar.
TJH

Yes, on both counts.

[Dod101]

I too have my Imperial holding at a nil cost having long since realised far more than my original cost but that does not make me feel any better. I will not be setting a stop loss though. I will just keep it for the time being.


Dod

[dealtn]

Looks to me that it is a company with positive cashflow, paying off debt (as it matures it is drawing down less as a replacement), and servicing a dividend.

Interesting to note that it appears to have been "punished" by the market over the last year or so for being "late to the party" with respect to New Generation Products (NGP), yet "punished" again, and relatively more so than its competitors, when the NGP market has run into (short-term?) problems. It wouldn't be the first time the market has shown such irrationality.

How long might that irrationality last? No idea, but with a P/E of 6.6, and a revenue that is revised down from top of 1-4% range to one of about 2% (not negative!), it's a share that has piqued my contrarian instinct.

[Dod101]

I agree dealtn although I am not tempted to buy any more. It is quite a kneejerk though, to use TJH's phrase.

Dod

[ayshfm1]

The drop made it underweight, so I bought a few more. Time will tell if thats a wise move or not.

[TheMotorcycleBoy]

I think that the falls yesterday in both IMB and PSON were vastly overdone. The problem with setting a stop loss is that you may be taken out inadvertently by a fat finger episode, or something similar.

You make a good point, tjh. My other fear re the stop loss, is that if we have the same Halloween-type effect as last Autumn, lots of indexes fall together, then the SL could trigger, for the wrong reason.

I see that IMB fell a little more this morning, so knees are still jerking

Oh aye. Has it just found it's current bottom at £17.40?

[idpickering]

The drop made it underweight, so I bought a few more. Time will tell if thats a wise move or not.

Likewise regarding the share being underweight in my HYP now. I’m not going to rush into any further purchase of their shares just yet. As I mentioned earlier in this thread, I’m at my maximum spend on them, and don’t want to make a rash grab at their shares, tempting though it is. To be overweight on them would be folly, not Foolish so to speak, I’m not saying never mind you.

Ian.

[88V8]

One would have expected the froth to come off the SP when they announced the end of the 10% divi increase. Evidently it didn't.

If I looked at my capital now, I would be down, so I won't. Can't say I'm worried about effective anti-tobacco court action in my time, if I were I'd be equally worried about alcohol and sugar. However, won't buy any more IMB fttb as I have a fag-packet full along with BATS.

Getting hard to know what one should buy, with all the doom n gloom.
Perhaps tjh's top-up-regardless strategy has much to commend it.

As to Moorfield's thought of a yield cap, that was championed for years by Luni. 150% of the FTSE average as a safe limit. I think it a sensible rule of thumb, just wish I had paid more attention with some of my purchases. Including IMB.

V8

[Dod101]

One would have expected the froth to come off the SP when they announced the end of the 10% divi increase. Evidently it didn't.

If you take a look at the prices tjh quoted in his first post yesterday, the froth came off a long time ago and I do not think the abandonment of the 10% increase in the dividend would have been a surprise to anyone, because no company can keep that up for ever. If they at least hold their dividend I will be perfectly happy. The trouble is that a drop of 13% in one day is more than 'froth' in my book. Down another 1% or so today as I write. it is not looking good, is it?

BAT has not been affected particularly so that would suggest that this is company specific.

Dod

[idpickering]

BAT has not been affected particularly so that would suggest that this is company specific.

Dod

Let’s see what they say on the release of their pre close trading statement on 11 December. I’ve topped up my BATS holdings four times this year thinking I was getting a bargain, funnily enough I only topped up IMB once this year and that was in January.

Ian.