Ahead of the H1 2026 Earnings release
Date: May 12, 2026 (Tuesday), before the bell
Guidance – H1 2026: Low single-digit growth in tobacco & NGP net revenue in H1 2026, driven by robust pricing, low single-digit combustible volume decline and mid-to-high single-digit NGP net revenue growth. Adjusted operating profit to be slightly higher than H1 2025, with growth accelerating in H2 2026. FX headwind: c.2.0-2.5% on EPS
Guidance – FY26: Low-single-digit tobacco and double-digit NGP net revenue growth, 3%-5% adjusted operating profit growth and at least high single-digit EPS growth in FY26. FX headwind: 0-1% on EPS
Consensus: £3.68 billion revenue (+1.8% at constant FX); £1.66 billion operating profit (+1.1% at constant FX); £1.283 EPS (vs. £1.239 in H1 2025)
H1 2026 Results
Imperial Brands delivered a resilient H1 FY26 performance, with underlying results broadly in line with guidance despite ongoing pressure from combustible volume declines, a challenging Australian market, and one-off impacts in US modern oral. The results reinforced the investment case around Imperial’s pricing-led combustible strategy, improving NGP execution, strong cash generation, and aggressive shareholder returns, while also highlighting the operational disruption associated with its 2030 transformation programme.
Group tobacco and NGP net revenue increased 1.8% at constant currency to £3.73bn (“beat”), supported primarily by strong combustible pricing and continued momentum in next-generation products. Tobacco net revenue rose 1.5%, despite tobacco volumes declining 1.5% to 85.7bn stick equivalents, demonstrating Imperial’s continued ability to offset structural volume declines through pricing. NGP net revenue increased 7.5%, driven by strong performances in Europe and AAACE, partially offset by weakness in the US. Adjusted operating profit increased 0.6% at constant currency to £1.64bn (“miss”), while adjusted EPS grew 5.3% to 127.7p, helped by continued share count reduction from the ongoing buyback programme.
Reported results were materially weaker due to large adjusting items. Reported operating profit declined 36.5% to £925m and reported EPS fell 38.1% to 59.9p, mainly reflecting £313m of Delaware settlement charges and £210m related to the 2030 Strategy implementation programme. Despite these exceptional costs, Imperial maintained strong cash conversion at 98% on a 12-month basis and reiterated full-year guidance.
Combustibles remained the core earnings driver. Tobacco pricing contributed +3.0% price/mix, more than offsetting the 1.5% volume decline. Management continues to prioritise profitability over share preservation, particularly as downtrading expands discount segments and widens margin differentials between premium and low-price products. Aggregate market share across key priority markets declined 16bps, though management explicitly framed this as a deliberate strategic choice rather than operational weakness.
Regional Performance – Europe
Europe was the standout region in H1. Tobacco and NGP net revenue increased 3.3% at constant currency to £1.60bn, while adjusted operating profit rose 8.1% to £686m, making Europe the largest contributor to Group profit growth. Tobacco pricing was particularly strong, with price/mix up 6.0%, offsetting a 3.9% decline in tobacco volumes. Europe also delivered robust NGP growth of 15.3%, supported by heated tobacco, modern oral, and rechargeable vaping products.
Germany continued to show signs of stabilisation and modest recovery. Market share increased 5bps, reflecting focused investment behind premium brands such as Davidoff and Gauloises, alongside value brand Paramount. Spain remained pressured from downtrading trends, though management highlighted improving momentum in local jewel brands Fortuna and Ducados. The UK continued to face sharp combustible industry volume declines of roughly 17%, driven by excise pressure and accelerating migration toward NGPs. Imperial responded by prioritising profitability and value-focused brands such as Paramount while defending premium fine-cut share through Golden Virginia.
European NGP performance was particularly encouraging. Heated tobacco growth accelerated following the rollout of the Pulze 3.0 device and continued innovation within the iD and iSenzia consumables ranges. Imperial also benefited from the broader consumer transition away from disposables toward rechargeable pod systems, with blu kits gaining share in markets including the UK, France, Spain, Greece, and Portugal. Modern oral growth remained strong in Nordic markets, supported by new flavour launches across Zone and Skruf.
Regional Performance – Americas
The Americas delivered a more mixed performance. Tobacco and NGP net revenue grew just 0.6% at constant currency to £1.19bn, while adjusted operating profit declined 4.1% to £441m. The US combustible business remained relatively resilient operationally, with tobacco net revenue increasing 1.5% despite volume declines of 4.2%, again reflecting pricing power. However, profitability was pressured by tariff-related costs in mass-market cigars, Delaware settlement-related impacts, and weakness in NGP revenue.
Within US cigarettes, Imperial continued investing behind premium brands Winston and KOOL, which gained 23bps of share within the premium segment. Meanwhile, deep discount brand Crowns continued to gain share as consumers traded down in response to macroeconomic pressure. Imperial also launched Malibu into the growing deep discount segment during March. Management acknowledged that the US cigarette category continues to face headwinds from affordability pressure and illicit vape sales.
The US NGP business was the largest weak spot in the release. NGP net revenue declined 45.8% at constant currency, primarily due to a one-off Zone promotional programme that performed better than expected and was booked in H1, reducing first-half revenue by approximately £13m. Excluding this timing effect, Zone itself continued to gain traction operationally, with volume growth above 40% and market share increasing 18bps to 2.8% of the category. Distribution expanded to 109,000 stores, and Imperial launched new Jalapeño Lime flavours in 6mg and 9mg strengths. Management expects a stronger second half due to the absence of repeat promotional costs and additional flavour launches.
Imperial also formally decided to exit its legacy myblu vape business in the US, reflecting both regulatory complexity and management’s increasing strategic focus on modern oral nicotine. Management characterised myblu as a small, declining, loss-making business with outdated products dating back to 2017. This decision should improve the profitability profile of the US NGP segment going forward.
Regional Performance – AAACE
The AAACE region produced highly divergent underlying trends. Reported tobacco and NGP net revenue increased only 1.1% at constant currency to £947m, while adjusted operating profit declined 3.0% to £352m. However, Australia continued to heavily distort regional performance. Excluding Australia, tobacco and NGP net revenue grew 9.2%, while adjusted operating profit increased 12.8%.
Australia remains Imperial’s most problematic combustible market. Legal industry volumes continued collapsing due to illicit trade growth and regulatory changes, with Imperial indicating legal market volumes declined roughly 50% year-on-year. Market share fell 55bps as management prioritised pricing and profitability over volume defence. Despite these pressures, Imperial continues refining its portfolio through brands such as JPS, Parker & Simpson, and Classics to target downtrading consumers. Management suggested Australia should become less of a drag in H2 as these severe declines annualise.
Outside Australia, AAACE performance was considerably stronger. African markets delivered strong growth, particularly Burkina Faso and Madagascar, while Morocco showed early signs of stabilisation following Gauloises flavour innovation. The Asia, Middle East and Turkey cluster also performed well, benefiting from pricing and entry into Syria. NGP growth in AAACE was exceptionally strong at 60%, albeit from a smaller base, supported by Pulze 3.0 heated tobacco expansion and rechargeable blu bar kit adoption in markets such as New Zealand and Slovakia.
Logista
Distribution subsidiary Logista delivered a softer result. Distribution gross profit declined 1.3% at constant currency, while adjusted operating profit fell 6.0% after eliminations. Weakness reflected lower tobacco inventory profits in Spain and France and softer transport activity, partially offset by stronger performance in Italy and growth in pharmaceutical logistics and courier operations. Importantly, non-tobacco activities now account for more than 50% of Logista gross profit, supporting the diversification strategy.
Capital Allocation
Cash generation and capital allocation remained major strengths. Free cash flow over the last 12 months reached £2.6bn, despite the £150m Delaware payment during the half. Net debt increased modestly to £10.5bn adjusted, though leverage remained stable at 2.4x EBITDA and management continues targeting leverage toward the lower end of the 2.0x-2.5x range by year-end.
Imperial continues returning substantial capital to shareholders. The company completed £809m of buybacks during H1 and remains on track to complete the £1.45bn FY26 buyback programme. Combined with the 4% dividend increase, management reiterated its commitment to progressive dividends and annual evergreen buybacks through 2030. Cumulative capital returns since FY21 now total approximately £11.5bn, equivalent to around 77% of the company’s market capitalisation at the January 2021 Capital Markets Day.
Other Highlights
The 2030 transformation programme also featured prominently. Imperial is targeting £320m of annual cost savings by 2030 through factory rationalisation, operational efficiencies, and technology investments. The closure of the Langenhagen factory in Germany and sale of the Taiwan facility are expected to deliver around £100m of annual savings once fully implemented. The company also highlighted its strategic partnership with Capgemini, which is intended to accelerate data capabilities, AI deployment, and operational efficiency.
Guidance
Looking ahead, management reiterated FY26 guidance despite geopolitical uncertainty related to the Middle East. Imperial still expects low-single-digit tobacco net revenue growth, double-digit NGP growth, and adjusted operating profit growth of 3%-5% at constant currency. Importantly, management expects a materially stronger second half, supported by the full flow-through of combustible pricing, improved US NGP performance, operational gearing, and easier Australian comparisons.
