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Imperial Tobacco said it has seen stronger than expected tobacco sales volumes during the coronavirus crisis as consumers in Europe and the US have shifted spend to tobacco products.

Posting a full year trading update, the FTSE 100 tobacco firm said its tobacco business has continued to perform well despite an uncertain and disrupted trading environment.

It said it has seen increased overall demand against expectations, as consumers “appear to have allocated more of their spend to tobacco” as well as some demand shifts between different markets and channels.

It said this has resulted in better than expected volumes, driven by improved volume trends in several key European markets and in the US.

However, these positive trends have largely been offset by weaker market volumes in the duty free channel and in traditional summer tourist destinations, where reduced travel has impacted demand.

Overall, it expects tobacco net revenue to increase by around 1% at constant currency.

In tobacco alternatives (next generation products), Imperial has significantly reduced investment while maintaining a range of options for future growth.

Trading has been “disappointing”, albeit in line with revised expectations with the level of underlying losses reduced in the second half as we curtailed expenditure.

NGP net revenue is expected to be around 30% lower than last year at constant currencies.

Therefore, group net revenue performance is expected to be broadly flat on last year at constant currencies.

However, it has incurred some additional manufacturing costs caused by the COVID-related restrictions. In addition, given the ongoing COVID-related uncertainties, it has increased our provisions, mainly in respect of stock and debtor positions.

As a result, we expect constant currency earnings per share will be down by around 6%, which is in line with current market expectations.

CEO Stefan Bomhard commented: “Imperial has continued to show resilience in adapting to the challenges posed by the COVID-19 pandemic and our priority remains the health, safety and well-being of our people across our operations.

“In my first three months as CEO I have focused on reviewing our strategy, engaging with employees, and visiting as many of our key markets as possible. I have been struck by the energy and passion of my colleagues, which increases my confidence in our ability to deliver a stronger performance in the years ahead.

“I expect to be able to share some initial observations about the business when we publish our preliminary results on 17 November, at which time we will also announce the date of a capital markets event to provide a strategic update in the first quarter of calendar 2021.”

Imperial has also made several hires to its leadership team, including Murray McGowan as group strategy and transformation director, Javier Huerta from Unilever as group manufacturing and supply chain director and Alison Clarke from Inchape as chief people and culture officer.

Imperial Brands shares are up 2.4% to 1,395.7p so far this morning.

Morning update

Brewer and pubco Shepherd Neame has warned of a continued “challenging” period for the rest of 2020 as new restrictions of pub openings hit trading.

Its new financial year started on 28 June. In the thirteen weeks since 4 July when pubs were allowed to reopen, the business has been profitable and cash generative.

Nearly all of our pubs have re-opened, traded successfully and benefitted from the Eat Out To Help Out Scheme across the summer. London pubs have been the last to open and most of these in the last few weeks.

Like-for-like sales in those 64 Managed Pubs and Hotels that were open for this period were down -7.9%. Coastal and destination sites have performed well and food and accommodation sales have been strong but city centre and Central London drinks-led outlets less so.

For the thirteen weeks to 26 September, it saw 73% of prior year Tenanted Pub income, this includes substantial rental support for licensees throughout the period and the phased opening of pubs.

Own Brand Beer and Cider volumes since the start of the new financial year are -1.9% versus last year.

It said that it anticipates that trading during the winter months will be challenging as the new restrictions, such as the rule of six and 10pm curfew, impact business and consumer confidence.

However, it said it welcomes the extension of the reduced VAT rate of 5% until March 2021.

On the markets this morning, the FTSE 100 has endged up 0.2% to 5,957.9p to start the day.

Early risers include Devro, up 5.3% to 180p, Naked Wines, up 3.6% to 433.1p and Bakkavor, up 3.2% to 65p.

Fallers include Total Produce, down 6.4% to 95p, Applegreen, down 2.5% to 302.1p and Science in Sport, down 2.5% to 35.1p.

Yesterday in the City

The FTSE 100 ended yesterday edging down 0.1% to 5,946.3pts.

Tesco fell back 0.7% to 212.6p after it revealed that sales soared 6.6% in the first half to £26.7bn as but costs also ballooned to weigh on profits.

Morrisons and Sainsbury’s both followed Tesco marginally down, closing down 0.6% at 169.5p and 0.3% at 196.5p respectively.

Other fallers included ready meals maker Bakkavor, down 4.6% to 63p, C&C Group, down 3.9% to 192.2p, Devro, down 3.5% to 171p and WH Smith, down 2.5% to 1,000p.

The day’s risers included Greggs, up 3.3% to 1,360p, Ocado, up 2.5% to 2,491p, McBride, up 1.7% to 61.2p, AG Barr, up 1.5% to 474p and Hotel Chocolat, up 1.3% to 325p.