Navigating the Post-Bomhard Era at Imperial Brands: Risks, Rewards, and a Compelling Investment Thesis

The retirement of Stefan Bomhard as CEO of Imperial Brands (LON: IMB) marks a pivotal moment for the tobacco giant. While shareholders celebrated a strategic pivot toward next-generation products (NGPs) and robust capital returns, governance concerns tied to executive compensation threaten to overshadow the company’s progress. This article argues that the post-Bomhard era presents a compelling buy opportunity as the market overreacts to perceived risks, while the fundamentals—driven by NGP growth and shareholder-friendly policies—remain strong.

Leadership Transition: A Structured Handover

Stefan Bomhard, who led Imperial through its shift from combustible tobacco to modern oral and vaping products, stepped down as CEO on October 1, 2024, after five years in the role. His successor, Lukas Paravicini (former CFO), inherits a stable leadership team and a clear roadmap. The transition was meticulously planned: Bomhard remained on the Board until December 31, 2024, with extended advisory support until May 2026, ensuring continuity.

At the January 29, 2025 AGM, shareholders ratified Paravicini’s elevation and the appointment of Stefan Murray McGowan as the new CFO. The Board’s focus on aligning leadership with long-term strategy—evident in Paravicini’s global FMCG experience and McGowan’s strategic expertise—bolsters confidence in the new regime’s ability to execute the 2030 growth plan.

Financial Performance: Strength in Strategic Focus

Despite a 0.6% decline in FY2024 net revenue to £32.41 billion, Imperial’s adjusted profit before tax rose 1.1% to £3.52 billion, while adjusted EPS surged 6.5% to 297 pence. The real driver of growth is NGPs, which saw a 26.4% constant-currency revenue jump, contributing to +5 basis points in market share gains in priority markets.

The dividend policy remains shareholder-centric: the interim dividend rose 78.5% to 80.16 pence, with a £2.8 billion capital return plan for FY2025.

Governance Risks: Executive Pay and Shareholder Sentiment

The transition is not without challenges. Bomhard’s tenure saw above-average CEO compensation, including equity awards tied to NGP milestones. While performance metrics were met, critics argue that such payouts risk misalignment with shareholder interests. Paravicini’s first test will be to rebalance executive incentives, ensuring pay reflects sustainable growth rather than short-term gains.

Shareholder sentiment remains divided. Bulls highlight the low-single-digit NGP revenue growth guidance and the high-single-digit EPS growth forecast for FY2025 as reasons to buy. Bears, however, point to lingering governance concerns and weak tobacco volumes in high-tax markets as risks.

Why This Is a Buy Opportunity

The market’s skepticism is overdone. Key positives include:
1. NGP dominance: Imperial’s Zone product (launched in the U.S. in 2024) and 26% NGP revenue growth position it to capitalize on the shift away from combustible cigarettes.
2. Capital returns: The £2.8 billion capital return plan (combining buybacks and dividends) signals confidence in cash flow, with free cash flow at £2.4 billion in FY2024.
3. Leadership credibility: Paravicini’s track record in cost discipline (evident in his CFO tenure) and NGP innovation focus align with shareholder priorities.

Conclusion: Reassessing Post-Transition Value

Imperial Brands’ stock has underperformed peers amid governance debates, but the fundamentals—strong NGP growth, robust capital returns, and a seasoned leadership team—suggest a compelling entry point. While the market may penalize the company for past governance missteps, the new leadership’s focus on performance-based pay and ESG integration could unlock upside.

Investors should act now: the low-single-digit revenue growth guidance for FY2025 and the high-single-digit EPS target imply undervaluation at current levels. With Paravicini’s strategic clarity and NGP’s secular tailwinds, Imperial Brands is primed to rebound. This is a rare opportunity to buy a high-quality asset at a discount—before the market recognizes the post-Bomhard era’s full potential.

Action: Consider accumulating shares of Imperial Brands ahead of FY2025 earnings, with a focus on the NGP-driven growth and capital return discipline.