By Yamini Kalia

(Reuters) -Imperial Brands pledged on Tuesday to boost shareholder returns to 2.8 billion pounds ($3.7 billion) in its new financial year, as it reported strong growth in vapes and other tobacco alternatives, sending its shares higher.

The maker of Winston cigarettes and Backwoods cigars has benefited from hiking tobacco prices to offset a decline in volumes, as well as rising demand for so-called next generation products (NGPs) including vapes, e-cigarettes and oral pouches.

The company said it planned to buy back 1.25 billion pounds of shares in the year to the end of September 2025, and pay out cash dividends of about 1.5 billion pounds. That would be up from 2.4 billion pounds of shareholder payouts in fiscal 2024.

Imperial, whose other brands include the blu vapes, forecast 20-30% growth in NGP net revenues at constant currencies for fiscal 2024, ahead of some analyst expectations, but said overall results would be in line with guidance, with a stronger pound holding back its adjusted operating profit.

Shares of the Bristol-headquartered firm were up 4.2% at 2,239 pence in morning trade, the biggest gain on London's benchmark index.

"Imperial Brands is managing to drive growth not only in its fledgling next generation brands, but also in ‘legacy’ tobacco products which still make up the lion’s share of the business," said Derren Nathan, head of equity research at Hargreaves Lansdown.

Imperial has stepped up focus on its top five markets and investment in NGPs to try to attract smokers and non-smokers alike to its products.

Countries around the world are rushing to regulate tobacco alternatives to try to curb nicotine usage.

British Prime Minister Keir Starmer has also supported the idea of prohibiting smoking in some outdoor spaces. This follows the Labour government's commitments during the July elections to implement a smoking ban for younger generations.

Cigarette makers like Imperial are also losing business in the United States, the company's largest market, due to illicit sales of e-cigarettes and disposable vapes from China.

($1 = 0.7641 pounds)

(Reporting by Yamini Kalia in Bengaluru; Editing by Subhranshu Sahu and Mark Potter)