British American Tobacco shares rise on news of meeting its earnings targets
CAPE TOWN – British American Tobacco (BAT) rose 2.24 percent on the JSE on Thursday to close at R634.30 after the group reported that it had met its earnings targets and made significant progress on its deleveraging programme and a higher dividend.
The multinational electronic and vaping products as well as traditional cigarettes group lifted revenue 5.7 percent to £25.9 billion (R510.68bn) in the year to December 31.
Profit from operations, which include the Kent, Dunhill and Lucky Strike brands, fell 3.2 percent to £9.016 million, while headline earnings per share eased 0.7 percent to 268.1p.
Basic earnings per share declined 5.4 percent to 249.7p. The group said its dividend per share increased 3.6 percent to 210.4p. It said it anticipated the global industry cigarette and tobacco-heating products volume in 2020 to fall around 4 percent.
UK-based Proactiveinvestors.co.uk noted that investors in the FTSE 100-listed group could rest easy for now as BAT had met targets. However, the future was clouded somewhat by the minimum age of buying nicotine products being raised to 21 from 18 in the US, while the possibility of additional regulations around vaping to address health concerns could also affect the longer-term outlook.
Chief executive Jack Bowles said he was “delighted” with progress made to develop a simpler, stronger, faster and more agile organisation.
“We have delivered value growth from our combustible business and grown our New Categories business, now providing potentially reduced risk products to close to 11 million consumers.”
A significant restructuring and simplification programme had been started in September, which was largely complete. “This will create the capabilities and resources to continue investing in New Categories and allow us to deliver on our financial commitments,” he said.
Bowles said he was confident of another year of high single figure adjusted constant currency earnings growth.
Cigarette and THP volume share increased by 20 basis points, with value share up 30 basis points in key markets.
New Categories revenue grew 36.9 percent, or 32.4 percent to £1.2bn at constant rates with strong growth in all categories, despite the slowdown in US vapour.
Excluding US vapour, New Categories revenue grew 39 percent at constant rates.
Lower profit from operations was driven by charges incurred in respect of Canada (Quebec), Quantum (simplification programme), other smoking and health litigation, including Engle in the US, Russia (excise dispute) and Indonesia (goodwill impairment), the majority of which were non-cash items.
Adjusted profit from operations of £11.1bn were up 7.6 percent, an increase of 6.6 percent on a constant currency basis.
At constant rates of exchange, the US delivered a strong year with adjusted revenue up 4.4 percent, value share up 30 basis points and adjusted profit from operations up 6.4 percent.