A quick look at first-half results from British American Tobacco (BATS) might tell the same old story: squeezed volumes, an adverse effect from currency headwinds and dependence on emerging markets. But look a little closer and the story is actually improving.
While the pound's strength weighed heavily on the reported numbers, at constant currencies sales showed a 3 per cent improvement to £7.78bn, and adjusted profits rose 4 per cent to just over £3bn. BATS credited the 'global drive brands' - Rothmans, Pall Mall, Dunhill, Kent and Lucky Strike - for improving the group's market share. Meanwhile, price increases, coupled with a close eye on costs, boosted the operating margin by 30 basis points (at constant currencies) to 39.2 per cent.
In any case, news that the company plans to maintain its 42 per cent stake in Reynolds American - which has agreed to buy Lorillard in a $25bn deal - overshadowed these results. The share buyback programme was suspended with immediate effect, but chief executive Nicandro Durante said the "strong portfolio of brands" at the enlarged Reynolds-Lorillard group more than justified continued investment. The companies will also continue to collaborate on new technologies for next generation e-cigarette products.
Prior to the results, broker Investec expected full-year pre-tax profits of £5.95bn, down from £6.08bn in 2013.
| BRITISH AMERICAN TOBACCO (BATS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 3,555p | MARKET VALUE: | £66bn | |
| TOUCH: | 3,555-3,557p | 12-MONTH HIGH: | 3,625p | LOW: 2,871p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 293p* | NET DEBT: | 191% | |
| Half-year to 30 June | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 7.57 | 2.99 | 107 | 45 |
| 2014 | 6.80 | 2.61 | 93 | 47.5 |
| % change | -11 | -13 | -13 | +6 |
Ex-div: 20 Aug Payment: 30 Sep *Includes intangible assets of £10.9bn, or 586p a share | ||||
