LONDON BRIEFING: BAT Ramps Up Investment On Smoking Alternatives

(Alliance News) - Dunhill and Rothmans cigarette maker British American Tobacco on Wednesday ...

Alliance News 9 December, 2020 | 8:12AM
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(Alliance News) - Dunhill and Rothmans cigarette maker British American Tobacco on Wednesday raised its revenue expectations, as the hit from Covid-19 has been less than first feared.

BAT said it was maintaining 2020 guidance as it seeks to transform its business, by switching to cigarette alternatives. The company is investing more in its New Category business and now has around 13 million non-combustible product consumers.

For 2020, BAT expects constant currency adjusted revenue growth to be at the high end of the guided 1% to 3% range. It also anticipates a reduced hit to earnings as a result of Covid-19 of 2.5%, from 3.0% previously.

Further, BAT expects a strong performance in its US business, with continued cigarette value share growth, up 40 basis points year-to-date and group cigarette volume is expected to be ahead of the industry.

"We are continuing to increase investment in our three New Categories of potentially reduced-risk cigarette alternatives, capitalising on our momentum, while continuing to deliver on our financial commitments," said Chief Executive Jack Bowles. "We are confident about the future for BAT and are committed to our 2025 New Category revenue ambition of GBP5 billion."

BAT shares were down 1.2% early Wednesday.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.4% at 6,582.38

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Hang Seng: up 0.7% at 26,487.12

Nikkei 225: closed up 1.3% at 26,817.94

DJIA: closed up 104.09 points, or 0.4%, at 30,173.88

S&P 500: closed up 0.3% at 3,702.25

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GBP: flat at USD1.3370 (USD1.3360)

EUR: up at USD1.2132 (USD1.2111)

Gold: down at USD1,860.80 per ounce (USD1,869.75)

Oil (Brent): flat at USD48.85 a barrel (USD48.98)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Wednesday's Key Economic Events still to come

0700 EST US MBA mortgage applications

1000 EST US wholesale trade

1030 EST US EIA weekly petroleum status report

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UK Prime Minister Boris Johnson will fly to Brussels in an attempt to reach a breakthrough on a post-Brexit trade deal over dinner with European Commission President Ursula von der Leyen. Johnson and the EU chief will try to salvage negotiations on Wednesday evening after the UK Government dropped controversial plans that would have allowed ministers to break international law. The olive branch came after the two sides reached an agreement on the implementation of the Brexit divorce deal as time rapidly runs out to the end of the transition period on December 31. But Brussels' chief negotiator Michel Barnier warned EU foreign ministers that he now believes a no-deal departure is more likely than a trade agreement being brokered in time, the PA news agency understands.Both sides have set the stage for a potentially make-or-break meal in the EU Commission's Berlaymont headquarters. Johnson will depart for the Belgian capital after taking part in Prime Minister's Questions.

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The US House of Representatives overwhelmingly passed an annual defence spending bill setting up a showdown with President Donald Trump who has threatened to veto the legislation. The mammoth USD740 billion- bill passed in a 335 to 78 vote, which is far greater than the two-third majority needed to override a presidential veto. The bill is now expected to pass a second vote in the Senate this week before heading to Trump's desk. The bill contains funding for national security along with the core policy decisions. The annual appropriations bill has passed each year since the 1960s in a bipartisan fashion. Trump is threatening to wield his veto power primarily over a demand that Congress repeal legal protections for technology companies, as the president is locked in a fight with social media giants over alleged bias against conservatives.

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BROKER RATING CHANGES

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BERENBERG RAISES CAIRN ENERGY TO 'BUY' ('HOLD') - TARGET 200 (140) PENCE

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BERENBERG INITIATES SSP GROUP WITH 'HOLD' - TARGET 348 PENCE

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RBC INITIATES HILTON FOOD WITH 'SECTOR PERFORM' - TARGET 1200 PENCE

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RBC INITIATES CRANSWICK WITH 'SECTOR PERFORM' - TARGET 3900 PENCE

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LIBERUM INITIATES SOURCEBIO WITH 'BUY' - TARGET 200 PENCE

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COMPANIES - FTSE 100

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Grocer Tesco said the conditions for the sale of its businesses in Thailand and Malaysia CP Retail Development have been satisfied following the formal notice of approval from the Office of Trade Competition Commission in Thailand. Tesco said that, combined with the approval received from the Ministry of Domestic Trade & Consumer Affairs in Malaysia in November, means there are no further conditions outstanding and the disposal is expected to complete on or around December 18. As previously announced, Tesco intends to return GBP5 billion of the proceeds to shareholders via a special dividend.

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Accounting software firm Sage said it has entered into an agreement for the sale of its Polish business to funds advised by Mid Europa Partners for GBP66 million. The business recorded GBP21 million in revenue and GBP4 million in operating profit in financial 2020. The sale is expected to complete in early 2021.

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Royal Dutch Shell has been hit with an exodus of several clean energy executives amid a split over the pace and extent of the company's shift towards greener energy, the Financial Times reported late Tuesday. The resignations come just weeks before Shell is set to announce its strategy for the energy transition, the FT said. Some have pushed for a more aggressive move from oil but management is more inclined to stick closer to the company's current path, according to four people familiar with the matter. The FT reported that Marc van Gerven, who headed the solar, storage and on-shore wind businesses at Shell, Eric Bradley, who worked in the distributed energy division, and Katherine Dixon, a leader in the energy transition strategy team, have all departed in recent weeks. Shell's vice-president for offshore wind is due to leave the company, and other top executives working in clean energy also plan to exit in the coming months, the FT said citing two of the people familiar with the matter.

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COMPANIES - FTSE 250

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Vistry Group said it will consider reinstating its dividend as it expects to deliver annual pretax profit at the top end of the guided range of GBP130 million to GBP140 million. Vistry confirmed that it expects to have a net debt position as at December 31, greater than GBP40 million, with the possibility of a modest net cash position. This has been driven by continued strong trading, low cancellations and good cash management it said. In November, Vistry confirmed its intention to resume dividend payments earlier than previously expected with an interim payment payable next November in respect of 2021 with a 2.5 times dividend cover and a progressive policy thereafter. However, given the strong cash performance and accelerated deleverage, Vistry said it will consider reinstating a "modest" final dividend in respect of 2020. The housebuilder also said it repaid furlough grants obtained as a result of the pandemic and has not benefited from any UK government schemes related to supporting the business and employees.

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G4S after the London market close on Tuesday said it has agreed to be taken over by Allied Universal in a GBP3.8 billion deal. Under the offer made by Atlas UK Bidco - which is indirectly controlled by Allied Universal - G4S shareholders will be entitled to receive 245 pence in cash for each share held. This values G4S at GBP3.8 billion and represents a 68% premium to G4S's closing price on September 11, the last business day before the offer period commenced. The offer also represents a 4% premium to GardaWorld's rival offer of 235p per share. G4S shares closed up 3.2% at 255.30 pence in London on Tuesday. The directors of the London-listed security services firm intend to unanimously to recommend shareholders accept the offer. The deal is expected to close in the first quarter of 2021.

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COMPANIES - GLOBAL

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Honda Motor has reportedly warned of disruptions to production at its Swindon plant due to a shortage of parts caused by transport problems. The BBC said the Japanese carmaker has told workers at the plant vessel delays and congestion at UK ports will force it to pause production on Wednesday "due to transport-related parts delay". The plant operates on a "just in time" production system, under which parts arrive at the location when needed. "The situation is currently being monitored with a view to restart production as soon as possible," Honda was quoted as saying by the BBC.

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Airbnb and DoorDash make their stock market debut this week as part of a "unicorn parade" capping a busy year for hot startups going public. This week's big initial public offerings include food-delivery service DoorDash, which has seen a surge during Covid-19 restrictions, to be followed by home-sharing platform Airbnb and e-commerce operation Wish. Firms going public with lofty valuations, some in the tens of billions, have been concentrated in technology, such as big data analytics group Palantir and cloud storage firm Snowflake earlier this year. DoorDash is aiming high with an opening share price of USD102, valuing the food delivery startup at USD38.7 billion overall for its stock market debut Wednesday, according to US media reports. DoorDash would be valued at USD32.4 billion based on outstanding common stock alone, not adding in private stakes being held by insiders. That is still more than double the USD16 billion that DoorDash was deemed worth during a private funding round in June.

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AT&T confirmed its guidance for 2020 and said business transformation efforts remain its priority. The Texas-based telecommunications company remains on track to generate USD26 billion or more in free cash flow for 2020 with a full-year dividend payout ratio percentage in the high 50s. The company said it will provide its 2021 financial outlook and capital allocation guidance when it reports its fourth-quarter 2020 results on January 27, 2021. AT&T said HBO Max is seeing improved traction. AT&T has 12.6 million HBO Max activations, up from 8.6 million as of September 30, and the number of hours of engagement per week has increased by 36% in the past 30 days. Last week, AT&T subsidiary Warner Bros said it will release its entire 2021 slate of movies on HBO Max streaming and in theatres simultaneously, including "The Matrix 4" and a "Dune" remake.

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Wednesday's Shareholder Meetings

CQS Natural Resources Growth & Income PLC - AGM

Riverstone Energy Ltd - EGM re discontinuation resolution

Orchard Funding Group PLC - AGM

GVC Holdings PLC - EGM re amendment of memorandum and articles of association

Ashoka India Equity Investment Trust PLC - AGM

Falcon Oil & Gas Ltd - AGM

Bowleven PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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