TOP NEWS: BAT Raises Annual Dividend As Profit Rises On Lower Costs

(Alliance News) - British American Tobacco PLC on Wednesday lifted its dividend for 2020, as ...

Alliance News 17 February, 2021 | 8:38AM
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(Alliance News) - British American Tobacco PLC on Wednesday lifted its dividend for 2020, as profit rose considerably on an improved operating performance and lower costs, despite a dip in revenue.

Shares in British American Tobacco were down 5.9% at 2,585.50 pence on Wednesday in London, the second worst performer in the FTSE 100. Its Johannesburg shares were 5.3% lower at ZAR529.67, lagging at the bottom of the Top 40 index.

For the year, the tobacco group - which owns cigarette brands such as Camel and Lucky Strike - posted pretax profit of GBP8.67 billion, a 9.6% rise from GBP7.91 billion in 2019.

Profit from operations increased 11% year-on-year to GBP9.96 billion from GBP9.02 billion, driven by a reduction in costs relating to raw materials and employee benefits.

BAT also noted that one-off costs for litigation charges and impairments dropped to GBP656 million in 2020 from GBP1.07 billion in 2019.

For 2020, the costs included a litigation charge of GBP487 million, following a settlement agreement for cases in the US states of Florida, Texas, Minnesota and Mississippi regarding brands previously sold to a third party. BAT also took an impairment charge of GBP209 million, largely related to Malaysia, where BAT said the retail environment remains challenging.

In 2019, BAT incurred a GBP436 million charge on a class action lawsuit in Canada, plus amortisation and impairment of trademarks totalling GBP481 million. Other litigations costs also had been booked against 2019 results, including a GBP236 million charge in the US and a GBP202 million charge in Russia.

BAT took a GBP172 million goodwill impairment in Indonesia in 2019. In addition, BAT's Quantum restructuring programme resulted in a GBP264 million charge that year.

Revenue declined by 0.4% to GBP25.78 billion in 2020 from GBP25.88 billion in 2019.

Although New Categories - which includes tobacco heating, vapour, and modern oral brands - saw revenue growth on a rise in volumes, there was a decline in cigarette volumes, and in revenue from the Combustibles business, as a result of disruption caused by the pandemic.

In constant currency terms, revenue rose by 3.3%.

British American Tobacco declared a dividend of 215.6 pence, up 2.5% from 210.4p paid out in 2019.

Looking ahead, BAT expects adjusted earnings per share in constant currency to rise by a mid-single figure for 2021, while revenue is set to grow by between 3% and 5%. However, the global cigarette market is expected to be down 3%, while the US market remains dependent on Covid-19 uncertainty.

"Last year we increased the number of consumers of our non-combustible products by 3 million to 13.5 million, doubling the rate of consumer adoption in the second half of 2020. We have excellent momentum in New Categories, with accelerating volume and value share gains," said Chief Executive Jack Bowles.

"Our investment behind New Categories has increased by a further GBP426 million compared to 2019, enabled by a 5th consecutive year of value share growth in combustibles. Enabled by Project Quantum, we continued to simplify the company and drive efficiencies, delivering GBP660 million of cost savings (being well on track to deliver our ambitious GBP1 billion of savings by 2022), further supporting new capabilities investment," Bowles added.

By Dayo Laniyan;

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
British American Tobacco PLC 2,507.00 GBX 1.01

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