- £27.3 billion non-cash impairment charge
- Global settlement with rival Philip Morris
- Strong performance from new categories
Investors in British American Tobacco (BATS) ‘rewarded’ the global tobacco giant this morning despite it reporting a loss from operations of £15.75 billion for the year ending 31 December after incurring a £27.3 billion non-cash impairment charge mainly related to its US combustibles brands.
The shares were up over 6% to £24.65 in morning trading although that still leaves them down 20% over the past year.
SUCCESS IN NEW CATEGORIES
Today's share price gain is likely attributable to the good news the firm announced alongside the bad.
Organic revenue for new categories rose 21% driven by vaping brands Vuse and Velo and a global settlement was reached with rival Philip Morris International (PM:NYSE) over patent infringement.
The company also announced dividend growth of 2% to 235.52p.
The FTSE 100 company also maintains its commitment to a smoke-free Britain ‘through appropriate and responsible’ vaping regulation.
The UK government recently announced its intention to ban disposable vapes which sent vaping supplier shares down.
Vaping stocks take a tumble after crackdown announced by UK government
Chief executive Tadeu Marroco expects the business to deliver '3-5% organic revenue [in 2024], and mid-single digit adjusted organic profit from operations growth by 2026 on a constant currency basis.’
EXPERT VIEWS
Russ Mould, investment director at AJ Bell said: ‘Usually, a company announcing losses running into the tens of billions of pounds wouldn’t be cause for celebration among investors. However, British American Tobacco has done just that this morning and been rewarded with share price gains.
‘The impairments which have tipped British American Tobacco into a mega loss are non-cash items, relating to a write-down of the value of its acquisition of the part of Reynolds American it did not already own in 2017. While the size of the write-down has grown slightly, it was previously flagged in December.’
Neil Shah, director of content and strategy at Edison Group, added: ‘BAT's refined strategic direction, aimed at 'Building a Smokeless World', signals a long-term commitment to transitioning towards reduced-risk alternatives.
‘With smokers continuing to switch to next generation products such as vaping, BAT will need to reassess the value of its assets in traditional combustibles.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell. The editor of this article also owns shares in British American Tobacco.
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