Brittish American Tobacco Announcement

[idpickering]

First Half Pre-Close Trading Update 2018

Results communications in 2018 will include presentation of results against 2017, as though the Group had owned the acquisitions made in 2017 for the whole of that year. Comparison of results on this basis will be termed "on a representative basis" and will provide shareholders with a results comparison representative of the Group having owned the acquisitions throughout 2017 and 2018. For these comparison purposes, the Group has previously issued the 2017 results on such a basis for both the six months ended 30 June 2017 and full year ended 31 December 2017.


Trading update - ahead of closed period commencing 26 June 2018

· The business continues to perform well and trading is in line with our expectations

· Strong adjusted revenue growth from the Strategic Brand Portfolio, on a representative basis

· Continued strong market share growth, driven by the Global Drive Brands (GDBs)

· Adjusted revenue and adjusted profit growth, on a representative basis, expected to be weighted to the second half of the year, as the impact of a number of significant events affecting the comparison with H1 2017 unwind

· Good adjusted constant currency EPS growth, is expected to be impacted by a significant currency translation headwind of around 9% for the first half and 6% for the full year, assuming exchange rates remain unchanged for the remainder of the year

https://www.investegate.co.uk/british-a ... 00050377R/

[Dod101]

Thanks Ian. I translate that as meaning don't get too excited about our half year results.

Dod

[idpickering]

Thanks Ian. I translate that as meaning don't get too excited about our half year results.

Dod

You're welcome Dod, and that's my conclusion too. BATS are still my chosen top up for this month. It would've been Imperial Brands but I've spent enough on their shares already.

Ian.

[kempiejon]

Ian,

I understand your desire to minimise company specific risks by not over weighting a particular share but comparing BATS 5.2% to IMB 6.7% I think that 25%ish extra yield, would be very difficult to overlook and I'd chance it with imb. I too have both in my HYP, I have added over the years so I assume the yields of each have moved around with both vying for first place. I'm relaxed about weightings within the sectors so am happy to let either overweight in pursuit of income, in fact I see I currently have more imb than bats.

[Dod101]

I have a larger holding in IMB as well but would not treat them as one pot. I am just a bit concerned because I do not understand why the market would place a higher rating on BAT than Imperial, except that it feels a 'risk premium' for want of a better expression, is warranted for Imperial.

Dod

[ReformedCharacter]

I am just a bit concerned because I do not understand why the market would place a higher rating on BAT than Imperial, except that it feels a 'risk premium' for want of a better expression, is warranted for Imperial.

Dod

It may be that Imperial has a much higher exposure to the European market where smoking rates are falling fastest. Only a supposition on my part as I'm pretty ignorant. I have some BAT but no IMB.

RC

[Dod101]

Yes probably that and Imperial have announced some I think so far unspecified sales whereas BAT seem pretty clear on their strategy. OTOH, Imperial confirm a continuing 10% increase in their dividend and for us that is very attractive. Probably nothing to worry about with either, at least in the relatively short term.

Dod

[Julian]

The announcement also says...

We expect our market share to continue to grow strongly, driven by the GDBs(*)

Might the markets be anticipating that BATS growing market share is going to be at the expense of IMB? That might account for some of the differing sentiment on the two companies.

- Julian

(*) GDB = "Global Drive Brands" - the tobacco industry playing its part in filling the world with cryptic three-letter acronyms!

[idpickering]

Ian,

I understand your desire to minimise company specific risks by not over weighting a particular share but comparing BATS 5.2% to IMB 6.7% I think that 25%ish extra yield, would be very difficult to overlook and I'd chance it with imb. I too have both in my HYP, I have added over the years so I assume the yields of each have moved around with both vying for first place. I'm relaxed about weightings within the sectors so am happy to let either overweight in pursuit of income, in fact I see I currently have more imb than bats.

Thanks for your input kempiejon. I do get where you're coming from believe me. As Dod points out in this post viewtopic.php?p=145157#p145157 -

Yes probably that and Imperial have announced some I think so far unspecified sales whereas BAT seem pretty clear on their strategy. OTOH, Imperial confirm a continuing 10% increase in their dividend and for us that is very attractive. Probably nothing to worry about with either, at least in the relatively short term.

Dod

It's income that we're about here, so I might just do a bit of Pickering, and go for IMB instead?

I might even top up my BATS holdings this month and IMB next month, in order to qualify for each shares ex divi dates, 28/06/18 and 24/08/18 respectively.

Ian.

[kempiejon]

It's income that we're about here, so I might just do a bit of Pickering, and go for IMB instead? I might even top up my BATS holdings this month and IMB next month, in order to qualify for each shares ex divi dates, 28/06/18 and 24/08/18 respectively. Ian.

As is your prerogative Ian and I doubt I'm the only one not surprised, I hope I helped your process rather than confusing the matter more. As I said, for me the higher yield is the only option if safety and reliability of the dividend is satisfied. I've a well diversified portfolio with plenty of shares adding new money each month so I usually look for the best income I can find. I'm probably not shortlisting tobaccos for my next buys but 6.7% yield and double digit growth looks pretty keen to me and more tobacco wouldn't break any of my concentration guidelines.

[richfool]

There is a Motley fool view on BATS here:
https://www.fool.co.uk/investing/2018/0 ... lue-traps/

Amongst the parts that drew my attention was this:

I am more concerned about other details in the release which again cast doubt over British American Tobacco’s long-term profits outlook, though...............................I’m worried by the rate at which total cigarette consumption is dropping. The firm itself estimates that global cigarette volumes will fall 3.5% in 2017.

[idpickering]

It's income that we're about here, so I might just do a bit of Pickering, and go for IMB instead? I might even top up my BATS holdings this month and IMB next month, in order to qualify for each shares ex divi dates, 28/06/18 and 24/08/18 respectively. Ian.

As is your prerogative Ian and I doubt I'm the only one not surprised, I hope I helped your process rather than confusing the matter more. As I said, for me the higher yield is the only option if safety and reliability of the dividend is satisfied. I've a well diversified portfolio with plenty of shares adding new money each month so I usually look for the best income I can find. I'm probably not shortlisting tobaccos for my next buys but 6.7% yield and double digit growth looks pretty keen to me and more tobacco wouldn't break any of my concentration guidelines.

Thanks for your continued input kempiejon. Rest assured that you haven't confused the issue. As can be seen in the "My HYP" thread here; viewtopic.php?f=15&t=11247&start=20 tobacco form 5.8% in capital value terms of my HYP, so not overly excessive. There's room for more tobacco I think, in the absence of much else as an option for my HYP currently too maybe,

Ian.

[idpickering]

There is a Motley fool view on BATS here:
https://www.fool.co.uk/investing/2018/0 ... lue-traps/

Amongst the parts that drew my attention was this:

I am more concerned about other details in the release which again cast doubt over British American Tobacco’s long-term profits outlook, though...............................I’m worried by the rate at which total cigarette consumption is dropping. The firm itself estimates that global cigarette volumes will fall 3.5% in 2017.

I did see that item thank you richfool, but elected to not copy a link to it here, as some here frown on me doing so with TMF articles it seems.

Ian.

[Dod101]

I suspect that the real answer to the fall in the share prices for the tobacco companies are in that item. The institutional investors (they make the market) have lost confidence in the long term viability of tobacco and in the main they are looking for growth or at least total return. We small investors are not going to have much impact and so the share price falls away. However if we are prepared to tolerate that, they should be good income shares for a long time to come.

Dod

[idpickering]

I suspect that the real answer to the fall in the share prices for the tobacco companies are in that item. The institutional investors (they make the market) have lost confidence in the long term viability of tobacco and in the main they are looking for growth or at least total return. We small investors are not going to have much impact and so the share price falls away. However if we are prepared to tolerate that, they should be good income shares for a long time to come.

Dod

Well said Dod. You hit the nail on it's head.

Ian.

[richfool]

I tend to Iook upon it along the lines, that I wouldn't want to hang/hold onto a cigarette as it approaches the end of its life, in case I got my fingers burned.

[OLTB]

I suspect that the real answer to the fall in the share prices for the tobacco companies are in that item. The institutional investors (they make the market) have lost confidence in the long term viability of tobacco and in the main they are looking for growth or at least total return. We small investors are not going to have much impact and so the share price falls away. However if we are prepared to tolerate that, they should be good income shares for a long time to come.

Dod

I have been reading the Philip Morris International reports/investor web pages and their focus is very much on moving away from the 'bad' tobacco and onto the 'healthier' form of consumption. Perhaps because their major market is the US and this is where a lot of pressure is coming from (the FDA). The FDA recently released a report here https://www.fda.gov/NewsEvents/Newsroom ... 610206.htm that confirms fewer young people are smoking combustible tobacco, and e-cigarettes have been the most commonly used tobacco products among middle and high school students. The report also talks about considering restricting flavours that appeal to younger people. The FDA seem pretty firm on reducing the number of people addicted to nicotine, which is why those companies whose markets are focussed away from the US may appeal more to investors.

I have also seen on cigarette packets (I am not a smoker myself) the health warnings and awful pictures showing the effects and illnesses smoking can cause, whereas the newer e-cigarettes packages don't seem to have the same restrictions (I may be wrong as I haven't closely looked). Imperial's Blu brand of e-cigarette undoubtedly went through a number of marketing projects to get the most attractive name, colour scheme etc. but who knows if the product packaging may also have restrictions placed on them eventually.

Just a thought that popped into my head, Imperial's name change from Imperial Tobacco to Imperial Brands - as there's no mention of tobacco, perhaps the branding of these e-products is seen as more important than the actual nicotine / tobacco part itself. Maybe there will be further consolidation of tobacco companies in the future and those with markets outside of the US, with established Brands, will become more attractive to those companies in the US seeking to gain immediate market exposure elsewhere.

Cheers, OLTB.

[Bouleversee]

Did I dream it or aren't IMB into something totally unconnected with smoking/vaping/heat not burn at all? Could look it up but no time and I expect someone will already know if I'm right.

[monabri]

Did I dream it or aren't IMB into something totally unconnected with smoking/vaping/heat not burn at all? Could look it up but no time and I expect someone will already know if I'm right.

Well, all I could find was the reference to next generation products ("Blu") on their (IMB) website.

http://www.imperialbrandsplc.com/About- ... ducts.html



Oh, by the way, regarding the TMF article on IMB, here's another from the same author from March last year!

https://www.fool.co.uk/investing/2017/0 ... e-id-sell/

BLT was 1244 on 10th March 2017 (article date) and closed at a tad over 1748p today.




BTW, Ian - your "t" is sticking!

[Bouleversee]

Thanks, Mon. Must have been wishful thinking in my sleep.