BATS - CEO "retires"

[YeeWo]

I'm assuming BATS is still a core hold of HYPers? https://www.telegraph.co.uk/business/20 ... ght-years/

The comments from "Jefferies analyst Owen Bennett" about 2/3rds the way through the article caught my attention : "a strange time to go” and feared “the news will be used to justify the view that the business is in trouble"".

Constructive Opinions please!

[idpickering]

I'm assuming BATS is still a core hold of HYPers? https://www.telegraph.co.uk/business/20 ... ght-years/

The comments from "Jefferies analyst Owen Bennett" about 2/3rds the way through the article caught my attention : "a strange time to go” and feared “the news will be used to justify the view that the business is in trouble"".

Constructive Opinions please!

Thanks YeeWo. That's a shame, but all things must pass I guess. As for the business being in trouble, I doubt it very much. I hold and shall continue to do so.

Ian.

[idpickering]

More on this here;

BRITISH AMERICAN TOBACCO ANNOUNCES CEO SUCCESSION

The Board of British American Tobacco p.l.c. (BAT) is pleased to announce that Jack Bowles, currently Chief Operating Officer of BAT's international business, will succeed Nicandro Durante as Chief Executive Officer of BAT following Nicandro's retirement on 1 April 2019.

In anticipation of this appointment, Jack will become Chief Executive Designate on 1 November 2018 and will join the Board on 1 January 2019.

Jack joined BAT in 2004 as CEO of BAT France and thereafter became Managing Director of the BAT listed subsidiary in Malaysia. He was appointed to the Management Board of BAT in 2009 as Regional Director for Western Europe and subsequently served as Regional Director in both the Americas Region and the Asia-Pacific Region before assuming his current role as Chief Operating Officer in 2017.

https://www.investegate.co.uk/british-a ... 00237750B/

Steady as she goes I suspect.

[monabri]

Mr Durante has been with BATS for ~37 years..joining in 1981...he's probably decided that that's enough!

From Wiki

"Durante joined BAT's Brazilian subsidiary Souza Cruz in 1981. In January 2008, he was appointed BAT's chief operating officer, and in March 2011 became chief executive.[2] Durante is BAT's first non-British CEO".


https://en.wikipedia.org/wiki/Nicandro_Durante

[YeeWo]

Mr Durante has been with BATS for ~37 years..joining in 1981...he's probably decided that that's enough! From Wiki

"Durante joined BAT's Brazilian subsidiary Souza Cruz in 1981. In January 2008, he was appointed BAT's chief operating officer, and in March 2011 became chief executive.[2] Durante is BAT's first non-British CEO".

https://en.wikipedia.org/wiki/Nicandro_Durante

While everything you quote above is AFAIK true, I wouldn't be using Wiki for information like this that is freely available on the company website itself. On the basis that Mr Durante has presided over a SP decline from £50+ 18 months ago to circa £35 today I've: -

probably decided that that's enough!

Putting the above SP decline into a context, a business the size of BAT losing circa 30% of it's value represents £10s of BILLIONS gone! That's SERIOUS, I really hope BAT refrain from trying to spin his departure as the culmination of a successful time running the business. I hope Jack Bowles keeps the dividends coming and takes decisive action to get the SP moving upwards!

[Dod101]

I agree with you YeeWo and there has been surprisingly little comment on that. There are clearly a lot of sellers in the market because every time that the share price moves up to around £40 it promptly falls back again. Yet the dividends keep coming so what's up? We all know that tobacco is in long term decline but even so?

As I have said many times, the dividends are dearly bought.

Dod

[vrdiver]

As I have said many times, the dividends are dearly bought.Dod

I guess that's a matter of perspective.
I bought BATS in 2005, topping up in 2007. Since then my capital has trebled and the dividends paid are 1.25x the capital cost.
XIRR shows as 15.1%, so on pretty much any measure, despite their fall in price, they have been an excellent LTBH for my HYP.

Going forward, I expect some interesting times as global populations increase in third world countries (where smoking tobacco is still dominant), first world switches to vaping and possibly stimulants other than just nicotine (which was a limitation of the tobacco leaf delivery method) and lots of other twists and turns, just as there have been in the last 50 years.

This is one case where SI seems logical to apply: I really have no idea what the future holds for big tobacco or how they will deal with it, so I can only judge them on past performance.

VRD

[Dod101]

Having looked at some numbers, I agree with you VRD but it has been a very good share rather than a great one, especially after the recent fall in the price (whether that is the same thing as value is another matter, but price is the value you will get if you sell today.)

I bought in 2001 at £5.45, so rather than the ten bagger it was, it is now a mere 7 bagger. Of course it is dividends that matter and they have gone from 32p for 2001 to 169.40p for 2016 so no complaints there. I have not quoted the 2017 dividend because of the change to quarterly payments but I am sure it has increased again.

It may be that the price of over £50 (it peaked around £55 in June 2017) was simply irrational exuberance, and actually looking at it like that, £35 or so is quite reasonable and if they keep increasing the dividend, the price will surely follow. YeeWo is being a bit unfair when we take a good look at the facts of the case. After all we could have sold at more than £50 but that is not what a HYP is about. The gyrations in price look a bit more than just market noise but it depends on the timescale and sentiment is moving against tobacco.

I cannot believe the implication of the heading to this thread, that the CEO is not simply retiring. He has done a great job in his time at the helm.

Dod

[monabri]

195.2p dividend in total for Q1 to Q4.

Code: Select all

Year End | Type | Announce Date | Ex-Dividend Date | Payment Date | Dividend
12/2018  | Q1   | 22-Feb-18     | 22-Mar-18        | 09-May-18    | 48.8p   
12/2018  | Q2   | 22-Feb-18     | 28-Jun-18        | 08-Aug-18    | 48.8p   
12/2018  | Q3   | 22-Feb-18     | 04-Oct-18        | 15-Nov-18    | 48.8p   
12/2018  | Q4   | 22-Feb-18     | 27-Dec-18        | 07-Feb-19    | 48.8p   


£5.45....ahhh!

[tjh290633]

The trading update by Imperial Group today suggests that the sector is far from declining.

Look at facts, not broker comments.

TJH

[Dod101]

195.2p dividend in total for Q1 to Q4.

Code: Select all

Year End | Type | Announce Date | Ex-Dividend Date | Payment Date | Dividend
12/2018  | Q1   | 22-Feb-18     | 22-Mar-18        | 09-May-18    | 48.8p   
12/2018  | Q2   | 22-Feb-18     | 28-Jun-18        | 08-Aug-18    | 48.8p   
12/2018  | Q3   | 22-Feb-18     | 04-Oct-18        | 15-Nov-18    | 48.8p   
12/2018  | Q4   | 22-Feb-18     | 27-Dec-18        | 07-Feb-19    | 48.8p   


£5.45....ahhh!

I do not know what '£5.45.......ahhh!' means but I think the numbers for the dividend illustrate what I meant because not all of these payments relate to 2017 or 2018 whereas I was quoting strictly the interim and final for a given year, but the implication seems clear; that the dividend is still increasing at a healthy pace.

Dod

[YeeWo]

YeeWo is being a bit unfair when we take a good look at the facts of the case. After all we could have sold at more than £50 but that is not what a HYP is about. The gyrations in price look a bit more than just market noise but it depends on the timescale and sentiment is moving against tobacco.
I cannot believe the implication of the heading to this thread, that the CEO is not simply retiring. He has done a great job in his time at the helm.
Dod

https://news.sky.com/story/share-price-decline-smokes-out-changing-of-the-guard-at-bat-11502591
Mark Kleinman at Sky is being a bit unfair also? HYPing aside, a business the size of BAT cannot simply shed circa 30% of it's value without having massive implications for the pension and fund management industry. I hold BAT and appreciate the long term dividend profile, but 30%ish decline is however you dress it up one helluva lot of money!

[CommissarJones]

I really hope BAT refrain from trying to spin his departure as the culmination of a successful time running the business.

Agreed that BATS has been a lousy performer in capital terms in the past year, but I am not convinced that this is unique to the company or to Durante as an individual. Looking at three-year charts of BATS, IMB, Philip Morris International and Altria, they all show a similar pattern: a price peak somewhere in the mid-2016 to mid-2017 period, and declines since then.

So ISTM that something has led to investor disenchantment with large-cap tobacco stocks generally. It's impossible to know exactly what, of course, but that won't stop me from going with the guesses of 1) doubts about the ability of next-generation products to replace cigarettes or 2) higher yields in the fixed-income market providing more competition for "bond proxy" shares.

[Arborbridge]

As I have said many times, the dividends are dearly bought.

Dod

Can you explain what you mean by that? Is it that you believe the dividends are being bought at the expense of capital increase? - or some other meaning.

BATs - formerly seemingly unshakable - has been a lousy performer of late, but my XIRR is now around 12%, respectably above RPI plus the dividend. Admittedly, the XIRR is well down from the glory days of knocking on 20% for a time, but I'd be happy if all my share dividends were that "cheaply" bought

While BATs has been an excellent share in my ten years of ownership, the real question is: are its days numbered?

Arb.

[IanTHughes]

As I have said many times, the dividends are dearly bought.

Can you explain what you mean by that? Is it that you believe the dividends are being bought at the expense of capital increase? - or some other meaning.

I do not know what is meant by “dividends are dearly bought" either, unless it is referring to buying low yield.

I started my HYP in February 2012, since when the yield of British American Tobacco (BATS) has rarely been above 4.50% and as a result BATS has never been top of my watchlist. I only bought a first tranche of Imperial Brands (IMB) in April 2014, and only then because I relaxed my “only buy the highest sustainable yield” rule in order to capture a holding of what I consider an excellent income provider.

I believe BATS is also an excellent income provider, the BATS dividend has increased at an annual rate of 8.84% over the last 10 years. I am sure that anyone buying at a “High Yield” would have done well, as I have done with IMB. But only if one has waited to buy at the “High Yield” points.

It is HYP after all



Ian

[Dod101]

To Arb, YeeWo et al, the background I found for my post timed at 5.10 pm made me revise my earlier comments about the dividends being dearly bought, as I hoped I had made clear (that is once I had taken a good look at the share price and dividends over a longish period)

When I use the expression 'dearly bought' I mean if you are buying a good yield at the expense of capital value that is surely 'dearly bought' As anyone who reads my ramblings knows I am not a pure HYPer in that I think that capital does matter.

It looks though that there was simply a bubble in tobacco share prices and that has now deflated and we are back into the long term trend. I have not tracked BAT for instance very far back, but from what I can see the peak of £55 can be explained. Investors got carried away by tobacco shares, why I know not and the prices have now returned to earth. Were it only BAT that was affected I could understand YeeWo's gripe but it has certainly applied to Imperial Brands as well and apparently other tobacco shares.

I doubt therefore that the CEO of BAT is being shown the door which is I suppose the implication of 'retiring'.

Dod

[vrdiver]

I am not a pure HYPer in that I think that capital does matter.

Sorry to be picky Dod, but even the pure* HYPers believe that capital does matter. it's just not the primary measure of the success of the strategy.

VRD


*Whatever "pure" might mean!

[tjh290633]

There is an alternative explanation, that the
Share price is depressed from its natural level by political correctness and health concerns. One day it will return to that natural level

TJH

[IanTHughes]

I am not a pure HYPer in that I think that capital does matter.

Sorry to be picky Dod, but even the pure* HYPers believe that capital does matter. it's just not the primary measure of the success of the strategy.

I think DOD101 is referring to his strategy of protecting the capital in his portfolio by selling a share before the price drops. Such action is not the normal practice of HYP which is to accept the downs as well as the ups in the value of one’s holdings whilst concentrating on Income being provided


Ian

[Gengulphus]

As I have said many times, the dividends are dearly bought.

Were dearly bought at certain times in the past, such as at over 5500p in the late spring of 2017, yes, that's true at present. Weren't dearly bought at other times in the past, such as at HYP1's purchase at about 1571p to replace Gallaher in April 2007 (*), that's equally true - and it would require some rather extremely bad future developments to make it not true. (There is of course no contradiction between those - it is completely normal that something can be cheap at one price and dear at a much higher price...)

Are dearly bought at the current price of 3540p? That's a good question - and it's one that only the passage of enough time (say 10 years) will settle, not by people saying what they think the answer is enough times ...

(*) See pyad's brief report - which doesn't give a share price, but it does it clear that the purchase was made with £5,000+£8,560 = £13,560, and the resulting number of shares in HYP1 is 863. That's slightly different from the figure of 862 I gave at the top of that same thread, but that's a figure board members reconstructed during pyad's 2008-2009 absence from the TMF boards, and well within the variation possible simply by buying at a different time on the same day. Those imply a purchase price of £13,560/863 = 1571p per share. So HYP1's hypothetical owner has well over doubled their capital - and they've received another 1436.6p per share in dividends while holding the shares, a total that they might reasonably expect to grow to about their purchase price in the next 9 months.

Gengulphus