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Summary
- British American Tobacco highlighted that the sales volume of global cigarette and tobacco heating product to remain subdued in 2020.
- Imperial Brands announced the interim dividend of 41.70 pence per share for FY2020.
- Imperial Brand’s Tobacco & NGP segment revenue was £10,712 million in H1 FY2020.
British American Tobacco (LON:BATS) & Imperial Brands PLC (LON:IMB) are FTSE-100 listed tobacco stocks. BATS had a dividend yield of ~5.94 percent, and IMB had a dividend yield of ~15.31 percent. BATS had a market cap of £60.35 billion with close to 2.29 billion shares outstanding, whereas IMB had a market cap of £12.47 billion with close 951.50 million shares outstanding. The one year return for BATS & IMB were about -13.90 percent and -38.25 percent, respectively. Both BATS and IMB were down by about 0.86 percent and 1.75 percent, respectively from the last closing price (as on 13 August 2020, before the market close at 2:00 PM GMT+1).
British American Tobacco PLC (LON:BATS) – A quarterly dividend of 52.6 pence per share to be paid in August 2020
British American Tobacco PLC is a UK based company that is engaged in the business of tobacco and nicotine. The Company’s product includes vapour and tobacco heating products and oral tobacco and nicotine products. Dunhill, Kent, Lucky Strike, Pall Mall, Camel and Newport are some of the brands under BATS extensive portfolio. British American Tobacco is included on the FTSE 100 index.
- On 5 August 2020, the Group appointed Guy Meldrum as the President of Reynolds American, BATS US business, and he would commence office from 1 September 2020. He is currently Regional Director, Asia-Pacific and the Middle East.
H1 FY2020 results (ended 30 June 2020) as reported on 31 July 2020
(Source: Group website)
In H1 FY20, the Group revenue increased by 2.4 percent year on year on a constant currency basis to £12,271 million. The combustible revenue and the new category revenue were up by 2.2 percent and 12.7 percent, respectively, that negated the 4 percent decline due to the Covid-19 impact in H1 FY20. The cigarettes price mix increased by 8.5 percent year on year that lowered the negative effect of 6.3 percent in sales volume of cigarette and tobacco heating products. Based on the regional performance, the adjusted revenue for the US and ENA (Europe & North Africa) increased by 9.7 percent and 3.0 percent year on year, respectively, whereas APME (the Asia Pacific & Middle East) and AMSSA (Americas & Sub-Saharan Africa) revenue declined by 10.5 percent and 0.9 percent year on year, respectively. The adjusted operating profit for the Group was £5,368 million in H1 FY20 with an operating margin of 43.7 percent. The operating margin improved from 42.9 percent in H1 FY19 to 43.7 percent in H1 FY20 following 4 percent positive impact of pricing and operational efficiencies, whereas negative impact was due to incremental new categories and translational foreign exchange. The adjusted earnings per share were 159.1 pence that increased by 6.6 percent year on year on constant rates. As on 30 June 2020, BATS had adjusted net debt of £44,237 million. The Group announced an interim dividend of 210.4 pence per share and the quarterly dividend of 52.6 pence per share would be paid in August 2020.
Performance in H1 FY2020 based on volume
In H1 FY20, the Group sold 310.5 billion cigarettes, which were down by 6.5 percent year on year from 332.1 billion sold in H1 FY19. The sales volume of tobacco heating product increased by 9.1 percent year on year to 4.2 billion in H1 FY20. Out of the total cigarette sale, the strategic cigarette sale was 203.6 billion, whereas the remaining 106.9 billion included vapour, modern oral and traditional oral products. Based on the regional performance, sales volume in all the regions that include the US, APME (the Asia Pacific & Middle East), AMSSA (Americas & Sub-Saharan Africa) and ENA (Europe & North Africa) declined.
Share Price Performance
1-Year Chart as on August-13-2020, before the market close (Source: Refinitiv, Thomson Reuters)
British American Tobacco PLC’s shares were down by close to 0.86 percent and trading at GBX 2,608.00 per share (as on 13 August 2020, before the market close at 2:00 PM GMT+1). BATS’s 52-week High and Low were GBX 3,507.00 and GBX 2,362.50, respectively. BATS had a market capitalization of £60.35 billion.
Business Outlook
BATS expects the revenue to grow in the range of 1 percent to 3 percent in FY20 with an EPS growth in the mid-single-digit. The Group expects the operating cash conversion to be over 90 percent in 2020. The Group has a target of £5 billion for the new category revenue for 2025. It highlighted that the sales volume of global cigarette and tobacco heating product to remain subdued in 2020.
Imperial Brands PLC (LON:IMB) – Cash conversion of 90 percent expected in H2 FY20
Imperial Brands PLC is a UK based tobacco and next-generation products (NGP) company. The Company’s NGP products include vapour, tobacco heating products and oral nicotine products. Brands under the portfolio are Davidoff, Winston and Bastos. Imperial Brands is included in the FTSE-100 index.
H1 FY2020 results (ended 31 March 2020) as reported on 19 May 2020
(Source: Company website)
In H1 FY20, the Imperial Brands reported revenue of £14,672 million, which increased by 2 percent year on year from £14,390 million in H1 FY19. The operating profit declined by 19.6 percent to £925 million in H1 FY20 from £1,150 million a year ago. The basic earnings per share were 55.6 pence in H1 FY20 lower than 71.2 pence per share in H1 FY19. The Company announced the interim dividend of 41.70 pence per share. The dividend would be paid in two parts, of which 20.85 pence was paid in June 2020 and remaining 20.85 pence would be paid in September 2020. The declared interim dividend in FY20 was lower than 62.56 pence paid in H1 FY19. As on 31 March 2020, Imperial Brands had net debt of £14,144 million.
Performance Segment wise and Region wise
In H1 FY20, Europe region generated revenue of £6,390 million, and the Americas reported revenue of £1,486 million. Africa, Asia & Australasia reported revenue of and £2,836 million. Product-wise, Tobacco & NGP revenue was £10,712 million, and Distribution segment revenue was £4,306 million. The operating profit for Tobacco & NGP was £880 million.
Share Price Performance
1-Year Chart as on August-13-2020, before the market close (Source: Refinitiv, Thomson Reuters)
Imperial Brands PLC’s shares were down by close to 1.75 percent and trading at GBX 1,295.00 per share (as on 13 August 2020, before the market close at 2:00 PM GMT+1). IMB’s 52-week High and Low were GBX 2,256.00 and GBX 1,238.00, respectively. Imperial Brands had a market capitalization of £12.47 billion.
Business Outlook
The Company highlighted that the business is poised to sustain the volatility in the market. The duration of the impact of the pandemic is unknown, and it is difficult to assess the brunt on the business. The H2 FY20 is expected to be challenging for the Company. Imperial Brands anticipates a negative 2 percent impact on the EPS in FY20. The cash conversion is expected to be close to 90 percent, and the net capital expenditure is expected to be £0.3 billion.
