BAT stubs out crisis fears as buyback plan resumes

Lucky Strike maker British American Tobacco has resumed a share buyback programme worth £750million after full-year profits were boosted by price hikes and the weak pound.

The world’s second biggest cigarette firm restarted the scheme, which was suspended in 2008 in the wake of the financial crisis, after seeing free cash flow increase by 23 per cent to £3.2billion. But investors were disappointed by the scale of the buyback, sending the shares down 56.18p to 2356.82p.

Pre-tax profits rose to £4.3billion from £4billion in line with forecasts on sales up 5 per cent to £43.8billion. The group – which also makes Kent, Dunhill, and Pall Mall – increased the total dividend to 114.2p-a-share from 99.5p. But volumes slipped 2 per cent to 708billion as smokers traded down to cheaper alternatives and black market cigarettes.

The firm said price hikes and smokers in more resilient developing markets trading up would offset sliding volumes. The figures were the swansong of chief executive Paul Adams who is taking a year off after seven years at the helm.

The tobacco boss, who gave up smoking cigarettes last year, said he has been approached for a number of non-executive roles but is ‘determined to be unencumbered for a year’.

When he steps down next Tuesday, Adams flies off for an extended holiday to Antigua and then to America, leaving chief executive-elect Nicandro Durante in charge.

Durante said the crisis in the Middle East had affected distribution in BAT’s key Egyptian market for 10 days, but that the financial hit was not material. The firm has achieved its target of cutting costs by £800million two years early and is developing a new cigarette with less toxins which, if successful, may not cause as much damage to smokers health.

BAT is also considering challenging a move by the Australian government to enforce generic packaging.

source: www.dailymail.co.uk