27th Nov 2019 08:03
(Alliance News) - British American Tobacco said Wednesday it expects revenue and profit growth towards the upper end of target despite a slowdown in the US vaping market amid regulatory pressure.
The Lucky Strike cigarette maker said it expects full-year currency-adjusted revenue growth in the upper half of its 3% to 5% guidance range, with an adjusted operating margin improvement of 50 to 100 basis points. Constant-currency adjusted operating profit is expected in the upper half of its 5% to 7% guidance range.
In Combustibles, global industry volumes are expected to be down around 3.5% for the full-year, with BAT's volumes to be broadly in line with the wider market.
In New Categories, Vuse and Vype vapour products have grown market share, though full-year constant currency revenue growth for the division is expected at the lower end of its 30% to 50% range, BAT said, reflecting a slowdown in the US vapour market.
"We expect to deliver a strong performance in 2019, building on the good progress we made in the first half. Our focus on our global strategic brands is delivering share gains and strong price mix in combustibles, both globally and in the US," said Chief Executive Jack Bowles.
He added that legal issues around vaping in the US should "lead to a better and stronger regulatory environment", in which the company is "well placed to succeed".
Massachusetts became the first American state to issue an outright ban on all e-cigarette devices in September amid a spate of deaths and injuries linked to vaping across the country, with the prohibition to last for four months.
"We are driving value growth in combustibles, we are investing to deliver a step change in New Categories, and we are transforming the business to create a stronger, simpler, more agile BAT. We are on track for a strong year," Bowles said.
BAT shares were trading flat early Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 7,431.04
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Hang Seng: marginally higher at 26,924.71
Nikkei 225: closed up 0.3% at 23,437.77
DJIA: closed up 55.21 points, or 0.2%, at 28,121.68
S&P 500: closed up 0.2% at 3,140.52
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GBP: soft at USD1.2831 (USD1.2845)
EUR: flat at USD1.1010 (USD1.1015)
Gold: soft at USD1,459.27 per ounce (USD1,460.48)
Oil (Brent): up at USD64.16 a barrel (USD63.77)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0930 GMT UK capital issuance
0700 EST US MBA weekly mortgage applications survey
0830 EST US advance report on durable goods
0830 EST US 2nd estimate 3Q gross domestic product
0945 EST US Bloomberg consumer comfort index
1000 EST US pending home sales index
1000 EST US personal income & outlays
1030 EST US EIA weekly petroleum status report
1200 EST US EIA weekly natural gas storage report
1400 EST US Beige Book
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UK shop prices fell for the sixth month in a row in November with retailers offering discounts as the festive season gets into full swing, figures from the British Retail Consortium and Nielsen showed. Shop prices, according to the BRC-Nielsen Shop Price Index, were down 0.5% year-on-year, following on from a 0.4% fall in October. Month-on-month, prices were flat following a 0.1% decrease in October. Food prices were up 1.4% year-on-year, slowing from the 1.6% increase posted in October, while the cost of non-food items fell 1.6%, versus a 1.5% fall in October.
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House price growth in London is showing signs of firming up following a period in the doldrums, according to a report. Less than a quarter (23%) of London postcodes have registered negative house price growth in October, down from 82% registering price falls a year ago, according to Zoopla. But the rate of annual growth in property values is slowing across the UK's major cities generally. Annual house price growth in every city covered by the index has now been running below 5% for three months in a row – in August, September and October.
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Jeremy Corbyn will try to steer his party's campaign back towards the NHS Wednesday after a bruising day of questioning about his tax plans and anti-Semitism in the Labour Party. The Labour leader was accused of not being fit to be prime minister by the Chief Rabbi and was forced to admit that some low-income taxpayers could end up paying more under the party's manifesto proposals. The Conservatives will also want to move the focus onto their agenda again after the party was accused by the Muslim Council of Britain of "denial, dismissal and deceit" over Islamophobia within its ranks. Corbyn also faced awkward questions on tax. His party has said it will not raise rates of income tax, National Insurance and VAT paid by the lowest-paid 95% of taxpayers and that only the richest 5% will pay more. But an interviewer pointed out that Labour's plans to scrap the marriage allowance, which lets married couples reduce their tax burden by GBP250 a year, would hit lower-income taxpayers .
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A darkly angry, sometimes swearing US President Donald Trump vowed to win landslide reelection at a Florida campaign rally Tuesday ahead of a Thanksgiving break spoiled by looming impeachment. The rally in Sunrise, located just north of Miami, saw Trump unleash harsh invective against his political foes, calling out Democrats' "depravity" and claiming that "the failed Washington establishment" is targeting him because he is "exposing a rigged system". As always, Trump reserved special venom for American journalists, whom he called "some of the most corrupt people in the world". The attack prompted thousands in the crowd to turn and boo and shout insults at media outlets covering the event.
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A major tunnel in Hong Kong reopened on Wednesday and a week-long police siege of a nearby university appeared to be winding down, closing one of the more violent chapters of the city's anti-government protests. The Cross-Harbour Tunnel, which links Hong Kong Island to the rest of the city, had been closed for two weeks after protesters blocked the approach with tons of debris and set the toll booths on fire. A search of the Hong Kong Polytechnic campus the previous day found just one woman, in weak condition, and a senior university official said it was unlikely anyone else remained.
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BROKER RATING CHANGES
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MORGAN STANLEY CUTS ROLLS-ROYCE TO 'EQUAL-WEIGHT' (OVERWEIGHT) - PRICE TARGET 800 (925) PENCE
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CITIGROUP CUTS PENNON GROUP TO 'NEUTRAL' ('BUY') - TARGET 950 PENCE
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BERENBERG CUTS MITCHELLS & BUTLERS TO 'HOLD' ('BUY') - TARGET 480 (360) PENCE
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COMPANIES - FTSE 100
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Hikma Pharmaceuticals said it has submitted its response to deficiencies in its abbreviated new drug application for a generic version of GlaxoSmithKline's Advair Diskus to the US Food & Drug Administration. The submission addresses the outstanding questions raised by the FDA in its complete response letter. "As we continue to develop our pipeline of complex generics, respiratory products are a key strategic focus for Hikma and our generic Advair submission is an important milestone. We are confident in our ability to bring a generic version of Advair to the US market," said Hikma Chief Executive Siggi Olafsson.
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COMPANIES - FTSE 250
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Pub operator Marston's swung to an annual loss though said it is making good progress on reducing debt. Revenue for the year to September 28 edged up to GBP1.17 billion from GBP1.14 billion the year before, but the company swung to a loss of GBP20.0 million from a GBP54.3 million profit. The firm's results were hit by a GBP43.4 million impairment of underperforming Destination and Premium properties, and GBP48.7 million loss reflecting interest rate swap valuation movements. Pub like-for-like sales growth was 0.8%, while brewing volumes were 1% ahead of the prior year. Marston's said its trading performance in 2019 was strong in wet-led pubs and brewing, with more subdued sales in food-led outlets. Net debt at the financial year end was GBP1.40 billion, up slightly from GBP1.39 billion a year ago, which the company said reflected investment in new sites. However, Marston's said it is ahead of schedule in its aim to reduce net debt by GBP200 million by 2023, having reduced growth capital spend on new-build pubs and lodges in 2019. The firm has raised its pub disposal target for the 2020 financial year to GBP70 million from GBP40 million.
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Soft drinks maker Britvic reported growth in annual revenue though profit took a hit from a write down of French assets. Revenue increased 1.4% in the financial year to September 29 to GBP1.55 billion, though pretax profit slid 24% to GBP110.3 million from GBP145.8 million. This fall in profit was due to adjusting items of GBP84.6 million, related to its business capability programme, past pension costs, and the closure of the Fruit Shoot multi-pack operation in the US, as well as additional adjusting items in relation to the proposed sale of the juice manufacturing sites in France. The company said it expects to make further progress in 2020 despite the current macro-economic environment remaining uncertain.
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Softcat said it maintained strong trading momentum in its first quarter. During the quarter to October 31, the IT infrastructure firm said it once again delivered year-on-year growth in revenue, gross profit and operating profit. "We've performed well during the first quarter of our new financial year. Customer numbers and gross profit per customer were both up on the prior period, and we again saw growth across all areas of technology and customer segments," said Chief Executive Graeme Watt.
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COMPANIES - INTERNATIONAL
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Abu Dhabi is likely to invest USD1.5 billion in Saudi Aramco to backstop its flotation, the Financial Times reported. According to "two people briefed on the move", Abu Dhabi's decision to invest in the oil behemoth came "from the top" as Abu Dhabi's leadership is "keen to support its allies in Riyadh", which has opted not to market shares outside Saudi Arabia and other Gulf neighbours. The newspaper said that one person briefed on the meeting between Saudi Aramco executives and investors in the emirate said Riyadh has been seeking even more Abu Dhabi investment, signalling allies might be wary of over-exposure to the float.
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Japan's Mitsui & Co is to make an unspecified impairment on two projects in Mozambique, it said. The projects under the microscope are the Moatize coal mine and the Nacala Corridor rail and port project, both of which are operated in joint ventures with Brazil's Vale. So far, Mitsui has invested USD300 million into the Moatize mine and USD600 million into the Nacala project, it said. "While Mitsui is now reviewing the amount of proven reserves based on the new long-term mining plan for the Moatize project, we hereby inform that recognition of impairment loss for the Moatize business is expected," said Mitsui.
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Wednesday's Shareholder Meetings
ASOS
SCS Group
Filtronic
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By Tom Waite; [email protected]
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