27th Feb 2020 08:43
(Alliance News) - British American Tobacco PLC on Thursday reported a drop in annual profit due to litigation charges and restructuring costs.
In 2019, the tobacco major - which owns cigarette brands such as Camel and Lucky Strike - posted a GBP7.91 billion pretax profit, down 5.2% from 2018.
While revenue rose 5.7% to GBP25.88 billion, depreciation, amortisation and impairment costs climbed 45% to GBP1.51 billion while other operating expenses were 18% higher at GBP7.85 billion.
The company incurred a GBP436 million charge on a class action lawsuit in Canada, plus amortisation and impairment of trademarks totalling GBP481 million.
Other litigation also took place, with a GBP236 million charge in the US, a GBP202 million charge in Russia, and a GBP172 million goodwill impairment in Indonesia. In addition, its Quantum restructuring programme resulted in a GBP264 million charge.
BAT explained has also been investing into New Categories, which includes tobacco heating, vapour, and modern oral brands.
In a November trading update, the company guided for a rise in adjusted operating profit for 2019 in the upper half of its 5% to 7% guidance range, from the GBP10.35 billion achieved a year before.
This target was exceeded, with the company's adjusted profit from operations up 7.6% at GBP11.13 billion.
BAT's constant currency revenue guidance was to the upper end of a guided range of 3% to 5%. This was also exceeded, with revenue up 6.6% to GBP25.68 billion at constant currency.
In 2020, BAT expects adjusted revenue growth in the 3% to 5% range at constant currency, plus "continued operating margin improvement". Revenue is likely to be second-half weighted, especially in New Categories, and earnings per share growth of a high single figure is expected at constant currency.
The company added that: "Extrapolating today's foreign exchange spot rates for the full year, we would expect a headwind of around 4% on full year adjusted earnings per share growth."
BAT raised its dividend by 3.6% to 210.4 pence per share
Chief Executive Jack Bowles said: "We have delivered value growth from our combustible business and grown our New Categories business, now providing potentially reduced risk products to close to 11 million consumers. In September, we announced a significant restructuring and simplification programme, which is largely complete.
"This will create the capabilities and resources to continue investing in New Categories and allow us to deliver on our financial commitments. Looking into 2020, we are confident of another year of high single figure adjusted constant currency earnings growth."
This is the first set of annual figures under Bowles, who took over as BAT's chief executive from Nicandro Durante in April.
Shares in BAT were down 0.6% at 3,201.50 pence in London on Thursday but were up 2.8% at ZAR637.44 in Johannesburg.
By Anna Farley; [email protected]
Copyright 2019 Alliance News Limited. All Rights Reserved.
Related Shares:
British American Tobacco