Lucky Strike maker British American Tobacco has seen its share price jump this morning after its new chief executive predicted a three – five per cent rise in organic revenue this year thanks to its decision to ramp up investment in cigarette alternatives.
Its shares rose 1.26 per cent when markets opened this morning, as former finance director of the group Tadeu Marroco delivered his first update as chief – noting that there would be “no change” to its ‘A Better Tomorrow’ strategy which launched in 2019.
During the quarter the group welcomed 900,000 new customers via sales of tobacco free goods such as vapes – with value share in its e-cigarette brand Vuse up 2.8 ppts.
However, sales in its combustible products such as traditional cigarettes fell off in its US market, as smoking continues to prove unfavourable with consumers.
BAT said it is on track to deliver £5bn of revenue in the next two years, but revenue growth would be impacted by its decision to transfer its Russian and Belarusian businesses.
“We are also making good progress towards de-leveraging our balance sheet, supporting our ambition to sustainably return excess cash to shareholders,” Marroco said.
“British American Tobacco is in a difficult place at the moment, with some previous ghosts coming back to haunt the group’s prospects,” Richard Hunter, head of markets at interactive investor, said.
“The recent fine of £508 million for sanctions busting in North Korea left a bad taste in the mouth for investors, while regulation more generally has been putting pressure on not only traditional cigarettes but also the likes of flavoured vapes in parts of the US.”
He added: “Meanwhile, litigation has been a sporadic issue over the last decade, while governments have increasingly become involved in punishing the sector with health benefits in mind.”
Its strong vape sales come amidst a global crackdown on the product, with many fearing that it could create health implications and lead young teenagers to get hooked on nicotine.
In the UK, prime minister Rishi Sunak told ITV’s This Morning programme in May that it was “ridiculous” that vapes are promoted to children, and vowed to look at ways of strengthening marketing rules. Starmer also committed to a crackdown on “harmful products” like vapes, junk food and sugary snacks.