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FTSE 100 edge higher, BAT rises on earnings beat, buyback supports Unilever

Published 08/02/2024, 08:45
Updated 08/02/2024, 09:10
© Reuters FTSE 100 Live: Stocks edge higher, BAT rises on earnings beat, buyback supports Unilever

Proactive Investors - BAT up on earnings beat, Compass gains on upbeat trading.

The FTSE 100 remains in positive territory - just - now up around5 points at 7,634.16.

BAT is up 4.1% after its results which analysts said were better-than-expected, boosted by growth in new category products, such as vapes, e-cigarettes and nicotine patches.

Adam Vettese, analyst at investment platform eToro said: “It's been evident for some time that cigarette companies will need to reinvent themselves as smoking rates decline and non-combustible alternatives become more and more popular.”

British American Tobacco (LON:BATS) has been going through this process for a few years now, and after a tough 2024 which saw 30% trimmed off its share price, its latest profits have beat estimates,” he noted.

Compass Group PLC (LON:CPG) is also going well, up 3.4%, after reporting a double-digit percentage organic increase in revenue in its financial first quarter, while saying recent acquisitions hold the promise of more growth ahead.

The Surrey, England-based food catering firm said revenue grew by 12% organically in the three months that ended December 31.

This was led by its Europe region, with a 13% rise, and Rest of World at 12%. North America growth was 11%.

Like-for-like volume was better than anticipated in the recent quarter, especially among Business & Industry clients, the firm added.

FTSE 100 opens higher as investors digest earnings

The FTSE 100 opened higher as investors digested results from a number of index heavyweights.

At 8:15am, London’s blue-chip index was up 0.2% at 7,644.03.

With AstraZeneca (NASDAQ:AZN), Unilever (LON:ULVR) and British American Tobacco reporting earnings today, plus Compass, Anglo American (JO:AGLJ) and SSE (LON:SSE), that’s equivalent to almost 20% of the FTSE 100 in terms of weighting.

Early reactions were mixed

AstraZeneca fell 1.9% despite reporting a rise in sales and profits in the fourth quarter.

Derren Nathan, head of equity research, Hargreaves Lansdown (LON:HRGV) said: “AstraZeneca has shrugged off falling sales of COVID-19 medicines with a strong 2023 performance. And with three new medicines approved since the third quarter, it’s not resting on its laurels.”

Unilever rose 3.0% after reporting a return to volume growth for sales, alongside a new share buy back.

SSE is down 2.2% although the company maintained its earnings forecast but said that turbine installation at the Dogger Bank wind farm has been hit by weather conditions, which may mean full operation is not achieved until 2025.

Unliever in new buyback but performance "needs to improve"

Unilever PLC reported underlying sales growth in the fourth quarter as it launched a new $1.5 billion share buyback.

The FTSE 100-listed firm which makes Hellmann’s mayonnaise and Dove soap said underlying sales in the fourth quarter rose 4.7% to €14.2 billion, although on a GAAP reported basis sales fell 3.0%.

For 2023 as a whole, underlying sales growth was 7% to €59.60 billion while operating profit fell 9.3% to €9.76 billion.

Chief Executive Hein Schumacher said there was more to do.

"Today's results show an improving financial performance, with the return to volume growth and margins rebuilding.”

“However, our competitiveness remains disappointing and overall performance needs to improve.”

Beauty & Wellbeing saw underlying sales rise 7.9% compared to last year, Personal Care sales rose 6.4% and Nutrition sales rose 4.7%. Ice cream sales dropped 0.4%.

A new €1.5 billion buyback was approved to be conducted during 2024.

Unilever said the 30 Power Brands (around 75% of turnover) were accretive to growth and margin, with underlying sales up 8.6%.

The company expects underlying sales growth for 2024 to be within its multi-year range of 3% to 5%, with more balance between volume and price.

BAT sees progress in new category sales

British American Tobacco PLC on Thursday reported modest progress in underlying profitability as new category sales, such as vapes, increased.

The FTSE 100-listed company adjusted sales in 2023 rose 1.6% to £27.28 billion supported by growth in new categories of 15.6% and resilient pricing.

BAT posted a reported loss from operations of £15.75 billion impacted by a £27.6 billion non-cash impairment charge mainly related to its US business.

Excluding this the firm reported an operating profit rose 3.1% to £12.47 billion.

Underlying diluted EPS rose 4.0% to 375.6p while the dividend was increased 2.0% to 235.52p.

Total combustibles organic revenue grew 0.6%, with an organic price/mix of plus 6.1% offset by lower volume and geographic mix mainly due to macro-economic pressures in the US impacting the premium segment

Chief Executive Tadeu Marroco said: “New Categories delivered continued volume-led revenue growth and increased profitability, driven by Vuse and Velo.”

“As a result, our New Categories portfolio has turned profitable two years ahead of our original target.”

“In combustibles, our commercial plans in the U.S. are enabling early signs of portfolio recovery,” he added.

Read more on Proactive Investors UK

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