Tobacco shares slide over court defeat on packaging
From today, all cigarette packets produced in the UK will be completely plain. Tobacco firms yesterday lost an appeal in the High Court. Britain will now go one step further on the new European rule which says health warnings must cover more than half the packaging of tobacco products.
It’s bad news for smokers who will likely find the increased costs of the new regulations and packaging filters through to them.
Sales of traditional tobacco products have been falling as people have switched to trendier vaping.
But Jasper Lawler, market analyst at CmC markets, said: ‘Tobacco is the ultimate sin stock and the strength of sin stocks is undeniable over time. The defensive qualities of these shares are unlikely to be trumped by new regulations.’
Tobacco sales in Asia, South America and Africa should also continue to grow as these markets are unaffected by the new restrictions. It’s worth pointing out too that retailers have a year to comply so they can continue to sell stock with the old packaging. British American Tobacco fell 1.9pc, or 79.5p, at 4,086p. Imperial Brands cut back 0.6pc, or 22.5p, to 3,666p.
Fever Tree shares fizzed up after a trading update. The premium mixer drinks brand said the first four months of the year had exceeded expectations, and foreign exchange rates had helped margins. It floated on the stock market in November 2014 at 170p a share. Yesterday shares sparkled up 16pc, or 95.5p, to 693.5p. Investec upped its target price by £1 to 840p.
rival Britvic had a less successful day, despite a positive update. The 7 Up maker said earnings had grown 7.1pc to £69m in the first half of the year and investors would get a dividend of 7p a share.
The firm’s acquisition of Brazilian soft drinks company Ebba last September helped revenues in the region grow 8.6pc.
Britvic has also secured a new seven-year deal with Subway in the UK from June, and is set to roll out its Fruit Shoot drinks in multipacks in US grocery stores.
But analysts at Goodbody said the group was struggling in the difficult UK retail environment. Squash brand robinsons is fighting to compete with discounters and a decision to remove its full sugar version. Despite the positive update investors were feeling flat. Shares weakened 1.6pc, or 11.5p, to 691.5p.
Bloomsbury shares were not on the bestsellers list either. The publishing group said profits were up 8pc to £13m, boosted by its acquisition of osprey Publishing 18 months ago. Increased sales of Harry Potter books worked their magic in the children’s and educational arm, where revenues rose 57pc. But investors were disappointed by the academic division. Shares dropped 2.7pc, or 4.3p, to 151p.
Restaurant Group shares were on the menu amid rumours that Cinven could make a play for the firm. The private equity firm invests in established businesses with the intention of growing them further. Current investments include shoe retailer Kurt Geiger and speciality pharma firm AmCo. It could be a welcome development for the struggling group behind food chains such as Frankie & Benny’s and Chiquito, which cut its profit outlook last month. Yesterday hungry investors nudged the share price up 5.4pc, or 17.3p, to 335p.
Reckitt Benckiser is rumoured to be launching a takeover bid for US firm Church & Dwight, which makes baking soda toothpaste and Trojan condoms. Church & Dwight told investors it is ‘not engaged in discussions with, nor has it received any proposal or communication concerning a potential bid for the company or any of its business units and is not otherwise aware of any information supporting these rumours’.
The New Jersey-based firm has a market cap of around £8.8bn. Yesterday a Spanish news outlet said US firm Procter & Gamble could also be a possible buyer. reckitt’s shares slipped 1.3pc, or 87p, to 6,763p.
Serco shares sank 1pc, or 1p, to 92p after it lost out in a bid to operate ferries to Scottish islands. Calmac won the eight-year contract worth £900m and will take over the service from october 1.
Serco said the decision will not have a significant impact on its guidance for the year as it hadn’t thought it likely it would win the bid.