BAT’S £1.5bn buyback ‘will shore up shares’
BRITISH American Tobacco (BAT), which has agreed on a £1.5bn share buyback programme for this year, has bought 180,000 shares at an average price of 3,535p, the company said yesterday.
Buybacks have the effect of reducing the number of shares in the market, which should increase the value of shares still available, though the market does not see this programme as very large relative to the size of the company, whose market capitalisation is nearly R1-trillion.
The company raised prices after seeing a drop in revenue last year in a tough economic environment. It is the world’s second-largest cigarette manufacturer after state-owned China National Tobacco, with nearly 90% of its 2-billion shares held offshore.
“This news is within the terms of the already announced buyback programme. This should provide continued support for the shares,” said a director of Imara SP Reid, Guy Algeo.
The UK share price was 3,544.00p at the time of the announcement yesterday, but soon started gaining ground. The South African price of R489.50 was above the one-year low of R388.73, but a little off the oneyear high of R504.49 struck earlier this month.
The South African market took some money out of the company soon after the announcement.
The company said it intended to hold these shares in Treasury and following the purchase of these shares, it now held 100,237,487 of its shares.
Just prior to the announce- ment, an offer price of R489.97 was in the market, while the bid price was R488.11. The I-Net consensus forecast was a “buy”.
The highest price paid in the buyback was 3,549p and the lowest price paid was 3,510p.
The company has its primary listing in London, with a secondary listing in SA.
“While we cannot underestimate the challenges ahead in 2013, I am confident that we have robust plans in place and the resources to succeed,” CEO Nicandro Durante said in the company’s 2012 annual report.
Chairman Richard Burrows directly addressed the share buyback programme. “We continued our share buyback programme in 2012. Between the beginning of March and the end of December, almost 39-million shares were repurchased at a value of £1.25bn. And we have announced a further £1.5bn share buyback programme for 2013.”
Group cigarette volumes declined 1.6% in 2012 to 694billion, with revenue down 1% to £15.9bn. Dividends per share, however, rose 7% to 134.9p.
Mr Burrows said profit was achieved through “good pricing and an outstanding improvement in operating margin”.
Exchange rates during the year, however, had a slight adverse effect.
The I-Net consensus forecast for 2013 sees an earnings yield of 6.57%, from the 5.26% in the last 12 months.
The company, which listed in 1912, is now among the top 10 companies on the London Stock Exchange and sells products in 180 countries.
It was the first tobacco company to publish a social report, at a time when tobacco companies — especially in the US — continue to be plagued by litigation by cancer sufferers and over alleged covering up of the full health effects of smoking.
British American Tobacco was selected for the 11th successive year in the 2012 Dow Jones Sustainability indices, which recognise economic, social and environmental performance.