British American Tobacco share were weaker on Thursday despite strength in their New Categories unit and a 6% dividend hike.
Total group revenue rise 7.7% to £27.6bn in 2022 and operating profit grew 2.8% to £10.5bn.
The group said they were confident their vapes and no-tobacco business would hit £5bn by 2025 as volume growth continued. However, it was weakness in their traditional combustibles core business causing concern with sluggish growth and further contraction of the market predicted.
“It’s hard to tell how much of this came from smokers feeling the squeeze of rising prices, and how much came from a drive by smokers to become more healthy,” said Derren Nathan, head of equity research at Hargreaves Lansdown.
“BATS’ cigarette brands include the likes of Rothmans, Camel and Newport. Despite the significant fall in volume of its biggest sales category, profits have done well. This has been helped by cost savings and strong pricing.”
Cash generated from operating activities grew 7% in the period and BATS said they were hiking their dividend by 6%.
“Another year of 100% cash conversion underpins the 8% dividend yield as well as investment in new categories but we note the statement of intent around debt repayment, with improved balance sheet strength now a priority. In the short term we see further approvals of US pre-market tobacco product applications (PMTAs) for new categories as pivotal to investor sentiment,” Nathan said.
