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.

F3 Uranium’s drill campaign at the Patterson Lake North (PLN) project has produced further promising mineralisation encounters that build on bumper uranium grades discovered in December.

Having confirmed the discovery of uranium with grades up to 59.2% U₃O₈ in December, F3 have drilled 8 of 20 holes planned for their winter drill programme to further map deposits at PLN’s JR Zone.

Today’s announcement further confirms the prospectiveness of the PLN project and F3 Uranium shares jumped 10% to C$0.34 on Wednesday.

There was a standout hole, PLN23-048, which yielded 14m total composite mineralisation from 246.5m – 260.5m with high levels of radioactivity.

“The drill program started by testing the depth extent of the zone, while also testing it along strike from the discovery area on line 00N,” said Raymond Ashley, Vice President Exploration at F3 Uranium.

“The team is becoming familiar with the geology and controls on mineralization on the JR Zone which is currently defined over an area measuring approximately 45m by 50m and have identified strong continuity of high grade mineralization along strike towards the south as the program continues to explore that direction to increase the total mineralized strike length. Additionally, we are continuing to drill test further towards the unconformity, with the objective to test the intersection of the A1 main shear zone at the unconformity.”

The FTSE 100 once again broke to all-time highs on Wednesday as optimism around UK economic growth boosted sentiment in UK stocks.

The index was also support by another strong session from BP after their shares received an ambitious 1,000p price target from analysts at Barclays. BP shares were 3% at the time of writing on Wednesday.

General sentiment improved on Wednesday after the National Institute of Economic and Social Research (Niesr) Think Tank said they expected the UK economy to avoid recession.

⚡️The return of the ‘squeezed middle’⚡️

The UK is likely to avoid a ‘protracted #recession’ in 2023, but for million of #households it will certainly feel like a recession⚠️

Our latest outlook for the UK economy is out now
⬇️⬇️⬇️#CostOfLivingCrisis https://t.co/YA7WplIo9N

— National Institute of Economic and Social Research (@NIESRorg) February 8, 2023

The Think Tank’s prediction is at odds with the Bank of England’s forecast of a recession – although the bank have recently improved their outlook from a prolonged downturn, to a short and shallow contraction.

“The tide of optimism washing over the London market is being pushed higher with the latest economic assessment judging that the UK could avoid a recession,” said Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown.

With the outlook for the UK economy improving in most quarters, the FTSE 100 was helped 0.6% higher to 7,919. The index had hit 7,933 earlier in the session – a fresh intraday all-time FTSE 100 high.

UK domestic stocks

While BP was doing a lot of the heavy lifting on Wednesday, the FTSE 100’s UK-focused stocks provided support for the index after the more optimistic UK economic prediction.

Housebuilders and retailers were among the top risers.

The homebuilding sector was spurred on by an upbeat release from Barratt Developments. Barrett’s said although forward sales were considerably lower than this time last year, they had seen signs of a revival in January.

“While the outlook for the second half of Barratt’s financial year remains uncertain, we’re cautiously optimistic for the group’s prospects in the long run. Recession fears have put housebuilders in a tricky spot, but Barratt’s significant net cash position of £965m gives it plenty of breathing room, even if the housing market deteriorates further,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Barratt’s shares rose 2.2% but it was Persimmon, storming ahead by 3.2%, that was the FTSE 100’s top riser at the time of writing. Persimmon will release final results 1st March.

Fraser Group’s consumers will enjoy a healthier UK economy and investors bid their shares up by 3% to 808p. The same sentiment was shared by Next with the bellwether retailer adding 2.8%.

The industrial chains and related power transmission products group Renold (LON:RNO) has issued a very positive Trading Update, it is noting record order books and is now expecting to beat market profit forecastsfor the year.

The group, which is a global leader in the manufacture of industrial chains, is also a manufacturer of a range of torque transmission products. 

Its products, which are sold throughout the world to a broad range of original equipment manufacturers and distributors, are used in a wide variety of industries including manufacturing, transportation, energy, steel and mining.

For the ten months to the end of January 2023 the group’s order intake was £216.5m, some 19.2% better, leaving the current order book at a record £104.1m.

Its order intake is running far ahead of its sales, with its turnover for the first ten months of the current year to end March, showing a 25.4% growth at £199.0m.

In excess of market expectations

The group stated that given the continued sales growth, a strong orderbook, benefits of the cost reduction and efficiency programmes, and the successful recovery of cost inflation on raw material and energy, the company is confident the current trading momentum will deliver revenues and underlying operating profit for the full year in excess of market expectations.

Analyst Opinion – Target Price of 52p

David Buxton at brokers finnCap has estimated that the current year to end March will see revenues lift to £238.3m (£195.2m) generating adjusted pre-tax profits of £14.3m (£11.5m) and taking earnings up to 4.8p (4.0p) per share.

For the coming year he has pencilled in £233.8m sales, £13.9m profits and 4.6p of earnings.

Anticipating a rerating for the group’s shares over the next two years he has a 52p Target Price out on the shares.

Conclusion – a very healthy upside on 5.4 pe

This group’s shares are currently on a very low rating, trading at 24.5p which puts them on only a 5.4 times price-to-earnings ratio.

These shares offer a very healthy upside.