In 2014 the requirement for UK listed companies to produce an Interim Management Statement (“IMS”) was removed. In July 2016, it was announced that British American Tobacco p.l.c. would no longer publish a quarterly IMS, and would instead issue short trading updates prior to the start of closed periods for the Interim and the Full Year results.
Trading update – ahead of closed period commencing 1 January 2018
- The business continues to perform well and trading is in line with our expectations
- Confident of another year of good earnings growth at constant currency, with:
- Continued market share growth, driven by the Global Drive Brands (GDBs)
- H2 organic operating profit growth reflecting the benefit from the phasing of volume shipments, offset by a more difficult pricing environment in some markets
- Reynolds American Inc. (RAI) integration on track, with the businesses performing strongly, driven by good share growth and pricing
- Full year EPS to benefit from a reduced currency translation tailwind of 5%
Second half organic volume is expected to benefit from the phasing of shipments in a number of key markets, including Pakistan, partly offset by the impact of the significant excise increase in the GCC. We anticipate full year industry volume to be down around 4%, with BAT again outperforming the industry, driven by continued good share growth.
Organic revenue in the second half benefits from growing NGP revenues and good overall pricing in most markets, although organic price mix is expected to moderate in H2 due to downtrading in the GCC and a more difficult pricing environment in some markets, notably in Russia. Full year organic price mix is expected to remain within historic ranges.
Trading in our markets continues to reflect the trends discussed at the Interim Results in July and our more recent Capital Markets Day, with Canada, Germany, Romania, Bangladesh and Ukraine performing well and conditions remaining challenging in Russia, GCC, Brazil, South Africa and Malaysia.
The national rollout of glo in Japan is complete and glo has continued its excellent performance with national share now at 2.7%. glo has also been successfully launched in Canada, Switzerland, South Korea and Russia and is now available in a total of five countries. In vapor, our share in Western Europe continues to grow and the performance of VUSE in the US remains strong.
FX
If exchange rates remained unchanged for the balance of the year, the translational currency tailwind would be expected to be 6% on operating profit. The transactional headwind remains around 2% on operating profit.
Full-year EPS is expected to benefit from a translational foreign exchange tailwind of 5%.
Changes to reporting structure
Following the acquisition of RAI, the Group will consolidate the results of RAI as a wholly owned subsidiary from the acquisition date.
For clarity, the Group will show the 2017 results under the existing regional structure (EEMEA, ASPAC, AMERICAS, WESTERN EUROPE and the USA) to enable an organic comparison.
To enable a like-for-like comparison of performance in 2018, the Group will also show 2017 results under the new regional structure (EUROPE AND NORTH AFRICA, ASIA PACIFIC AND MIDDLE EAST, AMERICAS AND SUB-SAHARAN AFRICA and the USA), including the impact of IFRS15 and as though the Group had owned RAI from 1 January 2017.
