Revenues rises at British American Tobacco in line with estimates

FTSE 100-listed British American Tobacco (BAT) has unveiled results for the full year ending December 31st showing that revenue at constant currency rose four per cent to 16bn pounds from 15.4bn pounds a year earlier.

Adjusted profit from operations at constant rates of exchange increased by 8.0% and reported profit from operations increased by 15%.

Group volumes were 694bn, down 1.6%, mainly due to industry contractions in some of British American Tobacco's larger markets.

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The group's four global drive brands grew volumes by 3.0%: Dunhill volumes were up 2.0%, Kent was up 1.0%, Lucky Strike grew 11% and Pall Mall 3.0%.

Adjusted diluted earnings per share (EPS) rose by 7.0% to 207.5p and at constant rates, adjusted diluted earnings per share would have been up by 12%, principally as a result of the growth in profit from operations.

Richard Burrows, Chairman of BAT, commented: "BAT delivered strong profit growth in 2012, achieved through good pricing and an outstanding improvement in operating margin, partially offset by adverse exchange rate movements.

"Despite the difficult trading conditions in many parts of the world, particularly southern Europe, these results demonstrate the company is in excellent shape and we remain confident that our strategy will continue to deliver superior shareholder returns."

Analyst view: Jefferies recommends 'buy'Dirk Van Vlaanderen, an equity analyst at Jeffries, gave BAT a 'buy' rating with a target price of 3,600p.

He said: "Fiscal year 2012 organic revenue growth of four per cent and volume growth of -1.6% were broadly in line with our estimates (and consensus, so far as we cant tell). The big positive surprise came through on margin delivery, where the company delivered 160bps of margin improvement to 37.4% which was approximately 50bps ahead of the Street and well ahead of the 50-100bps of annual margin progression management is targeting.

"The performance was broad-based across regions, but asia Pacific and EEMEA were stronger than we were expecting. The better margin performance was the main factor driving a 0.5% beat on FY-12 EPS, which came through at 207.5p," he added.

MF