BAT hikes dividend and launches £2bn share buyback as vape sales soar

has hiked dividends and launched a £2billion share buyback amid soaring profits, after it lured in almost 5million new customers to take up its vapers last year. 

The maker of Lucky Strike cigarettes and Vuse vapers reported a 42 per cent rise in sales of e-cigarettes, heated tobacco and oral nicotine products to £2.05billion in 2021.

It comes after the tobacco giant added some 4.8million new vaping customers, taking the total to 18.3million, and moving it one step closer to hit its 2030 target of 50million customers and 2025 target of £5billion of revenue. 

BAT added some 4.8m new vaping customers last year, taking the total to 18.3m

BAT added some 4.8m new vaping customers last year, taking the total to 18.3m

While the bulk of BAT’s sales still comes from its traditional cigarettes, new smokeless products are fast growing compared to so-called ‘combustibles’, which saw sales fall 3.2 per cent to £22billion.

Its Vuse vape brand is now the leading brand by value share globally, the company said, with sales up 59 per cent, while its tobacco heating product, glo, saw sales up 46 per cent.

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Its Velo nicotine pouches saw sales up 41 per cent.

BAT invested some £496million in these new products in 2021 as losses in the division shrank by £100million.

Bosses expect the non-combustible division to be profitable by 2025.

‘Significant investment into these new categories is beginning to show meaningful results’, said Richard Hunter, head of markets at interactive investor.

‘The direction of travel [is] clearly becoming established.’ 

Total sales were £25.7billion, down 0.4 per cent compared to 2020, with pre-tax profits up from £8.6billion to £9.2billion in the year.

The group also made annualised cost savings of £1.3 billion, while it continued to pay down debt, which was reduced by 11 per cent to stand at £35.5billion.

It expects to generate around £40billion of free cash flow over the next five years – which is more than half the business’s current market value, analysts have noted.

The strong results have led BAT to hike its dividend payment by 1 per cent to 217.8p and launch a share buyback of £2billion for this year. 

FTSE 100-listed  climbed 0.7 per cent to £32.91 in early trading on Friday.The stock has risen by around 20 per cent over the last year, with much of the gains since the start of the year. 

BAT shares have risen 20% over the last year, with much of the gains since the start of 2022

BAT shares have risen 20% over the last year, with much of the gains since the start of 2022

Steve Clayton, fund manager at HL Select, said: ‘The buy-back announcement was well flagged and the numbers are broadly what the market expected to see. 

‘But the underlying trends are looking very good for BATS.The tobacco trade is a high margin business, after all, the customers really want their nicotine hit.’

He added: ‘Buy-backs will push earnings per share ahead faster than underlying profit growth, raising the potential level of dividend per share the group can afford.’

Interactive investor’s Hunter said: ‘From an investment perspective, the sector has more recently been overlooked by some investors who are simply unable to enter the fray on ethical grounds.

‘Of late, however, there may be some winds of change.Recent market volatility and Harga kaca tempered the rotation away from growth stocks into value has refocussed attention on the likes of the oil and tobacco stocks.

‘However unfashionable they may be, propelled by strong cash generation, inelastic demand and generous dividend yields, the likes of British American Tobacco are having their own day in the sun at present.’

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