Figures for the first nine months from British American Tobacco were not that bad, certainly not bad enough, on the face of it, to prompt a 3 per cent slide in the price.
Consumption across the industry is falling by low single-digit figures each year, as people either give up or are prompted by higher tax to switch to illicit products.
BAT reported a 1 per cent decline in volumes to the end of September, representing the actual number of cigarettes sold. Revenues, stripping out currency factors, rose by 2.4 per cent as prices were increased and some consumers switched to the company’s five big brands, which are earmarked for heavy promotion.
By contrast, the fall in volumes over the first nine months of last year was 3 per cent. Take in those currency changes and the effect of the strong pound and reported revenues were off by 9.6 per cent, but this should have been appreciated beforehand by the market.
BAT does not give third-quarter figures, but work these out and it is obvious that the decline accelerated into that quarter, with revenues before currencies up by only 1.7 per cent and the decline in volumes running at 2.3 per cent. The markets are competitive, with pressure on consumer spending causing some smokers to downshift or go for smuggled product.
As ever with a global consumer product business, different markets are heading in different directions. Brazil, which is 12 per cent of profits, was off because of high comparators last time, when the authorities had cracked down on the illicit trade. Vietnam was an oddity, a move to put health warnings on packets for some reason impelling consumers to switch to illicits, while Russia was also weak.
Attempts to push up prices in Australia and Malaysia had to be reversed when the competition declined to follow suit.
Volumes of those five Global Drive Brands, though, were up by 6.2 per cent over the nine months.
BAT shares, off 91½p at £33.75, have been strong this year as investors moved into high-income stocks — the yield on the shares is 4.2 per cent. As ever, that yield is the best reason to hold the shares, if this chimes with your ethical investment principles.
Revenues up 2.4% at constant rates
6.2% Volume rise for five main brands
My advice Hold
Why BAT is suffering from a slowdown in consumer spending around the global, but the dividend yield is attractive
It is all starting to come together for Laird. This was part of the old Cammell Laird shipbuilder, but it has been reinvented as a maker of high-performance electronic products for smartphones and telecoms networks.
The third-quarter numbers produced the fifth consecutive quarter of growth. Laird has been investing heavily in R&D, comprising almost a tenth of revenues at the halfway stage. A plant in Shanghai opened last week; yesterday brought the announcement of another in Brazil, part of the policy of getting closer to manufacturers that take its components.
The balance sheet has been refinanced with long-term loan facilities, providing reassurance to those manufacturers that Laird has the stability to support long-term contracts.
Sales in dollar terms in the third quarter were up by 15 per cent year-on-year, or 6 per cent in sterling. The company does not talk about its customers, but it is clear that the performance materials side did well from the launch of Apple’s iPhone 6, from gaining more business from Samsung and from investment in 4G in China and the United States. The other division, wireless systems, has a later cycle but growth is coming through, with dollar sales up 12 per cent. The strong balance sheet will support infill acquisitions that take it into new technologies and territories, such as one this year in South Korea.
The shares, 15¼p ahead at 310p, sell on 16 times earnings. I have tipped them in the past, but that multiple still looks low. Buy.
Revenue £150m, up 6%
My advice Buy
Why All the investment and hard work is paying off
Development Securities has not been the most popular company in the property sector in recent years, although this has not stopped George Soros from making a healthy profit from a stake sold earlier in the year.
It has raised £200 million since 2009 to spend on secondary assets, shunning the booming central London market, but the shares are still trading on a heavy discount to net assets and it has taken time for the benefits to come through.
Halfway figures to the end of August suggest that this is happening. The company booked £18.2 million of profits from trading out properties bought at the low point in the market. It set out some punchy targets for such profits over the next three years, about £50 million in each.
In the spring, it bought Cathedral Group, which brought expertise in developing the sort of mixed, complex projects in which it specialises.
The halfway dividend is held at 2.4p, but those development profits mean there should be excess cash to fund special payments. The shares, off 3¼p at 187½p, are still on a 30 per cent discount to net asset value. One for the long-term investor.
NAV 269p per share, up 2.7%
My advice Long-term hold
Why Trading profits starting to kick in
And finally…
A positive enough statement arrives from Petropavlovsk, prompting a slight rise in the share price. The Russian goldminer missed some forecasts for production in the third quarter, but is guiding down expected costs for the year to below $900 an ounce, benefiting from cost-cutting and the lower rouble. There is no news, though, on negotiations with the holders of the $310.5 million bond that needs repaying in February, talks that, as one analyst put it, “pale the results into relative insignificance”.
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