City snapshot: British American Tobacco agrees Russia exit

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British American Tobacco has struck a deal to exit its operations in Russia and Belarus.

In March 2022 BAT announced that the ownership of its business in Russia was “no longer sustainable in the current environment” and that its intention was to exit the business.

This morning it has announced it has formally entered into an agreement to sell its Russian and Belarusian businesses in compliance with local and international laws.

The buyer is a consortium led by members of BAT Russia’s management team which, upon completion, will wholly own both businesses. Post completion, these businesses will be known as the ITMS Group.

As part of the agreement, their employment terms will remain comparable to their existing BAT terms for at least two years post-completion.

The group said it anticipates that the transaction will complete within the next month, once certain conditions have been satisfied.

Upon completion, BAT will no longer have a presence in Russia or Belarus and will receive no financial gain from ongoing sales in these markets.

Its operations in Russia include a head office in Moscow, 75 regional offices and a manufacturing facility in St Petersburg. BAT also has an office in Belarus.

As for 30 June 2023, on a constant currency basis, Russia and Belarus accounted for approximately 2.7% of group revenue, and approximately 2.5% of group adjusted profit from operations.

Morning update

Hilton Food Group has posted a rise in first half sales and profits on strong performance of its core meat category and a recovery in seafood..

A “robust” performance in the 28 weeks to 16 July saw revenue grow by 5.2% with volumes 0.2% higher.

Total revenue growth reflect higher volumes, continued raw material price inflation and also a full period of trading at Foppen following its acquisition in March 2022.

UK and Ireland revenues were up to £701.1m from £695.1m, despite a 4.4% drop in volumes.

Its UK based foodservice company, Fairfax Meadow continues to grow revenues and win new business.

Europe saw a 1.7% drop in volumes, though revenues were up 9.3% to £553.8m due to raw material price inflation.

Hilton noted that operations at its Dalco vegan and vegetarian business in the Netherlands has been impacted by increased raw material costs and changes in consumer purchasing patterns, one key driver of which has been the flight to value during the cost of living crisis.

It is proactively restructuring the business which will lead to the closure of its Oss facility to optimise the business at a single site centre of excellence.

APAC saw a 6.8% jump in volumes and revenues, driven by its partnership with Australian retailer Woolworths.

Hilton’s overall operating margin was steady at 2.0%, although the operating margin per kg increased slightly to 15.3p per kg (2022: 15.2p per kg).

Adjusted operating profit for the first 28 weeks of 2023 was £41.8m, 1.4% higher than in the previous year and 0.6% higher on a constant currency basis.

Statutory operating profit for the first 28 weeks of 2023 was £30.6m (down from £30.8m) after charging exceptional costs of £7.7m.

Hilton expects to continue to trade in line with board expectations for the rest of the year.

It said growth prospects were underpinned by recent acquisitions and the continued recovery in seafood, combined with opportunities to develop cross-category business and utilise wider supply chain management expertise.

“Hilton Foods continues to explore growth opportunities and wider geographic expansion with existing and new customers,” it stated. “With a strong financial position with leverage and headroom at comfortable levels, the outlook for continued progress remains positive.”

CEO Steve Murrells said: “I am pleased, in my first set of results as Hilton Food’s CEO, to show delivery of a robust performance against a challenging economic backdrop. Our core meat business has continued to perform strongly and we are pleased with the continued recovery in seafood. At the same time, we continue to make progress in our ESG strategy, including delivering packaging innovation to reduce plastic usage and setting more ambitious science-based targets.

“I joined Hilton because it is an exciting business with great people, real expertise in producing high-quality food products that consumers want and is a trusted partner to retailers around the world. As I look ahead, I am confident in the opportunities we have to grow, building on our existing partnerships and forging new ones, based on our unique multi-category protein offer.”

Elsewhere, payments specialist PayPoint has issued a trading update ahead of its AGM today.

It said it has continued the positive momentum and has made further progress in the execution of its strategic objectives across all four business divisions.

In shopping, it has continued to drive a strong sales performance, with further site growth in our PayPoint One retailer partner estate and its Handepay EVO card processing estate.

This has been supported by the continued strengthening of its SME and retailer proposition: further fmcg campaigns have been delivered for JTI, Coca-Cola, Amazon and Philip Morris through its consumer engagement platform, PayPoint Engage, with a healthy pipeline of brands signed up.

In e-commerce, it continues to see excellent volume growth through its technology platform, Collect+. This included recently surpassing the two million weekly parcel transaction in August, driven by the strength of our ‘out of home’ network, positive early growth in its recently launched ‘Store to Store’ service and the continued strong volumes seen through its partnership with Yodel and Vinted.

Payments & banking has two further bank clients going live in September, while Love2shop has seen a strong early uptake of its PayPoint Park Super Agent proposition, with over 500 retailers already signed up ready to recruit savers for the Christmas 2024 season.

Finally this morning, Palm Oil player MP Evans Group has announced a $60m acquisition of two Indonsian companies to grow its operations in the country.

It has signed a conditional agreement to acquire the entire issued share capital of two Indonesian companies, PT Agro Bumi Kaltim (ABK) and PT Nusantara Agro Sentosa (NAS), for a total consideration of US$60m.

Subject to the completion of legal and regulatory formalities in Indonesia, the group expects the deals to be finalised before the end of 2023.

The acquisition is in line with the group’s established strategy of increasing the planted hectarage close to its existing operations. ABK and NAS both own oil-palm plantations in East Kalimantan, and between them manage a total planted area of 8,350 hectares.

MP Evans is acquiring ABK and NAS from PT Palma Serasih Tbk, a listed Indonesian company with subsidiaries operating in the oil-palm sector, which has other plantation interests in East Kalimantan.

The most recent audited accounts for the companies being acquired are for the year ended 31 December 2022 and show that, as estates with relatively young plantings, ABK made a loss after tax in the year of $3m and NAS a loss of $2.6m.

The group expects that results from ABK and NAS will improve as the areas mature, and as management work to improve agronomic standards on both estates.

MP Evans chairman Peter Hadsley-Chaplin said: “The addition of the estates at ABK and NAS to the group portfolio is a great achievement and will bring our total area under management to over 65,000 hectares.

“We have been very keen to acquire more hectares close to Kota Bangun for some time and having the ABK estate supplying its crop to our existing mills will further enhance our operational efficiencies. With more hectares delivering more crop, we will be able to continue to increase our output, supporting the group’s ambition to deliver progressive returns.”

On the markets this morning, the FTSE 100 is down another 0.2% to 7,414.7pts.

Risers include PayPoint, up 3.1% to 558.9p, Virgin Wines, up 2.9% to 54p and Marks & Spencer, up 0.2% to 224p.

Fallers include Pets at Home, down 10.3% to 339.8p, Hotel Chocolat, down 2.6% to 111p and Just Eat Takeaway.com, down 2% to 1,009p.

Yesterday in the City

The FTSE 100 was down for a third consecutive day, dropping another 0.2% to 7,426.1pts.

WH Smith lost 6.3% to 1,390 despite strong sales progress over the past year, as the market hoped for faster second half growth and more evidence of improved profitability.

Bakkavor was up 2% to 101p as improved first half sales in China and a solid performance in its core UK business boosted sentiment on the stock.

Other fallers included Just Eat Takeaway.com, down 4.9% to 1,030p, Associated British Foods, down 1.8% to 1,957.5p, SSP Group, down 1.8% to 228.4p, THG, down 1.6% to 95.3p, Compass Group, down 1.3% to 1,986.5p and Ocado, down 1.3% to 847p.

Risers included Kerry Group, up 2.4% to €87.05, C&C Group, up 2.4% to 136.8p, Hotel Chocolat, up 2.2% to 114p, B&M European Value Retail, up 1.7% to 557p, Nichols, up 1.5% to 1,040p and Cranswick, up 1% to 3,392p.