British American Tobacco Appoints New CEO

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British American Tobacco’s (LON:BATS) CEO, Jack Bowles, is stepping down from the Board to be replaced immediately by Group Finance Director, Tadeu Marroco.

The release highlighted some of Mr Bowles achievements since the company unveiled its latest strategy in 2019. These include the return of over £20bn to shareholders and the performance in New Categories division, which is expected to reach profitability earlier than initially expected.

The shares were trading flat following the announcement.

Challenges For British American Tobacco’s New CEO

“Tadeu Marroco has a few burning challenges to meet head on as he takes up the helm at BATS. The market hasn’t taken well to the almighty $635m wrist slap imposed last month by the U.S.  Department of Justice and Office of Foreign Assets, for poor disclosures regarding exports to North Korea in 2017.

With $540m already provided for in the company’s books, most of this should have been in the price already. However strong governance needs to be front and centre of Mr Marroco’s priorities going forward.

Whilst new categories of tobacco products are a core focus of BATS, these products are also coming under increasing scrutiny as shown by Australia’s decision to ban imports of non-prescription vapes.

The recent fall in the valuation leaves BATS on a forward dividend yield of over 9%, one of the highest in the FTSE 100. Jack Bowles’ record of maintaining impressive cash generation in the face of a shrinking market has been very impressive.

With the baton moving to a finance man,  hopefully that cash generation will remain high up on the agenda and, with buy backs taking a back seat for now, the dividend is not overly ambitious.”

Article by Derren Nathan, head of equity research, Hargreaves Lansdown