BAT's shares plunged on Tuesday because of fears that it was planning to raise additional money from shareholders. BAT acted to prevent the creation of a false market by saying it had 'no present intention of making either an offer for Victoire or a rights issue'. Normally it ignores rumours.
Sir Patrick Sheehy, chairman, said the profits advance in the year ended 31 December came in an exceptionally difficult period for the tobacco industry.
A large fall in the tax charge, caused by last year's enhanced scrip dividend and better UK profitability, helped to produce a 31 per cent improvement in earnings to 38.5p a share. BAT is paying a final dividend of 12.2p to increase the total by 8 per cent to 20.1p. The group aims to rebuild dividend cover to 2-2.5 from the current level of 1.85 times.
The cigarette price war in America, recession and trading- down in Germany and an unexpected fall in exports all contributed to lower tobacco profits of pounds 1.2bn - a 14 per cent fall in local currencies. The result would have been pounds 138m lower but for the profit from an exchange of brands with American Brands last year.
The US price war, triggered last year by Philip Morris, sent underlying volume of sales of Kool, a menthol cigarette made by Brown & Williamson, BAT's US arm, down 18 per cent. The market was down only 4 or 5 per cent.
Sir Patrick said Kool had made a good start to 1994. Higher prices are allowing Brown & Williamson to achieve better margins on GPC Approved, the 'value-for-money' brand that has rapidly become the US market's fourth-largest, up from seventh in 1992.
Higher general insurance premiums helped Eagle Star to lift profits at its continuing operations from pounds 15m to pounds 179m. Underwriting losses almost halved to pounds 142m.
However, losses from domestic mortgage indemnity insurance have worsened, from pounds 93m in 1992 to pounds 115m in 1993. David Allvey, finance director, said there had been 'a burst of repossessions' in the past quarter prompted by a change in court procedures.
Discontinued financial insurances continue to make big losses - a 'disappointingly high' pounds 141m following a pounds 145m loss in 1992.
After standing still during the recession, Allied Dunbar, the UK life and pensions business, increased its profits by 22 per cent to pounds 151m.