29th July 2021
Good morning We start with the sad news that the iconic children’s TV show Arthur is coming to an end after 25 years. It gave us one of the catchiest theme tunes of all time and was a great source of many great memes.
- Cigarette giant’s future not in cigarettes
- Love Island and Euro 2020 boosts ITV
Yesterday's market moves
FTSE 100 +0.3% 7,017
FTSE 250 +0.6% 23,006
Markets rebounded from the previous day's losses as investors chewed through the latest company earning results and waited for any clues around policy direction from the latest US Federal Reserve announcement.
Cigarette giant’s future not in cigarettes
What’s going on?
British American Tobacco (BAT) has reported a better-than-expected 8% increase in revenue for the first six months of the year driven by strong performance in vaping and oral nicotine products.
The maker of the Lucky Strike and Dunhill brands says that it’s ramping up efforts to grow the business with products outside of traditional cigarettes.
Why is this important?
BAT’s purpose is to build ‘a better tomorrow’, this may seem ironic for one of the world’s biggest cigarette manufacturers but in recent years it’s taken steps to reduce the health impact of its products by expanding into areas such as vaping.
Its “new categories” business, which includes products outside of traditional cigarettes, saw revenues increase 50% to £942m in the first half of the year and make up for almost 10% of the total business.
Moving away from cigarettes is a sensible move as global tobacco use has become less popular, with 60m fewer users since 2000. Smokers are swapping tobacco for vaping instead.
BAT is also getting into the fast growing cannabis market by investing in £129m in Canadian cannabis group Organigram Holdings Inc.
It comes in the same week that Marlboro maker, Philip Morris International, announced its plans to stop selling cigarettes in the UK within the next 10 years.
In recent times investors have become more wary of companies that have less than ethical credentials and tobacco companies share prices have suffered - BAT’s share price has halved since its peak in 2017.
By moving more into alternative smoking products BAT hopes it can recapture more investor funds and increase its share price.
Love Island and Euro 2020 boosts ITV
ITV’s revenue jumped 27% to £1.5bn in the first half of the year driven by the return of summer Love Island and Euro 2020.
Advertising revenues in June were up 115% compared to the same period in 2020 as lockdown restrictions eased in the UK.
2020 was a tough year for traditional TV channels that are reliant on advertising revenue. Although more people were at home watching TV, companies cut back on ad spending due to the uncertainty created by the pandemic.
The reopening of the economy has given companies more confidence to increase their marketing budgets again.
The broadcaster has also had huge success selling original shows across the world with Love Island in 21 countries and quiz show The Chase in 17.
BritBox, ITV’s on demand streaming service with the BBC, grew its subscriber numbers by over 10% to 555,000. Although still small in comparison to Netflix which has more than 15m UK users.
ITV also said it wasn’t hugely keen on acquiring other channels. It ruled out buying BT Sport which recently came up for sale. However it wasn’t as transparent on Channel 4, the publicly owned but ad-funded broadcaster which is currently under government consultation over whether it should be privatized.
Stat of the day
Apple, Google owner Alphabet and Microsoft generated $57bn in profit between April and June, or $620m per day
Other stories to keep you in the loop
- No quarantine for fully jabbed US and EU travellers coming into the UK
- City watchdog demands boardrooms have at least 40% women
- Pfizer sells $7.8bn in Covid shots in three months
- Toy giant Mattel warns of higher prices as costs rise
- Barclays raises size of its bonus pool to £1bn as Covid restrictions ease