We have extracted the Chairperson’s Statement from the 2019 half year financial report for British American Tobacco Kenya Limited (BAT.ke), listed on the Nairobi Securities Exchange:
The Company grew shareholder value in a challenging operating environment in Kenya and across its export markets to deliver a solid set of results.
Gross revenue increased by 10.1% to KSh 19.2 billion. This was driven by excise-led pricing impacts in Kenya and Somalia coupled with growth in cut rag sales to Sudan. This was offset by lower sales volumes in Kenya and the Democratic Republic of Congo as a result of the continued impact of affordability challenges, together with a high incidence of duty not paid cigarette sales in Kenya. This latter issue has continued to deny the Government an estimated KSh 2.5 billion per annum in revenue. We continue to engage the relevant Government agencies to double their efforts to reduce the incidence of the illicit trade in cigarettes.
Our operating margin increased by 2.2 percentage points to 33.1%. This also resulted from excise-led pricing and an improved sales mix which more than offset the higher costs associated with increased cut rag and export sales volumes.
Profit before tax increased by 25.8% to KSh 3.6 billion reflecting the impact of the higher operating margin and lower finance costs due to lower borrowing as a result of further improvements in working capital management.
Cash from operating activities increased following higher profits and further improvements in working capital management.
Contribution to Government revenues
Our contribution to Government revenues in the form of Excise Duty, Value Added Tax (VAT), Pay As You Earn (PAYE) and Corporation Tax increased by KSh 503 million to KSh 9.3 billion, mainly due to higher sales revenues in Kenya as highlighted above.
The Board of Directors recommend an interim dividend in respect the year ending 31 December 2019 of KSh 3.50 per KSh 10 ordinary share. The interim dividend, which is subject to withholding tax, will be paid on 20 September 2019 to shareholders on the register at the close of business on 19 August 2019.
19 July 2019
By Order of the Board
Waeni Ngea (Ms)