Column: New measures are blow to tobacco industry

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The FTSE 100 continued its march sideways last week, ending relatively flat despite a rise in the pound. The currency rose sharply against the Dollar on Monday from a low of $1.2963 before topping out at $1.3262, then losing many of those gains on Tuesday. 
However, despite yet another Brexit defeat for the government last week, the pound began to rise back up to the level that was reached on Monday.

Following Tuesday evening’s rejection of the revised deal, and Wednesday’s rejection of a no-deal Brexit, Prime Minister Theresa May told MPs that the UK’s departure from the EU may be delayed if a third attempt to get the deal through Parliament failed. Michel Barnier, the chief EU negotiator, stated that the EU “cannot go any further” in trying to persuade MP’s to back the agreed terms of exit. 
Mr Barnier also warned that the recent developments mean that the risk of a “disorderly” Brexit have never been higher, adding further pressure to the Prime Minister and her team.

In a fresh blow to the tobacco industry, the US Food and Drug Administration (FDA) has outlined new measures to control the range of flavours available for purchase in a bid to combat what is described as “epidemic” levels of teen usage.

The requirements would give the FDA the right to push companies to comply with the requirements or remove their products from sale altogether. Tobacco shares were hit by the news, with what is seen as their best catalyst for future growth, in the largest market for vaping – the US - now in jeopardy. British American Tobacco and Imperial Brands were both shunned by investors, falling 2.24 per cent and 1.29 per cent respectively, moments after the announcement.

Shares in bookmaker GVC Holdings were also out of favour last week as two of its top executives sold large stakes in the company.

Around £750m was wiped from the value of the Ladbrokes owner after it was announced that chief executive Kenneth Alexander and chairman Lee Feldman had sold approximately £19.7m worth of shares. However, despite the sale, they both stated that they “remain convinced of the exciting prospects” for GVC. Their comments however, did little to calm investors, many of which sold large amounts of shares, amounting to a 13.96% drop on the day, falling a further 7.88 per cent in the three days following the announcement.

In better news, rival bookmaker 888 Holdings reported record earnings despite a tough UK market. Group revenue in the 12 months ended 30th December fell 2 per cent to $529.9m, with its UK business experiencing harsh trading conditions, with revenue down 16 per cent.

The government has tightened regulation on the industry and increased gambling taxes in a bid to protect consumers from falling into addiction. However, despite this, the globally diverse firm recorded a record EBITDA, increasing 6 per cent year-over-year to $107.1m, with chief executive Itai Pazner commenting: “despite headwinds in some areas of the business, the financial performance in 2018 was resilient”.

Please remember that investments and income arising from them can fall in value and you may lose some or all the amount you have invested.

Past performance and forecasts are not reliable indicators of future results or performance.

Please note that this article is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned.

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