REG - British Amer.Tobacco - 2025 H1 Pre-Close Trading Update
Tue 07:00
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RNS Number : 1114L British American Tobacco PLC 03 June 2025
3 June 2025
On track for FY delivery; revenue slightly ahead of previous guidance
· U.S. expected to return to revenue and profit growth(1) in H1 and
FY25, driven by strengthening Combustibles delivery and an excellent Velo Plus
performance
· Strong global growth from Velo in Modern Oral, the fastest
growing New Category segment
· Continued strong performance in AME; APMEA impacted by excise and
regulatory challenges in Bangladesh and Australia, as previously guided
· Low-single digit H1 New Categories revenue growth, with the
impact of illicit Vapour products in the U.S. and Canada partly offsetting
excellent Velo performance
· Accelerating H2 New Category revenue driven by deployment of
innovations in key markets
· Further improvement in New Category contribution margin(2),
driven by our Quality Growth focus
· Confident in delivering mid-term algorithm of 3-5% revenue growth
and 4-6% APFO(3) growth in 2026
· Partial monetisation of our ITC stake enabling increased
financial flexibility
· Strong cash generation with balanced capital allocation;
committed to reducing leverage(4) to 2-2.5x by end 2026, with progressive
dividend and sustainable share buy-backs - increased to £1.1bn in 2025
Tadeu Marroco, Chief Executive
"Our revenue performance in H1 is slightly ahead of our previous guidance, and
we now expect to deliver FY revenue growth of 1-2%, supporting 1.5 to 2.5%
adjusted profit from operations growth(3). 2025 is a deployment year and, as
previously highlighted, we expect our performance to be H2 weighted, mainly
driven by the roll-out of New Category innovations in key markets from the
middle of the year.
In the U.S., I am very pleased that we expect to return to both revenue and
profit(1) growth in H1 and FY. While Combustibles industry volume remains
under pressure c.-9% YTD(5), we have stabilised our total industry volume and
value share. Excluding the deep discount segment where we are not present, we
are gaining share, driven by Natural American Spirit and Lucky Strike.
I am excited by the successful launch of Velo Plus in the U.S. driving
excellent volume and revenue growth, with strong market share gains. Globally,
Velo continues to gain volume share in this fast-growing category, driven by
the U.S. and our continued leadership position in AME.
We are encouraged by the early performance of glo Hilo in Serbia and continue
to gain insights and critical learnings ahead of its phased roll-out in key
markets from H2 onwards. glo's performance YTD reflects a highly competitive
environment in Japan and continued phase-out of our legacy platform, alongside
actions we have taken in AME to focus resource allocation in the largest
profit pools.
The Vapour category remains impacted by the proliferation of illicit Vapour
products in the U.S. and Canada, with U.S. legal industry volume down
mid-teens YTD.
We expect low-single digit New Category revenue growth in H1, accelerating to
mid-single digit for FY. Excluding the impact of the U.S. and Canada Vapour
markets, we expect double-digit New Category revenue growth for FY.
While there is more to do, I am encouraged by the progress we are making
through our Quality Growth focus, and prioritising investment to the largest
profit pools. I am confident that the investments we have made and the actions
we are taking will drive a return to our mid-term algorithm in 2026. I am
pleased with our progress in increasing financial flexibility driven by
continued strong operating cash conversion and the completion of a partial
monetisation of our stake in ITC.
I remain committed to delivering sustainable value for our shareholders
through strong cash returns, including our progressive dividend and a
sustainable share buy-back programme."
Our outlook is underpinned by the following key areas, where we have continued
to make progress:
1. Combustibles: Return to growth in U.S. and continued resilience in AME;
robust pricing YTD
· Group volume share in top markets(6) -10bps, value share -10bps
· U.S. value share +10bps; volume share +10bps (+60bps excl. deep
discount where we are not present)
· U.S. expected to return to revenue and profit(1) growth in H1 and
FY, driven by successful execution of commercial actions
· Resilient AME financial performance led by Brazil, Türkiye and
Romania
· APMEA performance impacted by material excise increases and
regulatory headwinds in Bangladesh and Australia, as previously guided
2. H2 weighted New Category performance, driven by phasing of innovations
through the year
2.1 Velo: Continued strong growth and volume share gains; excellent
performance from Velo Plus in U.S.
· Volume share +270bps to 14.3% of Total Oral and +350bps to 29.7%
of Modern Oral in top markets(7)
· Strong double-digit revenue growth, driven by industry growth and
volume share gains
· Delivering encouraging results in the U.S., driven by Velo Plus,
with strong trial and retention rates driving total volume share of Modern
Oral +550bps to 11.9% and triple-digit revenue growth
· Continued leadership in AME, with strong financial performance in
Scandinavia, the UK and Poland
2.2 glo: Targeted innovation roll-out expected to drive acceleration in H2
· Volume share in top markets(8) -90bps, driven by a highly
competitive environment in Japan and the continued phase-out of our legacy,
super-slims platform
· AME volume share -10bps, with continued share growth in Poland,
Czech Republic and Spain, and a stable share performance in Italy, offset by
competitive dynamics in Germany and Romania
· Encouraging performance from glo Hilo launch in Serbia, doubling
previous trial to conversion rates
· Expect low-single digit revenue growth in H1 with H2 acceleration
driven by the phased roll-out of glo Hilo in key markets
2.3 Vuse: Continued global value share leadership; illicit Vapour headwinds
persist in U.S. and Canada
· Global value share in top markets(9) flat , with continued global
leadership in tracked channels
· U.S. value share flat, AME +10bps, driven by Europe +40bps
· Expect mid-teens revenue decline in H1, mostly driven by illicit
Vapour headwinds in U.S. and Canada
· Improving H2 revenue performance, driven by the phased roll-out
of our new premium Vapour product, Vuse Ultra, and continued targeted resource
allocation
3. Continued strong cash delivery, and balanced capital allocation
· On track to deliver operating cash flow conversion(10) in excess
of 90% again in FY25, reflecting strong cash discipline and maintaining a
laser focus on returns
· We expect to be back within our 2.0-2.5x adjusted net
debt/adjusted EBITDA(4) target range by end 2026, together with a progressive
dividend and sustainable share buy-back, increased to £1.1bn in 2025
Technical guidance for 2025:
· Global tobacco industry volume expected to be down c.2%
· 1-2% Group revenue growth for H1 and FY, at constant rates
(previously c.1%)
· Low-single digit New Category revenue growth in H1; accelerating
to mid-single digit for FY
· 1.5-2.5% adjusted profit from operations growth(3) at constant
rates for FY, weighted to H2, incl. a c.1.5% transactional FX(11) headwind
· Translational FX(11) headwind of c.4% on half-year and full-year
adjusted profit from operations(3)
· Net finance costs(3) of c.£1.8bn, subject to FX and interest
rate volatility
· Operating cash flow conversion(10) in excess of 90%, gross
capital expenditure in 2025 of c.£650 million
· Continue to deleverage(4) to our 2.0-2.5x adjusted net
debt/adjusted EBITDA target corridor by end 2026
For further information, please contact:
Media Centre
+44 (0) 20 7845 2888 (24 hours) | press_office@bat.com
(mailto:press_office@bat.com) | @BATplc (https://twitter.com/BATplc)
Investor Relations
ir_team@bat.com (mailto:ir_team@bat.com)
Victoria Buxton: +44 (0)20 7845 2012
Amy Chamberlain: +44 (0)20 7845 1124
John Harney: +44 (0)20 7845 1263
Webcast and Conference call - The conference call will begin at 8.30am (BST)
You can access the audio webcast via our website. You can also listen via conference call by dialling the numbers below. Quote the password 'BAT - 2025 First Half Pre-Close' when prompted by the operator.
UK Toll-Free: 0808 109 0700
UK-Toll: +44 (0) 33 0551 0200
South Africa Toll-Free: 0800 980 512
USA Toll-Free: 866 580 3963
USA Toll: +1 786 697 3501
A playback facility for the conference call will be available online via:
www.bat.com (https://www.bat.com/investors-and-reporting/results-centre) .
Financial guidance and trading update expectations based on constant rates:
Measures are calculated based on the prior year's exchange rate, removing the
potentially distorting effect of translational foreign exchange on the Group's
results. The Group does not adjust for normal transactional gains or losses in
profit from operations which are generated by exchange rate movements.
Market share and volume data YTD March 2025 average share growth vs. FY24
average.
This announcement also contains New Category contribution, adjusted profit
from operations, adjusted EBITDA, adjusted net debt, adjusted net finance
costs, adjusted results from associates and joint ventures, adjusted taxation
and adjusted profit attributable to shareholders, all of which are before the
impact of adjusting items and which are reconciled from profit from
operations, borrowings, net finance costs, results from associates and joint
ventures, taxation and profit attributable to shareholders. See "Note on
Non-GAAP Measures".
(1) Adjusted Profit from Operations: Profit from operations before the impact
of adjusting items.
( )
(2) New Category profitability at category contribution level and margin:
Profit from operations before the impact of adjusting items and translational
foreign exchange, having allocated costs that are directly attributable to New
Categories. Margin: New Category contribution as a percentage of New Category
revenue on an adjusted basis.
(3) ( )Adjusted Profit from Operations (adjusted for Canada): Profit from
operations before the impact of adjusting items on an "adjusted for Canada"
basis.
Net finance costs (adjusted for Canada): Also presented on an "adjusted for
Canada" basis.
Adjusted for Canada: Certain adjusted measures, including adjusted profit from
operations, category contribution, leverage, adjusted net debt and adjusted
EBITDA, are also presented on an "adjusted for Canada" basis, reflecting the
removal of 100% of adjusted profit from operations of our Canadian business,
excluding New Categories, from both 2024 and 2025 results, to remove the
distorting effect of the Canadian results, as from the date all of the Group's
outstanding tobacco litigation in Canada is settled, annual payments based on
a percentage (initially 85%, reducing over time) of the Group's net income
after taxes, based on amounts generated in Canada from all sources, excluding
New Categories, will be paid out by the Group until the aggregate settlement
amount is paid. Due to the uncertainty of the timing of the implementation of
the settlement, we have removed 100% of the results of the Canadian business,
excluding New Categories, for the periods under review here.
( )
(4) Leverage refers to the ratio of adjusted net debt to adjusted EBITDA,
excluding cash and investments held at fair value, on an "adjusted for Canada"
basis.
Adjusted net debt is not a measure defined by IFRS. Adjusted net debt is total
borrowings, including related derivatives, less cash and cash equivalents and
current investments held at fair value, excluding the impact of the
revaluation of Reynolds American Inc. acquired debt arising as part of the
purchase price allocation process.
Adjusted EBITDA is not a measure defined by IFRS. Adjusted EBITDA is profit
for the year before net finance costs/income, taxation on ordinary activities,
depreciation, amortisation, impairment costs, the Group's share of post-tax
results of associates and joint ventures, and other adjusting items, on an
"adjusted for Canada" basis.
(5) RSD, calculated on a Sales to Retail basis. c.-8% YTD on a Sales to
Wholesale basis.
(6) Top 7 Cigarette markets: U.S. - RSD, Germany - NielsenIQ, Japan - CVS,
Romania - NielsenIQ, Brazil - Scanntech, Mexico - NielsenIQ, Pakistan - Retail
Access. These seven markets cover an estimated c.60% of Cigarette industry
revenue in 2024.
(7) Top 7 Modern Oral markets: U.S. - RSD, Sweden - NielsenIQ, Denmark -
NielsenIQ, Norway - NielsenIQ, Switzerland - IMS, UK - NielsenIQ, Poland -
NielsenIQ. These seven markets cover an estimated c.90% of total industry
Modern Oral revenue in 2024.
(8) Top 10 HP markets: Japan - CVS-BC, South Korea - CVS, Italy - NielsenIQ,
Germany - NielsenIQ, Greece - NielsenIQ, Poland - NielsenIQ, Romania -
NielsenIQ, Czech Republic - NielsenIQ, Spain - Logista RA, Portugal - Logista
RA. These 10 markets cover an estimated c.80% of total industry HP revenue in
2024.
(9) Top 7 Vapour markets: U.S. - RSD, Canada - Scan Data, UK - NielsenIQ,
France - Logista RA, Germany - NielsenIQ, Poland - NielsenIQ, Spain - Logista
RA. These seven markets cover an estimated c.80% of global closed systems
consumables industry revenue in 2024.
(10) Operating Cash Conversion: Net cash generated from operating activities
before the impact of adjusting items and dividends from associates and
excluding trading loans to third parties, pension short fall funding, taxes
paid and net capital expenditure, as a proportion of adjusted profit from
operations.
(11) Based on current exchange rates of USD/GBP 1.3486 as at 30(th) May 2025.
Share growth refers to volume share for HP and Modern Oral and value share for
Vapour. As used herein, volume share refers to the estimated retail sales
volume of the product sold as a proportion of total estimated retail sales
volume in that category and value share refers to the estimated retail sales
value of the product sold as a proportion of total estimated retail sales
value (rechargeable closed systems consumables and disposables) in that
category. Please refer to the 2024 Annual Report on Form 20‐F for a full
description of these measures, together with a description of other Key
Performance Indicators (KPIs), on pages 391 and 392. Industry and global
revenue refer to the total industry revenue in the markets in which we are
present.
New Categories comprises Heated Products (HP), Vapour and Modern Oral. Our
products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and Camel
Snus, are subject to Food and Drug Administration (FDA) regulation and no
reduced-risk claims will be made as to these products without FDA clearance.
2024 Analysis of adjusted profit from operations and diluted earnings per
share by segment
Six months ended 30 June 2024
Group Reported Adj Items(*) Adjusted Adj for Canada As adjusted for Canada
£m £m £m £m £m
Profit from Operations
U.S. 1,775 1,278 3,053 - 3,053
AME 1,473 14 1,487 (232) 1,255
APMEA 1,010 14 1,024 - 1,024
Total Region 4,258 1,306 5,564 (232) 5,332
Net finance costs (305) (516) (821) (66) (887)
Associates and joint ventures 1,647 (1,367) 280 - 280
Profit before tax 5,600 (577) 5,023 (298) 4,725
Taxation (1,041) (115) (1,156) 77 (1,079)
Non-controlling interests (67) - (67) - (67)
Coupons relating to hybrid bonds net of tax (21) - (21) - (21)
Profit attributable to shareholders 4,471 (692) 3,779 (221) 3,558
Diluted number of shares (m) 2,232 2,232 2,232
Diluted earnings per share (pence) 200.3 169.3 159.4
Notes to the analysis of profit from operations above:
* Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2024 Analysis of adjusted operating margin, category contribution and adjusted
gross profit.
Six months ended 30 June 2024 Group reported Combustibles New Categories Traditional Oral Other
£m £m £m £m £m
Revenue 12,340 9,856 1,651 555 278
Profit from Operations 4,258
Operating margin 34.5%
Adjusting items 1,306
Adjustments in respect of Canada (232)
Adjusted profit from operations (as adj for Canada) 5,332
Adj. operating margin (as adj for Canada) 48.6%
Other costs that are not attributable to categories 901
Category Contribution (as adj for Canada) 6,233 5,573 129 427 104
Cat Contribution margin (as adj for Canada) 50.5% 56.6% 7.8% 76.9% 37.4%
Category spend (Marketing Investment and R&D) 1,812 952 813 26 21
Adjusted gross profit (as adj for Canada) 8,045 6,525 942 453 125
Adjusted gross margin (as adj for Canada) 65.2% 66.2% 57.1% 81.6% 45.0%
Year ended 31 December 2024 Group reported Combustibles New Categories Traditional Oral Other
£m £m £m £m £m
Revenue 25,867 20,685 3,432 1,092 658
Profit from Operations 2,736
Operating margin 10.6%
Adjusting items 9,154
Adjustments in respect of Canada (520)
Adjusted profit from operations (as adj for Canada) 11,370
Adj. operating margin (as adj for Canada) 44.0%
Other costs that are not attributable to categories 1,848
Category Contribution (as adj for Canada) 13,218 11,931 249 840 198
Cat Contribution margin (as adj for Canada) 51.1% 57.7% 7.3% 76.9% 30.1%
Category spend (Marketing Investment and R&D) 3,747 1,947 1,683 58 59
Adjusted gross profit (as adj for Canada) 16,965 13,878 1,932 898 257
Adjusted gross margin (as adj for Canada) 65.6% 67.1% 56.3% 82.2% 39.1%
- Adj. operating margin (as adj for Canada): Adjusted
profit from operations (as adj for Canada) as a percentage of revenue.
- Adj. gross profit (as adj for Canada): Profit from
operations before the impact of adjusting items and translational foreign
exchange, and before all non production/attributable distribution costs (as
adj for Canada).
- Adj. gross margin (as adj for Canada): Adjusted gross
profit (as adj for Canada) as a proportion of revenue.
Note on Non-GAAP Measures
This announcement contains several forward-looking non-GAAP measures used by
management to monitor the Group's performance. For the non-GAAP information
contained in this announcement, no comparable GAAP or IFRS information is
available on a forward-looking basis and our forward-looking revenue and other
components of the Group's results, including adjusting items, cannot be
estimated with reasonable certainty due to, among other things, the impact of
foreign exchange and adjusting items, which could be significant, being highly
variable. As such, no reconciliations for this forward-looking non-GAAP
information are available and we are unable to: present revenue before
presenting constant currency revenue; or present profit from operations
before presenting adjusted profit from operations at constant rates.
One non-GAAP measure which the Group uses and that is contained in this
announcement is operating cash conversion, a non-GAAP measure defined as net
cash generated from operating activities before the impact of adjusting items
and dividends from associates and excluding trading loans to third parties,
pension short fall funding, taxes paid and net capital expenditure, as a
proportion of adjusted profit from operations. This announcement also contains
New Category contribution, adjusted profit from operations, adjusted EBITDA,
adjusted net debt, adjusted net finance costs, adjusted results from
associates and joint ventures, adjusted taxation and adjusted profit
attributable to shareholders, all of which are before the impact of adjusting
items and which are reconciled from profit from operations, borrowings, net
finance costs, results from associates and joint ventures, taxation and profit
attributable to shareholders.
Adjusting items, as identified in accordance with the Group's accounting
policies, represent certain items of income and expense which the Group
considers distinctive based on their size, nature or incidence. These include
significant items in, profit from operations, net finance costs, taxation and
the Group's share of the post‐tax results of associates and joint ventures
which individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group's underlying financial performance. Although the
Group does not believe that these measures are a substitute for IFRS measures,
the Group does believe such results excluding the impact of adjusting items
provide additional useful information to investors regarding the underlying
performance of the business on a comparable basis.
The Group's Management Board reviews a number of our IFRS and non‐GAAP
measures for the Group and its geographic segments at constant rates of
exchange. This allows comparison of the Group's results, had they been
translated at the previous year's average rates of exchange. The Group does
not adjust for the normal transactional gains and losses in operations that
are generated by exchange movements. Although the Group does not believe that
these measures are a substitute for IFRS measures, the Group does believe that
such results excluding the impact of currency fluctuations year‐on‐year
provide additional useful information to investors regarding the operating
performance on a local currency basis.
The Group's Management Board regularly reviews the measures used to assess and
present the financial performance of the Group and, as relevant, its
geographic segments, and believes that these measures provide additional
useful information to investors. Certain of our measures are presented based
on an adjusted basis and on a constant currency basis. Please refer to the
2024 Annual Report on Form 20‐F for a full description of each measure
alongside non-financial measures, pages 391 to 410.
Forward looking statements
References in this announcement to 'BAT', 'Group', 'we', 'us' and 'our' when
denoting opinion refer to British American Tobacco p.l.c. (BAT PLC) and when
denoting business activity refer to BAT Group operating companies,
collectively or individually as the case may be.
This announcement does not constitute an invitation to underwrite, subscribe
for, or otherwise acquire or dispose of any BAT PLC shares or other
securities. This announcement contains certain forward-looking statements,
including "forward-looking" statements made within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. These statements are often,
but not always, made through the use of words or phrases such as "believe,"
"anticipate," "could," "may," "would," "should," "intend," "plan,"
"potential," "predict," "will," "confident in", "expect," "estimate,"
"project," "positioned," "strategy," "outlook", "target" and similar
expressions. In particular, these forward-looking statements include
statements regarding (i) the Group's expectations with respect to growth of
revenue and adjusted profit from operations in 2025 at the Group, segment and
category levels, (ii) the Group's expectations with respect to New Category
revenue in the full year of 2025, (iii) the Group's expectations to return to
the mid-term algorithm in 2026, (iv) the Group's expectations with respect to
the roll-out of glo Hilo in the second half of 2025, (v) the Group's
expectations with respect to Vuse revenue in 2025, (vi) statements under the
heading "Continued strong cash delivery, and balanced capital allocation",
(vii) statements regarding strong cash returns, (viii) statements regarding
the progressive dividend and sustainable share buy-back, including £1.1bn in
2025 and (ix) statements under the heading "Technical guidance for 2025".
These include statements regarding our intentions, beliefs or current
expectations concerning, amongst other things, our results of operations,
financial condition, liquidity, prospects, growth, strategies and the economic
and business circumstances occurring from time to time in the countries and
markets in which the Group operates.
All such forward-looking statements involve estimates and assumptions that are
subject to risks, uncertainties and other factors. It is believed that the
expectations reflected in this announcement are reasonable, but they may be
affected by a wide range of variables that could cause actual results and
performance to differ materially from those currently anticipated.
Among the key factors that could cause actual results to differ materially
from those projected in the forward-looking statements are uncertainties
related to the following: the impact of competition from illicit trade; the
impact of adverse domestic or international legislation and regulation; the
inability to develop, commercialise and deliver the Group's New Categories
strategy; the impact of supply chain disruptions; adverse litigation and
dispute outcomes and the effect of such outcomes on the Group's financial
condition; the impact of significant increases or structural changes in
tobacco, nicotine and New Categories related taxes; translational and
transactional foreign exchange rate exposure; changes or differences in
domestic or international economic or political conditions; the ability to
maintain credit ratings and to fund the business under the current capital
structure; the impact of serious injury, illness or death in the workplace;
adverse decisions by domestic or international regulatory bodies; direct and
indirect adverse impacts associated with climate change; direct and indirect
adverse impacts associated with the move towards a circular economy; and cyber
security risks caused by the heightened cyber-threat landscape, and increased
digital interactions with consumers, and changes to regulation.
Past performance is no guide to future performance and persons needing advice
should consult an independent financial adviser. The forward-looking
statements reflect knowledge and information available at the date of
preparation of this announcement and BAT undertakes no obligation to update or
revise these forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on such forward-looking statements.
No statement in this announcement is intended to be a profit forecast and no
statement in this announcement should be interpreted to mean that earnings per
share of BAT PLC for the current or future financial years would necessarily
match or exceed the historical published earnings per share of BAT PLC.
Additional information concerning these, and other factors can be found in BAT
PLC filings with the U.S. Securities and Exchange Commission ("SEC"),
including the Annual Report on Form 20-F, filed on 14 February 2025, and
Current Reports on Form 6-K, which may be obtained free of charge at the SEC's
website, http://www.sec.gov and BAT's website, http://www.bat.com.
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