REG - British Amer.Tobacco - Final Results
13/02/2025 07:00
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RNS Number : 9218W British American Tobacco PLC 13 February 2025
13 February 2025 - Press Release/Preliminary Results
British American Tobacco p.l.c.
Preliminary results for the year ended 31 December 2024
Building a Smokeless World
Tadeu Marroco, Chief Executive
"We are committed to Building a Smokeless World and becoming a predominantly
Smokeless business by 2035. I am confident that we have the right strategy,
science, innovation, breadth of capabilities and people to achieve this
ambition and deliver long-term sustainable value for all our stakeholders.
2024 was an investment year with delivery in line with our guidance. We
continued our transformation this year, adding 3.6 million adult consumers (to
a total of 29.1 million) of our Smokeless products, which now account for
17.5% of Group revenue, an increase of 1.0 ppts vs FY23.
Our performance has accelerated in the second half, driven by the phasing of
New Categories innovation and the benefits of investment in U.S. commercial
actions, together with the unwind of related wholesaler inventory movements.
Our focus on Quality Growth delivered better returns on more targeted
investments across all three New Categories, and our prioritisation and focus
is already transforming our business performance in Europe. We made further
progress on increasing profitability across New Categories, and I am
particularly pleased with our performance in Modern Oral.
In the U.S., our targeted investments have strengthened the business, despite
a challenging macro-economic backdrop and a growing presence of illicit
single-use vapour products. Through our commercial actions, we started to
improve our performance with sharper execution and we are opening up
untapped growth opportunities, particularly related to Modern Oral. We have
achieved another strong performance in AME and APMEA, with their combined
results delivering in line with our mid-term algorithm.
We are making good progress and while there is still more to do, I am certain
that the investment actions taken in 2024 are the right way forward for BAT.
Our foundations are strong and we will continue to reward shareholders through
our strong cash returns, including our progressive dividend and sustainable
share buy-back.
In 2025, while we expect significant regulatory and fiscal headwinds in
Bangladesh and Australia to impact our combustibles performance, I am
confident that we will progressively build on our delivery as we shift from
investment to deployment and we remain committed to returning to our
mid-term guidance of 3-5% revenue and 4-6% adjusted profit from operations*
growth on a constant currency in 2026."
Summary
- Revenue down 5.2%, driven by the sale of our businesses in Russia and
Belarus in September 2023 and translational FX headwinds
- Organic revenue up 1.3% (at constant rates), driven by New Categories
revenue up 8.9%
- Total combustibles organic revenue increased 0.1% (at constant rates),
as organic price/mix of +5.3% was offset by 5.2% lower volume
- Reported profit from operations of £2,736m (2023: loss of £15,751m) with
2024 including a provision of £6.2 billion in respect of the proposed
settlement in Canada, while 2023 was negatively impacted by one-off impairment
charges largely in the U.S.
- Adjusted organic profit from operations up 1.4% (at constant rates),
driven by AME and APMEA
- New Categories contribution increased by £251 million on an adjusted
organic, constant FX basis, with category contribution margin now at 7.1%, an
increase of 7.1 ppts on 2023
- Reported diluted EPS at 136.0p; adjusted organic diluted EPS up 3.6% (at
constant rates)
- Free cash flow of £7,901 million; adjusted net debt / adjusted EBITDA
down 0.13x to 2.44x (down 0.3x at constant rates)
- Dividend growth of 2.0% to 240.24p - with £900 million share buy-back
planned in 2025
- Continued Sustainability progress - launched Omni(TM), a major global
initiative to help in making a Smokeless World a reality
Performance highlights Reported Adjusted(2) Adjusted(2) Organic(3)
For year ended 31 December 2024 Current vs 2023 Current vs 2023 vs 2023
rates (current) rates (constant) (constant)
Cigarette and HP volume share +10 bps
Cigarette and HP value share -30 bps
Consumers of Smokeless products(1) 29.1m +3.6m
Revenue (£m) £25,867m -5.2% £25,867m -0.5% +1.3%
Revenue from New Categories (£m) £3,432m +2.5% £3,432m +6.1% +8.9%
Smokeless revenue as a % of total revenue (%) 17.5% +1.0 ppts
Profit from operations (£m) £2,736m n/m £11,890m -0.2% +1.4%
Adjusted gross profit growth (%) +0.5% +2.2%
Category contribution - New Categories (£m) £249m n/m n/m
Category contribution margin - New Categories (%)(**) 7.1% +6.6 ppts +7.1 ppts
Operating margin (%) +10.6% 68.3 ppts +46.0% +10 bps flat
Diluted earnings per share (pence) 136.0p n/m 362.5p +1.7% +3.6%
Net cash generated from operating activities (£m) £10,125m -5.5%
Free cash pre-dividend (£m) £7,901m -5.5%
Cash conversion (%) +370% +438 ppts +101% 30 bps
Borrowings including lease liabilities (£m) £36,950m -7.0%
Adjusted net debt to adjusted EBITDA ratio 2.44x -0.13x
Dividend per share (pence) 240.24 +2.0%
The use of non-GAAP measures, including adjusting items and constant
currencies, are further discussed from page 49, with reconciliation from the
most comparable IFRS measure provided.
Notes: 1. Internal estimate, see page 43 for a discussion on the revision to
prior estimates. 2. See page 29 for discussion on adjusting items. 3. Organic
measures exclude the performance of businesses sold (including the Group's
Russian and Belarusian businesses) or acquired, or that have an enduring
structural change impacting performance that may significantly affect the
users' understanding of the Group's performance in the current and comparator
periods to ensure like-for-like assessment across all periods.
* Due to the uncertainty around the timing of any settlement in Canada,
the Group will present certain measures excluding the profit earned from ITCAN
(except for New Categories) for 2025, with 2024 comparatives rebased
accordingly. Please refer to page 18. ** measure presented at constant rates
only. n/m refers to movements that are not meaningful as prior year was a
loss.
Our medium-term growth algorithm
Soraya Benchikh, Chief Financial Officer
"I am delighted to present my first full-year results as the Chief Financial
Officer. I am confident that we will deliver on our financial ambitions, and
I share the passion and conviction of our people to Build a Smokeless World. I
am also committed to ensuring our transformation will maximise returns for our
shareholders. In order to achieve this, our key financial focus areas are:
- Fuelling our transformation by maximising sustainable value from
combustibles, using our scale and efficiencies to release cash;
- Deploying capital in a disciplined and targeted manner in the largest profit
pools, with a focus on return on investment;
- Strengthening our financial position by reducing debt, providing us with
greater financial resilience;
- A balanced capital allocation approach, prioritising our transformation
while delivering a progressive dividend; and
- Maintaining a sustainable share buy-back programme.
We aim to drive performance using KPIs across our business units - ensuring we
create shareholder value throughout the Group.
We are already seeing results and expect to progressively improve our
performance in 2025 and return to our medium-term algorithm of 3-5% revenue
and 4-6% adjusted profit from operations growth* on a constant currency basis
by 2026*.
Our algorithm is built around five key pillars, with 2024 highlights below:
1. Drive quality revenue growth
We are committed to maximising sustainable value from our combustibles
business while driving growth in our New Categories through innovation and
premiumisation.
- Revenue was down 5.2%, due to the sale of our businesses in Russia and
Belarus in 2023 and translational FX headwinds.
- Combustibles pricing remained robust with Group organic price/mix of +5.3%
in 2024. However, excluding the impact of currency, our reported combustibles
revenue was down 1.6%. This was driven by lower combustibles volume (down
9.0%) largely due to the impact of the sale of our businesses in Russia and
Belarus partway through 2023 and the challenging market in the U.S., where
volume was 10.1% lower. On an organic, constant rate basis, combustibles
revenue was largely in line with the prior year (marginally up 0.1%).
- New Categories organic revenue was up 8.9% (at constant rates) with
revenue growth across all three regions.
2. Increase adjusted gross profit
We are focused on continuing to expand our adjusted gross profit through
revenue growth management and scale benefits.
- Total adjusted organic gross profit at constant rates, grew by £396
million, an increase of 2.2% compared to 2023.
- Our combustibles portfolio has remained resilient, with adjusted organic
gross profit marginally higher (up 0.3% at constant rates).
- Our New Categories business is the main driver of Group growth, delivering
improvement in the last four years. This momentum continued in 2024 with an
increase in adjusted gross profit of 19.8% (on an organic basis at constant
rates), driven by volume growth, revenue growth management and cost
optimisation.
3. Accelerate New Category contribution
We will continue to invest in our transformation and focus on the right
opportunities in key growth areas - evaluating spend effectiveness to maximise
returns, freeing up resources for growth and incremental profit.
- In 2024, we increased New Category contribution by £251 million (at
organic constant rates), with New Category contribution margin reaching 7.1%,
up 7.1 ppts.
4. Generate sustainable adjusted profit from operations growth
We are committed to disciplined cost management and continue to explore
opportunities to optimise our footprint.
- Adjusted organic profit from operations was up 1.4% (at constant rates) in
2024. This is supported by strict cost management. In 2024, we delivered
savings of £402 million to largely offset the impact of 6.5% (or
£387 million) inflation on our cost base mainly due to higher leaf prices
(impacted by adverse weather conditions) and manufacturing costs (labour and
utilities). We have committed to deliver cost savings of over £1.2 billion in
the three years to 2025 (with over 70% delivered to date) and an additional
£2 billion from 2026 to 2030.
5. Deliver in excess of £50 billion of free cash flow (2024-2030)
BAT is a highly cash generative company. We have delivered 100% operating cash
conversion over the last five years, with 101% conversion in 2024, well ahead
of our 90% target. In 2024, the Group generated £7.9 billion of free cash
flow before dividends.
In 2025, we will face challenges including FII GLO repayments and potential
settlement payments in connection with ITCAN's outstanding litigation in
Canada. Excluding those items, we expect BAT to generate over £8 billion of
average annual free cash flow, growing at least in line with adjusted profit
from operations.
We have returned £28 billion to shareholders over the last five years,
through our progressive dividend and sustainable share buy-back, starting with
£0.7 billion in 2024 with a further £0.9 billion committed for 2025. We have
continued to reduce our leverage and closed the year within our target range,
with an adjusted net debt to adjusted EBITDA ratio of 2.44x, or 2.75x
excluding the provision for cash, cash equivalents and investments held at
fair value in Canada."
2025 Outlook
- Global tobacco industry volume expected to be down c.2%.
- c.1% revenue growth (at constant rates), as we navigate increased excise
and VAT in Bangladesh and new tobacco regulations in Australia.
- 1.5-2.5% adjusted profit from operations growth (adjusted for Canada, at
constant rates)*, including an expected c.1.5% transactional FX headwind.
- Performance expected to be second half weighted as we deploy our
innovations throughout the year.
- Net finance costs* expected to be around £1.8 billion (adjusted for
Canada).
- The impact of translational foreign exchange is expected to be broadly
flat on full year adjusted profit from operations growth.
- Operating cash flow conversion in excess of 90%, with gross capital
expenditure in 2025 of approximately £650 million.
- Continue to deleverage (adjusted for Canada) to our 2.0-2.5x adjusted net
debt/adjusted EBITDA corridor by 2026.
- Commitment to dividend growth in sterling terms and £900 million share
buy-back.
* Due to the uncertainty around the timing of any settlement in Canada,
the Group will present certain measures excluding the profit earned from ITCAN
(except for New Categories) for 2025, with 2024 comparatives rebased
accordingly. Please refer to page 18.
Group Operating Review
Total Group volume and revenue
Prior year data is provided in the tables on pages 48 and 50.
For year ended 31 December 2024 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Constant
Unit vs 2023 vs 2023 £m vs 2023 £m £m vs 2023 £m vs 2023
New Categories 3,432 +2.5% 119 3,551 +6.1% 3,551 +8.9%
Vapour (units mn) 616 -5.9% -5.9% 1,721 -5.1% 44 1,765 -2.6% 1,765 -2.5%
Heated Products (sticks bn) 20.9 -11.6% -0.3% 921 -7.6% 51 972 -2.5% 972 +5.8%
Modern Oral (pouches bn) 8.3 +55.0% +56.1% 790 +46.6% 24 814 +51.0% 814 +53.2%
Traditional Oral (stick eq bn) 6.1 -8.2% -8.2% 1,092 -6.0% 31 1,123 -3.4% 1,123 -3.4%
Total Smokeless 4,524 +0.3% 150 4,674 +3.6% 4,674 +5.7%
Cigarettes (sticks bn) 505 -8.9% -5.0%
OTP incl RYO/MYO (stick eq bn) 13 -11.2% -11.2%
Total Combustibles 518 -9.0% -5.2% 20,685 -6.4% 1,063 21,748 -1.6% 21,748 +0.1%
Other 658 -1.0% 71 729 +9.7% 729 +10.1%
Total 25,867 -5.2% 1,284 27,151 -0.5% 27,151 +1.3%
Cigarettes and HP (sticks bn) 526 -9.0% -4.8%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Movement in Revenue
The following chart is in £m
Reported revenue decreased by 5.2% to £25,867 million, largely due to:
- The sale of the Group's businesses in Russia and Belarus partway
through 2023, with £479 million revenue included in the prior year; and
- A translational foreign exchange headwind of 4.7%.
Excluding such items, on an organic, constant rates basis, revenue from our
New Categories was up 8.9%, with combustibles marginally higher (up 0.1%) as
price/mix of +5.3% was largely offset by a 5.2% decline in volume, which was
impacted by the supply chain disruption in Sudan and market exits (in West
Africa).
Global duty paid industry cigarette volume was estimated to be down by c.2%.
In our Top markets, Group cigarette volume share was up 20 bps, with value
share 20 bps lower vs 2023.
The following analysis is on an organic, constant currency basis, which we
believe reflects the operational performance of the Group:
- In the U.S., revenue was down 3.4% as cigarette pricing and New Categories
growth of 4.6% were more than offset by 10.1% lower cigarette volume. The
cigarette industry volume was 8.4% lower (on a sales to wholesaler basis) due
to the continued macro-economic pressures on consumer spending, with a growth
in the deep-discounted category (in which the Group is not present) and lack
of enforcement against illicit single-use Vapour products.
Our New Categories revenue in the U.S. was driven by:
- Vapour, the Group maintained leadership in value share (of closed system
consumables, including single-use Vapour products in tracked channels) despite
a decline of 2.0 ppts to 50.2%. The growth of illicit single-use Vapour
products continues to negatively impact the legal market with industry volumes
in rechargeable closed systems down c. 9%. Consequently, our Vapour revenue
was 0.8% lower than 2023 as price/mix (+2.9%) was more than offset by
consumables volume which was down 3.7%; and
- Modern Oral, as volume grew 234%, with volume share up 2.1 ppts to 6.6%,
delivering higher revenue, which was up 232%, driven by the traction of our
refreshed Velo brand expression and Grizzly Modern Oral roll-out;
- In AME, revenue grew 4.9%, driven by combustibles (up 3.6%, underpinned by
a robust price/mix of +5.7%) and New Categories which were up 11.9% (driven by
Modern Oral despite a decline in Vapour revenue in Canada where a lack of
enforcement of illegal single-use products following the flavour ban in the
province of Québec has impacted volumes); and
- In APMEA, revenue was up 5.4%, as growth in Saudi Arabia, Japan, Nigeria
and Pakistan more than offset the impact of lower volume in Bangladesh,
Australia and Sudan (with the latter driven by the supply chain disruption due
to the ongoing conflict in that country).
On an organic, constant rate basis, Group revenue was up 1.3% to £27,151
million (2023: £26,804 million).
Please refer to pages 7 to 9 for a further discussion on the performance by
category and pages 10 to 12 for discussion on regional performance.
Group Operating Review
Continued
Profit from operations, operating margin and category contribution
Reconciliation of Profit from Operations and Operating Margin, to adjusted
profit from operations at constant rates of exchange
Further details and prior year data are provided in the table on page 53.
For year ended 31 December 2024 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2023 £m £m £m vs 2023 £m vs 2023
Profit from Operations (PfO) 2,736 n/m 9,154 549 12,439 -0.2% 12,439 +1.4%
Operating Margin 10.6% 68.3 ppts 45.8% 10 bps 45.8% flat
PfO delivered by
New Categories contribution 251 n/m 251 n/m
Rest of the Business 12,188 -2.1% 12,188 -0.7%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
n/m refers to movements that are not meaningful
Movement in Profit/(loss) from Operations
The following chart is in £m
Profit from operations and operating margin
Profit from operations was a profit of £2.7 billion compared to a loss in
2023 of £15.8 billion. The improvement was due to:
- A net decrease in amortisation, depreciation and impairment charges of
£25,513 million. In 2024, such charges were £3,101 million, as the U.S.
combustible brands commenced amortisation from 1 January 2024
(£1,427 million) with an impairment charge of £646 million in respect of
Camel Snus. In 2023, this was a total charge of £28,614 million, which
included impairment charges of £22,992 million in respect of certain
acquired U.S. brands and £4,614 million which included the impairment of
U.S. goodwill;
- Charges in respect of the anticipated settlement in Canada (£6,203
million), including £2,456 million in respect of cash and cash equivalents
and investments held at fair value, on the Group's balance sheet at 31
December 2024;
- A charge of £449 million following the conclusion of an excise assessment
in Romania;
- Impairment of fixed assets of £149 million in respect of the Group's head
office in London and the Group's intention to seek an orderly exit from Cuba
(discussed on page 20);
- A translational foreign exchange headwind of 4.4% due to the relative
strength of sterling against the Group's operating currencies; and
- 6.5% (or £387 million) inflation on our cost base (mainly related to
leaf and manufacturing costs), while absorbing a £136 million transactional
foreign exchange headwind.
In September 2023, the Group completed the sale of its businesses in Russia
and Belarus. These businesses contributed £193 million to the Group's
financial performance in 2023 (£nil in 2024), thereby acting as a headwind to
the comparative performance of 2024. The Group also recognised a charge of
£353 million relating to the sale that did not repeat in 2024.
Our Group operating margin was 10.6% in 2024, compared to -57.7% in 2023,
largely due to the amortisation and impairment charges referred to above.
The following analysis is on an organic, adjusted constant rate basis, which
we believe reflects the operational performance of the Group:
- In the U.S., adjusted profit from operations was down 3.5% to £6,580
million, largely due to the impact of lower combustibles volume and commercial
initiatives;
- In AME, adjusted profit from operations increased 7.5%, driven by
Türkiye, Germany, Romania, the UK, the Nordics, Switzerland and Italy, which
more than offset reductions in Canada; and
- In APMEA, adjusted profit from operations increased by 7.5%, driven by
Japan, Indonesia, Saudi Arabia, Sri Lanka and asset sales in West Africa,
including as related to the Group's exit from Mali. These more than offset a
decline in Australia and the impact of supply chain disruptions in Sudan.
In aggregate, adjusted organic profit from operations at constant rates of
exchange was up 1.4% with adjusted organic operating margin flat at constant
rates of exchange.
For a full discussion on the performance by region, please see pages 10 to 12.
Group Operating Review
Continued
Earnings per share
The following chart is in pence per share
Note:
The abbreviation "PFO" relates to Profit from Operations. NFC and Hybrid
referred to above relates to Net Finance Costs (NFC) and Hybrid bonds. Please
refer to page 13.
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS. For remuneration purposes, and
reflective of the Group's positive earnings on an adjusted basis, Management
included the dilutive effect of share options in calculating adjusted diluted
earnings per share.
Basic earnings per share were 136.7p compared to a loss of 646.6p in 2023,
driven by:
- The net reduction in non-cash amortisation and impairment charges in
respect of goodwill and trademarks, partly offset by the other items in profit
from operations discussed on page 4;
- A gain of £1,361 million recognised in respect of the partial sale of
the Group's investment in ITC Ltd. (ITC) (see page 32); and
- A net credit of £590 million related to the debt liability management
exercise undertaken in the first half of 2024 (see page 32).
Basic and diluted earnings per share also benefited from a reduction in the
number of shares, as the Group bought back and cancelled 27,392,429 shares as
part of the £700 million share buy-back programme.
Before adjusting items and including the dilutive effect of employee share
schemes, adjusted diluted earnings per share decreased by 3.5% to 362.5p
(2023: 375.6p). On a constant translational foreign exchange basis, adjusted
diluted earnings per share were 1.7% higher at 381.9p, being an increase of
3.6% on an adjusted, organic basis. For a full reconciliation of diluted
earnings per share to adjusted diluted earnings per share, at constant rates,
and adjusted diluted organic earnings per share, at constant rates, please see
page 56.
Cash/Capital allocation
The Group continues to be highly cash generative, delivering another year of
operating cash conversion in excess of our 90% guidance at 101%. We continued
to make good progress in deleveraging the Group, reaching our narrowed
2.0-2.5x adjusted net debt to adjusted EBITDA range, with a leverage ratio of
2.44x in 2024.
Liquidity remains strong with average centrally managed debt maturity close to
10 years, and a fixed debt profile of 78%. Our medium-term rating target
remains Baa1, BBB+ and BBB+, with a current rating of Baa1 (stable outlook),
BBB+ (stable outlook), BBB+ (stable outlook), from Moody's, S&P and Fitch,
respectively. The Group expects gross capital expenditure in 2025 of
approximately £650 million, mainly related to the ongoing investments in the
Group's operational infrastructure, including the expansion of our New
Categories portfolio and enhancements to our Modern Oral capacity.
Our active capital allocation framework considers the continued investment in
our transformation, the macro environment, and potential future litigation and
regulatory outcomes.
We continue to expect to deliver in excess of £50 billion of free cash flow
before dividends between 2024 and 2030.
We understand the importance of cash returns to shareholders, and remain
committed to our progressive dividend based upon 65% of long-term sustainable
earnings. Furthermore, in March 2024, we completed the monetisation of a
portion of our ITC stake, lowering our holding from 29.02% (31 December 2023)
to 25.45% at 31 December 2024 and enabling the initiation of a sustainable
share buy-back, starting with £700 million in 2024 and £900 million in 2025.
However, we are aware of and recognise future uncertainty surrounding a number
of ongoing litigation and regulatory challenges:
- with respect to the Franked Investment Income Group Litigation Order
(described on page 40): we have agreed to repay £0.8 billion to HMRC (being
the difference between the amounts received (£0.9 billion net of tax) plus
accrued interest, and the amount determined in the July 2021 judgment (£0.3
billion)). This will be paid in instalments. £50 million was paid in 2024,
while £479 million will be paid in 2025, £222 million in 2026 and £43
million in 2027 (as previously disclosed). We continue to believe we have
strong evidence-based arguments to support our remaining claim; and
- in Canada, where, as described on page 18, during 2024, the court-appointed
mediator's and monitors' plans of compromise and arrangement for ITCAN and
other tobacco companies to settle all claims and litigation relating to
tobacco in Canada (the Proposed Plans) were filed and subsequently approved by
the requisite majorities of the creditors. Under the Proposed Plans, if
ultimately approved by the Court and then implemented, substantially all of
the cash, cash equivalents and investments held at fair value on the balance
sheet in Canada would be paid as part of the settlement together with further
payments in future years based upon the performance of the tobacco companies
excluding their New Categories portfolios. At 31 December 2024, ITCAN had a
balance of £2,072 million related to restricted cash and cash equivalents and
£437 million related to restricted investments held at fair value.
Excluding such balances and the adjusted EBITDA earned in Canada from our
assessment of leverage would increase our ratio of adjusted net debt to
adjusted EBITDA to 2.75x.
Group Operating Review
Continued
Sustainability performance update
We seek to take a leading role in tackling some of the biggest global
challenges in sustainability. We aim to do so by responsibly Building a
Smokeless World, reducing our use of natural resources, and delivering our
climate goals as we transition to A Better Tomorrow™. We strive to create a
meaningful impact in the communities where we operate and inspire all our
employees to drive change. In 2024, we refined our Sustainability Strategy to
better address our material topics and continue to deliver value to our
stakeholders, focused on five strategic impact areas: Tobacco Harm
Reduction, Climate, Nature, Circularity and Communities.
We have received a Triple-A rating from CDP for our 2024 disclosures on
Climate Change, Water Security and Forest, reflecting our commitment to
environmental transparency and action.
TOBACCO HARM REDUCTION (THR): To migrate adult smokers from cigarettes to
smokeless products.
We continue to transform our business and made significant progress on our
goals. In 2024, we launched Omni™, our evidence-based manifesto for change,
which captures our commitment and progress towards creating A Better
Tomorrow™ by Building a Smokeless World. We also published our 'Commitment
to Responsible Vaping Products' to tackle pressing societal concerns such as
underage access, product safety and the enforcement of regulation(1).
CLIMATE: To transition towards a low-carbon economy.
Our 2030 near-term Science-Based Targets (SBTs) are in line with a 1.5°C
warming pathway and underpinned by commitments across energy, waste, water and
nature.
During 2024, in line with our climate transition efforts, we submitted Net
Zero Greenhouse Gas (GHG) emissions targets for validation to the Science
Based Targets initiative (SBTi).
We continue to make progress towards our Scope 1 and 2 emission reduction
targets. Energy reduction initiatives and increasing the use of renewable
fuels resulted in a 42.6% reduction in these emissions vs our 2020 baseline.
We are making progress against our Scope 3 emissions which reduced by 11%
year-on-year. Our Supplier Enablement programme has proven instrumental,
guiding our suppliers to decarbonise their own operations. By the end of 2024,
23.5% of our suppliers of purchased goods and services by spend had SBTs in
place, and an additional 17.3% have committed to setting them.
NATURE: To contribute to a Nature Positive(2) Future.
In line with the Science-Based Targets Network (AR3T framework), we have
adopted a mitigation hierarchy for our nature commitments.
Our Global Leaf Agronomy Development (GLAD) centre continues to promote the
use of agricultural technologies and practices. In Brazil, we introduced a
satellite monitoring system to detect potential deforestation or conversion
cases by tracking forest cover changes over time. Our recently developed
regenerative agriculture framework will be piloted in 2025. It includes a
methodology for assessing and prioritising local risks and the monitoring of
progress on the regeneration of the farmland ecosystem. We continue to
prioritise water stewardship initiatives across our own operations. We met our
2025 target for reduction in water withdrawn two years early and continue to
work on maintaining this target, achieving a 47.4% reduction in 2024 (vs our
2017 baseline).
CIRCULARITY: To reduce the use of virgin raw materials.
We continue to enhance our material science and design capabilities to improve
the circularity of our products and packaging.
In 2024, we introduced and began testing a set of ecodesign principles, which
will provide insights to support the reduction of our environmental impacts
across the product life cycle. In France, Ireland, Denmark, Sweden and the UK,
we recently launched two variants of Velo cans that were certified by the
International Sustainability and Carbon Certification for using bio-plastic or
Post-Consumer Resin plastic through a mass balance approach(3). Additionally
in Nottinghamshire, UK, we have partnered with a waste management company to
pilot a collection and recycling programme for used vapour products.
COMMUNITIES: To support the livelihoods and the resilience of our communities.
We continue to work with stakeholders in communities where we operate,
implementing community-focused initiatives.
In 2024, our 'Living Income' methodology was revised to better represent
living costs in rural areas and are in the process of co-creating action plans
with suppliers to target key income drivers for farmers.
We continued to work with the Responsible Business Alliance (RBA) as a
Supporter Member. This gives us access to the Responsible Mineral Initiative
and RBA-approved auditors who conduct on-site labour audits of our suppliers.
Across our own workforce, we maintained our year-on-year consistency in
compensating men and women within 1% of each other, as well as Ethnically
Diverse and Non-ethnically Diverse groups (as defined on page 43) within 1% of
one another for performing the same work or work of equal value.
1. bat.com/commitment-to-responsible-vaping-products. 2. According to The
Nature Positive Initiative, 'Nature Positive' is a goal which refers to
measurable outcomes that contribute to halting and reversing nature loss with
significant benefits to society
(https://www.naturepositive.org/about/the-initiative) 3. 'Mass balance' is
a principle that matches inputs (such as plastic waste) with outputs from a
recycling or production process, to determine the recycled content (source:
https://zerowasteeurope.eu/wp-content/uploads/2021/05/rpa_2021_mass_balance_booklet-2.pdf).
Enquiries
For more information, please contact Press Office:
Investor Relations: +44 (0)20 7845 2888 | @BATplc (https://twitter.com/BATplc)
Victoria Buxton +44 (0)20 7845 2012 BAT Media team (mailto:press_office@bat.com)
Amy Chamberlain +44 (0)20 7845 1124
John Harney+44 (0)20 7845 1263
BAT IR Team (mailto:IR_team@bat.com) IR_Team@bat.com
Webcast and Q&A session:
BAT will hold a live webcast for investors and analysts at 9.30am (GMT) on
13 February 2025, hosted by Tadeu Marroco, Chief Executive, and Soraya
Benchikh, Chief Financial Officer. The presentation will be followed by a
Q&A session. The webcast and presentation slides will be available to view
on our website at www.bat.com/latestresults
(https://www.bat.com/investors-and-reporting/results-centre) . If you prefer
to listen via conference call, please use the following dial-in details
(participant passcode: BAT FY 24).
Standard International: +44 (0) 33 0551 0200 SA (toll free): 0 800 980 512
UK (toll free): 0808 109 0701 U.S. (toll free): 866 571 0905
Video: Chief Executive and CFO's take on Full-Year 2024 Results: To watch
highlights of this year's results, please visit: ww
(https://www.bat.com/highlights-video-fy24) w
(https://www.bat.com/highlights-video-fy24) .bat.com/highlights-video-fy24
(https://www.bat.com/highlights-video-fy24)
Category Performance Review
Please see page 50 for a full reconciliation to constant currency and organic
metrics, including prior year data.
All references to volume share or value share movement in the following
discussion are compared to 2023. See page 42 for a discussion on the use of
these measures.
Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
For year ended 31 December 2024 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Constant
Unit vs 2023 vs 2023 £m vs 2023 £m £m vs 2023 £m vs 2023
New Categories 3,432 +2.5% 119 3,551 +6.1% 3,551 +8.9%
Vapour (units mn) 616 -5.9% -5.9% 1,721 -5.1% 44 1,765 -2.6% 1,765 -2.5%
HP (sticks bn) 20.9 -11.6% -0.3% 921 -7.6% 51 972 -2.5% 972 +5.8%
Modern Oral (pouches bn) 8.3 +55.0% +56.1% 790 +46.6% 24 814 +51.0% 814 +53.2%
New Categories contribution* 251 n/m 251 n/m
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
*New Categories contribution is presented above on adjusted and adjusted
organic bases, in each case at constant rates of exchange.
n/m refers to movements that are not meaningful
Vapour - Maintained global value share* leadership, U.S. illicit Vapour
headwinds persist
- BAT maintained global leadership in tracked channels with value share of
40.0% in Top Vapour markets**, down 1.2 ppts vs 2023, with strong gains in
Europe more than offset by the U.S. and Canada.
- Vapour is the largest contributor to New Category usage, reaching 11.9
million adult consumers, adding 0.1 million in 2024.
- Our new range of innovative products, which reached the market in Q4 2024,
are performing well, driven by key consumer-focused features, including
enhanced sensorials and a removable battery in many of our single-use
products.
- Four of the seven Top Vapour markets are profitable (on a category
contribution basis), driven by increased scale and marketing spend
effectiveness, as we continue to focus on delivering Quality Growth.
Vapour volume declined 5.9% vs 2023, with revenue down 5.1% to £1,721
million, or down 2.5% on an organic constant currency basis, driven by lack of
enforcement of illegal flavoured single-use Vapour products in the U.S. and
the impact of the flavour ban and current lack of enforcement on illegally
sold products in the province of Québec in Canada.
In the U.S., the world's largest Vapour market, the Group maintained
leadership in value share (of closed system consumables, including single-use
Vapour products in tracked channels) despite a decline of 2.0 ppts to 50.2%.
Revenue was down 0.8% on a constant currency basis, driven by continued lack
of enforcement of illegal flavoured and single-use products. While we estimate
illicit Vapour products to be almost 70% of the total U.S. Vapour market, we
are encouraged by:
- The Food and Drug Administration (FDA) increasing frequency of warning
letters, seizures and penalties;
- Implementation of Vapour directories in three states, with an additional
11 states having passed Vapour directory and enforcement legislation, with
staggered implementation up to Q4 2025; and
- Continued signs of illicit products volume decline in Louisiana, the first
state to implement a Vapour directory and enforcement legislation in October
2023, with Vuse Alto capturing the majority of the volume outflow back into
the legal segment.
Much more effective enforcement is needed to drive a meaningful impact. This
is why we have taken the proactive step of filing two complaints with the U.S.
International Trade Commission. One of those complaints-based on patents-is
ongoing and under investigation. The other complaint-based on unfair
competition-was strategically withdrawn so we can re-file to introduce new
evidence that would increase the likelihood of a favourable outcome.
In AME, our Vapour volume declined by 11.5% and revenue was down 10.8%, (a
decline of 8.6% on an organic constant currency basis) largely due to Canada
where a lack of enforcement of illegal single-use products following the
flavour ban in the province of Québec has impacted volumes. Vuse Go Reload,
our new rechargeable closed system, with enhanced sensorials, longer lasting
battery and device lock is performing well in Europe. The rechargeable closed
system segment began to return to growth at industry level in Europe. We are
well-positioned to capitalise on this momentum with global leadership in the
rechargeable closed segment, with value share of 59.9%.
Effective regulation and enforcement of Vapour products will remain a key
focus to unlock the full potential of the category. In addition to the
enforcement issues in the U.S. and in the province of Québec in Canada, we
believe there is a lack of enforcement regarding the 2ml tank liquid capacity
limit in the UK, both of which continue to negatively impact the legitimate
market.
Following the Mexican Government's decision to ban the sale of Vapour
products, Vuse will no longer be sold in Mexico. We believe this decision is
counter to the goal of reducing smoking rates, a goal we share. Smokeless
products, including Vapour products, are associated with an accelerated
decline in smoking prevalence.
In APMEA, total Vapour consumables volume grew strongly by 19.1%, with revenue
up 19.6%, or 23.7% on organic constant currency basis, driven by South Korea
and New Zealand.
* Based on estimated value share in measured retail for Vapour (i.e.,
value share of rechargeable closed systems consumables and disposables sales
in retail) in the Top Vapour markets.
** Top Vapour markets are defined as the Top markets by Vapour industry
revenue and account for c.80% of global Vapour industry revenue in 2024. Top
markets are the U.S., Canada, France, the UK, Spain, Poland and Germany. The
Top markets were revised in 2024, with an increase in value share in respect
of 2023 to 41.2%. Also in 2024, the Group changed from Marlin to Retail Scan
Data for the U.S. Vapour market, with the Group's Vapour value share in 2023
rebased to 52.1%.
Category Performance Review
Continued
Heated Products (HP) - Innovation pipeline starts to deliver performance
recovery
- glo volume declined 11.6%, with revenue down 7.6% negatively impacted by
the disposal of our businesses in Russia and Belarus partway through 2023 and
translational foreign exchange. On an organic basis, volume declined 0.3% with
revenue up 5.8% at constant rates of exchange.
- Industry HP category volume growth of 12%, slowed from 13% in 2023, mainly
due to slower growth in key European markets.
- glo volume share in Top markets* declined 40 bps to 16.7% vs 110 bps
decline in 2023.
- Continued HP category volume share gains in Poland and the Czech Republic,
and stabilisation in Italy, offset by heightened competitive activity in Japan
and South Korea.
- New innovations, glo Hyper Pro and improved consumables are driving
improved organic financial performance.
- veo, our non-tobacco consumables range, continues to outperform peers.
glo volume declined by 11.6% (down 0.3% on an organic basis). Reported revenue
declined by 7.6% due to the sale of our Russian and Belarusian businesses last
year. On an organic, constant rate basis, revenue grew 5.8%. glo continues to
show signs of category volume share improvement in Poland and the Czech
Republic and stabilisation in Italy. However, this was offset by the highly
competitive markets in Japan and South Korea and the deprioritisation of the
super-slim format in both markets, leading to glo's HP category volume share
in Top HP markets being down 40 bps to 16.7%.
In AME, volume was down 24.6%, or excluding the sale of the Group's businesses
in Russia and Belarus in 2023, this was a decline of 0.4%. Reported revenue
was down 12.2%, or up 6.1% on an organic basis at constant rates of exchange,
due to growth in Germany, Poland and Italy.
In APMEA, volume declined 0.2%, with revenue down 2.8%. However, on a constant
currency basis this was an increase of 5.6% driven by the strength of our
innovations and activation of our commercial plans in Japan.
Hyper Pro was introduced at the end of 2023, and is now present across 29
markets. BAT was the first to introduce a distinct EasyView screen with
HeatBoost technology for better performance. Due to this improvement and
coupled with the revamp of our consumables portfolio, glo is starting to
strengthen its position to compete in the premium segment and contribute to
accelerating growth.
veo, our first brand to launch a non-tobacco consumables range, continues to
strongly outperform peers and is now in 20 markets.
*Top HP markets are defined as the Top markets by HP industry revenue and
account for c.80% of global HP industry revenue in 2024. Top markets are
Japan, South Korea, Italy, Germany, Greece, Hungary, Poland, Romania and the
Czech Republic. The Top markets were revised in 2024, with a reduction in
our volume share in respect of 2023 to 17%.
Modern Oral - Strong volume, revenue and profit growth; continued leadership
outside the U.S.
- Continued strong volume growth of 55.0% driving revenue up 51.0% (at
constant rates).
- Modern Oral is the fastest growing New Category, driven by adult consumer
acquisition, up 54.2%, reaching 7.4 million users and increasing average daily
consumption in both established and expansion markets.
- AME leadership position maintained, with volume share leadership in 21
European markets and aggregate volume share at 64.7% in our six Top AME
markets*.
- Strong volume and revenue growth in the U.S. driven by our refreshed Velo
brand expression and Grizzly Modern Oral.
Modern Oral volume was up 55.0% and revenue up 46.6%, or 51.0% at constant
rates, driving volume share of the Total Oral category in Top markets up 2.0
ppts to 11.5% and our category volume share of Modern Oral up 1.3 ppts to
28.4%, driven by an increase in the highly competitive U.S. market.
In the U.S., volume grew 234%, with volume share up 2.1 ppts to 6.6%. Revenue
was up 223% (or 232% at constant rates), driven by the traction of our
refreshed Velo brand expression and Grizzly Modern Oral roll-out. While we
continue to await the outcome of our PMTA submission for our successful
European product, Velo 2.0, we are encouraged that we have started to
reinvigorate our performance in 2024.
In AME, we continue to be clear category leaders where we maintained volume
share leadership, which was down 10 bps at 64.7%, with volume growth of 50.2%
and revenue growth of 40.3% (or 44.4% at constant rates). Our continued
momentum is driven by further geographic expansion and innovation, following
the launch of our fusion and sensations ranges, tailored to meet the profiles
of local consumer tastes and preferences.
In APMEA, our volume grew 16.8% and our revenue grew 5.7% (or 10.0% at
constant rates), fuelled by robust growth from Global Travel Retail and
continued strong Emerging Market volume performance in Pakistan (up 27.3%).
Our insights and foresights in these markets give us confidence in our ability
to unlock the Emerging Market opportunity for Modern Oral going forward.
* Top Oral and Modern Oral markets are defined as the Top markets by
industry revenue, being the U.S., Sweden, Norway, Denmark, Switzerland,
Poland and the UK, accounting for c. 90% of global Modern Oral industry
revenue in 2024. The Top markets were revised in 2024, with a reduction in our
volume share in respect of 2023 to 27.1%.
Category Performance Review
Continued
Combustibles
- Group volume share up 20 bps in Top cigarette markets*, driven by
increases in both APMEA (up 40 bps) and AME (up 20 bps) with the U.S.
remaining flat vs FY 2023.
- Group value share down 20 bps in Top cigarette markets*, as AME (flat) and
APMEA (flat) were more than offset by the U.S.,
down 30 bps.
- U.S. commercial plans delivered sequential volume share growth in 2024
against continued industry headwinds.
- Robust combustibles pricing with a positive organic price/mix of +5.3%;
AME and APMEA continued to deliver strongly, with revenue up 3.6% and 3.5% on
an organic constant rate basis, respectively.
Group cigarette volume was down 8.9% (or down 5.0% on an organic basis) to 505
billion sticks (2023: 555 billion sticks). This was higher than the industry
decline of c. 2% predominantly driven by market exits in 2023 and supply chain
disruptions in Sudan. Volume growth in Türkiye, Brazil, Indonesia, Pakistan,
Venezuela and Mexico was more than offset by lower volume in the U.S., market
exits (notably in Africa), Sudan and Bangladesh with the U.S. impacted by
the continuing macro-economic headwinds and illicit single-use Vapour
products.
Total Group revenue from combustibles declined 6.4% to £20,685 million (2023:
£22,108 million), due to the lower volume and a translational foreign
exchange headwind of 4.8%. Revenue at constant rates of exchange was down
1.6%.
Excluding the impact of the sale of the Group's businesses in Russia and
Belarus in 2023, revenue was marginally higher (up 0.1% on constant currency
basis). Strong pricing, most notably in Bangladesh, Brazil and Türkiye more
than offset negative geographic mix (driven by the U.S.), with an overall
price/mix of +5.3% on a constant currency basis.
In the U.S., volume was down 10.1%, above the U.S. industry decline of 8.4%
(on a sales to wholesaler basis) which continues to be negatively affected by
macro-economic pressures impacting consumer behaviour, with growth in the
deep-discounted category (in which the Group is not present) and the increase
of solus-usage of New Category products, driven by the growth of illicit
single-use Vapour products. Further:
- U.S. volume share was flat which demonstrates that our previously announced
commercial actions are working. Lucky Strike remains the fastest growing
cigarette brand in the market; and
- U.S. premium volume share was up 50 bps, driven by Newport soft-pack and
Natural American Spirit.
Outside the U.S., our combustibles business continues to perform well.
In AME, revenue on an organic constant currency basis was up 3.6% driven by
volume growth in Brazil, Türkiye and Mexico, being partly offset by Canada
where a proliferation of illicit single-use Vapour products is impacting
combustibles volume.
In APMEA, revenue on a constant currency basis was up 3.5% driven by pricing
in Pakistan, New Zealand, Bangladesh, Sri Lanka, Kenya, Nigeria and Saudi
Arabia more than offsetting lower volume in Bangladesh and Australia and the
negative impact of the supply chain disruption in Sudan.
In 2025, we expect significant combustibles headwinds to impact performance,
particularly in Australia where new tobacco regulations come into effect in
April 2025 and in Bangladesh following a substantial increase in excise and
VAT.
* Top cigarette markets are defined as the Top cigarette markets by
industry revenue, being the U.S., Japan, Bangladesh, Brazil, Germany,
Pakistan, Mexico and Romania, accounting for c.60% of global industry
cigarettes revenue in 2024.
Traditional Oral
Group volume declined 8.2% to 6.1 billion stick equivalents. Total revenue was
£1,092 million (2023: £1,163 million), down 6.0% or 3.4% at constant rates.
Continued strong pricing in the U.S. drove Group price/mix of +4.8% at
constant rates of exchange. This was more than offset by the reduction in
volume in both the U.S. (down 8.9%) and AME (down 3.3%) in 2024. Group volume
share was down 40 bps driven by the U.S.
In the U.S. (which accounts for 97% of Group revenue from the category),
revenue declined 3.4% at constant rates of exchange, as pricing was
insufficient to offset the volume decline of 8.9%, driven by consumer
switching into Modern Oral.
Due to the ongoing U.S. market dynamics, the Group has recognised an
impairment charge of £646 million in respect of the carrying value of Camel
Snus. This reflects the reduced sales as consumers switch to alternative
products including Modern Oral. Commencing 1 January 2025, Camel Snus has been
assigned a 20-year useful economic life and has commenced amortisation from
that date which approximates to £23 million annually.
Beyond Nicotine
As consumers increasingly seek products offering Wellbeing and Stimulation
characteristics, our venturing unit, Btomorrow Ventures (BTV), is partnering
to strengthen our positioning in this market.
BTV has completed 28 investments since its launch in 2020, and continues to
invest in innovative, consumer-led brands, new sciences and technologies, and
sustainability to support the Group's transformational strategy for A Better
Tomorrow™.
In 2024, BTV launched a new £200 million fund, continuing its commitment to
minority investments, with a focus on the Wellbeing and Stimulation space.
This funding is in addition to the original £150 million fund in 2020.
Throughout 2024, BTV has continued to support its portfolio of companies with
a number of follow-on investment rounds and commercial partnerships with BAT,
including new investments in a U.S.-based adaptogens and nootropics beverage
company, Hop Wtr Inc., and a German AI-powered sustainable packaging company,
one.five.
The Group has continued to explore Beyond Nicotine organically through our
subsidiary, The Water Street Collective Ltd, with a series of pilot launches
of our own functional shot brand, Ryde. This offers a scientifically
formulated range of Energy, Focus and Relax products in three markets -
Australia, Canada and the U.S.
Please see page 20 for more information on our investments.
Regional Review
The performances of the regions are discussed below. The following discussion
is based upon the Group's internal reporting structure.
All references to volume share or value share movement in the following
discussion are compared to FY 2023. See page 42 for a discussion on the use of
this measure.
Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
United States (U.S.):
- We maintained Vapour value share leadership in tracked channels at 50.2%
(down 2.0 ppts vs 2023) - despite a decrease in revenue by 3.5%, or 0.8% at
constant rates of exchange, driven by lower volume due to the continued impact
of illicit single-use Vapour products.
- Combustibles volume down 10.1%, driven by macro-economic pressures
continuing to impact consumer affordability and the increase of solus-usage of
New Category products, driven by the growth of illicit single-use Vapour
products.
- U.S. premium volume share up 50 bps, driven by performance of Newport
soft-pack and Natural American Spirit.
- Grizzly Modern Oral commenced national roll-out in 2024 - achieving c.1%
volume share of Modern Oral by December 2024.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2023 vs 2023 £m vs 2023 £m £m vs 2023 £m vs 2023
New Categories 1,078 +1.8% 29 1,107 +4.6% 1,107 +4.6%
Vapour (units mn) 287 -3.7% -3.7% 998 -3.5% 27 1,025 -0.8% 1,025 -0.8%
HP (sticks bn) - -% -% - -% - - -% - -%
Modern Oral (pouches bn) 1.0 +234% +234% 80 +223% 2 82 +232% 82 +232%
Traditional Oral (stick eq bn) 5.3 -8.9% -8.9% 1,058 -6.1% 30 1,088 -3.4% 1,088 -3.4%
Total Smokeless 2,136 -2.2% 59 2,195 +0.5% 2,195 +0.5%
Total Combustibles 47 -10.1% -10.1% 9,094 -6.7% 253 9,347 -4.1% 9,347 -4.1%
Other 48 -25.3% 2 50 -22.7% 50 -22.7%
Total 11,278 -6.0% 314 11,592 -3.4% 11,592 -3.4%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
See page 47 for a discussion on the preparation of the U.S. financial
information, initially based on U.S. GAAP as the primary financial record and
converted to IFRS for the purpose of consolidation within the results of the
Group
Reported revenue decreased 6.0%, including a foreign exchange headwind of
2.6%. Smokeless now represents 18.9% of total revenue.
On a constant currency basis (excluding translational foreign exchange), which
we believe reflects the operational performance, revenue declined 3.4%. This
was driven by:
- Vapour, where the U.S. is the world's largest market, as the Group
maintained leadership in value share (of closed system consumables, including
single-use Vapour products in tracked channels) despite a decline of 2.0 ppts
to 50.2%. Revenue was down 0.8% driven by continued lack of enforcement of
illegal flavoured and single-use products. We estimate illicit Vapour products
to be almost 70% of the total U.S. Vapour market. As explained on page 7, we
are encouraged by the Food and Drug Administration (FDA) actions, the
implementation of Vapour directories and continued signs of illicit products
volume decline in Louisiana. However, we believe much more effective
enforcement is needed to drive a meaningful impact;
- Modern Oral, as volume grew 234%, with volume share up 2.1 ppts to 6.6%.
Revenue was up 232%, driven by the traction of our refreshed Velo brand
expression and Grizzly Modern Oral roll-out;
- Traditional Oral revenue declined 3.4% as pricing was insufficient to
offset the volume decline (down 8.9%), negatively impacted by accelerated
cross-category switching, particularly to Modern Oral and reduced consumption.
Value share in Traditional Oral decreased 40 bps, with volume share down 40
bps; and
- Combustibles, as volume was down 10.1%, above the U.S. industry decline of
8.4% (on a sales to wholesaler basis) which continues to be negatively
affected by macro-economic pressures impacting consumer behaviour, with growth
in the deep-discounted category (in which the Group is not present) and the
increase of solus-usage of New Category products, driven by the growth of
illicit single-use Vapour products. Consequently, revenue was down 4.1%
despite higher price/mix (+6.0%). Our premium volume share was up 50 bps,
driven by Newport soft-pack and Natural American Spirit. Our total volume
share was flat after a period of decline (which demonstrates that our
previously announced commercial actions are working), with value share down 30
bps, having declined 60 bps in 2023.
Profit from operations and operating margin
Please see page 48 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2023 £m £m £m vs 2023 £m vs 2023
Profit from Operations 4,087 n/m 2,299 194 6,580 -3.5% 6,580 -3.5%
Operating Margin 36.2% 209.5 ppts 56.8% -10 bps 56.8% -10 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
n/m refers to movements that are not meaningful.
Reported profit from operations increased to £4,087 million from a loss of
£20,781 million, due to the £4.3 billion impairment of goodwill and £23.0
billion impairment of the carrying value of some of the Group's U.S. acquired
brands recognised in 2023. From 1 January 2024, the Group commenced amortising
Newport, Camel, Natural American Spirit and Pall Mall over a period not
exceeding 30 years. The non-cash charge was £1.4 billion per year and was
treated as an adjusting item.
In 2024, the Group has recognised a charge of £646 million in respect of
Camel Snus, which will be designated as a definite-lived brand (with an
assumed life of 20 years) from 1 January 2025. Translational foreign exchange
was a headwind of 2.9%. Also in 2024, the Group recognised net income of
£132 million in connection with the settlement of historical litigation in
respect of the Fox River.
On a constant currency basis, and excluding adjusting items (including
amortisation and impairment charges in both periods), adjusted profit from
operations was down 3.5% to £6,580 million largely due to the impact of lower
combustibles volume and commercial initiatives.
Regional Review
Continued
Americas and Europe (AME):
- Resilient combustibles performance driven by pricing, with financial
performance negatively impacted by the sale of the Russian and Belarusian
businesses partway through 2023.
- Multi-category region with Smokeless now representing 19.1% of revenue.
- New Category revenue growth of 3.5%, or 6.1% at constant rates of exchange
(or 11.9% on an organic constant rate basis).
- Combustibles volume share up 20 bps and value share flat.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2023 vs 2023 £m vs 2023 £m £m vs 2023 £m vs 2023
New Categories 1,730 +3.5% 45 1,775 +6.1% 1,775 +11.9%
Vapour (units mn) 276 -11.5% -11.5% 611 -10.8% 14 625 -8.8% 625 -8.6%
HP (sticks bn) 8 -24.6% -0.4% 443 -12.2% 10 453 -10.4% 453 +6.1%
Modern Oral (pouches bn) 6.3 +50.2% +51.4% 676 +40.3% 21 697 +44.4% 697 +46.8%
Traditional Oral (stick eq bn) 0.8 -3.3% -3.3% 34 -5.8% 1 35 -3.6% 35 -3.6%
Total Smokeless 1,764 +3.3% 46 1,810 +5.9% 1,810 +11.6%
Total Combustibles 249 -10.2% -2.1% 7,039 -7.5% 447 7,486 -1.7% 7,486 +3.6%
Other 438 -6.7% 30 468 +0.2% 468 +0.6%
Total 9,241 -5.6% 523 9,764 -0.3% 9,764 +4.9%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported revenue was down 5.6% at current rates, negatively impacted by a
£479 million drag on the regional performance due to the timing of the sale
of the Group's businesses in Russia and Belarus partway through 2023 and a
5.3% translational foreign exchange headwind. Smokeless now represents 19.1%
of total revenue.
On a constant currency basis (excluding translational foreign exchange), which
we believe reflects the operational performance, revenue was largely in line
with prior year (down 0.3%) but up 4.9% on an organic basis. This organic
performance was driven by:
- Higher revenue from combustibles (up 3.6%), driven by volume growth in
Brazil, Türkiye and Mexico, being partly offset by Canada where a
proliferation of illicit single-use Vapour products is impacting combustibles
volume;
- Lower revenue in Vapour (down 8.6%), driven by Canada where a lack of
enforcement of illegal single-use products following the flavour ban in the
province of Québec has impacted volumes;
- A good revenue performance in HP (up 6.1%) due to growth in Germany,
Poland and Italy, with regional volume being relatively stable (down 0.4%);
and
- Modern Oral revenue growth of 46.8%, driven by Sweden, the UK, Norway,
Austria and Finland, as we maintained volume share leadership in 21 markets,
with total volume share at 64.7% (down 10 bps compared to 2023).
Profit from operations and operating margin
Please see page 48 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2023 £m £m £m vs 2023 £m vs 2023
(Loss)/Profit from Operations (3,464) -208% 6,784 192 3,512 +1.5% 3,512 +7.5%
Operating Margin -37.5% -70.1 ppts 36.0% 70 bps 36.0% 90 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported profit from operations declined by 208.5%, including a translational
foreign exchange headwind of 5.5%. 2024 was negatively impacted by the sale of
our businesses in Russia and Belarus in September 2023. Further, both years
were impacted by a number of charges affecting comparability of the regional
result.
In 2024, this included total charges of £6,203 million following the
publication of a proposed settlement of litigation in Canada (please see page
38), a charge of £449 million in respect of an excise assessment in Romania
and impairment of fixed assets of
£149 million (including the Group's head office in London and recognising the
Group's intention to seek an orderly exit from Cuba). This compares to charges
of £353 million (in 2023) related to the sale of the Group's businesses in
Russia and Belarus. 2023 was also affected by net credits of £120 million in
Brazil, largely related to the conclusion of historical VAT and excise tax
claims.
Excluding the impact of foreign exchange, adjusting items and on an organic
basis (which we believe reflects the operational performance), adjusted profit
from operations was up 7.5% to £3,512 million, driven by an improved
operational performance in:
- Türkiye, where the combustibles portfolio performed well with higher
volume and pricing;
- Germany, driven by our HP portfolio;
- Romania, following continued strong combustibles pricing and growth in New
Categories;
- the UK, driven by continued growth in our New Categories portfolio; and
- the Nordics, Switzerland and Italy, which all improved their New
Categories financial performance.
These were partly offset by a decline in adjusted profit from operations from
Canada, where adjusted profit from operations declined to £539 million due to
lower combustibles volume and a lack of enforcement of illegal single-use
Vapour products following the flavour ban in the province of Québec.
Regional Review
Continued
Asia-Pacific, Middle East and Africa (APMEA):
- Robust combustibles performance led by pricing, which more than offset
lower volume (partly due to market exits, notably in Africa).
- New Category revenue increased 1.0%, but was up 8.6% at constant rates of
exchange, driven by the growth of Vapour (in South Korea and New Zealand) and
HP in Japan.
- Combustibles value share flat with volume share 40 bps higher.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2023 vs 2023 £m vs 2023 £m £m vs 2023 £m vs 2023
New Categories 624 +1.0% 45 669 +8.6% 669 +8.6%
Vapour (units mn) 53 +19.1% +19.1% 112 +19.6% 3 115 +23.7% 115 +23.7%
HP (sticks bn) 13 -0.2% -0.2% 478 -2.8% 41 519 +5.6% 519 +5.6%
Modern Oral (pouches bn) 1.0 +16.8% +16.8% 34 +5.7% 1 35 +10.0% 35 +10.0%
Traditional Oral (stick eq bn) - -% -% - -% - - -% - -%
Total Smokeless 624 +1.0% 45 669 +8.6% 669 +8.6%
Total Combustibles 222 -7.3% -7.3% 4,552 -4.2% 363 4,915 +3.5% 4,915 +3.5%
Other 172 +31.1% 39 211 +59.8% 211 +59.8%
Total 5,348 -2.7% 447 5,795 +5.4% 5,795 +5.4%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported revenue declined 2.7% due to a translational foreign exchange
headwind of 8.1% largely related to the relative movement of sterling against
the Bangladeshi taka and Japanese yen.
Constant currency revenue was 5.4% higher, driven by pricing in Pakistan, New
Zealand, Bangladesh, Sri Lanka, Kenya, Nigeria and Saudi Arabia more than
offsetting lower volume in Bangladesh and Australia and the negative impact of
the supply chain disruption in Sudan.
Smokeless now represents 11.7% of total revenue.
On a constant currency basis (excluding translational foreign exchange), which
we believe reflects the operational performance, New Categories increased by
8.6%, driven by growth in revenue from:
- Vapour, driven by South Korea and New Zealand;
- HP, driven by the strength of our innovations and activation of our
commercial plans in Japan; and
- Modern Oral, fuelled by robust growth from Global Travel Retail and
continued strong Emerging Market volume performance in Pakistan (up 27.3%).
Our insights and foresights in these markets give us confidence in our ability
to unlock the Emerging Market opportunity for Modern Oral going forward.
Profit from operations and operating margin
Please see page 48 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2024 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2023 £m £m £m vs 2023 £m vs 2023
Profit from Operations 2,113 +15.1% 71 163 2,347 +7.5% 2,347 +7.5%
Operating Margin 39.5% 6.1 ppts 40.5% 80 bps 40.5% 80 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Profit from operations was 15.1% higher, as the prior year was adversely
affected by additional charges (£75 million) related to the DOJ and OFAC
resolutions of investigations into suspicions of sanctions breaches described
on page 20. 2023 was also negatively impacted by an impairment of goodwill in
respect of South Africa of £291 million due to the continued negative impact
of illicit trade. Similar charges in 2024 include the impairment of goodwill
in Malaysia of £39 million, following the change in regulations regarding the
sale of tobacco and Vapour products.
Excluding adjusting items and a translational foreign exchange headwind, the
performance was driven by:
- Japan, following the volume growth and improved financial performance of
our HP portfolio;
- Sri Lanka, largely due to pricing in combustibles as the economy recovers
from the financial crisis;
- Saudi Arabia, driven by pricing of combustibles;
- Indonesia, where combustibles volume grew; and
- Asset sales, including in West Africa as the Group exited Mali.
These more than offset a decline in Australia (driven by lower industry
volume) and in Sudan, where the Group was negatively impacted by the ongoing
conflict leading to supply chain disruptions.
Adjusted profit from operations at constant rates of exchange (which excludes
the impact of adjusting items and translational foreign exchange) increased by
7.5%.
In 2025, we expect significant combustibles headwinds to impact performance,
particularly in Australia where new tobacco regulations come into effect in
April 2025 and in Bangladesh following a substantial increase in excise and
VAT.
Other Financial Information
Analysis of profit from operations (by segment) and diluted earnings per share
Prior year data is provided in the table on page 48.
For year ended 31 December 2024 Reported vs Adj Items(1) Adjusted vs Exch. Adjusted at CC(2) vs Adjusted Organic at CC(2) vs
2023 2023 2023 2023
£m % £m £m % £m £m % £m %
Profit from Operations
U.S. 4,087 n/m 2,299 6,386 -6.4% 194 6,580 -3.5% 6,580 -3.5%
AME (3,464) -208% 6,784 3,320 -4.0% 192 3,512 +1.5% 3,512 +7.5%
APMEA 2,113 +15.1% 71 2,184 0.0% 163 2,347 +7.5% 2,347 +7.5%
Total Region 2,736 n/m 9,154 11,890 -4.6% 549 12,439 -0.2% 12,439 +1.4%
Net finance costs (1,098) -42.1% (491) (1,589) -11.7% (27) (1,616) -10.2% (1,616) -11.2%
Associates and joint ventures 1,900 +225% (1,379) 521 -9.7% 20 541 -6.2% 541 -6.2%
Profit before tax 3,538 n/m 7,284 10,822 -3.7% 542 11,364 +1.1% 11,364 +3.0%
Taxation (357) -112% (2,206) (2,563) -2.0% (106) (2,669) +2.0% (2,669) +4.2%
Non-controlling interests (113) -36.5% (38) (151) -15.9% (5) (156) -12.7% (156) -12.7%
Coupons relating to hybrid bonds net of tax (42) -6.6% - (42) -6.6% - (42) -6.6% (42) -6.6%
Profit attributable to shareholders 3,026 n/m 5,040 8,066 -4.0% 431 8,497 +1.1% 8,497 +3.1%
Diluted number of shares (m) 2,225 -0.2% 2,225 -0.5% 2,225 -0.5% 2,225 -0.5%
Diluted earnings per share (pence)(3) 136.0 n/m 362.5 -3.5% 381.9 +1.7% 381.9 +3.6%
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
3. In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
are therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS.
Net finance costs
Net finance costs were £1,098 million, compared to £1,895 million in 2023, a
decrease of 42.1%.
The performance in 2024 was driven by a net credit of £590 million related to
the capped cash debt tender offers, which targeted a series of low-priced,
long-dated GBP-, EUR- and USD-denominated bonds, under which the Group
repurchased bonds prior to their maturity in a principal amount of
£1.8 billion, including £15 million of accrued interest partly offset by a
fair value loss of £9 million (2023: £151 million) on debt-related
derivatives and, including other costs of £3 million, treated as an adjusting
item.
2024 was impacted by a translational foreign exchange tailwind of 1.5% (2023:
marginal headwind) due to the relative movement of sterling.
Our performance was also impacted by a number of items that are not deemed to
be in the normal course of the Group's ongoing operations and have been
treated as adjusting items, including finance costs related to:
- The Franked Investment Income Group Litigation Order (FII GLO) of £61
million (2023: £60 million);
- A fair value loss of £19 million (2023: £nil ) on embedded derivatives
related to associates;
- A charge of £14 million in relation to a tax case in Brazil;
- Interest charges of £8 million (2023: £16 million) in relation to a tax
provision in the Netherlands;
- Interest of £11 million on a tax provision in Indonesia;
- A release of £25 million of interest on tax provision in Canada in
relation to a settlement agreement with local authorities; and
- A further £11 million interest charge recorded on government liability
balances accumulated during CCAA protection.
On an adjusted, constant currency basis, net finance costs were £1,616
million, a decrease of 10.2% (2023: £1,799 million). This was:
- Largely due to higher interest income, driven by higher cash balances
resulting from the sale of a part of the ordinary shares held in the Group's
main associate ITC, higher interest rates on local deposits and an increase in
interest income in Canada (up £20 million to £110 million) due to the cash
build up in that market; and
- Lower interest expense driven by a reduction in short term funding
requirements in the year. The Group's average cost of debt declined to 4.9%
(compared to 5.2% in 2023) with the prior year including a fair value loss of
£151 million. Excluding this, the average cost of debt in 2024 was an
increase of 0.1% compared to 4.8% in 2023.
Also in 2024, in line with IAS 33 Earnings Per Share, £42 million (2023: £45
million) has been recognised as a deduction to EPS related to the perpetual
hybrid bonds issued in 2021, as the coupons paid on such instruments are
recognised in equity rather than as a charge to the income statement in net
finance costs.
For a full reconciliation of net finance costs to adjusted net finance costs
at constant rates, see page 54.
All of the adjustments noted above have been included in the adjusted earnings
per share calculation on page 32.
The Group has debt maturities of around £3.3 billion annually in the next
two years. Due to higher interest rates, net finance costs are expected to
increase as debts are refinanced.
Other Financial Information
Continued
Results of associates and joint ventures
The Group's share of post-tax results of associates and joint ventures
increased from £585 million to £1,900 million.
This was driven by a credit of £1,379 million in respect of:
- The sale by the Group of 436,851,457 ordinary shares held in the Group's
main associate, ITC Ltd (ITC) in India, realising a gain of
£1,361 million. The sale represents 3.5% of ITC's ordinary shares. The gain
has been treated as an adjusting item; and
- A deemed gain of £18 million (2023: £40 million) on dilution of the
Group's holding in ITC as a result of ITC issuing ordinary shares under ITC's
Employees Share Option Scheme, also treated as an adjusting item.
Accordingly, the Group's share of ITC has reduced from 29.02% (31 December
2023) to 25.45% at 31 December 2024.
The Group's share of ITC's post-tax results was 11.5% lower at £545 million
(2023: £616 million). The movements are partly due to the decrease in
shareholding as a result of the sale in our stake in ITC during the year.
On 24 July 2023, ITC announced a proposed demerger of its 'Hotels Business'
under a scheme of arrangement by which 60% of the newly incorporated entity
would be held directly by ITC's shareholders proportionate to their
shareholding in ITC. In January 2025, ITC Hotels Limited was listed and
commenced trading on the National Stock Exchange of India (NSE) and Bombay
Stock Exchange (BSE). The Group's direct stake in ITC Hotels Limited is 15%.
In 2023, the Group recognised an impairment charge of £34 million (net of
tax) in respect of the Group's investment in Organigram, treated as an
adjusting item. In 2024, no further impairment was required.
Excluding these adjusting items and the impact of translational foreign
exchange, on an adjusted constant currency basis, the Group's share of
post-tax results from associates and joint ventures was lower than in 2023,
down 6.2% to £541 million. Please refer to page 32 for discussion of the
adjusting items within the Group's share of post-tax results from associates
and joint ventures.
Taxation
The tax rate in the income statement was 10.1% for 2024 (2023: 16.8%). The
Group's tax rate is affected by the impact of the adjusting items referred to
on pages 29 to 32 and by the inclusion of the share of associates' and joint
ventures' post-tax profit in the Group's pre-tax results.
Excluding these, the Group's underlying tax rate for subsidiaries reflected in
the adjusted earnings per share on page 36 was 24.9% for 2024 (2023: 24.5%).
The marginal increase in the underlying tax rate in 2024 largely reflects mix
of profits and changes in legislation, including the new Pillar Two rules.
The Group has applied the mandatory exception to recognising and disclosing
information about deferred tax assets and liabilities related to Pillar Two
income taxes in accordance with IAS12 Income Taxes.
A full reconciliation from taxation on ordinary activities to the underlying
tax rate is provided on page 56.
On 15 December 2023, a further judgment was issued regarding the Netherlands
tax disputes for the 2003 - 2016 period. The disputes have a potential
aggregate net liability of £1,140 million. Having considered the judgment and
the Dutch judicial and international proceedings available to it, the Group
recognised a further adjusting charge of £70 million in 2023, with a total
provision of £144 million recognised by 31 December 2024. The findings of the
December judgment have been appealed. Appeal hearings took place in 2024, with
the Court of Appeal judgment expected in the first half of 2025.
Other Financial Information
Continued
Cash flow
For years ended 31 December
2024 2023 Change
£m £m %
Net cash generated from operating activities 10,125 10,714 -5.5%
Operating cash flow conversion 101% 100%
Free cash flow - before payment of dividends 7,901 8,360 -5.5%
Free cash flow - after payment of dividends 2,688 3,305 -18.7%
As at 31 December
2024 2023 Change
£m £m %
Borrowings (including lease liabilities) 36,950 39,730 -7.0%
Adjusted net debt 30,583 33,940 -9.9%
In the Group's cash flow, prepared in accordance with IFRS and presented on
page 28, net cash generated from operating activities declined by 5.5% to
£10,125 million (2023: £10,714 million). This was driven by:
- The realisation, in 2023, of tax credits in Brazil that did not repeat;
- Lower dividends received from the Group's associates of £406 million
(2023: £506 million), mainly related to ITC, largely reflecting the reduced
shareholding;
- A payment of £390 million in respect of an excise assessment in Romania;
and
- Decreases in tax paid of £1,854 million, compared to £2,622 million in
2023 as £700 million (US$895 million) have been deferred in the U.S. from
2024 until 2025.
During 2024, the Group made the final payment in respect of the settlement
agreements with the DOJ and OFAC in the amount of £267 million (2023: £262
million), while also receiving £132 million following the successful
conclusion of litigation concerning the Fox River.
In 2024, other litigation payments (mainly related to Engle and other
health-related claims in the U.S.) were higher at £147 million (2023: £73
million).
In 2023, the Group paid a one time payment of £59 million to settle the
investigation by the Nigerian Federal Competition and Consumer Protection
Commission (FCCPC).
The Group made interim repayments to HMRC of £50 million in both 2024 and
2023, and intends to make further interim repayments in future periods in
respect of the Franked Investment Income Group Litigation Order (FII GLO), as
described on page 40.
Operating cash conversion and free cash flow (before and after dividends paid
to shareholders)
The Group's operating cash conversion rate (based upon adjusted profit from
operations and defined on page 57) was 101% (2023: 100%).
This exceeded our target of at least 90%, demonstrating the ongoing strength
of the Group in turning operating performance into cash.
Free cash flow (before the payment of dividends), as defined on page 58, was
£7,901 million for 2024 (2023: £8,360 million), a decrease of 5.5%. This was
driven by the reduction in net cash generated from operating activities
discussed above and higher net interest paid (2024: £1,703 million; 2023:
£1,682 million), partly offset by lower net capital expenditure (2024: £434
million; 2023: £487 million).
After paying dividends of £5,213 million (2023: £5,055 million), free cash
flow (after dividends paid to shareholders), as defined on page 58, was
£2,688 million for 2024 (2023: £3,305 million).
For a full reconciliation of net cash generated from operating activities to
free cash flow before and after dividends, see page 58.
Other Financial Information
Continued
Borrowings and net debt
Borrowings (which includes lease liabilities) were £36,950 million at 31
December 2024, a decrease of 7.0% compared to £39,730 million at 31 December
2023. Foreign exchange movements, mainly related to the US dollar and
sterling, were a headwind in 2024. However the reduction in borrowings was due
to the net repayment of borrowings in the year, driven by the cash generated
by the business after the payment of dividends to shareholders in the period.
This reduction included the capped cash debt tender offer and subsequent
repayment prior to their maturity in a principal amount of £1.8 billion
of bonds.
The Group remains confident of its ability to access the debt capital markets
successfully and reviews its options on a continuing basis.
The Group's average centrally managed debt maturity was 9.5 years at 31
December 2024 (31 December 2023: 10.5 years), and the highest proportion of
centrally managed debt maturing in a single rolling 12-month period was 14.8%
(31 December 2023: 15.7%).
The Group defines net debt as borrowings (including related derivatives and
lease liabilities), less cash and cash equivalents (including restricted cash)
and current investments held at fair value. Closing net debt was £31,253
million at 31 December 2024 (31 December 2023: £34,640 million). A
reconciliation of borrowings to net debt is provided below.
As at 31 December
2024 2023 Change
£m £m %
Borrowings (including lease liabilities) (36,950) (39,730) -7.0%
Derivatives in respect of net debt (113) (170) -34%
Cash and cash equivalents 5,297 4,659 +13.7%
Current investments held at fair value 513 601 -14.6%
Net debt (31,253) (34,640) -9.8%
Maturity profile of net debt:
Net debt due within one year 1,545 852 +81.3%
Net debt due beyond one year (32,798) (35,492) -7.6%
Net debt (31,253) (34,640) -9.8%
The movement in net debt includes the free cash inflow, after payment of
dividends to shareholders, of £2,688 million (2023: £3,305 million inflow),
as described on page 58. Also impacting the carrying value of net debt at the
balance sheet date are:
- Cash payments related to share schemes and investing activities of £74
million (2023: £303 million), which, in 2024, was lower mainly due to the
movement in foreign exchange dividend hedges due to the movement in sterling,
predominantly against the US dollar;
- £1,577 million net proceeds from the partial monetisation of our
investment in ITC;
- The purchase of £0.7 billion of own shares under the Group's 2024 share
buy-back programme;
- Other non-cash movements of £568 million inflow (2023: £226 million
outflow), which, in 2024, mainly relate to the series of bonds repurchased in
May 2024 as part of the Group's debt liability management exercise discussed
on page 32; and
- Foreign exchange impacts related to the revaluation of foreign currency
denominated net debt balances being a net headwind of £674 million (2023:
£1,338 million tailwind).
In 2023, the Group reclassified £368 million in respect of certain balances
previously held-for-sale related to the proposed sale of the Group's
operations in Russia and Belarus.
These movements can be summarised as follows:
As at 31 December
2024 2023 Change
£m £m %
Opening net debt (including IFRS 16 Leases) (34,640) (39,281) -11.8%
Free cash inflow (after dividends) 2,688 3,305 -18.7%
Other cash payments (74) (303)
Proceeds from partial divestment of shares held in ITC 1,577 -
Purchase of own shares (698) -
Receipt from disposal of subsidiaries (net of cash disposed of) - 159
Transferred from held-for-sale - 368
Other non-cash movements 568 (226)
Foreign exchange (674) 1,338
Closing net debt (31,253) (34,640) -9.8%
Investments held at fair value through profit and loss include restricted
amounts of £437 million (31 December 2023: £446 million) due to investments
held by subsidiaries in CCAA protection, as well as £60 million (31 December
2023: £89 million) subject to potential exchange control restrictions.
Cash and cash equivalents include restricted amounts of £2,072 million (31
December 2023: £1,904 million) due to subsidiaries in CCAA protection and
£339 million (31 December 2023: £392 million) principally due to exchange
control restrictions.
Other Financial Information
Continued
Borrowings and net debt (continued)
Adjusted net debt and adjusted net debt to adjusted EBITDA
For the purposes of assessing the Group's ability to service and repay
borrowings, the Group uses the ratio of adjusted net debt to adjusted EBITDA.
Adjusted EBITDA is defined as profit for the year (earnings) before net
finance costs, taxation on ordinary activities, share of post-tax results of
associates and joint ventures, depreciation, amortisation, impairment costs
and adjusting items. Please refer to page 59 for a reconciliation of adjusted
EBITDA to profit for the year.
The Group also adjusts net debt for the purchase price allocation adjustment
to the debt, included within borrowings, acquired as part of the acquisition
of Reynolds American Inc. This is an accounting adjustment and does not
reflect the enduring repayment of the instrument. The Group Management Board
believes that this additional measure, which is used internally to assess the
Group's financial capacity, is useful to the users of the financial statements
in helping them to see how the Group's financial capacity has changed over the
year. The adjusted net debt position is provided below:
As at 31 December
2024 2023 Change
£m £m %
Net debt (31,253) (34,640) -9.8%
Purchase price allocation (PPA) adjustment to acquired debt 670 700 -4.3%
Adjusted net debt (30,583) (33,940) -9.9%
Exchange 947
Adjusted net debt translated at 2023 exchange rates (29,636) -12.7%
The Group's ratio of adjusted net debt to adjusted EBITDA as at 31 December
2024 was 2.44x (2023: 2.57x).
However, excluding the provision recognised in respect of cash and cash
equivalents and investments held at fair value, and adjusted EBITDA earned, in
Canada, this would have been 2.75x.
The calculation of adjusted net debt to adjusted EBITDA is provided on page
59.
Return on Capital Employed (ROCE)
The Group's ROCE, calculated in accordance with our reported numbers, was 2.7%
(2023: -13.2%), with the relative movement in 2024 due to the impairment of
goodwill and trademarks referred to earlier, impacting the Group's EBITDA in
2023.
On an adjusted basis, as defined on page 57, including dividends from
associates and joint ventures (as a proxy to a return
in the period, given the inclusion of the investment in associates and joint
ventures in the Group's calculation
of capital employed), adjusted ROCE grew from 10.9% in 2023, to 12.1% in 2024.
The movement in 2024 was mainly driven by the impairment of goodwill and
trademarks and increases in amortisation charges referred to earlier, the
impact of which has been adjusted out of EBITDA but reduces the value of
average capital employed.
Dividends summary
The Board has declared an interim dividend of 240.24p per ordinary share of
25p for the year ended 31 December 2024, payable in four equal quarterly
instalments of 60.06p per ordinary share in May 2025, August 2025, November
2025 and February 2026. This represents an increase of 2.0% on 2023 (2023:
235.52p per share), and a pay-out ratio, on 2024 adjusted diluted earnings per
share, of 66.3%.
The quarterly dividends will be paid to shareholders registered on either the
UK main register or the South Africa branch register and to holders of
American Depositary Shares (ADSs), each on the applicable record dates below:
Event (2025 unless stated otherwise) Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Record date (JSE, LSE and NYSE) 28 March 27 June 3 October 30 December
Payment date (LSE and JSE) 7 May 1 August 7 November 4 February 2026
ADS payment date (NYSE) 12 May 6 August 13 November 9 February 2026
Other Financial Information
Continued
Foreign currencies
The principal exchange rates used to convert the results of the Group's
foreign operations to sterling for the purposes of inclusion and consolidation
within the Group's financial statements are indicated in the table below.
Where the Group has provided results "at constant rates of exchange" this
refers to the translation of the results from the foreign operations at rates
of exchange prevailing in the prior period, thereby eliminating the
potentially distorting impact of the movement in foreign exchange on the
reported results.
The principal exchange rates used were as follows:
Average for the period ended As at
31 December 31
De
ce
mb
er
2024 2023 2024 2023
Australian dollar 1.937 1.873 2.023 1.868
Bangladeshi taka 147.803 134.747 149.662 139.909
Brazilian real 6.893 6.208 7.737 6.192
Canadian dollar 1.751 1.678 1.801 1.681
Chilean peso 1,206.394 1,044.498 1,245.543 1,113.264
Euro 1.181 1.150 1.209 1.154
Indian rupee 106.952 102.707 107.223 106.081
Japanese yen 193.583 174.883 196.827 179.721
Romanian leu 5.877 5.688 6.018 5.741
Russian ruble(1) 102.662 120.111
South African rand 23.423 22.962 23.633 23.313
Swiss franc 1.125 1.117 1.135 1.073
US dollar 1.278 1.244 1.252 1.275
1. As a result of the disposal of the Group's businesses in Russia, the
2023 rates reflect the average for the period ended and as at 13 September
2023, respectively, with the Russian rouble no longer deemed to be a
principal foreign currency in 2024.
Update on Quebec class action and CCAA
In March 2019, Imperial Tobacco Canada Limited and Imperial Tobacco Company
Limited (together, ITCAN), Group subsidiaries, obtained creditor protection
under the Canadian Companies' Creditors Arrangement Act (CCAA). Under a
confidential court supervised mediation process, ITCAN has been negotiating a
possible settlement of all of its outstanding tobacco litigation in Canada
while continuing to run its business in the normal course.
On 17 October 2024, the court-appointed mediator's and monitor's plan of
compromise and arrangement was filed in the Ontario Superior Court of Justice.
Substantially similar proposed plans were also filed for Rothmans, Benson
& Hedges Inc. (RBH, a subsidiary of Philip Morris International Inc.) and
JTI-Macdonald Corp. (JTIM, a subsidiary of Japan Tobacco International)
(collectively, the Proposed Plans).
On 31 October 2024, the court granted certain orders pursuant to which the
Proposed Plans were accepted for filing. On 12 December 2024, the Proposed
Plans were approved by the requisite majorities of the creditors. A sanction
hearing took place between 29-31 January 2025. During the sanction hearing,
the Court was asked to sanction the Proposed Plans. The Court's decision is
currently pending and the Stays are extended until 3 March 2025, or such time
as the Court's decision on the sanction order is released.
Under the Proposed Plans, if ultimately sanctioned and then implemented,
ITCAN, RBH and JTIM (the Companies) would pay an aggregate settlement amount
of CAD$32.5 billion (approximately £18 billion). This amount would be
funded by:
- an upfront payment equal to all the Companies' cash and cash equivalents
on hand (including investments held at fair value) plus certain court deposits
(subject to an aggregate industry withholding of CAD$750 million
(approximately £416 million)) plus 85% of any cash tax refunds that may be
received by the Companies on account of the upfront payments; and
- annual payments based on a percentage (initially 85%, reducing over time)
of each of the Companies' net income after taxes, based on amounts generated
from all sources, excluding New Categories, until the aggregate settlement
amount is paid.
The performance of ITCAN's New Categories (including Vapour products and
nicotine pouches) is not included in the basis for calculating the annual
payments.
These Proposed Plans, if ultimately sanctioned and implemented, would resolve
ITCAN's outstanding tobacco litigation in Canada and provide a full and
comprehensive release to ITCAN, BAT p.l.c. and all related companies for all
tobacco claims in Canada.
It is expected that the court will appoint neutral and independent third
parties to administer the implementation of the Proposed Plans.
In line with IFRS 10 (Consolidated Financial Statements), ITCAN is
consolidated in the Group's results.
Under IAS 37, Provisions, Contingent Liabilities and Contingent Assets, when
there is an expected future economic outflow, arising from a past event, the
value of which can be reasonably estimated, a provision should be recognised.
Accordingly, in accordance with IFRS, the Group has recognised a charge to the
income statement of £6,203 million (held as a liability at 31 December 2024),
being:
- £2,456 million in respect of the cash and cash equivalents including
investments held at fair value on the balance sheet at 31 December 2024 and
which is expected to be paid in 2025; and
- £3,747 million in respect of the Group's estimate of ITCAN's remaining
liability. As the terms of the Proposed Plans dictate, there is no
predetermined amount that ITCAN or any of the Companies individually are
required to pay. ITCAN and the other Companies are required to make annual
payments based on a percentage of net income after tax generated from all
sources, excluding New Categories, until the Companies settle the liability in
full. Furthermore, several factors including the future financial performance
of each Company (excluding New Categories) can impact the value of the
remaining liability. However these do not, in our view, preclude a provision
to be recognised based upon Management's estimates.
Due to the distortive nature of the above when comparing 2024 versus 2023, in
line with the Group's policy, the above charges have been treated as an
adjusting item.
Other Financial Information
Continued
Update on Quebec class action and CCAA (continued)
Adjusted Non-GAAP performance:
For the purposes of management reporting and reflecting how Management will
assess the performance of Canada on an ongoing basis, from 2025, a charge will
be recognised in the Group's income statement for management accounts purposes
and will be reflected in the Non-GAAP adjusted profit from operations for AME
and the Group, with a commensurate impact reflected in adjusted earnings per
share.
This charge will be calculated in line with the Proposed Plans - based on a
percentage of ITCAN's net income after taxes, based on amounts generated from
all sources, excluding New Categories. This will continue until the aggregate
settlement amount is paid. This will be reflected in the adjusted performance
of the Group and will be referred to as "as adjusted for Canada".
Due to the uncertain nature of the timing of the implementation of the
settlement on the Group's 2025 results, for the purposes of 2025 versus 2024
this charge will be 100% of the profit after interest and tax from all
sources, excluding New Categories, in Canada.
From 2026 (assuming the Proposed Plans have been implemented in 2025), this
charge will reflect the settlement agreement, being an assumed 85% of profit
after interest and taxes from all sources, excluding New Categories, in
Canada, reducing in future periods in line with the settlement agreement.
Management believe that recognising a charge to the income statement in the
year will reflect the financial performance in Canada resulting from the
decisions taken with respect to resource allocation by the Group's Management.
This approach will also ensure the economic delivery from Canada will be
comparable with other markets in the Group, when comparing the results as
represented by the adjusted income statement.
For ease of reference and to assist the users' understanding of the Group
results, 2024 results, as adjusted for 100% of Canada's profit after tax
(excluding New Categories) and presented to act as a comparator for the 2025
performance, would have been as follows:
For year ended 31 December 2024 Reported Adj Items Adjusted Adj. for Canada As adjusted for Canada
£m £m £m £m £m
Profit from Operations
U.S. 4,087 2,299 6,386 - 6,386
AME (3,464) 6,784 3,320 (520) 2,800
APMEA 2,113 71 2,184 - 2,184
Total Region 2,736 9,154 11,890 (520) 11,370
Net finance costs (1,098) (491) (1,589) (126) (1,715)
Associates and joint ventures 1,900 (1,379) 521 - 521
Profit before tax 3,538 7,284 10,822 (646) 10,176
Taxation (357) (2,206) (2,563) 169 (2,394)
Non-controlling interests (113) (38) (151) - (151)
Coupons relating to hybrid bonds net of tax (42) - (42) - (42)
Profit attributable to shareholders 3,026 5,040 8,066 (477) 7,589
Diluted number of shares (m) 2,225 2,225 2,225
Diluted earnings per share (pence)(3) 136.0 362.5 341.1
At 31 December 2024, restricted cash in ITCAN was £2,072 million and
restricted investments held at fair value were £437 million.
It is anticipated that there will be an outflow of cash, cash equivalents and
investments held at fair value as part of the implementation of the Proposed
Plans. To aid the users of the financial statements, the below table has been
provided to illustrate the Group's leverage ratio of adjusted net debt to
adjusted EBITDA, after adjusting for Canada.
Years ended 31 December 2024
£m
Adjusted net debt - see page 59 30,583
Provision recognised in respect of cash and cash equivalents and investments 2,456
held at fair value in Canada
Adjusted net debt as adjusted for the Canada cash, cash equivalents and 33,039
investments held at fair value
Adjusted EBITDA - see page 59 12,524
Adjusted EBITDA earned in Canada* (525)
Adjusted EBITDA as adjusted for the EBITDA earned in Canada* 11,999
Adjusted net debt to adjusted EBITDA as adjusted for Canada* 2.75x
*excludes New Categories
For a summary of the case, please see the Contingent Liabilities section on
page 38. Full details of the case and the assessment of goodwill will be
included in the Group's Annual Report and Accounts and Form 20-F for the year
ended 31 December 2024 (note 12 Intangible Assets and note 31 Contingent
Liabilities and Financial Commitments).
Other Information
Risks and uncertainties
The Board carried out a robust assessment of the Principal Risks and
uncertainties facing the Group for the period, including those that would
threaten its business model, future performance, solvency, liquidity and
viability. The Board also maintained close oversight of the Group's response
to critical external uncertainties, recognising current macro-economic and
geopolitical challenges.
All Group risks are reviewed biannually by the Audit Committee and annually by
the Board. Sustainability is core to the Group's long-term business strategy
and sustainability risk factors are embedded across the Group's risks in
accordance with the Group's Risk Management Framework.
In 2024, the Board recognised Climate Change and Circular Economy as separate
risks reflecting the distinct qualities of each.
The Principal Risks facing the Group are summarised under the headings of:
- Competition from illicit trade;
- Geopolitical tensions;
- Tobacco, New Categories and other regulation interrupts the growth
strategy;
- Supply chain disruption;
- Litigation;
- Significant increases or structural changes in tobacco, nicotine and New
Categories related taxes;
- Inability to develop, commercialise and deliver the New Categories
strategy;
- Disputed taxes, interest and penalties;
- Injury, illness or death in the workplace;
- Solvency and liquidity;
- Foreign exchange rate exposures;
- Climate change;
- Circular economy; and
- Cyber security.
A summary of all the risk factors (including the Principal Risks) which are
monitored by the Board through the Group's risk register will be included in
the Annual Report and Accounts and Form 20-F for the year ended 31 December
2024.
Update on investigations into misconduct allegations
The Group investigates, and becomes aware of governmental authorities'
investigations into, allegations of misconduct, including alleged breaches of
sanctions and allegations of corruption, at Group companies. Some of these
allegations of misconduct, alleged breaches of sanctions and allegations of
corruption are currently being investigated. The Group cooperates with the
authorities, where appropriate.
In June 2024, the Group paid US$332 million (approximately £267 million) to
the U.S. Department of Justice in final settlement of the previously disclosed
investigation.
Changes in the Group
ITC Ltd
In 2024, the Group sold 436,851,457 ordinary shares held in the Group's main
associate, ITC Ltd (ITC) in India. The sale represents 3.5% of ITC's ordinary
shares. The Group realised net proceeds of £1,577 million, with a net credit
of £1,361 million recognised in the year. The gain has been treated as an
adjusting item.
Organigram
As previously announced, the Group signed an agreement for a further
investment in Organigram, with a value of CAD$125 million (£74 million) in
three tranches.
In 2024, the Group concluded two of the three tranches for £24 million each,
acquiring 25,786,350 shares at a price of CAD$3.22 per share. The final
tranche of 12,893,175 shares at CAD$3.22 per share (estimated to be
£24 million) is anticipated to be completed in February 2025. These
investments are to support Organigram in the creation of "Jupiter", a
strategic investment pool designed to expand Organigram's geographic footprint
and capitalise on emerging growth opportunities.
The Group's equity position at 31 December 2024 was c.30.6% and is anticipated
to rise to c.36.65% (restricted to 30% voting rights) once the final tranche
has been completed.
During the year, Organigram completed investments into Sanity Group GmbH and
Steady State LLC, both of which are associated undertakings of the Group, and
an acquisition of Motif Labs Ltd. in Canada.
Other
In July 2024, the Group acquired Beni Oral Nicotine LLC for US$30 million
(£23 million) cash and deferred contingent consideration of up to US$200
million (£160 million), with the deferred consideration payable after five
years and contingent upon meeting certain performance indicators. The
transaction has been accounted for as an acquisition of assets.
Following a strategic review, the Group intends to seek an orderly exit from
Cuba. The financial impact on revenue or adjusted profit from operations of
any exit is not considered material to the understanding of the Group's
performance and the results of future periods will not reflect an inorganic
adjustment.
Other Information
Continued
Changes to the Main Board and Management Board
As previously disclosed, the following Board and Management Board changes have
taken place:
- Sue Farr and Dimitri Panayotopoulos stepped down from the Board as
Non-Executive Directors following the 2024 Annual General Meeting on 24 April
2024; and
- Soraya Benchikh was appointed as Chief Financial Officer, joining the Main
Board and the Management Board, with effect from 1 May 2024.
Also as previously disclosed:
- Karen Guerra joined the Remuneration Committee and stepped down from the
Audit Committee with effect from 10 February 2025;
- Uta Kemmerich-Keil will join the Board as an independent Non-Executive
Director and member of the Audit and Nominations Committees with effect from
17 February 2025; and
- Murray S. Kessler will step down from the Board with effect from 17
February 2025 and will not stand for re-election at the AGM.
Going concern
A description of the Group's business activities, its financial position, cash
flows, liquidity position, facilities and borrowings position, together with
the factors likely to affect its future development, performance and position,
are set out in this announcement. Further information will be provided in the
Strategic Report and in the Notes on the Accounts, all of which will be
included in the Group's 2024 Annual Report and Accounts and Form 20-F.
The Group has, at the date of this Preliminary Announcement, sufficient
existing financing available for its estimated requirements for at least 12
months from the date of approval of this condensed consolidated financial
information. This, together with the ability to generate cash from trading
activities, the performance of the Group's Strategic Portfolio, its leading
market positions in a number of countries and its broad geographical spread,
as well as numerous contracts with established customers and suppliers across
different geographical areas and industries, provides the Directors with the
confidence that the Group is well placed to manage its business risks
successfully through the ongoing uncertainty, the current macro-economic
financial conditions and the general outlook in the global economy.
After reviewing the Group's forecast financial performance and financing
arrangements, the Directors consider that the Group has adequate resources to
continue operating for at least 12 months from the date of approval of this
preliminary announcement and that it is therefore appropriate to continue to
adopt the going concern basis in preparing the Group's 2024 Annual Report and
Accounts and Form 20-F.
Additional information
In addition to this Preliminary Announcement, the Group wishes to inform the
reader that additional information will be available in documents filed with
or furnished to the LSE and U.S. Securities and Exchange Commission (SEC) on
14 February 2025 and which should be referred to in addition to this
Preliminary Announcement. Additional information includes:
- The Group's audited Financial Statements;
- Exchange rates;
- Reconciliations of all non-GAAP measures from the most relevant IFRS
equivalent;
- Information regarding contingent liabilities and financial commitments;
- Information for shareholders on dividends;
- Information with regard to the Group's Principal Risks;
- Key dates in respect of the year ending 31 December 2025; and
- Glossary and definition of key terms.
This information will be an extract of information that will be included in
the Group's 2024 Annual Report and Accounts and Form 20-F for the 12 months
ended 31 December 2024 which is expected to be published on 14 February 2025.
Financial Statements
Contents
Page
Financial Statements:
Group Income Statement 23
Group Statement of Comprehensive Income 24
Group Statement of Changes in Equity 25
Group Balance Sheet 27
Group Cash Flow Statement 28
Notes to the Financial Statements 29
Other Information 41
Data Lake and Reconciliations 48
Financial Statements
Group Income Statement
For years ended 31 December
2024 2023
£m £m
Revenue(1) 25,867 27,283
Raw materials and consumables used (4,565) (4,545)
Changes in inventories of finished goods and work in progress 129 (96)
Employee benefit costs (2,831) (2,664)
Depreciation, amortisation and impairment costs (3,101) (28,614)
Other operating income 340 432
Loss on reclassification from amortised cost to fair value (10) (9)
Other operating expenses (13,093) (7,538)
Profit/(loss) from operations 2,736 (15,751)
Net finance costs (1,098) (1,895)
Share of post-tax results of associates and joint ventures 1,900 585
Profit/(loss) before taxation 3,538 (17,061)
Taxation on ordinary activities (357) 2,872
Profit/(loss) for the year 3,181 (14,189)
Attributable to:
Owners of the parent 3,068 (14,367)
Non-controlling interests 113 178
3,181 (14,189)
Earnings/(loss) per share
Basic 136.7p -646.6p
Diluted(2) 136.0p -646.6p
All of the activities during both years are in respect of continuing
operations.
The accompanying notes on pages 29 to 40 form an integral part of this
condensed consolidated financial information.
1. Revenue is net of duty, excise and other taxes of £33,818 million and
£36,917 million for the years ended 31 December 2024 and 31 December 2023,
respectively.
2. In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS.
Financial Statements
Continued
Group Statement of Comprehensive Income
For years ended 31 December
2024 2023
£m £m
Profit/(loss) for the year (page 23) 3,181 (14,189)
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss: (50) (3,317)
Foreign currency translation and hedges of net investments in foreign
operations
- differences on exchange from translation of foreign operations (195) (4,049)
- reclassified and reported in profit for the year - 552
- net investment hedges - net fair value gains on derivatives 20 236
- net investment hedges - differences on exchange on borrowings 17 9
Cash flow hedges
- net fair value gains 65 59
- reclassified and reported in profit for the year 36 12
- tax on net fair value gains in respect of cash flow hedges (23) (23)
Investments held at fair value
- net fair value losses - (6)
Associates
- share of other comprehensive income, net of tax (13) (107)
- differences on exchange reclassified to profit or loss 43 -
Items that will not be reclassified subsequently to profit or loss: (7) (57)
Retirement benefit schemes
- net actuarial losses (19) (106)
- movements in surplus recognition (14) 24
- tax on actuarial (losses)/gains in respect of subsidiaries (1) 30
Investments held at fair value
- net fair value losses (6) -
Associates - share of other comprehensive income, net of tax 33 (5)
Total other comprehensive expense for the year, net of tax (57) (3,374)
Total comprehensive income/(expense) for the year, net of tax 3,124 (17,563)
Attributable to:
Owners of the parent 3,013 (17,699)
Non-controlling interests 111 136
3,124 (17,563)
The accompanying notes on pages 29 to 40 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Statement of Changes in Equity
At 31 December 2024 Attributable to owners of the parent
Share Share premium, capital redemption and merger reserves Other Retained Total attributable Perpetual hybrid bonds Non-controlling interests
capital reserves earnings to owners Total equity
of parent
£m £m £m £m £m £m £m £m
Balance at 1 January 2024 614 26,630 (894) 24,531 50,881 1,685 368 52,934
Total comprehensive (expense)/income for the year comprising: - - (21) 3,034 3,013 - 111 3,124
(page 24)
Profit for the year - - - 3,068 3,068 - 113 3,181
(page 23)
Other comprehensive expense for the year (page 24) - - (21) (34) (55) - (2) (57)
Other changes in equity
Cash flow hedges reclassified and reported in total assets - - 13 - 13 - - 13
Employee share options
- value of employee services - - - 70 70 - - 70
- proceeds from new shares issued - 6 - - 6 - - 6
- treasury shares used for share option schemes - - - - - - - -
Dividends and other appropriations
- ordinary shares - - - (5,209) (5,209) - - (5,209)
- to non-controlling interests - - - - - - (127) (127)
Purchase of own shares
- held in employee share ownership trusts - - - (94) (94) - - (94)
- share buy-back programme - - - (698) (698) - - (698)
- shares bought back and cancelled (7) 7 - - - - - -
Treasury shares cancelled (22) 22 - - - - - -
Perpetual hybrid bonds
- coupons paid - - - (56) (56) - - (56)
- tax on coupons paid - - - 14 14 - - 14
Other movements - - - 18 18 - - 18
Balance at 31 December 2024 585 26,665 (902) 21,610 47,958 1,685 352 49,995
Financial Statements
Continued
Group Statement of Changes in Equity (continued)
At 31 December 2023 Attributable to owners of the parent
Share Share premium, capital redemption and merger reserves Other Retained In respect of assets held-for-sale Total attributable Perpetual hybrid bonds Non-controlling interests Total equity
capital reserves earnings to owners
of parent
£m £m £m £m £m £m £m £m £m
Balance at 1 January 2023 614 26,628 2,655 44,081 (295) 73,683 1,685 342 75,710
Total comprehensive (expense)/income for the year comprising: (page 24) - - (3,281) (14,418) - (17,699) - 136 (17,563)
(Loss)/profit for the year (page 23) - - - (14,367) - (14,367) - 178 (14,189)
Other comprehensive expense for the year (page 24) - - (3,281) (51) - (3,332) - (42) (3,374)
Other changes in equity
Cash flow hedges reclassified and reported in total assets - - 27 - - 27 - - 27
Employee share options
- value of employee services - - - 71 - 71 - - 71
- proceeds from new shares issued - 2 - - - 2 - - 2
Dividends and other appropriations
- ordinary shares - - - (5,071) - (5,071) - - (5,071)
- to non-controlling interests - - - - - - - (110) (110)
Purchase of own shares
- held in employee share ownership trusts - - - (110) - (110) - - (110)
Perpetual hybrid bonds
- coupons paid - - - (58) - (58) - - (58)
- tax on coupons paid - - - 14 - 14 - - 14
Reclassification of equity in respect of assets classified as held-for-sale - - (295) - 295 - - - -
Other movements - - - 22 - 22 - - 22
Balance at 31 December 2023 614 26,630 (894) 24,531 - 50,881 1,685 368 52,934
The accompanying notes on pages 29 to 40 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Balance Sheet
As at 31 December
2024 2023
£m £m
Assets
Intangible assets 94,276 95,562
Property, plant and equipment 4,379 4,583
Investments in associates and joint ventures 1,902 1,970
Retirement benefit assets 937 956
Deferred tax assets 2,573 911
Trade and other receivables 282 321
Investments held at fair value 146 118
Derivative financial instruments 110 109
Total non-current assets 104,605 104,530
Inventories 4,616 4,938
Income tax receivable 67 172
Trade and other receivables 3,604 3,621
Investments held at fair value 513 601
Derivative financial instruments 186 181
Cash and cash equivalents 5,297 4,659
14,283 14,172
Assets classified as held-for-sale 11 14
Total current assets 14,294 14,186
Total assets 118,899 118,716
Equity - capital and reserves
Share capital 585 614
Share premium, capital redemption and merger reserves 26,665 26,630
Other reserves (902) (894)
Retained earnings 21,610 24,531
Owners of the parent 47,958 50,881
Perpetual hybrid bonds 1,685 1,685
Non-controlling interests 352 368
Total equity 49,995 52,934
Liabilities
Borrowings 32,638 35,406
Retirement benefit liabilities 820 881
Deferred tax liabilities 11,679 12,192
Other provisions for liabilities 4,071 531
Trade and other payables 685 893
Derivative financial instruments 268 206
Total non-current liabilities 50,161 50,109
Borrowings 4,312 4,324
Income tax payable 1,681 992
Other provisions for liabilities 3,044 468
Trade and other payables 9,550 9,700
Derivative financial instruments 156 189
Total current liabilities 18,743 15,673
Total equity and liabilities 118,899 118,716
The accompanying notes on pages 29 to 40 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Cash Flow Statement
For years ended 31 December
2024 2023
£m £m
Cash flows from operating activities
Cash generated from operating activities (page 34) 11,573 12,830
Dividends received from associates 406 506
Tax paid (1,854) (2,622)
Net cash generated from operating activities 10,125 10,714
Cash flows from investing activities
Interest received 187 145
Purchases of property, plant and equipment (486) (460)
Proceeds on disposal of property, plant and equipment 145 54
Purchases of intangibles (122) (141)
Proceeds on disposal of intangibles 39 27
Purchases of investments (216) (448)
Proceeds on disposals of investments 299 405
Investment in associates and acquisitions of other subsidiaries net of cash (48) (37)
acquired
Proceeds from disposal of shares in associate, net of tax 1,577 -
Disposal of subsidiary, net of cash disposed of - 159
Net cash generated from/(used in) investing activities 1,375 (296)
Cash flows from financing activities
Interest paid on borrowings and financing related activities (1,703) (1,682)
Interest element of lease liabilities (37) (30)
Capital element on lease liabilities (165) (162)
Proceeds from increases in and new borrowings 2,404 5,134
Reductions in and repayments of borrowings (4,826) (6,769)
Outflows relating to derivative financial instruments (128) (480)
Purchases of own shares - share buy-back programme (698) -
Purchases of own shares held in employee share ownership trusts (94) (110)
Coupon paid on perpetual hybrid bonds (56) (59)
Dividends paid to owners of the parent (5,213) (5,055)
Capital injection from and purchases of non-controlling interests - -
Dividends paid to non-controlling interests (121) (105)
Other 5 4
Net cash used in financing activities (10,632) (9,314)
Net cash flows generated from operating, investing and financing activities 868 1,104
Transferred from held-for-sale* - 368
Differences on exchange (281) (292)
Increase in net cash and cash equivalents in the year 587 1,180
Net cash and cash equivalents at 1 January 4,517 3,337
Net cash and cash equivalents at 31 December 5,104 4,517
Cash and cash equivalents per balance sheet 5,297 4,659
Overdrafts and accrued interest (193) (142)
Net cash and cash equivalents at 31 December 5,104 4,517
(*Included in Transferred from held-for-sale in 2023 is £102 million of
foreign exchange loss due to the devaluation of the Russian ruble.)
The accompanying notes on pages 29 to 40 form an integral part of this
condensed consolidated financial information. The net cash flows relating to
the adjusting items within profit from operations on pages 29 to 32, included
in the above, are an outflow of £824 million (31 December 2023: £156 million
outflow).
Notes to the Financial Statements
Accounting policies and basis of preparation
The condensed consolidated financial information has been extracted from the
Group's 2024 Annual Report and Accounts and
Form 20-F, including the financial statements for the year ended 31 December
2024, which is expected to be published on 14 February 2025. This condensed
consolidated financial information does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
The Group prepares its annual consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and UK-adopted international
accounting standards, and in accordance with the provisions of the UK
Companies Act 2006 applicable to companies under IFRS. UK-adopted
international accounting standards differ in certain respects from IFRS as
issued by the IASB. The differences have no impact on the Group's consolidated
financial statements for the periods presented.
These condensed financial statements have been prepared under the historical
cost convention, except in respect of certain financial instruments. They are
prepared on a basis consistent with the IFRS accounting policies as set out in
the Group's Annual Report and Accounts and Form 20-F for the year ended 31
December 2023.
The preparation of these condensed consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities and the disclosure of contingent
liabilities at the date of these condensed consolidated financial statements.
Such estimates and assumptions are based on historical experience and various
other factors that are believed to be reasonable in the circumstances and
constitute management's best judgment at the date of the condensed
consolidated financial statements. Other than in respect of certain
assumptions related to the assessment of the carrying value of goodwill and
intangible assets and with respect to the ongoing litigation in Canada (as
described on page 18), the key estimates and assumptions were the same as
those that applied to the consolidated financial information for the year
ended 31 December 2023, apart from updating the assumptions used to determine
the carrying value of liabilities for retirement benefit schemes. As described
on page 31, the Group has assessed whether there are any impairment triggers
related to the carrying value of the significant investments of goodwill and
intangibles. Other than as described on page 31 in relation to Camel Snus and
page 32 in relation to Malaysia, no other impairment of goodwill and
intangibles is required. In the future, actual experience may deviate from
these estimates and assumptions, which could affect these condensed
consolidated financial statements as the original estimates and assumptions
are modified, as appropriate, in the period in which the circumstances change.
After reviewing the Group's forecast financial performance and financing
arrangements, the Directors consider that the Group has adequate resources to
continue operating for at least 12 months from the date of approval of this
condensed consolidated financial information and that it is therefore
appropriate to continue to adopt the going concern basis in preparing the 2024
Annual Report and Accounts and Form 20-F.
Analysis of revenue and profit from operations by segment
Years ended 31 December 2024 2023
Reported Exchange Reported at CC(2) Reported
Revenue £m £m £m £m
U.S. 11,278 314 11,592 11,994
AME 9,241 523 9,764 9,791
APMEA 5,348 447 5,795 5,498
Total Region 25,867 1,284 27,151 27,283
Years ended 31 December 2024 2023
Reported Adj Items(1) Adjusted Exchange Adjusted at CC(2) Reported Adj Items(1) Adjusted
Profit/(loss) from operations £m £m £m £m £m £m £m £m
U.S. 4,087 2,299 6,386 194 6,580 (20,781) 27,602 6,821
AME (3,464) 6,784 3,320 192 3,512 3,194 266 3,460
APMEA 2,113 71 2,184 163 2,347 1,836 348 2,184
Total Region 2,736 9,154 11,890 549 12,439 (15,751) 28,216 12,465
Notes to the analysis of revenue and profit from operations above:
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
Adjusting Items
Adjusting items are significant items of income or expense 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 because of their size, nature or incidence.
In identifying and quantifying adjusting items, the Group consistently applies
a policy that defines criteria that are required to be met for an item to be
classified as adjusting. These items are separately disclosed in the segmental
analyses or in the notes to the accounts as appropriate.
The Group believes that these items are useful to users of the Group financial
statements in helping them to understand the underlying business performance
and are used to derive the Group's principal non-GAAP measures of organic
revenue, organic New Categories revenue, Smokeless revenue as a proportion of
total revenue, adjusted gross profit, adjusted gross margin, adjusted profit
from operations, adjusted organic profit from operations, organic New
Categories contribution, organic New Categories contribution margin, adjusted
diluted earnings per share, adjusted organic diluted earnings per share,
adjusted net finance costs, adjusted taxation and operating cash flow
conversion ratio, adjusted cash generated from operations, free cash flow
(before dividends paid to shareholders) and free cash flow (after dividends
paid to shareholders) all of which are before the impact of adjusting items
and which are reconciled from revenue, profit from operations, diluted
earnings per share, net finance costs, taxation, cash conversion ratio and net
cash generated from operating activities.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations
Adjusting items are significant items in the profit from operations that
individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group's underlying financial performance. In summary, in
2024, the Group incurred £9,154 million (2023: £28,216 million) of adjusting
items within profit from operations:
Years ended 31 December
2024 2023
£m £m
(a) Restructuring and integration costs - (2)
(b) Amortisation and impairment of trademarks and similar intangibles 2,279 23,202
(c) Charges in connection with disposal of subsidiaries - 351
(d) Charges in respect of an excise assessment in Romania 449 -
(d) Charges in respect of the ongoing litigation in Canada (excluding 6,203 -
goodwill)
(d) Charges in connection with disposal of associate 6 -
(d) Credit in settlement of historic litigation in relation to the Fox River (132) -
(d) Impairment of fixed assets, including related to the Group's head office 149 -
in London and the intention to seek an orderly exit from Cuba
(d) Credit in respect of calculation of excise on social contributions in - (148)
Brazil
(d) Credit in respect of calculation of VAT on social contributions in Brazil - (19)
(d) Charges in respect of DOJ and OFAC investigations 4 75
(d) Charges in respect of contributions on investment grants in Brazil - 47
(d) Other adjusting items (including Engle) 157 96
(e) Impairment of goodwill 39 4,614
Total adjusting items included in profit from operations 9,154 28,216
(a) Restructuring and integration costs
Restructuring costs have reflected the costs associated with the
implementation of revisions to the Group's operating model, mainly in relation
to Quantum, a restructuring programme implemented within the Group. No further
Quantum restructuring charges were recognised as adjusting in 2024 or 2023,
following the completion of the programme in 2022.
2023 included a net credit of £2 million in respect of unutilised
provisions.
(b) Amortisation and impairment of trademarks and similar intangibles
Acquisitions in previous years have resulted in the capitalisation of
trademarks and similar intangibles including those which are amortised over
their expected useful lives. The amortisation and impairment charge of £2,279
million (2023: £23,202 million) is included in depreciation, amortisation and
impairment costs in the income statement.
As a result of accelerated volume loss to Modern Oral, an impairment of £646
million in respect of the U.S. brand Camel Snus has been recognised.
Concurrent to the impairment assessment, and reflecting Management's revised
volume projections, Management concluded that it was appropriate to
redesignate Camel Snus as definite-lived from 1 January 2025
(2024: indefinite-lived, 2023: indefinite-lived) with an estimated life of 20
years to be amortised on a straight-line basis. The annual increase to
amortisation as a result of this change will be £23 million. Management
recognise that the date at which the redesignation to definite-lived is made
is judgmental.
(c) Loss on disposal of business
The charge in 2023 related to the disposal of the Russian and Belarusian
businesses, concluded in September 2023. There were no similar charges
recognised in 2024.
(d) Other
In 2024, the Group incurred a net charge of £6,836 million (2023: net charge
of £51 million) of other adjusting items. These included:
- A charge of £6,203 million in respect of the potential settlement in
Canada (please refer to page 18);
- A charge of £449 million in respect of an excise assessment in Romania
that was concluded in 2024, with £390 million paid and a provision recognised
for the remainder;
- A credit related to the settlement of historical litigation in respect of
the Fox River (£132 million);
- Impairment of fixed assets of £149 million, including in respect of the
Group's Head Office in London and the intention to seek an orderly exit from
Cuba; and
- Other costs of £157 million (2023: £96 million), mainly related to
litigation costs including Engle progeny and other health-related claims.
Included in 2024 was a credit of £2 million recognised for the settlement
with the state of Idaho and a credit of £18 million related to the
Washington portion of the 2004 Non-Participating Manufacturer adjustment
award.
In 2023, the Group concluded the DOJ and OFAC settlement agreements to resolve
historical breaches of sanctions (see page 20) recognising a charge in that
year of £75 million. The final payment was made in 2024, with the Group
recognising charges (largely due to foreign exchange movements) of £4
million. Also in 2023, the Group recognised net credits totalling £120
million in Brazil largely related to the calculation of VAT and excise on
social contributions.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(e) Ongoing impairment review of assets
The Group's impairment testing for goodwill uses the value-in-use method, with
calculations prepared on a ten-year cash flow forecast (five-year cash flow
forecast for Reynolds American, Canada and Malaysia) which assumes long-term
volume decline of cigarettes, generally offset by pricing.
After this forecast, a growth rate into perpetuity has been applied. The
Reynolds American trademarks and similar intangibles with indefinite lives
(brands) have been tested for impairment on the basis of fair value less cost
of disposal whereby, after calculating the value-in-use, a tax amortisation
benefit factor is applied to incorporate the additional value a market
participant would derive in an asset acquisition scenario. Post-tax discount
rates were used in the impairment testing, based on the Group's weighted
average cost of capital, taking into account the cost of capital and
borrowings, to which specific market-related premium adjustments are made.
These adjustments are derived from external sources and are based on the
spread between bonds (or credit default swaps, or similar indicators) issued
by the relevant local (or comparable) government, adjusted for the Group's own
credit market risk. Valuations derived from applying post-tax discount rates
to post-tax cash flows are aligned to those that would arise from applying
pre-tax discount rates to pre-tax cash flows. For ease of use and consistency
in application, these results are periodically calibrated into bands based on
internationally recognised credit ratings. This applies to all cash-generating
units (CGUs) with the exception of Reynolds American, for which the discount
rate is independently determined based on a weighted average cost of capital
in respect of the U.S. and U.S. market-related premiums, and Malaysia where
the discount rate reflects BAT Malaysia's weighted average cost of capital.
Further adjustments to reflect risk not otherwise reflected in the forecast
cash flows are also applied as required.
Subsequent to the FDA announcement on 28 April 2022 of a proposed product
standard to prohibit menthol as a characterising flavour in cigarettes, the
FDA formally submitted the final product standard to the Office of Management
and Budget on 18 October 2023. Following delays, in January 2025, the new
Trump administration withdrew the rule from the Office of Management and
Budget and it is currently held pending the new Trump administration's
reconsideration of regulations advanced by the previous administration.
Management notes that the timetable for any final product standard remains
uncertain.
On 21 June 2022, the FDA announced plans to develop a proposed product
standard that would establish a maximum nicotine level in cigarettes and
certain other combustible tobacco products to reduce addictiveness. On 15
January 2025, in the final days of the outgoing Biden administration, the FDA
issued a proposed product standard whereby the agency would limit nicotine
levels in cigarettes following a two-year effective date from publication of
any final rule. The proposed rule is currently subject to public comment, but
may be de-prioritised by the new Trump administration as it considers all
proposed regulations advanced by the previous administration. Management notes
that the FDA proposed rule does not itself constitute restrictions on nicotine
levels in cigarettes, and any proposed rule must still go through the
established comprehensive U.S. rule-making process, the timetable and outcome
for which remains uncertain. Management also notes that it is not known
whether or when this proposed rule will be finalised, and, if adopted, whether
the final rule will be the same as or similar to the proposed rule.
In December 2022, the sale of most tobacco products with characterising
flavours (including menthol) other than tobacco were banned in the state of
California. The impact of the ban in California has been reflected in the cash
flow forecasts used in the impairment model.
The Group has a long-standing track record of managing regulatory shifts and,
in the event of regulatory change, the Group remains confident in its ability
to navigate that environment successfully.
During 2023, evolving insights indicated that the decline in industry volume
would be higher than previously forecasted due to the continued macro-economic
headwinds in the U.S. combined with an acceleration of the Vapour category
growth. This growth is driven by adult combustible consumers turning to Vapour
devices (specifically through the use of illicit single-use products). Due to
the continued challenging trading conditions in the U.S., a detailed external
study was commissioned to assist Management with an independent view of the
potential forecast performance for the market. This review assisted Management
in preparing the Group's five-year forecast of the U.S. market, with further
extrapolation based upon the estimated performance of the brands.
Following the review and as a result of the higher forecast combustibles
market decline as described above, a total impairment of £27,291 million in
respect of the U.S. CGU was identified in 2023.
In 2024, in line with the approach used since 2022, the value-in-use
calculation for the total U.S. CGU and the fair value calculations for the
brand intangibles have been determined based on probability weighted scenarios
to derive a risk-adjusted cash flow forecast applied within the valuations.
These scenarios incorporate varying assumptions on potential timing for a
final product standard to prohibit menthol as a characterising flavour in
cigarettes becoming effective. However, the impact of the timing of any
potential menthol ban was not deemed to be a key assumption.
The below table illustrates the carrying values, the key assumptions used in
the assessment and the variance in that assumption required before an
impairment is required for Reynolds American goodwill and specific indefinite-
and definite-lived brand intangibles.
Carrying Value Pre-tax discount rate Long-term growth rate
At 31 December 2024 (£) Applied Required increase to reach nil headroom Applied Required reduction to reach nil headroom
Reynolds American Goodwill 31,491 9.0% 1.9% 1.0% (1.8)%
Newport 20,421 8.6% 0.5%
Camel 7,696 8.6% 3.9%
Pall Mall 2,522 8.8% 6.3%
Natural American Spirit 10,272 7.9% 1.6%
Grizzly 9,373 7.6% 0.7% 1.0% (0.8)%
Camel Snus * 459 8.6% N/A (6.9)% N/A
*An impairment has been recognised in respect of Camel Snus during the year
and hence the above sensitivities are not applicable. Long-term growth rates
are not applicable for the definite-lived brands.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(e) Ongoing impairment review of assets (continued)
In addition to the above, Management also considered reasonably possible
scenarios in respect of the Grizzly and Newport brands. The Newport brand
fair value is highly sensitive to changes in the volume assumptions.
Management believe a decrease in volume year on year in the discrete period by
an additional 1% is a reasonably possible change. This would result in an
impairment of £1.3 billion. Similarly, a 3% reduction in the 5-year
volume CAGR for Grizzly is considered reasonably possible and would result in
an impairment of £0.9 billion.
Based on the impairment assessment undertaken by Management, the Group has
recognised an impairment of £39 million for the Malaysia CGU. This reflects
the continued difficult trading environment and developing regulations related
to the Vapour marketplace.
Adjusting items included in net finance costs
In 2024, the Group incurred adjusting items within net finance costs which was
a net income of £491 million, compared to a net cost of
£96 million in 2023. This included:
- The early repurchase of bonds as the Group realised a gain of £602
million arising on the difference between the redemption value and the
amortised cost of the bonds, partly offset by a fair value loss of £9 million
on debt-related derivatives and incurred other transaction costs of £3
million;
- Interest of £61 million (2023: £60 million) in relation to the FII GLO,
as described on page 40;
- A charge of £14 million in relation to a tax case in Brazil;
- Interest of £11 million on a tax provision in Indonesia;
- Interest of £8 million in relation to a tax provision in the Netherlands;
- A release of £25 million of interest on tax provision in Canada in
relation to a settlement agreement with local authorities;
- A further £11 million interest charge recorded on government liability
balances accumulated during CCAA protection; and
- A fair value loss of £19 million on embedded derivatives related to
associates.
All of the adjustments noted above have been included in the adjusted earnings
per share calculation on page 36.
Adjusting items included in results of associates and joint ventures
Adjusting items included in results of associates and joint ventures was a
credit of £1,379 million in 2024 (2023: £8 million credit), mainly related
to:
- The sale by the Group of 436,851,457 ordinary shares held in the Group's
main associate, ITC in India. The sale represents 3.5% of ITC's ordinary
shares, realising a gain of £1,361 million; and
- A deemed gain of £18 million (2023: £40 million gain) as a result of ITC
issuing ordinary shares under the company's Employees Share Option Scheme. The
issue of these shares and change in the Group's share of ITC resulted in a
deemed partial disposal.
Accordingly, the Group's share of ITC has reduced from 29.02% (31 December
2023) to 25.45% at 31 December 2024.
In 2023, the Group also recognised an impairment charge with respect to the
investment in Organigram of £36 million (or £34 million net of tax). No
impairment related to Organigram was recognised in 2024.
The share of post-tax results of associates and joint ventures is after the
adjusting items noted above, which are excluded from the calculation of
adjusted earnings per share as set out on page 36.
Adjusting items included in taxation
The Group's tax rate is affected by the adjusting items referred to below and
by the inclusion of the share of associates and joint ventures post-tax profit
in the Group's pre-tax results.
Adjusting items in 2024 included a net credit of £157 million mainly relating
to Brazilian Federal Tax Authority challenges regarding the treatment of Rio
de Janeiro VAT incentives and a provision for potential tax exposures in
Indonesia, offset by the revaluation of deferred tax liabilities arising on
trademarks recognised in the Reynolds American acquisition in 2017 due to
changes in U.S. state tax rates and the reversal of a tax provision in Canada
following a settlement agreement with local authorities.
In 2023, it included a net credit of £73 million mainly relating to the
revaluation of deferred tax liabilities arising on trademarks recognised in
the Reynolds American acquisition in 2017 due to changes in U.S. state tax
rates, the reversal of provisions related to tax risks in Russia and a
potential clawback of tax reliefs arising from the closure of the Group's
factory in Switzerland, partially offset by a provision for potential tax
exposures in the Netherlands and the tax impact in Brazil arising from the
legal case regarding Rio de Janeiro VAT incentives described above.
The adjusting tax item also includes £2,049 million (2023: £5,415 million)
in respect of the taxation on other adjusting items, which are described on
pages 29 to 32.
Refer to page 40 for the Franked Investment Income Group Litigation Order
update.
As the above items are not reflective of the ongoing business, they have been
recognised as adjusting items within taxation. All of the adjustments noted
above have been included in the adjusted earnings per share calculation on
page 36.
Notes to the Financial Statements
Continued
Liquidity
The Treasury function is responsible for raising finance for the Group,
managing the Group's cash resources and the financial risks arising from
underlying operations. All these activities are carried out under defined
policies, procedures and limits, reviewed and approved by the Board,
delegating oversight to the Chief Financial Officer and Treasury function. The
Group has targeted an average centrally managed bond maturity of at least five
years with no more than 20% of centrally managed debt maturing in a single
rolling 12-month period. As at 31 December 2024, the average centrally managed
debt maturity of bonds was 9.5 years (31 December 2023: 10.5 years) and the
highest proportion of centrally managed debt maturing in a single rolling
12-month period was 14.8% (31 December 2023: 15.7%).
The Group continues to maintain investment-grade credit ratings, with ratings
from Moody's, S&P and Fitch of Baa1 (stable outlook), BBB+ (stable
outlook), BBB+ (stable outlook), respectively, and continues to target a solid
investment-grade credit rating of Baa1, BBB+ and BBB+. The strength of the
ratings has underpinned debt issuance and the Group is confident of its
ability to continue to successfully access the debt capital markets. A credit
rating is not a recommendation to buy, sell or hold securities. A credit
rating may be subject to withdrawal or revision at any time. Each rating
should be evaluated separately of any other rating.
In order to manage its interest rate risk, the Group maintains both floating
rate and fixed rate debt. The Group sets targets (within overall guidelines)
for the desired ratio of floating to fixed rate debt on a net basis (at least
50% fixed on a net basis in the short to medium term). At 31 December 2024,
the relevant ratio of floating to fixed rate borrowings after the impact of
derivatives was 22:78 (31 December 2023: 10:90). On a net basis, after
offsetting liquid assets but excluding cash and other liquid assets (including
investments held at fair value) in Canada, which are subject to certain
restrictions under CCAA protection, the relevant ratio of floating to fixed
rate borrowings was 13:87 (31 December 2023: 2:98).
Available facilities
It is Group policy that short-term sources of funds (including drawings under
both the US$4 billion U.S. commercial paper programme and £3 billion euro
commercial paper programme) are backed by undrawn committed lines of credit
and cash. As at 31 December 2024, no commercial paper was outstanding (31
December 2023: £0 million). Cash flows relating to commercial paper issuances
with maturity periods of three months or less are presented on a net basis in
the Group's cash flow statement.
At 31 December 2024, the Group had access to a £5.4 billion revolving credit
facility. This facility was undrawn at 31 December 2024. In March 2024,the
Group exercised the first of the one-year extension options on the
£2.5 billion 364-day tranche of the revolving credit facility, with the
second one-year extension subsequently exercised in February 2025. Effective
March 2025, therefore, the £2.5 billion 364-day tranche will be extended to
March 2026. Additionally, £2.85 billion of the five-year tranche remains
available until March 2025, with £2.7 billion extended to March 2026 and
£2.5 billion extended to March 2027.
During 2024, the Group extended short-term bilateral facilities totalling
£2.4 billion. As at 31 December 2024, £nil million was drawn on a
short-term basis with £2.4 billion undrawn and still available under such
bilateral facilities. Cash flows relating to bilateral facilities that have
maturity periods of three months or less are presented on a net basis in the
Group's cash flow statement.
In January 2025, the Group entered into a medium-term facility of £503
million (equivalent) which was fully drawn.
Issuance, drawdowns and repayments in the period
- In February 2024, the Group accessed the US dollar market under the SEC
Shelf Programme, raising a total of US$1.7 billion across two tranches;
- In March 2024, the Group repaid a £229 million bond at maturity;
- In April 2024, the Group accessed the Euro market under its EMTN
Programme, raising a total of €900 million;
- To optimise the Group's debt capital structure using available liquidity
and to reduce gross and net debt, the Group completed capped cash debt tender
offers in May 2024, targeting series of low-priced, long-dated GBP-, EUR- and
USD-denominated bonds, pursuant to which the Group repurchased bonds prior to
their maturity in a principal amount of £1.8 billion equivalent; and
- In August, September and October 2024, the Group repaid US$1.9 billion,
US$1 billion and €850 million of bonds at maturity, respectively.
The Group has debt maturities of around £3.3 billion annually in the next
two years. Due to higher interest rates, net finance costs are expected to
increase as debts are refinanced.
Notes to the Financial Statements
Continued
Cash Flow
Net cash generated from operating activities
Net cash generated from operating activities in the IFRS cash flows on page 28
includes the following items:
Years ended 31 December
2024 2023
£m £m
Profit/(loss) for the year 3,181 (14,189)
Taxation on ordinary activities 357 (2,872)
Share of post-tax results of associates and joint ventures (1,900) (585)
Net finance costs 1,098 1,895
Profit/(loss) from operations 2,736 (15,751)
Adjustments for:
- depreciation, amortisation and impairment costs 3,101 28,614
- decrease in inventories 35 265
- increase in trade and other receivables (269) (487)
- decrease in Master Settlement Agreement payable (294) (287)
- increase in trade and other payables 58 640
- decrease in net retirement benefit liabilities (76) (111)
- increase/(decrease) in other provisions for liabilities 6,322 (489)
- other non-cash items (40) 436
Cash generated from operating activities 11,573 12,830
Dividends received from associates 406 506
Tax paid (1,854) (2,622)
Net cash generated from operating activities 10,125 10,714
Net cash generated from operating activities declined by 5.5% to £10,125
million (2023: £10,714 million). This was driven by:
- The realisation, in 2023, of tax credits in Brazil that did not repeat;
- Lower dividends received from the Group's associates of £406 million
(2023: £506 million), mainly related to ITC, largely reflecting the reduced
shareholding;
- A payment of £390 million in respect of an excise assessment in Romania;
and
- Decreases in tax paid of £1,854 million, compared to £2,622 million in
2023 as £700 million (US$895 million) have been deferred in the U.S. from
2024 until 2025.
During 2024, the Group made the final payment in respect of the settlement
agreements with the DOJ and OFAC in the amount of £267 million (2023: £262
million), while also receiving £132 million following the successful
conclusion of litigation concerning the Fox River.
In 2024, other litigation payments (mainly related to Engle and other
health-related claims in the U.S.) were higher at £147 million (2023: £73
million).
In 2023, the Group paid a one time payment of £59 million to settle the
investigation by the Nigerian Federal Competition and Consumer Protection
Commission (FCCPC).
The Group made interim repayments to HMRC of £50 million in both 2024 and
2023, and intends to make further interim repayments in future periods in
respect of the Franked Investment Income Group Litigation Order (FII GLO), as
described on page 40.
Expenditure on research and development was approximately £380 million in
2024 (2023: £408 million) with a focus on products that could potentially
reduce the risk associated with smoking conventional cigarettes.
Net cash from investing activities
Net cash from investing activities was an inflow of £1,375 million, an
improvement of £1,671 million from the same period last year when it was an
outflow of £296 million. The improvement was largely due to £1,577 million
net proceeds from the partial monetisation of our investment in ITC, partly
offset by the receipt in 2023 of the net proceeds related to the sale of the
Group's businesses in Russia and Belarus (£159 million). Also included in
investing activities are cash flows related to short-term investment products,
including treasury bills, which were a net inflow of £83 million compared to
a net outflow of £43 million in 2023. Purchases of property, plant and
equipment were higher than 2023, at £486 million (2023: £460 million).
Included within investing activities is gross capital expenditure. This
includes the investment in the Group's global operational infrastructure
(including, but not limited to, the manufacturing network, trade marketing and
IT systems). In 2024, the Group invested £581 million, an increase of 7.3% on
the prior year (2023: £541 million). The Group now expects gross capital
expenditure in 2025 of approximately £650 million mainly related to the
ongoing investment in the Group's operational infrastructure, including the
expansion of our New Categories portfolio including enhancements to our Modern
Oral capacity.
Net cash used in financing activities
Net cash used in financing activities was an outflow of £10,632 million in
2024 (2023: £9,314 million outflow). The total outflow includes:
- The payment of the dividend of £5,213 million (2023: £5,055
million);
- Higher interest paid in the period of £1,703 million (2023: £1,682
million);
- The net repayment of borrowings in 2024 of £2,422 million compared to
a net repayment of borrowings in 2023 of £1,635 million;
- An outflow of £128 million related to derivatives (2023: outflow of £480
million); and
- In 2024, an outflow of £698 million (2023: £nil ) in respect of the 2024
share buy-back programme.
Notes to the Financial Statements
Continued
Related party disclosures
The Group's related party transactions and relationships for 2023 were
disclosed on pages 284 and 285 of the Group's Annual Report and Accounts and
Form 20-F for the year ended 31 December 2023.
In the year ended 31 December 2024, apart from the partial sale of the Group's
investment in ITC (refer to page 20), there were no material changes in
related parties or related party transactions to be reported.
Full details of the Group's related party transactions as at 31 December 2024
will be included in the Group's 2024 Annual Report and Accounts and Form 20-F.
Earnings per share
Basic earnings per share were 136.7p compared to a loss of 646.6p in 2023
driven by:
- The net reduction in non-cash amortisation and impairment charges in
respect of goodwill and trademarks, partly offset by the other items in profit
from operations discussed on page 29;
- A gain of £1,361 million recognised in respect of the partial sale of
the Group's investment in ITC (see page 32); and
- A net credit of £590 million related to the debt liability management
exercise undertaken in the first half of 2024 (see page 32).
These were partially offset by a charge of £6,203 million in respect of the
potential settlement in Canada (please refer to page 18).
Basic and diluted earnings per share also benefited from a reduction in the
number of shares, as the Group bought back and cancelled 27,392,429 shares as
part of the £700 million share buy-back programme.
Before adjusting items and including the dilutive effect of employee share
schemes, adjusted diluted earnings per share decreased 3.5% to 362.5p (2023:
375.6p). On a constant translational foreign exchange basis, adjusted diluted
earnings per share were 1.7% higher at 381.9p, being an increase of 3.6% on an
adjusted, organic basis. For a full reconciliation of diluted earnings per
share to adjusted diluted earnings per share, at constant rates, and adjusted
diluted organic earnings per share, at constant rates, please see page 56.
Earnings used in the basic, diluted and headline earnings per share
calculation represent the profit attributable to the ordinary equity
shareholders after deducting amounts representing the coupon on perpetual
hybrid bonds on a pro-rata basis regardless of whether or not coupons have
been declared and paid in the period. In 2024, this amounted to £42 million
(2023: £45 million).
Years ended 31 December
2024 2023
£m £m
Earnings/(loss) attributable to owners of the parent 3,068 (14,367)
Coupon on perpetual hybrid bonds (56) (59)
Tax on coupon on perpetual hybrid bonds 14 14
Earnings/(loss) 3,026 (14,412)
On 18 March 2024, the Company announced its intention to start a sustainable
share buy-back programme with £700 million worth of shares to be purchased
in 2024 and £900 million in 2025. The total number of shares repurchased
during 2024 as part of the share buy-back programme was 27,392,429 ordinary
shares. Total consideration for the repurchase of shares was £698 million,
and was recorded within retained earnings.
Basic earnings per share are based on the profit for the year attributable to
ordinary shareholders and the weighted average number of ordinary shares in
issue during the period (excluding treasury shares). For the calculation of
the diluted earnings per share, the weighted average number of shares reflects
the potential dilutive effect of employee share schemes.
In 2023, the Group reported a loss for the year. Following the requirements of
IAS 33 Earnings per Share, the impact of share options would be antidilutive
on a reported basis and is excluded, for 2023, from the table below. Earnings
per share calculations are based upon the following:
Reported Adjusted Headline
Basic Diluted Basic Diluted Basic Diluted
Year ended 31 December 2024
- Earnings £m 3,026 3,026 8,066 8,066 2,276 2,276
- Shares m 2,214 2,225 2,214 2,225 2,214 2,225
- Per share p 136.7 136.0 364.3 362.5 102.8 102.3
Year ended 31 December 2023
- (Loss)/earnings £m (14,412) (14,412) 8,403 8,403 8,169 8,169
- Shares m 2,229 2,229 2,229 2,237 2,229 2,229
- Per share p (646.6) (646.6) 377.0 375.6 366.5 366.5
In 2023, the Group reported a loss for the year. Following the requirements of
IAS 33, the impact of share options would be antidilutive and is therefore
excluded, for 2023, from the calculation of diluted earnings per share,
calculated in accordance with IFRS. For remuneration purposes, and reflective
of the Group's positive earnings on an adjusted basis, Management included
the dilutive effect of share options in calculating adjusted diluted earnings
per share.
British American Tobacco p.l.c. is a public limited company which is listed on
the London Stock Exchange, New York Stock Exchange
and the JSE Limited in South Africa. British American Tobacco p.l.c. is
incorporated in England and Wales (No. 3407696) and domiciled
in the UK.
Notes to the Financial Statements
Continued
Earnings per share (continued)
Adjusted diluted earnings per share are calculated by taking the following
adjustments into account (see pages 29 to 32):
Years ended 31 December
2024 2023
pence pence
Diluted earnings/(loss) per share 136.0 (646.6)
Effect of amortisation and impairment of goodwill, trademarks and similar 80.7 1,006.1
intangibles
Effect of impairment charges in respect of fixed assets, including the Group's 4.5 -
head office and the decision to exit Cuba
Effect of settlement of historical litigation in relation to the Fox River (4.9) -
Net effect of Excise and VAT cases - (5.7)
Effect of the ongoing litigation in Canada 205.0 -
Effect of disposal of subsidiaries - 24.5
Effect of Romania and Brazil other taxes 20.1 1.4
Effect of charges in respect of DOJ and OFAC investigations 0.2 3.4
Effect of planned disposal of subsidiaries - (8.7)
Effect of restructuring and integration costs - (0.2)
Effect of other adjusting items in operating profit 5.3 3.3
Effect of adjusting items in net finance costs (17.0) 3.1
Effect of gains related to the partial divestment of shares held in ITC (59.5) -
Effect of associates' adjusting items (0.8) (0.4)
Effect of adjusting items in respect of deferred taxation (12.0) (4.4)
Adjusting items in tax 4.9 1.2
Impact of dilution* (1.4)
Adjusted diluted earnings per share 362.5 375.6
Impact of translational foreign exchange 19.4 -
Adjusted diluted earnings per share translated at 2023 exchange rates 381.9 375.6
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS. For remuneration purposes, and
reflective of the Group's positive earnings on an adjusted basis, Management
included the dilutive effect of share options in calculating adjusted diluted
earnings per share.
The presentation of headline earnings per share, as an alternative measure of
earnings per share, is mandated under the JSE Listing Requirements. It is
calculated in accordance with Circular 1/2023 'Headline Earnings' as issued by
the South African Institute of Chartered Accountants.
Notes to the Financial Statements
Continued
Earnings per share (continued)
Diluted headline earnings per share are calculated by taking the following
adjustments into account:
Years ended 31 December
2024 2023
pence pence
Diluted earnings/(loss) per share 136.0 (646.6)
Effect of impairment of intangibles, property, plant and equipment, associates 30.2 1,003.6
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (4.4) (4.4)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and - (9.1)
associated costs (net of tax)
Effect of foreign exchange reclassification from reserves to the income - 24.8
statement
Issue of shares and change in shareholding of an associate (0.8) (1.8)
Gain on partial disposal of an associate and associated capital gains tax, (58.7) -
including foreign exchange recycled
Diluted headline earnings per share 102.3 366.5
The following is a reconciliation of earnings to headline earnings, in
accordance with the JSE Listing Requirements:
Years ended 31 December
2024 2023
£m £m
Diluted earnings/(loss) per share 3,026 (14,412)
Effect of impairment of intangibles, property, plant and equipment, associates 672 22,370
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (97) (98)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and - (203)
associated costs (net of tax)
Effect of foreign exchange reclassification from reserves to the income - 552
statement
Issue of shares and change in shareholding of an associate (18) (40)
Gain on partial disposal of an associate and associated capital gains tax, (1,307) -
including foreign exchange recycled
Headline earnings 2,276 8,169
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments
The Group has contingent liabilities in respect of litigation, taxes and
guarantees in various countries. These are described below, are further
described in Note 31 to the 2023 Annual Report and Accounts and Form 20-F and
will be included in the Group's 2024 Annual Report and Accounts and Form 20-F.
The Group is subject to contingencies pursuant to requirements that it
complies with relevant laws, regulations and standards. Failure to comply
could result in restrictions in operations, damages, fines, increased tax,
increased cost of compliance, interest charges, reputational damage or other
sanctions. These matters are inherently difficult to quantify.
In cases where the Group has an obligation as a result of a past event
existing at the balance sheet date, it is probable that an outflow of economic
resources will be required to settle the obligation and the amount of the
obligation can be reliably estimated, a provision will be recognised based on
best estimates and management judgment. There are, however, contingent
liabilities in respect of litigation, taxes in some countries and guarantees
for which no provisions have been made. While the amounts that may be payable
or receivable could be material to the results or cash flows of the Group in
the period in which they are recognised, the Board does not expect these
amounts to have a material effect on the Group's financial condition.
Taxes
The Group has exposures in respect of the payment or recovery of a number of
taxes. The Group is and has been subject to a number of tax audits covering,
among others, excise tax, value-added taxes, sales taxes, corporate taxes,
overseas withholding taxes and payroll taxes. The estimated costs of known tax
obligations have been provided in these accounts in accordance with the
Group's accounting policies. In some countries, tax law requires that full or
part payment of disputed tax assessments be made pending resolution of the
dispute. To the extent that such payments exceed the estimated obligation,
they would not be recognised as an expense.
There are disputes that are in or may proceed to litigation in a number of
countries, including Brazil, Indonesia and the Netherlands.
In Indonesia, the Directorate General of Taxes has filed assessments against
Bentoel group companies mainly relating to domestic and other intra-group
transactions during the years 2016-2021. Provisions totalling IDR 2,151
billion (£107 million) have been made in respect of claims totalling IDR
6,640 billion (£329 million) including interest and penalties. Objection
letters have been filed with the Tax Office and these assessments are being
challenged at various levels in court.
The Dutch tax authority has issued a number of assessments on various issues
across the years 2003-2016 in relation to various intra-group transactions.
The assessments amount to an aggregate net potential liability across these
periods of £1,140 million covering tax, interest and penalties. The Group
appealed against the assessments in full. Appeal hearings took place in the
second half of 2024, with the Court of Appeal judgment expected in the first
half of 2025.
The Group is also appealing the ruling in respect of sales taxes and penalties
in South Korea.
Group litigation
Group companies, as well as other leading cigarette manufacturers, are
defendants in a number of product liability cases. In a number of the cases,
the amounts of compensatory and punitive damages sought are significant. While
it is impossible to be certain of the outcome of any particular case or of the
amount of any possible adverse verdict, the Group believes that the defences
of the Group's companies to all these various claims are meritorious on both
the law and the facts, and a vigorous defence is being made everywhere. If an
adverse judgment is entered against any of the Group's companies in any case,
avenues of appeal will be pursued as necessary. Such appeals could require the
appellants to post appeal bonds or substitute security in amounts that could
in some cases equal or exceed the amount of the judgment. At least in the
aggregate, and despite the quality of defences available to the Group, it is
not impossible that the Group's results of operations or cash flows in a
particular period could be materially affected by this and by the final
outcome of any particular litigation, or governmental investigations.
U.S. - Engle
As at 31 December 2024, the Group's subsidiaries, R. J. Reynolds Tobacco
Company (RJRT), Lorillard Tobacco Company (Lorillard Tobacco) and Brown &
Williamson Holdings, Inc., had collectively been served in 91 pending Engle
progeny cases filed on behalf of approximately 125 individual plaintiffs. Many
of these are in active discovery or nearing trial. In 2024, RJRT or Lorillard
Tobacco paid judgments in four Engle progeny cases. Those payments totalled
approximately US$4.7 million (approximately £3.8 million) in compensatory
or punitive damages. Additional costs were paid in respect of attorneys' fees
and statutory interest. In addition, from
1 January 2022 to 31 December 2024, outstanding jury verdicts in favour of the
Engle progeny plaintiffs had been entered against RJRT or Lorillard Tobacco
for US$63.7 million (approximately £51 million) in compensatory damages (as
adjusted) and US$39.2 million (approximately £31 million) in punitive
damages. A majority of these verdicts are in various stages in the appellate
process and have been bonded as required by Florida law under the
US$200 million (approximately £159.7 million) bond cap passed by the
Florida legislature in 2009. Although the Group cannot currently predict when
or how much it may be required to bond and pay, the Group's subsidiaries will
likely be required to bond and pay additional judgments as the litigation
proceeds.
Canada
In Canada, following the implementation of legislation enabling provincial
governments to recover healthcare costs directly from tobacco manufacturers,
ten actions for recovery of healthcare costs arising from the treatment of
smoking and health-related diseases were commenced in ten provinces. Damages
sought have not yet been quantified by all ten provinces; however, in respect
of five provinces, the damages quantified in each of the provinces range
between CAD$10 billion (approximately £5.6 billion) and CAD$118 billion
(approximately £65.5 billion), and the province of Ontario delivered an
expert report quantifying its damages in the range of CAD$280 billion
(approximately £155 billion) and CAD$630 billion (approximately
£350 billion) in 2016/2017 dollars. The province of Ontario has amended its
Statement of Claim to claim damages of CAD$330 billion (approximately
£183 billion). On 31 January 2019, the province of Ontario delivered a
further expert report claiming an additional CAD$9.4 billion (approximately
£5.2 billion) and CAD$10.9 billion in damages (approximately
£6.1 billion) in respect of environmental tobacco smoke. No trial date has
been set. In respect of the province of New Brunswick, on 7 March 2019, the
New Brunswick Court of Queen's Bench released a decision requiring the
province of New Brunswick to produce a substantial amount of additional
documentation and data to the defendants. As a result, the original trial date
of 4 November 2019 has been delayed. No new trial date has been set.
In addition to the actions commenced by the provincial governments, there are
numerous class actions outstanding against Group companies. All of these
actions are currently subject to stays of proceedings.
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments (continued)
In March 2019, Imperial Tobacco Canada Limited and Imperial Tobacco Company
Limited (together, ITCAN), Group subsidiaries, obtained creditor protection
under the Canadian Companies' Creditors Arrangement Act (CCAA). Under a
confidential court supervised mediation process, ITCAN has been negotiating a
possible settlement of all of its outstanding tobacco litigation in Canada
while continuing to run its business in the normal course.
On 17 October 2024, the court-appointed mediator's and monitor's plan of
compromise and arrangement was filed in the Ontario Superior Court of Justice.
Substantially similar proposed plans were also filed for Rothmans, Benson
& Hedges Inc. (RBH, a subsidiary of Philip Morris International Inc.) and
JTI-Macdonald Corp. (JTIM, a subsidiary of Japan Tobacco International)
(collectively, the Proposed Plans).
On 31 October 2024, the court granted certain orders pursuant to which the
Proposed Plans were accepted for filing. On 12 December 2024, the Proposed
Plans were approved by the requisite majorities of the creditors. A sanction
hearing took place between 29-31 January 2025. During the sanction hearing,
the Court was asked to sanction the Proposed Plans. The Court's decision is
currently pending and the Stays are extended until 3 March 2025, or such time
as the Court's decision on the sanction order is released.
Under the Proposed Plans, if ultimately sanctioned and then implemented,
ITCAN, RBH and JTIM (the Companies) would pay an aggregate settlement amount
of CAD$32.5 billion (approximately £18 billion). Please refer to page 18.
As referred to on page 18, further to the publication of the Proposed Plans,
the Group has recognised a charge to the income statement of £6,203 million
(held as a liability at 31 December 2024).
Fox River
In January 2017, NCR Corporation (NCR) and Appvion (a former Group subsidiary)
entered into a Consent Decree with the U.S. Government to resolve how the
remaining clean-up will be funded and to resolve further outstanding claims
between them. The Consent Decree was approved by the District Court of
Wisconsin in August 2017. The U.S. Government enforcement action against NCR
was terminated as a result of that order and contribution claims from the
Potentially Responsible Parties (PRPs) against NCR were dismissed. On 3
January 2019, the U.S. Government, P. H. Glatfelter and Georgia-Pacific (the
remaining Fox River PRPs) sought approval for a separate Consent Decree
settling the allocation of costs on the Fox River. This Consent Decree was
approved by the District Court in the Eastern District of Wisconsin on 14
March 2019, and concludes all existing litigation on the Fox River clean-up.
Considering these developments, the provision has been reviewed. No adjustment
has been proposed, with the provision standing at £44 million at 31 December
2024 (31 December 2023: £44 million) after disbursements.
In July 2016, the High Court ruled in favour of BAT Industries p.l.c.
(Industries), stating that a dividend of €135 million (approximately
£112 million) paid by Windward Prospects Limited (Windward), a former Group
subsidiary, to Sequana S.A. (Sequana) in May 2009 was a transaction made with
the intention of putting assets beyond the reach of Industries and of
negatively impacting its interests. On 10 February 2017, following a hearing
in January 2017 to determine the relief due, the Court found in favour of
Industries, ordering that Sequana must pay an amount up to the full value of
the dividend plus interest which equates to around US$185 million
(approximately £147.7 million), related to past and future clean-up costs.
The Court granted all parties leave to appeal and Sequana a stay in respect of
the above payments. The appeal was heard in June 2018. Judgment was given on 6
February 2019 and the Court of Appeal upheld the High Court's findings against
Sequana. The Court of Appeal refused applications made by both parties for a
further appeal to the UK Supreme Court. Both parties applied directly to the
UK Supreme Court for permission to appeal in March 2019. On 31 July 2019, BTI
2014 LLC (BTI), a Group subsidiary, was granted permission to appeal to the
Supreme Court in respect of its claims against the former Windward directors
(who authorised the dividend payments to Sequana). On the same day, the
Supreme Court refused Sequana permission to appeal. On 5 October 2022, the
Supreme Court handed down its judgment, dismissing BTI's appeal. BTI has also
brought claims against certain of Windward's former advisers. In February
2017, Sequana entered into a process in France seeking court protection (the
"Sauvegarde"), exiting the Sauvegarde in June 2017. In May 2019, Sequana was
placed into formal liquidation proceedings. No payments have been received
from Sequana.
In June 2024, the Group settled one of its historical litigations related to
the clean-up costs of the Fox River, recognising net income of £132 million.
Kalamazoo
Georgia-Pacific, a designated PRP in respect of the Kalamazoo River in
Michigan, also pursued NCR in relation to remediation costs caused by PCBs
released into that river. On 26 September 2013, the United States District
Court, Michigan held that NCR was liable as a PRP on the basis that it had
arranged for the disposal of hazardous material for the purposes of the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
Following further litigation, on 11 December 2019, NCR announced that it had
entered into a Consent Decree with the U.S. Government and the State of
Michigan (subsequently approved by the Michigan Court on 2 December 2020),
pursuant to which it assumed liability for certain remediation work at the
Kalamazoo River. The payments to be made on the face of the Consent Decree in
respect of such work total approximately US$245 million (approximately
£195.6 million). The Consent Decree also provides for the payment by NCR of
an outstanding judgment against it of approximately US$20 million
(approximately £16.0 million) to Georgia-Pacific.
The quantum of the clean-up costs for the Kalamazoo River is presently
unclear. It seems likely to well exceed the amounts payable on the face of the
Consent Decree.
On 10 February 2023, NCR filed a complaint in the United States District Court
for the Southern District of New York against Industries, seeking a
declaration that Industries must compensate NCR for 60% of costs NCR incurred
and incurs relating to the Kalamazoo River site on the asserted basis that the
Kalamazoo River constitutes a 'Future Site' for the purposes of a 1998
Settlement Agreement between it, Appvion and Industries. On 23 June 2023,
Industries filed its defence and counterclaims in the proceedings. On 2
October 2023, NCR filed a motion for declaratory judgment on its complaint and
to strike out Industries' affirmative defences and counterclaims. Industries
has filed its reply to this motion. On 14 September 2024, the court issued a
judgment in respect of the motion striking out one of Industries' eight
affirmative defences and dismissing three of Industries' five counterclaims. A
pre-trial conference occurred on 30 October 2024, following which a case
management order was issued by the court. The parties are scheduled to
complete all fact discovery by 11 July 2025.
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments (continued)
Summary
Having regard to all these matters, with the exception of Fox River and Canada
(Quebec), the Group does not consider it appropriate to make any provision or
accrual in respect of any pending litigation. The Group does not believe that
the ultimate outcome of this litigation will significantly impair the Group's
financial condition. If the facts and circumstances change, then there could
be a material impact on the financial statements of the Group. In addition,
the Group accrues for damages, attorneys' fees and/or statutory interest,
including in respect of certain Engle progeny cases, certain U.S. individual
smoking and health cases, and the DOJ medical reimbursement/corrective
statement case.
Full details of the litigation against Group companies and tax disputes as at
31 December 2024 will be included in the Group's 2024 Annual Report and
Accounts and Form 20-F. Whilst there has been some movement on new and
existing cases against Group companies, there have been, except as otherwise
stated, no material developments in 2024 or to date in 2025 that would impact
the financial position of the Group.
Franked Investments Income Group Litigation Order
The Group is the principal test claimant in an action in the United Kingdom
against HM Revenue and Customs (HMRC) in the FII GLO. There were 15 corporate
groups in the FII GLO as at 31 December 2024. The case concerns the treatment
for UK corporate tax purposes of profits earned overseas and distributed to
the UK. The Supreme Court heard appeals in two separate trials during 2020.
The judgment in the first hearing was handed down in November 2020 and
concerned the time limit for bringing claims. The Supreme Court remitted that
matter to the High Court to determine whether the claim is within time on the
facts. The judgment from the second hearing was handed down in July 2021 and
concerned issues relating to the type of claims BAT is entitled to bring.
Applying that judgment reduces the value of the FII GLO claim to approximately
£0.3 billion, mainly as the result of the application of simple interest and
the limitation to claims for advance corporation tax offset against lawful
corporation tax charges, which is subject to the determination of the timing
issue by the High Court and any subsequent appeal.
The High Court hearing on time limits was held in late November 2023 with
judgment handed down in February 2024. The High Court determined that claims
should have been filed within six years of June 2000 meaning that BAT's claims
are in time. HMRC have applied to appeal the judgment, which has been granted,
with a hearing set for May 2025. The final resolution of all issues in the
litigation is likely to take several more years.
During 2015, HMRC paid to the Group a gross amount of £1.2 billion in two
separate payments, less a deduction (withheld by HMRC) of £0.3 billion. The
payments made by HMRC have been made without any admission of liability and
are subject to refund were HMRC to succeed on appeal. Due to the uncertainty
of the amounts and eventual outcome the Group has not recognised any impact in
the income statement in the current or prior period in respect of the receipt
(being £0.9 billion net of tax) which is held within trade and other
payables. Any future recognition as income will be treated as an adjusting
item, due to the size of the order, with interest of £61 million in respect
for 2024 (2023: £60 million) accruing on the balance, which was also treated
as an adjusting item.
The Group made interim repayments to HMRC of £50 million in 2024, 2023
and 2022, and, during 2024, the Group agreed to repay £0.8 billion to
HMRC (being the difference between the amounts received plus accrued interest
and the amount determined in the July 2021 judgment (£0.3 billion)). The
schedule for the remaining agreed repayments is:
- £479 million in 2025;
- £222 million in 2026; and
- £43 million in 2027.
Full details of the case will be included in the Group's Annual Report and
Accounts and Form 20-F for the year ended 31 December 2024 (note 10 Taxation
on ordinary activities).
Other Information
Dividends
The Board has declared an interim dividend of 240.24p per ordinary share of
25p for the year ended 31 December 2024, payable in four equal quarterly
instalments of 60.06p per ordinary share in May 2025, August 2025, November
2025 and February 2026. This represents an increase of 2.0% on 2023 (2023:
235.52p per share), and a pay-out ratio, on 2024 adjusted diluted earnings per
share, of 66.3%.
The quarterly dividends will be paid to shareholders registered on either the
UK main register or the South Africa branch register and to holders of
American Depositary Shares (ADSs), each on the applicable record dates set out
under the heading 'Key dividend dates' below.
General dividend information
Under IFRS, the dividend is recognised in the year that it is approved by
shareholders or, if declared as an interim dividend by directors, in the
period that it is paid.
The cash flow, prepared in accordance with IFRS, reflects the total cash paid
in the period, amounting to £5,213 million (2023: £5,055 million).
Dividends declared 2024 2023
Pence per share US$ per ADS Pence per share US$ per ADS
Quarterly Payment 1 (paid May 2024) 58.88 0.734851 57.72 0.723866
Quarterly Payment 2 (paid August 2024) 58.88 0.753752 57.72 0.734400
Quarterly Payment 3 (paid November 2024) 58.88 0.762702 57.72 0.713880
Quarterly Payment 4 (paid February 2025) 58.88 0.730435 57.72 0.731803
235.52 2.981740 230.88 2.903949
Holders of ADSs
For holders of ADSs listed on the New York Stock Exchange (NYSE), the record
dates and payment dates are set out below. The equivalent quarterly dividends
receivable by holders of ADSs in U.S. dollars will be calculated based on the
exchange rate on the applicable payment date. Cash dividends paid in respect
of ADSs are subject to a fee of up to US$0.05 per ADS payable to Citibank N.A.
the appointed depositary bank for BAT's ADS programme (the "Depositary").
Currently, such dividends are subject to a fee of up to US$0.04 per ADR per
year (a fee of US$0.01 per dividend based on the distribution of four
quarterly cash dividends per year). The dividend fee may not be varied by the
Depositary without the consent of BAT.
South Africa Branch register
In accordance with the JSE Limited (JSE) Listing Requirements, the
finalisation information relating to shareholders registered on the South
Africa branch register (comprising the amount of the dividend in South African
rand, the exchange rate and the associated conversion date) will be published
on the dates stated below, together with South Africa dividends tax
information. The quarterly dividends are regarded as 'foreign dividends' for
the purposes of the South Africa Dividends Tax. For the purposes of South
Africa Dividends Tax reporting, the source of income for the payment of the
quarterly dividends is the United Kingdom.
Key dividend dates
In compliance with the requirements of the London Stock Exchange (LSE), the
NYSE and Strate, the electronic settlement and custody system used by the JSE,
the following salient dates for the quarterly dividends payments are
applicable.
Event Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Preliminary announcement (includes declaration data required for JSE purposes) 13 February
Publication of finalisation information (JSE) 17 March 17 June 22 September 15 December
No removal requests permitted (in either direction) between the UK main 17 March- 17 June- 22 September- 15 December- 30 December
register and the South Africa branch register 28 March 27 June 3 October
Last Day to Trade (LDT) cum-dividend (JSE) 25 March 24 June 30 September 23 December
Shares commence trading ex-dividend (JSE) 26 March 25 June 1 October 24 December
No transfers permitted between the UK main register and the South Africa 26 March- 25 June- 1 October- 24 December- 30 December
branch register 28 March 27 June 3 October
No shares may be dematerialised or rematerialised on the South Africa branch 26 March- 25 June- 1 October- 24 December- 30 December
register 28 March 27 June 3 October
Shares commence trading ex-dividend (LSE) 27 March 26 June 2 October 29 December
Shares commence trading ex-dividend (NYSE) 28 March 27 June 3 October 30 December
Record date 28 March 27 June 3 October 30 December
(JSE, LSE and NYSE)
Last date for receipt of Dividend Reinvestment Plan (DRIP) elections (LSE) 11 April 11 July 17 October 14 January 2026
Payment date (LSE and JSE) 7 May 1 August 7 November 4 February 2026
ADS payment date (NYSE) 12 May 6 August 13 November 9 February 2026
Notes:
1. All dates are 2025, unless otherwise stated.
2. The dates set out above may be subject to any changes to public
holidays arising and changes or revisions to the LSE, JSE and NYSE timetables.
Any confirmed changes to the dates will be announced.
Other Information
Continued
Non-financial Key Performance Indicators (KPIs)
Volume
Volume is defined as the number of units sold. Units may vary between
categories. This can be summarised for the principal metrics as follows:
- Factory-made cigarettes (FMC) - sticks, regardless of weight or
dimensions;
- Roll-Your-Own/Make-Your-Own - kilos, converted to a stick equivalent based
upon 0.8 grams (per stick equivalent) for Roll-Your-Own and between 0.5 and
0.7 grams (per stick equivalent) for Make-Your-Own;
- Traditional Oral - pouches (being 1:1 conversion to stick equivalent) and
kilos, converted to a stick equivalent based upon 2.8 grams
(per stick equivalent) for Moist Snuff, 2.0 grams (per stick equivalent) for
Dry Snuff and 7.1 grams (per stick equivalent) for other oral;
- Modern Oral - pouches, being 1:1 conversion to stick equivalent;
- Heated sticks - sticks, being 1:1 conversion to stick equivalent; and
- Vapour - units, being pods, bottles and disposable units. There is no
conversion to a stick equivalent.
Volume is recognised in line with IFRS 15 Revenue from Contracts with
Customers, based upon transfer of control. It is assumed that there is no
material difference, in line with the Group's recognition of revenue, between
the transfer of control and shipment date.
Volume is used by management and investors to assess the relative performance
of the Group and its brands within categories, given volume is a principal
determinant of revenue.
Volume Share
Volume share is the estimated number of units bought by adult consumers of a
specific brand or combination of brands, as a proportion of the total
estimated units bought by adult consumers in the industry, category or other
sub-categorisation. Sub-categories include, but are not limited to, Heated
Products (HP), Modern Oral, Traditional Oral, Total Oral or Cigarettes. Except
when referencing particular markets, volume share is based on our Top markets.
Management note that the markets that form the definition of Top markets may
change between periods as this will reflect the development of the category
within markets including their relative sizes.
Where possible, the Group utilises data provided by third-party organisations,
including NielsenIQ, based upon retail audit of sales to adult consumers. In
certain markets, where such data is not available, other measures are employed
which assess volume share based upon other movements within the supply chain,
such as sales to retailers. This may depend on the provision of data by
customers including distributors/wholesalers.
Volume share is used by management to assess the relative performance of the
Group and its brands against the performance of its competitors in the
categories and geographies in which the Group operates. The Group's management
believes that this measure is useful to the users of the financial statements
to understand the relative performance of the Group and its brands against the
performance of its competitors in the categories and geographies in which the
Group operates. This measure is also useful to understand the Group's
performance when seeking to grow scale within a market or category from which
future financial returns can be realised. Volume share provides an indicator
of the Group's relative performance in unit terms versus competitors.
Volume share in each period compares the average volume share in the period
with the average volume share in the prior year. This is a more robust measure
of performance, removing short-term volatility that may arise at a point in
time. Due to the timing of available information, volume share for 2024 is
year-to-date December 2024 unless otherwise stated.
However, in certain circumstances, related to periods of introduction to a
market, in order to illustrate the latest performance, data may be provided as
at the end of the period rather than the average in that period. In these
instances, the Group states these at a specific date (for instance, December
2024).
Value Share
Value share is the estimated retail value of units bought by adult consumers
of a particular brand or combination of brands, as a proportion of the total
estimated retail value of units bought by adult consumers in the industry,
category or other sub-categorisation in discussion. Except when referencing
particular markets, value share is based on our Top markets. Management note
that the markets that form the definition of Top markets may change between
periods as this will reflect the development of the category within markets
including their relative sizes.
Where possible, the Group utilises data provided by third-party organisations,
including NielsenIQ, based upon retail audit of sales to adult consumers. In
certain markets, where such data is not available, other measures are employed
which assess value share based upon other movements within the supply chain,
such as sales to retailers. This may depend on the provision of data by
customers (including distributors and wholesalers).
Value share is used by management to assess the relative performance of the
Group and its brands against the performance of its competitors in the
categories and geographies in which the Group operates, specifically
indicating the Group's ability to realise value relative to the market. The
measure is particularly useful when the Group's products and/or the relevant
category in the market in which they are sold has developed or achieved scale
from which value can be realised. The Group's management believes that this
measure is useful to the users of the financial statements to comprehend the
relative performance of the Group and its brands against the performance of
its competitors in the categories and geographies in which the Group operates,
specifically indicating the Group's ability to realise value relative to the
market.
Value share in each period compares the average value share in the period with
the average value share in the prior year. This is a more robust measure of
performance, removing short-term volatility that may arise at a point of time.
Due to the timing of available information, value share for 2024 is
year-to-date December 2024 unless otherwise stated.
However, in certain circumstances, related to periods of introduction to a
market, in order to illustrate the latest performance, data may be provided as
at the end of the period rather than the average in that period. In these
instances the Group states these are at a specific date (for instance,
December 2024).
Other Information
Continued
Non-financial Key Performance Indicators (KPIs) (continued)
Price Mix
Price mix is a term used by management and investors to explain the movement
in revenue between periods. Revenue is affected by the volume (how many units
are sold) and the price (how much is each unit sold for). The Group may
achieve a movement in revenue due to the relative proportions of higher price
volume sold compared to lower price volume sold (price/mix).
This term is used to explain the Group's relative performance between periods
only. It is calculated as the difference between the movement in revenue
(between periods) and volume (between periods). For instance, the marginal
increase in combustibles revenue (excluding translational foreign exchange
movements and the impact of the sale of the Group's businesses in Russia and
Belarus) of 0.1% in 2024, with a decline in combustibles volume (also
excluding the impact of the sale of the Group's businesses in Russia and
Belarus) of 5.2% in 2024, leads to a price mix of +5.3% in 2024. No
assumptions underlie this metric as it utilises the Group's own data.
We also show (see page 3) the impact on revenue from the movement in
combustibles volume (being the movement in volume between periods multiplied
by the average combustibles revenue per thousand from the prior period) and
the impact from the combustibles price/mix effect (see page 3), which is
revenue from combustibles (at constant rates) less the volume effect from the
movement in combustibles.
Consumers of Smokeless Products
The number of consumers of Smokeless products is defined as the estimated
number of legal age (minimum 18 years) consumers of the Group's Smokeless
products - which does not necessarily mean these users are solus consumers of
these products. In markets where regular consumer tracking is in place, this
estimate is obtained from adult consumer tracking studies conducted by third
parties (including Kantar). In markets where regular consumer tracking is not
in place, the number of consumers of Smokeless products is derived from
volume sales of consumables and devices in such markets, using consumption
patterns obtained from other similar markets with consumer tracking (utilising
studies conducted by third parties, including Kantar). The number of consumers
is adjusted for those identified (as part of the consumer tracking studies
undertaken) as using more than one BAT brand.
The number of Smokeless products consumers is used by management to assess the
number of consumers regularly using the Group's New Categories products as
the increase in Smokeless products is a key pillar of the Group's
Sustainability ambition and is integral to the sustainability of our
business.
The Group's management believes that this measure is useful to the users of
the financial statements given the Group's sustainability ambition and
alignment to the sustainability of the business with respect to the Smokeless
portfolio.
During 2024, in line with standard practice, Kantar has made enhancements to
their adult consumer tracking studies to more accurately capture market trends
across categories. To ensure that the data is comparable between periods,
Kantar has back-trended the data to prevent any trend break, with the revised
historical data provided below:
Million consumers 2023 2022 2021
As previously reported 23.9 20.7 17.1
Back trended to reflect enhanced adult consumer tracking 25.5 22.3 18.2
Ethnically Diverse
For the purposes of our International Pay Equity Analysis, 'Ethnically
Diverse' groups in the respective countries are defined as ethnic groups who,
because of their physical or cultural characteristics, are/were historically
and systematically under-represented. Being a numerical minority is not a
characteristic of being an Ethnically Diverse group; sometimes larger groups
can be considered Ethnically Diverse groups. 'Non-ethnically Diverse' groups
in the respective countries are defined as ethnic groups who, because of their
physical or cultural characteristics, are/were historically and systematically
represented.
Other Information
Continued
Additional information
British American Tobacco is one of the world's leading consumer products
businesses, with brands sold across the world. We have strategic combustible
and HP brands - including Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans,
glo, veo, Newport (in the U.S.), Camel (in the U.S.) and Natural American
Spirit (in the U.S.) - and over 200 brands in our portfolio, including a
growing portfolio of reduced-risk products*†. We hold robust market
positions in each of our regions and have leadership positions in more than 50
markets.
References in this document to information on websites, including the web
address of BAT, have been included as inactive textual references only. These
websites and the information contained therein or connected thereto are not
intended to be incorporated into or to form part of this report.
*Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
†Our products as sold in the U.S., including Vuse, Velo, Grizzly, Kodiak,
and Camel Snus, are subject to FDA regulation and no reduced-risk claims will
be made as to these products without agency clearance.
Annual Report and Accounts and Form 20-F
Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2024 or 2023. Statutory
accounts for 2023 have been delivered to the Registrar of Companies and those
for 2024 will be delivered following the Company's Annual General Meeting. The
auditors' reports on the 2023 and 2024 accounts were unqualified, did not draw
attention to any matters by way of emphasis and did not contain statements
under s498(2) or (3) of Companies Act 2006 or equivalent preceding
legislation.
Publication
The Group's 2024 Annual Report and Accounts and Form 20-F will be published on
www.bat.com on or around 14 February 2025. A printed copy will later be
mailed to shareholders on the UK main register who have elected to receive it.
At the same time, shareholders will be notified of the availability of the
Annual Report and Form 20-F on the website and of the Performance Summary
together with other ancillary documents in accordance with their elections.
Specific local mailing and/or notification requirements will apply to
shareholders on the South Africa branch register. In addition, the Company
files its Annual Report on Form 20-F and other documents with the United
States Securities and Exchange Commission (SEC). BAT's filings are available
to the public, together with the public filings of other issuers, at the SEC's
website, www.sec.gov.
Distribution of Preliminary Statement
This announcement is released or otherwise made available or notified to the
London Stock Exchange, the JSE Limited and the New York Stock Exchange and
filed in accordance with applicable regulations. It may be viewed and
downloaded from our website www.bat.com.
Copies of the announcement may also be obtained during normal business hours
from: (1) the Company's registered office; (2) the Company's representative
office in South Africa; (3) British American Tobacco Publications; and (4)
Citibank Shareholder Services. Contact details are set out below.
This announcement was approved by the Board of Directors on 12 February 2025.
Shareholder Information
Financial calendar 2025
Event Date(1)
Annual General Meeting 2025(2) 16 April 2025
(at 11.30am)
Half-Year Report 2025 31 July 2025
1. Indicated dates are subject to change.
2. Details of the venue and business to be proposed at the meeting will be set
out in the Notice of Annual General Meeting, which will be made available to
all shareholders and published on www.bat.com.
Other Information
Continued
Forward-looking statements and other matters
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.
In particular, these forward-looking statements include, among other
statements, statements regarding the Group's future financial performance,
planned product launches and future regulatory developments and business
objectives (including with respect to sustainability and other environmental,
social and governance matters), as well as: (i) certain statements in the
Chief Executive Statement and Summary (both on page 1); (ii) certain
statements in the Chief Financial Officer Statement and the 2025 Outlook (both
on page 2); (iii) certain statements in the Group Operating Review (pages 3 to
6) including Cash/capital allocation and Sustainability update; (iv) certain
statements in the Category Performance Review (pages 7 to 9), including the
Vapour, Modern Oral and Beyond Nicotine sections; (v) certain statements in
the Regional Review section (pages 10 to 12), including the Asia-Pacific,
Middle East and Africa (APMEA) section; (vi) certain statements in the Other
Financial Information section (pages 13 to 19), including Taxation, Borrowings
and net debt and Dividends summary; (vii) certain statements in the Other
Information section (pages 20 to 21), including Update on Quebec class action
and CCAA, Risks and uncertainties, Update on investigations, Changes in the
Group, Going concern and Additional information; (viii) certain statements in
the Notes to the Financial Statements section (pages 29 to 40), including
Accounting policies and basis of preparation, Amortisation and impairment of
trademarks and similar intangibles, Ongoing impairment review of assets,
Liquidity, Cash Flow, Earnings per share and Contingent liabilities and
financial commitments sections; and (ix) certain statements in the Other
Information section (pages 41 to 44), including Dividends.
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," "expect," "estimate,"
"project," "positioned," "strategy," "outlook," "target" and similar
expressions. 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 British American Tobacco Group (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 caused by the
heightened cyber-threat landscape, the increased digital interactions with
adult consumers and changes to regulation.
A review of the reasons why actual results and developments may differ
materially from the expectations disclosed or implied within forward-looking
statements can be found by referring to the information contained under the
headings "Cautionary statement", "Group Principal Risks" and "Group Risk
Factors" in the 2023 Annual Report and Accounts and Form 20-F of British
American Tobacco p.l.c. (BAT). Additional information concerning these and
other factors can be found in BAT's filings with the U.S. Securities and
Exchange Commission (SEC), including the Group's Annual Report on Form 20-F
and Current Reports on Form 6-K, which may be obtained free of charge at the
SEC's website, www.sec.gov and BAT's Annual Reports.
No statement in this announcement is intended to be a profit forecast and no
statement in this communication should be interpreted to mean that earnings
per share of BAT for the current or future financial years would necessarily
match or exceed the historical published earnings per share of BAT. 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.
All financial statements and financial information provided by or with respect
to the U.S. or Reynolds American are initially prepared on the basis of U.S.
GAAP and constitute the primary financial statements or financial records of
the U.S./Reynolds American. This financial information is then converted to
International Financial Reporting Standards as issued by the IASB and as
adopted for use in the UK (IFRS) for the purpose of consolidation within the
results of the Group. To the extent any such financial information provided in
this announcement relates to the U.S. or Reynolds American it is provided as
an explanation of, or supplement to, Reynolds American's primary U.S. GAAP
based financial statements and information.
Our products as sold in the U.S. including Vuse, Velo, Grizzly, Kodiak and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without Agency clearance.
Caroline Ferland
Company Secretary
12 February 2025
Other Information
Continued
Corporate information
British American Tobacco p.l.c. is a public limited company which is listed on
the London Stock Exchange, New York Stock Exchange and the JSE Limited in
South Africa. British American Tobacco p.l.c. is incorporated in England and
Wales (No. 3407696) and domiciled in the UK.
Registered office
Globe House, 4 Temple Place, London, WC2R 2PG, UK
tel: +44 20 7845 1000
Primary listing
London Stock Exchange, Main Market (Share Code: BATS; ISIN: GB0002875804)
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, UK
tel: 0800 408 0094; +44 370 889 3159
Share dealing tel: 0370 703 0084 (UK only)
Your account: www.computershare.com/uk/investor/bri
Share dealing: www.computershare.com/dealing/uk
Web-based enquiries: www.investorcentre.co.uk/contactus
Secondary listing
JSE Limited (Share Code: BTI)
Shares are traded in electronic form only and transactions settled
electronically through Strate.
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, 2132, South Africa
tel: 0861 100 634; +27 11 870 8216
email enquiries: web.queries@computershare.co.za
Sponsor for the purpose of the JSE listing
Merrill Lynch South Africa (Pty) Ltd t/a BofA Securities
Representative office in South Africa
Waterway House South
No 3 Dock Road, V&A Waterfront, Cape Town 8000, South Africa
PO Box 631, Cape Town 8000, South Africa
tel: +27 21 003 6500
American Depositary Receipts (ADRs)
NYSE (Symbol: BTI; CUSIP Number: 110448107)
BAT's shares are listed on the NYSE in the form of American Depositary Shares
(ADSs) and these are evidenced by American Depositary Receipts (ADRs), each
one of which represents one ordinary share of British American Tobacco p.l.c.
Citibank, N.A. is the depositary bank for the sponsored ADR programme.
Citibank Shareholder Services
PO Box 43077, Providence, Rhode Island 02940-3077, USA
tel: +1 888 985 2055 (toll-free) or +1 781 575 4555
email enquiries: citibank@shareholders-online.com
website: www.citi.com/dr
Publications
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS, UK
tel: +44 20 7511 7797
e-mail enquiries: bat@team365.co.uk
If you require publications and are located in South Africa, please contact
the Company's Representative office in South Africa using the contact details
shown above.
Glossary and Definitions
The following is a summary of the key terms used within this report:
Term Definition
AME Americas (excluding U.S.) and Europe.
APMEA Asia Pacific, Middle East and Africa.
British American Tobacco, BAT, Group, we, us and our When the reference denotes an opinion, this refers to British American Tobacco
p.l.c. and when the reference denotes business activity, this refers to
British American Tobacco Group operating companies, either collectively or
individually, as the case may be.
Carbon Dioxide equivalent emissions Carbon Dioxide equivalent (CO2e) emissions include CO2, CH4 and N2O and are
reported where we have operational control. We do not include data on other
GHG emissions (HFCs, PFCs, SF6 and NF3) as they are estimated to be
insignificant.
Cigarette Factory-made cigarettes (FMC) and products that have similar characteristics
and are manufactured in the same manner, but due to specific features may not
be recognised as cigarettes for regulatory, duty or similar reasons.
Circular Economy The circular economy is a model of production and consumption, which involves
sharing, leasing, reusing, repairing, refurbishing and recycling existing
materials and products as long as possible.
Combustibles Cigarettes and OTP.
Constant Currency/Constant rates Presentation of results in 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.
Developed Markets As defined by the World Economic Outlook as Advanced Economies and those
within the European Union.
Double Materiality Assessment/Material topic Although financial materiality has been considered in the development of our
Double Materiality Assessment ("DMA"), our DMA/Material topic and any related
conclusions as to the materiality of sustainability matters do not imply that
all topics discussed therein are financially material to our business taken as
a whole, and such topics may not significantly alter the total mix of
information available about our securities.
Emerging Markets Those markets not defined as Developed Markets.
Factory Made Cigarettes (FMC) Dual-Use/Poly-Use Refers to the use by an adult consumer of both FMC products and potentially
reduced-risk tobacco and nicotine products which for many smokers is part of a
transitional period where those consumers move towards a complete switch to
potentially reduced-risk products by reducing the consumption of combustible
tobacco products and replacing them with one or more potentially reduced-risk
products.
HP Heated Products, including the devices, which include glo and our hybrid
products, which are used to heat our consumables being the Tobacco Heated
Products or Herbal Products for Heating.
Modern Oral Includes Velo, Grizzly and Lundgrens and products that are characterised as
nicotine replacement therapy (including oral pouches, gums, lozenges and
sprays).
New Categories (NC) Includes Vapour, HP and Modern Oral.
New Categories Poly- Use Refers to the consumption of two or more potentially reduced-risk tobacco or
nicotine product categories by adult consumers who do not consume any FMC
products.
Organic Performance presented excluding businesses sold or acquired that may
significantly affect the users understanding of the Group's performance when
compared across periods. Organic measures exclude the performance of such
businesses in the current and comparator periods to ensure like-for-like
assessment across all periods. In 2023 and 2024, organic measures exclude the
performance of Russia and Belarus as those businesses (in aggregate) were
deemed to be significant to the users' understanding of the financial
performance. The exits referred to in respect of other markets, including in
Africa, are not deemed significant for users' understanding.
OTP Other Tobacco Products, including make-your-own, roll-your-own, Pipe and
Cigarillos.
Reduced risk† Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
Smokeless New Categories plus Traditional Oral.
Solus usage Adult consumers using only one category of combustible or nicotine products.
THP Tobacco Heated Products (i.e., the consumables that contain tobacco used by
Heated Product devices).
Top Cigarette markets Top cigarette markets are defined as the Top cigarette markets by industry
revenue, being the U.S., Japan, Bangladesh, Brazil, Germany, Pakistan, Mexico
and Romania, accounting for c.60% of global industry cigarettes revenue in
2024.
Top HP markets Being the Top markets for HP industry revenue - Japan, South Korea, Italy,
Germany, Greece, Hungary, Poland, Romania and the Czech Republic. These
markets represent c. 80% of global HP industry revenue in 2024. The Top
markets were revised in 2024, with a reduction in our volume share in respect
of 2023 to 17.1%.
Top Modern Oral markets Being the Top Modern Oral markets for industry sales by revenue -the U.S.,
Sweden, Norway, Denmark, Switzerland, Poland and the UK. These markets
represent c. 90% of global Modern Oral industry revenue in 2024. The Top
markets were revised in 2024, with a reduction in our volume share in respect
of 2023 to 27.1%.
Top Vapour markets Top Vapour markets are defined as the Top markets by Vapour industry revenue.
Top markets are the U.S., Canada, France, the UK, Spain, Poland and Germany.
The Top markets account for c.80% of global Vapour industry revenue in 2024.
The Top markets were revised in 2024, with an increase in value share in
respect of 2023 to 41.2%. Also in 2024, the Group changed from Marlin to
Retail Scan Data for the U.S. Vapour market, with the Group's Vapour value
share in 2023 rebased to 52.1%.
Total Poly-Use Total number of adult consumers consuming two or more tobacco and/or nicotine
products, which may or may not include FMC products
Traditional Oral Including Moist Snuff (Granit, Mocca, Grizzly, Kodiak) and other traditional
snus products (including Camel Snus and Lundgrens).
Traditional Oral (TO) Poly-Use Refers to the consumption of traditional oral and one or more potentially
reduced-risk tobacco or nicotine products by adult consumers.
U.S. United States of America.
Vapour Battery-powered devices (rechargeable or single-use) that heat liquid
formulations - e-liquids - to create a vapour which is inhaled. Vapour
products include Vuse.
Value share Value share is the estimated retail value of units bought by adult consumers
of a particular brand or combination of brands, as a proportion of the total
estimated retail value of units bought by adult consumers in the industry,
category or other sub-categorisation in discussion. Except when referencing
particular markets, value share is based on our Top markets.
Volume share Offtake volume share, as independently measured by retail audit agencies and
scanner sales to adult consumers, where possible or based on movements within
the supply chain (such as sales to retailers) to generate an estimate of
shipment share, based upon latest available data. Except when referencing
particular markets, volume share is based on our Top markets.
† Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
All financial statements and financial information provided by or with respect
to the U.S. or Reynolds American are initially prepared on the basis of U.S.
GAAP and constitute the primary financial statements or financial records of
the U.S./Reynolds American. This financial information is then converted to
International Financial Reporting Standards as issued by the IASB and as
adopted for use in the UK (IFRS) for the purpose of consolidation within the
results of the Group. To the extent any such financial information provided in
this announcement relates to the U.S. or Reynolds American it is provided as
an explanation of, or supplement to, Reynolds American's primary U.S. GAAP
based financial statements and information.
Data Lake and Reconciliations
Reconciling volume to organic volume
Group Volume
Years ended 31 December 2024 2023
Reported Inorganic adjust's Organic Organic Reported Inorganic adjust's Organic
growth %
New Categories:
Vapour (units mn) 616 - 616 -5.9% 654 - 654
HP (bn sticks) 21 - 21 -0.3% 24 (3) 21
Modern Oral (bn pouches) 8.3 - 8.3 +56.1% 5.4 (0.1) 5.3
Traditional Oral (bn sticks eq) 6.1 - 6.1 -8.2% 6.6 - 6.6
Cigarettes (bn sticks) 505 - 505 -5.0% 555 (23) 532
OTP (bn sticks) 13 - 13 -11.2% 15 - 15
Total Combustibles (bn sticks) 518 - 518 -5.2% 570 (23) 547
Memo: Cigarettes + HP (bn sticks) 526 - 526 -4.8% 579 (26) 553
Inorganic adjustments relate to businesses bought or sold, being the Group's
businesses in Russia and Belarus, that were sold in 2023.
Analysis of profit from operations (by segment) and diluted earnings per share
Year ended 31 December 2024
Reported Adj Items(1) Adjusted Exchange Adjusted at CC(2) Inorganic Adjs Adjusted Organic
£m £m £m £m £m £m £m
Profit from Operations
U.S. 4,087 2,299 6,386 194 6,580 - 6,580
AME (3,464) 6,784 3,320 192 3,512 - 3,512
APMEA 2,113 71 2,184 163 2,347 - 2,347
Total Region 2,736 9,154 11,890 549 12,439 - 12,439
Net finance costs (1,098) (491) (1,589) (27) (1,616) - (1,616)
Associates and joint ventures 1,900 (1,379) 521 20 541 - 541
Profit before tax 3,538 7,284 10,822 542 11,364 - 11,364
Taxation (357) (2,206) (2,563) (106) (2,669) - (2,669)
Non-controlling interests (113) (38) (151) (5) (156) - (156)
Coupons relating to hybrid bonds net of tax (42) - (42) - (42) - (42)
Profit attributable to shareholders 3,026 5,040 8,066 431 8,497 - 8,497
Diluted number of shares (m)* 2,225 2,225 2,225 2,225
Diluted earnings per share (pence) 136.0 362.5 381.9 381.9
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS. For remuneration purposes, and
reflective of the Group's positive earnings on an adjusted basis, Management
included the dilutive effect of share options in calculating adjusted diluted
earnings per share.
Year ended 31 December 2023
Reported Adj Items(1) Adjusted Inorganic Adjs Adjusted Organic
£m £m £m £m £m
(Loss)/profit from Operations
U.S. (20,781) 27,602 6,821 - 6,821
AME 3,194 266 3,460 (193) 3,267
APMEA 1,836 348 2,184 - 2,184
Total Region (15,751) 28,216 12,465 (193) 12,272
Net finance costs (1,895) 96 (1,799) (21) (1,820)
Associates and joint ventures 585 (8) 577 - 577
(Loss)/profit before tax (17,061) 28,304 11,243 (214) 11,029
Taxation 2,872 (5,488) (2,616) 55 (2,561)
Non-controlling interests (178) (1) (179) - (179)
Coupons relating to hybrid bonds net of tax (45) - (45) - (45)
(Loss)/profit attributable to shareholders (14,412) 22,815 8,403 (159) 8,244
Diluted number of shares (m) 2,229 2,237 2,237
Diluted earnings per share (pence) (646.6) 375.6 368.5
Notes to the analysis of profit from operations above:
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
Data Lake and Reconciliations
Continued
Non-GAAP measures
To supplement the presentation of the Group's results of operations and
financial condition in accordance with IFRS, the Group also presents several
non-GAAP measures used by management to monitor the Group's performance. The
Group's management regularly reviews the measures used to assess and present
the financial performance of the Group and, as relevant, its geographic
segments.
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, currency fluctuations and the performance of businesses sold
or acquired that may significantly affect the users' understanding of the
Group's performance when compared across period, as applicable, provide
additional useful information to investors regarding the underlying
performance of the business on a comparable basis.
The following table demonstrates the principal non-GAAP measures which the
Group uses and indicates the IFRS measure from which each principal Non-GAAP
measure is reconciled from:
Non-GAAP Measure title Presented in Reconciled from:
Current rates Constant rates Organic IFRS measure
Revenue £m n/a(1) Yes Yes Revenue
New Categories revenue £m Yes Yes Yes Revenue
Smokeless revenue as a % of total revenue % Yes Revenue
Adjusted gross profit £m Yes Yes Profit from Operations
Adjusted gross margin % Yes Yes Revenue/Profit from Operations
Category contribution £m Yes Yes Profit from Operations
Category contribution margin % Yes Yes Revenue/Profit from Operations
Adjusted profit from operations £m Yes Yes Yes Profit from Operations
Adjusted operating margin % Yes Yes Yes Revenue/Profit from Operations
Adjusted diluted earnings per share p Yes Yes Yes Diluted Earnings per Share
Adjusted EBITDA £m Yes Yes Profit for the Year
Adjusted net debt £m Yes Yes Borrowings
Operating cash conversion % Yes Yes Net cash generated from operating activities
Adjusted cash generated from operations £m Yes Yes Yes Net cash generated from operating activities
Free cash flow before and after dividends paid to shareholders £m Yes Net cash generated from operating activities
Adjusted return on capital employed % Yes Profit from Operations / Average Total Assets less Current Liabilities
1. Revenue at current rates is the IFRS measure
The Group also uses adjusted share of post-tax results of associates and joint
ventures, and underlying tax rate.
Adjusting items, used to calculate certain of the above measures, are
identified in accordance with the Group's accounting policies. They
represent certain items of income and expense which the Group considers
distinctive based on their size, nature or incidence and which individually
or, if of a similar type, in aggregate, are relevant to an understanding of
the Group's underlying financial performance. Inorganic adjustments refer to
the results of businesses that have been acquired or sold, are due to be sold,
or where there is an enduring structural change in performance which would
have a significant impact on the users' understanding of the Group's
performance between periods. Additionally, the Group uses the non-GAAP
measures of non-controlling interest, coupons relating to hybrid bonds net of
tax and profit attributable to shareholders.
The Group also supplements its presentation of revenue in accordance with IFRS
by presenting the non-GAAP component breakdowns of revenues by product
category (including revenue generated from Vapour, Heated Products, Modern
Oral, New Categories as a whole, combustibles and Traditional Oral), including
by geographic segment (including revenue generated in the United States,
Americas and Europe and Asia-Pacific, Middle East and Africa) and including on
an organic basis. The Group further supplements the presentation of profit
from operations in accordance with IFRS by presenting the non-GAAP measure
referred to as New Categories contribution (including on an organic basis),
which reflects the marginal contribution of the New Categories products to the
Group's financial performance. This measure includes all attributable revenue
and costs. The Group's Management Board believes these measures, which are
used internally, are useful to the users of the financial statements in
helping them understand the underlying business performance of individual
Group product categories, including by geographic segments. They are not
presentations made in accordance with IFRS and should not be considered as an
alternative to breakdowns of revenues or profit from operations determined in
accordance with IFRS. Breakdowns of revenues by product category and
contributions to profit from operations by product category are not
necessarily comparable to similarly titled measures used by other companies.
As a result, readers should not consider these measures in isolation from, or
as a substitute analysis for, the Group's breakdowns of revenues as determined
in accordance with IFRS or profit from operations as determined in accordance
with IFRS.
In 2024, the Group introduced adjusted Gross Profit, adjusted Gross Margin and
Category Contribution Margin as non-GAAP measures. These measures demonstrate
the Group's profitability (before adjusting items and translational foreign
exchange) from the principal product categories, illustrating the category
profitability development as the Group realises the transition from
combustibles to Smokeless products in line with the Group's strategy to Build
a Smokeless World. New Categories adjusted Gross Margin and New Categories
Contribution Margin will be used within the Group's incentive schemes from
January 2025.
The Management Board, as the chief operating decision-maker, reviews a number
of our IFRS and non-GAAP measures for the Group and its product categories and
geographic segments (including on an organic basis) 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 profit from
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 (see page 18).
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
The Group also supplements its presentation of cash flows in accordance with
IFRS by presenting the non-GAAP measures of free cash flow (before dividends
paid to shareholders), free cash flow (after dividends paid to shareholders)
and operating cash flow conversion ratio. The Group's Management Board
believes these measures, which are used internally, are useful to the users of
the financial statements in helping them understand the underlying business
performance and can provide insights into the cash flow available to, among
other things, reduce debt and pay dividends. Free cash flow (before dividends
paid to shareholders), free cash flow (after dividends paid to shareholders)
and operating cash flow conversion ratio have limitations as analytical tools.
They are not presentations made in accordance with IFRS and should not be
considered as an alternative to net cash generated from operating activities
determined in accordance with IFRS. Free cash flow (before dividends paid to
shareholders), free cash flow (after dividends paid to shareholders) and
operating cash flow conversion ratio are not necessarily comparable to
similarly titled measures used by other companies. As a result, readers should
not consider these measures in isolation from, or as a substitute analysis
for, the Group's results of operations or cash flows as determined in
accordance with IFRS.
The Group also presents net debt and adjusted net debt, non-GAAP measures, on
pages 1, 16 to 17 and 58. The Group uses net debt and adjusted net debt to
assess its financial capacity. The Management Board believes that these
additional measures, which are used internally, are useful to the users of the
financial statements in helping them to see how business financing has changed
over the year. Net debt and adjusted net debt have limitations as analytical
tools. They are not presentations made in accordance with IFRS and should not
be considered as alternatives to borrowings or total liabilities determined in
accordance with IFRS. Net debt and adjusted net debt are not necessarily
comparable to similarly titled measures used by other companies. As a result,
readers should not consider these measures in isolation from, or as a
substitute analysis for the Group's measures of financial position as
determined in accordance with IFRS.
Due to the secondary listing of the ordinary shares of British American
Tobacco p.l.c. on the main board of the JSE in South Africa, the Group is
required to present headline earnings per share and diluted headline earnings
per share, as alternative measures of earnings per share, calculated in
accordance with Circular 1/2023 'Headline Earnings' issued by the South
African Institute of Chartered Accountants. These are shown on page 37.
The Group also presents the underlying tax rate, a non-GAAP measure, on page
14. The Group uses the underlying tax rate to assess the tax rate applicable
to the Group's underlying operations, excluding the Group's share of post-tax
results of associates and joint ventures in the Group's pre-tax results and
adjusting items. The Management Board believes that this additional measure,
which is used internally, is useful to the users of the financial statements
because it excludes the contribution from the Group's associates, recognised
after tax but within the Group's pre-tax profits, and adjusting items, thereby
enhancing users' understanding of underlying business performance.
Underlying tax rate has limitations as an analytical tool. It is not a
presentation made in accordance with IFRS and should not be considered as an
alternative to the Group's headline effective tax rate as determined in
accordance with IFRS. Underlying tax rate is not necessarily comparable to
similarly titled measures used by other companies. As a result, this measure
should not be considered in isolation from, or as a substitute analysis for,
the Group's underlying tax rate as determined in accordance with IFRS.
Revenue and organic revenue, at constant rates of exchange
Definition: revenue before the impact of foreign exchange and inorganic
adjustments.
Years ended 31 December 2024 2023
£m £m
Revenue 25,867 27,283
Impact of translational foreign exchange 1,284
Revenue translated at 2023 exchange rates 27,151 27,283
Inorganic adjustments translated at 2023 exchange rates - (479)
Organic revenue translated at 2023 exchange rates 27,151 26,804
Revenue (and organic revenue) by Product Category, including New Categories,
at constant rates of exchange
Definition: revenue derived from each of the main product categories,
including New Categories, before the impact of foreign exchange and inorganic
adjustments. These measures enable users of the financial statements to
compare the Group's business performance across and with reference to the
Group's investment activity.
Years ended 31 December 2024 2023
Group Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 3,432 119 3,551 - 3,551 3,347 (87) 3,260
Vapour 1,721 44 1,765 - 1,765 1,812 (1) 1,811
HP 921 51 972 - 972 996 (78) 918
Modern Oral 790 24 814 - 814 539 (8) 531
Traditional Oral 1,092 31 1,123 - 1,123 1,163 - 1,163
Smokeless 4,524 150 4,674 - 4,674 4,510 (87) 4,423
Combustibles 20,685 1,063 21,748 - 21,748 22,108 (389) 21,719
Other 658 71 729 - 729 665 (3) 662
Total Revenue 25,867 1,284 27,151 - 27,151 27,283 (479) 26,804
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Revenue (and organic revenue) by Product Category, including New Categories,
at constant rates of exchange (continued)
Years ended 31 December 2024 2023
U.S. Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 1,078 29 1,107 - 1,107 1,058 - 1,058
Vapour 998 27 1,025 - 1,025 1,033 - 1,033
HP - - - - - - - -
Modern Oral 80 2 82 - 82 25 - 25
Traditional Oral 1,058 30 1,088 - 1,088 1,127 - 1,127
Smokeless 2,136 59 2,195 - 2,195 2,185 - 2,185
Combustibles 9,094 253 9,347 - 9,347 9,744 - 9,744
Other 48 2 50 - 50 65 - 65
Total Revenue 11,278 314 11,592 - 11,592 11,994 - 11,994
Years ended 31 December 2024 2023
AME Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 1,730 45 1,775 - 1,775 1,673 (87) 1,586
Vapour 611 14 625 - 625 686 (1) 685
HP 443 10 453 - 453 505 (78) 427
Modern Oral 676 21 697 - 697 482 (8) 474
Traditional Oral 34 1 35 - 35 36 - 36
Smokeless 1,764 46 1,810 - 1,810 1,709 (87) 1,622
Combustibles 7,039 447 7,486 - 7,486 7,614 (389) 7,225
Other 438 30 468 - 468 468 (3) 465
Total Revenue 9,241 523 9,764 - 9,764 9,791 (479) 9,312
Years ended 31 December 2024 2023
APMEA Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 624 45 669 - 669 616 - 616
Vapour 112 3 115 - 115 93 - 93
HP 478 41 519 - 519 491 - 491
Modern Oral 34 1 35 - 35 32 - 32
Traditional Oral - - - - - - - -
Smokeless 624 45 669 - 669 616 - 616
Combustibles 4,552 363 4,915 - 4,915 4,750 - 4,750
Other 172 39 211 - 211 132 - 132
Total Revenue 5,348 447 5,795 - 5,795 5,498 - 5,498
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Gross Profit and Adjusted Gross Margin at Constant Rates of Exchange
Definition - Profit from operations before the impact of adjusting items and
translational foreign exchange, and before all non-production/attributable
distribution costs and presented excluding the inorganic performance of
certain businesses bought or sold in the period, in £ and as a proportion of
revenue (at constant rates).
To supplement BAT's performance presented in accordance with IFRS, the Group's
Management Board, as the chief operating decision‑maker, reviews the
contribution to Group profit from operations (before the impact of adjusting
items, translational foreign exchange and non-production/attributable
distribution costs). The measure is reviewed in absolute £ values and as a
proportion of revenue. This reflects the focus of the Group's strategic
ambition and investment activity. New Category adjusted gross margin (being a
sub-set of Group adjusted gross margin) will be included within the Group's
incentive schemes.
The Group's Management Board believes that these additional measures provide
information that enables users of the financial statements to compare the
Group's business performance across periods and by reference to the Group's
investment activity and strategic development. Adjusted gross profit and
adjusted gross margin have limitations as analytical tools. They are not
presentations made in accordance with IFRS, are not measures of financial
condition or liquidity and should not be considered as alternatives to profit
from operations as determined in accordance with IFRS. Adjusted gross profit
and adjusted gross margin are not necessarily comparable to similarly titled
measures used by other companies. As a result, you should not consider such
performance measures in isolation from, or as a substitute analysis for, BAT's
results of operations as determined in accordance with IFRS.
Please refer to page 53 for the reconciliation of Group profit from operations
to adjusted gross profit and adjusted gross margin, included as part of a
wider reconciliation of non-GAAP measures.
Category Contribution and Category Contribution Margin at Constant Rates of
Exchange
Definition - Profit from operations before the impact of adjusting items and
translational foreign exchange, having allocated costs that are attributable
to a product category and presented excluding the inorganic performance of
certain businesses bought or sold in the period, in £ and as a proportion of
revenue (at constant rates).
To supplement BAT's performance presented in accordance with IFRS, the Group's
Management Board, as the chief operating decision‑maker, reviews the
contribution to Group profit from operations (before the impact of adjusting
items and translational foreign exchange) of the principal product categories,
reflecting the focus of the Group's investment activity. The measure is
reviewed in absolute £ values and as a proportion of revenue. Category
contribution is, and Category contribution margin will be in the future,
assessed by management within the Group's incentive schemes.
The Group's Management Board believes that these additional measures provide
information that enables users of the financial statements to compare the
Group's business performance across periods and by reference to the Group's
investment activity. Category contribution and category contribution margin by
products as measures of Group performance have limitations as analytical
tools. They are not presentations made in accordance with IFRS, are not
measures of financial condition or liquidity and should not be considered as
alternatives to profit from operations as determined in accordance with IFRS.
Category Contribution and Category Contribution margin are not necessarily
comparable to similarly titled measures used by other companies. As a result,
you should not consider such performance measures in isolation from, or as a
substitute analysis for, BAT's results of operations as determined in
accordance with IFRS.
Please refer to page 53 for the reconciliation of Group profit from operations
to category contribution and category contribution margin, included as part of
a wider reconciliation of non-GAAP measures.
The reconciliation provided reflects the marginal contribution of the Group
principal product categories to the Group's financial performance. This
measure includes all attributable revenue and costs. This measure is provided
in aggregate as certain costs are incurred across all New Categories and are
not product specific. However, certain overhead costs that are not category
specific are excluded from Category Contribution.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Reconciliations of Revenue to Revenue (including on an organic basis) by
Product Category, at Constant
Rates of Exchange and Group Profit from Operations to Adjusted Organic Profit
from Operations, Adjusted Organic Operating margin, Category Contribution,
Adjusted Gross Profit and Adjusted Gross Margin, at constant rates of
exchange.
The following reconciliations are provided to support the definitions of the
above measures as explained on pages 50, 52 and 54.
2024
New Categories
Proposal Group reported Combustibles Vapour HP Modern Oral New Categories Traditional Oral Other
£m £m £m £m £m £m £m £m
Revenue 25,867 20,685 1,721 921 790 3,432 1,092 658
vs 2023 -5.2% -6.4% -5.1% -7.6% 46.6% 2.5% -6.0% -1.0%
Impact of translational FX 1,284 1,063 44 51 24 119 31 71
Revenue at constant FX 27,151 21,748 1,765 972 814 3,551 1,123 729
vs 2023 -0.5% -1.6% -2.6% -2.5% 51.0% 6.1% -3.4% 9.7%
Inorganic adjustments - - - - - - - -
Organic revenue 27,151 21,748 1,765 972 814 3,551 1,123 729
Profit from Operations 2,736
Operating margin 10.6%
Adjusting items (see 54) 9,154
Impact of translational FX 549
Inorganic adjustments -
Adjusted organic profit from operations 12,439
Adj. organic operating margin 45.8%
Other costs that are not attributable to categories 1,907
Category Contribution 14,346 13,012 251 863 220
Cat Contribution margin 52.8% 59.8% 7.1% 76.8% 30.2%
Category spend (Marketing Investment and R&D) 3,900 2,052 1,725 60 63
Adjusted gross profit 18,246 15,064 1,976 923 283
vs 2023 2.2% 0.3% 19.8% -1.6% 14.6%
Adjusted gross margin 67.2% 69.3% 55.7% 82.2% 38.9%
Adjusted gross profit at current rates 17,485 14,398 1,932 898 257
at Constant FX
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted profit from operations, adjusted profit from operations at constant
rates of exchange, adjusted organic profit from operations at constant rates
of exchange; adjusted operating margin and adjusted organic operating margin
Definition: profit from operations before the impact of adjusting items
(described on pages 29 to 32), inorganic adjustments and translational foreign
exchange; and adjusted profit from operations as a percentage of revenue and
adjusted organic profit from operations as a percentage of organic revenue, at
constant rates of exchange.
Years ended 31 December 2024 2023
£m £m
Profit/(loss) from operations 2,736 (15,751)
Add:
Restructuring and integration costs - (2)
Amortisation and impairment of trademarks and similar intangibles 2,279 23,202
Impairment of goodwill 39 4,614
Charges in respect of an excise assessment in Romania 449 -
Charges in respect of the ongoing litigation in Canada 6,203 -
Impairment charges in respect of fixed assets, including the Group's head 149 -
office in London
Charges in connection with disposal of associate 6 -
Credit in respect of calculation of excise on social contributions in Brazil - (148)
Credit in respect of settlement of historic litigation in relation to the Fox (132) -
River
Charges in connection with disposal of subsidiaries - 351
Charges in respect of contributions on investment grants in Brazil - 47
Credit in respect of recovery of VAT on social contributions in Brazil - (19)
Charges in respect of DOJ investigation and OFAC investigation 4 75
Other adjusting items (including Engle) 157 96
Adjusted profit from operations 11,890 12,465
Impact of translational foreign exchange on adjusted profit from operations 549
Adjusted profit from operations translated at 2023 exchange rates 12,439 12,465
Inorganic adjustments translated at 2023 exchange rates - (193)
Adjusted organic profit from operations translated at 2023 exchange rates 12,439 12,272
Operating Margin (Profit from operations as % of revenue) 10.6% -57.7%
Adjusted Operating Margin (Adjusted profit from operations as % of revenue) 46.0% 45.7%
Adjusted Organic Operating Margin (Adjusted organic PFO as % of organic 46.0% 45.8%
revenue)
Adjusted net finance costs and adjusted net finance costs, at constant rates
of exchange
Definition: net finance costs before the impact of adjusting items (described
on page 32) and translational foreign exchange.
Years ended 31 December 2024 2023
£m £m
Finance costs (1,349) (2,081)
Finance income 251 186
Net finance costs (1,098) (1,895)
Less: Adjusting items in net finance costs (491) 96
Adjusted net finance costs (1,589) (1,799)
Comprising:
Interest payable (1,759) (1,835)
Interest and dividend income 251 186
Fair value changes - derivatives (90) (599)
Exchange differences 9 449
Adjusted net finance costs (1,589) (1,799)
Impact of translational foreign exchange (27)
Adjusted net finance costs translated at 2023 exchange rates (1,616) (1,799)
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted share of post-tax results of associates and joint ventures and
adjusted share of post-tax results of associates and joint ventures, at
constant rates of exchange
Definition: share of post-tax results of associates and joint ventures before
the impact of adjusting items (described on page 32) and translational foreign
exchange.
Years ended 31 December 2024 2023
£m £m
Group's share of post-tax results of associates and joint ventures 1,900 585
Issue of shares and changes in shareholding (18) (40)
Other exceptional items in ITC - (2)
Gain on partial divestment of shares held in ITC (1,361) -
Impairment in relation to Organigram (net of tax) - 34
Adjusted Group's share of post-tax results of associates and joint ventures 521 577
Impact of translational foreign exchange 20
Adjusted Group's share of post-tax results of associates and joint ventures 541 577
translated at 2023 exchange rates
Adjusted taxation and adjusted taxation at constant rates of exchange
Definition: taxation before the impact of adjusting items (described on page
32) and translational foreign exchange.
Years ended 31 December 2024 2023
£m £m
UK
- current year tax 15 20
- adjustment in respect of prior periods 9 12
Overseas
- current year tax 2,571 2,804
- adjustment in respect of prior periods 108 (25)
Current tax 2,703 2,811
Pillar Two income tax 79 -
Total current tax 2,782 2,811
Deferred tax (2,425) (5,683)
Taxation on ordinary activities 357 (2,872)
Adjusting items in taxation 157 73
Taxation on adjusting items 2,049 5,415
Adjusted taxation 2,563 2,616
Impact of translational foreign exchange 106
Adjusted taxation translated at 2023 exchange rates 2,669 2,616
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Underlying tax rate and underlying tax rate, at constant rates of exchange
Definition: tax rate incurred before the impact of adjusting items (described
on pages 29 to 32) and translational foreign exchange and to adjust for the
inclusion of the Group's share of post-tax results of associates and joint
ventures within the Group's pre-tax results.
Years ended 31 December 2024 2023
£m £m
Profit/(loss) before taxation (PBT) 3,538 (17,061)
Less:
Share of post-tax results of associates and joint ventures (1,900) (585)
Adjusting items within profit from operations 9,154 28,216
Adjusting items within finance costs (491) 96
Adjusted PBT, excluding associates and joint ventures 10,301 10,666
Impact of translational foreign exchange 522
Adjusted PBT, excluding associates and joint ventures translated at 2023 10,823
exchange rates
Taxation on ordinary activities (357) 2,872
Adjusting items within taxation and taxation on adjusting items (2,206) (5,488)
Adjusted taxation (2,563) (2,616)
Impact of translational foreign exchange (106)
Adjusted taxation translated at 2023 exchange rates (2,669)
Effective tax rate 10.1% 16.8%
Underlying tax rate 24.9% 24.5%
Underlying tax rate (at 2023 exchange rates) 24.7%
Adjusted diluted earnings per share, at current and constant rates of exchange
and adjusted organic diluted earnings per share, at constant rates of exchange
Definition: diluted earnings per share before the impact of adjusting items
and inorganic adjustments, after adjustments to the number of shares
outstanding for the impact of share option schemes whether they would be
dilutive or not under statutory measures, presented at the prior year's rate
of exchange.
Years ended 31 December 2024 2023
pence pence
Diluted earnings/(loss) per share 136.0 (646.6)
Effect of amortisation and impairment of goodwill, trademarks and similar 80.7 1,006.1
intangibles
Effect of impairment charges in respect of fixed assets, including the Group's 4.5 -
head office and the decision to exit Cuba
Effect of settlement of historical litigation in relation to the Fox River (4.9) -
Net effect of Excise and VAT cases - (5.7)
Effect of the ongoing litigation in Canada 205.0 -
Effect of disposal of subsidiaries - 24.5
Effect of Romania and Brazil other taxes 20.1 1.4
Effect of charges in respect of DOJ and OFAC investigations 0.2 3.4
Effect of planned disposal of subsidiaries - (8.7)
Effect of restructuring and integration costs - (0.2)
Effect of other adjusting items in operating profit 5.3 3.3
Effect of adjusting items in net finance costs (17.0) 3.1
Effect of gains related to the partial divestment of shares held in ITC (59.5) -
Effect of associates' adjusting items (0.8) (0.4)
Effect of adjusting items in respect of deferred taxation (12.0) (4.4)
Adjusting items in tax 4.9 1.2
Impact of dilution* (1.4)
Adjusted diluted earnings per share 362.5 375.6
Impact of translational foreign exchange 19.4
Adjusted diluted earnings per share, at 2023 exchange rates 381.9 375.6
Inorganic adjustments - (7.1)
Adjusted organic diluted earnings per share, at 2023 exchange rates 381.9 368.5
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS. For remuneration purposes, and
reflective of the Group's positive earnings on an adjusted basis, Management
included the dilutive effect of share options in calculating adjusted diluted
earnings per share.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Return on Capital Employed
Definition: profit from operations, excluding adjusting items and including
dividends from associates and joint ventures, as a proportion of average
total assets less current liabilities in the period.
2024 2023
£m £m
Profit/(loss) from operations 2,736 (15,751)
Adjusting items 9,154 28,216
Dividends received from associates and joint ventures 406 506
Adjusted profit from operations, inclusive of dividends from associates and 12,296 12,971
joint ventures
Total Assets 118,899 118,716
Current Liabilities 18,743 15,673
Capital employed at balance sheet date 100,156 103,043
Average capital 101,600 119,368
Adjusted ROCE 12.1% 10.9%
Operating cash flow conversion ratio
Definition: net cash generated from operating activities before the impact of
adjusting items and dividends from associates and excluding taxes paid and
after net capital expenditure, as a proportion of adjusted profit from
operations.
Years ended 31 December 2024 2023
£m £m
Net cash generated from operating activities 10,125 10,714
Cash related to adjusting items 824 156
Dividends from associates (406) (506)
Tax paid 1,854 2,622
Net capital expenditure (434) (487)
Other 1 -
Operating cash flow 11,964 12,499
Adjusted profit from operations 11,890 12,465
Cash conversion ratio 370% -68%
Operating cash flow conversion ratio 101% 100%
Cash conversion is net cash generated from operating activities as a
proportion of profit from operations
( )
Adjusted cash generated from operations
Definition: net cash generated from operating activities before the impact of
adjusting items (litigation), excluding dividends received from associates,
and after dividends paid to non-controlling interests, net interest paid and
net capital expenditure.
Years ended 31 December 2024 2023
£m £m
Net cash generated from operating activities 10,125 10,714
Dividends paid to non-controlling interests (121) (105)
Net interest paid (1,669) (1,763)
Net capital expenditure (434) (487)
Effect of deferral of U.S. tax, in line with the federal disaster declaration (700) -
in central and western North Carolina
Other - 1
Cash related to adjusting items within adjusted cash generated from operations 360 (49)
Other costs excluding litigation and restructuring costs 399 19
Dividends from associates (406) (506)
Adjusted cash generated from operations 7,554 7,824
In 2024, the Group deferred tax payments in the U.S. from 2024 to 2025
totalling US$895 million (£700 million). For the purposes of the 2024 and
2025 adjusted cash generated from operations metric, which is included in the
Group's incentive schemes, the impact of deferral has not been included in the
calculation as it does not reflect the cash generated by the normal operations
of the Group.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
( )
Free cash flow (before and after dividends paid to shareholders), at constant
rates of exchange
Definition: net cash generated from operating activities after dividends paid
to non-controlling interests, net interest paid and net capital expenditure,
and translational foreign exchange. This measure is presented before and after
dividends paid to shareholders.
( )
Years ended 31 December 2024 2023
£m £m
Net cash generated from operating activities 10,125 10,714
Dividends paid to non-controlling interests (121) (105)
Net interest paid (1,669) (1,763)
Net capital expenditure (434) (487)
Other - 1
Free cash flow (before dividends paid to shareholders) 7,901 8,360
Dividends paid to shareholders (5,213) (5,055)
Free cash flow (after dividends paid to shareholders) 2,688 3,305
Impact of translational foreign exchange 406
Free cash flow (after dividends paid to shareholders), at 2023 exchange rates 3,094
Net debt
Definition: total borrowings, including related derivatives, less cash and
cash equivalents and current investments held at fair value.
Years ended 31 December 2024 2023
£m £m
Opening net debt (34,640) (39,281)
Free cash flow (after dividends paid to shareholders) 2,688 3,305
Other cash payments (74) (303)
Proceeds from partial divestment of shares held in ITC 1,577 -
Purchase of own shares (698) -
Other non-cash movements 568 (226)
Receipt from disposal of subsidiaries - 159
Transferred from/(to) held-for-sale - 368
Impact of foreign exchange (674) 1,338
Closing net debt (31,253) (34,640)
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted net debt and ratio of adjusted net debt to adjusted EBITDA, at
constant rates of exchange and ratio of adjusted net debt to adjusted, organic
EBITDA
Definition: net debt, excluding the impact of the revaluation of Reynolds
American Inc. acquired debt arising as part of the purchase price allocation
process and translational foreign exchange, as a proportion of profit for the
year (earnings) before net finance costs (interest), tax, depreciation,
amortisation, impairment, associates, adjusting items and translational
foreign exchange, and, where appropriate, excluding inorganic adjustments for
businesses sold in the period.
Years ended 31 December 2024 2023
£m £m
Borrowings (excluding lease liabilities) 36,365 39,232
Lease liabilities 585 498
Derivatives in respect of net debt 113 170
Cash and cash equivalents (5,297) (4,659)
Current assets held at fair value (513) (601)
Net debt items included within asset held-for-sale - -
Purchase price adjustment (PPA) to Reynolds American Inc. debt (670) (700)
Adjusted net debt 30,583 33,940
Translational foreign exchange impact to adjusted net debt (947)
Adjusted net debt, at 2023 exchange rates 29,636
Profit/(loss) for the year 3,181 (14,189)
Taxation on ordinary activities 357 (2,872)
Net finance costs 1,098 1,895
Depreciation, amortisation and impairment costs 3,101 28,614
Share of post-tax results of associates and joint ventures (1,900) (585)
Other adjusting items 6,687 360
Adjusted EBITDA 12,524 13,223
Translational foreign exchange impact to adjusted EBITDA 577
Adjusted EBITDA, at 2023 exchange rates 13,101
Adjustment for Russia and Belarus adjusted EBITDA - (207)
Adjusted, organic EBITDA 12,524 13,016
Ratio of adjusted net debt to adjusted EBITDA 2.44x 2.57x
Ratio of adjusted net debt to adjusted, organic EBITDA 2.44x 2.61x
Ratio of adjusted net debt to adjusted EBITDA, at 2023 exchange rates 2.26x
As discussed on page 18, a Global Settlement Agreement with respect to the
ongoing litigation in Canada has been proposed. This would lead to an outflow
of cash, cash equivalents and investments held at fair value as part of the
settlement, thereby increasing the level of adjusted net debt. To aid the
users of the financial statements, the below table has been provided to
illustrate the Group's leverage ratio of adjusted net debt to adjusted
EBITDA, after such a payment.
Years ended 31 December 2024
£m
Adjusted net debt (above) 30,583
Provision recognised in respect of cash and cash equivalents and investments 2,456
held at fair value (IHaFV) in Canada
Adjusted net debt excluding the Canada provision regarding cash, cash 33,039
equivalents and IHaFV
Adjusted EBITDA (above) 12,524
Adjusted EBITDA earned in Canada* (525)
Adjusted EBITDA excluding the EBITDA earned in Canada* 11,999
Adjusted net debt to adjusted EBITDA excluding Canada* 2.75x
*excludes New Categories.
Data Lake and Reconciliations
Continued
Summary of volume and revenue by category by region
Volume
Year ended 31 December U.S. AME APMEA Group
2024 % change 2024 % change 2024 % change 2024 % change
New Categories
Vapour (units mn) 287 -3.7% 276 -11.5% 53 +19.1% 616 -5.9%
HP (sticks bn) - -% 8 -24.6% 13 -0.2% 21 -11.6%
Modern Oral (pouches bn) 1.0 +234.0% 6.3 +50.2% 1.0 +16.8% 8.3 +55.0%
Traditional Oral (stick eq bn) 5.3 -8.9% 0.8 -3.3% - -% 6.1 -8.2%
Cigarettes (sticks bn) 47 -10.1% 238 -10.2% 220 -7.3% 505 -8.9%
OTP (stick eq bn) - -20.3% 11 -11.6% 2 -7.2% 13 -11.2%
Total Combustibles 47 -10.1% 249 -10.2% 222 -7.3% 518 -9.0%
Memo: Cigarettes and HP (sticks bn) 47 -10.1% 246 -10.7% 233 -6.9% 526 -9.0%
Organic Volume
Year ended 31 December U.S. AME APMEA Group
2024 % change 2024 % change 2024 % change 2024 % change
New Categories
Vapour (units mn) 287 -3.7% 276 -11.5% 53 +19.1% 616 -5.9%
HP (sticks bn) - -% 8 -0.4% 13 -0.2% 21 -0.3%
Modern Oral (pouches bn) 1.0 +234.0% 6.3 +51.4% 1.0 +16.8% 8.3 +56.1%
Traditional Oral (stick eq bn) 5.3 -8.9% 0.8 -3.3% - -% 6.1 -8.2%
Cigarettes (sticks bn) 47 -10.1% 238 -1.6% 220 -7.3% 505 -5.0%
OTP (stick eq bn) - -20.3% 11 -11.6% 2 -7.2% 13 -11.2%
Total Combustibles 47 -10.1% 249 -2.1% 222 -7.3% 518 -5.2%
Memo: Cigarettes and HP (sticks bn) 47 -10.1% 246 -1.6% 233 -6.9% 526 -4.8%
Revenue - reported at current rates (£m)
Year ended 31 December U.S. AME APMEA Group
2024 % change 2024 % change 2024 % change 2024 % change
New Categories 1,078 +1.8% 1,730 +3.5% 624 +1.0% 3,432 +2.5%
Vapour 998 -3.5% 611 -10.8% 112 +19.6% 1,721 -5.1%
HP - -% 443 -12.2% 478 -2.8% 921 -7.6%
Modern Oral 80 +223.3% 676 +40.3% 34 +5.7% 790 +46.6%
Traditional Oral 1,058 -6.1% 34 -5.8% - -% 1,092 -6.0%
Total Smokeless 2,136 -2.2% 1,764 +3.3% 624 +1.0% 4,524 +0.3%
Total Combustibles 9,094 -6.7% 7,039 -7.5% 4,552 -4.2% 20,685 -6.4%
Other 48 -25.3% 438 -6.7% 172 +31.1% 658 -1.0%
Total 11,278 -6.0% 9,241 -5.6% 5,348 -2.7% 25,867 -5.2%
Organic revenue - adjusted at constant rates (£m)
Year ended 31 December U.S. AME APMEA Group
2024 % change 2024 % change 2024 % change 2024 % change
New Categories 1,107 +4.6% 1,775 +11.9% 669 +8.6% 3,551 +8.9%
Vapour 1,025 -0.8% 625 -8.6% 115 +23.7% 1,765 -2.5%
HP - -% 453 +6.1% 519 +5.6% 972 +5.8%
Modern Oral 82 +232.3% 697 +46.8% 35 +10.0% 814 +53.2%
Traditional Oral 1,088 -3.4% 35 -3.6% - -% 1,123 -3.4%
Total Smokeless 2,195 +0.5% 1,810 +11.6% 669 +8.6% 4,674 +5.7%
Total Combustibles 9,347 -4.1% 7,486 +3.6% 4,915 +3.5% 21,748 +0.1%
Other 50 -22.7% 468 +0.6% 211 +59.8% 729 +10.1%
Total 11,592 -3.4% 9,764 +4.9% 5,795 +5.4% 27,151 +1.3%
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