REG - British Amer.Tobacco - Preliminary Results
12/02/2026 07:00
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RNS Number : 6701S British American Tobacco PLC 12 February 2026
12 February 2026 - Press Release/Preliminary Results
British American Tobacco p.l.c.
Preliminary results for the year ended 31 December 2025
Momentum Drives Further Confidence in 2026 Delivery
Summary
- Added 4.7 million consumers (to 34.1 million) of our Smokeless brands
- Smokeless products now 18.2% of Group revenue, up 70 bps vs FY24
- Reported revenue down 1.0% (due to currency headwinds), up 2.1% at constant
FX, driven by combustibles and Velo Plus in the U.S. and continued
multi-category growth in AME, partly offset by APMEA
- New Categories revenue growth accelerated to double-digits in H2, with FY
growth of 7.0%(2)
- New Categories contribution(2) increased by 77.1% to £442 million, driven
by our Quality Growth approach
- Improved combustibles revenue and category contribution(2,3) driven by the
U.S. and AME
- Reported profit from operations up 265% (with reported operating margin up
28.4 ppts to 39.0%), largely due to the movement in the Canadian settlement
provision
- Adjusted profit from operations(1,2,3) up 2.3%, adjusted operating
margin(1,2,3) at 44.0% (flat vs FY24)
- Reported diluted EPS up 157% to 349.1p, with adjusted diluted EPS(1, 2,3)
up 3.4%
- Confident in sustainably delivering mid-term growth algorithm, 2026
performance expected at the lower end of the range
- On track to reduce leverage(3) to within 2.0-2.5x by end 2026, supported by
continued strong cash conversion
- Dividend growth of 2.0% to 245.04p and a £1.3 billion share buy-back in
2026
Tadeu Marroco, Chief Executive
"I am pleased with our accelerating momentum through 2025, enabling full-year
delivery at the top end of our guidance. This reinforces our confidence in
sustainably delivering our mid-term algorithm from 2026.
Our U.S. business has delivered strong growth, mainly driven by sustained
momentum in combustibles, resulting from our commercial actions and enhanced
execution. Velo Plus has delivered excellent results with triple-digit revenue
growth, with Velo reaching the number 2 position in volume and value share and
achieving category contribution profitability within one year of launch. The
recent improvement in Vuse performance is encouraging, although the Vapour
category continues to be impacted by illicit proliferation. Over time, we
believe Vuse is well positioned to benefit from stronger enforcement at the
Federal and State level.
In AME, our multi-category portfolio continued to perform strongly, while our
performance in APMEA was impacted by fiscal and regulatory challenges in
Bangladesh and Australia.
Our New Categories revenue is accelerating, returning to double-digit growth
in H2, driven by strong Velo growth in all regions. We continue to prioritise
accelerating growth in category contribution through investment in our most
profitable markets.
Our enhanced R&D capabilities have enabled three premium innovation
launches - Vuse Ultra, glo Hilo and Velo Shift, with encouraging early results
and further targeted roll-outs planned in 2026. With this momentum, together
with resilient combustibles delivery and further productivity initiatives, we
are confident in sustainably delivering on our financial algorithm of +3-5%
revenue(2), +4-6% APFO(1,2,3) and +5-8% adjusted diluted EPS(1,2,3), with 2026
expected to be at the lower end of the range, as we continue to invest in our
transformation.
Our strong cash flow is driving increased financial flexibility and we expect
to be within our 2.0-2.5x target leverage range by end 2026.
I remain committed to delivering sustainable shareholder value through robust
cash returns, with progressive dividends and sustainable share buy-backs,
including £1.3 billion programme for 2026."
Summary Information
Performance highlights Reported Adjusted(3) Adjusted(3) for Canada(4)
For year ended 31 December 2025 Current vs 2024 Current vs 2024 Current vs 2024
rates (current) rates (constant) rates (constant)
Cigarette and HP volume share(1) -40 bps
Cigarette and HP value share(1) -10 bps
Consumers of Smokeless products(2) 34.1m +4.7m
Revenue (£m) £25,610m -1.0% £25,610m +2.1% £25,610m +2.1%
Revenue from New Categories (£m) £3,621m +5.5% £3,621m +7.0% £3,621m +7.0%
Smokeless revenue as a % of total revenue (%) 18.2% +70 bps
Profit from operations (£m) £9,997m +265% £11,572m +0.4% £11,279m +2.3%
Adjusted gross profit growth (%) +2.1% +3.4%
Category contribution - New Categories (£m) £427m +77.1% £427m +77.1%
Category contribution margin - New Categories (%) 11.8% 4.7 ppts 11.8% 4.7 ppts
Operating margin (%) 39.0% +28.4 ppts 45.2% -80 bps 44.0% flat
Diluted earnings per share (pence) 349.1p +157% 352.1p +0.7% 340.5p +3.4%
Net cash generated from operating activities (£m) £6,342m -37.4%
Free cash (before payment of dividend) (£m) £4,048m -48.8%
Adjusted cash generated from operations (£m)(5) £6,882m -5.5%
Cash conversion (%) +63% -307 ppts +100% -50 bps
Borrowings including lease liabilities (£m) £35,070m -5.1%
Adjusted net debt to adjusted EBITDA ratio 2.48x +0.05x 2.55x -0.20x
Dividend per share (pence) 245.04 +2.0%
The use of non-GAAP measures, including adjusting items and constant
currencies, are further discussed from page 49, with reconciliations from the
most comparable IFRS measure provided.
Notes:
1. To better reflect the evolving performance of each category, from 1 January
2026 the Group will decouple the value share and volume share metrics from a
combined Cigarettes and HP view to disclose Cigarettes and HP performance
separately. 2. Internal estimate. See page 43. 3. See page 26 for a discussion
on adjusting items. 4. As adjusted for Canada excludes the performance of the
Canadian business (excluding New Categories) given the requirement to use the
profits earned to settle the litigation liability - see page 17. There is no
adjustment to revenue. 5. 2025 was negatively impacted by deferral of tax in
the U.S. from 2024 of £678 million, the benefit of which was excluded in the
2024 comparator. Excluding the deferral from 2025, adjusted cash generated
from operations would have been £7,560 million, or £7,840 million at
constant rates of exchange in 2025 compared to £7,554 million in 2024.
2026 Outlook
- Global cigarette industry volume expected to be down c.2%.
- Lower end of our medium-term guidance ranges:
- 3-5% revenue(1) growth, with low double-digit New Category revenue
growth(1).
- 4-6% adjusted profit from operations growth(1,2) - H2 weighted.
- Expected c.1% transactional FX headwind.
- 5-8% adjusted diluted EPS growth(1,2) growth.
- We expect a translational FX headwind of c.3% on adjusted diluted EPS
growth(2).
- Net finance costs(1,2) expected to be c.£1.8 billion, subject to interest
rate volatility.
- Gross capital expenditure in 2026 of approximately £750 million.
- Operating cash flow conversion that exceeds 95%.
- Leverage within our 2.0-2.5x adjusted net debt/adjusted EBITDA(2) corridor
by year end.
- Commitment to dividend growth in sterling terms and £1.3 billion share
buy-back.
1. At constant rates of exchange. 2. As adjusted for Canada.
Enquiries
For more information, please contact
Investor Relations: Press Office:
Victoria Buxton +44 (0)20 7845 2012 +44 (0)20 7845 2888 | @BATplc
Amy Chamberlain +44 (0)20 7845 1124 media_centre@bat.com
John Harney+44 (0)20 7845 1263
BAT IR TeamIR_Team@bat.com
Webcast and Q&A session:
BAT will hold a live webcast for investors and analysts at 9.30am (GMT) on
12 February 2026, hosted by Tadeu Marroco, Chief Executive, and Javed Iqbal,
Interim 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.
If you prefer to listen via conference call, please use the following dial-in
details (participant passcode: BAT - FY25).
Standard International: +44 (0) 33 0551 0200 SA (toll free): 0 800 980 512
UK (toll free): 0808 109 0700 U.S. (toll free): 866 580 3963
Video: Chief Executive's take on Full-Year 2025 Results: To watch highlights
of this year's results, please visit: www.bat.com/highlights-video-fy25
Group Operating Review
Analysis of revenue, profit from operations (by segment) and diluted earnings
per share
Prior year data is provided in the table on page 61.
For year ended 31 December 2025 Reported vs Adj Items(1) Adjusted vs Exch. Adjusted at CC(2) vs Adj for Canada(3) at CC(2) vs
2024 2024 2024 2024
£m % £m £m % £m £m % £m %
Revenue
U.S. 11,534 +2.3% 369 11,903 +5.5% 11,903 +5.5%
AME 9,309 +0.7% 239 9,548 +3.3% 9,548 +3.3%
APMEA 4,767 -10.9% 196 4,963 -7.2% 4,963 -7.2%
Total Group 25,610 -1.0% 804 26,414 +2.1% 26,414 +2.1%
Profit from Operations
U.S. 4,942 +21% 1,601 6,543 +2.4% 223 6,766 +5.9% 6,766 +5.9%
AME 3,433 -199% (128) 3,305 -0.5% 72 3,377 +1.7% 3,069 +9.6%
APMEA 1,622 -23.3% 102 1,724 -21.1% 69 1,793 -17.9% 1,793 -17.9%
Total Group 9,997 +265% 1,575 11,572 -2.7% 364 11,936 +0.4% 11,628 +2.3%
Net finance costs (1,819) +65.7% 170 (1,649) +3.8% (27) (1,676) +5.5% (1,733) +1.0%
Associates and joint ventures 1,681 -11.5% (1,239) 442 -15.0% 33 475 -8.6% 475 -8.6%
Profit before tax 9,859 +179% 506 10,365 -4.2% 370 10,735 -0.8% 10,370 +1.9%
Taxation (2,094) +487% (344) (2,438) -4.9% (84) (2,522) -1.6% (2,425) +1.3%
Non-controlling interests (1) -98.7% (125) (126) -16.3% (3) (129) -14.1% (129) -14.1%
Coupons relating to hybrid bonds net of tax (87) +105.4% 29 (58) +36.9% - (58) +36.9% (58) +36.9%
Profit attributable to shareholders 7,677 +154% 37 7,743 -4.0% 283 8,026 -0.5% 7,758 +2.2%
Diluted number of shares (m) 2,199 -1.2% 2,199 -1.2% 2,199 -1.2% 2,199 -1.2%
Diluted earnings per share (pence) 349.1 +157% 352.1 -2.9% 365.0 +0.7% 352.8 +3.4%
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence - see pages 26 to 33.
2. CC: 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.
3. As adjusted for Canada excludes the performance of the Canadian
business (excluding New Categories).
Total Group revenue
Movement in Revenue
Reported revenue decreased 1.0% to £25,610 million, negatively impacted by a
translational foreign exchange headwind of 3.1%.
On a constant currency basis, revenue grew by 2.1%, with:
- The U.S. up 5.5% driven by combustibles, which benefitted from both strong
price/mix (including excise duty drawback) contributing +12.3% and the success
of the Velo Plus launch (with Modern Oral up 310% to £327 million). These
more than offset lower combustibles volume (down 7.7%) and lower revenue in
Vapour (down 3.4%);
- AME up 3.3% led by combustibles price/mix (+7.2%) and the growth of Modern
Oral (up 17.3%), which drove New Categories up 4.3% despite a decline in
Vapour of 11.4%; and
- APMEA down 7.2% due to regulatory and fiscal challenges in Australia and
Bangladesh, partially offset by higher revenue in Pakistan, Nigeria and
Indonesia.
New Categories continued to grow, with revenue up 7.0% at constant rates of
exchange driven by Modern Oral (up 48.0%) and HP (up 1.0%). However, Vapour
declined 8.6% due to the continued impact of illicit products mainly in the
U.S. and Canada and regulatory and excise changes in the UK, Poland and France
and market exits.
Group cigarette volume share declined 10 bps, with value share flat. Volume
share in the U.S. was down 10 bps and value share up 30 bps.
Refer to pages 7 to 9 for a discussion on regional performance and pages 10 to
12 for a further discussion on performance by category.
Group Operating Review
Continued
Profit from operations, operating margin and category contribution
Profit from operations on a reported basis was up 265%, with reported
operating margin up 28.4 ppts to 39.0%.
This was driven by lower adjusting items of £1,575 million (compared to
£9,154 million in 2024), largely due to:
- movements in respect of the Canadian litigation settlement. While 2024
included a charge of £6.2 billion, 2025 benefited from a net credit of
£524 million following a change to the forecasted Canadian combustibles
industry performance. This reduced the provision by £708 million (credit) but
was partly offset by a goodwill impairment charge of £184 million, described
on page 17;
- the classification in 2025 of the Group's business in Cuba as held-for-sale,
recognising a charge of £235 million (2024: £74 million) as discussed on
page 18; and
- the partial release of the provision recognised in respect of an excise
assessment in Romania (2025: £15 million credit; 2024: £449 million charge).
Translational foreign exchange was a headwind of 3.1% or £364 million.
Expenditure on research and development was £358 million in 2025 (2024:
£380 million), with a focus on products that could potentially reduce the
risk associated with smoking conventional cigarettes.
On an adjusted, constant currency basis and also as adjusted for Canada,
profit from operations was up 2.3% to £11,628 million, despite inflation on
our product costs estimated to be 5.8% (or £315 million). This increase was
largely due to:
- the U.S., which was up 5.9%, due to the revenue growth discussed earlier;
and
- AME, up 9.6%, due to an improved financial performance in Brazil (due to
combustibles with higher volume and pricing), Romania (driven by pricing in
combustibles) and Türkiye (led by the revenue performance in combustibles).
However, APMEA was down 17.9%, with the regional delivery largely driven by
the respective revenue performance discussed above.
The regional performance includes a total increase in New Categories
contribution of £193 million to £442 million at constant rates.
Adjusted operating margin declined 80 bps to 45.2% at constant rates of
exchange, but was flat at 44.0% when adjusted for Canada. For a full
discussion on the performance by region, please see pages 7 to 9.
Earnings per share
Basic earnings per share (EPS) were up 157% to 351.0p (31 December 2024:
136.7p), with diluted EPS up 157% to 349.1p (31 December 2024: 136.0p). The
increases in both basic and diluted EPS were largely driven by:
- Higher profit from operations due to the lower adjusting items described on
page 6; and
- A gain of £333 million in respect of the demerger of the hotels division
of the Group's Indian associate ITC (see page 32).
These were partly offset by:
- A lower gain arising on the partial sale of the Group's investment in ITC
in 2025 (£898 million) compared to £1,361 million in 2024 mainly due to a
lower number of shares disposed of (2025: 313.0 million shares; 2024: 436.9
million shares), discussed on page 32; and
- A credit in 2024, which did not repeat in 2025, of £590 million related to
the debt liability management exercise (see page 32).
Basic and diluted EPS were also positively impacted by the reduction in the
number of shares due to the cumulative effect of the 2024 and 2025 share
buy-back programmes, with 30,460,763 ordinary shares repurchased and cancelled
in the year ended 31 December 2025.
Before adjusting items and the impact of translational foreign exchange and
also including the dilutive effect of employee share schemes, adjusted diluted
earnings per share, at constant rates, increased 0.7% to 365.0p (31 December
2024: 362.5p).
Adjusting for the profit(1) performance of Canada, adjusted diluted earnings
per share was 340.5p, a decline of 0.2% (31 December 2024: 341.1p), being an
increase of 3.4% to 352.8p at constant rates of exchange.
For a full reconciliation of diluted earnings per share to adjusted diluted
earnings per share and adjusted diluted earnings per share as adjusted for
Canada, both at constant rates, see page 57. Please also refer to page 61 for
further reconciliations of profit from operations and diluted EPS to adjusted
profit from operations(1) and adjusted diluted EPS(1) at both current (actual)
and constant rates of exchange.
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
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 2024. See page 42 for a discussion on the use of
these measures.
Products 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.
United States (U.S.):
- Reported revenue up 2.3%, being an increase of 5.5% at constant rates.
- Modern Oral revenue up 297% (or 310% at constant rates) with category volume
share up 11.6 ppts to 18.0%, driven by Velo Plus.
- Vuse maintained value share leadership* despite a 6.4% decline in revenue
(down 3.4% at constant rates of exchange), mainly driven by lower volume due
to the continued impact of illicit single-use vapour products.
- Combustibles revenue up 1.4% (up 4.6% at constant rates) as price/mix
(including excise duty drawback) more than offset a 7.7% decline in volume.
Volume share down 10 bps with value share up 30 bps.
- Smokeless now represents 19.6% of total revenue.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency metrics,
including prior year data.
For year ended 31 December 2025 Volume Revenue
Reported Repor
ted
Current Exchange Co
ns
ta
nt
Unit vs 2024 £m vs 2024 £m £m vs 2024
New Categories 1,251 +16.1% 39 1,290 +19.8%
Vapour (units mn) 262 -8.8% 934 -6.4% 29 963 -3.4%
HP (sticks bn) - -% - -% - - -%
Modern Oral (pouches bn) 3.5 +249% 317 +297% 10 327 +310%
Traditional Oral (stick eq bn) 4.8 -8.9% 1,006 -5.0% 31 1,037 -2.0%
Total Smokeless 2,257 +5.6% 70 2,327 +9.0%
Total Combustibles (bn sticks) 44 -7.7% 9,218 +1.4% 295 9,513 +4.6%
Other 59 +23.2% 4 63 +27.5%
Total 11,534 +2.3% 369 11,903 +5.5%
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 48 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 increased 2.3%, despite a translational foreign exchange
headwind, negatively impacting revenue by 3.2%.
On a constant currency basis, which we believe reflects the operational
performance, revenue increased 5.5%. This was driven by the performance in:
- Combustibles, where revenue increased 4.6%, as the positive impact of
price/mix (including excise duty drawback) of +12.3% more than offset a 7.7%
reduction in volume, compared to the industry volume decline of 7.4%. Our
volume share was down 10 bps while value share was up 30 bps following the
commercial actions taken in 2024 to deliver sustainable value; and
- Modern Oral, where revenue increased by 310%, driven by higher volume (up
249%), following the successful national roll-out of Velo Plus. Accordingly,
our category volume share(1) was up 11.6 ppts to 18.0% with value share growth
of 9.1 ppts to 13.1%.
These were partly offset by:
- Vapour, where the U.S. is the world's largest market. Revenue was down 3.4%,
as price/mix (+5.4%) was offset by an 8.8% decline in consumables volume
driven by an industry decline of c.9% mainly due to the continued impact of
illicit single-use vapour products. There are encouraging signs for Vuse with
the brand back to revenue growth in the second half of 2025 driven by
increased enforcement at a Federal and State level. We remain optimistic that
Vuse will benefit as the authorities continue with enforcement initiatives in
2026. We maintained leadership in value share with an increase in value share
of 2.0 ppts to 51.7%*; and
- Traditional Oral, where revenue declined 2.0%, as price/mix (+6.9%) was more
than offset by lower volume (down 8.9%) due to the continued Poly-use of
Modern Oral by Traditional Oral consumers.
* Based on estimated value share for Vapour in tracked
channels (i.e., value share of rechargeable closed systems consumables and
disposables sales in retail) in the Top Vapour markets.
Profit from operations and operating margin
Please see page 61 for a full reconciliation to constant currency, including
prior year data.
For year ended 31 December 2025 Reported Adj. Exchange Adjusted
Current Co
ns
ta
nt
£m vs 2024 £m £m £m vs 2024
Profit from Operations 4,942 +20.9% 1,601 223 6,766 +5.9%
Operating Margin 42.8% +7 ppts 56.8% +20 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 increased by 20.9%, as both an impairment
charge of £646 million in respect of Camel Snus (see page 28) and income
(£132 million) related to Fox River recognised in 2024 did not repeat.
Accordingly, reported operating margin was up 6.6 ppts to 42.8%.
Excluding adjusting items (largely in respect of amortisation, impairment
charges and income related to Fox River recognised in 2024) and a
translational foreign exchange headwind of £223 million, our performance was
positively impacted by the growth in revenue (described above).
At constant rates of exchange, adjusted profit from operations was up 5.9% to
£6,766 million, with adjusted operating margin up 20 bps.
Regional Review
Continued
Americas and Europe (AME):
- Reported revenue up 0.7%, an increase of 3.3% at constant rates of exchange.
- New Category revenue up 4.8%, up 4.3% at constant rates of exchange.
- Resilient combustibles revenue performance - down 0.9%, an increase of 2.3%
at constant rates of exchange driven by price/mix.
- Combustibles volume share up 10 bps and value share down 70 bps.
- Multi-category region with Smokeless now representing 19.9% of revenue.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency, including
prior year data.
For year ended 31 December 2025 Volume Revenue
Reported Repor
ted
Current Exchange Co
ns
ta
nt
Unit vs 2024 £m vs 2024 £m £m vs 2024
New Categories 1,813 +4.8% (6) 1,807 +4.3%
Vapour (units mn) 244 -11.6% 543 -11.2% (1) 542 -11.4%
HP (sticks bn) 8 -3.4% 470 +6.2% 1 471 +6.2%
Modern Oral (pouches bn) 7.5 +19.0% 800 +18.3% (6) 794 +17.3%
Traditional Oral (stick eq bn) 0.7 -10.3% 37 +9.9% (1) 36 +5.1%
Total Smokeless 1,850 +4.9% (7) 1,843 +4.4%
Total Combustibles 237 -4.9% 6,974 -0.9% 226 7,200 +2.3%
Other(1) 485 +10.8% 20 505 +15.7%
Total 9,309 +0.7% 239 9,548 +3.3%
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.
1. Other revenue in AME largely relates to sales of leaf to external
parties and revenue from warehousing and distribution of other fast moving
consumer goods.
Reported revenue was up 0.7%, negatively impacted by a translational foreign
exchange headwind of 2.6%.
On a constant currency basis, which we believe reflects the operational
performance, revenue increased by 3.3% to £9,548 million, driven by:
- Combustibles, with revenue 2.3% higher, largely driven by higher volume and
pricing in Türkiye, Brazil and Mexico. These factors combined with robust
pricing in Romania to more than offset a reduction in revenue in Canada (due
to lower price/mix and volume) and Germany (driven by lower volume). Cigarette
value share was down 70 bps with volume share up 10 bps;
- Modern Oral, where we are category leaders, with volume up 19.0%. Revenue
grew 17.3%, while volume share of the Modern Oral category was down 20 bps.
The volume and revenue growth reflects the strength of our portfolio in both
established oral markets across Scandinavia, and markets that are more recent
adopters of Modern Oral such as the UK, Switzerland and Austria; and
- HP (revenue up 6.2%) as higher revenue in Italy and Germany was partly
offset by lower revenue in Romania largely due to the prioritisation of
resource allocation ahead of the wider roll-out of glo Hilo in the region.
These more than offset:
- Lower revenue from Vapour (down 11.4%), largely driven by a decline in
revenue in Canada (due to the continued lack of enforcement against illegal
flavoured vapour products) and regulatory and excise changes in the UK,
Poland and France. Our value share leadership was down 60 bps with gains in
Germany more than offset by a value share decline in Canada.
Profit from operations and operating margin
Please see page 61 for a full reconciliation to constant currency and as
adjusted for Canada metrics, including prior year data.
For year ended 31 December 2025 Reported Adj. Exchange Adjusted Adjusted for Canada
Current Constant Co
ns
ta
nt
£m vs 2024(2) £m £m £m vs 2024 £m vs 2024
Profit from Operations 3,433 n/m (128) 72 3,377 +1.7% 3,069 +9.6%
Operating Margin 36.9% n/m 35.4% -50 bps 32.1% +1.8 ppts
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.
1. Adjusted for Canada excludes the performance of the Canadian business
(excluding New Categories). 2. n/m - not meaningful as 2024 was a loss of
£3,464 million / operating margin -37%.
Reported profit from operations increased to a profit of £3,433 million (from
a loss of £3,464 million in 2024), largely due to movements in respect of the
Canadian litigation settlement. While 2024 included a charge of £6.2
billion, 2025 benefited from a net credit of £524 million following a change
to the forecasted Canadian combustibles industry performance. This reduced the
provision by £708 million (credit) but was partly offset by a goodwill
impairment charge of £184 million, described on page 17. 2025 was also
negatively impacted by the classification of the Group's business in Cuba as
held-for-sale, recognising a charge of £235 million (2024: £74 million) as
discussed on page 18, and a charge of £39 million which related to the loss
of a distribution facility in Ukraine following a missile attack in the second
half of 2025. A goodwill impairment charge in Peru (£72 million) was also
recognised due to the ongoing difficult trading conditions. These were
partially offset by a credit of £15 million in respect of an excise audit in
Romania (2024: £449 million charge). Other fixed asset charges of £75
million in 2024 did not repeat.
Our performance was also negatively impacted by a translational foreign
exchange headwind of £72 million or 2.2%.
Excluding the impact of foreign exchange, adjusting items (described above and
on page 29) and also adjusting for the performance of Canada, adjusted profit
from operations was up 9.6% to £3,069 million, due to an improved financial
performance in Brazil (due to combustibles with higher volume and pricing),
Romania (driven by pricing in combustibles), and Türkiye (led by the revenue
performance in combustibles). The increase was also due an improved financial
performance across our New Categories; notably in Modern Oral (driven by
Sweden, Switzerland and Italy), Vapour (which became profitable on a category
contribution basis) and a reduction in losses in HP driven by resource
allocation.
Regional Review
Continued
Asia-Pacific, Middle East and Africa (APMEA):
- Reported revenue declined 10.9%, a decrease of 7.2% at constant rates.
- Headwinds to volume and financial performance due to regulatory and fiscal
challenges in Australia and Bangladesh.
- Combustibles value share down 40 bps with volume share down 40 bps.
- New Category revenue down 10.6%, or 7.6% at constant rates of exchange,
driven by HP in Japan and South Korea.
- Smokeless now represents 11.7% of total revenue.
Volume/Revenue
Please see page 51 for a full reconciliation to constant currency, including
prior year data.
For year ended 31 December 2025 Volume Revenue
Reported Repor
ted
Current Exchange Co
ns
ta
nt
Unit vs 2024 £m vs 2024 £m £m vs 2024
New Categories 557 -10.6% 19 576 -7.6%
Vapour (units mn) 32 -38.2% 65 -41.2% 3 68 -39.4%
HP (sticks bn) 12 -3.9% 444 -7.0% 15 459 -3.8%
Modern Oral (pouches bn) 1.2 +24.7% 48 +39.8% 1 49 +44.2%
Traditional Oral (stick eq bn) - -% - -% - - -%
Total Smokeless 557 -10.6% 19 576 -7.6%
Total Combustibles 196 -11.7% 4,009 -11.9% 165 4,174 -8.3%
Other 201 +16.3% 12 213 +23.7%
Total 4,767 -10.9% 196 4,963 -7.2%
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 10.9%, largely due to the regulatory and fiscal
challenges impacting combustibles in Australia and Bangladesh, partly offset
by higher combustibles revenue in Nigeria, Indonesia and Pakistan.
Translational foreign exchange was a headwind of 3.7%.
On a constant currency basis, which we believe reflects the operational
performance, revenue was down 7.2%.
Combustibles revenue, was down 8.3% due to the factors described above. Our
combustibles value share declined 40 bps with volume share down 40 bps as
volume share gains in Pakistan were more than offset by reductions in Japan.
In total, New Categories revenue was down 7.6%.
Revenue grew in Modern Oral (up 44.2%) with strong revenue growth in Global
Travel Retail (GTR), Pakistan, Japan and South Africa.
However, this was more than offset by a reduction in:
- HP, with revenue down 3.8%, largely driven by Japan (which remains highly
competitive alongside the continued phase-out of our legacy super-slims
platform) and South Korea, partially offset by a strong performance in
Kazakhstan; and
- Vapour, as volume was down 38.2%, leading to a 39.4% reduction in revenue
largely driven by lower volume in South Africa and New Zealand and by the
Group exiting the category in a number of markets (including Malaysia and
Saudi Arabia).
Profit from operations and operating margin
Please see page 61 for a full reconciliation to constant currency metrics,
including prior year data
For year ended 31 December 2025 Reported Adj. Exchange Adjusted
Current Co
ns
ta
nt
£m vs 2024 £m £m £m vs 2024
Profit from Operations 1,622 -23.3% 102 69 1,793 -17.9%
Operating Margin 34.0% -5.5 ppts 36.1% -4.7 ppts
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 down 23.3%, including a translational foreign
exchange headwind of £69 million or 3.2%. The lower profit from operations
was mainly driven by the revenue movements above.
In 2025, the Group recognised a further impairment charge of £21 million
(2024: £39 million) in respect of Malaysia in response to the ongoing
difficult trading conditions.
Excluding adjusting items and translational foreign exchange, adjusted profit
from operations at constant rates was down 17.9% to £1,793 million driven by:
- Australia, due to continued increases in the illicit segment which we
estimate now accounts for more than 65% of the combustibles industry volume,
with the duty paid combustibles industry volume down more than 40% in 2025;
and
- Bangladesh, driven by the increase in excise and minimum price in January
2025, necessitating an increase in consumer prices by 20-30%, which resulted
in a reduction in the duty paid combustibles industry volume by more than 20%.
However, these were partly offset by an increase in Pakistan (led by the
growth of Modern Oral and pricing in combustibles), Nigeria (driven by higher
combustibles volume and improved combustibles pricing) and Indonesia (driven
by higher combustibles volume and pricing).
Category Performance Review
Vapour - Vuse
- Vapour revenue down 10.4% or 8.6% (at constant rates), with volume down
12.6%, impacted by illicit products mainly in the U.S. and Canada and
regulatory and excise changes (in the UK, Poland and France).
- Continued value share* leadership with a 60 bps increase driven by the U.S.
- In Europe, Vapour value share down 10 bps* with industry rechargeable closed
systems back in growth.
- Positive early performance of our premium innovation, Vuse Ultra, in Canada,
Germany and France.
Group Vapour performance was negatively impacted by:
- The U.S., the world's largest Vapour market, where Group volume was down
8.8% mainly due to the continued proliferation of illicit single-use vapour
products. Accordingly, revenue was down 6.4% (or 3.4% on a constant currency
basis). However, we are encouraged by recent signs of Vuse returning to
revenue growth in the second half of 2025 in the U.S. supported by increased
enforcement against illicit single-use vapour products. We maintained
leadership in value share with an increase in value share of 2.0 ppts to
51.7%*;
- AME, where revenue was 11.2% lower (a decline of 11.4% on a constant
currency basis), largely driven by a decline in revenue in Canada (due to the
continued lack of enforcement against illegal flavoured vapour products) and
regulatory and excise changes in the UK, Poland and France. Our value share*
leadership was down 60 bps with gains in Germany more than offset by a value
share decline in Canada; and
- APMEA, where volume declined 38.2%, leading to a 41.2% reduction in revenue
(being down 39.4% at constant rates), largely driven by lower volume in South
Africa and New Zealand and by the Group exiting the category in a number of
markets (including Malaysia and Saudi Arabia).
Our new premium innovation, Vuse Ultra, offers consumers a highly
differentiated, connected and customisable experience. We are encouraged by
the early performance in Canada, Germany and France.
*Based on estimated value share for Vapour in tracked channels (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 industry revenue, being the U.S., Canada, the UK, France, Germany,
Poland and Spain. These Top markets account for c.80% of total industry vapour
revenue (rechargeable closed systems consumables and disposables in tracked
channels) in 2024.
Heated Products (HP) - glo
- Revenue down 0.7%, up 1.0% at constant rates, impacted by competitive
pressure and resource allocation ahead of glo Hilo launches.
- Volume share* down 1.5 ppts, mostly impacted by competitive pressure and
the phase-out of legacy super-slims in Japan.
- AME volume share down 80 bps with growth in Spain, Portugal and the Czech
Republic more than offset by Romania, Germany, Italy and Poland.
- Momentum building with roll-out of glo Hilo in largest profit pools.
In AME, volume was down 3.4%, with revenue up 6.2% (being an increase of 6.2%
at constant rates), as higher revenue in Italy and Germany was partly offset
by lower revenue in Romania largely due to the prioritisation of resource
allocation ahead of the wider roll-out of glo Hilo in the region.
In APMEA, volume was down 3.9%, with revenue down 7.0%, or 3.8% at constant
rates, largely driven by Japan (which remains highly competitive alongside the
continued phase-out of our legacy super-slims platform) and South Korea,
partially offset by a strong performance in Kazakhstan.
Our new premium connected device, glo Hilo, offers faster heating technology
and an integrated display combined with a new consumables range, Virto and
tobacco-free Rivo. We have continued the roll-out through H2 2025, focused on
the largest profit pools with launches in Japan, Poland and Italy.
*Volume share is based upon the Top HP markets, which are defined as the Top
markets by industry revenue. Top markets are Japan, South Korea, Italy,
Germany, Greece, Poland, Romania, the Czech Republic, Spain and Portugal.
These Top markets account for c.80% of total industry HP revenue in 2024.
Modern Oral - Velo
- Revenue up 47.4%, up 48.0% at constant rates, with volume growth of 47.1%.
- Growth in volume share* up 5.8 ppts in Total Oral and up 7.5 ppts in Modern
Oral.
- AME volume share leadership maintained, with strong revenue growth in
Scandinavia, the UK and Switzerland.
- Triple-digit volume and revenue growth in the U.S., following the national
roll-out of Velo Plus.
In AME, where we are category leaders, our volume was up 19.0%, with revenue
up 18.3% (up 17.3% at constant rates) while volume share of the Modern Oral
category was down 20 bps.
The volume and revenue growth reflects the strength of our portfolio in both
established oral markets across Scandinavia, and markets that are more recent
adopters of Modern Oral such as the UK, Switzerland and Austria.
In the U.S., revenue increased by 297% (or 310% at constant rates), driven by
higher volume (up 249%), following the successful national roll-out of Velo
Plus. Accordingly, our category volume share was up 11.6 ppts to 18.0% with
value share growth of 9.1 ppts to 13.1%. This performance has positioned Velo
as the fastest growing brand in the category, reaching the number 2 position
in both volume and value share.
While we await the outcome of our PMTA submission for new Velo variants, we
have invested in higher capacity to support our sustainable growth agenda. In
addition, in August 2025, we expanded distribution of Grizzly nicotine
pouches, reaching 1.8% national share by December 2025 - successfully
capturing Grizzly Traditional Oral consumers interacting with the Modern Oral
category.
In APMEA, our volume grew 24.7% and our revenue grew 39.8% (up 44.2% at
constant rates), with strong revenue growth in Global Travel Retail (GTR),
Pakistan, Japan and South Africa.
*Volume share is based upon the Top Modern Oral markets which are defined as
the Top markets by industry revenue, being the U.S., Sweden, Denmark, Norway,
Switzerland, the UK and Poland, accounting for c.90% of total industry Modern
Oral revenue in 2024.
Category Performance Review
Continued
Combustibles
- Revenue down 2.3%, up 1.0% at constant rates with momentum accelerating
through the year.
- Value share* flat; volume share* down 10 bps, as growth in AME was more than
offset by the U.S. and APMEA.
- Return to growth in the U.S., with revenue up 1.4% (or 4.6% at constant
rates) as price/mix (including excise duty drawback) more than offset volume
decline.
- Resilient AME performance with revenue down 0.9%, or up 2.3% at constant
rates, driven by Türkiye, Brazil and Mexico.
- APMEA revenue declined 11.9%, or 8.3% at constant rates, impacted by
Australia and Bangladesh with total volume down 11.7%.
Group cigarette volume was down 7.9% to 465 billion sticks as volume growth in
Türkiye, Nigeria, Indonesia and Brazil was more than offset by lower volume
in a number of markets, mainly driven by Bangladesh, the U.S. and Poland and
market exits (including Mali).
Revenue from combustibles declined 2.3% to £20,201 million, up 1.0% at
constant rates of exchange as the Group benefitted from a robust price/mix
(including U.S. excise duty drawback) of +9.1%. This was partly offset by the
lower volume (down 8.1%).
Excluding the impact of translational foreign exchange:
- In the U.S., revenue increased 4.6%, as the positive impact of price/mix
(including excise duty drawback) of +12.3% more than offset a 7.7% reduction
in volume, compared to the industry volume decline of 7.4%. Our volume share
was down 10 bps while value share was up 30 bps following the commercial
actions taken in 2024 to deliver sustainable value;
- In AME, revenue was 2.3% higher, largely driven by higher volume and pricing
in Türkiye, Brazil and Mexico. These factors combined with robust pricing in
Romania to more than offset a reduction in revenue in Canada (due to lower
price/mix and volume) and Germany (driven by lower volume); and
- In APMEA, revenue declined 8.3% due to regulatory and fiscal challenges
impacting combustibles in Australia and Bangladesh, partly offset by higher
combustibles revenue in Nigeria, Indonesia and Pakistan.
*Volume and value share are based upon the Top cigarette markets which are
defined as the Top markets by industry revenue, being the U.S., Japan, Brazil,
Germany, Pakistan, Mexico and Romania, accounting for c.60% of total industry
cigarettes revenue in 2024.
Traditional Oral
Group volume declined 9.1% to 5.5 billion stick equivalents. Total revenue was
£1,043 million (2024: £1,092 million), down 4.5% or 1.7% at constant rates.
In the U.S. (which accounts for 96% of Group revenue from the category),
revenue declined 5.0% or 2.0% at constant rates of exchange, as price/mix was
insufficient to offset the volume decline of 8.9%, due to the continued
Poly-use with Modern Oral.
Value share in the U.S. decreased 40 bps, with volume share down 40 bps,
negatively impacted by consumer migration predominantly in the aspirational
premium segment, where Grizzly is positioned.
Outside the U.S., revenue grew 9.9% or 5.1% at constant rates of exchange as
pricing more than offset a 10.3% decline in volume in 2025.
Beyond Nicotine
Btomorrow Ventures (BTV), the corporate venture capital arm of BAT, has
completed 30+ investments since its launch in 2020.
BTV provides strategic value to the next generation of innovative companies,
to support the Group's purpose of creating A Better Tomorrow™.
In 2025, BTV's Fund II, an additional £200 million second fund commitment
from BAT announced in 2024, was repositioned.
Fund II now has a broader mandate, focusing on investments in:
- Smokeless nicotine products,
- business transformation and capability enablers,
- sustainability, and
- a continued focus on Wellbeing and Stimulation.
In 2025, BTV made five new investments, including Bloom Biorenewables and
China Materialia Evergreen Fund.
In November 2023, the Group announced the signing of an agreement for a
further proposed investment in Organigram of CAD$125 million (£74 million),
payable across three tranches, with approvals received from the shareholders
of Organigram on 18 January 2024.
In February 2025, we paid the last of the three tranches of the Group's
follow-on investment.
The Group's equity position at 31 December 2025 was 36.8% (restricted to 30%
voting rights).
Please see page 18 for more information on our investment in Organigram.
Following a series of pilot launches of our own functional wellness shot
brand, Ryde, we are continuing commercial expansion. Our scientifically
formulated range of Energy, Focus and Relax are available in three markets -
Australia, Canada and the U.S. Our recent innovations of Sleep and Exercise
shots are in selected distribution across the U.S. and Australia.
While immaterial to the Group's results, Ryde is not sold in Canada by ITCAN
but by another Group subsidiary. Accordingly, the performance does not form
part of the future settlement payments due as part of the Approved Plans and
have also been excluded from the adjustment referred to on page 17.
Other Financial Information
Cash flow
We continue to make progress on de-leveraging our balance sheet and we expect
to be within our leverage target range of 2.0-2.5x adjusted net debt/adjusted
EBITDA as adjusted for Canada by the end of 2026, driven by continued strong
cash generation.
We continue to expect the Group to generate c.£50 billion of free cash flow
before dividends between 2024 and 2030 (inclusive). To date we have generated
£11.9 billion.
Our active capital allocation framework considers the continued investment in
our transformation, the macro-environment, and potential future litigation and
regulatory outcomes.
We understand the importance of cash returns to shareholders, and remain
committed to our progressive dividend based upon 65% of long-term sustainable
earnings.
For years ended 31 December
2025 2024 Change
£m £m %
Net cash generated from operating activities 6,342 10,125 -37.4%
Operating cash flow conversion 100% 101%
Free cash flow - before payment of dividends 4,048 7,901 -48.8%
Free cash flow - after payment of dividends (1,190) 2,688 -144%
Note:
2025 was negatively impacted by the payment made in respect of the Approved
Plans in Canada of £2,560 million. Excluding this, net cash generated from
operations would have been £8,902 million, free cash flow before dividends
would have been £6,608 million and free cash flow after dividends would have
been an inflow of £1,370 million.
As at 31 December
2025 2024 Change
£m £m %
Borrowings (including lease liabilities) 35,070 36,950 -5.1%
Adjusted net debt 30,416 30,583 -0.5%
In the Group's cash flow, prepared in accordance with IFRS and presented on
page 26, net cash generated from operating activities declined by 37.4% to
£6,342 million (2024: £10,125 million). This was driven by:
- payment of cash, cash equivalents and investments held at fair value
totalling £2,560 million, in the second half of 2025, as part of the
Approved Plans (as discussed on page 17) in Canada;
- deferral of US$895 million of tax payments in the U.S. from 2024 to 2025,
negatively impacting 2025 by £678 million; and
- payment related to the Franked Investment Income Group Litigation Order (FII
GLO) of £479 million (2024: £50 million). The Group will make further
payments of £222 million in 2026 and £41 million in 2027 (see page 40).
These were partly offset by payments in 2024 in respect of the DOJ and OFAC
(£267 million) and an excise assessment in Romania (£390 million), both of
which did not repeat.
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 largely in line with the prior period,
at 100% (2024: 101%).
Free cash flow (before the payment of dividends), as defined on page 58, was
£4,048 million for 2025 (2024: £7,901 million), a decrease of 48.8%. This
was driven by the reduction in net cash generated from operating activities
(driven by the initial payment of £2.6 billion as part of the Approved Plans
in Canada, the deferral from 2024 of U.S. tax of £678 million and payments
in respect of FII GLO (£479 million)) and higher net capital expenditure
(2025: £612 million; 2024: £434 million), partly offset by lower net
interest paid (2025: £1,582 million; 2024: £1,669 million).
The Group expects its gross capital expenditure in 2026 to be approximately
£750 million mainly related to the ongoing investment in the Group's
operational infrastructure, including the expansion of our New Categories
portfolio and enhancements to our Modern Oral capacity.
After paying dividends of £5,238 million (2024: £5,213 million), free cash
flow (after dividends paid to shareholders), as defined on page 58, was an
outflow of £1,190 million for 2025 (2024: £2,688 million inflow).
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 £35,070 million at 31
December 2025, a decrease of 5.1% compared to £36,950 million at 31 December
2024 mainly due to foreign exchange movements related to the US dollar and
sterling, which were a tailwind in 2025.
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 2025 (31 December 2024: 9.5 years), and the highest proportion of
centrally managed debt maturing in a single rolling 12-month period was 15.1%
(31 December 2024: 14.8%).
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
£31,215 million at 31 December 2025 (31 December 2024: £31,253 million).
A reconciliation of borrowings to net debt is provided below.
As at 31 December
2025 2024 Change
£m £m %
Borrowings (including lease liabilities) (35,070) (36,950) -5.1%
Derivatives in respect of net debt 12 (113) -111%
Cash and cash equivalents 3,827 5,297 -27.8%
Current investments held at fair value 16 513 -96.9%
Net debt (31,215) (31,253) -0.1%
Maturity profile of net debt:
Net debt due within one year 492 1,545 -68.2%
Net debt due beyond one year (31,707) (32,798) -3.3%
Net debt (31,215) (31,253) -0.1%
The movement in net debt includes the free cash outflow, after payment of
dividends to shareholders, of £1,190 million
(2024: £2,688 million inflow), as described on page 58. Also impacting the
carrying value of net debt at the balance sheet date are:
- Cash inflow related to share schemes and investing activities of £167
million (2024: £74 million outflow), which, in 2025, included net proceeds
of £318 million from the sale of around 59% of the Group's investment in ITC
Hotels;
- the liquidation of investments (£437 million) that were then included in
the upfront payment in respect of Canada as part of the Approved Plans;
- Net proceeds from the partial monetisation of our investment in ITC of
£1,052 million (2024: £1,577 million);
- The purchase of £1.1 billion of own shares under the Group's 2025 share
buy-back programme (2024: £0.7 billion);
- Other non-cash movements of £41 million inflow (2024: £568 million
outflow) including the net inflow from the redemption and issuance of
perpetual hybrid bonds in 2025. 2024 was negatively impacted by the repurchase
of a series of bonds in May 2024 as part of the Group's debt liability
management exercise; and
- Foreign exchange impacts related to the revaluation of foreign currency
denominated net debt balances being a net tailwind of £1,121 million (2024:
£674 million headwind).
Investments held at fair value through profit and loss included restricted
amounts at 31 December 2024 of £437 million were subsequently paid as part
of the settlement of historical litigation in Canada as described on page 17.
At 31 December 2025 nil (31 December 2024: £60 million) was restricted due
to potential exchange control restrictions.
Cash and cash equivalents include restricted amounts of £268 million (31
December 2024: £2,072 million) in Canada which will be paid as part of the
ongoing settlement payments and £67 million (31 December 2024:
£339 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, including as
adjusted for Canada
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,
including as adjusted for Canada. 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. Adjusted EBITDA as
adjusted for Canada is further adjusted to exclude the impact of the Canadian
business (other than New Categories) as described on page 17. Please refer to
page 60 for a reconciliation of profit for year to adjusted EBITDA, including
as adjusted for Canada.
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
2025 2024 Change
£m £m %
Net debt (31,215) (31,253) -0.1%
Net debt items included within assets held-for-sale 208 - 0%
Purchase price allocation (PPA) adjustment to acquired debt 591 670 -11.7%
Adjusted net debt (30,416) (30,583) -0.5%
Exchange (1,018)
Adjusted net debt translated at 2024 exchange rates (31,434) (30,583) +2.8%
Provision recognised in respect of cash and cash equivalents and investments - (2,456)
held at fair value in Canada, paid in August 2025.
Adjusted net debt excluding the Canada provision, translated at 2024 exchange (31,434) (33,039) -4.9%
rates
The Group's ratio of adjusted net debt to adjusted EBITDA as at 31 December
2025 was 2.48x (2024: 2.44x).
Adjusting for Canada's adjusted EBITDA in both 2025 and 2024, and the cash
held at 31 December 2024 which reduced adjusted net debt in the comparator
period and was paid as part of the settlement obligation discussed on page 17,
our leverage ratio at
31 December 2025 was 2.55x, a reduction of 0.20x (2024: 2.75x).
The calculation of adjusted net debt to adjusted EBITDA (including adjustments
in respect of Canada) is provided on page 60.
Foreign currencies
The principal exchange rates used to convert the results of the Group's
foreign operations to pounds 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
2025 2024 2025 2024
Australian dollar 2.045 1.937 2.017 2.023
Bangladeshi taka 160.886 147.803 164.432 149.662
Brazilian real 7.363 6.893 7.371 7.737
Canadian dollar 1.842 1.751 1.844 1.801
Chilean peso 1,253.837 1,206.394 1,212.663 1,245.543
Euro 1.167 1.181 1.145 1.209
Indian rupee 114.989 106.952 120.892 107.223
Japanese yen 197.243 193.583 210.830 196.827
Romanian leu 5.885 5.877 5.834 6.018
South African rand 23.562 23.423 22.287 23.633
Swiss franc 1.094 1.125 1.066 1.135
US dollar 1.319 1.278 1.345 1.252
Sustainability Performance Update
We continue to embed sustainability across our business as a strategic lever,
driving performance, enhancing resilience, and enabling long-term growth. Our
sustainability strategy is anchored in four interconnected impact areas beyond
Tobacco Harm Reduction: Climate, Nature, Circularity, and Communities. By
focusing on these areas, we aim to mitigate risks, strengthen resilience, and
amplify positive contributions throughout our value chain.
Over the past few years, we have made significant progress. For the second
year in a row, BAT has received a Triple-A rating(*) from CDP for our 2025
disclosures on Climate Change, Water Security and Forest, one of 23 companies
globally, reflecting our commitment to environmental transparency and action.
Highlights include a 21% reduction in annual emissions between 2020 and 2024
(equivalent to 1,323 ktCO₂e), achieving 100% Alliance for Water Stewardship
certification across all manufacturing sites in 2025, and a 50.8% reduction in
water withdrawn. We also achieved a 30.4% reduction in absolute waste
generated in our operations (vs 2017 baseline), and 93.5% of farmers in our
Thrive Supply Chain(1) have diversified crops. For our non-tobacco supply
chain, we have achieved our 2025 target to complete an independent labour
audit assessment across all product materials and higher-risk indirect
suppliers.
As our 2025 targets reach maturity, we recognise both our achievements and the
work still ahead. Guided by our Double Materiality Assessment(^), we are
setting new 2030 targets under each strategic pillar, reinforcing our
commitment to responsible growth and long-term value creation. These targets
will enable us to proactively manage broad impacts, regulatory shifts, and
evolving stakeholder expectations.
In September 2025, we outlined our sustainability strategy and new 2030
targets to investors, receiving positive feedback on our digital data-driven
approach, robust governance, value chain collaboration and alignment of
commercial success with sustainable practices. Details of our new 2030 targets
will be available in our Combined Annual and Sustainability Report 2025 which
will be published on 13 February 2026.
Notes:
Our ambitions and targets cover all tobacco we purchase for our products
('tobacco supply chain'), which is used in our combustibles, Traditional Oral
and Heated Products. Our metrics, however, derive data from our annual Thrive
assessment, which includes our directly contracted farmers and those of our
third-party suppliers, which represented over 94% of the tobacco we purchased
by volume in 2025 ('Thrive Supply Chain').
* A to F (A as the best possible score). A rating is not a
recommendation to buy, sell or hold securities. A rating may be subject to
withdrawal or revision at any time. Each rating should be evaluated separately
from any other rating. In addition, the criteria used in ratings may differ
among ESG rating organisations. Companies may also supply different
information to such organisations (or none at all) and this lack of
consistency may impact ratings.
^ Although financial materiality has been considered in the development
of our Double Materiality Assessment (DMA), our DMA and any conclusions in
this document as to the materiality or significance 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.
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. During the period, the risk related to "Litigation" was renamed
"Litigation and external investigations", the risk related to "Circular
economy" was renamed "Circularity" and the risk related to "Cybersecurity" was
renamed "Digital & Cyber", reflecting the nature of the risk. There were
no changes to the underlying risks.
Leading in Sustainability is a core component and key building block of our
corporate strategy and sustainability risk factors are embedded across the
Group's risks in accordance with the management of these risks within the
Group.
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 and external investigations;
- 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;
- Circularity; and
- Digital & Cyber.
A summary of the Principal Risks which are monitored by the Board through the
Group's risk register will be included in the Group's Annual Report for the
year ended 31 December 2025.
Other Information
Continued
Update on Quebec class action, CCAA and the Approved Plans in Canada
As previously announced, on 29 August 2025, we implemented a court-sanctioned
plan of compromise and arrangement to resolve all Canadian tobacco litigation
and provide a full and comprehensive release to Imperial Tobacco Canada
Limited and Imperial Tobacco Company Limited (together ITCAN), BAT p.l.c. and
all related companies for all past, present and future tobacco claims in
Canada. Substantially similar plans were also implemented by 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 Approved Plans).
Under the Approved Plans, ITCAN, RBH and JTIM (collectively, the Companies)
are required to pay an aggregate settlement amount of CAD$32.5 billion
(approximately £17.6 billion). This amount is to be funded by:
- an upfront payment equal to all the Companies' cash and cash equivalents
that was on hand as of 31 July 2025 (including investments held at fair value)
plus certain court deposits (subject to an aggregate industry holdback of
CAD$750 million (£407 million) allocated in March 2025 to RBH) 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.
By the end of 2025, ITCAN had paid CAD$5.5 billion (£3.0 billion) in respect
of its upfront payment obligation, which included an escrow payment made
between December 2015 and June 2017 of CAD$758 million (£411 million) and
payments during the second half of 2025 of CAD$4.8 billion (£2.6 billion).
In addition, ITCAN's payment obligation based on the period from 1 August 2025
to 31 December 2025 is currently estimated to amount to CAD$156 million
(approximately £85 million) and will be due on 30 July 2026.
In line with IFRS 10 Consolidated Financial Statements, ITCAN is consolidated
in the Group's results.
Update on provision
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.
A provision of £6.2 billion was recognised in 2024.
For the 2025 financial year, the Group's estimated share of the undiscounted
future liability has not materially changed. However, the Group has recognised
a net credit of £708 million as the provision recognised in relation to the
Canadian litigation settlement was updated in line with the latest forecast of
the Canadian combustibles industry performance, impacting the present value of
the future liability described on page 31.
The update was, in particular, in respect of pricing and volume decline
assumptions. However, it was partly offset by the allocation of the industry
holdback to RBH referred to above.
The net credit has been treated as an adjusting item.
Update on goodwill
Further to the latest financial forecasts in respect of Canada, and as
discussed on page 30, the Group has reassessed the carrying value of goodwill.
An adjusting charge of £184 million has been recognised in 2025. Goodwill
recognised on the balance sheet in respect of Canada is £1,994 million at 31
December 2025.
Update on restricted cash
At 31 December 2025, restricted cash in respect of ITCAN was £268 million.
For a summary of the case, please see the Contingent Liabilities section on
page 39. Full details of the case and the assessment of goodwill will be
included in the Group's Annual Report for the year ended 31 December 2025
(note 12 Intangible Assets and note 31 Contingent Liabilities and Financial
Commitments).
Adjusted performance
As discussed in note 2 on page 27, Group's management (from 1 January 2025)
assesses the performance of the Group by reviewing adjusted profit from
operations as adjusted for Canada using the prior year's translational
exchange rates (constant rate) to evaluate segment performance and allocate
resources on a regional basis.
Due to the initial 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 is 100% of the profit after interest and tax from all sources in
Canada, excluding New Categories.
From 2026, this charge will (following the underlying terms of the Approved
Plans) be 85% of the profit after interest and tax from all sources in Canada,
excluding New Categories, reducing in future periods in line with the Approved
Plans.
Also from 1 January 2025, as part of the adjustment for Canada, the Group has
adjusted out the interest earned (in both the current year and comparator
year's performance) on restricted cash held in Canada that was subsequently
paid in line with the Approved Plans. The interest income earned on such
balances is not representative of the ongoing business.
Other Information
Continued
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 are currently being investigated. The Group cooperates with the
authorities, where appropriate.
In addition, the Group is, and may in the future be, subject to investigations
or legal proceedings in relation to, among other things, its marketing,
promotion or distribution activities in respect of its products. As such, the
Group or Group companies, could be subject to liability and costs associated
with any damages, fines, or penalties brought in connection with these
allegations.
There are instances where the Group investigates or where Group companies are
cooperating with relevant national competition authorities in relation to
competition law investigations and/or engaged in legal proceedings at the
appellate level.
Operational and process review
To further support our transformation and underpin investment initiatives to
drive long-term sustainable profit and cash flow growth, we have started a
structured time-bound programme (referred to as Fit2Win) to review processes
and ways of working which will generate efficiencies and facilitate faster,
more agile and effective decision-making.
This programme includes a comprehensive review of our overhead optimisation
opportunities, route to market and digitalisation, in order to deliver more
effective, data-driven digital ways of working.
It is expected to generate annualised cost efficiencies and cash flow of
c.£600 million by the end of 2028 which will be re-invested to support
further sustainable growth initiatives. These expected savings are in addition
to the £2 billion of targeted savings between 2026 and 2030 announced at our
Capital Markets Day in 2024.
We expect associated one-off costs of around £600 million (including
non-cash items of £100 million). As a one-off time bound programme and to aid
comparison of performance, c.£500 million will be treated as adjusting items
within adjusted profit from operations. Having commenced in 2025, the
programme is expected to complete in 2027.
Changes in the Group
Cuba
On 19 December 2025, the Group entered into an agreement to sell its 50%
shareholding in Brascuba Cigarrillos S.A. (Brascuba), its operating entity in
the Republic of Cuba (Cuba), to Tabagest S.A. (Tabagest), a company
incorporated in Cuba and an existing investor in Brascuba.
Completion of the business disposal and assignment of trading balances is
conditional on receipt of formal government approval and there being no
regulatory, compliance or other impediments to completion.
Upon completion, the Group will no longer have a presence in Cuba.
Consequently, management have classified the entirety of the assets and
liabilities of the Cuban business, excluding intercompany balances, as a
disposal group as at 31 December 2025 in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations.
Impairment charges of £231 million and associated costs of £4 million have
been recognised in the Income Statement as adjusting items.
ITC Ltd (ITC)
On 1 January 2025, ITC completed the demerger of its hotels business through a
scheme of arrangement. Under this scheme, 60% of the equity in the newly
incorporated entity, ITC Hotels Limited (ITC Hotels), was directly allocated
to ITC's shareholders in proportion to their existing shareholding in ITC as
of that date.
As part of the demerger accounting, ITC recognised the excess of the fair
value over the carrying value of the hotels business as an adjusting item. The
Group's share of this adjusted gain amounted to £333 million (net of tax).
The Group's initial direct stake was approximately 15% and recognised as a
non-current investment on the balance sheet held at fair value through Other
Comprehensive Income. However, in December 2025, the Group sold 9% of ITC
Hotels in a block trade, retaining a direct stake of 6.3%. Net proceeds from
the sale were £318 million.
On 28 May 2025, the Group disposed of 313.0 million shares in ITC resulting in
a gain of £898 million in 2025. The sale represented 2.5% of ITC's ordinary
shares. This compares to 2024 when the Group sold 436.9 million ordinary
shares held in ITC, representing 3.5% of ITC's ordinary shares, and recognised
a gain of £1,361 million in that year.
The gain in both years has been treated as an adjusting item.
Following the sale in 2025, the Group's shareholding in ITC decreased from
25.45% (31 December 2024) to 22.91% at 31 December 2025.
Net proceeds from the sale of ITC shares was £1,052 million in 2025 and
£1,577 million in 2024.
Organigram Global Inc. (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.
On 28 February 2025, the Group made the third and final tranche investment in
Organigram for CAD$42 million (£23 million), subscribing for 7,562,447
common shares and 5,330,728 preferred shares at a price of CAD$3.22 per share.
At 31 December 2025, the Group's ownership in Organigram was 36.77% (2024:
35.09%). Under the terms of the agreement, the Group's voting rights are
restricted to 30%.
Other Information
Continued
Changes to the Main Board and Management Board
Main Board
As previously announced:
- Soraya Benchikh stepped down from her role as Chief Financial Officer and
from the Board of Directors of the Company with effect from 26 August 2025. A
recruitment process to identify a permanent successor to the role of Chief
Financial Officer is underway. Javed Iqbal, Director, Digital and Information,
was appointed to the role of Interim Chief Financial Officer;
- Matthew Wright joined the Board as an independent Non-Executive Director and
a member of the Remuneration and Nominations Committees, with effect from 1
November 2025;
- Holly Keller Koeppel, stepped down from the Audit Committee, with effect
from 31 December 2025;
- Holly Keller Koeppel will step down from the Board at the conclusion of the
2026 Annual General Meeting (AGM); and
- Karen Guerra will be appointed as Senior Independent Director with effect
from the conclusion of the 2026 AGM (subject to re-election), when Holly
Keller Koeppel steps down from the Board.
Management Board
As previously announced:
- Jerome Abelman stepped down from his role as Director, Legal and General
Counsel and left BAT on 31 December 2025. He has been succeeded by Paul
McCrory, previously Director, Corporate and Regulatory Affairs, with effect
from 1 January 2026.
- Michael Dijanosic stepped down from his role as Regional Director,
Asia-Pacific, Middle East and Africa on 31 December 2025. He has been
succeeded by Pascale Meulemeester, with effect from 1 January 2026.
The responsibilities of the role of Director, Corporate and Regulatory Affairs
transferred (with effect from 1 October 2025) to Kingsley Wheaton, Chief
Corporate Officer.
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 2025 Annual Report.
The Group has sufficient existing financing available for its estimated
requirements for at least 12 months from the date of approval of this
preliminary announcement. 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 2025 Annual Report.
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
13 February 2026 and which should be referred to in addition to this
preliminary announcement. Additional information includes:
- The Group's audited Financial Statements;
- 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; and
- Glossary and definition of key terms.
This information will be included in the Group's:
- 2025 Annual Report; and
- Annual Report on Form 20-F for the 12 months ended 31 December 2025.
These are expected to be published on 13 February 2026.
Financial Statements
Contents
Page
Financial Statements:
Group Income Statement 21
Group Statement of Comprehensive Income 22
Group Statement of Changes in Equity 23
Group Balance Sheet 25
Group Cash Flow Statement 26
Notes to the Financial Statements 27
Other Information 42
Data Lake and Reconciliations 49
Financial Statements
Group Income Statement
For years ended 31 December
2025 2024
£m £m
Revenue(1) 25,610 25,867
Raw materials and consumables used (4,465) (4,565)
Changes in inventories of finished goods and work in progress 239 129
Employee benefit costs (3,125) (2,831)
Depreciation, amortisation and impairment costs (2,547) (3,101)
Other operating income 192 340
Loss on reclassification from amortised cost to fair value (12) (10)
Other operating expenses (5,895) (13,093)
Profit from operations 9,997 2,736
Net finance costs (1,819) (1,098)
Share of post-tax results of associates and joint ventures 1,681 1,900
Profit before taxation 9,859 3,538
Taxation on ordinary activities (2,094) (357)
Profit for the year 7,765 3,181
Attributable to:
Owners of the parent 7,764 3,068
Non-controlling interests 1 113
7,765 3,181
Earnings per share
Basic 351.0p 136.7p
Diluted 349.1p 136.0p
All of the activities during both years are in respect of continuing
operations.
The accompanying notes on pages 27 to 41 form an integral part of this
condensed consolidated financial information.
1. Revenue is net of duty, excise and other taxes of £32,160 million and
£33,818 million for the years ended 31 December 2025 and 31 December 2024,
respectively.
Financial Statements
Continued
Group Statement of Comprehensive Income
For years ended 31 December
2025 2024
£m £m
Profit for the year (page 21) 7,765 3,181
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss: (3,278) (50)
Foreign currency translation and hedges of net investments in foreign
operations
- differences on exchange from translation of foreign operations (3,330) (195)
- reclassified and reported in profit for the year 2 -
- net investment hedges - net fair value gains on derivatives 151 20
- net investment hedges - differences on exchange on borrowings (20) 17
Cash flow hedges
- net fair value gains 2 65
- reclassified and reported in profit for the year 16 36
- tax on net fair value gains in respect of cash flow hedges (13) (23)
Associates
- share of other comprehensive income, net of tax (133) (13)
- differences on exchange reclassified to profit or loss 47 43
Items that will not be reclassified subsequently to profit or loss: (83) (7)
Retirement benefit schemes
- net actuarial losses (10) (19)
- movements in surplus recognition (67) (14)
- tax on actuarial losses in respect of subsidiaries - (1)
Investments held at fair value
- net fair value losses (2) (6)
Associates - share of other comprehensive (loss)/income, net of tax (4) 33
Total other comprehensive expense for the year, net of tax (3,361) (57)
Total comprehensive income for the year, net of tax 4,404 3,124
Attributable to:
Owners of the parent 4,425 3,013
Non-controlling interests (21) 111
4,404 3,124
The accompanying notes on pages 27 to 41 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Statement of Changes in Equity
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 2025 585 26,665 (902) 21,610 47,958 1,685 352 49,995
Total comprehensive (expense)/income for the year comprising: (page 22) - - (3,267) 7,692 4,425 - (21) 4,404
Profit for the year (page 21) - - - 7,764 7,764 - 1 7,765
Other comprehensive expense for the year (page 22) - - (3,267) (72) (3,339) - (22) (3,361)
Other changes in equity
Cash flow hedges reclassified and reported in total assets - - 21 - 21 - - 21
Employee share options
- value of employee services - - - 83 83 - - 83
- proceeds from new shares issued - 2 - - 2 - - 2
Dividends and other appropriations
- ordinary shares - - - (5,240) (5,240) - - (5,240)
- to non-controlling interests - - - - - - (108) (108)
Purchase of own shares
- held in employee share ownership trusts - - - (61) (61) - - (61)
- share buy-back programme, shares bought back and cancelled (8) 8 - (1,114) (1,114) - - (1,114)
Perpetual hybrid bonds
- proceeds, net of issuance fees - - - - - 1,050 - 1,050
- redemption of perpetual hybrid bonds, net of costs - - - (39) (39) (844) - (883)
- tax on issuance fees - - - - - 2 - 2
- coupons paid - - - (55) (55) - - (55)
- tax on coupons paid - - - 14 14 - - 14
Non-controlling interests - acquisitions - - - (15) (15) - (4) (19)
Other movements - - - 54 54 - - 54
Balance at 31 December 2025 577 26,675 (4,148) 22,929 46,033 1,893 219 48,145
Financial Statements
Continued
Group Statement of Changes in Equity (continued)
Attributable to owners of the parent
Share Share premium, capital redemption and merger reserves Other Retained 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
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: (page 22) - - (21) 3,034 3,013 - 111 3,124
Profit for the year (page 21) - - - 3,068 3,068 - 113 3,181
Other comprehensive expense for the year (page 22) - - (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
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
- proceeds, net of issuance fees - - - - - - - -
- tax on issuance fees - - - - - - - -
- 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
The accompanying notes on pages 27 to 41 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Balance Sheet
As at 31 December
2025 2024
£m £m
Assets
Intangible assets 86,934 94,276
Property, plant and equipment 4,483 4,379
Investments in associates and joint ventures 1,521 1,902
Retirement benefit assets 880 937
Deferred tax assets 2,032 2,573
Trade and other receivables 288 282
Investments held at fair value 333 146
Derivative financial instruments 135 110
Total non-current assets 96,606 104,605
Inventories 4,382 4,616
Income tax receivable 470 67
Trade and other receivables 3,802 3,604
Investments held at fair value 16 513
Derivative financial instruments 162 186
Cash and cash equivalents 3,827 5,297
12,659 14,283
Assets classified as held-for-sale 25 11
Total current assets 12,684 14,294
Total assets 109,290 118,899
Equity - capital and reserves
Share capital 577 585
Share premium, capital redemption and merger reserves 26,675 26,665
Other reserves (4,148) (902)
Retained earnings 22,929 21,610
Owners of the parent 46,033 47,958
Perpetual hybrid bonds 1,893 1,685
Non-controlling interests 219 352
Total equity 48,145 49,995
Liabilities
Borrowings 31,708 32,638
Retirement benefit liabilities 801 820
Deferred tax liabilities 10,343 11,679
Other provisions for liabilities 3,161 4,071
Trade and other payables 484 685
Derivative financial instruments 124 268
Total non-current liabilities 46,621 50,161
Borrowings 3,362 4,312
Income tax payable 1,129 1,681
Other provisions for liabilities 608 3,044
Trade and other payables 9,328 9,550
Derivative financial instruments 91 156
Liabilities associated with assets classified as held-for-sale 6 -
Total current liabilities 14,524 18,743
Total equity and liabilities 109,290 118,899
The accompanying notes on pages 27 to 41 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Cash Flow Statement
For years ended 31 December
2025 2024
£m £m
Cash flows from operating activities
Cash generated from operating activities (page 36) 8,899 11,573
Dividends received from associates 369 406
Tax paid (2,926) (1,854)
Net cash generated from operating activities 6,342 10,125
Cash flows from investing activities
Interest received 201 187
Dividends received 1 -
Purchases of property, plant and equipment (551) (486)
Proceeds on disposal of property, plant and equipment 37 145
Purchases of intangibles (153) (122)
Proceeds on disposal of intangibles 31 39
Purchases of investments (54) (216)
Proceeds on disposals of investments 848 299
Investment in associates and acquisitions of other subsidiaries net of cash (29) (48)
acquired
Proceeds from disposal of shares in associate, net of tax 1,052 1,577
Disposal of subsidiary, net of cash disposed of 4 -
Net cash generated from investing activities 1,387 1,375
Cash flows from financing activities
Interest paid on borrowings and financing related activities (1,631) (1,703)
Interest element of lease liabilities (40) (37)
Capital element on lease liabilities (177) (165)
Proceeds from increases in and new borrowings 3,814 2,404
Reductions in and repayments of borrowings (3,932) (4,826)
Outflows relating to derivative financial instruments (380) (128)
Purchases of own shares - share buy-back programme (1,112) (698)
Purchases of own shares held in employee share ownership trusts (61) (94)
Proceeds from the issue of perpetual hybrid bonds, net of issuance costs 1,050 -
Redemption of perpetual hybrid bonds, net of costs (883) -
Coupon paid on perpetual hybrid bonds (54) (56)
Dividends paid to owners of the parent (5,238) (5,213)
Investments in relation to non-controlling interests (19) -
Dividends paid to non-controlling interests (100) (121)
Other 1 5
Net cash used in financing activities (8,762) (10,632)
Net cash flows (used in)/generated from operating, investing and financing (1,033) 868
activities
Transferred to held-for-sale (208) -
Differences on exchange (76) (281)
(Decrease)/Increase in net cash and cash equivalents in the year (1,317) 587
Net cash and cash equivalents at 1 January 5,104 4,517
Net cash and cash equivalents at 31 December 3,787 5,104
Cash and cash equivalents per balance sheet 3,827 5,297
Overdrafts and accrued interest (40) (193)
Net cash and cash equivalents at 31 December 3,787 5,104
The accompanying notes on pages 27 to 41 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 28 to 31, included in the above, are an outflow of £3,267
million (31 December 2024: £824 million outflow).
Notes to the Financial Statements
1. Accounting policies and basis of preparation
The condensed consolidated financial information has been extracted from the
Group's 2025 Annual Report, including the financial statements for the year
ended 31 December 2025, which is expected to be published on 13 February
2026. 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 consolidated 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 the Group's Annual Report
on Form 20-F for the year ended 31 December 2024.
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, the key estimates and assumptions were the same as those
that applied to the consolidated financial information for the year ended 31
December 2024, apart from updating the assumptions used to determine the
carrying value of liabilities for retirement benefit schemes.
As described on page 29, 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 29 in
relation to Camel Snus, page 30 in relation to Canada, and page 31 in relation
to Peru and 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.
As discussed on page 19, 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 Group's 2025 Annual Report.
2. Segmental analyses
New measure in 2025
As the Chief Operating Decision Maker, the Management Board (from 1 January
2025) assesses the performance of the Group by reviewing adjusted profit from
operations as adjusted for Canada using the prior year's translational
exchange rate (constant rate) to evaluate segment performance and allocate
resources to the overall business on a regional basis.
This new measure, being adjusted profit from operations as adjusted for
Canada, at constant rates, recognises a charge calculated in line with the
Approved Plans - based on a percentage of Imperial Tobacco Canada Limited's
and Imperial Tobacco Company Limited's (together ITCAN) adjusted profit from
operations from all sources in Canada, excluding New Categories. This charge
will continue until the aggregate settlement amount is paid. This is reflected
in the adjusted performance of the Group and is referred to as "as adjusted
for Canada". This approach presents the economic delivery from the AME region
in a manner comparable to that of the other regions in the Group.
Due to the initial 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 is 100% of the profit after interest and tax from all sources in
Canada, excluding New Categories.
From 2026, this charge will (following the underlying terms of the Approved
Plans) be 85% of the profit after interest and tax from all sources in Canada,
excluding New Categories, reducing in future periods in line with the Approved
Plans.
Please refer to page 39 for a definition of Approved Plans and an update on
the Canadian Litigation.
Revenue by segment
The following table shows 2025 revenue at 2025 rates of exchange, and 2025
revenue translated using 2024 rates of exchange. The 2024 figures are stated
at the 2024 rates of exchange.
Years ended 31 December 2025 2024
Reported Exchange Reported at CC(1) Reported
Revenue £m £m £m £m
U.S. 11,534 369 11,903 11,278
AME 9,309 239 9,548 9,241
APMEA 4,767 196 4,963 5,348
Total Region 25,610 804 26,414 25,867
Notes to the analysis of revenue above:
1. CC: 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.
Notes to the Financial Statements
Continued
Profit from operations by segment
The following table shows 2025 profit from operations at 2025 rates of
exchange, adjusted profit from operations at 2025 rates of exchange and also
translated using 2024 rates of exchange, and 2025 adjusted profit from
operations as adjusted for Canada(3) translated using 2024 rates of exchange.
The 2024 figures are stated at 2024 rates of exchange.
Year ended 31 December 2025
Reported Adj Items(1) Adjusted Exchange Adjusted at CC(2) Canada at CC(2) As adj. for Canada(3) at CC(2)
£m £m £m £m £m £m £m
Profit from Operations
U.S. 4,942 1,601 6,543 223 6,766 - 6,766
AME 3,433 (128) 3,305 72 3,377 (308) 3,069
APMEA 1,622 102 1,724 69 1,793 - 1,793
Total Region 9,997 1,575 11,572 364 11,936 (308) 11,628
Net finance costs (1,819)
Associates and joint ventures 1,681
Profit before tax 9,859
Taxation (2,094)
Profit for the year 7,765
Year ended 31 December 2024
Reported Adj Items(1) Adjusted Adj for Canada(3) As adjusted for Canada(3)
£m £m £m £m £m
Profit/(loss) 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)
Associates and joint ventures 1,900
Profit before tax 3,538
Taxation (357)
Profit for the year 3,181
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 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.
3. As adjusted for Canada excludes the performance of the Canadian
business (excluding New Categories).
3. Adjusting Items
Adjusting items are significant items of income or expense in profit from
operations, net finance costs, taxation, the Group's share of the post-tax
results of associates and joint ventures, diluted earnings per share, net cash
generated from operating activities and net debt 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 non-GAAP measures of adjusted profit from
operations, adjusted operating margin, adjusted gross profit, adjusted gross
margin, adjusted EBITDA, New Categories contribution, New Categories
contribution margin, adjusted net finance costs, adjusted taxation, adjusted
diluted earnings per share, operating cash flow conversion ratio, adjusted
cash generated from operations, free cash flow (before dividends paid to
shareholders), free cash flow (after dividends paid to shareholders) and
adjusted net debt, all of which are before the impact of adjusting items and
which are reconciled from profit from operations, diluted earnings per share,
net finance costs, taxation, net cash generated from operating activities and
net debt.
In addition, the non-GAAP measures of adjusted gross profit, adjusted gross
margin, adjusted profit from operations, adjusted operating margin, New
Categories contribution, New Categories contribution margin, adjusted net
finance costs, adjusted taxation and adjusted diluted earnings per share, are
presented with the additional adjustment to reflect the settlement of the
Canadian litigation, and are referred to as "as adjusted for Canada" (as
discussed above). Such measures are also reconciled from profit from
operations, diluted earnings per share, net finance costs and taxation. Along
with New Categories revenue, Smokeless revenue as a proportion of total
revenue, 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) referred to above these are
collectively the Group's principal non-GAAP measures.
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 2025, the Group incurred £1,575 million (2024: £9,154
million) of adjusting items within profit from operations:
Years ended 31 December
2025 2024
£m £m
(a) Restructuring and integration costs 66 -
(b) Amortisation and impairment of trademarks and similar intangibles 1,584 2,279
(b) Impairment of goodwill 277 39
(c) Impairment on held-for-sale assets and associated costs 235 -
(c) (Credit)/charges in respect of an excise assessment in Romania (15) 449
(c) Credit in respect of settlement of historical litigation in relation to - (132)
the Fox River
(c) Charges in respect of DOJ and OFAC investigations - 4
(c) Impairment charges in respect of the Group's operations in Cuba - 74
(c) Impairment of other fixed assets - 75
(c) Loss of a distribution facility in Ukraine 39 -
(c) Pension liability management (buy-out) 28 -
(c) Other adjusting items (including Engle) 66 157
(d) (Credit)/charges in relation to Canada Approved Plans (708) 6,203
Charges in connection with disposal of an associate 3 6
Total adjusting items included in profit from operations 1,575 9,154
(a) Restructuring and integration costs
To further support our transformation and underpin investment initiatives to
drive long-term sustainable profit and cash flow growth, we have started a
structured time-bound programme (referred to as Fit2Win) to review processes
and ways of working which will generate efficiencies and facilitate faster,
more agile and effective decision-making.
This programme includes a comprehensive review of our overhead optimisation
opportunities, route to market and digitalisation, in order to deliver more
effective, data-driven digital ways of working.
We expect associated one-off costs of around £600 million (including
non-cash items of £100 million). As a one-off time bound programme and to aid
comparison of performance, c.£500 million will be treated as adjusting items
within adjusted profit from operations. Having commenced in 2025, the
programme is expected to complete in 2027.
(b) Amortisation and impairment of trademarks and similar intangibles and
impairment of goodwill
(b)(i) 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, which do not exceed 30 years. The amortisation
and impairment charge of £1,584 million (2024: £2,279 million) is included
in depreciation, amortisation and impairment costs in the income statement.
The reduction in charge in 2025, compared to 2024, reflects an impairment
charge in respect of Camel Snus (£646 million) that was recognised in the
prior period and did not repeat.
(b)(ii) Ongoing impairment review of trademarks and similar assets including
goodwill
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, Malaysia, Australia and Peru) 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.
A post-tax discount rate is applied in the impairment testing, determined
using an appropriate valuation methodology that incorporates both internal
data and externally sourced market information. 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. A similar approach in respect of the discount rate has been applied
for the impairment testing of the trademarks and similar intangibles.
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.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(b)(ii) Ongoing impairment review of trademarks and similar assets including
goodwill (continued)
Reynolds American
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 for review. Following delays, in January 2025,
the Trump Administration withdrew the rule from the Office of Management and
Budget. The Spring 2025 Unified Agenda was released on 4 September 2025
wherein the menthol ban was no longer listed on the Long-Term Actions list and
was instead designated as "withdrawn".
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 was subject to public comment. However, on
20 January 2025, President Trump issued a memorandum entitled 'Regulatory
Freeze Pending Review' which froze all rules and proposed rules pending review
by the current Administration. The Spring 2025 Unified Agenda was released on
4 September 2025. The rule was no longer listed on the Long-Term Actions list
and was instead designated as "withdrawn".
No further changes have occurred in the legislative environment, nor in the
macro-economic environment, during the year to 31 December 2025 that present
an indicator of a potential impairment for either Reynolds American goodwill
or for the definite- or indefinite-lived brands.
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 Terminal value growth rate
At 31 December 2025 (£) Applied Required increase to reach nil headroom Applied Required reduction to reach nil headroom
Reynolds American Goodwill 29,322 8.5% 4.1% 1.0% (4.3)%
Newport 18,359 8.6% 1.4%
Camel 6,919 8.3% 5.9%
Pall Mall 2,225 8.4% 16.6%
Natural American Spirit 9,234 7.8% 0.7%
Grizzly 8,728 7.3% 0.5% 1.0% (0.6)%
Canada
As discussed on page 17, on 29 August 2025, we implemented a court-sanctioned
plan of compromise and arrangement to resolve all Canadian tobacco litigation;
together with similar plans implemented by RBH and JTIM, referred to as the
Approved Plans.
The value-in-use calculation for the Canada CGU has been prepared based on a
five-year cash flow forecast, after which a terminal value rate of decline of
3.65% (2024: decline of 3.65%) on the underlying business is assumed. In line
with the requirements of IAS 36, the value-in-use derived from the forecast
cash flows has been adjusted to include the book value of the provision
recognised in respect of the Approved Plans and the liability is included
within the carrying value of the Canada CGU for the purposes of the impairment
test.
A pre-tax discount rate of 11.4% (2024: 9.8%) has been assumed.
As a result of a rebasing of forecasts reflecting the current difficult
trading environment, an impairment charge of £184 million has been
recognised in respect of goodwill associated with the Canada CGU. The
remaining carrying value is £1,994 million at 31 December 2025 and reflects
the recoverable amount, being the value-in-use of the Canada CGU.
The table below indicates the additional amount of impairment that would be
required if the following individual changes were made to key assumptions
within the value-in-use model.
Additional impairment
£m
Assumptions
Decrease in volume by 3% year-on-year* (355)
Decrease in five-year pricing CAGR by additional 1% (110)
Increase in pre-tax discount rate by 100 bps (116)
* Volume sensitivity results in a proportional reduction in both net
revenue and direct costs with no impact to other operating costs which remain
flat. This demonstrates a year-on-year decrease in operating cash flow for the
forecast years.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(b)(ii) Ongoing impairment review of trademarks and similar assets including
goodwill (continued)
Peru
For the Peru CGU, as a result of ongoing difficult trading conditions, an
impairment trigger was identified at the half year and a full impairment
review was undertaken. The value-in-use calculation reflects the short- to
medium-term plans spanning a period of five years after which a terminal value
growth rate of -4% has been assumed. As a result of the review, the goodwill
associated with the CGU was impaired in full with a charge of £72 million
(2024: nil) being recognised.
Malaysia
For the Malaysia CGU, as a result of regulatory and macro-economic conditions,
the above assumptions were amended to reflect the short- to medium-term plans
spanning a period of five years after which a terminal value growth rate of
-1.4% has been assumed. The Malaysian government announced new regulations
under the Control of Smoking Products for Public Health Act 2024, which came
into effect in 2025 and has impacted the sale of tobacco and vapour products.
As a result of the impact of the new regulations, the Group exited the vapour
market in Malaysia and, as a result, goodwill associated with the Malaysia CGU
has been impaired by £21 million (2024: £39 million).
(c) Other
In 2025, the Group incurred a net charge of £353 million (2024: £627
million) of other adjusting items. These included:
- a credit of £15 million (2024: charge of £449 million) in respect of an
excise assessment in Romania that was concluded in 2024;
- a charge of £235 million (2024: £74 million) in respect of the Group's
planned exit from Cuba and the classification of the Group's business in Cuba
as held-for-sale, as discussed on page 18;
- a charge of £39 million which related to the loss of a distribution
facility in Ukraine following a missile attack in the second half of 2025;
- a charge of £28 million in respect of the buy-out of the UK pension fund;
and
- other litigation costs of £66 million (2024: £157 million), mainly related
to litigation costs including Engle progeny and other health-related claims.
In 2024, the Group also recognised a credit related to the settlement of
historical litigation in respect of the Fox River (£132 million) and charges
related to the impairment of fixed assets of £75 million, including in
respect of the Group's head office in London.
Also, in 2024, a charge of £4 million was recognised in respect of interest
accruing on the settlement due to the DOJ and OFAC regarding investigations
into alleged historical breaches of sanctions.
(d) Changes in provision in relation to Canada Approved Plans
A net credit of £708 million (2024: charge of £6,203 million) was
recognised in relation to the Approved Plans in Canada. The Group's estimated
share of the undiscounted future liability has not materially changed, however
the Group has recognised a credit to the income statement as the provision
recognised in respect of the Canadian litigation settlement was updated in
line with the latest forecast of the Canadian combustibles industry
performance, impacting the present value of the future liability. The update
was, in particular, in respect of pricing and volume decline assumptions.
Based on our current estimate, it is expected that payments in respect of our
estimated share of the future liability will continue for at least 40 years.
The pre-tax discount rate increased from 3.27% at 31 December 2024 to 3.86% at
31 December 2025. This credit was partially offset by the change in the
industry holdback associated with the upfront payment, which was allocated to
RBH. At 31 December 2025, net of translational FX movements, unwinding of
discount and the above factors, the current provision for the upfront payment
is nil (31 December 2024: £2,456 million) and the non-current provision for
the future payments is £2,794 million (31 December 2024: £3,747 million).
Refer to note 4 (page 32) for the unwinding of the discount in the years to 31
December 2025 and refer to note 12 (commencing on page 38) for further
information on the Approved Plans.
Management uses judgement to determine the key assumptions used to calculate
the present value of the provision. Changes to key assumptions can
significantly impact the amount expected to be paid and the years over which
payments are expected to be made. The key assumptions used to calculate the
provision are the rate at which volumes will decline, future pricing plans and
the discount rate. The impact of reasonably possible changes to these key
assumptions are assessed on an individual basis and have therefore been
considered in isolation. If the rate at which volumes will decline is lower by
3% (less volume decline than expected) compared to the base assumptions, the
provision would increase by £282 million.
The delivery of ITCAN's future pricing plans is subject to competitive actions
and the relative pricing position of brands and may therefore vary depending
on the competitive market conditions. If ITCAN's pricing delivery is 120% of
the base assumptions, the provision would increase by £94 million.
Assuming that there is no change to ITCAN's estimated share of the liability,
if the performance of the combustibles industry declines, as was the case
during 2025, whilst the undiscounted liability does not change, the present
value of the provision will decrease as the payment period extends further. A
combination of changes in several assumptions, including the future financial
performance (excluding New Categories) of ITCAN and each of the other
Companies, as defined in note 12 (commencing on page 38), and the performance
of the combustibles industry as a whole, may materially impact the provision.
Notes to the Financial Statements
Continued
4. Net Finance Costs
Net finance costs were £1,819 million, compared to £1,098 million in 2024,
an increase of 65.7%.
The increase in net finance costs was largely due to:
- a net credit in 2024 of £590 million related to the capped cash debt
tender offers, which targeted series of low-priced, long-dated GBP-, EUR- and
USD-denominated bonds, under which the Group repurchased bonds prior to their
maturity in an aggregate principal amount of £1.8 billion, including
£15 million of accrued interest, completed in May 2024 and, including other
costs of £3 million;
- a charge, in 2025, of £112 million related to the unwinding of the
discount on the provision associated with the Approved Plans in Canada;
- interest of £66 million (2024: £8 million) in respect of a tax provision
in the Netherlands; partly offset by
- a net monetary gain of £63 million related to Venezuela, due to the
continued application of hyperinflation accounting under IAS 29; and
- lower finance costs related to FII GLO of £30 million (2024: £61 million).
Before adjusting items described above, adjusted net finance costs were 3.8%
higher at £1,649 million (2024: £1,589 million), an increase of 5.5% at
constant rates of exchange, as 2025 was also impacted by a translational
foreign exchange tailwind due to the relative movement of sterling of 1.7%.
This was largely due to lower interest income mainly related to balances held
in Canada, as £2.6 billion was paid in line with the Approved Plans
(discussed on page 17) with interest income (net of fair value gains on
derivatives) in Canada reducing from £126 million in 2024 to £57 million
in 2025.
The Group's average cost of debt has increased to 5.0% (compared to 4.9% at 31
December 2024).
Also in 2025, in line with IAS 33 Earnings Per Share, £87 million (2024: £42
million), net of tax, 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 34.
The Group has debt maturities of around £2.4 billion in 2026 and around
£2.9 billion in 2027. Due to higher interest rates, net finance costs are
expected to increase as debts are refinanced.
5. Results of associates and joint ventures
The Group's share of post-tax results of associates and joint ventures
decreased to £1,681 million (2024: £1,900 million), mainly related to the
Group's investment in its associate ITC Ltd (ITC) in India.
The Group's share of post-tax results in respect of ITC was 12.3% lower at
£1,672 million (2024: £1,906 million).
Both years included an adjusting credit in respect of the sale of ordinary
shares held in its associate ITC in India.
- On 28 May 2025, the Group disposed of 313 million shares resulting in a gain
of £898 million in 2025. The sale represented 2.5% of ITC's ordinary shares.
As permitted by IAS 28 Investments in associates and joint ventures, results
up to 30 September 2025 have been used in applying the equity method.
On 13 March 2024, the Group announced the completion of the disposal of 436.9
million ordinary shares representing c.3.5% of ITC's total issued ordinary
share capital and roughly 12% of BAT's investment, resulting in a gain of
£1,361 million.
- Additionally, on 1 January 2025, ITC completed the demerger of its hotels
business through a scheme of arrangement. Under this scheme, 60% of the equity
in the newly incorporated entity, ITC Hotels Limited (ITC Hotels), was
directly allocated to ITC's shareholders in proportion to their existing
shareholding in ITC as of that date.
As part of the demerger accounting, ITC recognised the excess of the fair
value over the carrying value of the hotels business as an adjusting item. The
Group's share of this adjusted gain amounted to £333 million (net of tax).
The Group's initial direct stake was approximately 15% and recognised as a
non-current investment on the balance sheet held at fair value through Other
Comprehensive Income. However, in December 2025, the Group sold 9% of ITC
Hotels in a block trade, retaining a direct stake of 6.3%. Net proceeds from
the sale were £318 million.
Consistent with prior years, an adjusting gain of £6 million (2024: £18
million) has been recognised, being a deemed gain as a result of ITC issuing
ordinary shares under the company's Employees Share Option Scheme.
As a result of the above, the Group's shareholding in ITC has decreased from
25.45% (31 December 2024) to 22.91% at 31 December 2025.
One of our associates, VST Industries Limited, recognised an adjusting gain in
relation to a sale of land and buildings. The Group's share of this gain was
£3 million.
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 2024,
down 8.6% to £475 million.
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 34.
For a full reconciliation of the Group's share of post-tax results of
associates and joint ventures to adjusted share of post-tax results of
associates and joint ventures, at constant rates of exchange, see page 54.
Other Financial Information
Continued
6. Taxation
The tax rate in the income statement was 21.2% for 2025 (2024: 10.1%). The
Group's tax rate is affected by the impact of the adjusting items referred to
on pages 28 to 32 and by the inclusion of the share of associates' and joint
ventures' post-tax profit in the Group's pre-tax results.
In 2025, adjusting items in taxation included a net credit of £104 million
mainly relating to an additional tax charge pertaining to the Dutch litigation
following the Court of Appeal judgment received in September 2025 offset by
the revaluation of deferred tax liabilities arising on trademarks recognised
in the Reynolds American acquisition due to changes in U.S. state effective
tax rates and the partial release of a provision for tax exposure in
Indonesia.
In 2024, adjusting items in taxation included a net credit of £157 million
mainly relating to Brazilian Federal Tax Authority challenges regarding the
treatment of Rio de Janeiro VAT incentives (described further on page 38) 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.
The adjusting tax item also includes £240 million (2024: £2,049 million) in
respect of the taxation on other adjusting items, which are described on pages
28 to 32.
Refer to page 40 for the FII GLO 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 diluted
earnings per share calculation on page 34.
Excluding these, the Group's underlying tax rate for subsidiaries reflected in
the adjusted diluted earnings per share on page 34 was 24.6% for 2025 (2024:
24.9%). The marginal decrease in the underlying tax rate in 2025 largely
reflects the mix of profits and changes in legislation (including the new
Pillar Two rules).
In September 2025, the Court of Appeal issued its judgment in respect of the
ongoing tax disputes in the Netherlands. While further avenues of appeal are
being pursued, the Group has increased the provision by £171 million, with a
total provision of £326 million at 31 December 2025.
A full reconciliation from taxation on ordinary activities to the underlying
tax rate is provided on page 55.
7. Earnings per share
Basic earnings per share (EPS) were up 157% to 351.0p (31 December 2024:
136.7p), with diluted EPS up 157% to 349.1p (31 December 2024: 136.0p). The
increases in both basic and diluted EPS were largely driven by:
- Higher profit from operations due to the lower adjusting items described on
page 6; and
- A gain of £333 million in respect of the demerger of the hotels division
of the Group's Indian associate ITC (see page 32).
These were partly offset by:
- A lower gain arising on the partial sale of the Group's investment in ITC in
2025 (£898 million) compared to £1,361 million in 2024 mainly due to a lower
number of shares disposed of (2025: 313.0 million shares; 2024: 436.9 million
shares), discussed on page 32; and
- A credit in 2024, which did not repeat in 2025, of £590 million related to
the debt liability management exercise (see page 32).
Basic and diluted EPS were also positively impacted by the reduction in the
number of shares due to the cumulative effect of the 2024 and 2025 share
buy-back programmes, with 30,460,763 ordinary shares repurchased and cancelled
in the year ended 31 December 2025.
Before adjusting items and the impact of translational foreign exchange and
also including the dilutive effect of employee share schemes, adjusted diluted
earnings per share, at constant rates, increased 0.7% to 365.0p (31 December
2024: 362.5p).
For a full reconciliation of diluted earnings per share to adjusted diluted
earnings per share at constant rates, see page 34.
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 2025, this amounted to £87 million
(2024: £42 million), net of tax.
Years ended 31 December
2025 2024
£m £m
Earnings attributable to owners of the parent 7,764 3,068
Coupon on perpetual hybrid bonds (64) (56)
Tax on coupon on perpetual hybrid bonds 16 14
Loss on redemption of perpetual hybrid bonds (39) -
Earnings 7,677 3,026
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.
Other Financial Information
Continued
7. Earnings per share (continued)
Earnings per share calculations are based upon the following:
Reported Adjusted Headline
Basic Diluted Basic Diluted Basic Diluted
Year ended 31 December 2025
- Earnings £m 7,677 7,677 7,743 7,743 7,169 7,169
- Shares m 2,187 2,199 2,187 2,199 2,187 2,199
- Per share p 351.0 349.1 354.0 352.1 327.8 326.0
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
Adjusted diluted earnings per share are calculated by taking the following
adjustments into account (see pages 28 to 33):
Items presented below are net of tax and non-controlling interests when
applicable.
Years ended 31 December
2025 2024
pence pence
Diluted earnings per share 349.1 136.0
Effect of amortisation and impairment of goodwill, trademarks and similar 68.2 80.7
intangibles
Effect of impairment charges in respect of the Group's head office - 2.9
Effect of impairment charges in respect of the Group's operations in Cuba - 1.6
Effect of settlement of historical litigation in relation to the Fox River - (4.9)
Effect of the changes in provision in relation to the Approved Plans in Canada (23.7) 205.0
and associated costs
Effect of charges in respect of DOJ and OFAC investigations - 0.2
Effect of impairment of held-for-sale assets and associated costs 5.5 -
Effect of Romania other taxes (0.7) 20.1
Effect of restructuring costs 1.8 -
Effect of other adjusting items in operating profit 5.1 5.3
Effect of adjusting items in net finance costs 4.9 (17.0)
Effect of gains related to the partial divestment of shares held in ITC (40.8) (61.1)
Tax associated with the partial divestment of shares held in ITC and hotels 1.6 1.6
business demerger
Effect of associates' adjusting items (15.5) (0.8)
Effect of adjusting items in respect of deferred taxation (9.2) (12.0)
Adjusting items in tax 4.5 4.9
Redemption of perpetual hybrid bond - difference in spot rates 1.3 -
Adjusted diluted earnings per share 352.1 362.5
Impact of translational foreign exchange 12.9
Adjusted diluted earnings per share translated at 2024 exchange rates 365.0 362.5
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
7. Earnings per share (continued)
Diluted headline earnings per share are calculated by taking the following
adjustments into account:
Years ended 31 December
2025 2024
pence pence
Diluted earnings per share 349.1 136.0
Effect of impairment of intangibles, property, plant and equipment, associates 13.5 30.2
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (3.9) (4.4)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of losses on disposal of businesses, non-current investments and brands 0.1 -
(net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and 5.4 -
associated costs (net of NCI)
Issue of shares and change in shareholding of an associate (0.2) (0.8)
Gain on partial disposal of an associate and associated capital gains tax, (38.0) (58.7)
including foreign exchange reclassified
Diluted headline earnings per share 326.0 102.3
The following is a reconciliation of earnings to headline earnings, in
accordance with the JSE Listing Requirements:
Years ended 31 December
2025 2024
£m £m
Diluted earnings per share 7,677 3,026
Effect of impairment of intangibles, property, plant and equipment, associates 298 672
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (87) (97)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of losses on disposal of businesses, non-current investments and brands 2 -
(net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and 120 -
associated costs (net of NCI)
Effect of foreign exchange reclassification from reserves to the income (1) -
statement
Issue of shares and change in shareholding of an associate (5) (18)
Gain on partial disposal of an associate and associated capital gains tax, (835) (1,307)
including foreign exchange reclassified
Headline earnings 7,169 2,276
Notes to the Financial Statements
Continued
8. Cash Flow
Net cash generated from operating activities
Net cash generated from operating activities in the IFRS cash flows on page 26
includes the following items:
Years ended 31 December
2025 2024
£m £m
Profit for the year 7,765 3,181
Taxation on ordinary activities 2,094 357
Share of post-tax results of associates and joint ventures (1,681) (1,900)
Net finance costs 1,819 1,098
Profit from operations 9,997 2,736
Adjustments for:
- depreciation, amortisation and impairment costs 2,547 3,101
- decrease in inventories 112 35
- increase in trade and other receivables (295) (269)
- decrease in Master Settlement Agreement payable (79) (294)
- (decrease)/increase in trade and other payables (207) 58
- decrease in net retirement benefit liabilities (31) (76)
- (decrease)/increase in other provisions for liabilities (3,409) 6,322
- other non-cash items 264 (40)
Cash generated from operating activities 8,899 11,573
Dividends received from associates 369 406
Tax paid (2,926) (1,854)
Net cash generated from operating activities 6,342 10,125
Net cash generated from operating activities declined by 37.4% to £6,342
million (2024: £10,125 million). This was driven by:
(- ) payment of cash, cash equivalents and investments held at fair value
totalling £2.6 billion, in the second half of 2025, as part of the Approved
Plans (as discussed on page 17) in Canada;
(- ) deferral of US$895 million of tax payments in the U.S. from 2024 to
2025, negatively impacting 2025 by £678 million; and
(- ) payment related to the FII GLO of £479 million (2024: £50 million).
The Group will make further payments of £222 million in 2026 and
£41 million in 2027 (see page 40).
These were partly offset by payments in 2024 in respect of the DOJ and OFAC
(£267 million) and an excise assessment in Romania (£390 million), both of
which did not repeat.
Expenditure on research and development was approximately £358 million in
2025 (2024: £380 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 £1,387 million, a
marginal increase of £12 million from the same period last year when it was
an inflow of £1,375 million.
This was driven by the net movement from short-term investment products,
including treasury bills, which were an inflow of £794 million in 2025,
compared to an inflow of £83 million in 2024 due to:
- the net proceeds of £318 million from the sale, in December 2025, of
around 59% of the Group's investment in ITC Hotels; and
- the liquidation of investments (£437 million) that were then included in
the upfront payment in respect of Canada as part of the Approved Plans.
However, this was largely offset by lower net proceeds from the partial
monetisation of our investment in ITC of £1,052 million compared to £1,577
million in 2024.
Purchases of property, plant and equipment were higher than 2024, at £551
million (2024: £486 million).
In 2025, the Group invested £648 million in gross capital expenditure, an
increase of 11.7% on the prior year (2024: £581 million). This included
purchases of property, plant and equipment related to the ongoing investment
in the Group's operational infrastructure, including the expansion of our New
Categories portfolio and enhancements to our Modern Oral capacity.
The Group expects its gross capital expenditure in 2026 to be approximately
£750 million.
Net cash used in financing activities
Net cash used in financing activities was an outflow of £8,762 million in
2025 (2024: £10,632 million outflow). The total outflow includes:
- The payment of the dividend of £5,238 million (2024: £5,213 million);
- Lower interest paid in the year of £1,631 million (2024: £1,703 million)
as higher interest charges in line with the increase in the Group's average
cost of debt were more than offset by foreign exchange tailwinds;
- The net repayment of borrowings in 2025 of £118 million compared £2,422
million in 2024;
- An outflow of £380 million related to derivatives (2024: £128 million);
- A net inflow from the redemption and subsequent issuance of perpetual
hybrid bonds of £167 million; and
- An outflow of £1,112 million (2024: £698 million) in respect of the share
buy-back programme.
Notes to the Financial Statements
Continued
9. 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 2025, the average centrally managed debt maturity of bonds
was 9.5 years (31 December 2024: 9.5 years) and the highest proportion of
centrally managed debt maturing in a single rolling 12-month period was 15.1%
(31 December 2024: 14.8%).
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 2025,
the relevant ratio of floating to fixed rate borrowings after the impact of
derivatives was 24:76 (31 December 2024: 22:78). On a net debt basis, after
offsetting liquid assets and excluding cash and other liquid assets (including
investments held at fair value) in Canada, which were subject to certain
restrictions under CCAA protection in 2024 (and were subsequently paid into
the Global Settlement Trust Account as part of the Upfront Cash Contribution
in the second half of 2025), the ratio of floating to fixed rate borrowings
was 14:86 (31 December 2024: 13:87).
Available facilities
It is Group policy that short-term sources of funds (including drawings under
both the Group US$4 billion U.S. commercial paper (U.S. CP) programme and the
Group £3 billion euro commercial paper (ECP) programme) are backed by
undrawn committed lines of credit and cash. Commercial paper is issued by
B.A.T. International Finance p.l.c., B.A.T. Netherlands Finance B.V. and B.A.T
Capital Corporation and guaranteed by British American Tobacco p.l.c. At 31
December 2025, commercial paper of nil was outstanding (2024: nil). Cash
flows relating to commercial paper that have maturity periods of three months
or less are presented on a net basis in the Group's cash flow statement.
At 31 December 2025, the Group had access to a £5.0 billion revolving credit
facility. This facility was undrawn at 31 December 2025. In November 2025, the
Group refinanced its existing £5.2 billion facility at the reduced amount of
£5.0 billion comprising (i) a £2.5 billion 364-day tranche with two
one-year extension options and a one-year term out option and (ii) a
£2.5 billion five-year tranche with two one-year extension options.
During 2025, the Group refinanced or extended short-term bilateral facilities
totalling £2.7 billion. As at 31 December 2025, nil was drawn on a
short-term basis with £2.7 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
£468 million (equivalent), which was fully drawn as at 31 December 2025.
Issuance, drawdowns and repayments in the period
- In March 2025, the Group repaid a €650 million bond at maturity and
accessed the US dollar market under the SEC Shelf Programme, raising a total
of US$2.5 billion across three tranches;
- In June 2025, the Group repaid two bonds totalling an aggregate amount of
US$3.0 billion at maturity;
- In August 2025, the Group repaid a £300 million bond at maturity;
- In September 2025, the Group accessed the US dollar market under the SEC
Shelf Programme, raising US$750 million; and
- In October 2025, the Group issued two series of perpetual hybrid bonds, each
in an aggregate principal amount of €600 million and concurrently launched
a tender offer for its outstanding €1.0 billion 3% perpetual hybrid bond
(first callable in 2026). As a result, approximately 80.7% of the existing 3%
perpetual hybrid notes were repurchased at a slight premium, with the
remaining 19.3% redeemed at their principal value in November 2025.
The Group has debt maturities of around £2.4 billion in 2026 and around
£2.9 billion in 2027. Due to higher interest rates, net finance costs are
expected to increase as debts are refinanced.
Notes to the Financial Statements
Continued
10. Related party disclosures
The Group's related party transactions and relationships for 2024 were
disclosed on pages 341 and 342 of the Group's Annual Report and Form 20-F for
the year ended 31 December 2024.
In the year ended 31 December 2025, apart from the partial sale of the Group's
investment in ITC and demerger of ITC Hotels (refer to page 18), 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 2025
will be included in the Group's 2025 Annual Report.
11. Return on Capital Employed (ROCE)
The Group's ROCE, calculated in accordance with our reported numbers, was
10.3% (2024: 2.7%), with the relative movement in 2025 largely due to the
increase in profit from operations. with the prior period negatively impacted
by the recognition of the £6.2 billion charge in respect of the settlement of
historical litigation in Canada as discussed on page 17.
On an adjusted basis, as defined on page 59, 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) and adjusting for the performance of Canada(1), adjusted
ROCE grew from 11.6% in 2024, to 12.0% in 2025.
The movement in 2025 was mainly driven by the impairment of goodwill and
trademarks and increases in amortisation charges incurred in the current and
prior periods, the impact of which has been adjusted out of EBITDA but reduces
the value of average capital employed.
1. As adjusted for Canada excludes the performance of the Canadian
business (excluding New Categories).
12. 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 Group's 2024 Annual Report and the Group's 2024
Annual Report on Form 20-F and will be included in the Group's 2025 Annual
Report and the Group's 2025 Annual Report on 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 judgement. 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 and the Netherlands.
In Brazil, Souza Cruz, the Group's Brazilian subsidiary, successfully filed a
bank guarantee in respect of the disputed amount in the 2007-2008 tax case
where the Brazilian Federal Tax Authority is seeking to subject the profits of
overseas subsidiaries to corporate income tax and social contribution tax.
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 £1,082 million covering tax, interest and penalties. The Group
appealed against the assessments in full. On 11 September 2025, the Court of
Appeal issued its judgment, rescinding the £92 million fine and reducing the
adjustments relating to the termination of licence rights. The Court of Appeal
largely upheld the District Court's findings on the other intra-group
transactions. Both the Group and the Dutch Tax Authorities have issued
pro-forma appeals to the Supreme Court.
Having considered the judgment and the Dutch judicial and international
proceedings available to it, the Group recognised a further adjusting charge
of £171 million in 2025, with a total provision of £326 million recognised
at 31 December 2025.
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.
Notes to the Financial Statements
Continued
12. Contingent liabilities and financial commitments (continued)
Canada
All outstanding tobacco litigation in Canada has been resolved and all
relevant Group companies have been provided releases in full for all
historical tobacco-related claims in Canada.
Following a judgment by the Québec Court of Appeal in March 2019 in the
Québec class actions, JTI-MacDonald Corp ((JTIM) a subsidiary of Japan
Tobacco International and a co-defendant in the cases), Imperial Tobacco
Canada Limited (Imperial), Imperial Tobacco Company Limited (together with
Imperial, ITCAN) and Rothmans, Benson & Hedges Inc. ((RBH) a subsidiary of
Philip Morris International Inc. and a co-defendant in the cases) each filed
for creditor protection under the Companies' Creditors Arrangement Act (CCAA),
and court ordered stays (the Stays) of all tobacco litigation in Canada
against all defendants (including all Group companies that were defendants in
the Canadian tobacco litigation, including (i) ITCAN, British American Tobacco
p.l.c., British American Tobacco (Investments) Limited, B.A.T Industries
p.l.c. and Carreras Rothmans Limited) and (ii) R. J. Reynolds Tobacco Company
(RJRT) and R.J. Reynolds Tobacco International Inc. (collectively, the RJR
Companies).
Following the filing of proposed plans of compromise (collectively, the
Proposed Plans) by the court-appointed mediators and monitors for each of
ITCAN, RBH and JTIM in the Ontario Superior Court of Justice (the Court) in
October 2024, subsequent amendment, creditor approval in December 2024 and a
sanction hearing in January 2025, the Court issued an order finding each of
the Proposed Plans fair, reasonable, and in the public interest, and
sanctioned the Proposed Plans (hereinafter referred to as the Approved Plans).
The Approved Plans were implemented on 29 August 2025, as a result of which
all outstanding tobacco litigation in Canada against the defendants has been
resolved and all relevant Group companies have been provided release in full
for all historical tobacco-related claims in Canada.
On implementation, each of ITCAN, RBH and JTIM was required to pay into the
settlement fund cash and cash equivalents on hand (including investments held
at fair value) (other than, in the case of RBH, a holdback amount) plus
certain court deposits. If any cash tax refunds are later received on account
of these upfront payments, 85% of such refund amounts will also be payable
towards the settlement.
Going forward, each of ITCAN, RBH and JTIM will also be required to make
annual payments based on a percentage (initially 85%, reducing over time to
70%) of net income after tax based on amounts generated from all sources,
excluding New Categories, until they settle the liability (CAD$32.5 billion)
in full. The performance of ITCAN's New Categories (including Vapour products
and nicotine pouches) is not included in the basis for calculating the annual
payments (which New Categories products are also excluded from the releases
granted under the Approved Plans).
The Group has recognised a provision to reflect management's best estimate of
ITCAN's total payment obligations under the Approved Plans (see note 3).
U.S. - Engle
As at 31 December 2025, 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 33 pending Engle
progeny cases filed on behalf of approximately 50 individual plaintiffs. Many
of these are in active discovery or nearing trial. In 2025, RJRT or Lorillard
Tobacco paid judgments in three Engle progeny cases. Those payments totalled
approximately US$16.0 million (approximately £11.9 million) in compensatory
or punitive damages. Additional costs were paid in respect of attorneys' fees
and statutory interest.
In addition, from 1 January 2023 to 31 December 2025, outstanding jury
verdicts in favour of the Engle progeny plaintiffs had been entered against
RJRT or Lorillard Tobacco for US$32.5 million (approximately £24.1 million)
in compensatory damages (as adjusted) and US$25.7 million (approximately
£19.1 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 £148.7 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.
Kalamazoo
Georgia-Pacific, a designated Potentially Responsible Party (PRP) in respect
of the Kalamazoo River in Michigan, 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
£182.1 million). The Consent Decree also provides for the payment by NCR of
an outstanding judgment against it of approximately US$20 million
(approximately £14.9 million) to Georgia-Pacific.
The quantum of the clean-up costs for the Kalamazoo River is presently
unclear. It seems likely to 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 B.A.T Industries p.l.c.
(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 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. The proceedings are
ongoing.
Notes to the Financial Statements
Continued
12. Contingent liabilities and financial commitments (continued)
Investigations
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 are currently being investigated. The Group cooperates with the
authorities, where appropriate.
There are instances where the Group investigates or where Group companies are
cooperating with relevant national competition authorities in relation to
competition law investigations and/or engaged in legal proceedings at the
appellate level, including (amongst others) in Belgium and Brazil.
In addition, the Group is, and may in the future be, subject to investigations
or legal proceedings in relation to, among other things, its marketing,
promotion or distribution activities in respect of its products. This
includes, but is not limited to, allegations that such activities, whether
undertaken through traditional channels, digital platforms, third parties, or
distribution applications, do not comply with applicable laws or regulations.
As such, the Group or Group companies, could be subject to liability and costs
associated with any damages, fines, or penalties brought in connection with
these allegations.
Group litigation 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, and certain U.S.
individual smoking and health cases.
Full details of the litigation against Group companies and tax disputes as at
31 December 2025 will be included in the Group's 2025 Annual Report. 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 2025 or to date in 2026 that would impact the financial
position of the Group.
13. 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 2025. 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 heard in late November 2023 with
judgment handed down in February 2024. The High Court determined that claims
should have been filed within 6 years of June 2000 meaning that BAT's claims
are in time. HMRC appealed the judgment, and the appeal was heard in the Court
of Appeal in May 2025. There is no confirmed date when the judgement will be
handed down. 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 £30 million in respect
for 2025 (2024: £61 million) accruing on the balance, which was also treated
as an adjusting item.
In 2025, the Group paid £479 million, following the agreement with HMRC to
repay £0.8 billion (being the difference between the amounts received plus
accrued interest and the amount determined in the July 2021 judgment
(£0.3 billion)). The Group had previously made annual payment of £50
million in each of 2024, 2023 and 2022. The schedule for the remaining
repayments is
- £222 million in 2026; and
- £41 million in 2027.
Full details of the case will be included in the Group's 2025 Annual Report
(note 10 Taxation on ordinary activities).
Notes to the Financial Statements
Continued
14. Post Balance Sheet Event
Settlement with ITG Brands, LLC
In January 2026, two Group subsidiaries (Reynolds American Inc. and R.J.
Reynolds Tobacco Company (RJRT)) entered into a settlement agreement related
to historical litigation with ITG Brands, LLC (ITG). The dispute was with
respect to the liability arising under the Florida State Settlement Agreement,
specifically regarding the four brands (Winston, Salem, Kool and Maverick)
that were sold to ITG in 2015.
In settlement of the dispute, ITG paid RJRT a lump sum of US$200 million
(£148.7 million) on 30 January 2026. Additionally, ITG will also reimburse
RJRT the following amounts by the following dates:
- 15 October 2026: US$75.0 million (£55.8 million);
- 15 October 2027: US$77.9 million (£57.9 million); and
- 15 October 2028: US$80.8 million (£60.1 million).
Each payment is fully contingent upon RJRT accruing an overall MSA/Previously
Settled States Settlement Agreements (PSSSA) liability in excess of the
specified amount in the relevant calendar year.
The initial payment of US$200 million (£148.7 million) will be treated as
an adjusting item in 2026, with the subsequent payments treated as a
contingent asset until RJRT accrues an overall MSA/PSSSA liability requiring
the relevant amounts to be paid. ITG is also required to reimburse RJRT for
future payments RJRT makes to Florida based on sales of the Acquired Brands.
Nahadi Litigation
On 29 January 2026, a claim was filed in the U.S. District Court for the
Eastern District of Virginia against British American Tobacco p.l.c. (the
Company) and British-American Tobacco Marketing (Singapore) Private Limited
(BATMS). The claimants are 196 U.S. nationals and family members who claim
unquantified civil damages under the U.S. Anti-Terrorism Act. The substance of
the allegations relate to matters previously disclosed in relation to
historical business activities in the Democratic People's Republic of Korea
which resulted in the Company's April 2023 entry into a three-year deferred
prosecution agreement with the DOJ, with BATMS pleading guilty to the same
charges, and a civil settlement agreement with OFAC.
The Company and BATMS intend to vigorously defend the claim.
Other Information
Non-financial Key Performance Indicators (KPIs)
Volume
The Group reports volumes as additional information. This is done, where
appropriate, with cigarette sticks as the basis, with usage levels applied to
other products to calculate the equivalent number of cigarette units. Volume
is defined as the number of units sold. Units may vary between categories.
The conversion rates that are applied:
Equivalent to one cigarette
Factory-made cigarettes (FMC) 1 stick
Heated sticks 1 heat stick
Cigars 1 cigar (regardless of size)
Oral
- Pouch 1 pouch
- Moist Snuff 2.8 grams
- Dry Snuff 2.0 grams
- Loose leaf, plug, twist 7.1 grams
Pipe tobacco 0.8 grams
Roll-your-own 0.8 grams
Make-your-own
- Expanded tobacco 0.5 grams
- Optimised tobacco 0.7 grams
Vapour No conversion to a stick equivalent
Roll-your-own (RYO)
Loose tobacco designed for hand rolling, normally a finer cut with higher
moisture, compared to cigarette tobacco.
Make-your-own (MYO)
MYO expanded tobacco; also known as volume tobacco.
Loose cigarette tobacco with enhanced filling properties - to allow higher
yields of cigarettes/kg - designed for use with cigarette tubes and filled via
a tobacco tubing machine.
MYO non-expanded tobacco; also known as optimised tobacco
Loose cigarette tobacco designed for use with cigarette tubes and filled via a
tobacco tubing machine.
Vapour
Vapour is shown in units being pods, bottles and disposable units. There is no
conversion to a stick equivalent.
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-category. Sub-categories include, but are not limited to, Heated Products,
Modern Oral, Traditional Oral, Total Oral or Cigarettes. Except when
referencing particular markets, volume share is based on our Top markets. Top
markets are those markets that management determines are strategic in each
category, with reliable share data from third parties. Management notes 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 revenue 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 (and management believes that it
is useful to users of the financial statements to understand) the relative
performance of the Group and its brands against the performance of its main
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 (using the current year Top
markets). 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 2025 is for the year ended 31 December 2025
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
2025).
Please refer to the Glossary and Definitions on page 48 for a list of the Top
markets by product category.
Other Information
Continued
Non-financial Key Performance Indicators (KPIs) (continued)
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-category in discussion. Except when referencing
particular markets, value share is based on our Top markets. Top markets are
those markets that management determines are strategic in each category, with
reliable share data from third parties. Management notes 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 revenue 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 (and management believes that it
is useful to 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,
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.
Value share in each period compares the average value share in the period with
the average value share in the prior year (using the current year Top
markets). 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 2025 is for the year ended 31 December 2025
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
2025).
Please refer to the Glossary and Definitions on page 48 for a list of the Top
markets by product category.
Price Mix
Price mix is a term used by management and users of the financial statements
to explain the movement in revenue between periods. Revenue is affected by:
- volume (how many units are sold);
- price (how much is each unit sold for, less excise or other sales taxes and
the impact of excise duty drawback); and
- mix (being the relative proportions of higher value volume sold compared to
lower value volume sold).
In combination, the term price/mix 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 at constant rates of exchange) and
volume (between periods). For instance, the increase in combustibles revenue
(excluding translational foreign exchange movements) of 1.0% in 2025, combined
with a decline in combustibles volume of 8.1% in 2025, leads to a price mix
(including excise duty drawback) of +9.1% in 2025. No assumptions underlie
this metric as it utilises the Group's own data.
We also show (see page 5) 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 5), 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 adult 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 - referred to as 'poly users'.
The number of Smokeless products consumers is used by management to assess the
number of consumers 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 Board believes that this measure is useful to investors
given the Group's sustainability ambition and alignment to the sustainability
of the business with respect to the Smokeless portfolio.
Periodically, in line with standard practice, enhancements to the adult
consumer tracking studies may be required to more accurately capture market
trends across categories and as markets perform with respect to the
development of the categories. When a change is applied, to ensure that the
data is comparable between periods, historical data is back-trended to ensure
there is no trend break.
During 2025, Kantar made enhancements to their adult consumer tracking studies
in Germany. Accordingly, Kantar has back-trended the data with the revised
historical data provided below:
2024 2023
As previously reported 29.1 25.5
Back-trended to reflect enhanced adult consumer tracking 29.4 25.8
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 combustibles
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 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.
†Products 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
Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2025 or 2024. Statutory
accounts for 2024 have been delivered to the Registrar of Companies and those
for 2025 will be delivered following the Company's Annual General Meeting. The
auditors' reports on the 2024 and 2025 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 the Companies Act 2006 or equivalent preceding
legislation.
Publication
The Group's 2025 Annual Report will be published on www.bat.com on or around
13 February 2026. 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 Group's 2025 Annual
Report on the website and of the Combined Performance and Sustainability
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. The Company expects to file its Annual Report on Form
20-F with the SEC on 13 February 2025.
Distribution of Preliminary Statement
This preliminary 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 preliminary 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 preliminary announcement was approved by the Board of Directors on
11 February 2026.
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) in the heading Momentum Drives
Further Confidence in 2026 Delivery, the Summary and the Tadeu Marroco, Chief
Executive section (all on page 1); (ii) certain statements in the 2026 Outlook
(on page 3); (iii) certain statements in the Regional Review section (pages 7
to 9) including our belief that Vuse will benefit as the authorities continue
with enforcement initiatives in 2026 in the U.S. and our expectation of a
wider roll-out of glo Hilo in the AME region; (iv) certain statements in the
Category Performance Review (pages 10 to 12), including our encouragement by
the early performance of Vuse Ultra in certain markets; (v) certain statements
in the Other Financial Information section (pages 13 to 16), including Cash
flow; (vi) certain statements in the Sustainability Performance Update section
(page 16); (vii) certain statements in the Other Information section (pages 16
to 19), including Operational and process review, the Group's expectation to
close the sale of its Cuban subsidiary and the Group's expectation to continue
as a going concern; (viii) certain statements in the Notes to the Financial
Statements section (pages 27 to 41), including Accounting policies and basis
of preparation, the Group's forecast and assumptions with respect to
impairment testing under amortisation and impairment of trademarks and similar
intangibles and impairment of goodwill, the Group's expected capital
expenditure, the Group's targeted credit ratings and Contingent liabilities
and financial commitments sections; (ix) certain statements in the Other
Information section (pages 42 to 44); and (x) certain statements related to
dividends (page 47).
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," "being confident"
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 increased competition from illicit trade and illegal
products; changes or differences in domestic or international economic or
political conditions; the impact of adverse domestic or international
legislation and regulation of tobacco, New Categories and other regulation;
the impact of supply chain disruptions; adverse litigation and external
investigations 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; the inability
to develop, commercialise and deliver the Group's New Categories strategy;
adverse decisions by domestic or international regulatory bodies, including
disputed taxes, interest and penalties; the impact of serious injury, illness
or death in the workplace and those who work with the business; the ability to
maintain credit ratings and to fund the business under the current capital
structure; translational and transactional foreign exchange rate exposure;
direct and indirect adverse impacts associated with climate change (both
physical and transition); the ability to deliver a viable circular business
model in response to global demand, combined with increasing regulatory,
stakeholder and consumer pressure; and the Group's ability to defend against
Cyber & Digital actions that result in loss of confidentiality,
availability or integrity of systems and data.
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 Group's 2024 Annual Report and the Group's Annual Report on
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 the Group 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.
Products 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
11 February 2026
Other Corporate Information
Corporate information
British American Tobacco p.l.c. is a public limited company 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
Stock Exchange Listings
The Company's ordinary shares are listed on the London Stock Exchange (the
primary listing (share code: BATS; ISIN GB0002875804)), the JSE Limited
(secondary listing (abbreviated name: BATS; trading code: BTI)) and are traded
on the New York Stock Exchange (NYSE) in the form of ADSs and are evidenced by
American Depositary Receipts (ADRs) (symbol: BTI; CUSIP number 110448107).
Each BAT ADS represents one ordinary share. BAT ADRs have been listed on the
NYSE since 25 July 2017 as a Sponsored Level III ADS programme for which
Citibank, N.A. is the depositary (the Depositary) and transfer agent.
Sponsor for the purpose of the secondary 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
Manage your shareholding
Ordinary shareholder enquiries
United Kingdom Registrar
Computershare Investor Services PLC (Computershare)
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
tel: 0800 408 0094 (UK only) or +44 370 889 3159 (Overseas)
online: www.investorcentre.co.uk/contactus
South African Registrar
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, 2132, South Africa
tel: 0861 100 634; +27 11 870 8216
email: web.queries@computershare.co.za
American Depositary Shares (ADS) enquiries
All enquiries regarding ADS holder accounts and payment of dividends should be
addressed to: 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: citibank@shareholders-online.com
website: www.citi.com/dr
Publications
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS
tel: +44 20 7511 7797 email: bat@team365.co.uk
Holders of shares held on the South Africa register can contact the Company's
Representative office in South Africa using the contact details shown above.
Other Corporate Information
Continued
Quarterly dividends for the Year Ended 31 December 2025
The Board has declared an interim dividend of 245.04p per ordinary share of
25p for the year ended 31 December 2025, payable in four equal quarterly
instalments of 61.26p per ordinary share in May 2026, August 2026, November
2026 and February 2027. This represents an increase of 2.0% on 2024 (2024:
240.24p per share), and a pay-out ratio, on 2025 adjusted diluted earnings per
share, of 69.6%. On an adjusted for Canada basis, this is a pay-out ratio of
72.0% in 2025 (2024: 70.4%).
Please refer to page 57 for a reconciliation of diluted earnings per share to
adjusted earnings per share, including as adjusted for Canada.
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), Strate
(the electronic settlement and custody system used by the JSE) and the NYSE,
the following are the salient dates for the quarterly dividends payments. All
dates are 2026 unless otherwise stated.
Event Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Preliminary announcement (includes declaration data required for JSE purposes) 12 February
Publication of finalisation information (JSE) 17 March 30 June 21 September 14 December
No removal requests permitted (in either direction) between the UK main 17 March- 30 June- 21 September- 14 December- 29 December
register and the South Africa branch register
27 March 10 July 2 October
Last Day to Trade (LDT) cum-dividend (JSE) 24 March 07 July 29 September 23 December
Shares commence trading ex-dividend (JSE) 25 March 08 July 30 September 24 December
No transfers permitted between the UK main register and the South Africa 25 March- 8 July- 30 September- 24 December- 30 December
branch register
27 March 10 July 2 October
No shares may be dematerialised or rematerialised on the South Africa branch 25 March- 8 July- 30 September- 24 December- 30 December
register
27 March 10 July 2 October
Shares commence trading ex-dividend (LSE) 26 March 9 July 1 October 24 December
Shares commence trading ex-dividend (NYSE) 27 March 10 July 2 October 29 December
Record date 27 March 10 July 2 October 29 December
(JSE, LSE and NYSE)
Last date for receipt of Dividend Reinvestment Plan (DRIP) elections (LSE) 15 April 24 July 16 October 13 January 2027
Payment date (LSE and JSE) 7 May 14 August 6 November 3 February 2027
ADS payment date (NYSE) 12 May 19 August 12 November 8 February 2027
Notes:
1. All dates are 2026, 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.
Shareholder Information
Calendar 2026
Event Date(1)
Annual General Meeting(2) Wednesday 15 April 2026
at 11.30am
Half-Year Report Thursday 30 July 2026
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.
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.
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.
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.
OTP Other Tobacco Products, including make-your-own, roll-your-own, Pipe and
Cigarillos.
Poly-usage/Poly-use Refers to consumers consuming two or more tobacco and/or nicotine products.
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 Being the Top cigarette markets which are defined as the Top markets by
industry revenue, being the U.S., Japan, Brazil, Germany, Pakistan, Mexico and
Romania, accounting for c.60% of total industry cigarettes revenue in 2024.
Top HP markets Being the Top HP markets which are defined as the Top markets by industry
revenue. Top markets are Japan, South Korea, Italy, Germany, Greece, Poland,
Romania, the Czech Republic, Spain and Portugal. These Top markets account for
c.80% of total industry HP revenue in 2024.
Top Modern Oral markets Being the Top Modern Oral markets which are defined as the Top markets by
industry revenue, being the U.S., Sweden, Denmark, Norway, Switzerland, the UK
and Poland, accounting for c.90% of total industry Modern Oral revenue in
2024.
Top Vapour markets Being the Top Vapour markets which are defined as the Top markets by industry
revenue, being the U.S., Canada, the UK, France, Germany, Poland and Spain.
These Top markets account for c.80% of total industry vapour revenue
(rechargeable closed systems consumables and disposables in tracked channels)
in 2024.
Traditional Oral Including Moist Snuff (Granit, Mocca, Grizzly, Kodiak) and other traditional
snus products (including Camel Snus and Lundgrens).
U.S. United States of America.
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.
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.
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.
† Products 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.
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
Volume
Group Volume
Years ended 31 December 2025 2024
Reported Change % Reported
New Categories:
Vapour (units mn) 538 -12.6% 616
HP (bn sticks) 20 -3.7% 21
Modern Oral (bn pouches) 12.2 +47.1% 8.3
Traditional Oral (bn sticks eq) 5.5 -9.1% 6.1
Cigarettes (bn sticks) 465 -7.9% 505
OTP (bn sticks) 12 -14.0% 13
Total Combustibles (bn sticks) 477 -8.1% 518
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.
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:
Non-GAAP Measure title Presented in Reconciled from:
Current rates Constant rates Adjusted for Canada(2) IFRS measure
Revenue £m n/a(1) Yes Revenue
New Categories revenue £m 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 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 Yes Profit from Operations / Average Total Assets less Current Liabilities
1. Revenue at current rates is the IFRS measure.
2. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
The Group also uses adjusted share of post-tax results of associates and joint
ventures, adjusted net finance costs, adjusted taxation and underlying tax
rate.
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 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.
Non-GAAP measures also include measures excluding the impact of adjusting
items. 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 and currency fluctuations that may significantly
affect the users' understanding of the Group's performance when compared
across period, as applicable, provide additional useful information to users
of the financial statements regarding the underlying performance of operating
performance on a local currency basis (see page 15) and the business on a
comparable basis.
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.
As discussed on page 17, for certain measures, the Group also adjusts for the
performance of Canada reflecting how Management assesses the performance of
Canada on an ongoing basis.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
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.
Breakdowns of revenues by product category (including revenue generated from
Vapour, Heated Products, Modern Oral, New Categories as a whole, Traditional
Oral, Smokeless products as a whole and combustibles) and by geographic
segment (including revenue generated in the United States, Americas and Europe
and Asia-Pacific, Middle East and Africa), contributions to profit from
operations by product category, adjusted gross profit, adjusted gross margin,
category contribution, category contribution margin, adjusted profit from
operations, adjusted operating margin, adjusted net finance costs, adjusted
group share of post-tax results of associates and joint ventures, adjusted
taxation, underlying taxation, adjusted diluted earnings per share, free cash
flow (before dividends paid to shareholders), free cash flow (after dividends
paid to shareholders), adjusted cash generated from operations, operating cash
conversion ratio, net debt, adjusted net debt, adjusted net debt / adjusted
EBITDA, and adjusted return on capital employed (including, where appropriate,
presented as adjusted for Canada) have limitations as analytical tools. They
are not presentations made in accordance with IFRS and none of these non-GAAP
measures should be considered as an alternative measure of revenue, profit
from operations, cash flows or any financial measure based thereon, as
applicable, determined in accordance with IFRS.
These measures demonstrate, among other things, 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.
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.
None of these non-GAAP measures are necessarily comparable to similarly titled
measures used by other companies. As a result, readers should not consider
these non-GAAP measures in isolation from, or as a substitute analysis for,
the Group's revenue, profit from operations, cash flows or any financial
measure based thereon, as applicable, 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 35.
Revenue, at Constant Rates of Exchange
Definition - Revenue before the impact of foreign exchange.
For the year ended 31 December 2025 2024
£m £m
Revenue 25,610 25,867
Impact of translational foreign exchange 804
2025 revenue re-translated at 2024 exchange rates 26,414 25,867
Change in revenue at prior year's exchange rates (constant rates) 2.1%
Revenue by Product Category or Geographic Segment - Including Revenue from New
Categories, at Constant Rates of Exchange
Definition - Revenue by product category, and at the prior year's prevailing
exchange rate, derived from the principal product categories of Combustibles,
New Categories (being comprised of revenue from Vapour, HP and Modern Oral),
and Traditional Oral, including by the geographic segments of the United
States, Americas and Europe, and Asia-Pacific, Middle East and Africa.
Reconciliation of revenue by product category to revenue by product category
at constant rates of exchange (2025 - 2024)
For the year ended 31 December 2025 2024
Group Reported vs 2024 Impact of exchange Reported at cc Reported at cc vs 2024 Reported
£m % £m £m % £m
New Categories:
Vapour 1,542 -10.4% 31 1,573 -8.6% 1,721
HP 914 -0.7% 16 930 +1.0% 921
Modern Oral 1,165 +47.4% 5 1,170 +48.0% 790
Total New Categories 3,621 +5.5% 52 3,673 +7.0% 3,432
Traditional Oral 1,043 -4.5% 30 1,073 -1.7% 1,092
Combustibles 20,201 -2.3% 686 20,887 +1.0% 20,685
Other 745 +13.2% 36 781 +18.7% 658
Revenue 25,610 -1.0% 804 26,414 +2.1% 25,867
Note:
cc: constant currency - measures are calculated based on a re-translation of
the current year's results of the Group at the prior year's exchange rates
and, where applicable, its geographical segments or product categories.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Revenue by Product Category or Geographic Segment - Including Revenue from New
Categories, at Constant Rates of Exchange (continued)
For the year ended 31 December 2025 2024
U.S. Reported vs 2024 Impact of exchange Reported at cc Reported at cc vs 2024 Reported
£m % £m £m % £m
New Categories:
Vapour 934 -6.4% 29 963 -3.4% 998
HP - - - - - -
Modern Oral 317 +296.9% 10 327 +309.6% 80
Total New Categories 1,251 +16.1% 39 1,290 +19.8% 1,078
Traditional Oral 1,006 -5.0% 31 1,037 -2.0% 1,058
Combustibles 9,218 +1.4% 295 9,513 +4.6% 9,094
Other 59 +23.2% 4 63 +27.5% 48
Revenue 11,534 +2.3% 369 11,903 +5.5% 11,278
For the year ended 31 December 2025 2024
AME Reported vs 2024 Impact of exchange Reported at cc Reported at cc vs 2024 Reported
£m % £m £m % £m
New Categories:
Vapour 543 -11.2% (1) 542 -11.4% 611
HP 470 +6.2% 1 471 +6.2% 443
Modern Oral 800 +18.3% (6) 794 +17.3% 676
Total New Categories 1,813 +4.8% (6) 1,807 +4.3% 1,730
Traditional Oral 37 +9.9% (1) 36 +5.1% 34
Combustibles 6,974 -0.9% 226 7,200 +2.3% 7,039
Other 485 +10.8% 20 505 +15.7% 438
Revenue 9,309 +0.7% 239 9,548 +3.3% 9,241
For the year ended 31 December 2025 2024
APMEA Reported vs 2024 Impact of exchange Reported at cc Reported at cc vs 2024 Reported
£m % £m £m % £m
New Categories:
Vapour 65 -41.2% 3 68 -39.4% 112
HP 444 -7.0% 15 459 -3.8% 478
Modern Oral 48 +39.8% 1 49 +44.2% 34
Total New Categories 557 -10.6% 19 576 -7.6% 624
Traditional Oral - - - - - -
Combustibles 4,009 -11.9% 165 4,174 -8.3% 4,552
Other 201 +16.3% 12 213 +23.7% 172
Revenue 4,767 -10.9% 196 4,963 -7.2% 5,348
Note:
cc: constant currency - measures are calculated based on a re-translation of
the current year's results of the Group at the prior year's exchange rates
and, where applicable, its geographical segments or product categories.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Profit from Operations, Adjusted Profit from Operations at Constant
Rates of Exchange, Adjusted Profit from Operations at Constant Rates of
Exchange as adjusted for Canada(1); Adjusted Operating Margin and Adjusted
Operating Margin as adjusted for Canada
Definition - Profit from operations before the impact of adjusting items
(including, as applicable, adjustments in respect of Canada) and translational
foreign exchange; and adjusted profit from operations (including, as
applicable, adjustments in respect of Canada), as a percentage of revenue.
For the year ended 31 December 2025 2024
£m £m
Profit from operations 9,997 2,736
Add:
Restructuring 66 -
Amortisation and impairment of trademarks and similar intangibles 1,584 2,279
(Credit)/charges in respect of Romania's other taxes (15) 449
(Credit)/charges in respect of the Canada Approved Plans (708) 6,203
Impairment charges in respect of Cuba's fixed assets - 74
Impairment charges relating to the Group's head office in London - 75
Impairment of goodwill 277 39
Charges in connection with disposal of associate 3 6
Pension liability management (buy-out) 28 -
Impairment on held-for-sale assets and associated costs 235 -
Charges in respect of DOJ investigation and OFAC investigation - 4
Credit in respect of settlement of historical litigation in relation to the - (132)
Fox River
Loss of a distribution facility in Ukraine 39 -
Other adjusting items (including Engle) 66 157
Adjusted profit from operations 11,572 11,890
Impact of translational foreign exchange 364
Adjusted profit from operations, translated at 2024 exchange rates 11,936 11,890
Change in adjusted profit from operations, translated at 2024 exchange rates +0.4%
Adjustments in respect of Canada(1), translated at 2024 rates (308) (520)
Adjusted profit from operations as adjusted for Canada, translated at 2024 11,628 11,370
exchange rates
Change in adjusted profit from operations as adjusted for Canada, translated +2.3%
at 2024 exchange rates
Operating Margin (Profit from operations as a % of revenue) 39.0% 10.6%
Adjusted Operating Margin (Adjusted profit from operations as a % of revenue) 45.2% 46.0%
Adjusted Operating Margin as adjusted for Canada (Adjusted PFO as adjusted for 44.0% 44.0%
Canada as a % of revenue), translated at 2024 exchange rates
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
Adjusted Gross Profit and Adjusted Gross Margin both as adjusted for Canada
and 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 adjusting for the performance of Canada
(excluding New Categories), in £ and as a proportion of revenue (at constant
rates).
These measures reflect 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 as adjusted for Canada) is included within the
Group's incentive schemes.
Costs are incurred by the products either directly as incurred by the product
or category or, when incurred by products via an allocation of shared
distribution mechanism in a market, such costs are allocated based upon each
category's revenue as a proportion of total revenue from that market.
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 both as adjusted for
Canada and 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 adjusting for the performance of Canada
(excluding New Categories), in £ and as a proportion of revenue (at constant
rates).
New Category contribution and New Category contribution margin (being a
sub-set of Group category contribution and Group category contribution margin)
are included within the Group's incentive schemes.
These measures reflect the marginal contribution of the Group's principal
product categories to the Group's financial performance. These measures
include all attributable revenue and costs. These measures are 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. Where costs are incurred by
products via a shared distribution mechanism in a market, such costs are
allocated based upon each category's revenue as a proportion of total revenue
from that market.
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.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Reconciliations of Revenue to Revenue by Product Category, at Constant Rates
of Exchange and Profit from Operations to Adjusted Profit from Operations,
Adjusted Operating Margin, Category Contribution, Category Contribution
Margin, Adjusted Gross Profit and Adjusted Gross Margin, at Constant Rates of
Exchange and including adjustments in respect of Canada (excluding New
Categories).
The following reconciliations are provided to support the definitions of the
above measures as explained on pages 51 to 52.
For the year ended 31 December 2025
Group reported New Categories Traditional Oral Combustibles Other
£m £m £m £m £m
Revenue 25,610 3,621 1,043 20,201 745
Impact of translational FX 804 52 30 686 36
Revenue at 2024 exchange rates (see page 51) 26,414 3,673 1,073 20,887 781
Profit from operations 9,997
Operating margin 39.0%
Adjusting items (see page 52) 1,575
Impact of translational FX 364
Adjustments in respect of Canada(1) (308)
Adjusted profit from operations as adjusted for Canada 11,628
vs 2024 2.3%
Adjusted operating margin as adjusted for Canada 44.0%
Other costs that are not attributable to categories 2,053
Category contribution as adjusted for Canada 13,681 442 798 12,235 206
Category contribution margin as adjusted for Canada 51.8% 12.0% 74.3% 58.6% 26.4%
Category spend (Marketing Investment and R&D) 3,860 1,703 91 1,992 74
Adjusted gross profit as adjusted for Canada 17,541 2,145 889 14,227 280
vs 2024 3.4% 11.0% -0.9% 2.5% 8.9%
Adjusted Gross margin as adjusted for Canada 66.4% 58.4% 82.8% 68.1% 35.8%
Impact of translational FX 483 29 26 414 14
Adjusted gross profit at current rates as adjusted for Canada 17,058 2,116 863 13,813 266
For the year ended 31 December 2024
Group reported New Categories Traditional Oral Combustibles Other
£m £m £m £m £m
Revenue 25,867 3,432 1,092 20,685 658
Profit from operations 2,736
Operating margin 10.6%
Adjusting items (see page 52) 9,154
Adjustments in respect of Canada(1) (520)
Adjusted profit from operations as adjusted for Canada 11,370
Adjusted operating margin as adjusted for Canada 44.0%
Other costs that are not attributable to categories 1,848
Category contribution as adjusted for Canada 13,218 249 840 11,931 198
Category contribution margin as adjusted for Canada 51.1% 7.3% 76.9% 57.7% 30.1%
Category spend (Marketing Investment and R&D) 3,747 1,683 58 1,947 59
Adjusted gross profit as adjusted for Canada 16,965 1,932 898 13,878 257
Adjusted gross margin as adjusted for Canada 65.6% 56.3% 82.2% 67.1% 39.1%
at Constant FX
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Net Finance Costs at Current and Constant Rates of Exchange and
Adjusted Net Finance Costs as adjusted for Canada(1) at Constant Rates
of Exchange
Definition - Net finance costs before the impact of adjusting items,
adjustments in respect of Canada (where appropriate,
and excluding New Categories) and translational foreign exchange.
For the year ended 31 December 2025 2024
£m £m
Finance costs (2,033) (1,349)
Finance income 214 251
Net finance costs (1,819) (1,098)
Less: Adjusting items in net finance costs 170 (491)
Adjusted net finance costs (1,649) (1,589)
Comprising:
Interest payable (1,715) (1,759)
Interest and dividend income 214 251
Fair value changes - derivatives (521) (90)
Exchange differences 373 9
Adjusted net finance costs (1,649) (1,589)
Impact of translational foreign exchange (27)
Adjusted net finance costs, translated at 2024 exchange rates (1,676) (1,589)
Adjustments in respect of Canada(1), translated at 2024 exchange rates (57) (126)
Adjusted net finance costs as adjusted for Canada, translated at 2024 exchange (1,733) (1,715)
rates
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the interest earned in Canada on cash and cash
equivalent balances held as of July 2025 that were paid as part of the
settlement agreement, provided as it is included directly or indirectly in
measures used by management for remuneration.
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 and translational foreign exchange.
For the year ended 31 December 2025 2024
£m £m
Group's share of post-tax results of associates and joint ventures 1,681 1,900
Issue of shares and changes in shareholding (5) (18)
Other exceptional items in ITC (333) -
Gain on partial divestment of shares held in ITC (898) (1,361)
Gain on sale of land and property by VST industries Limited (3) -
Adjusted Group's share of post-tax results of associates and joint ventures 442 521
Impact of translational foreign exchange 33
Adjusted Group's share of post-tax results of associates and joint ventures, 475 521
translated at 2024 exchange rates
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Taxation at Current and Constant Rates of Exchange and Adjusted
Taxation as adjusted for Canada, at Constant Rates of Exchange
Definition - Taxation before the impact of adjusting items, adjustments in
respect of Canada (where appropriate, and excluding New Categories) and
translational foreign exchange.
For the year ended 31 December 2025 2024
£m £m
UK corporation tax
- current year tax expense 15 15
- adjustments in respect of prior periods 2 9
Overseas tax
- current year tax expense 2,355 2,571
- adjustments in respect of prior periods (296) 108
Current tax 2,076 2,703
Pillar Two income tax 82 79
Total current tax 2,158 2,782
Deferred tax (64) (2,425)
Taxation on ordinary activities 2,094 357
Adjusting items in taxation 104 157
Taxation on adjusting items 240 2,049
Adjusted taxation (2,438) (2,563)
Impact of translational foreign exchange (84)
Adjusted taxation, translated at 2024 exchange rates (2,522) (2,563)
Adjustments in respect of Canada(1), translated at 2024 exchange rates 97 169
Adjusted taxation as adjusted for Canada, translated at 2024 exchange rates (2,425) (2,394)
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
Underlying Tax Rate and Underlying Tax Rate at Constant Rates of Exchange and
Underlying Tax Rate as adjusted for Canada(1), at Constant Rates of Exchange
Definition - Tax rate incurred before the impact of adjusting items,
adjustments in respect of Canada (where appropriate, and excluding New
Categories) 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.
For the year ended 31 December 2025 2024
£m £m
Profit before taxation (PBT) 9,859 3,538
Less:
Share of post-tax results of associates and joint ventures (1,681) (1,900)
Adjusting items within profit from operations 1,575 9,154
Adjusting items within finance costs 170 (491)
Adjusted profit before taxation, excluding associates and joint ventures 9,923 10,301
Impact of translational foreign exchange 337
Adjusted PBT, excluding associates and joint ventures, translated at 2024 10,260 10,301
exchange rates
Adjustments in respect of Canada(1), translated at 2024 exchange rates (365) (646)
Adjusted PBT, excluding associates and joint ventures and as adjusted for 9,895 9,655
Canada, translated at 2024 exchange rates
Taxation on ordinary activities (2,094) (357)
Adjusting items within taxation and taxation on adjusting items (344) (2,206)
Adjusted taxation (2,438) (2,563)
Impact of translational foreign exchange on adjusted taxation (84)
Adjusted taxation, translated at 2024 exchange rates (2,522) (2,563)
Adjustments in respect of Canada(1), translated at 2024 exchange rates 97 169
Adjusted taxation as adjusted for Canada, translated at 2024 exchange rates (2,425) (2,394)
Effective tax rate 21.2% 10.1%
Underlying tax rate 24.6% 24.9%
Underlying tax rate (at 2024 exchange rates) 24.6% 24.7%
Underlying tax rate (2024 exchange rates) as adjusted for Canada(1) 24.5% 24.8%
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Diluted Earnings per Share, at Current and Constant Rates of Exchange
and Adjusted Diluted Earnings per Share, at Constant Rates of Exchange as
adjusted for Canada(1)
Definition - Diluted earnings per share before the impact of adjusting items
and the performance of Canada (where appropriate, and excluding New
Categories), 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 current and the prior years' rates of
exchange.
For the year ended 31 December 2025 2024
pence pence
Diluted earnings per share 349.1 136.0
Effect of amortisation and impairment of goodwill, trademarks and similar 68.2 80.7
intangibles
Effect of impairment charges in respect of the Group's head office - 2.9
Effect of impairment charges in respect of the Group's operations in Cuba - 1.6
Effect of settlement of historical litigation in relation to the Fox River - (4.9)
Effect of the changes in provision in relation to the Approved Plans in Canada (23.7) 205.0
and associated costs
Effect of charges in respect of DOJ and OFAC investigations - 0.2
Effect of impairment of held-for-sale assets and associated costs 5.5 -
Effect of Romania other taxes (0.7) 20.1
Effect of restructuring costs 1.8 -
Effect of other adjusting items in operating profit 5.1 5.3
Effect of adjusting items in net finance costs 4.9 (17.0)
Effect of gains related to the partial divestment of shares held in ITC (40.8) (61.1)
Tax associated with the partial divestment of shares held in ITC and hotels 1.6 1.6
business demerger
Effect of associates' adjusting items (15.5) (0.8)
Effect of adjusting items in respect of deferred taxation (9.2) (12.0)
Adjusting items in tax 4.5 4.9
Redemption of perpetual hybrid bond - difference in spot rates 1.3 -
Adjusted diluted earnings per share 352.1 362.5
Impact of translational foreign exchange 12.9
Adjusted diluted earnings per share, translated at 2024 exchange rates 365.0 362.5
Adjustments in respect of Canada(1), translated at 2024 exchange rates (12.2) (21.4)
Adjusted diluted earnings per share as adjusted for Canada, translated at 2024 352.8 341.1
exchange rates
Adjusted diluted earnings per share (see above) 352.1 362.5
Adjustments in respect of Canada(1) (11.6) (21.4)
Adjusted diluted earnings per share as adjusted for Canada(2) 340.5 341.1
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
2. The Group's dividend pay-out ratio is with reference to adjusted
diluted earnings per share, at current rates. Based upon a dividend of 245.04p
in 2025 (2024: 240.24p), discussed on page 47, this was a dividend pay-out
ratio of 69.6% in 2025 (2024: 66.3%). On an adjusted for Canada basis, this is
a pay-out ratio of 72.0% in 2025 (2024: 70.4%).
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
net capital expenditure, as a proportion of adjusted profit from operations.
For the year ended 31 December 2025 2024
£m £m
Net cash generated from operating activities 6,342 10,125
Cash related to adjusting items 3,267 824
Dividends from associates (369) (406)
Tax paid 2,926 1,854
Net capital expenditure (612) (434)
Other - 1
Operating cash flow 11,554 11,964
Adjusted profit from operations* 11,572 11,890
Cash conversion ratio** 63% 370%
Operating cash flow conversion ratio 100% 101%
* See page 52 for a reconciliation of profit from operations to adjusted
profit from operations.
** Net cash generated from operating activities as a percentage of profit
from operations.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Cash Generated from Operations (at Current and Constant Rates of
Exchange)
Definition - Net cash generated from operating activities before the impact of
adjusting items, excluding dividends received from associates, and after
dividends paid to non-controlling interests, net interest paid and net capital
expenditure, and translational foreign exchange.
For the year ended 31 December 2025 2024
£m £m
Net cash generated from operating activities 6,342 10,125
Dividends paid to non-controlling interests (100) (121)
Net interest paid (1,582) (1,669)
Net capital expenditure (612) (434)
Effect of deferral of U.S. tax, in line with the federal disaster declaration - (700)
in central and western North Carolina
Cash related to adjusting items within adjusted cash generated from operations 3,176 360
Other costs excluding litigation and restructuring costs 27 399
Dividends from associates (369) (406)
Adjusted cash generated from operations 6,882 7,554
Impact of translational foreign exchange 258
Adjusted cash generated from operations, translated at 2024 exchange rates 7,140 7,554
In 2024, the Group deferred tax payments in the U.S. from 2024 to 2025
totalling US$895 million. At 2024 rates of exchange this was £700 million,
but £678 million at 2025 rates of exchange. For the purposes of management
incentives in 2024, as this was not included in the target, the positive
effect of the deferral was removed. However, the payment was included in the
target for management incentives in 2025 and no adjustment has been made in
the calculation of adjusted cash generated from operations. On a normalised
basis, adjusting both years for the respective impact of the deferral,
adjusted cash generated from operations would have been £7,560 million, or
£7,840 million at constant rates of exchange in 2025 compared to £7,554
million in 2024.
Free Cash Flow - Before and After Dividends Paid to Shareholders
Definition - Net cash generated from operating activities after dividends paid
to non-controlling interests, net interest paid and net capital expenditure.
This measure is presented before and after dividends paid to shareholders.
For the year ended 31 December 2025 2024
£m £m
Net cash generated from operating activities 6,342 10,125
Dividends paid to non-controlling interests (100) (121)
Net interest paid (1,582) (1,669)
Net capital expenditure (612) (434)
Free cash flow (before dividends paid to shareholders) 4,048 7,901
Dividends paid to shareholders (5,238) (5,213)
Free cash flow (after dividends paid to shareholders) (1,190) 2,688
The Group has an expectation to deliver in excess of £50 billion of free
cash flow (FCF) before dividends between 2024 and 2030 (inclusive). The table
below provides a reconciliation of the progress to date.
FCF before dividends (as above)
£m
Year ended 31 December 2024 7,901
Year ended 31 December 2025 4,048
Total 11,949
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Return on Capital Employed (ROCE) and Adjusted Return on Capital
Employed as adjusted for Canada
Definition - Profit from operations, excluding adjusting items and including
dividends from associates and joint ventures and other adjusting items
(including in respect of Canada (excluding New Categories)), as a proportion
of average total assets less current liabilities in the period.
For the year ended 31 December 2025 2024
£m £m
Profit from operations 9,997 2,736
Adjusting items 1,575 9,154
Dividends received from associates and joint ventures 369 406
Adjusted profit from operations, inclusive of dividends from associates and 11,941 12,296
joint ventures
Adjustments in respect of Canada(1) (293) (520)
Adjusted profit from operations, inclusive of dividends from associates and 11,648 11,776
joint ventures and as adjusted for Canada(1)
Total Assets 109,290 118,899
Current Liabilities 14,524 18,743
Capital employed at balance sheet date 94,766 100,156
Average capital(2) 97,461 101,600
Adjusted ROCE +12.3% +12.1%
Adjusted ROCE as adjusted for Canada(1) +12.0% +11.6%
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
2. Average capital is the average capital employed (being the net of total
assets less current liabilities) at the prior year and current year balance
sheet dates.
Net Debt
Definition - Total borrowings, including related derivatives, less cash and
cash equivalents and current investments held at fair value.
2025 2024
£m £m
Borrowings (including lease liabilities) (35,070) (36,950)
Derivatives in respect of net debt 12 (113)
Cash and cash equivalents 3,827 5,297
Current investments held at fair value 16 513
Net debt (31,215) (31,253)
For the year ended 31 December 2025 2024
£m £m
Opening net debt (31,253) (34,640)
Free cash flow (after dividends paid to shareholders) (1,190) 2,688
Other cash payments 167 (74)
Net proceeds from the partial divestment of shares in ITC 1,052 1,577
Purchase of own shares (1,112) (698)
Net impact from the issue and redemption of perpetual hybrid bonds 167 -
Transferred to held-for-sale (208) -
Other non-cash movements 41 568
Impact of foreign exchange 1,121 (674)
Closing net debt (31,215) (31,253)
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted Net Debt to Adjusted Earnings Before Interest, Tax, Depreciation and
Amortisation
(Adjusted EBITDA), at both Current and Constant rates of exchange, including
as adjusted for Canada(1)
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/income, taxation on ordinary
activities, depreciation, amortisation, impairment costs, the Group's share of
post-tax results of associates and joint ventures, translational foreign
exchange and other adjusting items (including in respect of Canada
(excluding New Categories)) as discussed on page 17.
For the year ended 31 December 2025 2024
£m £m
Borrowings (excluding lease liabilities) 34,541 36,365
Lease liabilities 529 585
Derivatives in respect of net debt (12) 113
Cash and cash equivalents (3,827) (5,297)
Current investments held at fair value (16) (513)
Net debt items included within assets held-for-sale (208) -
Purchase price allocation adjustment to Reynolds American Inc. debt (591) (670)
Adjusted net debt 30,416 30,583
Translational foreign exchange impact to adjusted net debt 1,018
Adjusted net debt, translated at 2024 exchange rates 31,434 30,583
Adjusted net debt 30,416 30,583
Provision recognised in respect of cash and cash equivalents and investments - 2,456
held at fair value in Canada
Adjusted net debt excluding the Canada provision 30,416 33,039
Profit for the year 7,765 3,181
Taxation on ordinary activities 2,094 357
Net finance costs 1,819 1,098
Depreciation, amortisation and impairment costs 2,547 3,101
Share of post-tax results of associates and joint ventures (1,681) (1,900)
Other adjusting items (not related to Canada, depreciation, amortisation and (304) 6,687
impairment costs)
Adjusted EBITDA 12,240 12,524
Translational foreign exchange impact to adjusted EBITDA 382
Adjusted EBITDA, translated at 2024 exchange rates 12,622 12,524
Adjusted EBITDA 12,240 12,524
Adjustments in respect of Canada(1) (295) (525)
Adjusted EBITDA as adjusted for Canada 11,945 11,999
Adjusted net debt to adjusted EBITDA 2.48x 2.44x
Adjusted net debt to adjusted EBITDA as adjusted for Canada 2.55x 2.75x
Adjusted net debt to adjusted EBITDA, translated at 2024 exchange rates 2.49x
1. The adjustment in respect of Canada is discussed on page 17, with the
adjustment based upon the profit after interest and tax from all sources,
excluding New Categories, in Canada.
As discussed on page 36, during the second half of 2025 cash, cash equivalents
and investments held at fair value totalling £2.6 billion were paid as part
of the Approved Plans in Canada (as discussed on page 17). This balance has
been held on the balance sheet in prior periods, reducing the level of net
debt in those periods.
Data Lake and Reconciliations
Continued
Summary reconciliation of Profit from Operations and Diluted EPS to adjusted
Profit from Operations and Adjusted Diluted EPS (as adjusted for Canada)
2025 at actual (2025) rates
For year ended 31 December 2025 Reported Adj Items(1) Adjusted Ad. for Canada Adjusted for Canada(3) vs
2024
£m £m £m £m £m %
Profit from Operations
U.S. 4,942 1,601 6,543 - 6,543 +2.4%
AME 3,433 (128) 3,305 (293) 3,012 +7.6%
APMEA 1,622 102 1,724 - 1,724 -21.1%
Total Region 9,997 1,575 11,572 (293) 11,279 -0.8%
Net finance costs (1,819) 170 (1,649) (54) (1,703) -0.7%
Associates and joint ventures 1,681 (1,239) 442 - 442 -15.0%
Profit before tax 9,859 506 10,365 (347) 10,018 -1.6%
Taxation (2,094) (344) (2,438) 92 (2,346) -2.0%
Non-controlling interests (1) (125) (126) - (126) -16.3%
Coupons relating to hybrid bonds net of tax (87) 29 (58) - (58) +36.9%
Profit attributable to shareholders 7,677 37 7,743 (255) 7,488 -1.3%
Diluted number of shares (m) 2,199 2,199 2,199 -1.2%
Diluted earnings per share (pence) 349.1 352.1 340.5 -0.2%
2025 at constant rates
For year ended 31 December 2025 Reported Adj Items(1) Adjusted Exch. Adjusted at CC(2) Ad. for Canada Adjusted for Canada(3) at CC(2) vs
2024
£m £m £m £m £m £m £m %
Profit from Operations
U.S. 4,942 1,601 6,543 223 6,766 - 6,766 +5.9%
AME 3,433 (128) 3,305 72 3,377 (308) 3,069 +9.6%
APMEA 1,622 102 1,724 69 1,793 - 1,793 -17.9%
Total Region 9,997 1,575 11,572 364 11,936 (308) 11,628 +2.3%
Net finance costs (1,819) 170 (1,649) (27) (1,676) (57) (1,733) +1.0%
Associates and joint ventures 1,681 (1,239) 442 33 475 - 475 -8.6%
Profit before tax 9,859 506 10,365 370 10,735 (365) 10,370 +1.9%
Taxation (2,094) (344) (2,438) (84) (2,522) 97 (2,425) +1.3%
Non-controlling interests (1) (125) (126) (3) (129) - (129) -14.1%
Coupons relating to hybrid bonds net of tax (87) 29 (58) - (58) - (58) +36.9%
Profit attributable to shareholders 7,677 37 7,743 283 8,026 (268) 7,758 +2.2%
Diluted number of shares (m) 2,199 2,199 2,199 2,199 -1.2%
Diluted earnings per share (pence) 349.1 352.1 365.0 (12.2) 352.8 +3.4%
2024 at actual (2024) rates
For year ended 31 December 2024 Reported Adj Items(1) Adjusted Ad. for Canada Adjusted for Canada(3)
£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) 136.0 362.5 (21.4) 341.1
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence - see pages 28 to 33.
2. CC: 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.
3. As adjusted for Canada excludes the performance of the Canadian
business (excluding 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
2025 % change 2025 % change 2025 % change 2025 % change
New Categories
Vapour (units mn) 262 -8.8% 244 -11.6% 32 -38.2% 538 -12.6%
HP (sticks bn) - -% 8 -3.4% 12 -3.9% 20 -3.7%
Modern Oral (pouches bn) 3.5 +249% 7.5 +19.0% 1.2 +24.7% 12.2 +47.1%
Traditional Oral (stick eq bn) 4.8 -8.9% 0.7 -10.3% - -% 5.5 -9.1%
Cigarettes (sticks bn) 43 -7.7% 227 -4.5% 195 -11.6% 465 -7.9%
OTP (stick eq bn) 1 -0.1% 10 -12.4% 1 -26.9% 12 -14.0%
Total Combustibles 44 -7.7% 237 -4.9% 196 -11.7% 477 -8.1%
Revenue - reported at current rates (£m)
Year ended 31 December U.S. AME APMEA Group
2025 % change 2025 % change 2025 % change 2025 % change
New Categories 1,251 +16.1% 1,813 +4.8% 557 -10.6% 3,621 +5.5%
Vapour 934 -6.4% 543 -11.2% 65 -41.2% 1,542 -10.4%
HP - -% 470 +6.2% 444 -7.0% 914 -0.7%
Modern Oral 317 +297% 800 +18.3% 48 +39.8% 1,165 +47.4%
Traditional Oral 1,006 -5.0% 37 +9.9% - -% 1,043 -4.5%
Total Smokeless 2,257 +5.6% 1,850 +4.9% 557 -10.6% 4,664 +3.1%
Total Combustibles 9,218 +1.4% 6,974 -0.9% 4,009 -11.9% 20,201 -2.3%
Other 59 +23.2% 485 +10.8% 201 +16.3% 745 +13.2%
Total 11,534 +2.3% 9,309 +0.7% 4,767 -10.9% 25,610 -1.0%
Revenue - at constant rates (£m)
Year ended 31 December U.S. AME APMEA Group
2025 % change 2025 % change 2025 % change 2025 % change
New Categories 1,290 +19.8% 1,807 +4.3% 576 -7.6% 3,673 +7.0%
Vapour 963 -3.4% 542 -11.4% 68 -39.4% 1,573 -8.6%
HP - -% 471 +6.2% 459 -3.8% 930 +1.0%
Modern Oral 327 +310% 794 +17.3% 49 +44.2% 1,170 +48.0%
Traditional Oral 1,037 -2.0% 36 +5.1% - -% 1,073 -1.7%
Total Smokeless 2,327 +9.0% 1,843 +4.4% 576 -7.6% 4,746 +4.9%
Total Combustibles 9,513 +4.6% 7,200 +2.3% 4,174 -8.3% 20,887 +1.0%
Other 63 +27.5% 505 +15.7% 213 +23.7% 781 +18.7%
Total 11,903 +5.5% 9,548 +3.3% 4,963 -7.2% 26,414 +2.1%
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