British American Tobacco Plc (LON:BATS) has announced its Half-Year Report for the six months to 30 June 2026
H1 in line with expectations; Confident in FY26 guidance
Half-Year Summary
– Smokeless products now 19.8% of Group revenue, up 1.6 ppts vs FY25
– Revenue up 1.4%, up 2.9% at constant FX, driven by the U.S. (up 8.5% led by strong multi-category delivery), and resilience in AME (up 0.9%), partly offset by a slower than expected recovery in APMEA (down 6.3%)
– New Categories revenue up 18.0%2 and New Categories contribution margin up 3.3 ppts to 13.8%2
– Improved combustibles revenue, up 2.1%2, driven by price/mix (including excise duty drawback in the U.S.)
– Reported profit from operations down 15.8% (with reported operating margin down 7.1 ppts to 34.9%), partly due to a credit in the prior year related to the Canadian settlement provision
– Adjusted profit from operations1,2,3 up 3.5%, adjusted operating margin1,2,3 up 30 bps at 43.7%
– Reported diluted EPS down 28.6% to 145.3p, with adjusted diluted EPS1,2,3 up 7.9%
– FY26 adjusted diluted EPS1,2,3 now expected to be towards the middle of our 5-8% guidance range
– Share buy-back programme on track for £1.3 billion in 2026
Tadeu Marroco, Chief Executive
“Our H1 performance is in line with expectations. We are building momentum as we transform and I am confident that we are firmly on track to deliver our full-year 2026 guidance.
New Category revenue growth has accelerated to 18.0%2, driven by another strong performance from Modern Oral globally (up 65.9%2), and a return to double-digit growth2 in U.S. Vapour. This improving portfolio mix, together with our continued focus on quality growth and disciplined resource allocation in Heated Products and Vapour, drove an increase in New Category contribution of 54.7%.
We further extended our global category leadership in Modern Oral, now our largest New Category (by revenue), achieving 39.2% volume share in our top markets4, up 8.4 ppts versus FY25. Revenue grew 65.9%2, driven by the continued excellent performance of Velo Plus in the U.S. and sustained double-digit growth2 in AME and APMEA.
We delivered a robust performance in combustibles with revenue up 2.1%2, driven by the U.S. and AME, more than offsetting a slower than expected recovery in APMEA. We continue to drive value from combustibles to fund our transformation, while remaining focused on volume share globally. In H1 2026, we have actively increased investment in key markets in response to heightened competitive activity, including in the U.S., where our combustibles volume share has started to stabilise.
In the U.S., the recently published FDA prioritisation guidance for Vapour and Modern Oral, together with other Federal and State enforcement actions, mean that BAT is well-positioned to benefit from our multi-category nicotine portfolio, leveraging Reynolds’ strong execution and extensive distribution capabilities. In the second half of 2026 we plan to roll out Velo Max nationally, together with a disciplined roll-out of a select range of adult-focused Vuse flavours.
We expect mid-teens New Categories revenue growth for the full-year 2026, driven by continued global momentum in Modern Oral and further traction from innovation roll-outs, partly offset by lapping a higher second half comparator in the U.S.
We continue to make good progress towards our year-end target leverage range of 2.0-2.5x while rewarding shareholders through strong cash returns. I remain committed to delivering sustainable value for our shareholders.”
Summary Information
| Performance highlights | IFRS | Non-GAAP | ||||||
| Reported | Adjusted3 | Adjusted for Canada5 | ||||||
| For six months to 30 June 2026 | Current | vs 2025 | Current | vs 2025 | Current | vs 2025 | ||
| rates | (current) | rates | (constant) | rates | (constant) | |||
| Cigarette volume share1 | -30 bps | |||||||
| Cigarette value share1 | -40 bps | |||||||
| Consumers of Smokeless products2 | 35.0m | +0.9m | ||||||
| Revenue (£m) | £12,235m | +1.4% | £12,235m | +2.9% | £12,235m | +2.9% | ||
| Revenue from New Categories (£m) | £1,928m | +16.8% | £1,928m | +18.0% | £1,928m | +18.0% | ||
| Smokeless revenue as % of total revenue (%)4 | 19.8% | +1.6 ppts | ||||||
| Profit from operations (£m) | £4,266m | -15.8% | £5,426m | +2.5% | £5,319m | +3.5% | ||
| Adjusted gross profit growth (%) | +1.8% | +3.2% | +2.5% | +3.8% | ||||
| Category contribution – New Categories (£m) | £257m | +54.7% | £257m | +54.7% | ||||
| Category contribution margin – New Categories (%) | 13.3% | +3.3 ppts | 13.3% | +3.3 ppts | ||||
| Operating margin (%) | 34.9% | -7.1 ppts | 44.4% | -20 bps | 43.5% | +30 bps | ||
| Diluted EPS (pence) | 145.3p | -28.6% | 167.7p | +5.9% | 164.0p | +7.9% | ||
| Net cash generated from operating activities (£m) | £3,402m | +47.3% | ||||||
| Free cash pre-dividend (£m) | £2,285m | +85.2% | ||||||
| Adjusted cash generated from operations (£m) | £2,102m | +45.4% | ||||||
| Cash conversion (%) | 79.7% | +34.1 ppts | 79.7% | +5.6 ppts | ||||
| Borrowings including lease liabilities (£m) | £35,063m | -0.4% | ||||||
| Adjusted net debt (£m) | £31,969m | +6.1% | ||||||
The use of non-GAAP measures, including adjusting items and constant currencies, are further discussed from page 49, with reconciliation from the most comparable IFRS measure provided.
Notes:
1. To better reflect the evolving performance of each category, from 1 January 2026, the Group has decoupled the value share and volume share metrics from a combined Cigarettes and HP view to disclose the performance of Cigarettes as a distinct category. 2. Internal estimate. 3. See page 27 for discussion on adjusting items. 4. Movement in Smokeless revenue as a percentage of total revenue compared to full year 2025. 5. As adjusted for Canada. The adjustment in respect of Canada is discussed on pages 49 and 50, with the adjustment based upon a percentage (2026: 85%; 2025: 100%) of the net income after taxes earned from all sources, excluding New Categories, in Canada. There is no adjustment to revenue.
Confirmation of Full-Year 2026 Guidance
– Global cigarette industry volume expected to be down c.3%.
– Lower end of our medium-term guidance ranges:
– 3-5% revenue1 growth, with mid-teens New Category revenue growth1.
– 4-6% adjusted profit from operations growth1,2 – H2 weighted.
– Expected c.1% transactional FX headwind.
– We expect a translational FX headwind of c.2-3% on adjusted diluted EPS growth2.
– Adjusted net finance costs1,2 expected to be c.£1.65 billion (prev. £1.75 billion), subject to interest rate volatility.
– Adjusted diluted EPS growth1,2 now expected to be towards the middle of 5-8% medium-term guidance range.
– 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 EBITDA2 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. The adjustment in respect of Canada is discussed on pages 49 and 50, with the adjustment based upon a percentage (2026: 85%; 2025: 100%) of the net income after taxes earned from all sources, excluding New Categories, in Canada.
