British American Tobacco Plc raises FY revenue guidance

British American Tobacco PLC (LON:BATS) has announced its 2025 H1 pre-close trading update.

On track for FY delivery; revenue slightly ahead of previous guidance

·      U.S. expected to return to revenue and profit growth¹ in H1 and FY25, driven by strengthening Combustibles delivery and an excellent Velo Plus performance

·      Strong global growth from Velo in Modern Oral, the fastest growing New Category segment

·      Continued strong performance in AME; APMEA impacted by excise and regulatory challenges in Bangladesh and Australia, as previously guided

·      Low-single digit H1 New Categories revenue growth, with the impact of illicit Vapour products in the U.S. and Canada partly offsetting excellent Velo performance

·      Accelerating H2 New Category revenue driven by deployment of innovations in key markets     

·      Further improvement in New Category contribution margin², driven by our Quality Growth focus

·      Confident in delivering mid-term algorithm of 3-5% revenue growth and 4-6% APFO³ growth in 2026

·      Partial monetisation of our ITC stake enabling increased financial flexibility

·      Strong cash generation with balanced capital allocation; committed to reducing leverage⁴ to 2-2.5x by end 2026, with progressive dividend and sustainable share buy-backs – increased to £1.1bn in 2025

Tadeu Marroco, British American Tobacco Plc Chief Executive

“Our revenue performance in H1 is slightly ahead of our previous guidance, and we now expect to deliver FY revenue growth of 1-2%, supporting 1.5 to 2.5% adjusted profit from operations growth³. 2025 is a deployment year and, as previously highlighted, we expect our performance to be H2 weighted, mainly driven by the roll-out of New Category innovations in key markets from the middle of the year.

In the U.S., I am very pleased that we expect to return to both revenue and profit¹ growth in H1 and FY. While Combustibles industry volume remains under pressure c.-9% YTD⁵, we have stabilised our total industry volume and value share. Excluding the deep discount segment where we are not present, we are gaining share, driven by Natural American Spirit and Lucky Strike.

I am excited by the successful launch of Velo Plus in the U.S. driving excellent volume and revenue growth, with strong market share gains. Globally, Velo continues to gain volume share in this fast-growing category, driven by the U.S. and our continued leadership position in AME.

We are encouraged by the early performance of glo Hilo in Serbia and continue to gain insights and critical learnings ahead of its phased roll-out in key markets from H2 onwards. glo’s performance YTD reflects a highly competitive environment in Japan and continued phase-out of our legacy platform, alongside actions we have taken in AME to focus resource allocation in the largest profit pools.

The Vapour category remains impacted by the proliferation of illicit Vapour products in the U.S. and Canada, with U.S. legal industry volume down mid-teens YTD.

We expect low-single digit New Category revenue growth in H1, accelerating to mid-single digit for FY. Excluding the impact of the U.S. and Canada Vapour markets, we expect double-digit New Category revenue growth for FY.

While there is more to do, I am encouraged by the progress we are making through our Quality Growth focus, and prioritising investment to the largest profit pools. I am confident that the investments we have made and the actions we are taking will drive a return to our mid-term algorithm in 2026. I am pleased with our progress in increasing financial flexibility driven by continued strong operating cash conversion and the completion of a partial monetisation of our stake in ITC.

I remain committed to delivering sustainable value for our shareholders through strong cash returns, including our progressive dividend and a sustainable share buy-back programme.”

Our outlook is underpinned by the following key areas, where we have continued to make progress:

1. Combustibles: Return to growth in U.S. and continued resilience in AME; robust pricing YTD

·      Group volume share in top markets⁶ -10bps, value share -10bps

·      U.S. value share +10bps; volume share +10bps (+60bps excl. deep discount where we are not present)

·      U.S. expected to return to revenue and profit¹ growth in H1 and FY, driven by successful execution of commercial actions

·      Resilient AME financial performance led by Brazil, Türkiye and Romania

·      APMEA performance impacted by material excise increases and regulatory headwinds in Bangladesh and Australia, as previously guided

2. H2 weighted New Category performance, driven by phasing of innovations through the year

2.1 Velo: Continued strong growth and volume share gains; excellent performance from Velo Plus in U.S.

·      Volume share +270bps to 14.3% of Total Oral and +350bps to 29.7% of Modern Oral in top markets⁷

·      Strong double-digit revenue growth, driven by industry growth and volume share gains

·      Delivering encouraging results in the U.S., driven by Velo Plus, with strong trial and retention rates driving total volume share of Modern Oral +550bps to 11.9% and triple-digit revenue growth

·      Continued leadership in AME, with strong financial performance in Scandinavia, the UK and Poland

2.2 glo: Targeted innovation roll-out expected to drive acceleration in H2

·      Volume share in top markets⁸ -90bps, driven by a highly competitive environment in Japan and the continued phase-out of our legacy, super-slims platform

·      AME volume share -10bps, with continued share growth in Poland, Czech Republic and Spain, and a stable share performance in Italy, offset by competitive dynamics in Germany and Romania

·      Encouraging performance from glo Hilo launch in Serbia, doubling previous trial to conversion rates

·      Expect low-single digit revenue growth in H1 with H2 acceleration driven by the phased roll-out of glo Hilo in key markets

2.3 Vuse: Continued global value share leadership; illicit Vapour headwinds persist in U.S. and Canada

·      Global value share in top markets⁹ flat , with continued global leadership in tracked channels

·      U.S. value share flat, AME +10bps, driven by Europe +40bps

·      Expect mid-teens revenue decline in H1, mostly driven by illicit Vapour headwinds in U.S. and Canada

·      Improving H2 revenue performance, driven by the phased roll-out of our new premium Vapour product, Vuse Ultra, and continued targeted resource allocation

3. Continued strong cash delivery, and balanced capital allocation

·      On track to deliver operating cash flow conversion¹⁰ in excess of 90% again in FY25, reflecting strong cash discipline and maintaining a laser focus on returns

·      We expect to be back within our 2.0-2.5x adjusted net debt/adjusted EBITDA⁴ target range by end 2026, together with a progressive dividend and sustainable share buy-back, increased to £1.1bn in 2025

Technical guidance for 2025:

·      Global tobacco industry volume expected to be down c.2%

·      1-2% Group revenue growth for H1 and FY, at constant rates (previously c.1%)

·      Low-single digit New Category revenue growth in H1; accelerating to mid-single digit for FY

·      1.5-2.5% adjusted profit from operations growth³ at constant rates for FY, weighted to H2, incl. a c.1.5% transactional FX¹¹ headwind

·      Translational FX¹¹ headwind of c.4% on half-year and full-year adjusted profit from operations³

·      Net finance costs³ of c.£1.8bn, subject to FX and interest rate volatility

·      Operating cash flow conversion¹⁰ in excess of 90%, gross capital expenditure in 2025 of c.£650 million

·      Continue to deleverage⁴ to our 2.0-2.5x adjusted net debt/adjusted EBITDA target corridor by end 2026