British American Tobacco reaffirms 2026 guidance and announces £1.3bn buy back

British American Tobacco plc (LON:BATS) has announced its 2025 H2 pre-close trading update.

On track for FY25 delivery; Reaffirming 2026 guidance and announcing a £1.3bn share buy-back

·      Now expect c.2% revenue and adjusted profit from operations¹ growth for FY25

·      New Category revenue growth accelerating to double-digit in H2, driving mid-single digit for FY

·      Strong U.S. revenue and profit² momentum, driven by ongoing combustibles delivery and an excellent Velo Plus performance, which is on track for full-year profitability³

·      Early signs of Federal and State enforcement actions tackling U.S. illicit Vapour products support recent Vuse volume and revenue improvement

·      Velo driving strong global growth in Modern Oral, the fastest growing New Category

·      AME delivery remains strong; APMEA impacted by ongoing fiscal and regulatory headwinds in Bangladesh and Australia

·      Further acceleration in New Category contribution³, in line with our Quality Growth approach

·      Confident in sustainably delivering mid-term growth algorithm from 2026 (+3-5% revenue, +4-6% APFO¹ and +5-8% adj. diluted EPS¹), with 2026 performance expected at the lower end of the range

·      Strong cash generation and balanced capital allocation; on track to reduce leverage⁴ to within 2.0-2.5x by end 2026, alongside progressive dividends and sustainable share buy-backs – FY26: £1.3bn

Tadeu Marroco, British Ameican Tobacco Chief Executive

“Full-year delivery remains on track.

I am particularly pleased with our momentum in the U.S., the world’s largest nicotine value pool. Strengthened combustibles performance and enhanced commercial execution reinforce our future confidence. Velo Plus continues to deliver excellent results, reaching number 2 in volume and value share, with profitability³ on-track for full year.

Recent Vuse volume and revenue improvement in the U.S. 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 Federal and State level enforcement.

Group New Category revenue is accelerating to double-digit growth in H2.

Velo continues to grow strongly in all three regions, in the fastest growing New Category with the lowest risk^*† profile, relative to cigarettes.

We remain focused on establishing glo Hilo as a premium offering in the largest Heated Products profit pools, across three priority markets in H2. Further roll-outs are planned in 2026.

Vuse Ultra, our premium vaping platform, is driving encouraging early results in priority launch markets of Canada, Germany and France. Premium “Vapour Done Right” is a significant, untapped segment for further value creation.

While there is more to do, we continue to prioritise investment in our most profitable markets and categories, driving accelerating New Category contribution³, in line with our Quality Growth approach. We remain confident in delivering our mid-term algorithm next year.

Our strong operating cash conversion is driving increasing financial flexibility as we reduce leverage⁴ towards our 2.0-2.5x target range. I remain committed to delivering sustainable shareholder value supported by robust cash returns, progressive dividends and sustainable share buy-backs, and I am pleased to announce today that we are increasing our buy-back programme to £1.3bn for 2026.”

Our outlook is underpinned by three key areas, where momentum continues:

1. Combustibles: Resilient financial performance driven by the U.S. and AME

·      Group value share in top markets⁵ flat, volume share -10bps

·      U.S. value share +20bps; volume share flat

·      Improving H2 Group revenue and category profit¹ performance driven by the U.S.

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

·      APMEA performance impacted by material fiscal and regulatory headwinds in Bangladesh and Australia (c.-1% on revenue and c.-2% on APFO¹ growth, as previously guided)

2. H2 New Category revenue growth acceleration, driven by Velo Plus and recent U.S. Vapour improvement

2.1 Velo: Clear category leadership in AME; excellent Velo Plus performance in the U.S.

·      Volume share +460bps to 15.9% of Total Oral and +590bps to 31.8% of Modern Oral in top markets⁶

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

·      Excellent U.S. performance with Velo Plus driving volume share of Modern Oral +920bps to 15.6% and triple-digit revenue growth; expect positive FY category contribution³

·      Continued leadership in AME, with strong financial delivery

2.2 glo: Broadly flat FY revenue growth, impacted by competitive activity and resource reallocation ahead of glo Hilo launches 

·      Volume share in top markets⁷ -1.2ppts, impacted by Japan, which remains highly competitive alongside the continued phase-out of our legacy super-slims platform

·      AME volume share -60bps, with continued share growth in Czech Republic, Portugal and Spain, offset by the impact of resource allocation decisions in other key markets ahead of glo Hilo roll-out

·      Establishing glo Hilo in the premium segment with H2 launches – Japan (Sept), Poland (Oct) and Italy (Nov)

2.3 Vuse: Improved H2 revenue performance driven by recent U.S. improvement

·      Continued global leadership in tracked channels, with value share in top markets⁸ +10bps, driven by the U.S. +70bps, supported by early signs of increased Federal and State enforcement

·      AME value share -50bps driven by illicit Vapour in Canada

·      Encouraging early performance of premium innovation Vuse Ultra in Canada, Germany and France

·      Expect FY revenue to be down high-single digit (vs. -13% in H1) due to illicit headwinds in U.S. and Canada, re-prioritised resource allocation and market exits

3. Continued strong cash delivery, and balanced capital allocation

·      On track to deliver another year of operating cash flow conversion⁹ in excess of 95% in FY25, reflecting strong cash discipline and a clear focus on returns

·      We expect to be within our 2.0-2.5x adjusted net debt/adjusted EBITDA⁴ target range by end 2026, together with a progressive dividend and share buy-backs – increased £1.3bn announced for FY26

Technical guidance for FY25:

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

·      c.2% Group revenue growth at constant rates

·      Mid-single digit New Category revenue growth at constant rates

·      c.2% adjusted profit from operations growth¹ at constant rates, incl. a c.1% transactional FX¹⁰ headwind

·      c.3% translational FX¹⁰ headwind on adjusted profit from operations¹ and c.4% on adjusted diluted EPS¹

·      Net finance costs¹ of c.£1.8bn, subject to FX and interest rate volatility

·      Operating cash flow conversion⁹ in excess of 95%, gross capital expenditure in 2025 of c.£650 million

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