Coronavirus Update

British American Tobacco Plc - First Half Pre-Close Trading Update 2019





Trading update - ahead of closed period commencing 2 July 2019

·      The business continues to perform well, with Group Full Year (FY) guidance unchanged

·      Combustibles continue to perform strongly, driven by the growth of the Strategic Brands and good pricing

·      First half (H1) New Category revenue growth approaching our FY guidance range, with an expected acceleration in the second half (H2) leading to FY growth around the middle of the 30-50% range, on a constant currency basis

·      The US business is performing well with good pricing and continued value share growth in an industry expected to be down 4% to 5% on a volume basis for the FY

·      On track for a FY reduction in currency-neutral Adjusted Net Debt**/Adjusted EBITDA*** of c.0.4x


"We are creating a stronger, simpler business and driving a step change in New Categories, built on the foundation of a strong combustible business.  With our focus on building global brands, we intend to consolidate our New Category portfolio into fewer brands. Our Strategic Brands continue to take share, while new product launches and a sharpened focus on priority markets and products are expected to drive stronger New Category growth in the second half.  We are on track for a good performance in 2019 with revenue and adjusted operating profit growth in line with our guidance and delivery of high single figure FY adjusted diluted EPS growth at constant rates of exchange."


Jack Bowles, Chief Executive



1. The business continues to perform well and Group FY guidance remains unchanged


·    FY global industry volume expected to be down around 3.5%

·    On track for constant currency revenue growth in the mid-upper half of our long-term guidance range of 3-5%

·   Corporate value share up +10bps YTD v FY18, with a strong share performance by the Strategic Combustible Brands, up +50bps YTD. Corporate volume share down -10bps YTD

·    Good adjusted operating margin improvement expected, including a further increase in investment behind New Categories

·    Constant currency adjusted operating profit growth expected in the upper half of our long-term guidance range of 5-7%

·    FY adjusted diluted EPS growth expected to benefit from a currency translation tailwind of around 1.0% for FY19, and 1.5% for H1 19, at current exchange rates*

·    Confident of delivering high single figure constant currency adjusted diluted FY19 EPS growth


2. THP, Vapour and Modern Oral (New Categories) on track to deliver 30-50% FY constant currency revenue growth


·    Vuse Alto in the US continues to grow and has reached a retail volume (ml) share of 8.3% YTD in the US, driving the Vuse family to a volume (ml) share of 19.1% YTD

·    Vype ePen3 continues to perform strongly reaching a value share of 6.8% in the UK and 12.1% in France

·   glo share in Japan is at 5% YTD, with continued strong growth in total nicotine corporate share, to 17% YTD, up from 16.2% at HY 2018. Revenue is expected to accelerate in H2 with the launches of glo Pro (improved satisfaction technology) and glo Nano (smaller design unit) in Q4

·   In the Modern Oral segment, EPOK and LYFT continue to lead the growth of the category in Scandinavia and Switzerland. H2 is expected to benefit from the rollout of Velo in the US in July

·    H1 New Category constant currency revenue growth approaching our FY guidance range, reflecting the unwinding of high year end 2018 trade inventories following the restocking of Vibe and low first quarter trade demand due to regulatory uncertainty in the US

·    New Category revenue growth expected to accelerate in H2, driven by the timing of new and enhanced product launches, leading to FY growth around the middle of our 30-50% guidance range


 3. The US is performing well with volume in line with expectations


·    US industry volume decline remains within historic ranges with Sales to Retail (STR) down 5.3% YTD. We expect FY industry volume to be down 4% to 5%, driven by earlier cigarette price increases and rising gas prices

·    Continued corporate value share growth up +20bps YTD, with US Strategic brands up +30 bps, driving good revenue growth on a constant currency basis

·    Traditional Oral tobacco expected to deliver good constant currency revenue growth driven by good pricing, with share of moist up +20bps


4. De-leveraging remains on track


·   Adjusted Net debt**/adjusted EBITDA*** reducing at around 0.4x per annum excluding the impact of FX

·    H1 cash conversion is expected to be impacted by the timing of MSA payments. The business remains on track to deliver FY19 free cash flow after dividends of £1.5bn

·   The Group's medium-term rating target remains BBB+/Baa1, with a current rating of BBB+/Baa2