British American Tobacco (BATS) CMD 2024 summary

Strategic transformation and future vision

• Aims to become a predominantly smokeless business by 2035, targeting over 50% of revenues from smokeless products and 50 million consumers by 2030, with a focus on quality growth, sustainability, and cultural transformation.

• Multi-category approach (vapor, heated, modern oral) is central, leveraging consumer insights, innovation, and partnerships, supported by a robust R&D ecosystem and significant investments in the U.S. and Europe.

• Investments in R&D, digital tools, and external partnerships have doubled, supporting a robust innovation pipeline, faster product launches, and over 200 pipeline innovations with 2,300 patent families.

• Beyond nicotine, the company is piloting wellness products and making targeted investments in cannabis and other adjacent categories.

• Commitment to sustainability, tobacco harm reduction, and responsible business practices underpins long-term growth.

Financial guidance and shareholder value

• The medium-term financial algorithm targets 3%-5% organic revenue growth and 4%-6% profit growth from 2026, driven by new categories and disciplined cost management.

• Expects to generate over £50bn in free cash flow by 2030, with >90% cash conversion, supporting progressive dividends, sustainable buybacks (£700m in 2024, £900m in 2025), and selective bolt-on M&A.

• New categories achieved profitability two years ahead of plan, with improving contribution margins and targeted reinvestment.

• Maintains a strong balance sheet, targeting leverage of 2x–2.5x net debt to EBITDA, with ongoing efforts to optimize working capital and cost of sales.

• Over £30bn returned to shareholders since 2018, with disciplined capital deployment and cost management.

New category and product innovation

• Smokeless products (vapour, heated, modern oral) now account for 18% of group revenue, up from 2% in 2017, with Vuse as the #1 global vape brand and glo as #2 in heated products.

• Velo leads the modern oral category in Europe and is expanding rapidly in the U.S. with new product ranges.

• Over £6bn invested in new categories since 2020, with a 36% revenue CAGR (2020–2023) and double-digit growth expected to continue.

• Productivity and cost savings on track to deliver over £1.2bn by 2025 and an additional £2bn by 2030.

• Transformation scorecard shows steady improvement in revenue, gross profit, and return on capital employed.