British American Tobacco (BATS) H1 2026 earnings summary

Executive summary

• H1 2026 results met expectations, with revenue up 2.9% at constant FX and adjusted profit from operations up 3.5%, driven by strong U.S. multi-category performance and robust New Category momentum.

• Smokeless products now account for 19.8% of group revenue, with 4.1 million new smokeless consumers added, totaling 35 million.

• New Category contribution rose 55% to £269m, with Modern Oral up 65.9% and U.S. Vapour returning to double-digit growth.

• Resilient combustibles performance, especially in the U.S. and AME, supported by cost-saving initiatives.

• Transformation momentum is supported by disciplined investment, targeted resource allocation, and ongoing cost optimization.

Financial highlights

• Group revenue: £12,235m (+1.4% reported, +2.9% constant FX); New Category revenue grew 18% to £1,928m.

• Adjusted profit from operations: £5,421m (+3.5% constant FX, as adjusted for Canada); adjusted diluted EPS up 7.9% to 164.0p.

• Adjusted gross profit increased 3.8% to £8.3bn; adjusted operating margin at 43.7% (+30bps, as adjusted for Canada).

• Free cash flow generation remains strong, targeting over £50bn from 2024-2030; cash conversion above 95% expected for the full year.

• Share buy-back programme on track for £1.3bn in 2026; leverage target of 2.0-2.5x by year-end.

Outlook and guidance

• FY26 guidance reaffirmed: 3-5% revenue growth, mid-teens New Category revenue growth, 4-6% adjusted profit from operations growth (H2 weighted).

• Adjusted diluted EPS growth expected toward the middle of 5-8% guidance range.

• Operating cash flow conversion expected to exceed 95%; leverage to be within 2.0-2.5x corridor.

• Net finance cost for the year expected around £1.65bn; underlying tax rate 24%-25%.

• Commitment to progressive dividend and £1.3bn share buy-back for FY26; gross capital expenditure for 2026 expected at ~£750m.