British American Tobacco (BATS) H2 2024 earnings summary

Executive summary

• 2024 results were in line with expectations, driven by transformation initiatives, robust growth in AME and APMEA, and recovery in U.S. Combustibles.

• Smokeless products now account for 17.5% of group revenue, with 3.6 million new consumers added, reaching 29.1 million.

• Shareholder returns prioritized through improved financial flexibility, 2% dividend growth, and a £900m share buyback planned for 2025.

• Leverage reduced to 2.4x, with strong cash returns and a focus on sustainable transformation.

• Confident in sustainable transformation, with 2025 as a deployment year and a return to mid-term growth algorithm in 2026.

Financial highlights

• Organic, constant currency group revenue grew 1.3% year-over-year; new category revenue up 8.9%; adjusted operating profit rose 1.4%; diluted EPS increased 3.6%.

• Adjusted gross profit expanded by GBP 400 million, with gross margin up 60bps to 67.2%.

• Excluding the U.S., revenue grew 5.1% and operating profit 7.5%.

• Modern Oral revenue surged 53%, with category share up 130 basis points.

• Operating cash conversion exceeded 100% for the fifth consecutive year.

Outlook and guidance

• 2025 guidance: group revenue growth around 1%, APFO growth of 1.5%-2.5% (adjusted for Canada), with significant headwinds in Bangladesh and Australia.

• 2026 targets: 3%-5% revenue growth and 4%-6% APFO growth, adjusted for Canada at constant rates.

• Performance expected to be second-half weighted in 2025 due to new category innovation rollouts.

• Continued focus on U.S. performance improvement, Velo growth, innovation deployment, and strong AME delivery.