British American Tobacco (BATS) Trading Update summary

Financial Performance and Guidance

• On track for FY25 with approximately 2% revenue and adjusted operating profit growth expected, despite headwinds from Bangladesh and Australia impacting group revenue and profit by about 1% and 2% respectively.

• Strong U.S. business momentum, with both revenue and profit growth in combustibles for the first time since 2022, and value share gains attributed to commercial actions and improved execution.

• Operating cash conversion is expected to exceed 95% in FY25, with financial flexibility improving and over GBP 50 billion in free cash flow targeted by 2030.

• Committed to 2x-2.5x net debt to EBITDA leverage by end-2026, supported by a GBP 1.3 billion share buyback for FY26 and a progressive dividend.

• Guidance for 2026 is at the lower end of the mid-term algorithm (3%-5% revenue, 4%-6% profit growth, 5%-8% adjusted diluted EPS growth) due to continued investment in innovation and market exits.

New Category and Product Performance

• New Category revenue growth is set to accelerate to double digits in H2, led by Modern Oral (Velo Plus) and improved U.S. vapor performance; full-year New Category revenue growth expected at mid-single digits.

• Velo Plus is the fastest-growing U.S. Modern Oral brand, reaching number two in volume and value share, and driving triple-digit revenue growth in H2.

• Glo Halo, a new premium heated product, launched in Japan, Poland, and Italy, is showing strong early retention and brand health, with plans for broader rollout in 2026.

• Vuse maintains global value share leadership in vapor, with U.S. performance rebounding due to enforcement against illicit products; value share reached 50.4% in the U.S.

• Premium innovation Vuse Ultra delivers encouraging early results in Canada, Germany, and France.

Regulatory and Market Environment

• FDA and U.S. authorities are increasing enforcement against illicit vapor products, supporting legal market recovery and benefiting Vuse.

• Modern Oral is recognized by the FDA for its harm reduction potential, and a pilot program is streamlining PMTA review for nicotine pouches.

• Australia and Bangladesh face significant industry volume declines due to regulatory and fiscal headwinds, fueling illicit trade and reducing government excise collection.

• Exit from certain markets (Mozambique, Cuba) and continued regulatory challenges in Australia are factored into 2026 guidance.

• Vuse faces headwinds from illicit vapor in Canada and market exits.