British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Day (2021)
51 slides from British American Tobacco P.l.c's investor day presentation, 2021
Slide 1: Enterprise of the Future: Transformation and Growth
Enterprise of the Future Transformation and Growth Jack Bowles | Chief Executive A BETTER TOMORROW Tadeu Marroco| Finance and Transformation Director
Slide 2: Important information
= ) Important information AT A BETTER TOMORROW The information contained in this presentation in relation to British American Tobacco p.l.c. ("BAT") and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use
Slide 3: Important information
= ) Important information AT A BETTER TOMORROW Forward-looking Statements (continued) Additional information concerning these and other factors can be found in BAT's filings with the U.S. Securities and Exchange Commission (“SEC”), including the Annual Report on Form 20-F and Current Reports on Form
Slide 4: Building A Better Tomorrow™
Building A Better Tomorrow™ We are uniquely positioned with our consumer- centric multi- category portfolio We have the strengths, new capabilities, brands and resources to succeed We are ona journey: transformation is happening. The opportunity is huge >AT A BETTER TOMORROW We are confident in deli
Slide 5: We are committed to transforming BAT to reduce our health impact
1 We are committed to transforming BAT to reduce our health impact BAT”
Slide 6: Committed to Building A Better Tomorrow™
Committed to Building A Better Tomorrow™ BAI A BETTER TOMORROW Our Purpose Our Commitment To provide adult consumers with a wide range of enjoyable and less risky products* To reduce the health impact- of our business To encourage smokers to switch completely to scientifically-substantiated reduced-
Slide 7: Creating the Enterprise of the Future is Key
Creating the Enterprise of the Future is Key From Cigarettes y Declining Volume Growing Value *Beyond refers to Wellbeing & Stimulation Beyond Nicotine. Target market for consumer acquisition is existing adult smokers/nicotine/beyond nicotine users. A BETTER TOMORROW
Slide 8: Delivering Value for all Our Stakeholders
Delivering Value for all Our Stakeholders 5A7 A BETTER TOMORROW © Robust corporate GOVERNANCE + Business ethics + Responsible marketing + Regulation and policy engagement ..With stretching targets 50 million consumers of non-combustible* Category neutral by use plastic & all plastic Revenue in 2025
Slide 9: Delivering for all Stakeholders in 2020
Delivering for all Stakeholders in 2020 2AT A BETTER TOMORROW 2020 2020 PROFIT 2020 REVENUE GROWTH* EPS GROWTH FROM OPERATIONS GROWTH* +3.3% +4.8% +5.5% LEADER IN DIVERSITY OPERATING CASH LEVERAGE DIVIDEND CONVERSION REDUCTION PAY-OUT=* 103% -0.3x 65% A £26bn revenue, consumer-centric multi-category
Slide 10: Shared Stakeholder & Shareholder Value
i) Shared Stakeholder & Shareholder Value BAT A BETTER TOMORROW Our Targets: * Medium-term growth targets. On a constant rate basis. See Appendix A2. * Non-Combustible consumer definition: see Appendix AG.
Slide 11: We are uniquely positioned with our consumer-centric multi-category portfolio
2 We are uniquely positioned with our consumer-centric multi-category portfolio BAT”
Slide 12: Consumer-Centric Multi-Category model
Consumer-Centric Multi-Category model = AT * Revenue Growth Management
Slide 13: Leading brands in New Categories
A BETTER TOMORROW gle 20782 ese are positions based an value share of vapour and volume share of THP and Modern oral. Vuse brand represents c. 80% of FY20 vapour revenue. Cantinue to migrate remaining Vype brands during 2021, Velo brand represents over SO%of 13,
Slide 14: Deep Consumer Insights to Target Distinct Consumer Spaces
Deep Consumer Insights to Target Distinct = AT Consumer Spaces (Stow TOGETHER gle PROGRESSIVE Stigma ACU30 Income vuse EXPLORATION Stigma ACU3Z0 Income -> PLEASURE = CLASSIC Stigma ACU30 Income FLOW Stigma ACU30 Income Ww i vio ENERGISING Stigma ACU30 Income
Slide 15: Unique Multi-Category Consumer Insights Driven Portfolio
PRODUCT SATISFACTION INDEX (PSI) Unique Multi-Category Consumer Insights Driven Portfolio {C. 20% of industry FMC? volumes) Predominantly THP A BETTER TOMORROW FULL FLAVOUR MARKETS (C. 50% of industry FMC* volumes) (C. 30% of industry FMC* volumes) Both THP & Vapour Predominantly Vapour MODERN MODER
Slide 16: Targeting: Globally Capable, Locally Relevant
Targeting: Globally Capable, Locally Relevant 3AT” A BETTER TOMORROW i) y vuse vio gle 1 Consumer & Commercial N. America & W. Europe Northern Europe Central & Eastern Europe Oral Mixed Usage — Opportunity Predominantly Vapour 2 Product Satisfaction — Index (PSI) Japan & SK 3 Regulatory & Tax/Excise
Slide 17: A Large, Growing New Category Opportunity
=<) A Large, Growing New Category Opportunity 3AT A BETTER TOMORROW Non- Combustibles** 13.5mn Consumers Revenue & Consumers Share” ~79mn ~123mn Net Consumers** Net Consumers** ~£16bn revenue ~£29bn revenue 2025 estimate based on company data, Industry Incidence Study 8 BAT internal estimates, exclu
Slide 18: We have the strengths, new capabilities, brands & resources to succeed
3 We have the strengths, new capabilities, brands & resources to succeed
Slide 19: Unrivalled Outlet Reach in Our Top 40 Markets
Unrivalled Outlet Reach in Our Top 40* Markets > AT Double the retail reach of large-cap CPGs meee" i on-premise — Modern [ff Convenience/Traditional Outlet Tlm 4-5m 7m 1.5m Reach Channel Split CPG Beverages Alcohol Note: Company share of retail sales estimated based on category channel breakdown; f
Slide 20: World-Class Capability in Science and R&D
= World-Class Capability in Science and R&D 3AT> A BETTER TOMORROW * Representative 2017 basis with a full 12 months of US acquisition, Reynolds. “ First amongst leading tobacco and nicotine global companies a
Slide 21: Developing a New World of Digital Insights
= Developing a New World of Digital Insights 3AT A BETTER TOMORROW Digital Hubs Supply chain ? Finance, HR, | Legal Customers & Consumers 1:1 engagement with New Category consumers Zero-touch Factories ¢.10m NC consumers in database +40% Virtual Experts in >50% factories +100% work hours saved 2.4X
Slide 22: Accelerating transformation
Accelerating transformation > 400+ management hires bringing new capabilities > Learning and development at speed and scale via 100% virtual delivery 2 disability BG confident Purpose driven organisation > With new Ethos and leadership capability > 80+ awards and certifications Digitally enabled wor
Slide 23: We are on a journey: Transformation is happening. The opportunity is huge
Slide 24: We Have Made a Strong Start
We Have Made a Strong Start 3AT” A BETTER TOMORROW Non-Combustible New Category New Category Strong growth in Consumers: Revenue Investment New Categories 29% 443% 2 13.5m Cacr £1.4bn cAcr +c. £430m 2020 2020 2020 . EPS Growth Free Cash Flow Dividend Continued strong 18.5% Generated Paid financial d
Slide 25: Delivered by Our Operational Priorities
Delivered by Our 3 Operational Priorities Step-Change In New Categories Delivering accelerated growth in New Categories Generating the investment Building the resources and cash flow capabilities to succeed A BETTER TOMORROW 25
Slide 26: Our Transformation Journey is Accelerating
i) Our Transformation Journey is Accelerating BAT? A BETTER TOMORROW Non-Combustible products revenue % e Oo * + 63, 42% 28% 27% 13x 85% of our developed market* revenue Note: % Revenue by market FY2020 *OECD excluding Australia and Turkey where Non-Combustible products are unavailable 26
Slide 27: Accelerating New Category Growth and Profitability
y Accelerating New Category Growth and Profitability BAT A BETTER TOMORROW Jo. e) | @ vio Establishing Vuse as Leveraging improved Leveraging superior the global leader: in consumer satisfaction international products Vapour, with a clear & innovation pipeline & accelerate US growth pathway to to be
Slide 28: Establishing Vuse as a Global Leader
= 9. Establishing Vuse as a Global Leader BAT? 69.0% 29.1% [] #1 20.0% 28.0% -——BAT TTL Value Share ——BAT TTL Value Share Dec-19 Dec-20 Dec-19 Dec-20 Lara #1 17.9% es #1 40.0% = #1 52.2% 12.0% 23.3% RAPTLVEoS —Vype TTL Value Share ——Vype TTL Value Share Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Stro
Slide 29: With a Clear Pathway to Profitability
So. With a Clear Pathway to Profitability =| AT = Channel shift away from high cost vape stores = Front margin: already reduced significantly in France and Canada = E-Commerce expansion = Subscription sales = c. £100m productivity savings delivered in 2020 = Design for automation = Further scale ben
Slide 30: Leveraging Improved Satisfaction to Drive Accelerated Growth
gle Leveraging Improved Satisfaction to Drive Accelerated Growth >AT A BETTER TOMORROW o Japan = Russia L Italy . Ukraine t Romania ww ww 5.9% 14% “we 1.9% ° 0.9% 1.2% 5.0% 9, 9 0.5% 0.3% 0.1% 0.5% Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 Japan: 6.3% Moscow: 4.6% Market
Slide 31: glo: Insight Driven Innovation to be the Fastest Growing THP Brand
A BETTER TOMORROW “ay gle Insight Driven Innovation to be the BAT? Fastest Growing THP Brand Glo 1.0 2017 Satisfaction > Taste & Flavour ® Kent Slims format Sources: Company data consumer product tests Oi = = =z Glo Pro & LD Evaro) 2019 Neo Slims Glo Hyper 2020 — © Neo Premium format upgrades King S
Slide 32: Leverage Superior International Product and Leadership Position
W and Leadership: Position Leading* in both established and new oral markets c.95% of Industry Revenue, including US SWE NOR DEN { i> a Al 4 64% 67% 91% DE CZE 95% 50% 87% © Leverage Superior International Product > AT A BETTER TOMORROW With superior products and mix Overall Product Established New
Slide 33: Velo Expanded US Range to Accelerate Growth
A BETTER TOMORROW velo Expanded US Range to Accelerate Growth AT Portfolio strengthened by Dryft acquisition STreNgth (a 284 2,487 Flavours 2 10 SKUs 4 28 Expected Nov’20 Mar’21 6K outlets =» c.80K Circle K outlets Exclusivity Nationwide* Encouraging early results, with distribution building Velo US
Slide 34: Exciting Product Innovation Pipelines
Exciting Product Innovation Pipelines ePod / Alto P Hyper+ superiority* upgrade CBD & Zero* . City tests Superior neo sensorials CREATIONS: * Superiority through new device upgrades including Bluetooth enabled age verification. “Zero nicotine >AT A BETTER TOMORROW Patented nicotine delivery New stre
Slide 35: Beyond Nicotine: Exploring New Opportunities
= Beyond Nicotine: Exploring New Opportunities 3AT A BETTER TOMORROW Clear portfolio expansion boundaries he Go Wellbeing ion” Leveraging Delivery Platforms BAT Global NEW CATEGORY Marketing GROWTH Reach OPPORTUNITIES Strategic and Financial Attractiveness Usage Less Regain Additional * Indicative a
Slide 36: Beyond Nicotine: Leveraging our Strengths
Beyond Nicotine: Leveraging our Strengths to 2AT Explore “On The Go Wellbeing & Stimulation” “""™ Target Area BAT Strengths & Capabilities On the Go Wellbeing & Stimulation & on (CG) Th] a Active : Product Distribution Global Reach Insights stewardship 4 ok Science Navigating M&A Portfolio &R&D Regu
Slide 37: £5bn Revenue: Clear Pathway to Profitability
£5bn Revenue: Clear Pathway to Profitability >AT A BETTER TOMORROW New Category Revenue Marketing Investment New Category Profitability FY20BATNC Category BATshare FY25 BAT revenue growth growth NCrevenue 2020 2025 c.80% E> c.40% Marketing investment as % of revenue Marketing investment expected to
Slide 38: We are confident in delivering our targets and building A Better Tomorrow™
Slide 39: Combustibles Value Growth: Sustainable Investment Resources and Cashflows
Combustibles Value Growth: Sustainable > AT Investment Resources and Cashflows seererroxonon Well positioned Strategic brands Driving value growth Global Leader with #1 Position Brand & SKU rationalisation Global Market SKU Reduction Share” Over Last 2 years” Targeted pricing with RGM~ The BAT Group
Slide 40: RGM driving sustainable value creation
RGM‘ driving sustainable value creation RGM* powered by a data science-led approach ( Lead Markets 2=**-: New Markets [J) = . g la to be covered by RGM* by end of 2021 * Revenue Growth Management. On a constant currency basis. See Appendix A2. 40
Slide 41: US Combustibles: a Source of Value Growth
= US Combustibles: a Source of Value Growth 2AT A BETTER TOMORROW Newport ‘P Highest share-& Fastest growing: value share* brand in the growth in market market Value Premium (+50bps vs FY19) (+5% volumes vs FY'19) Share- Share- 1S Low cigarette prices relative to income** 2.8 0.6 —__ Japan Russia Ge
Slide 42: Quantum 2020-2022 target
+ 2020-2022 target A BETTER TOMORROW KEY BENEFITS Generate resources Fund investments and capabilities Stronger, simpler, faster organisation Agility to operate, increased efficiency, new capabilities On track for £1DN- benefit by 2022 2
Slide 43: FY20: Strong Results in a Challenging Year
FY20: Strong Results in a Challenging Year 2020 Results y Non-Combustibles 10% of revenue y Accelerating New Category: - Consumer acquisition* - Revenue and share growth Jy Good New Category revenue and share« growth momentum entering 2021 2021 outlook y 3-5% revenue growth’ v Retaining mid-single d
Slide 44: Continued Financial Delivery: confident in our medium-term financial algorithm
Continued Financial Delivery: confident in our —y medium-term financial algorithm post-COVID ‘4X! ¥+2% to +3% Combustibles Revenue Growth~ v¥-3% to -4% Duty Paid Industry Cigarette Volume ¥ Continued robust price mix-* (7.6% 3 year average) v New Category Revenue Growth towards £5bn 2025 target ¥Y P
Slide 45: Continued Financial Delivery: confident in our medium-term financial algorithm
Continued Financial Delivery: confident in our = AT medium-term financial algorithm post-COVID msl Y Combustible value growth vY Working capital efficiencies v¥ Capex = Depreciation* ¥ £1bn Quantum savings 2020-2022 v¥ >90% operating cash flow conversion= ¥ 65% Dividend pay-out ¥ Continued investmen
Slide 46: Our Responsibility to Transform
Our Responsibility to Transform SAT A BETTER TOMORROW - The largest and only truly global tobacco and nicotine company Present in > 180 markets 1 Including the US — 40% of global industry value and creating trends across our multi- categories 2 . . === -° the only truly consumer-centric, multi-categ
Slide 47: A Clear Framework to Accelerate Transformation
=) A Clear Framework to Accelerate Transformation 2AT A BETTER TOMORROW Csuest Creating the Enterprise of the Future
Slide 48: Our Strategic Journey
Our Strategic Journey A BETTER TOMORROW « Strategy + 3 Clear Priorities * Capability Building + Science and R&D * Digital Agenda - Financial Delivery * QUANTUM * Innovation Pipeline * 2030 Ambitions * Financial Delivery * Operational Delivery * New Ways of Working * QUEST - Enterprise of the Future
Slide 49: Confident in delivering A Better Tomorrow™
Confident in delivering A Better Tomorrow” BAT A BETTER TOMORROW 9 * Medium-term growth targets. On a constant rate basis. See Appendix A2. * Non-Combustible consumer definition: see Appendix A6.
Slide 50: Enterprise of the Future
Enterprise of the Future Transformation & Growth Jack Bowles | Chief Executive Tadeu Marroco| Finance Director A BETTER TOMORROW
Slide 51: Appendix
. ~) Appendix > AT Al: Adjusting (Adj.) ABETTER TOMORROW Adjusting items represent certain items which the Group considers distinctive based upon their size, nature or incidence. A2: Constant currency Constant currency- measures are calculated based on a re-translation, at the prior year's exchange
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