British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Day (March 2019)
25 slides from British American Tobacco P.l.c's investor day presentation, Mar 14, 2019
Slide 1: Investor Day | 14 March 2019
——EEE BRITISH AMERICAN TOBACCO Investor Day | 14 March 2019 * ae RANSFORMIN ACCELERATING DELIVERY —
Slide 2: Delivering Sustainable Returns
Delivering Sustainable Returns Tadeu Marroco Deputy Finance Director & Group Transformation Director
Slide 3: Important Information
Important Information 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 by, any person or entity
Slide 4: Important Information (continued)
Important Information 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 to be filed on 15 March 2019 and Current Reports on
Slide 5: Tadeu Marroco
TADEU MARROCO DEPUTY FD & GROUP TRANSFORMATION DIRECTOR 26Yrs Latin America, Europe, Central Asia, Middle East Group Financial Industry & Africa focus Controller experience MANAGEMENT BOARD SINCE 2014 Business development Regional Director Director WER/ENA
Slide 6: We remain committed to:
We remain committed to: 1 High Single Figure Adjusted EPS growth at Constant FX 2 Dividend policy of 65% of earnings with growth in Sterling terms 3 Focus on cost management to allow continued investment in New Categories 4 De-leveraging at -0.4x per annum at Constant FX
Slide 7: Where are we coming from?
RANSFORMING isis to) ACCELERATING DELIVERY a 5
Slide 8: Consistent growth in earnings and dividends
Consistent growth in earnings^ and dividends Earnings per share^ growth* Dividends per share 203 Average growth 2005 - 2018: 11% p. a. CAGR: 12% 195 169 148 154 142 135 127 114 100 84 66 56 47 5% 10% 10% 9% 5% 5% 12% 15% 12% 12% 10% 9% 9% 10% 11% 10% 8% 10% 10% 9% -4% -5% -4% -7% -12% -10% 2005 2006
Slide 9: An exciting future
RANSFORMING isis to) ACCELERATING DELIVERY a 7
Slide 10: We expect rapid growth in New Categories
We expect rapid growth in New Categories BAT NEW CATEGORY REVENUE AMBITION £bn Modern Oral THP £5bn Vapour Average 30% - 50% CAGR 0.9 0.6 0.3 2018* 2023/4 Funding growth while we deliver High Single Figure EPS* * Adjusted and constant rate basis. See Appendix, notes A2 and A3. Source: Internal Estim
Slide 11: New Categories bring enhanced margins
New Categories bring enhanced margins Category Gross Margin % of Revenue * excluding Devices 2017 2018 FMC 64% 65% THP Consumables 83% 81% VAPING Consumables 29% 42% MODERN ORAL 59% 66% TRADITIONAL ORAL 75% 78% PRRPs 67% 72% Average GM > FMC * Adjusted, representative and constant rate basis. See Ap
Slide 12: New Categories | Drivers of competitiveness
New Categories | Drivers of competitiveness Brands Consumer Insights Trade Marketing & Distribution Innovation Regulation Quality Supply Chain Research & Development Science IP New Categories represent a sustainable and profitable opportunity BAT is well positioned for a step change across each New
Slide 13: Our formula for growth
Our formula for growth Long Term Expectation 2018 Delivery Next 2-3 yrs (organic, constant FX) Net Revenue +3% to +5% +3.5% * Mid to Upper Operating Margin 50-100 bps 40bps ^ Mid to Upper 180 bps ex NGP Investment Adjusted Profit From Operations (APFO) +5% to +7% +4% * Upper +7% ex NGP Investment Ad
Slide 14: How we will de-leverage the balance sheet
How we will de-leverage the balance sheet 2018 Next 2-3 yrs APFO +4% * +5% to +7% Capex £0.9bn ~£0.9bn Operating Cash Flow Conversion % 113% ≥ 90% 100% ex MSA timing Net Interest Paid £1.5bn ~£1.5bn Tax £1.9bn ~26% ETR Free Cash Flow%‘ 113% ≥ 80% 92% ex MSA timing Free Cash Flow after Dividends £3.3
Slide 15: How will we fund the growth?
How will we fund the growth? 13
Slide 16: Good progress delivering a globally integrated enterprise
Good progress the last 5 years delivering a globally integrated enterprise (US still to come) › Completed SAP implementation in 180+ markets and 40+ factories, in record time › Single operating model with standardised business processes › This investment allowed us, in turn, to: › Drive functional t
Slide 17: Showcase | Global Business Services
Showcase | Global Business Services Good progress to date, with scale up of 3 strategic hubs › Fully functioning shared services supporting, Finance, Global Treasury, HR, Procurement, Master Data, Global Analytics, and Business optimisation › 1,700 employees partnering with 180+ markets (40% of Fina
Slide 18: Value adding capabilities in GBS
Value adding capabilities in GBS to drive simplification, speed and effectiveness Analytics & Insights Process Digitisation Process Automation Leveraging SAP platform to deliver Chatbots deployed to reduce 15 Bots deployed across New insights and reporting manual intervention Product Innovations, Pr
Slide 19: Showcase | Globally Integrated Operations
Showcase | Globally Integrated Operations – delivering P&L benefits… › Fully integrated supply chain managing 100% › Global Procurement to manage 90% of Direct of Group leaf requirements, including PRRP Materials and 80% of Indirects › One Virtual Global Factory › One Global Planning Hub OEE* IMPROV
Slide 20: Consistent underlying operating margin improvement
Consistent underlying operating margin improvement 0.7% 0.5% ‐0.6% ‐0.9% 0.2% 0.4% Adjusted Operating Margin Increase Average 2013‐18 1.9% Combustibles & Oral 1.4% 1.5% 1.6% 1.5% 1.5% 1.1% excluding TFX and NGP impact ‐0.4% ‐0.5% ‐0.4% ‐0.2% ‐0.1% ‐0.7% ‐1.4% Transactional FX ‐1.9% ‐2.1% ‐0.2% NGP I
Slide 21: Confident we can continue to drive operating margin growth
Going forward, we are confident we can continue to drive operating margin growth › “Sweat” the enterprise-wide platform to accelerate organisational efficiencies delivery and respond faster to the new challenges of the future › Accelerate Multi-Function GBS: new and sustainable growth engine › Impro
Slide 22: Transformational Ways of Working
Transformational Ways of Working to enable the Group’s growth agenda DIGITAL ORGANISATIONAL CAPABILITIES & STRUCTURES SCALE Accelerate Growth in the New Nicotine World OPERATING WITH GREATER FOCUS & SPEED AND AGILITY SIMPLICITY Cost efficiencies programme supporting the growth agenda
Slide 23: Conclusions
Conclusions › We will leverage our globally integrated enterprise › Our Cost Savings Programme will drive Operating Margin growth while we continue to invest in New Categories › We remain committed to delivering High Single Figure EPS growth at Constant FX › In the Short Term, EPS growth will be dri
Slide 24: Thank you.
——EEE BRITISH AMERICAN TOBACCO Thank you. cw * ae RANSFORMING ACCELERATING DELIVERY —
Slide 25: Appendix
Appendix A1: Representative basis Where appropriate, the Group is also presenting (as a supplement to the results) the 2018 performance against 2017, as though the Group had owned the acquisitions made in 2017 for the whole of that year. Comparison of results on this basis are termed “on a represent