British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — British American Tobacco Industries, p.l.c. — H1 2024 Earnings Presentation
52 slides from British American Tobacco P.l.c's earnings presentation, Jul 25, 2024
Slide 1: Building a Smokeless World
Building a Smokeless World Interim Results 2024 Tadeu Marroco – Chief Executive | Soraya Benchikh – Chief Financial Officer
Slide 2: 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 3: Important Information
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 and Current Reports on Form 6-K, which may be obtain
Slide 4: The way forward
The way forward Interim Results 2024 Tadeu Marroco – Chief Executive
Slide 5: Driving a sustainable transformation
Driving a sustainable transformation ▪ Our transformation continued in H1 ▪ Consumers of Smokeless* products up 1.4m to 26.4m ▪ Smokeless represents 17.9% of Group revenue, up 1.4ppts A Better Tomorrow ▪ Driving returns on more targeted NC investment ▪ £165m increase in category contribution** Build
Slide 6: Targeted investment year in 2024
Targeted investment year in 2024 H1 performance in line with Confident in H2 acceleration to expectations and guidance deliver FY guidance (Negative low-single digit revenue* and APFO**) (Low-single digit revenue* and APFO** growth) Key factors: Key drivers: ▪ Adverse U.S. wholesaler inventory moves
Slide 7: Sharper execution focus in six key areas
Sharper execution focus in six key areas Sharpen execution 1 2 3 4 5 Drive Consistent U.S. Significantly Lead responsible Enhance profitability in combustibles strengthen HP New Category financial New Categories value growth development flexibility 6 Collaborative and inclusive culture 7
Slide 8: Good progress over the last 12 months… with more to do
Good progress over the last 12 months… with more to do Sharpen execution 1 2 3 4 5 Lead Drive Consistent U.S. Enhance Significantly responsible profitability in combustibles financial strengthen HP New Category New Categories value growth flexibility development Increased NC Encouraging results Pate
Slide 9: H1 performance in line; on track for FY24 guidance
H1 performance in line; on track for FY24 guidance Interim Results 2024 Soraya Benchikh – Chief Financial Officer
Slide 10: Returns-focused approach, enabled by empowered teams
Returns-focused approach, enabled by empowered teams Extensive global My Key Priorities Finance/Management career ▪ Various pivotal BAT roles ▪ Quality Growth focus ▪ Over two decades across three ▪ More balanced top and bottom- continents line performance ▪ Most recently: President for Europe ▪ Tar
Slide 11: H1 performance in line with expectations
H1 performance in line with expectations Group New Category Profit from Diluted Earnings per Revenue Revenue Operations Share Reported -8.2% -0.4% -28.3% +13.8% £12,340m £1,651m £4,258m 200.3p Adjusted -0.8%* +7.4%* -0.9%** +1.3% ** Organic Constant Currency 177.7p £12,944m £1,709m £5,809m On track
Slide 12: H1 performance impacted by U.S. wholesaler inventory movements
H1 performance impacted by U.S. wholesaler inventory movements… HY24 U.S. HY24 Group Organic Organic Organic Organic adjusted for U.S. inventory^ adjusted for U.S. inventory^ -13.7% -11.4% -6.6% -6.4% Volume* Volume* Volume* Volume* -6.7% -4.8% -0.8% FLAT Revenue** Revenue** Revenue** Revenue** -5.1
Slide 13: Organic adjusted results in line with guidance
Organic adjusted results in line with guidance Organic Group Organic Adjusted Organic Adjusted Revenue* Operating Profit** Diluted EPS** Key performance drivers £bn £bn Pence NC revenue* +7.4% -0.8% -0.9% +1.3% Combustibles revenue* -2.6% ▪ Volume^ -6.9% ▪ Price^ +7.2% ▪ Mix^ -2.9% ▪ -1.6% revenue a
Slide 14: New Category revenue growth driven by Velo
New Category revenue growth driven by Velo Heated Modern 28.4% Vapour Products Oral Total 2020 – 2024 CAGR £889m £469m £351m £1,709m HY24 vs. HY23 1.7 breakdown by 1.6 Category 1.3 48.7% 0.9 0.6 2.6% 7.4% HY20 HY21 HY22 HY23 HY24 -4.0% New Category revenue (£bn) HY24 New Category revenue and growth*
Slide 15: Vuse: Maintains global value share leadership
Vuse: Maintains global value share leadership* Vapour revenue up +2.6%** -50bps Value share Top Vapour markets share*** HY24 vs. FY23 51.2% 87.8% 9.4% 28.8% 41.4% -1.1ppts -4.8ppts -0.6ppts +2.9ppts 40.9% US CAN GBR DEU 39.3% 54.5% 15.4% 30.1% +6.0ppts +1.0ppts +7.1ppts FRA POL ESP APMEA APMEAexciti
Slide 16: glo: innovation drives sequential share gains in H1 2024
glo: innovation drives sequential share gains in H1 2024 glo revenue down -4.0%* -20bps Volume share Latest volume share gains in selected key markets HY24 vs. FY23 (growth vs. Dec’23***) 18.1% 18.4% 13.2% 34.7% 17.1% +0.6ppts +0.7ppts +1.4ppts 16.8% JPN ITA POL New glo Hyper Pro and enhanced consum
Slide 17: Velo: Strong category growth and continued AME leadership
Velo: Strong category growth and continued AME leadership* AME T6 Share Modern of Modern Oral revenue upOral Category +48.7%** 64.9% +30bps +110bps Volume share of Modern Oral Volume share of Total Oral #1 in AME * 57.4% 63.4% SWE NOR 87.6% 55.4% DNK GBR 29.5% 8.3% 27.1% 9.5% 27.4% 10.6% 93.8% 95.4%
Slide 18: Quality Growth drives improved NC Contribution margin and profitability
Quality Growth drives improved NC Contribution margin* and profitability** New Category Contribution** (£m) New Category Contribution Margin* FY22 FY23 HY24 FY22 FY23 HY24 136 8% 0 0% -366 +£165m +10ppts HY24 HY24 Improvement -13% Improvement vs. HY23*** vs. HY23*** Improving contribution* across al
Slide 19: Combustibles: AME and APMEA growth offset by the U.S.
Combustibles: AME and APMEA growth offset by the U.S. Key drivers Combustibles organic revenue** growth by region and globally AME APMEA U.S. Group ▪ YTD volume share* +30bps 3.0% ▪ AME +30bps, APMEA +70bps ▪ YTD value share* -10bps driven by the U.S. 1.2% ▪ AME & APMEA +20bps -1.6% Adj. for U.S. In
Slide 20: U.S.: Macro-economic and illicit vape pressures persist
U.S.: Macro-economic and illicit vape pressures persist Revenue* APFO** New Category Revenue* +2.2% -6.7% -5.1% £5,514m £3,135m Vapour Modern Oral Adjusted for inventory movements^ -4.8% -2.6% flat +122% Combustibles Revenue* 20% -8.5% Smokeless^^ as a % of U.S. revenue Adjusted for inventory moveme
Slide 21: U.S. combustibles industry impacted by continued macro-economic pressures
U.S. combustibles industry impacted by continued macro-economic pressures HY24 drivers of industry volume decline HY24 BAT volume* and drivers -10.0%* (includes c.-4% poly-usage**) Industry Industry volume BAT adjusted Consumer Industry de- volume Low end decline HY24 Share volume Inventory BAT volu
Slide 22: U.S. commercial actions gaining traction
U.S. commercial actions gaining traction H1 volume share showing signs …to support sustainable value share of recovery… delivery HY23 FY23 HY24 HY23 FY23 HY24 vs. vs. vs. vs. vs. vs. HY22 FY22 HY23 HY22 FY22 HY23 Volume share* Value share* basis points basis points Total U.S. combustibles -30 -10 +1
Slide 23: AME: Strong H1 delivery
AME: Strong H1 delivery Revenue* APFO** Organic New Category revenue* +15.8% +5.4% +5.3% Modern £4,580m £1,567m Vapour Oral HP +1% +47% +7% Regional growth drivers: 25% Organic combustibles revenue* Smokeless^ as a % of AME revenue in markets where we are present TUR MEX ROM SWE GER +3.0% Continued
Slide 24: APMEA: Resilient delivery
APMEA: Resilient delivery Revenue* APFO** New Category revenue* -3.3% +1.8% +3.8% Modern £2,850m £1,107m Vapour Oral HP +48% +24% -13% Regional growth drivers: 18% Smokeless^ as a % of APMEA revenue in Combustibles revenue* +1.2% markets where we are IDN PAK LKA NZL NGA present Expected H2 accelerat
Slide 25: Group margin: offsetting transactional FX and inflationary headwinds
Group margin: Successfully offsetting transactional FX and inflationary headwinds with NCs and efficiency gains flat* +0.2% Improvement in New Categories Contribution contributing to Operating Margin Performance partly offset by Transactional FX and traditional business * On an organic, adjusted con
Slide 26: Adjusted organic diluted EPS up 1.3%
Adjusted organic diluted EPS up 1.3%* Organic Adjusted Current** -3.5% +1.3% FX headwind -4.7% Organic Adjusted Constant* . * Adjusted diluted EPS on an organic, constant rate basis. See Appendices A1 , A2 & A7. **Adjusted diluted EPS on an organic, current rate basis. See Appendices A1 and A7. 26
Slide 27: Continued strong cash generation driving leverage reduction
Continued strong cash generation driving leverage reduction Strong operating cash conversion* Strengthening our balance sheet alongside a manageable maturity profile Expecting another year of strong Expect to be within our narrowed 2-2.5x adj. operating cash conversion >90%* net debt / adj. EBITDA c
Slide 28: Dynamic approach to capital allocation as we transform
Dynamic approach to capital allocation as we transform Cash Flow c.£40bn Investing Litigation/ 5-Year in our transformation Fiscal/Regulatory outcomes Cumulative Free Cash Flow*** Free Cash Flow* Growing Narrowed 2.0-2.5x** Bolt-On Sustainable Dividend Leverage Corridor M&A Share Buy-Back Committed
Slide 29: 2024 is the first step in delivering our mid-term sustainable growth algorithm
2024 is the first step in delivering our mid-term sustainable growth algorithm 2026 2025 Sustainable mid-term growth Progressive improvement 2024 Targeted investment • Continued U.S. recovery 3-5% Organic Revenue • Improved NC profitability*** Growth* • Low-single digit organic revenue* • Strengthen
Slide 30: Confident in H2 acceleration
Confident in H2 acceleration Interim Results 2024 Tadeu Marroco – Chief Executive
Slide 31: Confident in our H2 performance acceleration
Confident in our H2 performance acceleration H1 24 H2 24 FY24 Results Acceleration Guidance Organic Organic adj. for U.S. inventory^ H2 expected accelerators Group Low-single • Improving U.S. performance revenue* -0.8% Flat digit • Unwind of wholesaler inventory movements • Majority of previously an
Slide 32: U.S. consumer sentiment is a leading indicator of premium volume trends
U.S. consumer sentiment is a leading indicator of premium volume trends Global Financial Period of rising consumer confidence (2010-2020) Inflation COVID Crisis Crisis -3.9% volume decline (CAGR) Federal Excise Tax increase 97 98 95 96 93 92 88 89 87 86 84 82 79 78 77 72 66 67 65 64 59 1% 1% 0% 0% -
Slide 33: U.S. deep discount segment stabilising while branded value starting to increase
U.S. deep discount segment stabilising while branded value starting to increase +0.8ppts +0.1ppts share gain Dec’23 vs. Jan’23 share gain May’24 vs. Dec’23 Deep discount segment volume share of U.S. market 13.1% May’24 Volume Share HY24 vs. FY23 33vs. Dec23 12.3% Deep discount segment 13.0% +0.4ppts
Slide 34: Volume share gains in key investment states drive H1 national share recovery
Volume share gains in key investment states drive H1 national share recovery Newport Newport Menthol Soft-Pack Positive Impact Newport volume share of premium % 24.0 25.1 80% Reduction in Low-End Growth* vs. HY22 Newport soft-pack volume share of market % 3.1 30% Improvement in Newport Box Switch ou
Slide 35: Strengthening our portfolio for long-term delivery
Strengthening our portfolio for long-term delivery • Balanced portfolio • Expanded retail contract coverage • Increased sales force by 10% • Upgraded digital data analytics Natural American Spirit Lucky Strike 2.7 Value share % 4.6 Value share % 4.3 1.3 JUL22 SEP22 NOV22 JAN23 MAR23 MAY23 JUL23 SEP2
Slide 36: Investment in retail contract expansion driving growth
Investment in retail contract expansion driving growth Through our expanded …we are driving volume share …with gains across our contract universe… momentum portfolio* -1.6ppts 26.3 82% 88% Deep discount 24.3 24.8 +1.2ppts 22.2 Q3’23 Q2’24 +2.3ppts 20.8 21.5 19.3 +0.6ppts Coverage BAT 18.5 +0.5ppts J
Slide 37: Actively supporting more effective U.S. Vapour enforcement
Actively supporting more effective U.S. Vapour enforcement FDA • Increasing fines, import refusals and seizures • Creation of Federal Multi-Agency Task Force, including: • Department of Justice, Federal Trade Commission Active Reynolds engagement • Vuse Alto tobacco Marketing Granted Orders received
Slide 38: Encouraging progress on vapour enforcement at state level
Encouraging progress on vapour enforcement at state level Louisiana Vapour directory and enforcement More directories to come actions drive Iegal market growth Industry WI RI IA NE Louisiana Vapour volume Volume CA UT CO KY VA +15.9% +23.0% OK NC vs. Pre-Enforcement* AL LA +3.2ppts Louisiana Vapour
Slide 39: glo volume share turnaround driven by Hyper Pro
glo volume share turnaround driven by Hyper Pro Japan Italy Poland Volume Share of Category* Volume Share of Category Volume Share of Category glo DS glo SS glo glo 34.7% +1.2ppts 16.9% +1.4ppts 15.8% 15.7% +0.7ppts 13.1% 13.2% 33.3% 12.4% 3.2% 33.3% 2.1% 1.5% June-23 Dec-23 Jun-24 June-23 Dec-23 Ju
Slide 40: Pro resonating strongly with consumers on key attributes
Pro resonating strongly with consumers on key attributes Stronger brand equity Clearly improved perception Improved ADC*** for Pro driven by Pro* post-trial** consumers* Device Attribute Uplift glo ADC Progression glo Brand Strength Score (May’24) (May’24 vs. Dec’23) (Post Trial) Great All other Tot
Slide 41: Vuse Go 2.0: New single-use vape with removable battery
Vuse Go 2.0: New single-use vape with removable battery* Vuse Go 2.0 11 market launches since May significant with superior heating technology H2 roll-out 5k 8k Easy-view liquid Improved Mouthpiece 1K 3K 5K 8K FeelM Max SA Boost / Intensity Better Sensorials Control Removable Battery* Battery indica
Slide 42: Vuse Go Reload: Modi-style rechargeable device with upgraded pods
Vuse Go Reload: Modi-style rechargeable device with upgraded pods Vuse Go Reload device 8 market launches since May Coupled with our best ever Vuse flavours significant H2 roll-out New And Improved 2ml Pod Ready To Vape, Up To 1000 Puffs Modi-like Long Lasting Battery Device Lock Ergonomic Design Wh
Slide 43: Reinvigorating our Modern Oral portfolio in the U.S.
Reinvigorating our Modern Oral portfolio in the U.S. New York National National Launch Begins 14.5% HY24 volume share +3.9ppts vs. FY23 +122% NY Pilot Launch HY24 16.5% Revenue* growth June volume share vs. HY23 From 9.3% pre-pilot Weekly volume National Jul’23 Aug Sep Oct Nov Dec Jan'24 Feb Mar Apr
Slide 44: Additional Modern Oral launches expected to drive H2 performance
Additional Modern Oral launches expected to drive H2 performance Grizzly Modern Oral U.S. Launches with added sensorial nationwide roll-out underway dimension across international markets • Insight: Traditional Oral consumers • Insight: Sensorial flavour experience are increasingly using Modern Oral
Slide 45: On track for full-year guidance
On track for full-year guidance Key drivers • Reversal of U.S. wholesaler inventory moves^ • Majority of previously announced investment in U.S. commercial initiatives now completed o H1 volume and value share signs of recovery, led by premium • Acceleration in New Category growth Confident in H2 ac
Slide 46: Driving a sustainable transformation
Driving a sustainable transformation • Our smokeless* transformation continued in H1 A Better • Increasing NC returns on more targeted investment Tomorrow • Making good progress on our six focus areas set out at HY23 Building a Switch Smokeless to Better World • Enhanced financial flexibility and re
Slide 47: Q&A Interim Results 2024
Q&A Interim Results 2024 Tadeu Marroco – Chief Executive | Soraya Benchikh – Chief Financial Officer
Slide 48: BAT Capital Markets Day – 16 October, Southampton, UK
BAT Capital Markets Day – 16 October, Southampton, UK Click for event preview video: https://www.bat.com/cmd2024 *This event is open to sell-side analysts and institutional shareholders. Space is limited. 48
Slide 49: Appendix
Appendix Interim Results 2024
Slide 50: Appendix: Our New Category shares in Top markets
Appendix: Our New Category shares in Top markets* Cigarettes Volume share of Vuse Value share glo Volume share Velo Volume share Volume share Cigarettes of Total Vapour of HP of Total Oral of Modern Oral HY24 Change HY24 Change HY24 Change HY24 Change HY24 Change volume HY24 vs. value HY’24 volume H
Slide 51: Appendix: Group Results excluding Russia in H1
Appendix: Group Results excluding – Russia in H1 Group excluding Group excluding Growth excluding Total Russia/Belarus Russia/Belarus Russia/Belarus Group Growth HY24 HY23 HY24 v HY23 HY24 v HY23 Volume 260bn 278bn -6.6% -12.7% FMC & HP (£ Millions) (£ Millions) Revenue* 12,944 13,056 -0.8% -3.7% NC
Slide 52: Appendix: Definitions
Appendix A1: Adjusting (Adj.) 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 the prior year's exchange rate, removing the potentially distorting effec
British American Tobacco Industries, p.l.c. — H1 2024 Earnings Presentation on 6ix