British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — FY2020 Earnings Presentation
42 slides from British American Tobacco P.l.c's earnings presentation, February 2021
Slide 1: 'Accelerating Transformation' Preliminary results 2020
‘Accelerating Transformation’ Growth in New Categories and Group earnings despite COVID-19 Preliminary results 2020 Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
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 (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 and Current Reports on Form 6-K, which may be obtain
Slide 4: Committed to Building A Better Tomorrow: On track for 2025 targets
Committed to Building A Better TomorrowTM Today, we have a significant CPTO* base of c.£90bn With a strong growing base of 10% Non-Combustibles** Revenue and already 13.5mn consumers £5bn New Category Revenue by 2025 To reduce the health impact 50mn Non-Combustible** Product Consumers by 2030 of our
Slide 5: Transforming, Investing and Growing
Transforming, Investing and Growing • Accelerating New Category growth: • Additional 3m Non-Combustibles consumers* to reach 13.5m • Accelerating volume growth in New Categories in H2 • Continued growth and 20bps** value share gain in Combustibles • 100bps Margin expansion and c.£430m increase in Ne
Slide 6: With Clear Points of Difference
With Clear Points of Difference • The largest and only truly global tobacco and nicotine company 1 • Present in over 180 markets • Including the US – 40% of global industry value and creating trends across our multi-categories 2 • The only truly consumer-centric, multi-category company • With the gl
Slide 7: Accelerating Non-Combustible consumer acquisition
Accelerating Non-Combustible consumer acquisition* Non-Combustible** consumer numbers Vapour THP ModernOral TraditionalOral 13.5 m 6.7 m 4.0 m 1.5 m 3.0 m +3.0m (29%) +1.5m (30%) +1.4m (51%) +0.7m (79%) +0.1m (5%) When including Includes consumer poly-usage***: 1.7m (+0.7m or 70%) poly-usage: 15.2mn
Slide 8: Accelerating consumer acquisition in H2
Accelerating consumer acquisition in H2 13.5m +3m Non-Combustible* consumers over 2020 +1.1m FY20 Total Non-Combustible* +0.8m consumers +0.6m +0.5m Q1 Q2 Q3 Q4 (COVID impact) Non-Combustible* consumers 2020 growth Growth versus FY19. Source: Company data. *See Appendix A6 8
Slide 9: FY 2020: Building A Better Tomorrow
FY 2020: Building A Better TomorrowTM 13.5m 26 % 14 % 40 % Non-Combustible Value Share Volume share Volume Share product consumers* In Top 5 markets** In Top 6 markets** In Top 9 markets** +3m +52% +29% +62 % Vapour Pod/Liquid THP Stick Pouch Non-Combustible Volume growth product consumers* Volume g
Slide 10: Strong consumable volume growth in H2 across all categories
Strong consumable volume growth in H2 across all 3 categories +74% H1 H2 +59% +56% +43% +45% +9% Vuse glo Velo Pod/Liquid Stick Pouch Volume Volume Volume (ex Sens) Volume growth of Vapour consumables, THP sticks, and Modern Oral pouches. Vuse brand represents c. 80% of FY20 vapour revenue. Velo bra
Slide 11: FY 2020: Results Demonstrate Resilience
FY 2020: Results Demonstrate Resilience REPORTED ADJUSTED FY 2020 FY 2020 @ Current rates @ Constant rates* Revenue -0.4% +3.3% New Category Revenue +14.9% +15.4% Operating Margin +380 bps** +100 bps*** Profit From Operations +10.5%** +4.8% Diluted EPS +12.0%** +5.5% * On an adjusted, constant rate
Slide 12: FY 2020: Delivering Today
FY 2020: Delivering Today +20bps +15% +7.3% -4.3% Corporate Value New Category Price/Mix** BAT Volumes Share^ Revenue* (Combustibles) (FMC+THP+Hybrid) +3.3% +4.8% +5.5% £7.3bn Group Adjusted Profit* Adjusted Diluted Free Revenue* from operations EPS* Cash Flow*** Share growth versus FY19. Source: Co
Slide 13: Our Ethos enabled the best of BAT through COVID
Our Ethos enabled the best of BAT through COVID Bold & Operational ESG Empowered Agility Front & Centre • Sales force adapted routes to • Dynamic response to supply • Supporting communities with market against disruption chain disruptions & government testing equipment, 3D printers, & mandated shutd
Slide 14: Tadeu Marroco
Tadeu Marroco Finance and Transformation Director 14
Slide 15: FY 2020: Further Transformation Fuels Growth
FY 2020: Further Transformation Fuels Growth Delivering revenue, profit and earnings growth* in challenging circumstances Accelerating New Categories through H2 with good momentum into 2021 Combustibles and Quantum generating value and cashflow to invest in NCs £7.3bn FCF, driven by operating cash c
Slide 16: Revenue: Growth in a Challenging Environment
REVENUE: Growth in a Challenging Environment COVID Resilient Combustible volumes headwind c. 2.5% • Outperforming the industry (+30bps volume share*) • Strong performance in DMs +1.0% +2.3% -3.7% Robust pricing • Robust pricing environment +2.3% • • No accelerated downtrading +7.6% 3 year average pr
Slide 17: Vuse: Establishing Vuse as a Global Leader
Vuse: Establishing Vuse as a Global Leader x2 value share* in T5** Markets c.75% of Industry Revenue 69.0% # 2 29.1% # 1 20.0% 28.0% Vuse TTL Value Share Vuse TTL Value Share Dec-19 Dec-20 Dec-19 Dec-20 # 1 17.9% # 1 40.0% # 1 57.2% 13.1% 12.0% 23.3% 42.0% Vype TTL Value Share Vype TTL Value Share V
Slide 18: glo: Leveraging Improved Satisfaction to Drive Accelerated Growth
glo: Leveraging Improved Satisfaction to Drive Accelerated Growth Record Volume Share Across Key Markets (c. 80% of Industry Revenue) Japan Russia Italy Ukraine Romania 5.9% 1.4% 1.9% 1.2% 0.9% 5.0% 0.3% 0.5% 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%
Slide 19: Velo: International Leadership Driven by Superior Product
Velo: International Leadership Driven by Superior Product Leading* in both established With superior products** and new oral markets and mix c.95% of Industry Revenue, including US SWE NOR Established New to DEN Overall Product oral market oral market Appeal 64% 67% 91% VELO 4.7 4.9 CH DE CZE Compet
Slide 20: Velo: Expanded US Product Range to Accelerate Growth
Velo: Expanded US Product Range to Accelerate Growth Nov’20 Mar’21 Portfolio Strengthened by Dryft Acquisition 6K outlets c.80K Circle K outlets Exclusivity Nationwide* Initial Expanded portfolio portfolio Encouraging early results, with Nicotine strength (mg) 2&4 2, 4 & 7 distribution building Flav
Slide 21: Combustibles: Delivering Value Growth
COMBUSTIBLES: Delivering Value Growth +20 bps +40 bps +40 bps Corporate Value Corporate Volume Strategic Brand Share^ Share^ Value Share +2.8 % +7.3 % 66 % Combustibles Combustibles Strategic Brand Revenue* Price/Mix** Share of Group Combustible volume Share growth versus FY19. FMC share. ^ See Appe
Slide 22: Successfully Navigating Regulation
Successfully Navigating Regulation EU & Turkey Menthol Ban BAT nicotine consumer retention 109 % 105 % 91 % Total nicotine Total nicotine Total nicotine 91% - EU Menthol Industry retention retention retention volume retained in FMC FMC consumers migrating Hyper growth off-setting Significant vapour
Slide 23: Regions: Resilient performance across the Group
REGIONS: Resilient performance across the Group Adjusted Value Adjusted Profit from Revenue* Share** Operations* US +11.2% +45bps +15.5% ENA +2.1% Flat -2.4% APME -9.9% +10bps -7.3% AMSSA +1.4% +30bps -2.5% Group +3.3% +20bps +4.8% *Adjusted and constant rate basis. See Appendix A1-A2. **Value share
Slide 24: H2 Emerging Market volume recovery
H2 Emerging Market volume recovery BAT Volume H1 BAT Volume H2 BAT Volume Full Year Developed Emerging Developed Emerging Developed Emerging 0.0% GTR GTR -3.5% -3.5% -3.3% -6.1% -6.4% -6.7% -7.3% Source: Company data. BAT volume % change versus same period last year 24
Slide 25: US: A Strong Performance
US: A Strong Performance +11.2 +83 +15.5 Strong Brands Driving Value Share Growth % % % Higher Pricing Ahead of US Revenue US New Category US Operating Peers enabled by Revenue Growth* Revenue Growth* Profit Growth* Growth Management US Combustibles Volume Share 35%, Newport Value Share 17% +45 bps
Slide 26: Operating Margin: Releasing Funds to Support the Growth Agenda
OPERATING MARGIN: Releasing Funds to Support the Growth Agenda +1.0 -0.9 2.2 -0.4 44.1% 43.1% +100bps + c.£430m Operating New Category Margin Marketing Growth* Investment 2019 Adjusted Price/mix and Incremental Transactional FX 2020 Adjusted Operating Margin Operational Efficiencies New Categories O
Slide 27: Quantum: Generating Significant Additional Investment Resources
Quantum: Generating Significant Additional Investment Resources Quantum 1 Quantum 2 KEY BENEFITS Supply chain optimisation QUANTUM Generate resources Organisational design Operating model Fund investments and capabilities Simplification Route to market Marketing Spend Effectiveness Stronger, simpler
Slide 28: EPS: Growth up +5.5% Against Significant COVID Headwind
EPS*: Growth up +5.5%, Against Significant COVID Headwind Strong FY EPS* delivery • Resilient APFO** growth • Reduction in underlying tax rate to 24.9% 5.5% Resilient against headwinds • COVID • Higher Net Finance Costs + • Lower contribution from Adjusted diluted associates EPS* growth * Adjusted,
Slide 29: Cash: Strong Generation Driving Deleverage
CASH: Strong Generation Driving Deleverage Adj. Net Debt / Adj. 3.5x -0.3x 3.2x +0.1x 3.3x EBITDA 2.6 41.7 - 0.4 39.5 39.5 39.5 39.12 39.12 OPENING NET FREE CASH FLOW OTHER CASH & CLOSING NET DEBT FX CLOSING NET DEBT DEBT AFTER DIVS NON-CASH @ CONSTANT RATES* * On a constant rate basis. See Appendix
Slide 30: Cash and Deleverage: Strong Liquidity Position
CASH AND DELEVERAGE: Strong Liquidity Position >90% operating cash conversion Strong Operating Cash Strengthened Liquidity Manageable Maturity Flow Conversion in 2020 Profile £ in billions 8.9 £ in billions $ 3.9 100%* 103% 3.4 97% £ 1.9 € 3.9 $ 2.8 2.5 USD: Apr EUR: Apr GBP: Jun USD: Sep 7, 10 & 30
Slide 31: Capital Allocation: Our Priorities
CAPITAL ALLOCATION: Our Priorities ✓ Combustible value growth c.£40bn ✓ Working capital efficiencies 5 Year Drivers of cash Cumulative ✓ Capex = Depreciation* generation Free Cash ✓ £1bn Quantum savings 2020-2022 Flow ^ ✓ >90% operating cash flow conversion** ✓ 65% Dividend pay-out Capital Allocatio
Slide 32: FY 2021 Guidance: Resilience in an Uncertain Environment
FY 2021 GUIDANCE: Resilience in an Uncertain Environment Performance within guidance 3-5% range dependent on Revenue Growth* +/- External factors: Mid Single Figure • COVID impact EPS Growth** • US industry volume • Associate performance Continued Deleverage c.3X Adjusted Net Debt/Adjusted EBITDA by
Slide 33: Jack Bowles
Jack Bowles Chief Executive 33
Slide 34: Further Transformation Fuels Growth
Further Transformation Fuels Growth Clear Commercial Priorities Good Progress in 2020 Non-combustible Consumers* +3.0m STEP-CHANGE IN NEW CATEGORIES Accelerating New Category performance Combustibles price/mix** +7.3% COMBUSTIBLE Value share*** +20bps SIMPLIFY VALUE Savings of £660m driven by Quantu
Slide 35: Consumer-Centric Multi-Category model
Consumer-Centric Multi-Category model Multi-Category Consumer Portfolio Consumer Moments Digital Insights Consumer Centricity Digitally Product Embedded Satisfaction RGM* Index Product Boundaries Beyond multi-category… we are consumer-centric multi-category 35 * Revenue Growth Management
Slide 36: A Clear Framework to Accelerate Transformation
A Clear Framework to Accelerate Transformation Creating the Enterprise of the Future Quantum Unleash Empowered Shaping Technology & Delivery Innovation Organisation Sustainability Digital 36
Slide 37: Confident in Medium-Term Guidance Post-COVID
Confident in Medium-Term Guidance Post-COVID High 3-5% Single £5bn 50mn Figure EPS* New Non- Revenue* Categories Combustible growth Revenue Consumers** Growth Adjusted diluted (post COVID) by 2025 by 2030 Creating Shared Stakeholder and Shareholder Value * On a constant rate basis. See Appendix A2.
Slide 38: Committed to Building A Better Tomorrow: On track for 2025 targets
Committed to Building A Better TomorrowTM Today, we have a significant CPTO* base of c.90bn With a strong growing base of 10% Non-Combustibles** Revenue and already 13.5mn consumers £5bn New Category Revenue by 2025 To reduce the health impact 50mn Non-Combustible Consumers** by 2030 of our business
Slide 39: 'Accelerating Transformation' Preliminary results 2020
‘Accelerating Transformation’ Growth in New Categories and Group earnings despite COVID-19 Preliminary results 2020 Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
Slide 40: 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 a re-translation, at the prior year’s exchange rates, of the current year
Slide 41: Top BAT Market Share Movements (1)
Top BAT Market Share Movements (1) SOM FY20 Movement SOM FY20 Movement Market Market (%) (ppt) (%) (ppt) Argentina 23.4 0.1 France 16.0 (1.4) Australia 41.9 0.4 Germany 20.1 0.1 Bangladesh 78.3 9.9 Indonesia 4.0 (1.7) Belgium 25.0 0.2 Italy 17.7 (0.3) Brazil 74.9 (0.8) Japan 18.8 0.9 Bulgaria 37.8 0
Slide 42: Top BAT Market Share Movements (2)
Top BAT Market Share Movements (2) SOM FY20 Movement SOM FY20 Movement Market Market (%) (ppt) (%) (ppt) New Zealand 70.8 (1.3) Spain 10.4 (1.5) Pakistan 76.3 1.4 Switzerland 33.4 (1.6) Poland 27.8 (0.8) Taiwan 10.8 0.8 Romania 58.5 (0.4) Turkey 25.8 2.6 Russia 24.5 0.8 UK 8.6 (0.8) South Africa 76.
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