British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Paris DB Consumer Conference (May 2019)
30 slides from British American Tobacco P.l.c's conference presentation, May 2019
Slide 1: Paris DB Consumer Conference
Paris DB Consumer Conference Jack Bowles | Chief Executive
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 filed on 15 March 2019 and Current Reports on Form 6
Slide 4: A strong foundation
A strong foundation Adjusted Profit Adjusted Net New Category Operating Revenue Revenue from Operations Margin +3.5%* +97%* +4.0%* +40bps 180bps ex NGP Investment Adjusted Dividend Free Cash Flow Diluted EPS pay-out ratio after Dividends +12%** +68% £3.3bn £1.9bn ex MSA timing Source: Company data.
Slide 5: Stronger, simpler, faster
Stronger, simpler, faster • A strong foundation • Established multi-category strategy • Superior consumer understanding • Continued outperformance in combustibles • Transforming the business
Slide 6: Three areas of focus
Three areas of focus STEP-CHANGE SIMPLIFY THE COMBUSTIBLE VALUE IN NEW CATEGORIES COMPANY GROWTH • Products & Brands that • Organisation redesign • Grow share consumers love • Additional cost savings • Leverage our Strategic Brands • Delivering in Digital programme • Sharper innovation focus • Build
Slide 7: Diverse consumers, differing needs
Diverse consumers, differing needs FMC THP Oral Vapour 9m → 20m+ PRRP Consumers 2018 to 2023/4 Source: Internal data and company estimates
Slide 8: Driving strong revenue growth
Driving strong revenue* growth 3-5% ~£5bn New Category Revenue by 2023/4 BAT Revenue (bn) CAGR 5XAcceleration in new categories 2018 2023-24 Revenue growth of 3-5%* pa | Average 30-50%* pa growth in New Categories Source: BAT Internal Estimates. £5bn stated @ Budget Rates * constant currency basis.
Slide 9: Step-change in New Categories
Step-change in New Categories BRANDS AND DELIVER IN BUILDING NEW PRODUCTS THAT CONSUMERS LOVE DIGITAL WORLD CAPABILITIES Average 30-50%* pa revenue growth in New Categories * constant currency basis. See Appendix A3.
Slide 10: Step-change in New Categories | progress to date
Step-change in New Categories | progress to date Consumer understanding Building global brands Winning products Rationalise and focus 1,000+ owned retail Digital engagement Advanced technologies Induction heating Distiller Plate
Slide 11: Vapour: Great products driving growth
Vapour: Great products driving growth Alto growing volume share in the US Leadership in Europe driven by strong growth of ePen3 Building a strong global brand is a key priority
Slide 12: Alto & Vibe driving US volume share recovery
Alto & Vibe driving US volume share recovery +5.5 pp* Vuse growth driven by Alto and Vibe Share of consumables volume (millilitres) Overall Vuse family share (ml) 19.1% 8.3 +4.3 pp* Alto share (ml) 5.5 8.3% +2.2 0.8 pp* 0.1 Vibe share (ml) Sep 2018 Oct 2018 Nov 2018 Dec 2018 Jan 2019 Feb 2019 Mar 20
Slide 13: ePen3 leads pod-mod category in the UK…
ePen3 leads pod-mod category in the UK… 40.7% Value Share of Market 6.8 ePen3 Maintains BAT value leadership 5.8 Competitor 6.8% ePen3 W45 W17 Nov18 Record value share Apr 19 Source: Nielsen retail share
Slide 14: … and France
… and France 16.4% Value Share of Market Retail value ePen3 share 12.1 12.1% ePen3 Key competitor 5.0 Retail value W45 W17 share Nov18 Apr 19 Source: Strator retail share
Slide 15: THP: New glo devices set to drive future growth
THP: New glo devices set to drive future growth Continued growth in Japan with a total nicotine share of 17% New glo devices and consumables in H2 deliver higher product satisfaction with better design For Europe new product launches in Q4 expected to drive growth
Slide 16: BAT growing share of the total nicotine market in Japan
BAT growing share of the total nicotine market in Japan glo share growth +40bps v Q4 18 Strong total nicotine share growth (FMC+THP) glo Competitor-1 Competitor-2 Excise 15.4 17.0 +1.6pp vs. Exit’17 24.4 24.3 22.9 22.8 21.3 21.5 4.3 5.0 5.0 PM 36.1 35.1 -1pp 18.5 4.6 vs. Exit’17 4.1 4.2 14.6 2.6 11.
Slide 17: New glo devices and consumables deliver higher product satisfaction
New glo devices and consumables deliver higher product satisfaction and improved performance Step 1: Overall Satisfaction at parity with key competitor launching in H2 ‘19 glo Pro glo Nano Rated Superior on: Rated Superior on: › Premium device › Ergonomics › Taste consistency › Taste consistency › S
Slide 18: Modern Oral | Rapid growth and a substantial opportunity
Modern Oral | Rapid growth and a substantial opportunity Leading category growth in Scandinavia and Switzerland Superior products Significant US growth opportunity for Velo FDA response on MRTP for Camel Snus pending Source: Company data
Slide 19: Leading category growth in traditional oral markets
Leading category growth in traditional oral markets SWE LYFT is outperforming competition NOR EPOK is the fastest growing brand Share of oral category Share of oral category LYFT EPOK 57% 1.8 73% 9.5 BAT Share of Modern 8.2 BAT Share of Modern Oral Segment Oral Segment 1.4 5.5 0.8 Competitor 0.7 0.5
Slide 20: Segment leadership in new oral markets
Segment leadership in new oral markets DK EPOK Category leader in Denmark SWZ EPOK #1 Brand Share of oral category Share of oral category EPOK 60.5 98% 53.2% Competition 46.7% BAT Share of Modern 38.0 Oral Segment 99% 37.8 BAT Share of Modern Oral Segment EPOK 24.9% Competition 1.8 CW1/18 CW3/18 CW5
Slide 21: Substantial US growth opportunity for Velo
Substantial US growth opportunity for Velo Roll-out to 70k Direct consumer Comprehensive Significant US outlets by year engagement in key marketing plan across roll-out from July end US cities all channels Key VELO Competitor Uniqueness 51% 42% (%T2B) 62 Expectations Exceeded (%) 36% 24% 55 Satisfyi
Slide 22: Summary | New Categories: Fewer brands, better products, more satisfaction
Summary | New Categories: Fewer brands, better products, more satisfaction VAPOUR THP MODERN ORAL Vapour products driving strong growth Continued growth in Japan with 17% share** Leadership in Modern Oral in Scandinavia & Switzerland Build a strong global brand New Glo devices and consumables to be
Slide 23: Simplify the Company | focus, energy, resources
Simplify the Company | focus, energy, resources ORGANISATION COST SAVINGS FOCUS ON CASH & REDESIGN PROGRAM DELEVERAGING CULTURE & TALENT Stronger | Simpler | Faster Reduce complexities Multi function global business services Generating around £1.5bn of free cash Building new skills & talent capabili
Slide 24: Combustible value growth
Combustible value growth GROW SHARE ACCELERATE GROSS MARGIN SHARPER INNOVATION FOCUS Leverage our brand & innovation assets Strategic brands portfolio Focus on growth segments 150Mn consumers use our Brands daily Revenue to Gross Margin conversion Powered by innovation improving fast Leading Share a
Slide 25: Combustible value growth | the engine of Group delivery
Combustible value growth | the engine of Group delivery Industry c. -3.5% +50bps +10 volume decline** Strategic Brand bps Corporate Strong Pricing Volume Share Value Share growth YTD v FY18* YTD growth v FY18 Combustibles drive value for reinvestment in New Categories & deleveraging Source: Company
Slide 26: Strong performance in the US
Strong performance in the US Value share +20bps YTD vs. FY’18 FY industry volume expected to be 30 around -4-5% 20 Issues interpreting Nielsen data Gas prices up 30%* BAT Strategic Brands -10 Vapour market impact c. -0.5% Non-Strategic Brands Strong pricing Source: Company data Complex, thorough pro
Slide 27: Summary | Three areas of focus – good progress, with more to come
Summary | Three areas of focus – good progress, with more to come STEP-CHANGE SIMPLIFY THE COMBUSTIBLE VALUE IN NEW CATEGORIES COMPANY GROWTH Good progress: • Proven and winning Vaping mix • Organisation redesign • Growing value share • Modern Oral share growth in EU • Cost savings areas identified
Slide 28: We deliver against our financial metrics | 2019 guidance
We deliver against our financial metrics | 2019 guidance Adjusted Profit Adjusted Net New Category Operating Revenue Revenue from Operations Margin 3-5%** 30-50%** 5-7%* 50-100bps Mid-Upper Avg CAGR Upper Adjusted Dividend Free Cash Flow Adj Net Debt Diluted EPS payout ratio after Dividends /Adj EBI
Slide 29: Appendix
Appendix A1: Representative basis Where appropriate, the Group presented (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 were termed “on a representative ba
Slide 30: Paris DB Consumer Conference
Paris DB Consumer Conference Jack Bowles | Chief Executive
British American Tobacco p.l.c. — Paris DB Consumer Conference (May 2019) on 6ix