British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — H1 2022 Earnings Presentation
47 slides from British American Tobacco P.l.c's earnings presentation, 2022
Slide 1: Interim Results 2022: New Category Growth Driving Faster Transformation
Interim Results 2022 New Category Growth Driving Faster Transformation 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: New Category Growth Driving Faster Transformation
Interim Results 2022 New Category Growth Driving Faster Transformation Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
Slide 5: We are Transforming and Delivering
We are Transforming and Delivering Transforming Delivering robust Successfully our business financial results navigating the macro environment Superior shareholder returns: Dividend growth and £2bn Buyback 5
Slide 6: H1 2022 - Transforming and Delivering
H1 2022 - Transforming and Delivering Transforming Delivering robust Successfully navigating our business financial results the macro environment • 20.4m adult consumers of • Group revenue up +5.7%; • £1.5bn Quantum savings Non-Combustible products* +3.7% at constant FX** delivered 6 months ahead of
Slide 7: Over 20m consumers of our Non-Combustible products
Over 20m consumers of our Non-Combustible* products 20.4 30% 2018-2022 18.3 Compound Growth Rate 16.1 13.5 11.6 10.5 8.9 8 2018 Dec 2019 Jun 2019 Dec 2020 Jun 2020 Dec 2021 Jun 2021 Dec 2022 Jun Consumers of Non-Combustible* products Source: Company data. * See Appendix A6. 7
Slide 8: Strong New Category revenue momentum
Strong New Category revenue momentum 31% 2018-2022 H1’22 NC Revenue CAGR Non-Combustible % of Group H1’21 Revenue H1’20 14.6% H1’19 H2’21 +2ppts* H2’20 H2’19 H2’18 12 months to 12 months to 12 months to 12 months to Jun 2019 Jun 2020 Jun 2021 Jun 2022 New Category revenue (Rolling 12 months trading)
Slide 9: On track for £5bn New Category revenue and profitability by 2025
On track for £5bn New Category revenue and profitability** by 2025 50%+ >£1bn 10% Reduction in Invested in Reduction in New Category New Categories New Category losses* in H1 2022 in H1 2022 losses* in 2021 2/3 1/3 9 New Category New Category New Category loss reduction loss reduction countries driv
Slide 10: glo hyper X2 – New smaller, lighter device
glo hyper X2 – New smaller, lighter device • Dedicated Boost button for maximum taste satisfaction • Improved LED status indicators • Convenient iris shutter 10
Slide 11: glo hyper X2 – now launched in Japan
glo hyper X2 – now launched in Japan 11
Slide 12: Vuse Go – New disposable fast approaching #2 in UK
Vuse Go – New disposable fast approaching #2^ in UK 12 ^ Value share of disposables segment, UK.
Slide 13: Vuse ePod 2+ – Our first Bluetooth connected device
Vuse ePod 2+ – Our first Bluetooth connected device 13
Slide 14: Velo – Driving growth through innovation and ESG
Velo – Driving growth through innovation and ESG 14
Slide 15: H1 2022 Reported results impacted by one-off items
H1 2022 Reported results* impacted by one-off items +5.7%Group Revenue 28.6 % Group Operating Margin Reported results most significantly impacted by c.£1bn impairment of Russian assets -25.0% Profit from Operations -42.9% Diluted EPS * Results presented on a reported current rate basis. 15
Slide 16: We are delivering robust financial results
We are delivering robust financial results H1 2022 Adjusted +3.9 +3.7% Group Revenue* Group Revenue* % 43.9% Group Operating Margin*** +4.9% Profit from Operations** 77% Operating Cash Conversion**** +5.7% Diluted EPS** £3.8bn Cash returned to shareholders^ Confident in Full Year guidance * On a con
Slide 17: Successfully navigating the challenging macro environment
Successfully navigating the challenging macro environment Quantum Agility Margin expansion* • Successfully £1.5bn managing inflation 43.9% • Activating Business Annualised Continuity Plans +90bps cost savings • Ensuring end market supply continuity * Growth versus H1’21. On an adjusted basis at curr
Slide 18: Full Year 2022 – Transforming and Delivering
Full Year 2022 – Transforming and Delivering Successfully Transforming Delivering robust navigating the our business financial results macro environment • Continued New Category • Revenue growth of 2-4%** • Leveraging our growth momentum • Mid-Single figure EPS organisational agility • Strong H2 inv
Slide 19: Tadeu Marroco
Tadeu Marroco Finance and Transformation Director
Slide 20: H1 2022: Robust financial results
H1 2022: Robust financial results REPORTED ADJUSTED H1 2022 H1 2022 @ Current rates @ Constant rates Revenue +5.7% +3.7%* New Category Revenue +45.4% +45.0%* Operating Margin -11.7 ppts +90 bps** Profit From Operations -25.0% +4.9%*** Diluted EPS -42.9% +5.7%*** Comparison versus H1’21. * On a repor
Slide 21: Delivering robust financial results
Delivering robust financial results +3.7% +4.8% +10bps £2.3bn Group Combustibles Cigarette & THP Free Cash Flow*** Revenue* Price/Mix** Value Share^ +45% -4.2% +4.9% +5.7% New Category Combustibles Adjusted Profit Adjusted Diluted Revenue* BAT Volume from Operations* EPS* Share growth YTD versus FY2
Slide 22: Strong revenue growth ahead of volume growth across all three New Category brands
Strong revenue growth ahead of volume growth across all three New Category brands *** • Revenue* up +48% • Revenue* up +44% • Revenue* up +37% • Volume up +19% • Volume up +30% • Volume up +10% • Category Share** 34.7% • Category Share** 19.6% • Category Share** 31.4% • Brand Power^ +7% • Brand Powe
Slide 23: Further reduction in New Category losses of £281m
Further reduction in New Category losses of £281m* • Prices increased in all 3 New Categories across both Revenue Growth devices and consumables Management • Improved Trade Margins for Vuse** • Further scale benefits Reduced Cost of • c.£120m productivity savings*** delivered Goods • Vuse Cost of Go
Slide 24: Vapour: Vuse extends global leadership despite growth in disposable segment
Vapour: Vuse extends global leadership despite growth in disposable segment Vuse value share momentum continues +48% Vuse revenue 34.7% growth* + 120 bps Vuse value share of Vapour category** Growing Vuse revenue faster +19% Vuse volume 49.8% + 670 bps than volume growth Vuse value share of Vapour c
Slide 25: Vuse growing closed system value share in all T5
Vuse growing closed system value share in all T5** Continued closed system momentum across T5** Markets (c.80% of Industry Revenue) US Canada UK France Germany 63.9% 49.2% 83.3% 89.0% 39.9% 88.2% 61.7% 42.1% 76.8% 31.0% 37.8% 33.4% 37.8% 45.8% 39.6% 15.6% 9.2% 3Q21 4Q21 1Q22 2Q22 3Q21 4Q21 1Q22 2Q22
Slide 26: Vuse Go disposable already launched in UK, rapid H2 roll out planned in Europe
Vuse Go disposable already launched in UK, rapid H2 roll out planned in Europe Already Fast approaching #3 Disposables #2 Disposables Share* Share* • Premium price positioning • Very limited cannibalisation • Take-back scheme for devices • Strong Youth Access Prevention controls with Verify platform
Slide 27: THP: glo continues to grow rapidly driven by hyper
THP: glo continues to grow rapidly driven by hyper glo volume share momentum continues +44% glo revenue 19.6% growth* + 160 bps glo volume share of THP category** Growing glo +30% 3.3% revenue faster glo volume + 70 bps than volume growth glo volume share of total nicotine (FMC+THP)** Revenue and vo
Slide 28: glo share of total nicotine up YTD in all T9 markets
glo share of total nicotine* up YTD in all T9 markets Record YTD glo Nicotine* Share in many key markets (c.80% of Industry Revenue) Japan Italy Romania Poland Czech Rep +0.6 ppts +1.0 ppts +0.3 ppts +1.9 ppts +1.0 ppts YTD YTD YTD YTD YTD 2.8% 7.3% 7.0% 3.2% 1.8% 1.8% 1.0% 0.7% 0.7% 1.5% 3Q21 4Q21
Slide 29: glo hyper X2 launched in Japan
glo hyper X2 launched in Japan 29
Slide 30: Modern Oral: Velo continued International leadership
Modern Oral: Velo continued International leadership* Maintaining European leadership in a fast growing category +37% Velo revenue 69.2% growth** -30 bps Velo volume share of European Modern Oral category*** Growing Velo +10%Velo volume 31.4% -3.4 ppts revenue faster than volume growth Velo volume s
Slide 31: Velo: Continued International leadership
Velo: Continued International leadership* Continued Share Growth Across Key** Markets (c.80% of Industry Revenue) USA Sweden Norway Denmark Switzerland 93.8% 92.0% 91.5% 93.0% 64.4% 64.3% 86.2% 61.6% 61.3% 85.3% 57.7% 21.1% 10.0% 56.3% 18.9% 6.3% 10.2% 8.9% 2.0% 1.5% 3Q21 4Q21 1Q22 2Q22 3Q21 4Q21 1Q
Slide 32: Velo: Geo expansion driving growth in new markets
Velo: Geo expansion driving growth in new markets UK volume share Leadership achieved Entering South Africa city pilot phase 2 Targeted activation plan with expanded distribution 48% volume share* +19 ppts 10 pouch mini can 5 pouch sachet pack • > 30% conversion to active user** • Trade presence inc
Slide 33: Combustibles: Delivering value growth
Combustibles: Delivering value growth +10 bps -10 bps +20 bps Combustibles Combustibles Strategic Brand Value Share^ Volume Share^ Value Share^ +0.6 % +4.8 % +30 bps Combustibles Combustibles US value share^ Revenue* Price/Mix** Financials growth versus H1’21 ^ Share growth versus FY21. Cigarette sh
Slide 34: H1 2022: All four regions contributing to results
H1 2022: All four regions contributing to results New Category Combustible Adjusted Profit Revenue* Revenue* Value Share** from Operations* EUROPE +49.8% +9.7% -30bps +11.7% APME +15.9% +4.7% +40bps -5.4% AMSSA +71.5% +6.0% -40bps +6.5% USA +59.2% -0.3% +30bps +5.5% Group +45.0% +3.7% +10bps +4.9% F
Slide 35: US: Continued Vuse strength and robust pricing in a challenging environment
US: Continued Vuse strength and robust pricing in a challenging environment • Vuse now #No.1 value share*** +59 • 19.4% volume growth -0.3 +380 • 60% revenue growth* % bps • 36.3% YTD May, up % 380bps US Revenue US New Category Revenue Growth* Vapour Growth* value share • Sequential combustible volu
Slide 36: Strong Group Operating Margin expansion
Strong Group Operating Margin expansion +90bps + 90 bps Margin improvement H1 2021 Adjusted Price/mix** and Incremental Transactional FX H1 2022 Adjusted Operating Margin Operational Efficiencies New Categories Operating Margin* * On an adjusted current rate basis. See Appendix A1. ** See Appendix A
Slide 37: EPS: Growth up +5.7%
EPS*: Growth up +5.7% H1 2022 EPS growth benefitting from: > Operational performance > Increase in Associate Income driven by post COVID recovery in ITC > Share buyback > FX translation tailwind +2.9% + 5.7% Adjusted diluted EPS* growth H1 2021 Adjusted Net Associates Taxation Non- Diluted H1 2022 a
Slide 38: Cash: On track for another year of strong cash conversion in excess of 90%
Cash: On track for another year of strong cash conversion in excess of 90% Further strong cash flow delivery: H1 Operating Cash Flow Conversion • Continued working capital focus • New ways of working releasing cash 80% 77% from business c.£40bn 67% 5 Year Cash flow weighted to H2, as normal 65%* Cum
Slide 39: FY 2022 Guidance maintained irrespective of timing of Russian business transfer
FY 2022 Guidance maintained irrespective of the timing of the transfer of our Russian business 2-4% Revenue Growth* Mid-Single Figure EPS Growth** * On a constant rate basis. See Appendix A2. ** Adjusted Diluted EPS on a constant rate basis. See Appendix A1 & A2. 41
Slide 40: Jack Bowles
Jack Bowles Chief Executive
Slide 41: We are delivering on our operational priorities
We are delivering on our operational priorities STEP-CHANGE IN Continued strong New Category momentum NEW CATEGORIES Delivering robust financial results COMBUSTIBLE SIMPLIFY VALUE THE GROWTH COMPANY Continued savings from Quantum Confident in FY 2022 guidance 43
Slide 42: Our Faster Transformation is well underway
Our Faster Transformation is well underway STEP-CHANGE IN We are transforming and delivering NEW CATEGORIES Driven by our multi-category strategy Actively encouraging adult smokers to switch* Delivering on our Purpose * To reduced risk products. Based on the weight of evidence and assuming a complet
Slide 43: We are building A Better Tomorrow
We are building A Better Tomorrow TM From To Multi-Category CPG Cigarettes Nicotine & Beyond* Declining Volume Growing Volume Growing Value & Value Carbon neutral Eliminate unnecessary single- 50 million consumers of £5bn New Category operations Net zero value chain use plastic in our packaging & No
Slide 44: Interim Results 2022: Q&A
Interim Results 2022: Q&A Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
Slide 45: Group Results excluding Russia/Belarus
Group Results excluding – Russia/Belarus Growth Total Group excluding Group excluding Group Growth Group excluding excluding Russia/Belarus Russia/Belarus H1’22 v H1’21 Russia/Belarus Russia/Belarus H1’22 H1’21 FY21 H1’22 v H1’21 Volume 291bn 301bn -3.4% -3.1% 608bn FMC & THP (£ Millions) (£ Million
Slide 46: Appendix
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
Slide 47: New Category Growth Driving Faster Transformation
Interim Results 2022 New Category Growth Driving Faster Transformation Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
British American Tobacco p.l.c. — H1 2022 Earnings Presentation on 6ix