British American Tobacco P.l.c. · LSE:BATS
British American Tobacco P.l.c — Investor Day (2024)
19 slides from British American Tobacco P.l.c's investor day presentation, Oct 25, 2024
Slide 1: Capital Effectiveness & Our Growth Algorithm
Building a Smokeless World 7.83" Capital Effectiveness & Our Growth Algorithm Soraya Benchikh, Chief Financial Officer
Slide 2: My areas of focus
My areas of focus 1 2 3 4 Fuelling Disciplined targeted Strengthen Balanced transformation capital deployment financial resilience capital allocation • Drive Combustibles • Smart investment • Strong balance • Progressive dividend value focused on largest sheet • Sustainable share • Leverage NC profi
Slide 3: Our Mid-Term Growth Algorithm
Our Mid-Term Bal ance d capital allocat ion Growth Algorithm d tran sformation & Fun reholder returns sha 1 CO n rev Qu S 0b flow op 5 en al h ^ >£ as 30 u i tim 3- e ^ c 20 ty ow 5% n^ D sa isa eli gs by 2 gr * y vin e sio fre ver tion b ver ital 5 c.£2 30 th >90% cash con & cap working & bn Capex
Slide 4: Quality revenue growth: Sustainable Combustibles revenue growth
1 Quality revenue growth Sustainable Combustibles revenue growth Recent Combustibles volume & price/mix Combustibles mid-term outlook 2020-2023 CAGR (%) Industry volume*: -3% to -4% BAT volume: -3% to -4% Price/Mix Combustibles +5.0% Price/Mix: +4% to +5% Revenue Revenue**: +1.3% (constant currency
Slide 5: Quality revenue growth: Incremental New Category revenue growth
1 Quality revenue growth Incremental New Category revenue growth Recent NC volume & price/mix performance New Categories mid-term outlook 2020-2023 CAGR (%) • Volume growth driven by • Strong multi-category industry growth Price/Mix* • Share gains +10% • Enhanced price/mix* driven by New Categories
Slide 6: Increasing gross profit
2 Increasing gross profit New Category driving gross profit growth Gross profit evolution 2020-2023 CAGR 2020-2023 (%) • Resilient Combustibles gross profit Total Group gross profit: +4.2% • Pricing • RGM • COS efficiencies New +92% Categories • Rapidly growing New Categories gross profit • Volume a
Slide 7: Gross profit: Cost of sales optimisation
2 Gross profit Cost of sales optimisation Consistently delivered strong productivity savings • Further productivity savings expected via: Cost of sales savings (£bn) • Combustibles product simplification • New Category optimisation and scale benefits • 2023-2025 original productivity target of £1bn:
Slide 8: Increasing gross profit: Significant improvement in key markets
2 Increasing gross profit Significant improvement in key markets ITA FRA POL CZE SWE Total gross profit CAGR 2020-2023 (%) +5.6% +4.9% +7.7% +28.5% +19.5% New Category gross profit % of total 39% 33% 54% 40% 60% New Category gross profit 0% 1% 16% 4% 47% Combustibles 2020 2023 2020 2023 2020 2023 20
Slide 9: Accelerate New Category contribution: Smart reinvestment
3 Accelerate New Category contribution Smart reinvestment New Categories investment 2020-2023 93% • Smart and targeted investment to fuel 76% growth and contribution 57% 50% • Improving reinvestment rates as we grow 1.6 1.6 1.7 1.4 2020 2021 2022 2023 • Releasing additional resources to fuel growth
Slide 10: Accelerate New Category contribution: Profitability achieved ahead of expectations
3 Accelerate New Category contribution Profitability achieved 2 years ahead of expectations New Category contribution 2020-2023 (£bn) Contribution • Key drivers of category contribution growth: margin* (%) -77% -46% -13% 0% • Revenue growth driven by: • Volume and price/mix (0.4) • Category mix (1.0
Slide 11: Sustainable APFO Growth: Robust management of administrative overheads
4 Sustainable APFO Growth Robust management of administrative overheads* Group admin overheads* (£bn) 10% • Proven track record of disciplined cost 6% management 4% 1% • Broadly flat 2023 vs. 2020 in absolute terms • Managed 20%+ cumulative inflation over 2020-2023 1.8 1.8 1.8 1.8 • Successfully off
Slide 12: Sustainable APFO Growth: Building blocks in place
4 Sustainable APFO Growth Building blocks in place for sustainable growth Group APFO 2020–2023 Mid-term outlook* (£bn) +4.5% CAGR • Improvement in APFO growth in 2025 • Return to sustainable APFO growth of +4% to +6% by 2026 2020 2021 2022 2023 Chart data based on 2020-22 adjusted basis. 2022-’23 on
Slide 13: Cash delivery
5 Cash delivery Rigorous focus on cash delivery Free cash flow generation 2020-2023 (£bn) >100% operating cash flow conversion* • 2024-2025 cash delivery impacted by: • Timing of potential settlement payments** • FX headwinds 8.4 • Expect >£8bn annual free cash flow from 2026 8.0 7.3 7.4 • Growing i
Slide 14: Disciplined capital allocation
5 Disciplined capital allocation Balancing cash returns and deleveraging Consistent deleveraging £30bn cash returned to shareholders since 2018 Adjusted net debt to adjusted EBITDA* Cash returns to shareholders** 4.0 6.9 3.5 3.3 5.1 3.0 4.6 4.7 4.9 2.9 4.3 2.6 2018 2019 2020 2021 2022 2023 2018 2019
Slide 15: Capital allocation priorities
5 Capital allocation priorities Cash generation Generate in excess of £50bn* Free Cash Flow** by 2030 Deliver business transformation Targeted investment in business transformation Optimise portfolio Continuously review our footprint and drive cash flows Progressive Within 2.0-2.5x Assess bolt-on M&
Slide 16: Our 2026 Growth Algorithm supported by metrics
Our 2026 Growth Algorithm Bal ance d capital allocat ion supported by metrics d tran sformation & Fun reholder returns sha 1 CO bn low rev Qu S 0 op 5 hf ^ en al >£ as 30 u i tim 3- e ^ c 20 ty ow 5% n^ D sa isa eli gs by 2 gr * y vin e sio fre ver tion b ver ital 5 c.£2 30 th >90% cash con & cap wo
Slide 17: Transformation scorecard
Transformation scorecard Metric 2020 2021 2022 2023 1 Revenue growth (%) +3.3% +6.9% +2.3% +3.1% 2 Smokeless revenue/total revenue (%) 10.1% 12.3% 14.8% 16.5% Gross profit growth1 (%) +2.8% +6.0% +4.0% +2.8% New Category contribution margin3 (%) -77% -46% -13% 0% New Category spend effectiveness4 (%
Slide 18: My areas of focus
My areas of focus 1 2 3 4 Fuelling Disciplined targeted Strengthen Balanced transformation capital deployment financial resilience capital allocation • Drive Combustibles • Smart investment • Strong balance • Progressive dividend value focused on largest sheet • Sustainable share • Leverage NC profi
Slide 19: 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