British American Tobacco p.l.c. · LSE:BATS
British American Tobacco p.l.c — H1 2021 Earnings Presentation
43 slides from British American Tobacco p.l.c's earnings presentation, 2021
Slide 1: Strong Brands Drive New Category Acceleration
Strong Brands Drive New Category Acceleration Interim Results 2021 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: Strong Brands Drive New Category Acceleration
Strong Brands Drive New Category Acceleration Interim Results 2021 Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
Slide 5: Building A Better Tomorrow
Building A Better TomorrowTM Our Purpose Our Commitment To provide adult To reduce the consumers with a wide health impact range of enjoyable and of our business less risky products To encourage smokers to switch completely to scientifically-substantiated reduced-risk alternatives* * Based on the we
Slide 6: Delivering Our Purpose is Transforming BAT
Delivering Our Purpose is Transforming BAT From To Multi-category CPG Cigarettes Nicotine & Beyond* Declining Volume Growing Volume Growing Value & Value Creating value for all our stakeholders 50 million consumers of £5bn New Category Eliminate unnecessary single-use Carbon neutral non-combustible*
Slide 7: HY 2021: Consumer-Centric Multi-Category Strategy Delivering Strong Growth
HY 2021: Consumer–Centric Multi–Category Strategy Delivering Strong Growth Consumer Consumer Digital Multi- • Strong New Category momentum, revenue* up +50% Insights Category Moments Portfolio • Building strong brands - leveraging digital • Continued progress on ESG Consumer Centricity 91 /100 Digit
Slide 8: HY 2021: Strong New Category Momentum
HY 2021: Strong New Category Momentum New Category Revenue* up +50% Record H1 NC Consumer Acquisition**, up +2.6m to 16.1m Global Fastest Growing Global Leadership THP Brand Leadership ambition ambition ambition Revenue* up +59% Revenue* up +38% Revenue* up +63% * Revenue growth at constant rates. S
Slide 9: HY 2021: Building A Better Tomorrow
HY 2021: Building A Better TomorrowTM 16.1m 32 % 17 % 40 % Non-Combustible Value Share Volume share Volume Share product consumers* In Top 5 markets** In Top 9 markets** In Top 5 markets** +2.6m +6.1ppts +3.2ppts +2.8ppts Growth Growth Growth Growth Growth May YTD versus FY20. Source: Company data.
Slide 10: HY 2021 - Accelerating Consumer Acquisition Across All Three Categories
HY 2021 - Accelerating Consumer Acquisition* Across All Three Categories Number of consumers of Non-Combustible** products Vapour THP ModernOral TraditionalOral 16.1 m 7.5 m 5.3 m 2.2 m 3.0 m +2.6m (19%) +0.9m (13%) +1.2m (31%) +0.7m (45%) Flat When including Includes consumer poly-usage***: 1.9m (+
Slide 11: HY 2021: Accelerating Consumer Acquisition
HY 2021: Accelerating Consumer Acquisition* Record 1H21 Performance: +2.6m vs. Dec 20 (c. 2.5x vs. 1 year ago); +4.5m vs. Jun 20 +2.6m 16.1 Accelerating & +1.9m Highest ever 13.5 6-monthly growth +1.1m 11.6 c.85% +1.6m of FY 2020 10.5 +0.9m growth already 8.9 achieved in 8 1H21 2018 Dec 2019 Jun 201
Slide 12: HY 2021: Consumer Conversion Driving Strong Consumable Volume Growth
HY 2021: Consumer Conversion* Driving Strong Consumable Volume Growth** 2H20 1H21 +124% +99% +70% +59% +56% +45%^ Vuse glo Velo Pod/Liquid Stick Pouch Volume Volume Volume * Consumer conversion from cigarettes to New Categories. ** Growth versus same period last year. ^ Excluding glo Sens growth in
Slide 13: We are Building Brands of the Future
We are Building Brands of the Future #1 Value Share in 4 of T5** Ambition to become Fastest Fastest Awareness Growth in & fastest growing*** in all T5** Growing*** THP Brand the US 1ST Carbon Neutral Record glo category share Strongest Brand in the Nordics Global vape brand^ in key markets Strengthe
Slide 14: Powered by Consumer-Focused Digitalisation
Powered by Consumer-Focused Digitalisation 12.1M 29M c.1.9 Bn # 1 in Contactable Adult Total own Potential media reach from Strategic Branded +142% New Category Consumers e-comm visits partnerships (1H21) search traffic Increase in social across T5* for Vuse followers vs 1H20 +63% vs 1H20 +58% vs 1H
Slide 15: Building a Consumer-led Ecosystem Beyond Nicotine
Building a Consumer-led Ecosystem Beyond Nicotine Target areas: Target Consumer Areas Boost & Energy 13 investments Health and Functional Wellness products – e.g. Science Sustainability Technology closed to date Focus, Energize & Relax Clarity & Focus • R&D collaboration Calm & Relax • c.20% associa
Slide 16: Quest: Accelerating Our Transformation
Quest: Accelerating Our Transformation Deliver Quantum Creating infrastructure towards a Unleash multi-category platform business Innovation Empowered Enhancing our future sustainability Value creation for Organisation A Better TomorrowTM Purposeful, Accelerating change with next-Gen Consumer Centri
Slide 17: HY 2021: Currency Translation Masks Strong Growth
HY 2021: Currency Translation Masks Strong Growth REPORTED ADJUSTED HY 2021 HY 2021 @ Current rates @ Constant rates* Revenue -0.8% +8.1%** New Category Revenue +40.4% +50.0%** Operating Margin -120 bps -70 bps*** Profit From Operations -3.7% +5.4% Diluted EPS -6.0% +6.1% * On an adjusted, constant
Slide 18: HY 2021: Strong Results
HY 2021: Strong Results +50% +4.3% +10bps +5.4% New Category Combustibles Cigarette & THP Adjusted Profit* Revenue* Price/Mix** Value Share^ from Operations +8.1% +1.5% +20bps +6.1% Group Combustibles Cigarette & THP Adjusted Diluted Revenue* BAT Volumes Volume Share^ EPS* Share growth YTD May 21 ve
Slide 19: HY 2021: Accelerating our Transformation
HY 2021: Accelerating our Transformation Clear Operational Priorities Strong results in H1 2021 Accelerating New Category growth* STEP-CHANGE IN Non-Combustible** Consumers +2.6m to 16.1m NEW CATEGORIES Building strong brands and leveraging digital c.£350m increased*** NC investment COMBUSTIBLE SIMP
Slide 20: Tadeu Marroco
Tadeu Marroco Finance and Transformation Director 20
Slide 21: Accelerating our Transformation
Accelerating our Transformation Strong progress against financial focus areas 1. Releasing funds to support growth agenda • £0.9bn total Quantum savings delivered to date • Value through combustibles, revenue* up +5.8% 2. Maximising marketing spend effectiveness • c.£350m incremental** investment dr
Slide 22: Revenue: Strong Growth and New Category Momentum
Revenue: Strong Growth and New Category Momentum Revenue growth* +8.1% • Combustible revenue* +5.8% +2.9%* • New Category revenue* +50% -8.9% – Vapour +59% – THP +38% +5.2%* – Modern Oral +63% + 8.1% Strong volume performance Revenue growth • Accelerating NC volumes • Combustibles +10bps volume shar
Slide 23: Accelerating Portfolio Transformation
Accelerating Portfolio Transformation % of H1 DM/EM revenue in % of H1 Group revenue non-combustibles in non-combustibles 15% 12% 1 + ppts v FY20 4% 2 + ppts v FY20 2 + ppts v FY20 Developed Emerging Group Markets (DM) Markets (EM) (c.70% of Group Revenue) (c.30% of Group revenue) Source: Company da
Slide 24: Vuse: Approaching Global Category Leadership
Vuse: Approaching Global Category Leadership Continued strong value share* across T5** Markets (c.75% of Industry Revenue) US Canada UK France Germany 76.7% 59.0% 44.6% 30.9% 19.9% 51.2% 50.3% 15.5% 33.9% 24.2% 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20
Slide 25: Vuse: Approaching Leadership in the US
Vuse: Approaching Leadership in the US Vuse US value share • Vuse value share up 5.1ppts reaching 30.0% May YTD • Number 1 device share, with 60.4% May YTD 30.9% • Vuse consumable volume up 97% • Vuse key brand attributes* ahead of main peer • Brand I Love, High Quality, Advanced Technology 24.2% •
Slide 26: glo: Hyper Continues to Accelerate Share Growth
glo: Hyper Continues to Accelerate Share Growth Record glo Nicotine* Share across key markets (c.80% of Industry Revenue) Japan Russia Italy Ukraine Romania 3.1% 6.3% 1.9% 1.7% 5.3% 1.5% 0.9% 0.7% 1.0% 0.3% 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q2
Slide 27: glo: Hyper Strong Category Share Growth in ENA
glo: Hyper Strong Category Share Growth in ENA glo driving national THP Category Share Russia Italy Ukraine Romania Poland Kazakhstan 48.6% 18.8% 20.0% 22.0% 12.1% 18.4% 11.9% 36.9% 9.0% 10.2% 3.6% 3.6% 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q
Slide 28: Velo: Maintaining International Leadership
Velo: Maintaining International Leadership Continued Share Growth Across Key* Markets (c.82% of Industry Revenue) Sweden Norway Denmark Switzerland 94.9% 92.0% 95.0% 92.5% 63.8% 58.8% 61.8% 55.5% 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 3Q20 4Q20 1Q21 2Q21 Quarterly average Quarte
Slide 29: Velo: Establishing a National Brand in the US
Velo: Establishing a National Brand in the US Velo US volume share • Velo portfolio - 100% coverage of nicotine segments Consumer promotion • Distribution expanded to c.80k outlets, with Mar’21 13.5% distribution continuing to build • Over 60% of consumers see Velo as Modern and 6.4% Innovative* Vel
Slide 30: Combustibles: Delivering Value Growth
Combustibles: Delivering Value Growth +10 bps +10 bps +20 bps Combustibles Value Combustibles Volume Strategic Brand Share^ Share^ Value Share^ +5.8 % +4.3 % -17 % Combustibles Combustibles SKU rationalisation Revenue* Price/Mix** completed to date*** Share growth versus FY20. Cigarette share. ^ See
Slide 31: Regions: Over 5% Revenue Growth in Every Region
Regions: Over 5% Revenue Growth* in Every Region Cigarette Adjusted Profit from Revenue* Value Share** Operations* US +9.1% +40bps +9.7% ENA +5.9% -10bps -3.7% APME +5.8% -10bps +2.8% AMSSA +11.5% -30bps +4.2% Group +8.1% +10bps +5.4% * Constant rate basis. See Appendix A1-A2. ** Value share of ciga
Slide 32: US: Continued Strong Performance
US: Continued Strong Performance +55 • Total Nicotine value share now +9.1 +50 36.5% May YTD % % bps • Vuse approaching value share US Revenue US New Category US Total Nicotine leadership Growth* Revenue Growth* Value Share growth** • Strong value growth from combustibles enabled by Revenue Growth M
Slide 33: Group Operating Margin: Strong Operational Performance Funding New Category Investment
Group Operating Margin: Strong Operational Performance Funding New Category Investment -0.7 +1.5 -1.6 43.7 -0.6 43.0 +c.£350m New Category Marketing Investment H1 2020 Adjusted Price/mix and Incremental Transactional FX H1 2021 Adjusted Operating Margin Operational Efficiencies New Categories Operat
Slide 34: Quantum: Over £900m Total Savings Delivered
Quantum: Over £900m Total Savings Delivered Phase 1 Phase 2 Phase 3 £1bn Phase 1 and 2 savings Organisational expected to be Operating model / Route to Market delivered design 12 months early QUANTUM Processes and Ways of working simplification Supply chain optimisation Target increased to £1.5bn* C
Slide 35: EPS: Growth up +6.1%
EPS*: Growth up +6.1% +6.1% -2.3% 9.5 0.2 -0.8 1.0 -0.1 -0.1 167.5 -13.3 HY EPS* growth benefitting from: › Operational performance growth 157.8 › Reduction in underlying tax rate 154.2 to 24.8% Partially offset by: › Reduced income from + 6.1% Adjusted diluted EPS* growth Associates FX translation
Slide 36: Cash: Continued Cash Flow Delivery
Cash: Continued Cash Flow Delivery H1 Operating • Further strong cash flow delivery: Cash Flow Conversion • Combustibles price/mix growth 80% • New ways of working releasing cash from business 66% 67% • Year-on-year comparison largely impacted by the 65%* deferral of excise in the US in H1’20 • Cash
Slide 37: FY 2021 Guidance: Strong Operational Momentum and Cash flow
FY 2021 Guidance: Strong Operational Momentum and Cash flow • Continued strong New Category revenue growth* >5% • Improved global combustibles volume outlook, driven by Emerging Market recovery Revenue Growth* • H2 to reflect geographic & portfolio mix and strong comparator • Further incremental New
Slide 38: Jack Bowles
Jack Bowles Chief Executive 38
Slide 39: 2021 - A Pivotal Year
2021 - A Pivotal Year New Category revenue* +50%; share gains in all 3 categories STEP-CHANGE IN NEW CATEGORIES 16.1m non-combustible product consumers**, up 2.6m FY New Category losses expected to reduce COMBUSTIBLE SIMPLIFY VALUE On track to reach c.3x Adj. Net Debt/Adj. EBITDA*** THE COMPANY GROW
Slide 40: Delivering our Purpose to Create Shared Stakeholder & Shareholder Value
Delivering our Purpose to Create Shared Stakeholder & Shareholder Value From To Multi-category CPG Cigarettes Nicotine & Beyond* Declining Volume Growing Volume Growing Value & Value 50 million consumers of £5bn New Category Eliminate unnecessary single-use Carbon neutral non-combustible** Revenue b
Slide 41: Our Transformation is Accelerating
Our Transformation is Accelerating Our established multi-category strategy is working We are building strong global brands Continuing the digitalisation of the whole business at speed BAT is changing rapidly – bold, agile, innovative, digitally enabled, diverse and inclusive, powered by our ethos Cr
Slide 42: Interim Results 2021: Q&A
Interim Results 2021: Q&A Jack Bowles – Chief Executive | Tadeu Marroco – Finance and Transformation Director
Slide 43: 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
British American Tobacco p.l.c. — H1 2021 Earnings Presentation on 6ix