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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  British American Tobacco Plc    BATS   GB0002875804

BRITISH AMERICAN TOBACCO PLC

(BATS)
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08/03BRITISH AMERICAN TOBACCO : HY 2020 Presentation transcript (397 kb)
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British American Tobacco : HY 2020 Presentation slides

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07/31/2020 | 03:15am EDT

Multi-Category strategy delivers growth in difficult times

Interim Results 2020

Jack Bowles - Chief Executive | Tadeu Marroco - Finance Director

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 that is a citizen or resident or located in any jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

References in this presentation to 'British American Tobacco', 'BAT', 'Group', 'we', 'us' and 'our' when denoting opinion refer to British American Tobacco p.l.c. and when denoting tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be.

The information contained in this presentation does not purport to be comprehensive and has not been independently verified. Certain industry and market data contained in this presentation has come from third party sources. Third party publications, studies and surveys generally state that the data contained

therein have been obtained from sources believed to be reliable, but that there is no guarantee of accuracy or completeness of such data.

Forward-looking Statements

This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any BAT shares or other securities. This presentation contains certain forward-looking statements, made within the meaning of Section 21E of the United States Securities Exchange Act of 1934, regarding our intentions, beliefs or current expectations concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates. In particular, these forward looking statements include statements regarding the BAT Group's future financial performance, future regulatory developments, planned product launches and the projected future financial and operating impacts of the COVID-19 pandemic.

These statements are often, but not always, made through the use of words or phrases such as "believe," "anticipate," "could," "may," "would," "should," "intend," "plan," "potential," "predict," "will," "expect," "estimate," "project," "positioned," "strategy," "outlook", "target" and similar expressions.

It is believed that the expectations reflected in this presentation are reasonable but they may be affected by a wide range of variables that could cause actual results to differ materially from those currently anticipated.

The forward-looking statements reflect knowledge and information available at the date of preparation of this presentation and BAT undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are uncertainties related to the following: the impact of competition from illicit trade; the impact of adverse domestic or international legislation and regulation; changes in domestic or international tax laws and rates and the impact of an unfavourable ruling by a tax authority in a disputed area; adverse litigation and dispute outcomes and the

effect of such outcomes on the Group's financial condition; changes or differences in domestic or international economic or political conditions; the impact of

the COVID-19 pandemic; adverse decisions by domestic or international regulatory bodies; the impact of market size reduction and consumer down-trading; translational and transactional foreign exchange rate exposure; the impact of serious injury, illness or death in the workplace; the ability to maintain credit ratings and to fund the business under the current capital structure; the inability to develop, commercialise and rollout New Categories; and changes in the market position, businesses, financial condition, results of operations or prospects of the Group.

2

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 26 March 2020 and Current Reports on Form 6-K, which may be obtained free of charge at the SEC's website, http://www.sec.gov, and BAT's Annual Reports, which may be obtained free of charge from the British American Tobacco website www.bat.com.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Readers are cautioned not to place undue reliance on such forward-looking statements.

Additional Information

All financial statements and financial information provided by or with respect to the US or Reynolds American Inc. ("RAI") are initially prepared on the basis of U.S. GAAP and constitute the primary financial statements or financial records of the US business/RAI. This financial information is then converted to International Financial Reporting Standards as issued by the IASB and as adopted by the European Union (IFRS) for the purpose of consolidation within the results of the BAT Group. To the extent any such financial information provided in this presentation relates to the US or RAI it is provided as an explanation of, or supplement to, RAI's primary U.S. GAAP based financial statements and information.

Our vapour product Vuse (including Alto and Vibe), and certain oral products including Grizzly, Granit, Camel Snus, Kodiak and Velo, which are sold in the US, are subject to the Food and Drug Administration (FDA) regulation and no reduced-risk claims will be made to these products without agency clearance.

No Profit or Earnings Per Share Forecasts

No statement in this presentation is intended to be a profit forecast and no statement in this presentation should be interpreted to mean that earnings per share

of BAT for the current or future financial years would necessarily match or exceed the historical published earnings per share of BAT.

Audience

The material in this presentation is provided for the purpose of giving information about BAT and its subsidiaries to investors only and is not intended for general consumers. BAT, its directors, officers, employees, agents or advisers do not accept or assume responsibility to any other person to whom this material is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. The material in this presentation is not provided for product advertising, promotional or marketing purposes. This material does not constitute and should not be construed as constituting an offer to sell, or a solicitation of an offer to buy, any of our products. Our products are sold only in compliance with the laws of the particular jurisdictions in which they are sold.

3

2020 H1 RESULTS: Our Multi-Category strategy delivers growth in difficult times

Delivering revenue, profit and earnings growth* in exceptional circumstances Multi-Category consumer acquisition drives revenue and share growth** Excellent Combustibles value and volume share growth

Navigating COVID supported by our diverse geographic footprint

Committed to delivery and our 65% dividend pay-out ratio

Share growth versus FY19. Source: Company data

4

* On an adjusted, constant rate basis. See Appendix A1 & A2 ** Tracked share metrics

Building A Better Tomorrow

A Defining Corporate Purpose

Good Progress in 2020

Non-Combustibles now 10% of revenue

Additional 2.7m* Non-Combustibles consumers

Invested additional £250m** in New Categories

Set ambitious 2025 environmental targets

Set ambitious 2030 Carbon Neutrality target

To reduce the health impact of our business by offering a greater choice of enjoyable and less risky products for our consumers

* Growth over last 12 months. ** Marketing Investment

5

Delivering for Today & Investing in the Future

Clear Commercial Priorities

Good Progress in 2020

STEP-CHANGE IN

NEW CATEGORIES

COMBUSTIBLE VALUE

GROWTH

SIMPLIFY THE COMPANY

Growing share* in New Categories

New Category revenue** +12.7%

Cigarette price/mix*** +8.5% Group revenue** +2.4%

Quantum savings c.£240m YTD

Navigating COVID with agility

Stronger, Simpler, Faster Commitment to Deliver

Our people have gone above and beyond to deliver growth

Share growth versus FY19. Source: Company data

6

* Volume share in THP, Value share in Vapour.. ** On an adjusted, constant rate basis. See Appendix A1 & A2. *** Price/mix defined in Appendix A4

H1 2020 RESULTS: Delivering for Today

Results demonstrate real resilience during COVID

REPORTED

ADJUSTED

H1 2020

H1 2020

@ Current rates

@ Constant rates*

Revenue

+0.8%

+2.4%

New Category Revenue

+14.7%

+12.7%

Operating Margin

+550 bps**

+80 bps***

Profit From Operations

+16.4%**

+3.3%

Diluted EPS

+22.7%**

+6.6%

* On an adjusted, constant rate basis. See Appendix A1 & A2 .

7

** Prior period affected by charge in respect of the Quebec class action in Canada. *** Current rate growth

H1 2020 RESULTS:

A strong performance in a challenging environment

+50bps +20bps +40bps

Corporate

Corporate Value

Strategic Cig+THP

Volume Share

Share

Value Share

+12.7% +2.4% +3.3%

New Category

Group

Adjusted Profit* from

Revenue*

Revenue*

operations

Share growth versus FY19. Source: Company data

* On an adjusted, constant rate basis. See Appendix A1 & A2

-6.3%

-5.3% (excl GTR)

BAT Volumes

(FMC+THP)

+6.6%

Adjusted Diluted

EPS*

8

Successfully navigating a challenging environment

COVID revenue* headwind c.4% H1; c.3% expected FY

Developed Markets

Emerging Markets

(c.75% of Group revenue)

(c.25% of Group revenue)

Consumption resilient;

Volume impacted by

stable to slightly higher

lockdown severity & duration

Good pricing

› Deeper lockdown in some

Little evidence of

markets

accelerated downtrading

› Reduced illicit trade in others

› South Africa sales ban

Volume share +30bps

Volume share +70bps

New Categories

Category growth slowed; now recovering

  • Face-to-faceconsumer activation restricted
  • Switch to Digital comms
  • E-commercerevenue up >2x

Growing share**

Global Travel Retail (GTR) substantially impacted

Share growth versus FY19. Source: Company data

9

*Adjusted Revenue on a constant rate basis. See Appendix A1 & A2

** Volume share in THP, Value share in Vapour..

NEW CATEGORIES: Driving a Step-Change

Investing in Non-Combustible consumer acquisition in New Categories

Leveraging our digital capabilities

Growing our overall share** in New Categories

Share growth versus FY19. Source: Company data

10

* On an adjusted, constant rate basis. See Appendix A1 & A2. ** Volume share in THP, Value share in Vapour..

New Categories: Consumer acquisition drives growth

+2.7m

(vs H1 2019)

Non-Combustible

product Consumers

#1

Vapour Device

Sales***

+12.7%

New Category

Revenue*

UP2x

E-commerce

Revenue*

250m

Additional

Investment**

UP2x

Speed of

Innovation^

Share growth versus FY19. Source: Company data

11

* On an adjusted, constant rate basis. See Appendix A1 & A2. ** Marketing Investment. *** Volume share of devices: US and Canada, share of starter kits UK, France: and Germany ^ Prototype to product

New Categories: Successfully pivoting to digital during COVID

Strong momentum in social media across New Categories

33% 89%

Share of Social Media

Share of Social Media

Engagement in Vapour

Engagement in Mod. Oral

x1.5

Social

X

Social

Mentions

Mentions

2.8

H1 2020 vs SPLY

H1 2020 vs SPLY

Source: BAT Internal Estimates : Social Media Listening Analytics

Hyper

Highest interest THP

launch

x1.9 Social

Mentions

Post Hyper Launch (Q2'20 vs SPLY)

12

VAPOUR: Delivering a Step-Change

6.1m vapour consumers

Vuse/Vype growing value share in all key markets

Industry returning to growth in all key markets

13

Vapour: Vuse/Vype driving strong growth

+2.1m

(vs H1 2019)

Vapour

Consumers

26%

Value Share

in T5 Markets

+39%

Vapour

Revenue*

UP3x

Strategic Brand

Value Share in T5**

+70%

US Vapour

Revenue*

UP 3x

Vuse Alto US Value Share**

Number of consumers growth versus HY19. Number of consumers includes poly-users unless otherwise indicated. Source: Company data

14

* On an adjusted, constant rate basis. See Appendix A1 & A2 . ** growth over last 12 months

Vapour: Vuse/Vype growing share* in all key markets

Industry returning to growth in all key markets

Vapour Industry Value

Vuse/Vype

12m

3m

YTD Value

YTD

change

change

share

vs FY 19

-17%

+20%

26.0%

+10.4pp

+73%

+38%

35.0%

+11.0pp

+24%

+17%

13.0%

+1.8pp

+21%

+25%

26.6%

+9.4pp

-11%

+2%

45.8%

+10.0pp

T5 Markets recovered to 76% of prior year peak value**

* Value share. Company data. Share growth YTD share v FY19. **Top 5 vapour markets offtake value

Note: US(Vapour) - Jun Marlin Vapour Consumables Value Share; Canada - Jun Scan Data Vapour Value Share; UK - Jun

15

accounting for 80% of vapour revenue. US industry based on volume. Growth over last 12 months

Nielsen Vype Value Share; France - Jun Strator Vapour Value Share; Germany - Jun Nielsen Vapour Value Share;

(May '20 vs. Jun '19).

Vapour: Vuse/Vype is No.1 in device sales

Leading indicator of future growth

#1

#1

#1

#1

#1

47% 70% 36% 70% 44%

Vype/Vuse Volume Share of Device / Starter Kits (Latest available month)

Note : (1) USA & Canada : Volume Share of Device (Jun'20) (2) UK & France : Volume Share of Starter Kits (Jun'20) (3) Germany : Volume Share of Starter Kits (May'20)

16

Vapour: Vuse brand consolidation grows share

Canada value share at 44%* post Vype to Vuse migration

Value Share

+9%pts

Accelerating post migration

Online

Sales

+54%

VS. Q1'20

Vuse

JUUL

IQOS

Retention

Vuse

66%

Migration

100%

Vuse

56%

Within Vuse

44%

Consumer

27%

91%

3%

3%

Awareness

Dec'19 Jan'20 Feb'20 Mar'20

Apr'20 May'20 Jun'20

Vuse growing share of total nicotine post migration

* Latest weekly Value share. Note: Company data - Consumables $ Share of Value by brand. Retention and consumer data based on internal consumer data tracker .

17

THP: Delivering a Step-Change

Growing volume share in Japan and ENA

Strong early results from Hyper

Delivering improved satisfaction

Pivoting to digital activation

Note: Company data - Improved satisfaction based on +30% tobacco stick with device delivery based on consumer testing data.

18

THP: Growing volume share in Japan and ENA

+70bps

to 18.9%

Japan Total Nicotine

Volume Share

0.7%

glo Hyper Japan

June Share

5.4%

glo Japan

June Share

2.8%

glo Moscow June Share

Jun

YTD vs.

YTD

FY 19*

5.3%

+0.3pp

2.3%

+1.3pp

Moscow

0.2%

+0.1pp

0.7%

+0.5pp

THP revenue down -12%* due to:

  • Japan excise harmonisation
  • glo Sens underperformance

THP Volume share growth v FY19. Japan - Jun CVS-BC Vol. Share of FMC+THP+Hybrid; Russia - Moscow Jun IMS est. Vol. Share of FMC+THP; Italy - Jun Nielsen Vol. Share of FMC+THP; Ukraine - May Nielsen RMS Vol. Share of

19

FMC+THP; *On an adjusted, constant rate basis. See Appendix A1 & A2

THP: glo Hyper delivers improved satisfaction

Induction heating and larger stick format

Tobacco Satisfaction

Taste and Flavour

Device

Stick

Conversion Rates

++

++

+

++

++

+30% More Tobacco + King Size

New Flavours & Capsules

Fast Ramp up with Boost Button

Premium King Stick Format

50% Conversion

Sources consumer data: company data based on brand launch monitor, CCC offtake data, social media listening, CVS share, ecommerce, glo stores and D2C consumer data. Conversion rates based on device penetration

20

relative to share at latest weekly share.

THP: Continued growth* in Japan supported by glo Hyper

+5.9%

glo

June Exit Share*

1.3%

glo Hyper

June Exit Share*

37%

glo Hyper

New Consumer

Acquisition

50%

UP 2X

Conversion

Rate

Hyper

launch

H1 Exit

5.4%

5.9%

4.7%

H1 Exit

0.7%

1.3%

Dec'19 Jan'20 Feb'20 Mar'20

Apr'20 May'20 Jun'20

Total Glo

Hyper

H1 Digital launches; H2 Full launches in Japan, Russia, Romania, Italy and Germany

* Volume share. Chart source: CVS Offtake

21

Sources consumer data: company data based on brand launch monitor, CCC offtake data, social media listening, CVS share, ecommerce, glo stores and D2C consumer data. Conversion rates based on device penetration

relative to latest weekly share.

MODERN ORAL: Delivering a Step-Change

Strong revenue* growth in a fast-growing category

Strengthening leadership in Scandinavia**

Volume share growth in US, but limited by portfolio gaps

Share growth versus FY19. Source: Company data

22

* On an adjusted, constant rate basis. See Appendix A1 & A2. ** EPOK and LYFT brands

Modern Oral: 71% growth* in an exciting category

#1

Scandinavia

Volume Share

+71%

Modern Oral

Revenue*

+3.6ppts

-300bps L3Mths

US Modern Oral

Share

Portfolio gaps limiting share growth in US

Encouraging pilots in

APME & AMSSA

  • COVID impacting activations

Volume share

YTD vs.

Jun YTD

FY 19**

9.3%

+3.6pp

3.9%

+1.7pp

72.6%

+17.1pp

53.4%

+7.1pp

14.2%

+3.1pp

* Constant currency revenue growth. Volume Share growth YTD share v FY19. See Appendix A1, A2. Scandinavian volume share relates to EPOK and LYFT brands. ** Volume share v FY19. US(MO) - Jun Marlin Vol.

23

Share of Total Modern Oral; Sweden - Jun Nielsen Vol. Share of Total Oral; Denmark - Jun Nielsen Vol. Share of Total Oral; Switzerland - Jun Scan Data excl. Co-op Vol. Share of Total Oral (SPAR & Top CC data

missing from Jun); Norway - Jun Nielsen Vol. Share of Total Oral;

Modern Oral: Leadership in Scandinavia

Volume Share of

Total Oral

4.5

62%

Share in

Modern Oral

1.4

Mar'19 Jun'19 Sep'19 Dec'19 Mar'20 Jun'20

LYFT/EPOK

Share of total oral in retail, %

Volume Share of

Volume Share of

Total Oral

Total Oral

14.7

74.3

67%

95%

Share in

Share in

Modern Oral

Modern Oral

8.6

Mar'19 Jun'19 Sep'19

Dec'19 Mar'20 Jun'20

Mar'19 Jun'19 Sep'19 Dec'19 Mar'20 Jun'20

EPOK

LYFT/EPOK

Share of total oral in retail, %

Share of total oral in retail, %

Source : Nielsen retail RA June 2020, NCT R3M June 2020, NO Dunhumby

24

NEW CATEGORIES: Driving a Step-Change

Adding 2.7m Non-Combustible product consumers

Delivering 12.7% revenue* growth in a challenging environment

Investing an additional £250m**

Successfully pivoting to digital during COVID

Growing share*** in Vapour and THP, with strong revenue growth in Modern Oral

Share growth versus FY19. Source: Company data

25

* On an adjusted, constant rate basis. See Appendix A1 & A2. ** Marketing Investment *** Volume share in THP, Value share in Vapour

COMBUSTIBLES: Value and volume share growth

Excellent global value and volume share growth, with strong pricing

Driving revenue* and value share growth in the US

Value and volume share growth in every region

Growing value share in Developed Markets and volume share in Emerging

Markets

Share growth versus FY19. Source: Company data * On an adjusted, constant rate basis. See Appendix A1 & A2

26

The BAT Group does not own all brands featured in this presentation in all markets, e.g. BAT is the owner of Camel and Natural American Spirit in US only

Combustibles: Delivering excellent share growth

+50bps

Corporate Volume

Share

+2.2%

Combustibles

Revenue*

+20bps

Corporate Value

Share

+8.5%

Cigarette

Price/Mix

+40bps

Strategic Brand Value Share

66%

Strategic Brand

Share of Group

Combustible volume

Share growth versus FY19. Source: Company data

27

* On an adjusted, constant rate basis. See Appendix A1 & A2

Combustibles: Well balanced portfolio

Driving value growth and strong pricing

Premium

36%

of Group CPTO*

Mid

19%

of Group CPTO*

VFM^

45%

of Group CPTO*

Source: Company internal estimates at constant rates. The BAT Group does not own all brands featured in this presentation in all markets, e.g. BAT is the owner of Camel and Natural American Spirit in US only. *Estimated

28

consumer price turnover (CPTO) Combustible Strategic Brands FY 2019.

Combustibles: a strong performance

Winning in all market types and key segments

Key Segments

DMs (c.75% revenue)

EMs (c.25% revenue)

Driving growth

Driving value growth

Driving volume growth

+100bps

70

Freshness and

50

stimulation

Slimmer

+170bps

20

30

30

+30bps

Flat

Corporate Share

Share in Developed

Share in Emerging

Non full

Markets

Markets

flavour

Volume share change

Value share change

FMC share change YTD 2020 vs FY 2019

29

Driving revenue growth in the US

US Corporate Volume Cigarette Share 35%, Newport Share 15%

+10%

US Revenue and

Operating Profit

Growth*

+76%

US New Category

Revenue*

+30bps

US Value Share

+10%pts

US Vapour

Value Share growth

Strong Brands Driving Value Share Growth

Higher Pricing Ahead of Peers enabled by Revenue Growth Management

Cigarette industry volume up +0.8%; FY outlook c.-2.5%

YTD vapour value share up c.1.5x

Share growth versus FY19. Source: Company data

30

* On an adjusted, constant rate basis. See Appendix A1 & A2

Multi-Category Strategy: Total Nicotine share in the US up 70bps

US Nicotine Industry Value by Category

THP

Modern Oral 0.0%

1.0%

Vapour

5.5%

Cigarettes

Traditional

83.0%

Oral

10.5%

US Nicotine

Industry Value

by Category

BAT Growing Share of Total Nicotine

35.9% +70bps

US Nicotine Value

US Nicotine Value

Share

Share Growth

33.6% +60bps

US Nicotine Volume

US Nicotine Volume

Share

Share Growth

Share growth versus FY19. Source: Company data

31

H2: COVID uncertainty remains

Navigating COVID with Agility

  • Little evidence of accelerated downtrading to date in DMs
  • Lockdown restrictions slowly easing
  • All factories now fully reopened
  • BCPs maintain supply continuity

South Africa

Sales Ban Maintained

  • Court hearing delayed to August
  • We have a strong case
  • Planning for a positive outcome

GTR Substantially

Impacted

  • Planning for some recovery end Q4

COVID Uncertainty

Remains

  • Planning for sequential recovery through H2
  • Environment remains uncertain

Share growth versus FY19. Source: Company data. BCP: Business Continuity planning

32

South Africa cigarette and alcohol ban

A strong Q1 performance - Court hearing in August

Strong Q1 Performance

+10%

Volume vs. SPLY

Avg Daily Consumption

-38%

Daily consumption

An Illicit Market

100%

Total market is illicit

Group Impact

25m

Adjusted profit from operations per month

Illicit Price Spike

  • 300%

Government Revenue Lost

340m

Tobacco Excise and VAT*

Share growth versus FY19. Source: Company data

33

*Industry-wide

2020 H1 RESULTS: Our Multi-Category strategy delivers growth in difficult times

Delivering Revenue, Profit and Earnings Growth* in exceptional circumstances Multi-Category consumer acquisition drives revenue and share growth** Excellent Combustibles value and volume share growth

Navigating COVID supported by our diverse geographic footprint

Committed to delivery and our 65% dividend pay-out ratio

Share growth versus FY19. Source: Company data

34

* On an adjusted, constant rate basis. See Appendix A1 & A2 ** Tracked share metrics

Delivering for today & investing in the future

STEP-CHANGE IN NEW

CATEGORIES

COMBUSTIBLE VALUE

GROWTH

SIMPLIFY THE COMPANY

Unique Multi-Category Strategy

Investing in our Global Brands

Strong brands and pricing

Broad based share growth

Agile organisation, resilient supply

chain, embracing digital

Focus on cost control and

investing in the future

35

Tadeu Marroco |

Finance Director

H1 2020 RESULTS:

Delivering for today & investing in the future

Delivering revenue* growth in a challenging environment

Releasing funds to support the growth agenda

Realising the benefits of Quantum Phase 1

Generating cash to de-lever the balance sheet

Committed to dividend growth and our 65% pay-out ratio

* On an adjusted, constant rate basis. See Appendix A1 & A2

37

REVENUE: Growth in a challenging environment

Revenue* +2.4%, absorbing c.-4% H1 COVID headwind

  • Combustible revenue* +2.2%
  • New Category revenue* +12.7%

Strong cigarette price/mix** +8.5%

  • Volume and value share gains of +50bps; +20bps
  • 5.6% Strategic brand combustible revenue* growth
    (66% of Group volume)
  • Strong US performance with revenue* +9.7%

Total Revenue* £bn

12.4

+2.4%

12.1

H1'19H1'20

* On an adjusted, constant rate basis. See Appendix A1 & A2. **Price/mix defined in Appendix A4

38

PRICING: Continued strong price/mix* +8.5%

Strong, balanced brand portfolio

Cigarettes Price / Mix

Revenue growth management

Elasticity & affordability remain robust

>80% pricing achieved YTD

Little evidence of accelerated downtrading to date

Strong H1 pricing, benefitting from 2019 rollover

Lapping a strong price/mix comparator in H2

9.2%

7.0%

8.5%

H1'19 FY19 H1'20

* Price/mix defined in Appendix A4

39

REGIONS: Value share** growth in all regions

Regional performance reflects contrasting EM/DM COVID impacts

Adjusted

Value

Adjusted Profit from

Revenue*

Share**

Operations*

US

+9.7%

+30bps

+9.6%

ENA

+3.0%

+10bps

+2.9%

APME

-10.5%

+20bps

-6.9%

AMSSA

-0.9%

+50bps

-3.6%

Group

+2.4%

+20bps

+3.3%

*Adjusted and constant rate basis. See Appendix A1-A2. **Value share of cigarettes (APME: cigs+THP) v FY19

40

Source: Company data

MARKETS: Contrasting EM/DM COVID impacts

DMs (c.75% revenue)

EMs (c.25% revenue)

H1 Industry Volume

H1 Industry Volume

GER

+3.7%

BRA

+7.8%

USA

+0.8%

RUS

-2.6%

JPN

-3.9

%

VNM

-8.8%

ITA

-4.0%

MEX

-14.4%

Source: Company data

41

OPERATING MARGIN:

Releasing funds to support the growth agenda

New Categories investment +c.£250m; margin +80bps

+0.8

4.0

-2.7

-0.5

43.7%

42.9%

+80bps

+

£250m

New Category

Marketing

Investment

2019 Adjusted

Pricing and Operational

Incremental New

Transactional FX

2020 Adjusted

Operating Margin

Efficiencies

Categories

Operating Margin*

* On an adjusted current rate basis. See Appendix A1.

42

QUANTUM: Realising the benefits of Phase 1

80% of Phase 1 savings realised; c.£300m expected savings for FY20

Phase 1 Completed:

Ahead of schedule

Organisational re-design

Simplification and agility New ways of working

Phase 2 Underway:

Operational efficiency

Route to market focus Supply chain productivity

80% Phase 1

savings realised

~£240m

in H1 2020

Phase 2

~£700m

2021-22

Expected savings

£1bn

2020-2022

Expected savings

Supporting investment and

continued delivery

On track to deliver Phase 1 savings of £300m

43

EPS*: Strong growth up +6.6%

H1 EPS* growth benefitting from:

  • Good contribution from associates
  • Reduced H1 underlying tax rate 25.0%

FY EPS* considerations:

  • H2 associate income reflecting COVID
  • FY underlying tax rate slightly lower than previous guidance of 25.5%
  • FX translation headwind of c.2.5%

* Adjusted, diluted, EPS at constant rates. See Appendix A1 and A2.

44

CASH AND DELEVERAGE:

Strong liquidity position >90% operating cash conversion

Strong H1 Operating Cash

Strengthened Liquidity

Manageable Maturity

Flow Conversion

in H1

Profile

80%

£ in billions

3.9

£ in billions

7.2

3.4

£

70%*

66%

1.9

3.3

3.0

2.6

73%*

$

2.3*

1.0

USD: April 2020 EUR: April 2020 GBP: June 2020

Due H2'20 Due'21

Due'22

Due'23

7, 10 & 30 year 4.5 & 8 year 8 year bonds

bonds

bonds

H1'18

H1'19

H1'20

Cash generation led by

£3.9bn

Bond issuance

8.9yr

Average Maturity

£4.8bn

12-18 month Bi-laterals

88:12

Fixed:Floating

Combustibles

£6.0bn

Renewed RCF: 1 & 5 year term

59:24:11:6

$:£:€:Other

21 banks; No financial covenants

* Repaid in July 2020

* H1 2018 normalised for MSA impact in 2018. H1 2020 normalized for US excise deferral and COVID related inventories.

45

Committed to dividend growth & 65% pay-out ratio

CAPITAL

DISCIPLINE

ALLOCATION

PRIORITIES

c.£650m Capex = Depreciation*

Deleverage (Adj Net debt/Adj EBITDA**)

Around 3x expected by end 2021

1.5x-2.5x long term corridor

Working Capital efficiencies

Dividend

65% pay-out ratio growth in GBP

£1bn Quantum savings expected 2020-2022

BAT Ventures; partnerships/small

scale M&A

*Adjusted **Adjusted Net Debt to Adjusted EBITDA

46

On track to deliver FY 2020 Guidance

Demonstrating resilience through COVID challenges

1-3%

Mid Single

Continue to

Revenue*

Figure

De-leverage

EPS Growth^

* Adjusted Revenue on a constant rate basis. See Appendix A1 & A2

47

^Adjusted Diluted EPS on a constant rate basis. See Appendix A1

& A2

Jack Bowles |

Chief Executive

2020 H1 RESULTS: Our Multi-Category strategy delivers growth in difficult times

Delivering revenue, profit and earnings growth* in exceptional circumstances Multi-Category consumer acquisition drives revenue and share growth** Excellent Combustibles value and volume share growth

Navigating COVID supported by our diverse geographic footprint

Committed to delivery and our 65% dividend pay-out ratio

Share growth versus FY19. Source: Company data

49

* On an adjusted, constant rate basis. See Appendix A1 & A2 ** Tracked share metrics

Delivering for Today & Investing in the Future

Clear Commercial Priorities

Good Progress in 2020

STEP-CHANGE IN

NEW CATEGORIES

COMBUSTIBLE VALUE

GROWTH

SIMPLIFY THE COMPANY

Growing share* in New Categories

New Category revenue** +12.7%

Cigarette price/mix*** +8.5% Group revenue** +2.4%

Quantum savings c.£240m YTD

Navigating COVID with agility

Stronger, Simpler, Faster Commitment to Deliver

Our people have gone above and beyond to deliver growth

Share growth versus FY19. Source: Company data

50

* Volume share in THP, Value share in Vapour.. ** On an adjusted, constant rate basis. See Appendix A1 & A2. *** Price/mix defined in Appendix A4

H1 2020 RESULTS:

A strong performance in a challenging environment

+50bps +20bps +40bps

Corporate

Corporate Value

Strategic Cig+THP

Volume Share

Share

Value Share

+12.7% +2.4% +3.3%

New Category

Group

Adjusted Profit* from

Revenue*

Revenue*

operations

Share growth versus FY19. Source: Company data

* On an adjusted, constant rate basis. See Appendix A1 & A2

-6.3%

-5.3% (excl GTR)

BAT Volumes

(FMC+THP)

+6.6%

Adjusted Diluted

EPS*

51

We are Building A Better Tomorrow

10% Non-Combustibles Revenue and 11.6mn Consumers Today

50mn Non-Combustible Product Consumers by 2030*

£5bn New Category Revenue by 2025*

Carbon Neutral by 2030*

To reduce the health impact of our business by offering a greater choice of enjoyable

and less risky products for our consumers

We remain committed to our medium-term guidance post-COVID

* ESG ambitions

52

Appendix

ESG awards and recognition

2016

2017

2018

2019

2020

BBB

Europe

CLIMATE: A-

WATER: B

No.1

Ranking

A

A

BBB

World leader

World leader

World leader

50 most

CLIMATE: A-

CLIMATE: B

CLIMATE: A

sustainable

companies

WATER: A-

WATER: B-

WATER: B

Leader

92%

Best place to work

for LGBT+

FTSE top 5 ranking for

Modern Slavery Statement

Advancing non-animal testing

Best eBook for Science & Technology Report

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's results of the Group and, where applicable, its segments.

A3: Share metrics

Volume share: The number of units bought by consumers of a specific brand or combination of brands, as a proportion of the total units bought by consumers in the

industry, category or other sub-categorisation. Sub categories include, but are not limited to, the total nicotine category, modern oral, vapour, traditional oral or cigarette. Corporate volume share is the share held by BAT Group/Reynolds (US region).

Value share: The retail sales value of the product sold as a proportion of total retail sales value in that category.

Premium share: The retail sales volume of the premium product sold as a proportion of total retail sales volume of premium products in that category.

Nicotine share: The retail sales volume of the nicotine product sold as a proportion of total nicotine product volume in that category.

Exit share: The retail sales volume of the product sold as a proportion of total retail sales volume in that category at a specific period point in time.

A4: Price/Mix

Price mix is a term used by management and investors to explain the movement in revenue between periods. Revenue is affected by the volume (how many units are

sold) and the value (how much is each unit sold for). Price mix is used to explain the value component of the sales as the Group sells each unit for a value (price) but may

also achieve a movement in revenue due to the relative proportions of higher value volume sold compared to lower value volume sold (mix).

A5: Environmental Targets

Targets cover: climate change, water and waste, sustainable agriculture. Full details are available from the ESG Report https://www.bat.com/group/sites/UK__9D9KCY.nsf/vwPagesWebLive/DOAWWEKR/$file/BAT_ESG_Report_2019.pdf.

A6: Non-Combustible consumers

The number of consumers of Non-Combustible products is defined as the estimated number of Legal Age (minimum 18 years) consumers of the Group's Non-Combustible products. In markets where regular consumer tracking is in place, this estimate is obtained from adult consumer tracking studies conducted by third parties (including Kantar). In markets where regular consumer tracking is not in place, the number of consumers of Non-Combustible products is derived from volume sales of consumables and devices in such markets, using consumption patterns obtained from other similar markets with consumer tracking (utilising studies conducted by third parties including Kantar).

The number of Non-Combustible products consumers is used by management to assess the number of consumers regularly using the Group's New Category products as the increase in Non-Combustible products is a key pillar of the Group's ESG Ambition and is integral to the sustainability of our business.

The Group's management believes that this measure is useful to investors given the Group's ESG ambition and alignment to the sustainability of the business with respect to the Non-Combustibles portfolio.

55

Disclaimer

British American Tobacco plc published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 July 2020 07:15:04 UTC

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Sales 2020 25 593 M 33 427 M 33 427 M
Net income 2020 6 913 M 9 029 M 9 029 M
Net Debt 2020 40 870 M 53 380 M 53 380 M
P/E ratio 2020 8,09x
Yield 2020 8,43%
Capitalization 54 154 M 70 725 M 70 730 M
EV / Sales 2020 3,71x
EV / Sales 2021 3,46x
Nbr of Employees 64 099
Free-Float 92,8%
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NameTitle
Jack Marie Henry David Bowles Chief Executive Officer & Executive Director
Richard George William Burrows Chairman
Alan Davy Operations Director
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