08 Jun - 13 min read

2021 first half pre-close trading update

2021 first half pre-close trading update

British American Tobacco p.l.c.
Incorporated in England and Wales
(Registration number: 03407696)
Short name: BATS
Share code: BTI
ISIN number: GB0002875804
("British American Tobacco p.l.c." or "the Company")

8 June 2021
                                       BRITISH AMERICAN TOBACCO p.l.c.
                                     2021 First Half Pre-Close Trading Update

                    CONTINUED NEW CATEGORY ACCELERATION
Trading update - ahead of closed period commencing 28 June 2021

Jack Bowles, Chief Executive:
‘We are accelerating our transformation to build A Better Tomorrow.

We are creating brands of the future and sustainable value for all our stakeholders. We added +1.4m non-combustible
product consumers1 in Q1, to reach a total of 14.9m.

We are investing and building strong, fast growing international brands in each segment, rapidly accelerating our reach
and consumer acquisition, thanks to our digitalisation and our multi-category consumer-centric approach, supported by
the right resources and products, and our agile organisation. Our portfolio of non-combustible products is tailored to
meet the needs of adult consumers. We are growing New Categories at pace, encouraging more smokers to switch to
scientifically substantiated reduced risk alternatives2.

We continue to expect 2021 to be a pivotal year for the business, with accelerating New Category revenue growth, a
clear pathway to New Category profitability by 2025, and leverage reducing to c.3x by year end.

ESG is deeply embedded in our organisation, and we have set ourselves stretching targets: £5bn New Category revenue
by 2025; 50 million consumers of non-combustible products and carbon neutrality across our own operations by 20303,
which I am confident in delivering.
In summary, we are accelerating our transformation with increased investment capitalising on our growing momentum
in the New Categories, and a record quarter for consumer acquisition. This, together with our strong business
performance, is reflected in our upgraded Group revenue growth guidance of above 5% for 2021.
The momentum across the business is strong, and I am excited about the future for BAT.’

FY 2021 expectations:
o Upgraded constant currency revenue growth of above 5%, ahead of our 3-5% guidance
o Mid-single digit adjusted diluted constant currency EPS growth
o Strong operating cashflow conversion in excess of 90%
o Leverage reducing to around c.3x Adjusted Net debt 4/ Adjusted EBITDA5 by year end

Driven by:
o Accelerating acquisition of non-combustible product consumers1, up +1.4m to 14.9m in Q1, with our New Category
    products now sold in 74 markets across 53 countries
o Continued acceleration of New Category volume and revenue growth, with market share 6 gains across all three
    New Categories in all key markets
o Further increased New Category investment, weighted to H1, capitalising on our good momentum
o Strong combustibles pricing and robust volume
o Negative geographic mix driven by a continuing recovery in Emerging Markets
o No expected recovery in Global Travel Retail until 2022
o A robust US performance, driven by New Category growth and strong combustible pricing
o Associate income reflecting the impact of the COVID environment in India on ITC, given our share of results are
    reported one quarter in arrears
o   Operating cash conversion weighted to the second half due to the phasing of Excise and MSA payments relative to
    the prior year
o   Translation headwind of c.-8% on adjusted diluted EPS growth, and a transactional headwind of c.-2% on adjusted
    profit, for both H1 and FY 2021, applying current foreign exchange spot rates7

Trading update detail: Strong share6 growth in each New Category across key markets

Vuse approaching global leadership in vapour reaching 31.4% category value share in Top 5 vapour markets April
YTD, up 5.9 ppts vs FY 2020
     o Vuse independently confirmed as the first global carbon neutral vape brand8
     o Vuse/Vype growing value share in all Top 5 markets and continuing to close the gap on global leadership
     o Vuse/Vype brand migrations in Top 5 markets to be completed by the end of H1
     o Continued volume share leadership of devices in all Top 5 markets
     o Vuse now leads the category in 16 states in the US, with a total YTD Vuse family value share of 29.8%; Vuse
        Alto value share is up 6.9 ppts v FY20 to 27.2% YTD

glo achieving strong volume share growth in ENA driven by Hyper, with continued positive volume share momentum
in Japan. glo’s THP category volume share of consumables in the Top 9 THP markets reached 16.2% April YTD, up 2.9
ppts vs. FY 2020
      o In Japan, glo nicotine (FMC+THP) volume share grew +80bps v FY20 to reach YTD share of 6.2%. Whilst volume
         growth continued to be strong, revenue in H1 is expected to be impacted by increased consumer acquisition
         investment, and partial absorption of excise also due to the disproportionate impact of the excise
         harmonisation on our products
      o In ENA, which represents more than half of global THP industry volume, glo Hyper drove strong volume share
         growth, reaching a glo YTD nicotine (FMC+THP) volume share of 1.7% in Russia, Ukraine 2.7%, Romania 1.5%
         and 1.4% in Italy, in April
      o glo Hyper is now launched in 18 of 21 glo markets with further expansion planned in H2 2021

Consolidating International volume share leadership in Modern Oral, with strong Velo volume share growth in the
US. Modern Oral Category share of Modern Oral in Top 5 markets reached 40.2% April YTD up 3.4 ppts vs. FY 2020
     o Velo volume share in the US up strongly by 6 ppts from December to reach an April share of 14.6% in a
        competitive market
     o On track for unconstrained US production capacity around mid-year
     o In Sweden and Norway modern oral category volume share of 57.6% and 63.3% drove total oral category
        volume share of 6.7% and 17.2%, up 1.8 ppts and 2.0 ppts YTD v FY20 respectively

Continued value and volume share gains in combustibles, with strong pricing partially offset by geographic mix
    o Group value and volume share both up 10bps YTD. Group FY cigarette volume expected to be ahead of the
        industry, with FY industry volume expected to be down c.3%
    o We continue to extract costs, rationalise, and simplify our combustible portfolio and Strategic Brands
        represent around two thirds of our volume
    o Volume recovery and share growth in key Emerging Markets, including Bangladesh, Pakistan and Vietnam
    o Expected strong constant currency revenue growth in the US driven by strong price mix, and value share up
        40bps YTD, with premium share up 40bps YTD, driven by Natural American Spirit and Newport, reflecting no
        accelerated downtrading in our portfolio
    o The US industry volume outlook remains unclear, due to continuing macro-economic and fiscal uncertainties




Building on our strong ESG foundations we are creating shared value for all our stakeholders, recent highlights
include:
     o In 2020, we set ambitious environmental targets3, including achieving carbon neutrality across our own
         operations by 2030, and for our tobacco supply chain to be free of child labour by 2025.
    o    In 2021, we set additional stretching targets, which include achieving carbon neutrality across our value chain
         by 2050 and 100% renewable electricity in operations sites by 2030
    o    We have a substantial body of scientific data for our reduced risk products2 across each category and look
         forward to publishing our glo 180 day study in July, following very encouraging results from our 90 day study.
    o    Our work has continued to receive external recognition this year, including Refinitiv ranking BAT as the third
         highest ESG-rated FTSE100 company, the Financial Times naming us as Climate and Diversity leaders, and
         being recognised as a Global Top Employer for the fourth year in a row by the Top Employers Institute.




For further information, please contact:
British American Tobacco Press Office
+44 (0) 20 7845 2888 (24 hours) | @BATplc
British American Tobacco Investor Relations
Mike Nightingale / Victoria Buxton / William Houston / John Harney
+44 (0) 20 7845 1180 / 2012 / 1138 / 1263
Webcast and Conference call - The conference call will begin at 8.30am (BST).
You can access the audio webcast via our website. You can also listen via conference call by dialling the numbers below,
using the password: BAT Pre-Closing Update
United Kingdom Toll-Free: 0808 109 0700
United Kingdom Toll: +44 (0) 33 0551 0200
United States Toll-Free: 1 866 966 5335
United States New York: +1 212 999 6659
South Africa Toll-Free: 0 800 980 512
Johannesburg Toll: +27 (0) 11589 8302
A playback facility for the conference call will be available online via www.bat.com.

Market share and volume data (unless otherwise stated) YTD April 2021.

T9 THP markets: Japan - CVS-BC, South Korea - CVS, Russia - IMS (BAT+PMI), Italy - Nielsen, Germany - Nielsen, Romania
- Nielsen, Ukraine - Nielsen, Poland - Nielsen, Czech - Nielsen.
T5 Vapour markets: US - Marlin, Canada - Scan Data, UK - Nielsen, France - Strator, Germany - Nielsen.
T5 M Oral markets: US - Marlin, Sweden - Nielsen, Denmark - Nielsen, Norway - Nielsen, Switzerland - Scan Data excl.
SPAR and Top CC.

1
  Non-Combustible Consumer Definition: The number of consumers of Non-Combustible products is defined as the
estimated number of Legal Age (minimum 18 years, US: 21 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.
2
  Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free
and are addictive. Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to Food
and Drug Administration (FDA) regulation and no reduced-risk claims will be made as to these products without FDA
clearance.
3
  Environmental 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_2020.pdf.
4
  Adjusted Net Debt is not a measure defined by IFRS. Adjusted Net Debt is total borrowings, including related derivatives,
less cash and cash equivalents and current investments held at fair value, excluding the impact of the revaluation of
Reynolds American Inc. acquired debt arising as part of the purchase price allocation process.
5
  Adjusted EBITDA is not a measure defined by IFRS. Adjusted EBITDA is profit for the year before net finance costs/income,
taxation on ordinary activities, depreciation, amortisation, impairment costs, the Group’s share of post-tax results of
associates and joint ventures, and other adjusting items.
6
  Share growth refers to volume share for THP and Modern oral and Value share for Vapour
As used herein, volume share refers to the retail sales volume of the product sold as a proportion of total retail sales volume
in that category and value share refers to the retail sales value of the product sold as a proportion of total retail sales value
in that category. Please refer to the 2020 Annual Report on Form 20-F for a full description of these measures, together with
a description of other Key Performance Indicators (KPIs), on page 275-275
7
  Current exchange rates of USD/GBP 1.4172 as at 4 June 2021
8
  Vuse’s carbon neutrality has been independently validated by Vertis based on product Life Cycle Assessment data provided
by an independent third party across scopes 1, 2 and 3. Based on ePod, ePen, eTank mini, Alto devices and consumables
internal sales forecast (calculated March 2021) for 12 months starting from April 2021.

New Categories comprises Tobacco Heating Products (THP), Vapour and Modern Oral.

Note on Non-GAAP Measures

This announcement contains several non-GAAP measures used by management to monitor the Group’s performance.
For the non-GAAP information contained in this announcement, no comparable GAAP or IFRS information is available
on a forward-looking basis, as the effect of adjusting items and rates of exchange, which could be significant, may be
highly variable and cannot be estimated with reasonable certainty.

The Group’s Management Board regularly reviews the measures used to assess and present the financial performance
of the Group and, as relevant, its geographic segments, and believes that these measures provide additional useful
information to investors. Certain of our measures are presented based on an adjusted basis and on a constant currency
basis. Please refer to the 2020 Annual Report on Form 20-F for a full description of each measure alongside non-
financial KPIs, pages 274 to 284.

The principal non-GAAP measure which the Group uses and that is contained in this announcement is adjusted diluted
earnings per share which is before the impact of adjusting items and is derived from
diluted earnings per share. This announcement also contains operating cash conversion, a non-GAAP measure defined
as net cash generated from operating activities before the impact of adjusting items and dividends from associates and
excluding trade loans to third-parties, pension short fall funding, taxes paid and after net capital expenditure, as a
proportion of adjusted profit from operations.

This announcement also contains adjusted net debt and adjusted EBITDA. The Group uses adjusted net debt and
adjusted EBITDA to assess its financial capacity. The Management Board believes that these additional measures, which
are used internally, are useful to the users of the financial statements in helping them to see how business financing
has changed over the year.

Adjusting items, as identified in accordance with the Group’s accounting policies, represent certain items of income and
expense which the Group considers distinctive based on their size, nature or incidence. These include significant items
in, profit from operations, net finance costs, taxation and the Group’s share of the post-tax results of associates and
joint ventures which individually or, if of a similar type, in aggregate, are relevant to an understanding of the Group’s
underlying financial performance. Although the Group does not believe that these measures are a substitute for IFRS
measures, the Group does believe such results excluding the impact of adjusting items provide additional useful
information to investors regarding the underlying performance of the business on a comparable basis.


The Group’s management reviews a number of our IFRS and non-GAAP measures for the Group and its geographic
segments at constant rates of exchange. This allows comparison of the Group’s results, had they been translated at the
previous year’s average rates of exchange. The Group does not adjust for the normal transactional gains and losses in
operations that are generated by exchange movements. Although the Group does not believe that these measures are
a substitute for IFRS measures, the Group does believe that such results excluding the impact of currency fluctuations
year-on-year provide additional useful information to investors regarding the operating performance on a local
currency basis.

Forward looking statements

References in this announcement to ‘BAT’, ‘Group’, ‘we’, ‘us’ and ‘our’ when denoting opinion refer to British American
Tobacco p.l.c. (“BAT PLC”) and when denoting business activity refer to BAT Group operating companies, collectively or
individually as the case may be.

This announcement does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any
BAT PLC shares or other securities. This announcement contains certain forward-looking statements, including “forward-
looking” statements made within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. 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. These include statements 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.

All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other
factors. It is believed that the expectations reflected in this announcement 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.

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; the inability to develop, commercialise and deliver the Group's New
Categories strategy; the impact of market size reduction and consumer down-trading; adverse litigation and dispute
outcomes and the effect of such outcomes on the Group's financial condition; the impact of significant increases or
structural changes in tobacco, nicotine and New Categories related taxes; translational and transactional foreign
exchange rate exposure; changes or differences in domestic or international economic or political conditions; the ability
to maintain credit ratings and to fund the business under the current capital structure; the impact of serious injury, illness
or death in the workplace; adverse decisions by domestic or international regulatory bodies; and changes in the market
position, businesses, financial condition, results of operations or prospects of the Group.

Past performance is no guide to future performance and persons needing advice should consult an independent
financial adviser. The forward-looking statements reflect knowledge and information available at the date of
preparation of this announcement and BAT undertakes no obligation to update or revise these forward-looking
statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place
undue reliance on such forward-looking statements.

No statement in this announcement is intended to be a profit forecast and no statement in this announcement should
be interpreted to mean that earnings per share of BAT PLC for the current or future financial years would necessarily
match or exceed the historical published earnings per share of BAT PLC.

Additional information concerning these and other factors can be found in BAT PLC 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 obtained free of charge at the SEC’s website, http://www.sec.gov, and the Company’s Annual Reports, which may be
obtained free of charge from the British American Tobacco website http://www.bat.com.


Sponsor: UBS South Africa (Pty) Ltd

Date: 08-06-2021 08:00:00
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