BAT Raises sales growth outlook amid shift to e-cigarettes

British American Tobacco resumes sales in South Africa

British American Tobacco (BAT) raised its annual revenue growth forecast on Tuesday as the cigarette maker’s focus on e-cigarettes and tobacco-heating devices pays off, sending its shares up 2%.

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 consumers 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 a pace, encouraging more smokers to switch to scientifically substantiated reduced-risk alternatives.

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:

  • Upgraded constant currency revenue growth of above 5%, ahead of our 3-5% guidance
  • Mid-single digit adjusted diluted constant currency EPS growth
  • Strong operating cash flow conversion in excess of 90%
  • Leverage reducing to around c.3x Adjusted Net debt/ Adjusted EBITDA by year-end

British American Tobacco resumes sales in South Africa

Driven by:

  • Accelerating acquisition of non-combustible product consumers, up +1.4m to 14.9m in Q1, with our New Category products now sold in 74 markets across 53 countries
  • The continued acceleration of New Category volume and revenue growth, with market share gains across all three New Categories in all key markets
  • Further increased New Category investment, weighted to H1, capitalising on our good momentum
  • Strong combustibles pricing and robust volume
  • Negative geographic mix is driven by a continuing recovery in Emerging Markets
  • No expected recovery in Global Travel Retail until 2022
  • A robust US performance, driven by New Category growth and strong combustible pricing
  • Associate income reflecting the impact of the COVID environment in India on ITC, given our share of results, are reported one quarter in arrears
  • Operating cash conversion weighted to the second half due to the phasing of Excise and MSA payments relative to the prior year
  • 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 share 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

  • Vuse independently confirmed as the first global carbon-neutral vape brand8
  • Vuse/Vype growing value share in all Top 5 markets and continuing to close the gap on global leadership
  • Vuse/Vype brand migrations in Top 5 markets to be completed by the end of H1
  • Continued volume share leadership of devices in all Top 5 markets
  • 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
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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

  • In Japan, glo nicotine (FMC+THP) volume share grew +80bps v FY20 to reach a 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
  • 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
  • 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

  • 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
  • On track for unconstrained US production capacity around mid-year
  • 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

  • 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%
  • We continue to extract costs, rationalise, and simplify our combustible portfolio and Strategic Brands represent around two-thirds of our volume
  • Volume recovery and share growth in key Emerging Markets, including Bangladesh, Pakistan and Vietnam
  • 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
  • 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:

  • In 2020, we set ambitious environmental targets, including achieving carbon neutrality across our own operations by 2030, and for our tobacco supply chain to be free of child labour by 2025.
  • 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
  • We have a substantial body of scientific data for our reduced risk products across each category and look forward to publishing our glo 180-day study in July, following very encouraging results from our 90-day study.
  • 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.