British American Tobacco (BAT) published its Half-Year Report, for the six months to 30 June 2021 on Wednesday 28 July. The company saw its revenue up 8.1% led by New Category growth and a partial recovery from prior-year COVID-19 impacts.
Revenue fell to GBP12.18 billion from GBP12.27 billion. New Categories revenue rose 50% to GBP942 million, and the company expects full-year losses from the segment to reduce.
Cigarette value share up 10 bps, and volume share up 10 bps reflecting strong EM performance while Vapour revenue up 59%, Vuse approaching global category value share leadership.
Jack Bowles, Chief Executive commented:
“This has been an exciting period of growth in New Categories, with New Category constant currency revenue up by 50% in the first half. We added 2.6m consumers, our highest ever increase, to our non-combustible product consumer base, to reach 16.1m.
This demonstrates our accelerating transformation driven by our multi-category portfolio, with continued key market share gains in all three New Categories. We are building strong, global brands of the future with Vuse, Velo and glo. These are underpinned by industry-leading multicategory consumer insights and science, with increasing digitalisation.
We have invested a further incremental £346m in the first half, funded by continued value growth from combustibles and expect to reach our £1bn Quantum savings target 12 months early. We have now increased our savings target to £1.5bn by 2022.”
H1 Financial Highlights:
- Combustible revenue up 5.8% with price/mix of 4.3%, reflecting Emerging Market (EM) recovery
- Further, £256m cost savings, driven by Quantum, target increased to £1.5bn (previously £1bn) by 2022
- Adjusted profit from operations up 5.4%* includes a transactional FX impact of 2%
- Adjusted operating margin down 70 bps, driven by increased New Category investment, geographic mix and transactional FX
- Adjusted diluted EPS up 6.1%
- Operating cash flow conversion of 67%, reflecting phasing of excise payments in the US in 2020
- BAT’s highest ever non-combustible product consumer acquisition +2.6m to 16.1m in H1, with 11.8% of Group revenue delivered by non-combustible products
- Vapour revenue up 59%*, Vuse approaching global category value share leadership
- glo revenue up 38%*, with glo Hyper volume share gains in ENA and Japan
- Velo revenue up 63%*, with our T5 volume share of the Modern Oral category at 39.5% up 280 bps
- Further incremental increase of £346m investment in H1, capitalising on strong momentum in all three New Categories
New Category consumables volume growth accelerated and was up substantially in all three categories. Combustibles volume was up 1.5%, driven by cigarette volume share gains (up 10 bps) and the recovery of emerging markets including Bangladesh, Pakistan, Vietnam, Brazil and South Africa, following the impact of COVID-19 last year. Duty paid industry cigarette volume was broadly stable in the first half of 2021.
Revenue from non-combustibles now represents 11.8% of Group revenue, up from 10.1% at FY 2020, reflecting strong New Category revenue growth of 40.4% (or 50.0% at constant rates of exchange).