PRESS RELEASE
08 FEBRUARY 2024
"2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment.
New Categories delivered continued volume-led revenue growth and increased profitability, driven by Vuse and Velo. As a result, our New Categories portfolio has turned profitable two years ahead of our original target.
In combustibles, our commercial plans in the U.S. are enabling early signs of portfolio recovery. AME and APMEA performed well, with a strong revenue and profit performance, led by our well-balanced portfolio.
Our refined strategy commits us to 'Building a Smokeless World', a predominantly smokeless business, with 50% of our revenue from Non-Combustibles by 2035. Consistent with this vision, and taking into account the current macro-economic pressures impacting the U.S. combustibles industry, the growth of illicit single-use vapour products and uncertainty around a potential menthol ban in the U.S., we have taken a non-cash impairment charge of £27.3 billion, mainly relating to our acquired U.S. combustibles brands.
We are investing to strengthen our U.S. business, accelerate innovation momentum, and enhance capabilities that support our strategic delivery. We expect these investments, together with the U.S. macro-economic pressures, will impact 2024. Thereafter, we will progressively build to deliver 3-5% organic revenue, and mid-single digit adjusted organic profit from operations growth by 2026 on a constant currency basis. We are committed to continuing to reward shareholders with strong cash returns throughout this period.
I am confident that the choices we have made will drive our long-term success and create sustainable value for all our stakeholders."
For year ended 31 December 2023
Cigarette and HP volume share | |
---|---|
REPORTED Current rates | |
REPORTED Vs 2022 (current) | -10 bps |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Cigarette and HP value share | |
REPORTED Current rates | |
REPORTED Vs 2022 (current) | -50 bps |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Non-combustible consumers 3 | |
REPORTED Current rates | 23.9m |
REPORTED Vs 2022 (current) | +3.2m |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Revenue (£m) | |
REPORTED Current rates | £27,283m |
REPORTED Vs 2022 (current) | -1.3% |
ADJUSTED 1 Current rates | £27,283m |
ADJUSTED 1 Vs 2022 (current) | +1.6% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | +3.1% |
Revenue from New Categories (£m) | |
REPORTED Current rates | £3,347m |
REPORTED Vs 2022 (current) | +15.6% |
ADJUSTED 1 Current rates | £3,347m |
ADJUSTED 1 Vs 2022 (current) | +17.8% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | +21.0% |
(Loss)/profit from operations (£m) | |
REPORTED Current rates | £(15,751)m |
REPORTED Vs 2022 (current) | -250% |
ADJUSTED 1 Current rates | £12,465m |
ADJUSTED 1 Vs 2022 (current) | +3.1% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | +3.9% |
Category contribution - New Categories (£m) 4 | |
REPORTED Current rates | |
REPORTED Vs 2022 (current) | |
ADJUSTED 1 Current rates | £17m |
ADJUSTED 1 Vs 2022 (current) | n/m |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | n/m |
Operating margin (%) | |
REPORTED Current rates | (57.7)% |
REPORTED Vs 2022 (current) | -95.8 ppts |
ADJUSTED 1 Current rates | +45.7% |
ADJUSTED 1 Vs 2022 (current) | +60 bps |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | +40 bps |
Diluted (loss)/earnings per share (pence) | |
REPORTED Current rates | (646.6)p |
REPORTED Vs 2022 (current) | -322% |
ADJUSTED 1 Current rates | 375.6p |
ADJUSTED 1 Vs 2022 (current) | +4.0% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | +5.2% |
Net cash generated from operating activities (£m) | |
REPORTED Current rates | £10,714m |
REPORTED Vs 2022 (current) | +3.1% |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Adjusted cash generated from operations (£m) | |
REPORTED Current rates | |
REPORTED Vs 2022 (current) | |
ADJUSTED 1 Current rates | £7,824m |
ADJUSTED 1 Vs 2022 (current) | +2.9% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Cash conversion (%) | |
REPORTED Current rates | (68.0)% |
REPORTED Vs 2022 (current) | -167 ppts |
ADJUSTED 1 Current rates | +100.0% |
ADJUSTED 1 Vs 2022 (current) | -40 bps |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Borrowings 5 (£m) | |
REPORTED Current rates | £39,730m |
REPORTED Vs 2022 (current) | -7.9% |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Adjusted Net Debt (£m) | |
REPORTED Current rates | |
REPORTED Vs 2022 (current) | |
ADJUSTED 1 Current rates | £33,940m |
ADJUSTED 1 Vs 2022 (current) | -7.4% |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) | |
Dividend per share (pence) | |
REPORTED Current rates | 235.52p |
REPORTED Vs 2022 (current) | +2.0% |
ADJUSTED 1 Current rates | |
ADJUSTED 1 Vs 2022 (current) | |
ADJUSTED 1 ORGANIC 2 Vs 2022 (constant) |
REPORTED | ADJUSTED 1 | ADJUSTED 1 ORGANIC 2 | |||
---|---|---|---|---|---|
Current
rates |
Vs 2022
(current) |
Current
rates |
Vs 2022
(current) |
Vs 2022
(constant) |
|
Cigarette and HP volume share | -10 bps | ||||
Cigarette and HP value share | -50 bps | ||||
Non-combustible consumers 3 | 23.9m | +3.2m | |||
Revenue (£m) | £27,283m | -1.3% | £27,283m | +1.6% | +3.1% |
Revenue from New Categories (£m) | £3,347m | +15.6% | £3,347m | +17.8% | +21.0% |
(Loss)/profit from operations (£m) | £(15,751)m | -250% | £12,465m | +3.1% | +3.9% |
Category contribution - New Categories (£m) 4 | £17m | n/m | n/m | ||
Operating margin (%) | (57.7)% | -95.8 ppts | +45.7% | +60 bps | +40 bps |
Diluted (loss)/earnings per share (pence) | (646.6)p | -322% | 375.6p | +4.0% | +5.2% |
Net cash generated from operating activities (£m) | £10,714m | +3.1% | |||
Adjusted cash generated from operations (£m) | £7,824m | +2.9% | |||
Cash conversion (%) | (68.0)% | -167 ppts | +100.0% | -40 bps | |
Borrowings 5 (£m) | £39,730m | -7.9% | |||
Adjusted Net Debt (£m) | £33,940m | -7.4% | |||
Dividend per share (pence) | 235.52p | +2.0% |
The use of non-GAAP measures, including adjusting items and constant currencies, are further discussed from page 50 of the full announcement, with reconciliation from the most comparable IFRS measure provided.
Note
1 See page 31 of the full announcement for discussion on adjusting items.
2 Organic measures exclude the performance of businesses sold (including the Group's Russian and Belarusian businesses) or acquired, or that have an enduring structural change impacting performance that may significantly affect the users' understanding of the Group's performance in the current and comparator periods to ensure like-for-like assessment across all periods.
3 Internal estimate, excluding Russia and Belarus, see page 44 of the full announcement.
4 New Categories contribution is positive in 2023 at £17 million (at current rates of exchange), turning from a loss of £366 million in 2022. Accordingly, the movement is deemed not meaningful (or n/m) in % terms.
5 Includes lease liabilities.
When appointed as Chief Executive, I was clear that the fundamentals of our strategy remain correct. However, we need to clarify our vision and strengthen our execution.
We are therefore refining our A Better Tomorrow™ purpose, with a vision to 'Build A Smokeless World'.
Our vision is clear and focused on migrating cigarette consumers to reduced-risk*† alternatives.
At the same time, we will manage our cigarette business responsibly, enabling the returns to continue to invest in growing smokeless alternatives.
Leading in adult consumer choice is the cornerstone of our vision. Consumers are not choosing a single alternative to smoking, and BAT is very well positioned in all three of the main alternatives to smoking:
We have refined our strategy, enabling sharper execution with a clear organisational line of sight across three strategic pillars:
I am pleased with the progress made across each of our key focus areas in 2023, each aligning with our strategic pillars:
A key part of our Dynamic Business pillar is financial flexibility, disciplined capital allocation and strong shareholder distributions. We remain committed to our 25-year track record of consistent dividend growth, rewarding our shareholders through all economic cycles.
Over the next five years, we expect to generate around £40 billion of free cash flow before dividends.
In addition, we continue to pursue all opportunities to enhance balance sheet flexibility and, as part of this, we regularly review our stake in ITC. We recognise that we have a significant shareholding which offers us the opportunity to release and reallocate some capital.
Our shareholding in ITC has existed in one way or another since the early 1900s and is subject to numerous share capital changes and regulatory restrictions. We have been actively working for some time on completing the regulatory process required to give us the flexibility to monetise some of our shareholding and will update you at the earliest opportunity.
It is an exciting time to be part of BAT and I look forward to working with my colleagues around the globe to Build a Smokeless World and drive A Better Tomorrow™.
* Based on the weight of evidence and assuming a complete switch from cigarette smoking. These products are not risk free and are addictive.
† Our Vapour product Vuse (including Alto, Solo, Ciro and Vibe), and certain products including Velo, Grizzly, Kodiak, and Camel Snus, which are sold in the U.S., are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.
* at constant rates of exchange.
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.
In particular, these forward-looking statements include, among other statements, statements regarding the Group's future financial performance, planned product launches and future regulatory developments and business objectives (including with respect to sustainability and other environmental, social and governance matters), as well as: (i) certain statements in the Summary and the Chief Executive statement and the 2024 Outlook (both on pages 1 to 2 of the full announcement); (ii) certain statements in the Group Operating Review (pages 3 to 7of the full announcement); (iii) certain statements in the Category Performance Review (pages 8 to 10 of the full announcement); (iv) certain statements in the Regional Review section (pages 11 to 13 of the full announcement); (v) certain statements in the Other Financial Information section (pages 14 to 19 of the full announcement); (vi) certain statements in the Other Information section (pages 20 to 23 of the full announcement); (vii) certain statements in the Notes to the Financial Statements section (pages 31 to 42 of the full announcement), including the Liquidity and Contingent liabilities and financial commitments sections; and (viii) certain statements in the Other Information (including Dividends) section (pages 43 to 46 of the full announcement).
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 British American Tobacco Group (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 and performance 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 supply chain disruptions; 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; changes in the market position, businesses, financial condition, results of operations or prospects of the Group; direct and indirect adverse impacts associated with Climate Change and the move towards a Circular Economy; and Cyber Security caused by the heightened cyber-threat landscape, the increased digital interactions with consumers and changes to regulation.
A review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found by referring to the information contained under the headings “Cautionary statement”, "Group Principal Risks" and "Group Risk Factors" in the 2022 Annual Report and Accounts and Form 20-F of British American Tobacco p.l.c. (BAT). 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 Group's 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, www.sec.gov and BAT’s Annual Reports, which may be obtained free of charge from the BAT website www.bat.com.
No statement in this announcement is intended to be a profit forecast and no statement in this communication 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. 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.
All financial statements and financial information provided by or with respect to the U.S. or Reynolds American are initially prepared on the basis of U.S. GAAP and constitute the primary financial statements or financial records of the U.S./Reynolds American. This financial information is then converted to International Financial Reporting Standards as issued by the IASB and as adopted for use in the UK (IFRS) for the purpose of consolidation within the results of the Group. To the extent any such financial information provided in this announcement relates to the U.S. or Reynolds American it is provided as an explanation of, or supplement to, Reynolds American’s primary U.S. GAAP based financial statements and information.
Our Vapour product Vuse (including Alto, Solo, Ciro and Vibe), and certain products including Velo, Grizzly, Kodiak, Camel Snus and Granit, which are sold in the U.S., are subject to FDA regulation and no reduced-risk claims will be made as to these products without Agency clearance.
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