British American Tobacco PLC (BATS) - Trading Statement - 04 June 2024

[idpickering]

On track to deliver FY guidance; strategic discipline and focused investment driving positive momentum

· On track to deliver FY24 guidance with H1 delivery in line with our expectations

· Expected H2 acceleration driven by the phasing of innovation in New Categories, and the benefits of H1 investment in U.S. commercial actions and related wholesaler inventory movements

· We are driving a further improvement in New Category profitability1 through our Quality Growth focus on a more balanced top-line and bottom-line delivery

· In Combustibles, U.S. commercial plans continue to gain traction despite a challenging macro-economic backdrop; in AME and APMEA we gained volume and value share, with robust H1 pricing

· Good AME performance reflecting the benefit of our multi-category portfolio; H2 weighted APMEA performance due to the phasing of New Category launches, and a strong H1 comparator

· Partial monetisation of our ITC stake enabled the initiation of a sustainable share buy-back

· Strong cash conversion with our leverage2 expected to be within our narrowed target range of 2.0-2.5x by year-end 2024.

Tadeu Marroco, Chief Executive

"Our year-to-date performance is in line with our expectations, and we are on track to deliver our guidance of low-single digit revenue and adjusted profit from operations growth on an organic3, constant currency basis in 2024.

As previously highlighted, we expect our performance to be second-half weighted, mainly driven by wholesaler inventory movements related to continued investment in our U.S. commercial actions, as well as the phasing of new launches. Our guidance also reflects ongoing macro-economic pressures, particularly in the U.S. market and continued lack of effective enforcement against the growing illicit vapour segment. As a result, we expect our H1 revenue and adjusted profit from operations to be down by low-single digits on an organic3, constant currency basis.

We are sharpening our execution and making targeted investment choices to drive our medium-term sustainable growth algorithm. We are investing to sustainably strengthen our U.S. business, accelerate innovation momentum, and enhance capabilities that support our strategic delivery.

These investments will set the business up for a stronger future. While there is still more to do, I am confident that our actions are working, and I am encouraged by our continued traction in U.S. Combustibles, initial performance of glo Hyper Pro and enhanced consumables in early launch markets as well as the continued success of our non-tobacco range veo in Europe.

https://www.investegate.co.uk/announcem ... nt/8240016

Also posted on Company News here- viewtopic.php?p=667348#p667348

I hold these in my HYP, and know others here do too, so this may be of interest here.

Ian.

[idpickering]

For what it's worth (to others perhaps/), I topped up my BATS holdings yesterday. They now make up 4.3% in capital value terms, of my 26 share HYP.

In the sector they sit alongside Imperial Brands in my HYP, which is of similar capital value weighting as BATS is in my HYP.

That'll do for them maybe, as I look elsewhere for likely buys in the future.

Ian.

[kempiejon]

For what it's worth (to others perhaps/), I topped up my BATS holdings yesterday. They now make up 4.3% in capital value terms, of my 26 share HYP.

In the sector they sit alongside Imperial Brands in my HYP, which is of similar capital value weighting as BATS is in my HYP.

That'll do for them maybe, as I look elsewhere for likely buys in the future.

Ian, interesting what prompted your thinking here? I have both the Baccy's held IMB for over 25years BATS a decade plus, last added to BATS in 2019. I see from divdata BATS dividend is covered 1.69 times, yields a tasty 2.5 time the FTSE100's 3.55%, 25+ years of increasing dividends with a cagr of 3.02% for the past 5 years - some 6% over 15. However the business is clearly in decline, do you feel they can manage that profitably? I'm not sold on their alternative products yet but I think they'll contribute to my income for another decade and 9.5% is a perfectly good return for income.

[88V8]

I have both the Baccy's ....I think they'll contribute to my income for another decade and 9.5% is a perfectly good return for income.

Yes, me likewise.
Rumours of their demise seems to have been exaggerated and as an income investor I should not care that I am underwater...
But... given my tax band and what Labour are likely to do to dividend tax, maybe I should care. Bad enough being paid divis out of one's capital, but divis taxed at ?50% ??

V8

[moorfield]

I have both the Baccy's ....I think they'll contribute to my income for another decade and 9.5% is a perfectly good return for income.

Yes, me likewise.
Rumours of their demise seems to have been exaggerated and as an income investor I should not care that I am underwater...
But... given my tax band and what Labour are likely to do to dividend tax, maybe I should care. Bad enough being paid divis out of one's capital, but divis taxed at ?50% ??

V8

I see they will soon be peddling their wares to the poor folk of Sudan.

https://www.theguardian.com/business/ar ... s-to-sudan

Makes you feel lovely warm and fuzzy inside that the divi looks good for another decade , doesn't it.

[idpickering]

For what it's worth (to others perhaps/), I topped up my BATS holdings yesterday. They now make up 4.3% in capital value terms, of my 26 share HYP.

In the sector they sit alongside Imperial Brands in my HYP, which is of similar capital value weighting as BATS is in my HYP.

That'll do for them maybe, as I look elsewhere for likely buys in the future.

Ian, interesting what prompted your thinking here? I have both the Baccy's held IMB for over 25years BATS a decade plus, last added to BATS in 2019. I see from divdata BATS dividend is covered 1.69 times, yields a tasty 2.5 time the FTSE100's 3.55%, 25+ years of increasing dividends with a cagr of 3.02% for the past 5 years - some 6% over 15. However the business is clearly in decline, do you feel they can manage that profitably? I'm not sold on their alternative products yet but I think they'll contribute to my income for another decade and 9.5% is a perfectly good return for income.

Thanks for your input. I agree that the figures look ok. My thinking is similar to yours, in that I'm 62, and think BATS may well be paying out well for years yet maybe. Similarly, I agree 9.5% income return is perfectly good. I'm happy to hold, but have a rule that I have a maximum spend on any given share. I like to think it stops me grasping what might be a falling knife. As you say, and I agree, that the business/industry is in decline perhaps?

I have doubled up on LGEN though to be honest. As I hold IMB too, I think I've got that doubling up tactic covered.

Ian.

[88V8]

Yes, me likewise.
Rumours of their demise seems to have been exaggerated...

I see they will soon be peddling their wares to the poor folk of Sudan.
Makes you feel lovely warm and fuzzy inside that the divi looks good for another decade , doesn't it.

Yes, it does.
The good folk of Sudan have increased their population from 30mio to 50mio over the last thirty years. As someone who wants to see a fall in the world population, I welcome the advent of BATs and hope that the good folk embrace them heartily.

But seriously, is it much worse than the supermarkets... purveyors of fags, booze and unhealthy food?

V8

[moorfield]

But seriously, is it much worse than the supermarkets... purveyors of fags, booze and unhealthy food?

My comment was deliberately vague to be read different ways depending on your pov. You're quite right here imo, every company that HYPsters hold presents moral or ethical questions if one looks hard enough.

On the list I hold/have held, naming no names:

Environmental polluter
Animal tester
Peddler of derivative finance to small businesses
Manufacturer of tobacco products
Manufacturer of weapons
Exploiter of zero-contract employees
Exploiter of third world employees or countries
Destroyer of indigenous rainforest
Government briber/palm-greaser

I've made the point before from a HYP Practical perspective it seems faintly absurd and hypocritical to virtue-signal over some and not others. HYPs are built on dividends, and in that respect BATs aim to peddle fags in Sudan looks like astute business.