British American Tobacco Plc (LON:BATS) has announced its preliminary results for the year ended 31 December 2024.
Tadeu Marroco, Chief Executive
“We are committed to Building a Smokeless World and becoming a predominantly Smokeless business by 2035. I am confident that we have the right strategy, science, innovation, breadth of capabilities and people to achieve this ambition and deliver long-term sustainable value for all our stakeholders.
2024 was an investment year with delivery in line with our guidance. We continued our transformation this year, adding 3.6 million adult consumers (to a total of 29.1 million) of our Smokeless products, which now account for 17.5% of Group revenue, an increase of 1.0 ppts vs FY23.
Our performance has accelerated in the second half, driven by the phasing of New Categories innovation and the benefits of investment in U.S. commercial actions, together with the unwind of related wholesaler inventory movements.
Our focus on Quality Growth delivered better returns on more targeted investments across all three New Categories, and our prioritisation and focus is already transforming our business performance in Europe. We made further progress on increasing profitability across New Categories, and I am particularly pleased with our performance in Modern Oral.
In the U.S., our targeted investments have strengthened the business, despite a challenging macro-economic backdrop and a growing presence of illicit single-use vapour products. Through our commercial actions, we started to improve our performance with sharper execution and we are opening up untapped growth opportunities, particularly related to Modern Oral. We have achieved another strong performance in AME and APMEA, with their combined results delivering in line with our mid-term algorithm.
We are making good progress and while there is still more to do, I am certain that the investment actions taken in 2024 are the right way forward for BAT. Our foundations are strong and we will continue to reward shareholders through our strong cash returns, including our progressive dividend and sustainable share buy-back.
In 2025, while we expect significant regulatory and fiscal headwinds in Bangladesh and Australia to impact our combustibles performance, I am confident that we will progressively build on our delivery as we shift from investment to deployment and we remain committed to returning to our mid-term guidance of 3-5% revenue and 4-6% adjusted profit from operations* growth on a constant currency in 2026.”
Summary
– Revenue down 5.2%, driven by the sale of our businesses in Russia and Belarus in September 2023 and translational FX headwinds
– Organic revenue up 1.3% (at constant rates), driven by New Categories revenue up 8.9%
– Total combustibles organic revenue increased 0.1% (at constant rates), as organic price/mix of +5.3% was offset by 5.2% lower volume
– Reported profit from operations of £2,736m (2023: loss of £15,751m) with 2024 including a provision of £6.2 billion in respect of the proposed settlement in Canada, while 2023 was negatively impacted by one-off impairment charges largely in the U.S.
– Adjusted organic profit from operations up 1.4% (at constant rates), driven by AME and APMEA
– New Categories contribution increased by £251 million on an adjusted organic, constant FX basis, with category contribution margin now at 7.1%, an increase of 7.1 ppts on 2023
– Reported diluted EPS at 136.0p; adjusted organic diluted EPS up 3.6% (at constant rates)
– Free cash flow of £7,901 million; adjusted net debt / adjusted EBITDA down 0.13x to 2.44x (down 0.3x at constant rates)
– Dividend growth of 2.0% to 240.24p – with £900 million share buy-back planned in 2025
– Continued Sustainability progress – launched OmniTM, a major global initiative to help in making a Smokeless World a reality
| Performance highlights | Reported | Adjusted2 | Adjusted2 Organic3 | ||||
| For year ended 31 December 2024 | Current | vs 2023 | Current | vs 2023 | vs 2023 | ||
| rates | (current) | rates | (constant) | (constant) | |||
| Cigarette and HP volume share | +10 bps | ||||||
| Cigarette and HP value share | -30 bps | ||||||
| Consumers of Smokeless products1 | 29.1m | +3.6m | |||||
| Revenue (£m) | £25,867m | -5.2% | £25,867m | -0.5% | +1.3% | ||
| Revenue from New Categories (£m) | £3,432m | +2.5% | £3,432m | +6.1% | +8.9% | ||
| Smokeless revenue as a % of total revenue (%) | 17.5% | +1.0 ppts | |||||
| Profit from operations (£m) | £2,736m | n/m | £11,890m | -0.2% | +1.4% | ||
| Adjusted gross profit growth (%) | +0.5% | +2.2% | |||||
| Category contribution – New Categories (£m) | £249m | n/m | n/m | ||||
| Category contribution margin – New Categories (%)** | 7.1% | +6.6 ppts | +7.1 ppts | ||||
| Operating margin (%) | +10.6% | 68.3 ppts | +46.0% | +10 bps | flat | ||
| Diluted earnings per share (pence) | 136.0p | n/m | 362.5p | +1.7% | +3.6% | ||
| Net cash generated from operating activities (£m) | £10,125m | -5.5% | |||||
| Free cash pre-dividend (£m) | £7,901m | -5.5% | |||||
| Cash conversion (%) | +370% | +438 ppts | +101% | 30 bps | |||
| Borrowings including lease liabilities (£m) | £36,950m | -7.0% | |||||
| Adjusted net debt to adjusted EBITDA ratio | 2.44x | -0.13x | |||||
| Dividend per share (pence) | 240.24 | +2.0% | |||||
The use of non-GAAP measures, including adjusting items and constant currencies, are further discussed from page 49, with reconciliation from the most comparable IFRS measure provided.
Notes: 1. Internal estimate, see page 43 for a discussion on the revision to prior estimates. 2. See page 29 for discussion on adjusting items. 3. 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.
* Due to the uncertainty around the timing of any settlement in Canada, the Group will present certain measures excluding the profit earned from ITCAN (except for New Categories) for 2025, with 2024 comparatives rebased accordingly. Please refer to page 18. ** measure presented at constant rates only. n/m refers to movements that are not meaningful as prior year was a loss.
Our medium-term growth algorithm
Soraya Benchikh, British American Tobacco Chief Financial Officer
“I am delighted to present my first full-year results as the Chief Financial Officer. I am confident that we will deliver on our financial ambitions, and I share the passion and conviction of our people to Build a Smokeless World. I am also committed to ensuring our transformation will maximise returns for our shareholders. In order to achieve this, our key financial focus areas are:
– Fuelling our transformation by maximising sustainable value from combustibles, using our scale and efficiencies to release cash;
– Deploying capital in a disciplined and targeted manner in the largest profit pools, with a focus on return on investment;
– Strengthening our financial position by reducing debt, providing us with greater financial resilience;
– A balanced capital allocation approach, prioritising our transformation while delivering a progressive dividend; and
– Maintaining a sustainable share buy-back programme.
We aim to drive performance using KPIs across our business units – ensuring we create shareholder value throughout the Group.
We are already seeing results and expect to progressively improve our performance in 2025 and return to our medium-term algorithm of 3-5% revenue and 4-6% adjusted profit from operations growth* on a constant currency basis by 2026*.
Our algorithm is built around five key pillars, with 2024 highlights below:
1. Drive quality revenue growth
We are committed to maximising sustainable value from our combustibles business while driving growth in our New Categories through innovation and premiumisation.
– Revenue was down 5.2%, due to the sale of our businesses in Russia and Belarus in 2023 and translational FX headwinds.
– Combustibles pricing remained robust with Group organic price/mix of +5.3% in 2024. However, excluding the impact of currency, our reported combustibles revenue was down 1.6%. This was driven by lower combustibles volume (down 9.0%) largely due to the impact of the sale of our businesses in Russia and Belarus partway through 2023 and the challenging market in the U.S., where volume was 10.1% lower. On an organic, constant rate basis, combustibles revenue was largely in line with the prior year (marginally up 0.1%).
– New Categories organic revenue was up 8.9% (at constant rates) with revenue growth across all three regions.
2. Increase adjusted gross profit
We are focused on continuing to expand our adjusted gross profit through revenue growth management and scale benefits.
– Total adjusted organic gross profit at constant rates, grew by £396 million, an increase of 2.2% compared to 2023.
– Our combustibles portfolio has remained resilient, with adjusted organic gross profit marginally higher (up 0.3% at constant rates).
– Our New Categories business is the main driver of Group growth, delivering improvement in the last four years. This momentum continued in 2024 with an increase in adjusted gross profit of 19.8% (on an organic basis at constant rates), driven by volume growth, revenue growth management and cost optimisation.
3. Accelerate New Category contribution
We will continue to invest in our transformation and focus on the right opportunities in key growth areas – evaluating spend effectiveness to maximise returns, freeing up resources for growth and incremental profit.
– In 2024, we increased New Category contribution by £251 million (at organic constant rates), with New Category contribution margin reaching 7.1%, up 7.1 ppts.
4. Generate sustainable adjusted profit from operations growth
We are committed to disciplined cost management and continue to explore opportunities to optimise our footprint.
– Adjusted organic profit from operations was up 1.4% (at constant rates) in 2024. This is supported by strict cost management. In 2024, we delivered savings of £402 million to largely offset the impact of 6.5% (or £387 million) inflation on our cost base mainly due to higher leaf prices (impacted by adverse weather conditions) and manufacturing costs (labour and utilities). We have committed to deliver cost savings of over £1.2 billion in the three years to 2025 (with over 70% delivered to date) and an additional £2 billion from 2026 to 2030.
5. Deliver in excess of £50 billion of free cash flow (2024-2030)
BAT is a highly cash generative company. We have delivered 100% operating cash conversion over the last five years, with 101% conversion in 2024, well ahead of our 90% target. In 2024, the Group generated £7.9 billion of free cash flow before dividends.
In 2025, we will face challenges including FII GLO repayments and potential settlement payments in connection with ITCAN’s outstanding litigation in Canada. Excluding those items, we expect BAT to generate over £8 billion of average annual free cash flow, growing at least in line with adjusted profit from operations.
We have returned £28 billion to shareholders over the last five years, through our progressive dividend and sustainable share buy-back, starting with £0.7 billion in 2024 with a further £0.9 billion committed for 2025. We have continued to reduce our leverage and closed the year within our target range, with an adjusted net debt to adjusted EBITDA ratio of 2.44x, or 2.75x excluding the provision for cash, cash equivalents and investments held at fair value in Canada.”
2025 Outlook
– Global tobacco industry volume expected to be down c.2%.
– c.1% revenue growth (at constant rates), as we navigate increased excise and VAT in Bangladesh and new tobacco regulations in Australia.
– 1.5-2.5% adjusted profit from operations growth (adjusted for Canada, at constant rates)*, including an expected c.1.5% transactional FX headwind.
– Performance expected to be second half weighted as we deploy our innovations throughout the year.
– Net finance costs* expected to be around £1.8 billion (adjusted for Canada).
– The impact of translational foreign exchange is expected to be broadly flat on full year adjusted profit from operations growth.
– Operating cash flow conversion in excess of 90%, with gross capital expenditure in 2025 of approximately £650 million.
– Continue to deleverage (adjusted for Canada) to our 2.0-2.5x adjusted net debt/adjusted EBITDA corridor by 2026.
– Commitment to dividend growth in sterling terms and £900 million share buy-back.
* Due to the uncertainty around the timing of any settlement in Canada, British American Tobacco will present certain measures excluding the profit earned from ITCAN (except for New Categories) for 2025, with 2024 comparatives rebased accordingly. Please refer to page 18.
