TIDMBATS
RNS Number : 7653U
British American Tobacco PLC
27 November 2019
This announcement contains inside information
27 November 2019
BRITISH AMERICAN TOBACCO p.l.c.
2019 Second Half Pre-Close Trading Update
ON TRACK FOR A STRONG YEAR
Trading update - ahead of closed period commencing 1(st) January
2020
The business continues to perform well and we expect:
-- A strong financial performance on an adjusted basis
-- A good performance from Combustibles, with strong price mix and share gains
-- Strong results in the US
-- Growing share and good revenue growth in New Categories in second half (H2)
-- FY New Category constant currency revenue growth at the lower
end of our range of 30-50%, reflecting the recent slowdown in the
US vapour market
-- De-leveraging in line with our guidance
Jack Bowles, Chief Executive:
"We expect to deliver a strong performance in 2019, building on
the good progress we made in the first half. Our focus on our
global strategic brands is delivering share gains and strong price
mix in combustibles, both globally and in the US. Increased
investment and new product launches are delivering good New
Category revenue growth in H2, despite the recent slowdown in the
US vapour market. We believe that the issues around vaping in the
US should lead to a better and stronger regulatory environment in
which we are well placed to succeed. In summary, we are delivering
on our priorities. We are driving value growth in combustibles, we
are investing to deliver a step change in New Categories and we are
transforming the business to create a stronger, simpler, more agile
BAT. We are on track for a strong year."
The business continues to perform well and we expect:
A strong financial performance on an adjusted basis
-- FY constant currency adjusted revenue growth in the upper
half of our 3-5% long term guidance range
-- FY adjusted operating margin improvement of 50-100bps while
delivering substantial additional investment behind New
Categories
-- FY constant currency adjusted operating profit growth in the
upper half of our 5-7% long-term guidance range
-- FY high single figure constant currency adjusted diluted EPS
growth, with a currency translation tailwind of around 1.2%, and a
headwind of around 2% for 2020*
A good performance from Combustibles, with strong price mix and
share gains
-- No change to expectations for global industry volumes, down around 3.5% for the FY
-- BAT FY volumes to be broadly in line with the industry, after
adjusting for the continued impact of Egypt and Venezuela and a
60bps impact from a one-off stock reduction in Russia
-- Corporate value share up 20bps YTD, driven by the Strategic Brands, up 55bps YTD
-- Corporate volume share up over 10bps YTD, with Strategic Brands up 60bps YTD
-- FY combustible price mix in excess of 7%
Strong results in the US
-- Strong constant currency revenue growth in line with the 3-5%
Group guidance range, supported by good pricing and reduced
discounting
-- No change to 2019 expectations for FY US industry volumes,
down around 5.5%. Expect between 4-6% in 2020
-- Continued strong value share performance, with corporate
value share up 30bps YTD, and premium share up 50bps YTD, driven by
Natural American Spirit and Newport
-- Strategic brands volume share up 20bps YTD; corporate volume share flat YTD
-- Traditional Oral tobacco to deliver good constant currency
revenue growth driven by pricing and share growth in moist snuff,
up 90bps YTD
Growing share and good revenue growth in New Categories in
H2
-- In vapour, Vuse is growing value share in the US, with Vuse
Alto value share up 840bps to 11.1% in October, with total Vuse
family value share at 17.5%. Vype continues to grow value share,
reaching 11.8% in the UK, up 260bps, and 19.2% in France, up 790bps
in October, with ePod successfully launched in both markets. In
Canada, Vype is the fastest growing brand, reaching a value share
of 27.6%, up 570 basis points since July
-- In THP, glo in Japan is holding volume share at 4.9% YTD in a
competitive market. glo Pro and glo Nano launched successfully,
with distribution building; glo Sens rollout began this month.
Total nicotine corporate volume share in Japan is up 210bps to
18.4% YTD. Elsewhere, glo is now above 1% volume share in key
cities in Eastern Europe, including Moscow
-- In Modern Oral, Velo's rollout in the US has now expanded to
75k outlets and reaching a modern oral category volume share of
9.2%. LYFT/EPOK continue to grow, consolidating their leadership of
the modern oral category outside the US
-- FY New Category constant currency revenue growth at the lower
end of our range of 30-50%, reflecting the slowdown in the US
vapour market
-- New Category constant currency revenue growth, excluding US
vapour, to be around the middle of the range
De-leveraging in line with our guidance
-- Adjusted Net debt**/adjusted EBITDA*** reducing by
approximately 0.4x excluding the impact of FX
-- FY free cash flow after dividends on track for GBP1.5bn
-- Medium-term rating target remains BBB+/Baa1, with a current rating of BBB+/Baa2****
The person responsible for making this announcement is Paul
McCrory, BAT's Company Secretary.
For further information, please contact:
British American Tobacco Press Office
+44 (0) 20 7845 2888 (24 hours) | @BATPress
British American Tobacco Investor Relations
Mike Nightingale / Rachael Brierley / John Harney
+44 (0) 20 7845 1180 / 1519/ 1263
Webcast and Conference call - The conference call will begin at
8.30am (GMT).
You can access the audio webcast via our website. You can also
listen via conference call by dialling the numbers below, using PIN
code 64839587 followed by #:
United Kingdom Toll-Free: 08003589473
United Kingdom Toll: +44 3333000804
United States Toll: +1 6319131422
A playback facility for the conference call will be available
for 48 hours after the call. To access this facility please use the
numbers below, PIN code 301304134 followed by #:
United Kingdom: +44 (0) 333 300 0819 (UK toll-free number 0800
358 2049)
United States: 1 (866) 931 1566 (toll-free number 1 844 307
9361)
Market share data (unless otherwise stated) is at October 2019
and volume data is based on YTD October.
* Current exchange rates of USD/GBP 1.275 as at 25(th) November
2019
** Adjusted Net Debt is total borrowings, including related
derivatives, less cash and cash equivalents and current
available-for-sale investments, excluding the impact of the
revaluation of RAI acquired debt arising as part of the purchase
price allocation process.
*** Adjusted EBITDA is not a measure defined by IFRS. Adjusted
EBITDA is profit for the year before net finance costs/income,
taxation on ordinary activities, depreciation, amortisation,
impairment costs, the Group's share of post-tax results of
associates and joint ventures, and other adjusting items.
****A credit rating is not a recommendation to buy, sell or hold
securities. A credit rating may be subject to withdrawal or
revision at any time. Each rating should be evaluated separately of
any other rating.
As used herein, volume share refers to the retail sales volume
of the product sold as a proportion of total retail sales volume in
that category and value share refers to the retail sales value of
the product sold as a proportion of total retail sales value in
that category.
New Categories comprises Tobacco Heating Products (THP), Vapour
and Modern Oral.
Note on Non-GAAP Measures
This announcement contains several non-GAAP measures used by
management to monitor the Group's performance. For the non-GAAP
information contained in this announcement, no comparable GAAP or
IFRS information is available on a forward-looking basis, as the
effect of adjusting items and rates of exchange, which could be
significant, may be highly variable and cannot be estimated with
reasonable certainty.
The Group's Management Board regularly reviews the measures used
to assess and present the financial performance of the Group and,
as relevant, its geographic segments, and believes that these
measures provide additional useful information to investors.
Certain of our measures are presented based on an adjusted basis
and on a constant currency basis. Please refer to the 2018 Annual
Report on Form 20--F for a full description of each measure, pages
258 to 266. Free cashflow after dividends is a new measure
introduced from 1 January 2019, in order to enhance the
understanding of availability of cash generated after the payment
of dividends.
The principal non-GAAP measures which the Group uses and that
are contained in this announcement are adjusted revenue, adjusted
profit from operations and adjusted diluted earnings per share
which are before the impact of adjusting items and are reconciled
from revenue, profit from operations and diluted earnings per
share, respectively. This announcement also contains New Category
revenue, a non-GAAP measure reconciled from revenue, and adjusted
operating margin, a non-GAAP measure defined as adjusted profit
from operations as a percentage of adjusted revenue.
This announcement also contains adjusted net debt and adjusted
EBITDA. The Group uses adjusted net debt and adjusted EBITDA to
assess its financial capacity. The Management Board believes that
these additional measures, which are used internally, are useful to
the users of the financial statements in helping them to see how
business financing has changed over the year.
Adjusting items, as identified in accordance with the Group's
accounting policies, represent certain items of income and expense
which the Group considers distinctive based on their size, nature
or incidence. These include significant items in revenue, profit
from operations, net finance costs, taxation and the Group's share
of the post--tax results of associates and joint ventures which
individually or, if of a similar type, in aggregate, are relevant
to an understanding of the Group's underlying financial
performance. Although the Group does not believe that these
measures are a substitute for IFRS measures, the Group does believe
such results excluding the impact of adjusting items provide
additional useful information to investors regarding the underlying
performance of the business on a comparable basis.
The Group's management reviews a number of our IFRS and
non--GAAP measures for the Group and its geographic segments at
constant rates of exchange. This allows comparison of the Group's
results, had they been translated at the previous year's average
rates of exchange. The Group does not adjust for the normal
transactional gains and losses in operations that are generated by
exchange movements. Although the Group does not believe that these
measures are a substitute for IFRS measures, the Group does believe
that such results excluding the impact of currency fluctuations
year--on--year provide additional useful information to investors
regarding the operating performance on a local currency basis.
Forward-looking statements
This announcement does not constitute an invitation to
underwrite, subscribe for, or otherwise acquire or dispose of any
British American Tobacco p.l.c. ("BAT") shares or other securities.
This announcement contains certain forward-looking statements,
including "forward-looking" statements made within the meaning of
Section 21E of the United States Securities Exchange Act of 1934,
regarding our intentions, beliefs or current expectations
concerning our year-end results as well as, 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 Group operates.
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.
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 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; changes in domestic or
international tax laws and rates; adverse litigation and dispute
outcomes and the effect of such outcomes on the Group's financial
condition; changes or differences in domestic or international
economic or political conditions; adverse decisions by domestic or
international regulatory bodies; the impact of market size
reduction and consumer down-trading; translational and
transactional foreign exchange rate exposure; the impact of serious
injury, illness or death in the workplace; the ability to maintain
credit ratings and to fund the business under the current capital
structure; the inability to develop, commercialise and roll-out
Potentially Reduced-Risk Products; and changes in the market
position, businesses, financial condition, results of operations or
prospects of the Group.
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.
No statement in this communication 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.
Additional information concerning these and other factors can be
found in the Company's filings with the U.S. Securities and
Exchange Commission ("SEC"), including the Annual Report on Form
20-F filed on 15 March 2019 and Current Reports on Form 6-K, which
may be obtained free of charge at the SEC's website,
http://www.sec.gov, and the Company's Annual Reports, which may be
obtained free of charge from the British American Tobacco website
www.bat.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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