TIDMBATS
RNS Number : 8821B
British American Tobacco PLC
12 June 2019
12 June 2019
BRITISH AMERICAN TOBACCO p.l.c.
FIRST HALF PRE-CLOSE TRADING UPDATE 2019
Trading update - ahead of closed period commencing 2 July
2019
-- The business continues to perform well, with Group Full Year (FY) guidance unchanged
-- Combustibles continue to perform strongly, driven by the
growth of the Strategic Brands and good pricing
-- First half (H1) New Category revenue growth approaching our
FY guidance range, with an expected acceleration in the second half
(H2) leading to FY growth around the middle of the 30-50% range, on
a constant currency basis
-- The US business is performing well with good pricing and
continued value share growth in an industry expected to be down 4%
to 5% on a volume basis for the FY
-- On track for a FY reduction in currency-neutral Adjusted Net
Debt**/Adjusted EBITDA*** of c.0.4x
"We are creating a stronger, simpler business and driving a step
change in New Categories, built on the foundation of a strong
combustible business. With our focus on building global brands, we
intend to consolidate our New Category portfolio into fewer brands.
Our Strategic Brands continue to take share, while new product
launches and a sharpened focus on priority markets and products are
expected to drive stronger New Category growth in the second half.
We are on track for a good performance in 2019 with revenue and
adjusted operating profit growth in line with our guidance and
delivery of high single figure FY adjusted diluted EPS growth at
constant rates of exchange."
Jack Bowles, Chief Executive
1. The business continues to perform well and Group FY guidance
remains unchanged
-- FY global industry volume expected to be down around 3.5%
-- On track for constant currency revenue growth in the
mid-upper half of our long-term guidance range of 3-5%
-- Corporate value share up +10bps YTD v FY18, with a strong
share performance by the Strategic Combustible Brands, up +50bps
YTD. Corporate volume share down -10bps YTD
-- Good adjusted operating margin improvement expected,
including a further increase in investment behind New
Categories
-- Constant currency adjusted operating profit growth expected
in the upper half of our long-term guidance range of 5-7%
-- FY adjusted diluted EPS growth expected to benefit from a
currency translation tailwind of around 1.0% for FY19, and 1.5% for
H1 19, at current exchange rates*
-- Confident of delivering high single figure constant currency adjusted diluted FY19 EPS growth
2. THP, Vapour and Modern Oral (New Categories) on track to
deliver 30-50% FY constant currency revenue growth
-- Vuse Alto in the US continues to grow and has reached a
retail volume (ml) share of 8.3% YTD in the US, driving the Vuse
family to a volume (ml) share of 19.1% YTD
-- Vype ePen3 continues to perform strongly reaching a value
share of 6.8% in the UK and 12.1% in France
-- glo share in Japan is at 5% YTD, with continued strong growth
in total nicotine corporate share, to 17% YTD, up from 16.2% at HY
2018. Revenue is expected to accelerate in H2 with the launches of
glo Pro (improved satisfaction technology) and glo Nano (smaller
design unit) in Q4
-- In the Modern Oral segment, EPOK and LYFT continue to lead
the growth of the category in Scandinavia and Switzerland. H2 is
expected to benefit from the rollout of Velo in the US in July
-- H1 New Category constant currency revenue growth approaching
our FY guidance range, reflecting the unwinding of high year end
2018 trade inventories following the restocking of Vibe and low
first quarter trade demand due to regulatory uncertainty in the
US
-- New Category revenue growth expected to accelerate in H2,
driven by the timing of new and enhanced product launches, leading
to FY growth around the middle of our 30-50% guidance range
3. The US is performing well with volume in line with
expectations
-- US industry volume decline remains within historic ranges
with Sales to Retail (STR) down 5.3% YTD. We expect FY industry
volume to be down 4% to 5%, driven by earlier cigarette price
increases and rising gas prices
-- Continued corporate value share growth up +20bps YTD, with US
Strategic brands up +30 bps, driving good revenue growth on a
constant currency basis
-- Traditional Oral tobacco expected to deliver good constant
currency revenue growth driven by good pricing, with share of moist
up +20bps
4. De-leveraging remains on track
-- Adjusted Net debt**/adjusted EBITDA*** reducing at around
0.4x per annum excluding the impact of FX
-- H1 cash conversion is expected to be impacted by the timing
of MSA payments. The business remains on track to deliver FY19 free
cash flow after dividends of GBP1.5bn
-- The Group's medium-term rating target remains BBB+/Baa1, with a current rating of BBB+/Baa2
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
Market share data is at April 2019 and volume data is based on
YTD April. Share of glo is as of week commencing 13 May 2019.
* Current exchange rates of USD/GBP 1.276 as at 7 June 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.
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. Shipments to Retail (STR) represents sales from
wholesale to retail and measures actual sales reported by suppliers
representing 94% industry coverage for cigarettes. In the Group's
experience, this provides the most reliable indicator of consumer
trends in the US.
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. 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.
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 principal non-GAAP measures which the Group uses and that
are contained in this announcement are adjusted profit from
operations and adjusted diluted earnings per share which are before
the impact of adjusting items and are reconciled from profit from
operations and diluted earnings per share, respectively. This
announcement also contains adjusted operating margin, a non-GAAP
measure defined as adjusted profit from operations as a percentage
of adjusted revenue.
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, made
within the meaning of Section 21E of the United States Securities
Exchange Act of 1934, 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 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.
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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