British American Tobacco p.l.c. ("BAT") will be hosting a series of analyst and investor meetings over the coming weeks in which we will discuss the progress of the business and opportunities ahead. Ahead of these meetings, BAT provides the following update to the market:
· The business continues to perform well and we remain confident of delivering good adjusted revenue growth on a constant currency representative basis, mainly driven by the Strategic Brand Portfolio (which covers our Strategic Combustible and Potentially Reduced Risk Products (PRRP) brands)
· We expect to once again exceed our high single figure constant currency adjusted diluted earnings per share growth target in 2018
· BAT continues to deliver good market share gains. Expectations remain unchanged for industry volume to be down around 3.5% for the full year. In the US, we are performing well, with growing value share and pricing in line with expectations. US industry volume decline remains in line with historic ranges and is expected to be down around 4.0-4.5% for the full year, with a slight improvement in H2
· In Tobacco Heating Products (THP), our geographic expansion continues to progress well with THP revenue expected to grow substantially. In Japan, the THP category remains flat, however glo's share is now at 4.4%, up from 3.3% at the start of the year
· BAT's global vapour business is expected to deliver double digit volume and constant currency revenue growth in 2018, on a representative basis, with Vuse in the US continuing to perform well driven by the launch of our pod-mod product, Alto, and the reintroduction of Vibe. Vype continues to grow share, with ePen3 showing promising initial results in the UK and Canada
· THP and vapour revenue is showing strong growth and is expected to reach £900m of reported revenue in 2018, led by THP. The revision from the previously announced revenue target of £1bn is largely driven by a reduction in planned year-end stocks in Japan as the THP category remains flat and the effect of the Vuse Vibe recall in the US
· In Oral Tobacco, we expect strong constant currency revenue growth on a representative basis, with good performances in both the US and Europe, following the continued success of Epok
· Full year price mix is expected to exceed the 5.5% achieved in 2017, supporting good adjusted revenue and adjusted operating profit growth, on a constant currency representative basis, weighted to the second half of the year
· Full year adjusted EPS growth is expected to be impacted by a currency translation headwind of around 7%, assuming exchange rates remain unchanged for the remainder of the year
· De-leveraging plans remain on track and net debt*/adjusted EBITDA** would be expected to reach around 3X by the end of 2019, based on exchange rates as at 16 January 2017, the date of the announced agreement to acquire Reynolds American Inc. However, at prevailing exchange rates, we expect net debt*/adjusted EBITDA** to be 3.8-3.9X by the end of this year and reduce to 3.3-3.5X by the end of 2019. The Group's medium-term rating target remains BBB+/Baa1
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