BAT: H2 & FY22 Results

Share on facebook
Share on twitter
Share on email
Share on whatsapp
Share on linkedin

Top-line & Bottom-line results

Adjusted, at constant currencies

Net revenue up +2.3% (New Category net revenue up +37%)

Operating profit up +4.3%; operating margin +90 bps

EPS up +5.8%

Key Highlights

New Categories (NC):

– BAT now expects NC profitability in 2024, one year ahead of plan

– NC revenue: +37% (vapor +44%; heated tobacco +27%; modern oral +46%)

– Weight of NC revenue in total: 14.8% (+2.4pps)

– NC losses reduced by 60.7% to £366Mn in 2022

– Number of non-combustible consumers: +4.2Mn to 22.5Mn

The US Market: (52.4% of total operating profit) 

– Combustibles: volume -15.5%; revenue -6.1%

– Operating profit: +3.5% on the back of +330bps margin expansion to 53.7%

– Very poor combustible performance, partially offset by the strong performance of Vuse (volume +10%, revenue +46%)

2023 Guidance

– Global tobacco industry volume: -2%

– Revenue growth: 3-5% (reported growth to be impacted by the transfer of Russia business)

– Adjusted EPS growth: mid-single digit (2% FX headwind, growth to be second half weighted)

– Operating cash flow conversion: above 90%

Our take-away

Trading at 8.3x adj. EPS and 8.7x adj. EV/EBITDA. Dividend yield: 7.5% (based on Feb 8, 2022 closing price: £30.91)

The situation in the key US combustible market is dire: 6.1% revenue and 15.5% volume decline. The progress in NPGs is noteworthy, but it is not easy to prosper financially when half of the business (by operating profit) is not doing well. Nevertheless, we maintain our long-term cautious optimism on BAT.

Our conclusion: More pain ahead before a Better Tomorrow

Call Request:
Reports

We will reach out to you within 24 hours to discuss your request. Please note that we only respond to requests with a valid business e-mail address
Disclaimer: The content in our Market Pulse section is/shall not be construed as investment advice. It is for informative purposes only and does not take into account the individual needs, investment objectives and specific financial circumstances. Any action taken upon the information in our Market Pulse section is strictly at the reader’s own risk. We assume no responsibility or liability for the actions taken. Moreover, we also assume no responsibility or liability for any errors or omissions in our content – which is provided on an “as is” basis with no guarantees of completeness, accuracy, usefulness or timeliness even if we only depend on the infromation sources that are believed to be accurate.

Consultation
Session Request

We will reach out to you within 24 hours to discuss your request. Please note that we only respond to requests with a valid business e-mail address