Ahead of the H1 2026 Trading Update release
Date: June 2, 2026 (Tuesday), before the bell
FY26 Consensus: At constant currency, 3.4% Revenue, 4.3% Adjusted profit from operations and 5.9% adjusted diluted EPS growth. 16.2% New Category revenue growth.
BAT FY26 Guidance: Lower end of the medium-term guidance ranges – defined as 3-5% revenue growth, 4-6% adjusted profit from operations growth and 5-8% adjusted diluted EPS growth. H2-weighted operating profit growth. Low double-digit New Category revenue growth. c.1% transactional and c.3% translational FX headwind.
—
BAT H1 2026 Trading Update
British American Tobacco (BAT) has delivered a reassuringly steady H1 2026 trading update, confirming that the group remains firmly on track to achieve its full-year financial guidance. The primary narrative continues to be the group’s strategic multi-category pivot, where accelerating revenue growth within non-combustible “New Categories” is successfully picking up the slack from secular volume declines in traditional cigarettes. Notably, management has upgraded its full-year outlook for New Categories to mid-teens revenue growth, underpinned by stellar market share gains in Modern Oral (Velo) and Vapour (Vuse), which help offset persistent competitive headwinds in Heated Products (glo).
Geographically, the U.S. market acts as the operational anchor for the first half, though overall Group profit realization will be heavily skewed toward H2 due to a combination of shifting regional dynamics and the compounding benefits of the “Fit2Win” cost-saving program. From a capital allocation standpoint, BAT remains an resilient cash generator. The company is on track to convert over 95% of its operating cash flow, successfully de-lever the balance sheet to its target range by year-end, and continue returning substantial capital to shareholders via a progressive dividend and a ongoing £1.3 billion share buy-back program.
Combustibles: Pricing Resilience Outpaces Volume Headwinds
Traditional tobacco products continue to deliver resilient financial results, primarily sustained by robust year-to-date pricing strategies that counteract a deteriorating global volume backdrop. Management has revised its full-year technical guidance for the global cigarette industry, now projecting an overall volume decline of c.2.5%, compared to its previous estimate of a 2.0% contraction.
BAT’s consolidated performance across its top tobacco markets shows minor market share erosions, with Group value share down 20 basis points (bps) and volume share down 30 bps.
– United States: Revenue and profit growth have shown continued momentum, even as market share declined by 20 bps in value and 80 bps in volume. This volume drop was heavily driven by intense competitive activity in the deep-discount segment; excluding deep-discount products, BAT’s volume share contraction was limited to a more modest 20 bps.
– AME (Americas, Europe, Middle East): Financial delivery remained highly resilient, spearheaded by solid market performance in Brazil and Türkiye. Regional value share contracted by 20 bps, but volume share ticked up by 10 bps.
– APMEA (Asia-Pacific, Middle East, Africa): Progress in the first half has been slower than originally anticipated, with value share down 30 bps and volume share down 30 bps. However, sequential improvements are visible relative to the exit rates of H2 2025, and performance is expected to stabilize over the remainder of the year.
New Categories: Revenue Growth Acceleration
The overarching highlight of the update is the upward revision of New Category revenue growth, which is now expected to hit the mid-teens range for both H1 and the full year 2026, marking an acceleration from the previous low double-digit guidance. This performance is being prioritized in highly profitable value pools to drive robust category contribution margins.
– Velo (Modern Oral): VELO continues to be a massive commercial success, registering strong double-digit revenue growth and expanding its global category volume leadership. In top markets, Velo captured an additional 5.7 percentage points (pts) of the Total Oral share and 7.4 pts of the Modern Oral segment. The rollout of Velo Plus in the U.S. has been highly effective, expanding BAT’s total volume share of the domestic Modern Oral market by 10.4 pts. Strong financial performances were echoed across the AME region, where Velo heavily over-indexed on value share.
– Vuse (Vapour): Globally, Vuse extended its value share leadership in tracked channels by adding 1.3 pts. Group vapour revenue is projected to grow at a mid-single-digit pace for H1 and the full year, heavily insulated by the U.S., where value share surged by 4.2 pts. Conversely, AME value share contracted by 1.5 pts due to disruptive regulatory overhauls in the UK and Poland, though Vuse successfully maintained its overarching value share leadership across Europe.
– glo (Heated Products): Heated products represent the primary weak spot in the portfolio. Volume share in top markets contracted by 1.6 pts (down 0.7 pts in AME and 2.1 pts in APMEA), pushed down by severe competitive intensity within the value segment. Consequently, glo is expected to post a low double-digit revenue decline for H1 and the full year 2026, exacerbated by material adverse inventory movements in Japan. On a positive note, the premium glo Hilo device is gaining traction, capturing a 2.6% share in Japan, 8.8% in Poland, and 1.5% in Italy. To stabilize the value tier, BAT initiated a platform reset by launching Hyper Pro Plus in Italy, Romania, and Greece during Q2, which management expects will drive a volume share recovery in H2.
Regional Performance & Financial Skew
The financial cadence of the year will be heavily weighted toward the second half. In the U.S., exceptional multi-category performance across combustibles, vapour, and modern oral is heavily skewed toward H1, primarily because the company will be lapping a much tougher prior-year comparator in H2. Management notably highlighted the FDA’s recent enforcement prioritization guidance as a constructive regulatory milestone aimed at clearing illicit products and improving market access for responsible operators.
The AME region is expected to see financial acceleration in H2, fueled by targeted commercial execution and a phased rollout of product innovations. In APMEA, performance is expected to achieve sequential stabilization as the year progresses. Management explicitly noted that they are closely monitoring geopolitical tensions in the Middle East; while there is currently no material impact on the Group’s financial performance, the situation presents a dynamic risk to broader consumer sentiment if macroeconomic uncertainty lingers.
Technical Guidance & Financial Framework
BAT reiterated its confidence in its mid-term organic growth targets, though it explicitly guided that FY 2026 performance will land at the lower end of these stated ranges.
FY 2026 Guidance Metrics Table
| Financial Metric | FY 2026 Guidance Target |
| Organic Revenue Growth | 3% to 5% (at the lower end) |
| New Category Revenue Growth | Mid-teens (Upgraded from low double-digit) |
| Adjusted Profit from Operations Growth | 4% to 6% (H2 weighted; at the lower end) |
| Adjusted Diluted EPS Growth | 5% to 8% (at the lower end) |
| Operating Cash Flow Conversion | In excess of 95% |
| Adjusted Net Debt / Adjusted EBITDA Leverage | 2.0x to 2.5x corridor by year-end |
| Sustainable Share Buy-Backs | £1.3 billion allocated for 2026 |
| Gross Capital Expenditure | c.£750 million |
| Net Finance Costs | c.£1.75 billion (Down from £1.8 billion) |
| Transactional FX Headwind | ~1% impact on profit from operations |
| Translational FX Headwind | 2% to 3% headwind on H1 and FY adjusted diluted EPS |
Conclusion
From an analytical standpoint, BAT’s H1 2026 trading update delivers exactly what defensive equity investors look for: consistency, cash generation, and clear corporate transition. While the downward revision of global cigarette industry volumes to a 2.5% contraction highlights the ongoing secular decay of the legacy business, BAT’s pricing power remains a highly effective financial shield. More importantly, the revenue upgrade to mid-teens growth in New Categories proves that the company’s alternative nicotine portfolio is successfully scaling, led by the exceptional global expansion of Velo and a dominant legal market position for Vuse in the U.S..
The primary operational risk to monitor into the second half is execution within the Heated Products category. The low double-digit revenue drop for glo highlights real competitive vulnerability, making the H2 rollout of the Hyper Pro Plus device a critical catalyst to watch. Nonetheless, with a capital allocation framework that converts over 95% of operating profit into cash, clear visibility toward hitting a 2.0–2.5x leverage target, and an ongoing £1.3 billion share buyback alongside a progressive dividend, BAT remains an income vehicle capable of weathering near-term headwinds.
Download BAT H1 2026 Trading Update press release
—
H1 2025 Financial Baseline (Adjusted for Canada)
To provide an accurate year-over-year baseline, BAT disclosed restated financial figures for the six months ended 30 June 2025, adjusting for the structural impacts of the Canadian tobacco litigation settlement finalized in August 2025. For H1 2025, total regional adjusted profit from operations stood at £5,394 million, which adjusts down £154 million to £5,240 million on an “Adjusted for Canada” basis. This baseline operating profit was regionally distributed as follows: United States: £3,063 million, AME: £1,320 million, APMEA: £857 million.
A direct comparison of the H1 2025 baseline performance before and after the Canada adjustments reveals the following structural impacts:
– Adjusted Profit Before Tax: Stands at £4,755 million before the adjustment, which reduces by £196 million to £4,559 million on an as-adjusted basis – – including £42 million unfavorable finance cost impact
– Adjusted Profit Attributable to Shareholders (Net Profit): Measures £3,573 million before the adjustment, decreasing by £145 million to £3,428 million once Canada is excluded – including £51 million favorable tax impact
– Adjusted Diluted Earnings Per Share (EPS): Sits at 162.0 pence before the adjustment, resetting 6.5 pence lower to 155.5 pence on the formal as-adjusted baseline.
