British American Tobacco Industries, p.l.c.

Hi, everyone. I'm delighted to welcome you to our full year 2025 results presentation. With me this morning, Javed Iqbal, Interim CFO, and Victoria Buxton, Group Head of Investor Relations. I will begin with our transformation highlights. Javed will then take you through our financial results in more detail. Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead given the clear momentum we are driving. We will then take your questions. With that, I would like to draw your attention to the disclaimers on slides two and three. So let's begin by looking at the positive transformation momentum we are driving. starting with some key highlights we added 4.7 million smokeless consumers bringing our total to 34.1 million mainly driven by our continued strong performance in modern oral this marks our strongest growth acceleration to date and position as well for 2026. we delivered 2025 group results at the top end of guidance driven by resilient delivery in combustibles and an excellent performance from Vilo in all three regions. Our discipline focus on quality growth continues to improve returns on more targeted investments, with new category contributing now up 77% at constant rates. Alongside this, we remain committed to investing behind our premium innovation launches, supporting long-term value creation. We continue to deliver strong cash returns for shareholders. In addition to our progressive dividend, in December we announced an increase to our share buyback to £1.3 billion in 2026. Looking ahead, we are confident in returning to our mid-term algorithm this year with the accelerated momentum through the second half of 2025, positioning us well for continued delivery. I am proud that we have delivered on all of our 2025 priorities, and I want to thank our teams around the world for driving these encouraging results. Our performance reflects the clear momentum we are driving as we continue to build a track record of delivery. I'd like to take a moment to highlight two areas from last year that stand out to me. First, the return to both revenue and profit growth in the U.S. for the first time since 2022. a significant milestone driven by stronger combustibles performance, a return to revenue growth in vapor in the second half, and more than all. As a result, we grew 30 base points of combustibles value share. Second, we are delivering quality growth in new categories, launching premium innovations in each category, while delivering a return to double-digit revenue growth in second half, and category contribution growth up 77% for the full year. The progress we made in 2025 reinforces my confidence in our future delivery. And with that, I will hand over to Javed to take you through our 2025 performance in more detail.

Thank you, Tadeo, and good morning, everyone. I am pleased to share that we delivered results at the top end of guidance on a constant currency basis. The performance was driven by return to growth in the U.S., a robust performance in AME, and the strength of Modern Oral globally. Our reported numbers reflect some adjusting items, including nearly 1.6 billion pounds, mainly related to the annual amortization of our U.S.-acquired trademarks, A net credit of 524 million pounds following a change in the forecasted outlook for the Canadian combustible industry. We also recognized a gain of nearly 900 million pounds from the partial monetization of our ITC stake. To give you a clear view of our underlying performance, I will focus on constant currency adjusted and where applicable adjusted for Canada metrics. You can find further detail on adjusting items and share data in the appendix. We delivered group results at the top end of guidance supported by accelerated momentum through the second half. Group revenue increased by 2.1%. Adjusted profit rose 3.4%. Adjusted profit from operations grew 2.3%. And adjusted diluted EPS was up 3.4%. Let's now turn to new categories revenue, grew by 7%, driven by outstanding growth in modern odour, which was up strongly by 48%, with heated products up 1%. This was partially offset by a nearly 9% decline in vapour, mainly due to continued illicit pressures in the US and Canada. Our second half use performance showed a clear improvement versus the mid-teens decline in age 1. supported by early signs of strong enforcement activity in the U.S. We continue to deliver quality growth with gross profit up over £200 million and category contribution reaching £442 million. This reflects our disciplined approach to return on investment, targeted investments in high-value markets, and increasing scale benefit across our portfolio. I am proud of the progress we are making, and I am particularly pleased with our accelerated H2 momentum, where we returned to double-digit new category revenue growth. Now turning to combustible, revenue grew 1%, with volume decline more than offset by continued robust price mix across markets. We delivered quality growth here too. Both gross profit and category contribution increased 2.5%. driven by a strong performance in the u.s positive price mix and continued productivity and simplification gains which i will speak to shortly our performance highlights the breadth of our global footprint with strong delivery in the u.s and ame more than offsetting fiscal and regulatory headwinds in bangladesh and australia which impacted total group revenue by around 1% and group adjusted profit from operations by around 2%. This resilience and increasing momentum in H2 reinforces our confidence in future delivery. Turning to our regions, starting with the U.S. In combustibles, we delivered a 4.6% increase in revenue with our strengthened portfolio, sharper execution, and enhanced revenue growth management. driving price mix, including excise duty drawback. Value share increased 30 basis point, with volume share down 10 basis point. In new category, revenue grew nearly 20%, driven by the success of VELO+, which delivered over 300% growth. While VAPOR revenue was down 3.4% for the full year, we are encouraged that views return to revenue growth in age 2, supported by early signs of enforcement actions. Overall U.S. revenue increased 5.5% and adjusted profit grew 5.9%, mostly driven by a strong combustible performance. Importantly, VeloPlus reached positive category contribution within its first year, underscoring the scalability of our modern oral business model. Tadeo will share more detail on the U.S. shortly. In AME, we delivered another robust performance. Revenue grew over 3%, with combustible up more than 2%, supported by strong delivery in Brazil, Turkey, and Mexico with solid pricing. New category revenue increased 4.3%, mainly driven by modern oral, which grew over 17%. We are the clear modern oral readers in the region. with over 60% volume share in top markets, selling at a premium, and strongly outperforming peers, which Tadeo will expand on later. Growth was further supported by heated products, with revenue up over 6%, driven by Italy, Germany, and Ukraine. This was partially offset by competitive dynamics in Romania, as we reallocated resources ahead of the GloHelo launch. Vapor revenue declined more than 11%, mostly impacted by the lack of illicit enforcement in Canada and regulatory and exercise changes in UK, France, and Poland. Adjusted operating profit grew by nearly 10%, driven by operating leverage and efficiency gains in combustibles, and scale benefit and resource allocation driving improved contribution across all three new categories. AME is a true multi-category region, delivering high-quality growth and demonstrating the resilience and balance of our portfolio. In APMIA, growth in key markets including Pakistan, Nigeria, and Indonesia was more than offset by fiscal and regulatory headwinds in Bangladesh and Australia. Total revenue declined 7.2%, with combustibles down 8.3%. New category revenue was down 7.6%. Strong growth in modern oral was more than offset by heightened competitive activity in heated products in the value for money segment in South Korea and Japan. Along the phase out of our super slim platform. Our vapor performance reflects strategic decisions. taken to reduce our footprint and reallocate resources away from markets where regulation and enforcement do not support a responsible, competitive landscape. Adjusted profit was down 17.9%, mainly due to challenges in Bangladesh and Australia. As we continue to navigate headwinds into 2026, we expect our performance to stabilize for the full year, supported by Bangladesh as we lap last year's decline, and with the drag from Australia becoming progressively less material year on year. Turning now to our group operating margin, which was broadly flat at 44%, we successfully offset inflationary and FX pressures through a strong U.S. performance, higher profitability in new categories, and continued cost savings. Transactional FX headwinds on adjusted profit of approximately 1% were primarily driven by Turkey, Japan, and Nigeria. At current rate, operating margin expanded by close to 10 basis point. BAT has a strong track record of disciplined and cost savings, and we continue to build on that foundation. Since 2023, we have delivered £1.2 billion in productivity savings. These efficiencies help us offset inflationary pressures and foreign exchange headwinds, while continue to fund innovations and growth in new categories. In 2025 alone, we absorbed around £300 million of inflationary cost increases in addition to transactional effects. looking ahead we remain focused on simplifying combustibles and scaling new categories targeting a further 2 billion pounds in productivity savings by 2030. in addition we now expect our fit to win program to deliver 600 million pounds of annualized incremental savings by 2028. we expect around 500 million pounds of these savings to be delivered by 2027, with the remaining benefits realized by the end of 2028. We are committed to reinvesting these savings to support further sustainable growth initiatives. Fit2Win is a transformational project that is reinventing BAT. As outlined at our 2025 half-year results, it is centered on optimizing processes and ways of working to create a leaner, faster, and more data-driven organization. Since half-year, we have made strong progress. We have expanded the program to include organizational streamlining to sharpen focus and improve speed of execution. allowing us to raise total annualized savings by a further £100 million. To unlock these benefits, we now expect around £600 million of associated costs over the next two years. As a structured time-bound program, £500 million will be treated as adjusting, including around £100 million of non-cash items. As previously guided, this spend is already underway. with the majority of costs expected to be incurred this year and concluding in 2027. Bringing it all together, earning per share increased by 3.4% as operating profit growth and lower share count was partly offset by net finance costs, our reduced share of ITC profits and tax. Our underlying tax rate was 24.5%. Our strong cash generation continues to enhance our financial flexibility. This has enabled us to announce a 2% increase in our dividend and increase our share buyback by £200 million to £1.3 billion for 2026. Alongside this, we continue to deliver to 2.55x adjusted net debt to adjusted EBITDA at the end of 2025 and we remain on track to be within our 2 to 2.5 times target range by year end while our 2025 cash delivery was impacted by the double c double a upfront payment and the prior year deferral of tax payments in the us we remain on track to deliver more than 50 billion pounds in free cash flow by the end of 2030 And we continue to focus on our capital allocation priorities, which are investing in transformation, balancing, deleveraging with progressive dividends and sustainable share buybacks, and selective bolt-on M&A to support our transformation. I am excited about the future and confident in our ability to deliver our mid-term algorithm of 3-5% revenue growth, 4% to 6% adjusted profit from operations growth, and 5% to 8% adjusted diluted EPS growth. Our return to this midterm algorithm in 2026 marks a major milestone in our transformation journey and reinforces the strength and resilience of our strategy. Our confidence is underpinned by continued growth in the U.S., robust multi-category delivery in AME, low double-digit new category revenue growth led by VLOG globally, a further improvement in new category contribution, and continued savings from our productivity programs. Although we still have more work to do, and it will take time to stabilize performance in APMIA, we will continue to invest in our premium innovations rollout. As a result, we expect 2026 to be at the lower end of these ranges and our profit performance to be second-half weighted, driven by the phasing of new category investment and as fit-to-win savings built through the year. And with that, I'll hand it back to Tadeo.

Thank you, Javed. So, moving on. Now to the positive transformation momentum we are driving. In 2023, when I became Chief Executive, I committed to sharpening our focus and execution, guided by a refined strategy and ambition to become a predominantly smokeless business by 2035. And I'm proud to say that we have made significant progress across all three strategic pillars, as we continue to build a track record of delivery. While there is still more to do, I'm confident that our focus, investment, and sharp execution are driving real momentum, as you can see from our 2025 results. Our progress underpins our confidence in sustainably delivering our mid-term algorithm, while continuing to reward shareholders with strong cash returns. I'd now like to highlight five points that demonstrate this. First, we have successfully reset our U.S. business, returning to revenue and profit growth in 2025. While the U.S. macroeconomic environment remains dynamic, the pace of combustibles industry volume decline started to moderate in 2025, down 7.4%. Against this backdrop, driven by the actions we have taken to strengthen our portfolio and sharpen execution, our U.S. combustibles business delivered strong revenue and profit growth in 2025. Driving value from our combustible business is essential to funding our transformation, and the U.S. is a key driver of this. In line with this strategy, we gained 30 base points of total industry value share. I particularly encourage that our financial performance accelerate in the second half. This positive momentum reinforces my confidence in the resilience of our U.S. combustible business and our ability to deliver sustainable value going forward. VeloPlus is the fastest growing modern auto brand and the largest modern auto value pool globally. Since launch at the end of 2024, it has already reached the number two position in both volume and value share, gaining nearly 18 percentage points of volume share and nearly 14 points of value share. And we are pleased that our share momentum has continued into the start of 2026. VilaPlus has more than doubled its consumer base and driven over 300% more than our revenue growth, capturing around 70% of industry volume growth and 80% of industry value growth in December. All of this is underpinned by a consistent repurchase rate of around 70% throughout the year. Importantly, we achieved positive category contribution within the first 12 months of launch. fully aligned with Velo's global payback profile. The total U.S. modern oil category continues to grow strongly and has already overtaken the size of the legitimate vapor category at over 2 billion pounds of revenue in 2025. VeloPlus is a great product, and these results demonstrate this in what remains a highly dynamic category. Its impressive success also highlights the broader strength of our U.S. capabilities and executional excellence, from consumer insights and branding to enhanced digital analytics and distribution enabled by a rejuvenated Reynolds. Our performance was further enhanced by the successful launch of Grizzly Modern Oro in the summer, which achieved close to 2% volume share by year-end. taking our total volume share of U.S. modern oil to 25.8%. Through this momentum, I'm delighted to announce that at the end of the year, we reached global volume share leadership in modern oil, measured across the top modern oil markets, representing around 90% of total industry revenue. Second, we are premiumizing our new category portfolio, Vilo is already the clear European leader, around six times larger than our nearest competitor. We continue to focus on consumer-led innovation to strengthen product satisfaction among adult consumers and extend Vilo's success. At the start of this year, we began the nationwide rollout of our latest innovation, ViloShift, in Sweden, following a successful pilot with key retailers and online partners. VeloShift is reshaping the modern order experience, featuring a new comfort pouch design, five distinct sensory flavors, and a differentiated X-Cant that stands out on shelf. Trading at a premium to the core Velo range, VeloShift is a red-drive incremental share in the channels where it has launched, with further market rollouts planned through 2026. These results highlight not only the strength of Velo brands, and innovation pipeline, but also the quality of our execution across European markets. We see premium vapor done right as a highly attractive, untapped segment for further value creation. VIUS Ultra is our most advanced vapor device yet, driving meaningful performance improvement for VIUS in markets where we have launched, including value share gains of nearly 80 percentage points in Canada, close to 4 percentage points in Germany and above 2 percentage points in France. As Javed highlighted, we have made proactive strategic decisions to focus our execution on the largest profit pools, with more supportive regulation and enforcement. Wills Ultra is central to this approach and I am encouraged by the strength of its early performance with further launch planned in the key markets in 2026. Our breakthrough innovation platform, Glow Hilo, introduced our first two-piece device and is designed to establish glow in the premium segment. While still early days, we are starting to drive encouraging results in priority launch markets, Japan, Poland, and Italy, with the majority of consumers new to Glow coming from both premium combustibles and the broader heated products category. We are also strengthening Glow's overall brand equity across key consumer metrics. This consumer response is translating to early volume share momentum. We are encouraged by early trial to retention rates of around 50%, providing further confidence in the platform's potential. In 2026, our focus will be on accelerating trial among premium consumers across both combustibles and heated products supported by target online and in-person activations. We will continue to scale Glorhilo through additional market rollouts in the largest heated product profit pools, where we can generate the strongest returns. Overall, we remain confident in the strength of this innovation platform and expect to progressively build share within the premium segment over time. As Jabet highlighted, the heated products category remain highly competitive, and this has impacted our 2025 performance in the value for money segment where we are present with GlowHyper. Introducing Glow Hilo into the premium space allows us to further differentiate and tier our portfolio. We see a clear opportunity to strengthen Glow's overall performance across both premium and value-for-money segments. Central to this is the launch of our next-generation Glow Hyper device from Q2. The new Glow Hyper delivers a step-change offering. Quick starts, longer started session length, new connectivity and a replaceable battery. These innovations significantly improve the consumer experience and we are also further enhancing the consumables range. Taken together, these upgrades create a much stronger proposition designed to reinforce our competitiveness in the value-for-money segment. Third, I'm proud of the strong progress we have made improving new category profitability. Since 2021, we have driven a £1.4 billion improvement in category contribution, with all three new categories contributing to this momentum. Importantly, we have achieved this while continuing to invest in our transformation to drive future sustainable growth. Our new categories are meaningfully contributing to group results, as we benefit from increased scale, reflecting traction in established markets while continuing to invest in new market launches. This is supported by more consistent and constructive regulatory frameworks, such as those in place for ModernOro in 24 markets, up from just 4 markets in 2022. We have sequentially improved our performance each year, And through our quality growth approach, we remain committed to driving sustainable profitability improvement moving forward. Fourth, I'm encouraged by the signs of positive progress we are seeing in the regulation and enforcement of new categories, especially in the U.S. While the vapor category continues to be impacted by the proliferation of illicit products, views return to revenue growth in the second half after 18 months of decline. This has been supported by increased state-level enforcement with vapor directory and enforcement legislation representing around 50% of track of the industry volume by year-end. In addition, views performance in the second half benefited from a competitor exit, further strengthening our market's position. Our recovery has also been supported by early signs of increased federal enforcement targeting borders and larger distributors, resulting in high levels of seizures and fines. Looking ahead, we are encouraged by the increased focus and funding directed towards strengthening the FDA's enforcement capabilities. We were also pleased to receive a favorable initial determination on our International Trade Commission complaint from the administrative law judge who has recommended a general exclusion order on imported illicit vapor device. We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review. With an estimated 7% of the U.S. vapor industry value still illicit, We are hopeful the authorities will continue with enforcement initiatives in 2026. Reynolds continues to advocate for a level playing field so that adult nicotine consumers have access to high-quality, compliant vapor products. Over time, we believe VIUS is well positioned to benefit from strong enforcement at both the federal and state levels. In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping adult smokers who would otherwise continue to smoke to transition to less-risk alternatives, reinforcing their role in tobacco harm reduction. We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. This is an important step towards keeping underage, appealing, illicit products out of the market, while giving responsible manufacturers a more predictable path to PMTA authorization. We are confident in the strength of our science and portfolio, and we look forward to being able to complement our existing U.S. portfolio with VeloMax, a higher moisture modern oil product in 2026, and we have increased capacity to support our sustainable growth agenda. And the final point I would like to highlight is that our financial flexibility continues to strengthen, and we remain on track to generate more than 50 billion pounds of free cash flow by 2030. VAT is a highly cash-generative business, delivering at least 100 operating cash conversions annually since 2020. 100% of operating cash conversion, reflecting our strong cash discipline and clear focus on returns and enabling us to return £34 billion of cash to shareholders over the same period. We remain committed to delivering sustainable shareholder returns with a 25-year track record of dividend growth and our sustainable share-by-back program. I am confident that we will sustainably deliver our mid-term algorithm as we are firmly committed to growing revenue sustainably and improving profitability. To conclude, we are carrying momentum into 2026, underpinned by a robust innovation pipeline, strong strategic partnerships, and confidence in our future FIT capabilities. We are executing with discipline and delivering against our priorities. At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation, together with strong cash returns. I'm excited about the future for BAT and believe we are well positioned to deliver long-term, sustainable growth and value for our stakeholders. Thank you for listening. We will now be joined on stage by Victoria for the question and answer session.