Dynamic Business
The Dynamic Business pillar envisages a future-fit, data-driven organisation; ensuring we are efficient and effective in all of our operations.
This will ensure that we deliver financial flexibility to invest in our business, people and products to win in a fast-changing environment and deliver superior returns to our investors.
- Exciting, Winning Company
- Operational Excellence
- Capital Effectiveness
- Creating a diverse, inclusive and people-oriented place to work
- Being data-driven and delivering operational excellence/cost management
- Focused on investors’ returns
An Exciting and Winning Company
At BAT, our people are the heart of our business and they are key to driving our purpose. This is why our focus on culture transformation is so important.
Our People Strategy, which we introduced in 2024, is centred around three ambitions for 2030:
– enabling tomorrow’s success for our business and colleagues;
– creating an amazing people experience; and
– making BAT the place to be for current and prospective talent.
Our ambitions are complemented by our six corporate Values, which act as a compass, ensuring our people understand what is expected of them and the part they play in bringing BAT’s vision to life.
Operational Excellence
To achieve the delivery of our refined corporate strategy and our vision of Building a Smokeless World, greater focus on our global execution will be required. This includes where and how we allocate resources at a regional and market level, and driving greater productivity while reducing complexity.
Investment case
Transformation Driving Quality Growth
Our corporate purpose is to build A Better Tomorrow™ by reducing the health impact of our business. To accelerate the next phase of our transformation, we are committed to Building a Smokeless World. We will deploy our global multi-category portfolio to actively encourage adult smokers – who would otherwise continue to smoke – to Switch to Better*† nicotine products, and continue to seek long-term opportunities Beyond Nicotine in Wellbeing and Stimulation, realising the multistakeholder benefits of A Better Tomorrow™.
Building a Sustainable Future for our Stakeholders
Building a Sustainable Future is about seeking to actively migrate smokers - who would otherwise continue to smoke - away from cigarettes and to smokeless alternatives sustainably, responsibly and with integrity.
BAT’s vision is to Build a Smokeless World. As we transition to A Better Tomorrow™, we are committed to doing so responsibly – by reducing our reliance on natural resources, managing our environmental impact and respecting human rights across our business operations and supply chain.
Dynamic Business Making Active Choices for the Future
Our multi-category portfolio benefits from decades of consumer insights that have driven our No. 1 global revenue position in combustibles.
In addition, leveraging the benefits of our expertise in science and R&D, our manufacturing, distribution and marketing has enabled us to build three global New Category brands, Vuse, glo and Velo, delivering over £3 billion of annual revenue.
Continuing our Track Record of Delivery
We are confident in our growth outlook, and have a proven track record of performance.
Over the last 10 years, we have delivered an average 7% adjusted diluted EPS growth (at constant rates) and a 5% dividend CAGR and are confident in sustainably delivering our medium-term targets of 3-5% revenue growth and 5-8% adjusted diluted EPS growth on a constant currency, adjusted for Canada basis from 2026.
Capital Effectiveness
Capital Effectiveness is a key focus of delivering a Dynamic Business to Build a Smokeless World.
The key objective is to unlock shareholder value by optimising access, utilisation and return of capital resources.
– maximise our cash generation;
– invest in the right opportunities;
– optimise the return on our investments;
– reduce our debts; and
– generate sustainable returns.
Our active capital allocation framework considers the continued investment in our transformation, the macro-environment, potential future litigation and regulatory outcomes.
Our Board continues to review our capital allocation priorities including both internal and external opportunities and our external stakeholders while considering the uncertain macro-environment, foreign exchange fluctuations and higher interest rates.
Capital Allocation Framework
Cash Generation
Maximising cash generation is an essential component in our capital allocation decisions.
Driven by rigorous working capital management, the Group generated an operating cash conversion in each of the last five years of at least 100%.
While the Group remains highly cash generative, cash is a critical resource to ensure that we can invest in the right opportunities in Building a Smokeless World.
Recent macro-economic trends, including geopolitical instability, conflicts, inflation and interest rate volatility, have meant that cash is a costly resource. As such, internally generated cash and working capital are much more valuable and they must be mobilised effectively and optimised efficiently.
This will be done by continuing to focus on a high cash conversion rate as well as rigorous focus on working capital.
Our commitment:
To generate over £50 billion of free cash flow before dividends between 2024 and 2030 (inclusive).
Our record:
Since 2024, the Group has generated £11.9 billion of free cash flow (before dividends).
Excluding material payments in areas such as the Canadian litigation settlement and repayments in respect of FII GLO, we have generated significant cash returns and expect to continue to generate around £8 billion of free cash flow (before dividends) annually.
This is despite the significant investment in New Categories and while incurring external payments made in respect of litigation and settlements. This demonstrates the resilience of the Group to continue to generate exceptional cash flow, while delivering the Group's transformation ambitions.
Maximising our Investments
As we continue to build A Better Tomorrow™, the Group seeks to optimise the return on our investments and seeks to invest in the right opportunities.
In 2026, the Group expects to invest around £750 million of gross capital expenditure to enhance our growth opportunities and deliver operational efficiencies. This includes purchases of property, plant and equipment related to the ongoing investment in the Group’s operational infrastructure, including the expansion of our New Categories portfolio and enhancements to our Modern Oral capacity.
We will continue to proactively assess the performance of our assets to ensure value is maximised through operational returns or through disposal.
In addition, as part of our transformation, we invest in the Wellbeing and Stimulation space and through our venturing unit, Btomorrow Ventures, and in the cannabis space, including in Organigram.
Our commitment:
To continue to actively assess investments, be it for acquisition or disposal, to maximise our delivery and provide the right infrastructure for the BAT of tomorrow.
Our record:
The acquisition of Reynolds American Inc. impacted our capital base.
We have improved our adjusted return on capital employed consistently from 8.3% in 2018 to 12.1% in 2024, with a further improvement to 12.3% in 2025.
Including the adjustment for Canada (excluding New Categories), adjusted ROCE was 12.0%, an increase from 11.6% in 2024.
Generate sustainable returns
Generating shareholder value, via sustainable returns, is an integral part of our strategic ambition.
Over the past 25 years we have consistently grown the dividend per ordinary share in absolute terms.
On 12 February 2026, the Company announced that the Board had declared an interim dividend of 245.04p per ordinary share, payable in four equal quarterly instalments of 61.26p per ordinary share in May 2026, August 2026, November 2026 and February 2027.
This represents an increase of 2.0% on 2024 (2024: 240.24p per share, up 2.0%).
The Board is committed to strengthening the balance sheet to provide greater business reliance during an uncertain macro economic environment, whilst aiming to reduce leverage towards the middle of our 2.0-2.5x adjusted net debt to adjusted EBITDA (adjusted for Canada) target corridor.
We strongly believe that share buy-backs have an important role to play within our capital allocation framework.
Since recommencing the share buy-back programme in 2024, the Group has repurchased a total of £1.8 billion of shares, with a further £1.3 billion expected to be executed in 2026.
Our commitment:
Progressive dividend – in sterling terms, by reference to the Group’s dividend policy which is to pay dividends of 65% of long-term sustainable earnings, calculated with reference to adjusted diluted earnings per share.
To buy back shares in a sustainable programme, with reference to our target leverage range of 2.0-2.5x adjusted net debt to adjusted EBITDA (adjusted for Canada).
Our record:
In 2025, 2024 and 2023, we have returned:
– £5.2 billion (2024: £5.2 billion; 2023: £5.1 billion) via dividends;
– £1.1 billion via share buy-backs in 2025; and
– £0.7 billion via share buy-backs in 2024.
Since 2020, we have returned a total of £33.9 billion to shareholders.
Reducing debt
Total borrowings (which includes lease liabilities) decreased to £35,070 million in 2025 (2024: £36,950 million).
Total borrowings include £591 million (31 December 2024: £670 million) in respect of purchase price adjustments related to the acquisition of Reynolds American Inc.
The Group remains confident about its ability to access the debt capital markets successfully and reviews its options on a continuing basis.
We have a credit rating* of Baa1 (stable outlook), BBB+ (stable outlook), BBB+ (stable outlook) by Moody's, S&P and Fitch.
Our leverage target range is 2.0-2.5x adjusted net debt to adjusted EBITDA (adjusted for Canada).
Given the challenges of the external environment, the Group continues to aim to:
– de-lever our gross debt levels (from £35.1 billion in 2025); and
– moderate the annual Net Financing Cost levels to support the overall strategy of the Group.
This is expected to deliver a resilient balance sheet, able to withstand future uncertainties, de-risk the future solvency and liquidity risk, and provide increased flexibility for the Group to be able to invest in growth opportunities and sustainably return excess cash to shareholders.
Our commitment:
To retire debt in a sustainable manner, reducing our risk of refinancing and net finance cost exposures, while continuing to target a solid investment-grade credit rating of Baa1, BBB+ and BBB+ by Moody's/ S&P/Fitch.
Our record:
Since the acquisition of Reynolds American Inc. in 2017, we have consistently reduced our borrowings from £49.1 billion to £35.1 billion at 31 December 2025.
Our leverage (as measured by the ratio of adjusted net debt to adjusted EBITDA, (adjusted for Canada since 2024) has also improved from a high of 5.3x in 2017 to 2.55x in 2025.
A credit rating is not a recommendation to buy, sell or hold securities. A credit rating may be subject to withdrawal or revision at any time. Each rating should be evaluated separately of any other rating.