British American Tobacco - Preliminary announcement - year ended 31 December 2016

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News Release

Preliminary announcement - year ended 31 December 2016

23 February 2017


Key financials
Revenue £14,751m £14,008m £13,104m +12.6% +6.9%
Adjusted profit from operations* £5,480m £5,197m £4,992m +9.8% +4.1%
Profit from operations £4,655m £4,424m £4,557m +2.2% -2.9%
Adjusted diluted earnings per share* 247.5p 230.0p 208.4p +18.8% +10.4%
Basic earnings per share 250.2p - 230.9p +8.4% -
Dividend per share 169.4p - 154.0p +10.0% -
*The non-GAAP measures, including adjusting items and constant currencies, are set out on page 19 of the full announcement.

Full year highlights

  • The Group’s cigarette market share1 in its Key Markets2 continued to grow very strongly, up 50 basis points (bps). This was driven by another excellent performance by our Global Drive Brand (GDB) portfolio with volume up 7.5% and market share increasing 100 bps.
  • Group cigarette volume grew 0.2% to 665 billion, with a 0.8% decline on an organic basis outperforming the industry, which was estimated to decline by around 3.0%. Total tobacco volume was 0.1% higher than 2015.
  • Group revenue was up 12.6% at current rates, partly reflecting the translational tailwind as a result of the relative weakness of sterling. Revenue grew 6.9% at constant rates and was 5.3% up on an organic basis.
  • Adjusted Group profit from operations increased 9.8% at current rates, or by 4.1% at constant rates of exchange. Excluding the adverse impact of exchange movements on a transactional level, adjusted Group profit at constant rates, would have increased by approximately 10%.
  • Profit from operations, at current rates of exchange, was 2.2% higher at £4,655 million.
  • Without the adverse transactional impact of foreign exchange and the impact from acquisitions, operating margin would have improved by around 160 bps. On a reported basis, it fell 90 bps to 37.2%.
  • Adjusted diluted earnings per share, at current rates, was up 18.8% at 247.5p. At constant rates of exchange, it increased 10.4% despite the transactional headwinds from foreign exchange.
  • Basic earnings per share was up 8.4% at 250.2p (2015: 230.9p), resulting from the improved operating performance and foreign exchange tailwind.
  • The Group’s vapour business grew to become the world’s largest, outside of the US, and we successfully launched our Tobacco Heating Product, glo™, in Japan.
  • On 17 January 2017, the Group announced the agreed terms of a recommended offer for the acquisition of the remaining 57.8% of Reynolds American Inc. (Reynolds American) not already owned by the Group. We expect the transaction to close in Q3 2017, subject to obtaining the relevant approvals.
  • The Board has recommended a final dividend of 118.1p, to be paid on 4 May 2017. This will take the 2016 total dividend to 169.4p per share, an increase of 10.0%.

[1]Key Market offtake share, as independently measured by AC Nielsen.
[2]The Group’s Key Markets represent around 80% of the Group’s volume
All variances within this document are based upon the absolute number.

Richard Burrows, Chairman, commenting on the year ended 31 December 2016

"The Group delivered exceptional earnings, volume and market share growth in 2016, despite challenging trading conditions persisting in many of our Key Markets. Our results this year demonstrate our ability to continue delivering excellent shareholder returns while investing in the future strength of the business. The 10% increase in our total dividend for 2016 to 169.4p reflects our confidence in our strategy, our people and in generating growth for our shareholders in 2017 and beyond."

Preliminary results for the year ended 31 December 2016 - full announcement (984 kb) 

Forward looking statements

Certain statements in this communication regarding the proposed merger of Reynolds American and BAT (the “Proposed Transaction”), the expected timetable for completing the Proposed Transaction, the benefits and synergies of the Proposed Transaction, future opportunities for the combined company and any other statements regarding BAT’s, Reynolds American’s or the combined company’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are “forward-looking” statements made within the meaning of Section 21E of the United States Securities Exchange Act of 1934. These statements are often, but not always, made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,” “plan,” “potential,” “predict,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “outlook” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual future financial condition, performance and results to differ materially from the plans, goals, expectations and results expressed in the forward-looking statements and other financial and/or statistical data within this communication. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are uncertainties related to the following: whether the conditions to the Proposed Transaction will be satisfied and the Proposed Transaction will be completed on the anticipated timeframe, or at all; the failure to realize contemplated synergies and other benefits from the Proposed Transaction; the incurrence of significant costs and the availability and cost of financing in connection with the Proposed Transaction; the effect of the announcement of the Proposed Transaction, and related uncertainties as to whether the Proposed Transaction will be completed, on BAT’s, Reynolds American’s or the combined company’s ability to retain customers, retain and hire key personnel and maintain relationships with suppliers and on their operating results and businesses generally; the ability to maintain credit ratings; changes in the tobacco industry and stock market trading conditions; changes or differences in domestic or international economic or political conditions; changes in tax laws and rates; the impact of adverse legislation and regulation; the ability to develop, produce or market new alternative products profitably; the ability to effectively implement strategic initiatives and actions taken to increase sales growth; the ability to enhance cash generation and pay dividends; adverse litigation and dispute outcomes; and changes in the market position, businesses, financial condition, results of operations or prospects of BAT, Reynolds American or the combined company.

Additional information concerning these and other factors can be found in Reynolds American’s filings with the U.S. Securities and Exchange Commission (“SEC”), including Reynolds American’s most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and BAT’s Annual Reports, which may be obtained free of charge from BAT’s website Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof and BAT undertakes no obligation to update or revise publicly any forward-looking statements or other data or statements contained within this communication, whether as a result of new information, future events or otherwise.

No statement in this communication is intended to be a profit forecast and no statement in this communication should be interpreted to mean that earnings per share of BAT or Reynolds American for the current or future financial years would necessarily match or exceed the historical published earnings per share of BAT or Reynolds American, respectively.

Additional information and where to find it

This communication is neither a solicitation of a proxy nor a substitute for any proxy statement or other filings that may be made with the SEC in connection with the Proposed Transaction. Any solicitation will only be made through materials filed with the SEC. Nonetheless, this communication may be deemed to be solicitation material in respect of the Proposed Transaction by BAT.

BAT intends to file relevant materials with the SEC, including a registration statement on Form F-4 that will include a proxy statement of Reynolds American that also constitutes a prospectus of BAT. Investors and security holders are urged to read all relevant documents filed with the SEC (if and when they become available), including the proxy statement/prospectus, because they will contain important information about the Proposed Transaction. Investors and security holders will be able to obtain the documents (if and when available) free of charge at the SEC’s website, , or for free from BAT at / +44 (0) 20 7845 1000. Such documents are not currently available.

Participants in solicitation

This communication is neither a solicitation of a proxy nor a substitute for any proxy statement or other filings that may be made with the SEC in connection with the Proposed Transaction. Nonetheless, BAT, and its affiliates and each of their directors and executive officers and certain employees may be deemed to be participants in the solicitation of proxies from the holders of Reynolds American common stock with respect to the Proposed Transaction. Information about such parties and a description of their interests are set forth in BAT’s 2015 Annual Report, which may be obtained free of charge from BAT’s website  and the proxy statement for Reynolds American’s 2016 Annual Meeting of Stockholders, which was filed with the SEC on March 23, 2016, Reynolds American’s annual report for the year ended December 31, 2016, which was filed on Form 10-K with the SEC on February 9, 2017 and Reynolds American’s Form 10-K/A, which is to be filed with the SEC on or before May 1, 2017 (such filings by Reynolds American, collectively, “Reynolds SEC filings”). To the extent holdings of Reynolds American securities by such parties have changed since the amounts contained in the Reynolds SEC filings, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Additional information regarding the interest of such parties will also be included in the materials that BAT intends to file with the SEC in connection with the Proposed Transaction. These documents (if and when available) may be obtained free of charge from the SEC’s website , or from BAT using the contact information above.


This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

This communication should not be construed as investment advice and is not intended to form the basis of any investment decision, nor does it form the basis of any contract for acquisition or investment in any member of the BAT group, financial promotion or any offer, invitation or recommendation in relation to any acquisition of, or investment in, any member of the BAT group.


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Anna Vickerstaff
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