BAT says 2026 guidance is intact – but the mix matters more than the headline
British American Tobacco has used this trading update to say the full-year plan is still on track. The market will probably take that as a solid enough message, especially because the company has upgraded its expectation for New Category revenue growth to mid-teens for both H1 and the full year, from low double-digit growth before.
That said, this is not a blow-the-doors-off update. BAT is still guiding to the lower end of its medium-term ranges for 2026, and it is leaning quite heavily on a strong U.S. showing, better New Category momentum, cash generation and an H2 improvement elsewhere.
In plain English, this reads like: the engine is working, but a few parts still need tightening.
Key numbers from the BAT trading update retail investors should focus on
| Metric | BAT guidance / update |
|---|---|
| Group revenue growth | 3-5% for FY 2026, still expected at the lower end |
| Adjusted profit from operations growth | 4-6%, lower end, with H2 weighted delivery |
| Adjusted diluted EPS growth | 5-8%, lower end |
| New Category revenue growth | Mid-teens for H1 and FY 2026, upgraded from low double-digit |
| Operating cash flow conversion | In excess of 95% |
| Share buy-backs | £1.3bn in 2026 |
| Leverage target | 2.0-2.5x by year-end |
| Net finance costs | c.£1.75bn, improved from previously £1.8bn |
| Gross capital expenditure | c.£750m |
| Global cigarette industry volume | Expected down c.2.5%, worse than previous c.2% |
Why BAT’s New Category growth upgrade matters for the investment case
This is the most encouraging part of the statement. BAT now expects mid-teens revenue growth from New Categories – meaning Modern Oral, Vapour and Heated Products – in both H1 and the full year.
That matters because investors want proof BAT can keep shifting towards products with better long-term relevance than traditional cigarettes. The company also says New Category contribution is improving, which means these products are not just growing sales, but becoming more financially useful too.
The standout performer is clearly Velo, BAT’s Modern Oral brand. BAT says Velo delivered strong double-digit revenue growth, extended its leadership and gained +5.7 percentage points of Total Oral share and +7.4 percentage points of Modern Oral share in top markets.
In the U.S., Velo Plus looks especially strong, with Modern Oral volume share up +10.4 percentage points. That is a big number and arguably one of the most attractive datapoints in the whole update.
Vuse is helping too, but glo is still the weak spot
BAT’s vapour business also looks healthier. Vuse increased global value share by +1.3 percentage points in top markets, while U.S. value share rose +4.2 percentage points. BAT expects mid-single digit vapour revenue growth in H1 and the full year, led by the U.S.
The weaker area is glo, BAT’s heated products business. BAT expects a low double-digit revenue decline in H1 and FY 2026, with volume share in top markets down -1.6 percentage points. Japan inventory movements and heavy competition in the value segment are the main issues.
My read is simple enough: BAT has two strong New Category legs right now – Modern Oral and Vapour – but Heated Products is still wobbling. The good news is the winners are currently strong enough to outweigh the loser.
Strong U.S. tobacco and nicotine performance is doing a lot of the heavy lifting
The U.S. remains the key profit pool, and BAT says revenue and profit growth there are strong, driven by combustibles, Modern Oral and Vapour. That is reassuring because when BAT performs well in the U.S., it tends to cover a lot of sins elsewhere.
There is a catch, though. Management says U.S. performance will be skewed to H1 because it is about to lap a stronger H2 comparator. In other words, the second half gets tougher, so the current pace may not carry through cleanly.
On cigarettes, BAT said U.S. share was down -20 basis points by value and -80 basis points by volume. A basis point is one hundredth of a percentage point. The company blamed heavier competition, mainly in deep discount, and noted the volume decline was -20 basis points excluding deep discount.
That tells you pricing is still helping profits, but the competitive backdrop is not easy. BAT can manage that for a while, but it is not something investors should ignore.
AME is holding up, APMEA still needs fixing, and H2 is doing a lot of work in this story
Outside the U.S., the message is more mixed. AME – BAT’s Americas and Europe region – is described as resilient, with performance expected to accelerate in H2 thanks to commercial actions and more New Category launches.
APMEA is the less comfortable bit. BAT admits progress there has been slower than expected in H1, although it still expects sequential improvement versus H2 2025 and a stabilising performance through the year.
That is not disastrous, but it does increase the importance of the second half. BAT explicitly says group profit delivery will be H2 weighted, helped by APMEA stabilisation and the growing benefit of Fit2Win savings. Whenever a company leans heavily on H2, investors should note the execution risk.
Cash flow, buy-backs and debt reduction keep the BAT shareholder case alive
For income and value investors, the capital allocation message is important. BAT says it is on track for operating cash flow conversion above 95%, still plans a progressive dividend, and intends sustainable share buy-backs of £1.3bn in 2026.
It also expects leverage – debt relative to earnings – to fall into its 2.0-2.5x target range by year-end. That matters because BAT has spent years working to improve the balance sheet after major acquisitions and legal overhangs.
In fairness, this part of the update is genuinely positive. Strong cash generation gives management more room to reward shareholders and reduces pressure if trading turns bumpier later on.
What is negative in this BAT RNS and why investors should not gloss over it
- BAT still expects 2026 performance at the lower end of its medium-term growth ranges.
- Global cigarette industry volume is now expected to fall by c.2.5%, slightly worse than the previous c.2%.
- glo is struggling, especially in Japan and in value-focused heated tobacco competition.
- APMEA has improved more slowly than management wanted.
- Vapour in AME has been hit by regulatory changes in the UK and Poland.
- There is a c.1% transactional FX headwind and a 2-3% translational FX headwind on adjusted diluted EPS growth.
There is also a geopolitical note in the statement. BAT says it is monitoring developments in the Middle East and sees no significant impact right now, but warns that broader macroeconomic and geopolitical conditions could hurt consumer sentiment if uncertainty continues.
My verdict on the BAT pre-close update for 2026
I think this is a good update, not a great one. The upgrade in New Category revenue growth is the headline positive, and the U.S. performance looks properly strong. Those two factors together make the full-year guidance feel credible.
But there is no getting around the fact that BAT is still guiding to the lower end of its ranges, glo remains under pressure, and H2 carries a lot of the burden. Actual H1 2026 sales and profit figures are not disclosed here, so investors are still being asked to trust the direction of travel more than the destination.
If you already like BAT for cash flow, dividends and buy-backs, this update supports that case. If you want a cleaner growth story across every region and category, it is not there yet. Still, on balance, BAT has done enough here to keep the market on side.
