British American Tobacco half-year results 2026: smokeless growth supports guidance

British American Tobacco's first-half results showed an increasingly important contribution from smokeless products, solid pricing in cigarettes and a sharp improvement in cash generation.

The headline numbers need some care, though. Reported profit and earnings fell heavily, partly because the previous year included credits and gains that did not repeat. On BAT's adjusted measures, the underlying picture was considerably stronger.

Management said trading was in line with expectations and confirmed its full-year guidance. Adjusted diluted earnings per share growth is now expected towards the middle of the 5% to 8% guidance range.

Investors can read the original company announcement for the complete figures and accounting reconciliations.

BAT's half-year results at a glance

Measure	H1 2026	Change
Revenue	£12,235 million	+1.4% reported, +2.9% constant currency
New Categories revenue	£1,928 million	+16.8% reported, +18.0% constant currency
Smokeless share of Group revenue	19.8%	+1.6 percentage points versus FY 2025
Reported profit from operations	£4,266 million	-15.8%
Adjusted profit from operations, adjusted for Canada	£5,421 million	+3.5% at constant currency
Reported diluted EPS	145.3p	-28.6%
Adjusted diluted EPS, adjusted for Canada	167.8p	+7.9% at constant currency
Net operating cash flow	£3,402 million	+47.3%
Free cash flow before dividends	£2,285 million	+85.2%

Constant currency strips out exchange-rate movements to give a clearer view of operational performance. BAT also presents figures adjusted for Canada because part of the Canadian business's income is used to calculate payments under its litigation settlement.

Smokeless products are becoming more meaningful

The central investment story remains BAT's attempt to reduce its reliance on cigarettes by building New Categories, which include Modern Oral nicotine pouches, Vapour and Heated Products.

Progress was strongest in Modern Oral. Revenue from the category rose 65.9% at constant currency, while volume increased 57.5%. BAT said Modern Oral is now its largest New Category by revenue.

Velo Plus was the standout performer in the US, where Modern Oral revenue increased 220% at constant currency. BAT's volume share in the US category rose 11.6 percentage points to 29.8%.

Group Vapour revenue also returned to growth, rising 5.3% at constant currency. US Vapour revenue increased 19.8%, supported by 14.9% volume growth. Vuse's value share in tracked US channels rose 4.1 percentage points to 55.9%.

The weak point was Heated Products. Revenue fell 11.7% at constant currency, reflecting inventory movements and increased competition, particularly in Japan.

Overall, New Categories revenue rose 18.0% at constant currency. Category contribution increased 54.7% to £257 million, while the contribution margin improved by 3.3 percentage points to 13.3%. Contribution is the profit generated by a category after directly attributable costs.

That combination of faster sales and improving profitability matters. Growth alone would be less persuasive if BAT had to keep spending heavily without demonstrating better economics.

Cigarettes still fund the transformation

Despite the strategic focus on smokeless products, combustibles remain the financial engine of British American Tobacco PLC.

Combustibles revenue increased 2.1% at constant currency, even though Group cigarette volume fell 4.6% to 218 billion sticks. Price and product mix increased 6.8%, helping offset lower volumes.

The US delivered a particularly strong revenue performance. Combustibles revenue increased 5.0% at constant currency as price and mix, including an excise duty drawback, outweighed a 5.2% volume decline.

There is still a competitive warning here. Group cigarette volume share declined 30 basis points and value share fell 40 basis points. In the US, volume share dropped 80 basis points, although management said it started to stabilise during the half.

BAT has increased investment in important markets to respond to competitive activity. That may support market share, but it also creates tension between defending today's cigarette profits and funding tomorrow's smokeless portfolio.

Regional performance was uneven

The US was the strongest region, with revenue increasing 8.5% at constant currency and adjusted operating profit rising 10.1%. Its multi-category performance was led by Modern Oral, Vapour and improved combustibles revenue.

Americas and Europe was more subdued. Revenue increased 0.9% at constant currency, with Modern Oral growth and resilient cigarette pricing partly offset by weaker Vapour and Heated Products sales. Adjusted operating profit, after the Canada adjustment, rose 1.1%.

Asia-Pacific, Middle East and Africa was the clear disappointment. Revenue fell 6.3% at constant currency and adjusted operating profit dropped 16.5%.

The region faced illicit cigarette sales in Bangladesh and Australia, inventory timing in Vietnam, lower Malaysian volumes and competition in Japanese Heated Products. BAT estimated that illicit products accounted for around 80% of Australian cigarette industry volume, with duty-paid industry volume falling by more than 50%.

This is not simply a demand issue. Regulation, illicit trade and competitive intensity can weaken legitimate sales while making investment decisions more difficult.

Why reported profit fell so sharply

Reported profit from operations declined 15.8% to £4,266 million, while reported diluted EPS fell 28.6% to 145.3p.

The comparison was affected by several significant items. The prior period included a much larger credit relating to the Canadian litigation settlement provision. It also benefited from gains connected with BAT's investment in ITC, including the demerger of ITC's hotel division and a partial share sale.

In 2026, BAT recognised £370 million of costs relating to its Fit2Win operational and process review programme. These costs were partly offset by a £149 million credit from settling historical litigation with ITG Brands.

The adjusted numbers therefore provide a more useful view of current trading, but investors should not ignore the reported charges. Restructuring, litigation and regulation have real financial consequences, even when management excludes them from its preferred performance measures.

Cash flow and shareholder returns

Cash generation was a strong feature. Net cash from operating activities rose 47.3% to £3,402 million, while free cash flow before dividends increased 85.2% to £2,285 million.

Some of that improvement reflected lower tax and litigation-related payments, plus the £149 million ITG settlement receipt. It was not entirely driven by underlying profit growth.

Adjusted net debt stood at £31,969 million at 30 June 2026, up from £30,416 million at the end of 2025. BAT nevertheless expects leverage to fall within its target range of 2.0 to 2.5 times adjusted net debt to adjusted EBITDA by year end.

The company remains committed to dividend growth in sterling and said its £1.3 billion share buyback for 2026 is on track. It purchased £649 million of shares during the first half.

What investors should watch in the second half

BAT continues to expect revenue growth at the lower end of its 3% to 5% medium-term range and adjusted operating profit growth at the lower end of 4% to 6%. Both measures are at constant exchange rates, with profit growth expected to be weighted towards the second half.

New Categories revenue is expected to grow by a mid-teens percentage for the full year. Planned launches include a national US roll-out of Velo Max and a selected range of adult-focused Vuse flavours.

The positives are faster Modern Oral growth, improving New Categories profitability, strong US execution and better cash flow. The concerns are weaker performance in APMEA, declining cigarette market share, Heated Products pressure and the continuing financial effects of litigation and restructuring.

For the second half, the key question is whether BAT can maintain its smokeless momentum while delivering the expected profit acceleration and reducing leverage. The first-half figures suggest the transformation is gaining traction, but progress remains uneven across categories and regions.