Detailed narrative
U.S. returns to growth for the first time since 2022
The U.S. — the largest global nicotine profit pool and management's key focus — delivered revenue +3.7% and adjusted profit +3.2%, led by combustibles revenue +3.8% as the business lapped last year's investment cycle. Total volume share rose 10 bps and value share 20 bps (ex-deep-discount volume share +60 bps), with Lucky Strike value share +60 bps as the fastest-growing U.S. combustible brand, Natural American Spirit +10 bps, and Newport stabilized via a soft-pack variant.
Management attributes the recovery to portfolio strengthening, price-gap/indexation fixes, expanded contract coverage, a larger sales force and enhanced revenue growth management. A structural duty-drawback tailwind adds to the top line but management stressed growth would have occurred regardless.
Modern Oral / Velo — the fastest-growing new category, global and U.S.
Modern Oral revenue grew over 40% and is BAT's largest new category in AME by revenue and contribution, with gross margin ~10 pp above combustibles and payback just over one year; Velo holds ~63% volume share in AME top markets, roughly 6x its closest competitor, and captures ~60% of category growth.
In the U.S., Velo Plus drove >380% Modern Oral revenue growth, reached 17%+ volume share by July (from ~9 pp gained by May), is #2 in volume share in 11 states (including NY and Texas, ~10% of the U.S. category), and is now in 135,000 outlets within six months.
Retention runs ~70% even as launch discounts are withdrawn; U.S. average daily consumption of 3 pouches (vs 6 in AME, 12 in Sweden) frames further headroom. The higher-moisture Velo 2.0 (BAT's successful European formulation) awaits FDA authorization and would be complementary.
Premium innovation rollout — glo Hilo and Vuse Ultra
glo Hilo, a breakthrough Heated Products device targeting the premium segment (>80% of industry value), launched in Sendai, Japan in June after a Serbia pilot at end-2024; it captured 1.5 pp of volume share in weeks at a premium price even without the 2-piece device, which arrives with the national Japan rollout in September.
In Vapour, Vuse Ultra — BAT's first premium vapour entry — launched online in Canada at end-Q1 and nationwide from June, taking over 2 pp of value share, and has since launched in the U.K. and Germany. Both roll out in a targeted way into the largest profit pools through H2, with meaningful impact expected in 2026.
Quality growth and the Fit2Win cost program
New category contribution margin rose 280 bps to 10.6% (gross margin +250 bps) on targeted high-value-market investment, ROI discipline and scale. BAT has delivered nearly GBP 900M of productivity savings since 2023, expects to exceed GBP 1.2 billion by year-end, and targets a further GBP 2 billion of COGS savings by 2030.
A new 3-year Fit2Win program — simplifying work processes, reviewing indirects and routes to market, and embedding digital decision-making — is expected to generate ~GBP 500M annualized savings by end-2028 (incremental to the GBP 2bn target), with GBP 500M of costs over two years (GBP 350M treated as adjusting, 2025-2027).
H1 absorbed GBP 166M of inflation and a ~1% transactional FX headwind🌐.
Capital allocation, deleveraging and adjusting items
BAT raised the 2025 buyback by GBP 200M to GBP 1.1 billion (GBP 650M in H2) alongside its progressive dividend, and has returned GBP 17 billion to shareholders over three years while deleveraging. Reported numbers include a GBP 575M reduction in the Canadian provision (updated market forecast) and a GBP 900M gain from the partial sale of the ITC investment; adjusted diluted EPS was 162.1p on a constant basis (+1.7%) versus 155.5p on a current basis.
Management reiterated intent to divest the ITC Hotels stake — held up by bureaucratic/central-bank approvals dating to shareholdings from the early 1900s — with proceeds funding a return to the 2.5x-2x leverage corridor by end-2026.
Regulation and illicit trade
Vapour directory and enforcement legislation has now passed in 18 U.S. states, and FDA actions (product reclassifications, closing small-shipment loopholes, seizures) have driven a >40% reduction in vapour-related shipments to the U.S. — though the long supply chain means no meaningful on-the-ground impact yet, so no legal-vapour recovery is assumed in 2025 guidance.
Management is cautiously optimistic💬 on federal enforcement priorities and continues to press the FDA to accelerate authorizations (only ~25 granted against millions of submissions over five years). Illicit single-use products depressed U.S. Vapour (-12.3%) and Canada (Quebec flavor ban with near-zero enforcement); BAT exited Malaysia vapour where enforcement is absent.
Regional performance — AME strong, APMEA pressured
AME revenue rose 3.5% (combustibles ~+3% on strong Brazil and Turkey volumes and pricing; new categories +1.3% including ~17% Modern Oral growth), with adjusted operating profit up over 10% on operating leverage, new-category scale, resource-allocation choices and Canada accounting treatment.
APMEA revenue fell 4.8% (combustibles -7.9%) and adjusted operating profit -12.3%, as fiscal and regulatory headwinds🌐 in Bangladesh and Australia outweighed good performances in Pakistan and Nigeria; new categories grew 2.5% on Heated Products in Japan and Modern Oral in emerging markets, offset by strategic vapour market exits.
Group operating margin grew 20 bps at current rates.
Digital transformation and strategic partnerships
Management framed digital as a key execution enabler: 85% cloud hosting, a Microsoft-built enterprise data platform on MS Fabric, a new GenAI lab in Dubai (deploying tools like Ask Omni and consumer-insight bots), and IT run costs cut 40% at 99.9% uptime.
A newly announced strategic partnership with Accenture will transition BAT's global shared services, giving access to Accenture's technology and Agentic AI ecosystem while BAT strengthens Accenture's supply-chain capabilities. Omni was activated in 13 markets in H1 with more planned for H2.