Highlights

  • British American Tobacco added 4.7 million smokeless consumers in FY2025, bringing the total to 34.1 million.
  • Smokeless products now account for 18.2% of Group revenue, an increase of 70 basis points year-on-year.
  • The company announced a 2.0% dividend increase to 245.04p and confirmed a GBP 1.3 billion share buy-back for 2026.

British American Tobacco p.l.c. (LSE:BATS) is drawing renewed market attention after Jefferies issued a Buy rating with a target price of GBX 5,200. The endorsement follows the company’s preliminary results for the year ended 31 December 2025, alongside updated guidance for 2026. Shares were trading at GBX 4,388.00 on 12 February, up 29.29% over the past year and 4.75% year-to-date.

Revenue Performance and Category Growth

For the year ended 31 December 2025, reported revenue declined 1.0%, primarily due to currency headwinds. At constant exchange rates, revenue rose 2.1%, supported by combustibles performance in the United States and growth of Velo Plus. Multi-category expansion in the AME region contributed positively, while APMEA performance weighed on the overall result.

New Categories revenue increased 7.0% for the full year, with growth accelerating into double digits during the second half. Contribution from New Categories rose 77.1% to GBP 442 million, reflecting expansion in smokeless offerings.

Smokeless brands now represent 18.2% of Group revenue, marking a continued shift in the company’s revenue mix.

Profitability and Earnings

Reported profit from operations increased 265%, with operating margin rising 28.4 percentage points to 39.0%, largely due to movements in the Canadian settlement provision.

Adjusted profit from operations rose 2.3%, while the adjusted operating margin remained flat at 44.0%. Reported diluted earnings per share climbed 157% to 349.1p, and adjusted diluted EPS grew 3.4%.

Net finance costs for 2026 are projected at approximately GBP 1.8 billion, subject to interest rate movements. Gross capital expenditure is expected to be around GBP 750 million.

2026 Outlook

British American Tobacco expects global cigarette industry volume to decline by approximately 2% in 2026. The company guided toward the lower end of its medium-term ranges:

  • Revenue growth of 3–5%, with low double-digit growth in New Categories.
  • Adjusted profit from operations growth of 4–6%, weighted toward the second half.
  • Adjusted diluted EPS growth of 5–8%, with a projected translational FX headwind of approximately 3%.

A transactional FX headwind of around 1% is anticipated. The company aims to reduce leverage to within the 2.0–2.5x adjusted net debt to adjusted EBITDA corridor by year-end 2026, supported by operating cash flow conversion exceeding 95%.

Dividend growth in sterling terms and a GBP 1.3 billion share buy-back remain central to capital allocation plans.

Jefferies’ Buy rating and GBX 5,200 target underscore renewed analyst attention on British American Tobacco following its FY2025 results. With expansion in smokeless categories, earnings growth, dividend increases, and a GBP 1.3 billion share buy-back planned for 2026, the company enters the new financial year with defined targets and capital return commitments.

Frequently Asked Questions (F&Q)

  1. What is Jefferies’ target price for British American Tobacco?
    Jefferies has set a target price of GBX 5,200 and issued a Buy rating on the stock.
  2. How did British American Tobacco perform in FY2025?
    Revenue rose 2.1% at constant exchange rates, adjusted profit from operations increased 2.3%, and adjusted diluted EPS grew 3.4%.
  3. What are the company’s shareholder return plans for 2026?
    The company plans a 2.0% dividend increase to 245.04p and a GBP 1.3 billion share buy-back programme in 2026.