Why Are British American Tobacco Plc Shares Up Today?

British American Tobacco Plc (LSE:BATS) shares rose 0.39% to 4,662.0p today. The modest gain follows a first half in which the group reported higher revenue, faster growth in non-combustible products and a sharp rise in cash flow.

In its 2026 half-year results, BAT reported Revenue of £12,235 million, up 2.9% at constant currency, and adjusted profit from operations of £5,426 million. New Categories revenue rose 18.0% at constant currency to £1,928 million.

Today's small move looks consistent with a stable market for defensive consumer stocks, with investors balancing declining cigarette volumes against the growth of newer products such as Velo Plus and Vuse.

About British American Tobacco Plc

British American Tobacco Plc is a global consumer goods group focused on tobacco and nicotine products.

Its portfolio includes traditional cigarettes alongside New Categories, which cover vapour products such as Vuse, heated products such as glo and modern oral products such as Velo.

The group sells its products across the Americas, Europe, Africa, the Middle East and Asia-Pacific, giving LSE:BATS a broad international footprint.

Tadeu Marroco is the Chief Executive.

Its scale gives it significant pricing power, distribution reach and cash generation, which fund both Shareholder returns and Investment in lower-risk nicotine products.

Key Reasons Behind Today's Upturn

Today's 0.39% rise is modest and appears to reflect general conditions in the market rather than a single catalyst.

Consumer staples with defensive characteristics and large cash generation can attract interest when investors look for stability.

Market attention is also on the group's transformation, with New Categories contributing a growing share of revenue and profit.

At the same time, investors will watch how quickly growth in newer products can offset declining global cigarette volumes.

The group's long record of cash generation and shareholder distributions is another reason it features in many income-focused portfolios, although performance of the shares depends on delivery against guidance.

H1 2026 Financial Performance

Revenue for the six months to 30 June 2026 was £12,235 million, up 1.4% as reported and 2.9% at constant currency.

Adjusted profit from operations was £5,426 million, up 0.6% as reported. At constant currency it was £5,530 million, up 2.5%.

Organic growth was led by the US, where revenue rose 8.5%, and by Africa and the Middle East (AME), up 0.9%, partly offset by a 6.3% decline in Asia-Pacific, Middle East and Africa (APMEA).

Adjusted Operating Margin was 44.4%, reflecting the high profitability of the core business.

Reported operating margin was 34.9%, reflecting items outside the adjusted measure. Adjusted for Canada, profit from operations at constant currency grew 3.5% to £5,421 million.

New Categories Momentum

New Categories remain the main strategic growth driver for BAT.

Revenue in the half rose 16.8% as reported and 18.0% at constant currency to £1,928 million.

New Categories contribution reached £257 million, up 54.7%, showing that these products are moving closer to making a meaningful profit contribution.

For the full year, the group expects mid-teens growth in New Categories revenue.

The scale of this shift matters. As cigarette volumes fall by about 3% a year across the industry, the group needs newer products to Supply more of its growth and profit over time.

Velo Plus and Modern Oral

Modern oral nicotine pouches are one of the fastest-growing areas of the market, and Velo Plus is the group's main product in the US.

US modern oral revenue rose 209%, or 220% at constant currency, driven by Velo Plus.

This performance matters because modern oral products can offer higher growth than cigarettes and appeal to adult consumers looking for alternatives.

Competition in the segment is intense, so continued execution on distribution, innovation and consumer uptake will be important.

Success in modern oral could also help the group reduce reliance on markets where cigarette volumes are falling faster, supporting a more balanced revenue base.

Vuse and Heated Products

In vapour, US revenue for Vuse increased 15.6%, or 19.8% at constant currency, and the Brand held a value share of 55.9% in tracked channels.

In AME, vapour revenue declined 11.9%.

In heated products, glo revenue fell 14.2%, or 11.7% at constant currency. However, the glo Hilo device is driving share growth in Japan, Poland and Italy.

The mixed picture shows that New Categories growth is uneven by market and product, and that regulation and illicit competition can influence outcomes.

Cash Flow and Balance Sheet

Free Cash Flow before dividends rose 85.2% to £2,285 million, which provides the foundation for dividends, Buybacks and Debt reduction.

After dividends, there was a cash outflow of £349 million, reflecting the timing of payments in the first half.

Adjusted net debt was £31,969 million. BAT expects Leverage to be within its target range of 2.0 to 2.5 times by the end of 2026.

Adjusted net finance costs are now expected to be about £1.65 billion, an improvement on the previous estimate of £1.75 billion.

Lower leverage matters because it increases the group's flexibility to maintain buybacks and Dividend growth without adding to financial risk.

Buyback and Dividend Growth

Shareholder returns are an important feature of the BAT story.

The group spent £649 million on its share buyback in the first half, and the 2026 programme is expected to total £1.3 billion.

BAT also expects to grow its dividend in sterling terms for 2026.

These commitments depend on continued cash generation, which is why operating cash conversion, expected to be above 95%, is a key measure to monitor.

FY2026 Guidance

BAT confirmed its full-year 2026 guidance and said adjusted Diluted Earnings per Share growth is now expected toward the middle of its 5% to 8% medium-term range.

It expects revenue growth of 3% to 5% at constant currency and adjusted profit from operations growth of 4% to 6%, weighted toward the second half.

Global cigarette industry Volume is expected to decline by about 3%.

The group also expects a transactional currency headwind of about 1% and a translational headwind of roughly 2% to 3% on earnings per share, plus gross Capital Expenditure of about £750 million.

Profit growth is weighted to the second half, so delivery in the coming months will be important for confidence in the full-year outlook.

Key Growth Catalysts

The main catalyst for LSE:BATS is the scale-up of New Categories, particularly Velo Plus in the US and Vuse in vapour.

Pricing power in combustible products continues to support profitability while volumes decline.

Lower finance costs and a falling Leverage Ratio could leave more room for shareholder distributions.

Further Market Share gains for glo Hilo in heated products would also help broaden the growth base.

Key Risks to Watch

Regulation is the most significant risk for the tobacco industry, and changes to flavour rules, taxation or product standards can affect growth.

Illicit trade and competition from low-priced products can pressure market share in some regions.

Currency movements remain a headwind for a Business reporting in sterling but earning in many currencies.

The continued decline in cigarette volumes means the success of New Categories is central to the long-term outlook.

Conclusion

British American Tobacco Plc shares rose 0.39% to 4,662.0p today, following a half-year report showing revenue growth, a sharp rise in cash flow and faster growth in New Categories.

With £1,928 million of New Categories revenue, an expected £1.3 billion buyback and guidance for dividend growth in sterling, the group has a clear capital allocation framework.

For LSE:BATS, the key things to watch ahead are the second-half weighting of profit growth, Velo Plus execution in the US and the pace of deleveraging toward the 2.0 to 2.5 times range.

Today's gain is small, and investors will continue to focus on regulation, cash generation and the transition away from combustible products.