FY26 guidance maintained

Interim dividend raised

So-called ‘smokeless’ products now make up almost 20 per cent of British American Tobacco’s (BATS) sales, in a sign the tobacco major’s transition towards alternative sources of nicotine is accelerating.

The FTSE 100 group had warned last month that 2026 sales and profit could skew towards the “lower end” of its full year guidance on account of a larger-than-expected drop in global cigarette volumes. The company now expects the global cigarette market to decline by 3 per cent in 2026, versus 2.5 per cent previously.

And this was borne out in its first-half results. Sales at the tobacco major rose 1 per cent to £12.2bn for the six months to 30 June, driven by volume increases across its oral pouches and vapes. Traditional cigarette volumes dropped by 4.7 per cent.

BATS:LSE

British American Tobacco P.l.c

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Although pre-tax profit fell by over a quarter, this was largely driven by the establishment of a provision to settle litigation in Canada. When this was removed, adjusted profit from operations rose 3.5 per cent to £5.12bn.

Even so, the board maintained its expectation of revenue and adjusted profit from operations growth at the lower end of the 3–5 per cent and 4–6 per cent range for 2026. But some analysts are more optimistic than others.

“Management is clearly increasingly confident in its ability to deliver,” said Simon Hales, an analyst at Citi. “We still see scope for management to raise guidance more broadly with September’s [capital markets day],” he added.

There is a chance some of this optimism is baked into the valuation. The shares continue to trade at a premium to their five-year history, on 13 times forward earnings, so for now we stick to hold.

Last IC view: Hold, 4,347p, 12 Feb 2026

BRITISH AMERICAN TOBACCO (BATS)  ORD PRICE:4,709pMARKET VALUE:£ 102bnTOUCH:4,707-4,711p12-MONTH HIGH:5,368pLOW: 3,677pDIVIDEND YIELD:5.3%PE RATIO:16NET ASSET VALUE:2,250p*NET DEBT: 67%Half-year to 30 JunTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)202512.15.57201116.60202612.24.05146121.32% change+1-28-27+4Ex-div:08 JulPayment:14 Aug*Includes intangible assets of £87bn, or 4,032p a share