British American Tobacco PLC (LSE:BATS) has said it remains confident of hitting its £5bn revenue target by 2025, with profitability in the New Category division now expected one year ahead of target.
The FTSE 100-listed tobacco group made the predictions together with full-year results which showed a 7.7% rise in revenue to £27.6bn, a 2.8% increase in operating profit to £10.5bn and a 1.3% fall in diluted EPS to 291.9p.
Shareholders received a 6% hike to the dividend to 230.9p.
In the results statement, BAT chief executive Jack Bowles, said: “Our New Category business delivered strong volume, revenue and market share growth and has become a significant contributor to the group's financial delivery. In 2022, we invested more than £2bn in New Categories to drive long-term sustainable growth, while making excellent progress in reducing operating losses by 62%.”
The division is now expected to be profitable in 2024, one year ahead of plan.
BAT said non-combustible product consumers rose by 4.2mln to 22.5mln and New Categories revenue jumped 37.0% to £2.8bn with growth in Vapour (+43.8%), THP (+26.7%) and Modern Oral (+45.6%).
On the traditional cigarette side of the business revenues were underpinned by price/mix improvements of 4.6% although global cigarette value share was flat despite a 10 basis point rise in US value share.
Cost savings continue apace with £1.9bn delivered so far, well ahead of the original £1bn target, with £629mln delivered in 2022.
Looking ahead, BAT forecast a fall of around 2% in global tobacco industry volumes and predicted mid-single figure constant currency adjusted EPS growth, including a circa 2% transactional FX headwind, with growth weighted to the second half.
Organic revenue growth between 3% to 5% is expected, on a constant currency basis, with reported growth impacted by the timing of the transfer of the Russian and Belarusian businesses which are expected to close in 2023.
Bowles concluded: “Looking forward, while we expect the macro-economic environment to remain challenging, we will continue to deliver and further accelerate our transformation.”