British American Tobacco Stock

Good morning, everyone, and welcome to the BAT 2026 Capital Markets Day. I'm Victoria Buxton, Group Head of Investor Relations. I am delighted that so many of you are joining us here today, both in person and online. Thank you for taking the time to hear more about BAT's transformation.

Before we start, I'd like to draw your attention to the following cautionary statements, which apply throughout the day. Unless otherwise stated, our comments will focus on constant currency adjusted measures, which include adjustments related to profit from our Canadian combustibles business, and average year-to-date share data is to July 2026 versus full year 2025 average.

We are not expecting any fire alarms today. So if you hear one, please exit by the doors at the back or front of the room and make your way downstairs to exit the building the same way that you came in.

BAT's sustainable transformation continues to gain momentum. Over the next 2 days, we will share our vision for the future of BAT and demonstrate why we believe BAT is best positioned to win in the growing global nicotine industry, powered by our world-class capabilities, leading brands, broad footprint and exceptional people.

We will start the presentation shortly at 12:00. Those of you attending in person will join interactive exhibitions while the webcast will be paused. On the back of your badges, you will see key event times as well as 2 labels, as shown in the example on screen. Your Day 1 label indicates which group you're in today for our innovation, digital and trade marketing interactive exhibitions. I will return later to share more detail on these. Your Day 2 label indicates your group for our Reynolds Operations Center site visit tomorrow.

In addition, at the end of the coffee and lunch breaks, you will hear a bell or a chime. Thank you. Please take this as a signal to return to the auditorium. I am now delighted to hand over to David Waterfield, President of Reynolds American. David has led and grown some of the group's most successful businesses around the world and most recently, has led our turnaround in the U.S. David, over to you.

Thank you, Victoria. Well, good morning, everyone, and welcome to Capital Markets Day in Winston-Salem, North Carolina. It's a privilege to host you at the home of Reynolds American in the city we have called home since our founding in 1875. Let me begin with the significance of where we are meeting today. Winston-Salem is a city shaped by reinvention. Its economy has evolved from its traditional industrial roots into a more diverse center across manufacturing, health care, biotechnology, financial services and research.

Today, the city is home to approximately 0.25 million people and anchors a broader Piedmont Triad region, which has over 1.7 million people. Its universities and colleges provide an important foundation for talent, connecting education and commercial enterprise with the needs of a changing economy. Reynolds has been part of this community story for more than 150 years, and Winston-Salem has grown and evolved, so have we. That makes Winston-Salem a particularly fitting place for today's conversation. Since 1875, Reynolds has helped shape this community through investment, employment, innovation and long-term civic partnership. We are proud of that history, but our focus is firmly on what comes next.

From this foundation, Reynolds is transforming and investing to deliver sustainable growth in the next era of the U.S. nicotine market. We're pleased to have you with us and look forward to sharing more about our business, our people and the opportunity ahead for BAT.

I'll now hand over to our Chief Executive Officer, Tadeu Marroco. Thank you.

[Presentation]

Thank you, David. Good morning, everyone. And thank you for joining us today. It's a pleasure to be here in Winston-Salem, home of Reynolds America (sic) [ Reynolds American ] at the BAT Capital Markets Day. I will share the exciting opportunity ahead for BAT, the pathway to Horizon 2030. And I'm joined by our Management Board and other senior leaders. There will be many opportunities to engage with us all directly. As we continue to transform, so too does BAT leadership. So I'm especially pleased to welcome Dragos who returned to BAT as our new CFO; and Celina, who will lead our APMEA region.

So I believe BAT is uniquely positioned to win, not just because our industry is growing in value. Our multi-category portfolio, global footprint, people culture and hard-to-replicate capabilities, together with our best-in-class regional execution will drive sustainable value at scale.

Let me open with 5 key messages that frame the next few days. First, the momentum is real. New Category revenue was up 18% in H1, whilst total revenue was up 8.5% in the U.S., the world's largest nicotine value pool. That is delivered, not ambition. Second, my belief is that the industry has a long runway of profitable growth ahead. Third, the New Categories, and Modern Oral in particular, are where the industry is growing. We hold strong positions in each of them, especially as the clear global leader in Modern Oral.

Fourth, we are both performing and transforming at the same time, building capabilities that make us future fit. We are not trading one for the other. And fifth, the pathway to our 2030 algorithm is clear and aligned to investor expectations. We are delivering against the ambitions we have set out.

Today, we will demonstrate how we plan to win over Horizon 2030. At our Capital Markets Day in 2024, I made 5 commitments, and I would like to review our progress against each of them. First, we said we would become increasingly profitable in New Categories. Between 2023 and 2025, we delivered an incremental GBP 450 million in New Category contribution led by Modern Oral and Vapour. In H1 '26, New Category revenue was up 18%, with category contribution up 55%. That is profitable growth, not growth at any cost.

Second, we said we would turn around the U.S. In H1 '26, U.S. revenue was up over 80% (sic) [ 8% ], adjusted profit up 10% with New Category revenue up 60%. The U.S. is back to growth, and this quality growth with top and bottom line delivery. The U.S. is the cornerstone of the BAT business. And today, you will experience firsthand the strength of our Reynolds organization.

Third, we said a multi-category strategy would win with consumers. We are growing across New Categories with leading positions in Modern Oral and Vapour, and this portfolio give us optionality as consumer preference shifts recognizing both markets and consumers differ.

Fourth, we lay out how credible science can underpin regulatory direction. Regulators around the world are starting to grasp tobacco harm reduction. That shift is opening up categories and new markets.

And fifth, we said we would deliver our financial algorithm. H1 '26 adjusted diluted EPS growth is within our 5% to 8% algorithm with revenue, profitability and cash all moving in the right direction. We set out what we would do, and we are doing it.

Our recipe for success is simple, prioritize what matters, focus on the most attractive value pools, execute with the discipline, with great -- build great teams and consistently deliver on our commitments. We are delivering today and investing in a better tomorrow. The nicotine industry is transforming and growing.

In our addressable markets, we expect the total legal industry revenue to grow at around a 4% CAGR between 2025 and 2030. This revenue will be driven by double-digit growth categories, underpinned by resilient low single-digit growth in Combustibles. Within New Categories, Modern Oral is fastest-growing category by far, a category that -- in which we are global leaders. And we expect the Modern Oral industry revenue to almost triple by 2030.

Smokers are increasingly switching to New Categories. And this is offsetting volume decline in Combustibles as smokers look for smokeless alternatives. We are committed to actively encouraging adult smokers who would otherwise choose to continue to smoke to make a full switch to smokeless alternatives, underpinning our 2035 predominantly smokeless ambition. During that switching process, our insights show consumers using multiple nicotine products or poly-using. We also see a growing preference for non-inhalation products. Indeed, Modern Oral is expected to grow double digits on a compound basis, reaching a number similar to Heated Product consumers by 2030.

For many smokers, poly-use is a transitional period on the way to a complete switch to smokeless. Part of any transformation is also a transition. And whilst adult smokers who choose to continue using nicotine should switch completely without delay, poly-usage is a reality of the industry transformation. Over the last 5 years, total poly-use has doubled mostly driven by poly-use within New Categories, and we expect this trend to continue.

A better tomorrow is not new. The fundamental direction of the BAT strategy is not changing. That strategy rests on 3 core elements of our strategic arrowheads, quality growth, a dynamic business and a sustainable future. What has evolved is the context, how markets, consumers and regulation have developed. The strategy is delivering and the switch to smokeless is accelerating. So the question is not whether that direction is right. It's a question of how we build on it and the question of strategic execution. And today is all about BAT's Horizon 2030. On the quality growth, we will explore the U.S. as a cornerstone as our growth driver, a sharper expression of our inhalation portfolio and optionality beyond nicotine.

Then to tobacco harm reduction and our world-class capabilities. Each of these has a session in the agenda, so I will leave the detail to the team. The point here is that the agenda maps to the strategy. And let me show you how these 7 building blocks come together. The U.S. is our growth cornerstone. It is the world's largest nicotine value pool. 2 years ago, it was our biggest question mark. Today, it's our proof point. We will continue to lead and accelerate Modern Oral through category adoption, premium differentiation and broader flavors and formats. Modern Oral is and will be our clear driver in our smokeless journey.

In Combustibles, we are investing to strengthen our portfolio for those who choose to continue to smoke through portfolio laddering and digitally enhanced revenue growth management. In Vapour, our portfolio will increasingly shift to premium and ensure we are well placed to capture more poly-users interacting between New Category inhalation space.

And in Heated Products, we are making selective investments choice with glo Hilo and Hyper. As more consumers are poly-using within the smokeless inhalation space, we will broaden our approach to this reality with a most selective return of investment mindset, deploying new innovations in the frontier between Vapour and Heated as Anniek will present later.

Beyond Nicotine will also be an important part of the future. Whilst currently small, we are strategically focused on well-being stimulation cannabis. We will also highlight 2 critical enablers, tobacco harm reduction, understanding and its impact on the regulatory environment, led by world-class science and evidence-based policy.

And finally, our capabilities, distribution scale and retail reach, invest in the technology of the future, winning with the best talent and a leaner, more empowered organization. These are all BAT's growth drivers. Importantly, these are not 7 separate independent plants. They are managed cohesively. Altogether, they will deliver the 2030 algorithm. They hold greater than the sum of the parts.

As Julian will demonstrate, at BAT, we begin with the consumer. Turning our insights into growth is through innovation, demanding that we understand consumers better than anyone else. Increasingly, we are tech enabling our insights with digital listening and AI. This feeds innovation, leveraging our unique R&D ecosystem, leading to a pipeline of differentiated products. And we then execute at scale with our world-class manufacturing footprint and regional execution through our global reach.

Turning to the U.S., our largest region, where we are the fastest-growing company in total nicotine. 60 million adult nicotine consumers, a GBP 42 billion revenue pool. And 1/3 of the global nicotine value projected to keep growing through 2030. Modern Oral is the fastest-growing category in the market. In H1 '26, our volume and revenue were up around 200%. Volume share is now over 30% with Velo capturing around 80% of industry growth. Our success demonstrates our executional excellence. Within 18 months of launch, we had built local manufacturing, reached over 90% weighted distribution and Velo Plus became America's #2 brand. And with Velo Max, we will bring incremental flavors and levels.

In Vapour, enforcement is starting to yield results. Vuse is performing strongly with revenue up nearly 20% at H1 of this year and value share close to 57% year-to-date. Furthermore, we have recently launched a range of Vuse flavors in a responsible manner.

And in Combustibles, we are strengthening our portfolio to align with recent category dynamics through a strategically laddered portfolio, strong brands and sharper revenue growth management. In 2024, the turnaround story was only a plan. Now it is in the numbers. David will talk more about the U.S. opportunity this afternoon. However, our ambition is clear: win in the world's largest nicotine value pool with our exceptional portfolio and proving execution of capabilities.

The global opportunity for Modern Oral is exciting. Velo is the fastest-growing brand in the fastest-growing new category. In Q4 last year, we achieved a global volume share leadership and Velo is global #1 in both equity and consumer satisfaction. Consumers volume and revenue have all tripled in 3 years, with industry revenue expected to triple again by 2030, and Velo is expected to outperform this.

Looking ahead, our ambition is to strengthen that leadership. And here are the reasons to believe. In Europe, we are the clear leader with nearly 7x the volume share and 10x the value share of our nearest competitor. We earn that through a combination of product, brand and execution, superior pouch comfort, smoother nicotine delivery and a broader range of flavors and formats and the economic follows with gross profit per unit around 4x combustibles. Fred will focus on that AME performance later.

Regulators are also starting to recognize the category's public health potential, reinforcing value sustainability. And going forward, our priorities are clear. First, category growth. Today, global incidence remains low, and average daily consumption in a mature market like Sweden at 12 pouches per day is 3x higher than the global average at 4.

Second, we will build Velo as the Modern Oral reference, adult flavors, formats, product innovation and an average stronger brand expression. These priorities will sustain our momentum through to 2030. In summary, brand building, distribution and innovation are capabilities that will drive competitive advantage. In the near term, there will, of course, be a cost of entering to newer markets. That said, we model profitability reaching levels higher than our traditional business over time.

Winning Combustibles is critical and will help enable our transformation. It is a GBP 63 billion industry with around 1 billion adult smokers globally and remains a highly profitable value pool, one where we are #1 in revenue across our 140 markets. Indeed, we are #1 or 2 in 25 of our top 40 markets. Notably, the consumer environment continues to evolve. In response, we have deployed a laddered portfolio across price tiers alongside digitally enhanced revenue growth management tools.

We will focus on 4 combustible priorities. First, being choiceful, concentrate on 20 key markets that represent 80% of industry revenue. Fewer priorities, better executed. In the U.S., we are investing in and extending our portfolio through new product launches and laddering, extending trade coverage and strengthening our adult nicotine consumer digital database.

Secondly, we keep adapting our global portfolio through innovation, new product introductions and refreshed blends and packaging. Thirdly, we are leveraging our scale through more than 11 million retail outlets, 150 million daily consumer touch points and an integrated global supply chain. And fourthly, we have a sharp eye on productivity with a strong track record of savings delivery, and I am confident our future plans will also deliver.

Turning now to Vapour. Vapour is the largest New Category by total consumer numbers and is a significant contributor to our revenue at GBP 1.5 billion in 2025. Vuse is the largest legal brand globally and continues to strength with over 44% value share in top markets, up 1.1 percentage points year-to-date. I want to be open about the regulatory picture because it matters. The category's full potential has been constrained by poor regulation and weak enforcement.

Disappointingly, it's not a level playing field. Regulation is an important input in selecting our priorities. That said, we are seeing early signs of progress in key markets such as here in the U.S., where we estimate the total illicit value pool is around GBP 7 billion. Our basic case assumes 30% of illicit markets value returns to the legal market by 2030. This represents at around GBP 2 billion white space opportunity, a potentially important driver of sustainable growth.

We see premium Vapour done right as an attractive and untapped segment for further value creation. Our latest innovation Vuse Ultra in our most advanced product yet. Rolling out in 2025, focused on the largest profit pools we have achieved, meaningful value share gains in strategic markets. Going forward, we will continue to focus on the U.S. as the market leader and to develop Vuse in premium globally while advocating for regulation and enforcement.

Let me turn to Heated Products focused on the largest and most attractive profit pools. This is an estimated GBP 9 billion category, growing high single digits annually with around 80% of the value concentrated in the premium segment. With over 13% volume share in our top Heated Products -- Heated markets, we have a competitive foundation. However, this is a highly contested category with high cost of growth.

Our focus is on 2 things. Our Hyper core protects our scale and revenue and will participate tactically in the value segment as this supports consumer inflow into the category. The second is premium, where we are establishing our position with glo Hilo. Innovation improvement is measured. Consumer perception is 10 to 15 percentage points ahead of our previous cores. While early days, our premium share is already 80% in key launch market Poland, with most of this inflow new to glo coming from premium combustibles and the broader Heated category.

Looking forward, we will approach this category with our current competitive platforms and broadened Vapour offers to current Heated users who represent an attractive cohort of consumers increasingly poly-using across the inhalation space. We will remain targeted in our rollout approach with a clear focus on reducing category losses from 2027 onwards.

Lastly, a word on Beyond Nicotine. While our approach is measured, the opportunity ahead is real. We take confidence from the capabilities we already have in place across science, R&D, supply chain, consumer insights and our global reach.

Alongside well-being stimulation, we have patiently built an early-stage ecosystem in cannabis, providing optionality over time as the regulatory landscape evolves. Today, this is a small business, and this is not -- it's not in our 2030 algorithm. It's an option we are building choicefully. James will talk about this beyond 2030 growth engine later.

Turning to tobacco harm reduction and regulation. We have decades of experience operating in complex regulatory environments. Although the regulatory environment is moving in the right direction, it's not fast enough. 70 of our top 80 markets permit at least 1 new category. Modern Oral regulation has expanded from 4 markets in 2023 to over 30 markets today.

In the U.S., the FDA pathway enables appropriate flavors and nicotine strengths in both Vapour and Modern Oral. That progress is not accidental. It rests on science, advocacy and engagement. Yet the science only matters if it shapes its understanding. And that's why we built Omni, our go-to authority on tobacco harm reduction. Omni has been a centerpiece of my commitment to be more front-footed in corporate affairs, which Kingsley will talk more -- in more detail later on.

While I'm encouraged by the recent progress, particularly in the U.S., more needs to be done. And we have the scale, experience and patience to succeed. The key point here is this. Better regulation is not simply a matter of principle. It creates a more sustainable business, and it is a clear unlock for long-term value creation.

So let me briefly touch on capability development, starting with our data foundation. Through strategic partnerships, we are embedding a next-generation data foundation with AI, a core operating capability. With around 1,000 AI agents in daily active use. Today, every BAT employee who has a computer has access to AI and is being trained to use it. Our ambition here is simple, more embedded intelligence into everyday decision every day. Javed will tell -- will talk more about our progress next.

Distribution scale and retail reach for us is a genuine structural advantage and is roughly double that of other large cap consumer companies. Behind this sits an integrated operations network, both resilient and agile. 45 manufacturing sites, 15 of them multi-category, 34,000 suppliers and over 100 innovation partners, which Zafar will talk more about.

BAT has also become a leaner company. Our Fit2Win program is making us smarter and faster. Beyond delivering expected GBP 700 million in benefits by 2028, we are creating fastest planning cycles and that simpler organization with clear accountabilities. And of course, none of this works without people. We continue to be -- to attract, upskill and retain top talent. Capability lives in the organization itself, not in the technology.

As we transform, our employer value proposition is strengthening, allowing us to attract a broader talent base. There have also been noticeable change in leadership roles. Since becoming CEO, around 60% of my direct reports are either new to BAT, new to the Management Board or new in role. It's the fusion of external and internal talent, experience and skills that makes a winning team. And I'm proud to lead a winning team.

So let me bring all of that back to one page. 7 strategic levers and one growth agenda, driving U.S. multi-category growth to continue to deliver in the world's largest nicotine value pool, prioritizing resource behind our global leadership position in Modern Oral, accelerating category growth and ensuring Velo as the fastest-growing brand in the fastest-growing category, continue to invest in our combustibles business, strengthening our global portfolio to drive sustainable future, focus relatively -- selectively on New Category inhalation with more premium innovation and carefully developing beyond nicotine optionality.

And all of these underpinned by consumer relevant innovation, our tobacco harm reduction agenda and building world-class capabilities. These are not 7 separate initiatives. Instead, they come together to compound our strategic execution capability. These are the building blocks that will deliver Horizon 2030.

And finally, to the algorithm, our guidance targets sustainable growth of 3% to 5% revenue, 4% to 6% adjusted profit and 5% to 8% adjusted diluted earnings. Furthermore, we expect to generate more than GBP 50 billion of free cash flow between 2024 and 2030. Our pathway to deliver is clear. Revenue performance comes from our growth engines, 1% to 2% from Combustibles through pricing, portfolio mix, mid-teens growth in New Categories with target investments where the value pool sits, driving at least a 30% New Category contribution margin by 2030. That is quality growth, not volume for its own sake.

Group profitability will also benefit from a genuine step-up in efficiency, GBP 2 billion of productivity savings between 2026 and 2030 and GBP 700 million of annualized Fit2Win benefits by 2028. Kickers will support earnings, including further share buybacks and reduced finance costs over time as leverage hits the 2 to 2.5x corridor.

2 years ago, back in 2024, I set out 5 commitments. Today, I have outlined our delivery against each of them. As we map out our Horizon 2030 ambitions, I would ask you to judge it against that track record, delivering today, investing in a better tomorrow.

Just before I hand over to Javed, I would like to thank him. Javed served as our interim CFO for the past year. He made an outstanding contribution to this important stage of our journey. On behalf of the Board and myself, I would like to thank him for his leadership and highly valued contribution. Thank you, Javed, and over to you.

[Presentation]

Thank you, Tadeu and good morning, everyone. My name is Javed Iqbal, I'm Director Digital and Information at BAT. And I will now take you through our changing digital landscape. Digital and AI are now embedded as an integral part of transformation of BAT, fully sponsored by our CEO and supported by the management team and already playing a pivotal role in creating opportunities for top line growth and productivity right across our organization. And you will see this all throughout the day in all the presentations.

Let's start with our strategic ambition. Our better tomorrow is built on 3 pillars: quality growth, sustainable future and dynamic business. Digital and AI no longer sit alongside these pillars, they are integrated into every one of them. In quality growth, AI is accelerating innovation and powering our marketing. In dynamic business, ChatBAT is transforming how our people work every day. And in sustainable future, we are digitalizing agriculture and compliance to make our supply chain smarter and leaner, all driving growth, productivity and competitive advantage across BAT and fueling our transformation into a better tomorrow.

Today, I would like to focus on the first 2 pillars. None of this ambition happens alone. It's built on a deep trusted partnership, and none more strategic to us than our partnership with Microsoft. To bring that partnership to life, I would like to hand over to Judson Althoff, CEO of Microsoft Commercial Business, who joins us with a short message on how far we have come together.

Hi, everyone. I'm Judson Althoff, CEO of Microsoft's Commercial Business. I would like to thank Tadeu and BAT's Management Board for inviting me to join you today to share a few words about our partnership. Microsoft and BAT's long-standing relationship is built on trust, innovation and shared ambition. A year ago, our Boards met to craft the vision for BAT's frontier firm journey. And today, it is exciting to see the momentum as that vision translates to real transformation.

From the rollout of Microsoft 365 Copilot to enrich employee experiences to democratizing data across the business with Microsoft Fabric, BAT is embedding AI throughout the workforce to unlock insights, accelerate decision-making and deliver real business outcomes. And BAT is also building their own AI solutions like ChatBAT developed on Microsoft Foundry that harnesses the company's unique intelligence and expertise to deliver differentiated capability at enterprise scale and better serve millions of customers around the world.

At Microsoft, we believe AI reaches its full potential when it amplifies human ambition. Frontier transformation is more than just deploying AI. It's about building an intelligence foundation rooted in trust where knowledge compounds, expertise scales and people can focus on what matters most. As one of our strategic global customers and partners, I'm thrilled to see BAT leading the way with AI and agentic capabilities to fundamentally redefine how work gets done. We're honored to be a trusted partner as BAT continues to innovate in the era of AI, and I'm proud of the work that we have delivered together. I look forward to what's ahead. Thank you.

Thank you, Judson. So that's the perspective of one of the global digital leaders shaping the future of artificial intelligence. The question for BAT is not whether this transformation will happen, but how we harness it to create a competitive advantage, unlock productivity and accelerate growth. That's the story I would like to share with you today. The key point is none of this is possible without the right foundations. AI at scales demands a modern cloud-first, data-driven core, and that is exactly what we have spent last few years building.

Thanks to our strategic partnerships, BAT is ahead of the curve. Let me share 4 key highlights. First, we streamlined our strategic technology partnerships, reducing IT run costs by 40%, while maintaining 99.9% uptime. Second, we are a global leader in cloud adoption with 85% cloud hosting through strategic partnerships with Microsoft, SAP and AWS.

Gartner Research Board membership survey of 58-plus CIOs indicate that 80% of enterprise workload will be cloud hosted by 2027. BAT reached 85% cloud hosting in 2025, placing us ahead of the curve and enabling faster innovation and scalable digital capabilities.

Third, our pioneering partnership with Microsoft enabled the rapid build of our enterprise data platform, advancing our global data infrastructure through Microsoft Fabric and next-gen technologies. This empowers our data-first agile organization, enhancing tools like RGM and marketing spend effectiveness.

And finally, we launched our Gen AI lab in 2025, making BAT the first CPG company in the region's AI hub, which has enabled deployment of use cases like Ask Omni, AI-powered sustainability bots and advanced consumer insight tools. This leads me to a critical point this transformation journey required, substantial incremental investment. Based on Gartner consumer product industry median is 8% of transformation investment for a leading CPG organization.

However, in BAT's case over the last 5 years, we have systematically optimized traditional technology spend and redirected those savings into transformation, mainly focusing in data analytics, AI, employee experience and compliance. As a result, investment in transformational initiatives has more than doubled from 11% to 23% with minimal increase in total IT spend. This shift is enabling us to accelerate AI, digital workplace capabilities and data-driven innovation while maintaining a sustainable cost base.

With the foundations and right investments in place, we are ready for our next chapter at BAT. Our ambition is to be recognized as the AI leader in the CPG industry, but our focus is not AI for AI's sake. AI must create measurable business value at scale. Every investment is evaluated through a commercial lens. We prioritize use cases that drive growth, improve productivity, enhance decision making or reduce costs. If a use case cannot demonstrate a clear value, it is not a priority.

Our approach is simple: disrupt, adopt and scale. We identify opportunities where AI can transform how we operate, adopt proven solutions quickly and scale them to drive value. Our approach is built on 3 principles: commercially focused, cost conscious and value driven. Success is not measured by the amount of AI we deploy, but by the business outcomes we deliver. Together with this approach and principles, we ensure that AI become not just a technology capability, but a catalyst for BAT's transformation.

Let me show you what that looks like in practice. Bringing our value-driven approach to life, starting with our most powerful AI capability in R&D and my favorite too. The next video demonstrates how we are augmenting our scientists with AI, not simply to do things faster, but to unlock better outcomes and support our smokeless transformation.

[Presentation]

There are 3 key points I want to leave with you on innovation. First, speed. AI intelligent enhances formulation design, reducing work that previously took 3 months to around 30 minutes. Second, effectiveness. AI supported product development doubles the success rate, enabling us to identify stronger solution earlier in the process. Third, productivity. Our AI patent researcher reduces search time by more than 90%, allowing our scientists to focus more of their time on discovery and innovation.

Together, these capabilities reduce time to market, increase success rate and unlock R&D productivity. This is precisely what we mean by value-driven AI, applying technology where it can deliver clear commercial impact and drive quality growth. And you will hear more about this from Zafar on our R&D AI capabilities.

Having seen how AI is accelerating innovation in R&D, let's move to another critical growth engine for BAT, our commercial and marketing capabilities. Our focus pans across marketing from understanding consumers to enabling our trade teams to creating content at scale. First, synthetic consumer AI segments give us richer consumer insights and a deeper understanding of preferences, behaviors and trends. In the next presentation, Julian will talk about this new exciting capability, which help us improve targets and develop consumer-relevant efforts as we do this by leveraging our years of research data now harnessed by the power of AI.

[Presentation]

Let's look into our second use case, AI-enabled trade assistant. At BAT, strategy is ultimately delivered at the point of execution in store, in front of the customer. And within the limited time, our field teams have to make the right decision. This is where we leverage AI to help drive quality growth. We augment our field force. With AI intelligence, it helps them to plan their day with the highlights of key stores to be visited and recommendation of actions they should take. It also amplifies the visit by deep diving into data to provide insights that turn into actions.

We are testing this exciting capability in Canada and plan to scale it into other markets soon. The result is more time with customers, more consistent execution across territories and better relationship with our partners. This is how AI become a productivity engine in trade and productivity becomes a platform for growth.

And lastly, we are transforming content creation through AI, enabling us to create once and scale to adopt everywhere, significantly reducing time to market. While improving efficiency and effectiveness, as an example, leveraging AI in content for our McLaren social media activation has enabled 90% reduction in agency CRs, plus 180% market participation with 7x more assets production per race and 8x faster content turnaround.

Here, again, there are 3 key takeaways I want to leave on AI-powered marketing. First, speed. We can reduce concept testing from 4 weeks to just 1 day, which allows our team to make faster insight-led decisions while retaining final validation with real consumers. Second, effectiveness. Our AI trade assistant provide richer customer insights, enabling more meaningful engagement and higher-quality commercial conversation. Third, scale. Generative AI enables us to create 7x more content while reducing agency effort by up to 90%, significantly increasing marketing productivity. Together, these capabilities help us understand consumer faster, engage customers more effectively and scale content creation efficiently. This is value-driven AI delivering tangible commercial impact.

So far, you have seen how AI is helping us to create value in R&D and marketing. But our ambition goes beyond specific functions. We are using AI to empower and reskill our employees through ChatBAT, transforming BAT's workforce and adopting AI at scale.

[Presentation]

ChatBAT is our enterprise-wide AI ecosystem designed to help every employee embrace AI in a secure, responsible way. It brings together the capabilities needed to embed AI across all levels of organization. At its Foundation, ChatBAT is powered by the rollout of Microsoft's Frontier version of Copilot, bringing AI assistance into daily workflows. On top of that, we are investing in enterprise-wide AI training as dedicated AI super users program and vibrant AI communities that help share knowledge, accelerate adoption.

ChatBAT also includes an agentic AI platform, providing enterprise backbone to govern AI agents across BAT. This ensures innovation while remaining secure and reusable. Across the business, most importantly, it is about AI inclusion. Our ambition is to make AI accessible to everyone, ensuring every employee can benefit from greater productivity, better insights and faster decision making.

Every employee has the opportunity to learn and reskill at their own pace. The real power of ChatBAT is not the technology itself. It is what happens when thousands of colleagues across BAT use AI every day to work smarter, move faster and create more value. That is why our focus has been as much on people as it has been on platform. We have invested heavily in capability building, to ensure AI becomes part of how BAT works every day.

The results have been exceptional. ChatBAT recorded over 140,000 visits on day 1. We have already seen more than 10,000-plus training registration, making this the fastest adoption of any training program in BAT's history, pushing us to work with Microsoft to increase our training capacity per session from 100 users to 1,000 users per session. We complemented this with our AI super user program, where we planned by end of this year, 150 colleagues have undertaken advanced AI learning, representing more than 9,000 hours of capability building. Most importantly, this learning is translating into action. We already have a significant number of AI agents embedded across business functions.

Looking ahead, our ambition is even greater, to double adoption in 2027, maintain 80% daily active usage, more than 1,000 active agents across the organization. This is how we create a truly dynamic business, not by deploying AI to a few, but by upskilling every team member with tools and confidence to use AI every day. Everything I've shown so far is delivering value today, but we are equally excited about what comes next.

As we look ahead, our focus on investments on high-impact opportunities, where AI can fundamentally transform core business processes and create sustainable competitive advantage. 4 strategic priorities stand out. First, applying AI to cost of goods sold, optimization. BAT will have one integrated view of every factory, every category and every product real time. So we drive productivity and efficiency, maximizing profitability on every unit manufactured; second, further accelerating R&D through AI; third, embedding AI into integrated business planning and management, enabling faster decisions, stronger governance and more proactive risk management.

And last, in the U.S., Reynolds is integrating finance and commercial data into an AI-enabled performance platform. This will automate reporting and deliver predictive insights for faster and smarter decision-making. While we focus on delivering value across the functions, we are also enhancing resilience in our cybersecurity measures to deal with the heightened external threats due to AI.

Just as an example, we are testing new AI capabilities with Microsoft that enables automated detection, prioritization and remediation of security threats proactively. These are not incremental improvements. These projects represent a step change to reimagine our most critical business processes with the help of AI.

As I said in the opening, scaling AI requires strong strategic partnerships. Let's now hear from Julie Sweet, CEO of Accenture and our strategic digital partner, on how BAT is turning AI ambition into enterprise-wide impact.

Hello. I'm Julie Sweet, Chair and CEO of Accenture. Thank you, Tadeu and Javed for inviting me to be part of your Capital Markets Day. We are privileged to work with BAT as your strategic partner on your reinvention with AI. Your leadership team has embraced the hard work of transformation, reimagining what's possible for a company with a century of history. And by focusing on 2 fundamentals of reinvention, you are on track to see results.

The first is using AI to solve your biggest business challenges. Instead of just automating old ways of working, you're using AI models and virtual experience to speed up time to market of new products. AI is helping to drive the cost of goods, optimize marketing and intuitively connect critical parts of your business so leaders can make better decisions faster.

The second fundamental is that you are rethinking every part of the enterprise to get the most from AI. Together, we are strengthening BAT's digital core, the foundations of your reinvention, your SAP S/4HANA implementation and supply chain transformation. We created ChatBAT, a unique AI experience that helps BAT employees put AI to work every day.

We're also helping BAT leaders with the skills they need for an AI powered future. A reinvention of this scale is only possible because our people are working side-by-side with yours to make every core function more efficient and effective. We're optimizing cost base, creating new value and reinvesting in growth. I believe our partnership is a model for what reinvention requires, working together across every area of BAT, laser-focused on getting you closer to becoming a majority smokeless business by 2035.

So I wanted to thank you, Tadeu and Javed and everyone at BAT for this opportunity and for your collaboration, your leadership and your conviction. Together, we have shown, you are not waiting for the future, you are building it.

What resonated with me is the distinction between experimenting with AI and truly scaling it. As Julie highlighted, the opportunity is not simply deploying new tools, but fundamentally redesigning how work gets done across the enterprise. That's exactly the journey we are on at BAT. So we have built the foundations, and we are reskilling our people, embedding AI into everyday work and applying it commercially focused opportunities across R&D, marketing and our core business processes.

Our ambition is clear: to become the leading AI-powered organization in CPG. We will achieve this by continuing to disrupt, adopt and scale while remaining value-driven, cost-conscious and commercially focused. For BAT, AI is not the destination. It is a catalyst for transformation and delivering a better tomorrow. Building on our 125 years of legacy, BAT is now writing the next chapter powered by AI.

Before I close, I would like to leave you with one final invitation. We will be hosting you in the digital innovation room. My colleagues, Wilmer, Ahu, Luis and Irene will be there to showcase some of our AI capabilities and answer questions you may have. Looking forward to seeing you there.

With that, I'll pass over to Julian, who will take you through the progress we have made in insights and foresights. Thank you. Thank you very much.

Thank you, Javed. Good morning, everyone. I'm Julian Prynn, BAT's Global Head of Consumer Insights and Foresights for the last 3 years, 29 years in the group in various roles and locations across regional, global and end market level, including a period here in Reynolds and as well as Marketing Director out in the Middle East.

At the last Capital Markets Day, we described the transformation we've made in modernizing consumer insights in BAT, becoming a driver of growth and innovation in our multi-category nicotine context. Our ability to increasingly understand complex behaviors, including the poly-usage of various products and categories in different consumption moments is bringing real benefits as we turn this into action.

We've been further augmenting and amplifying these capabilities through AI and other technology, giving us richer, faster actionable insights that are deeply embedded in the business, powering growth across categories. The poly-usage dynamics we've seen not only remain valid, but they're accelerating. And our cross-category insights and experience are increasingly important. One size never did fit all with different preferences among different consumer groups and markets, and that remains the case.

Poly-use continues to grow and is very significant in the leading New Category markets, increasingly driven by multi-New Category poly-use as the dual use of combustibles with New Categories has plateaued. And the fact that Modern Oral is now clearly the fastest-growing nicotine category further amplifies the poly-use trend with the vast majority of Modern Oral users also using other New Categories in complementary ways.

In the last Capital Markets Day, I explained 3 of the main elements of our consumer insights transformation that are embedded in the business, especially with our marketing and R&D colleagues through our insights teams around the world. Our digital track engine is fully operational in 22 markets, monitoring adult online search, social and reviews. It's fast and real picking up trends and opportunities as well as potential problems, tracking new launches and activities, all digested via AI into themes with sentiment directed to our marketer's screens.

Demand moments helps us understand New Categories, poly-usage and by understanding the different choice drivers in different consumption moments, helps us develop products and plan our multi-category portfolio in an integrated way, as you'll hear more from Anniek later. The New Category journey labs map consumer journeys from combustibles to New Categories, helping us encourage smoker conversion into New Categories and to ensure that our New Category products evolve with consumer preferences over time. And our foresights are helping get the whole business more forward-looking, directly feeding our innovation pipeline in actionable ways, giving us a competitive advantage.

I'll now briefly explain some of the ways we've been improving and modernizing in these 3 areas and show examples of how that connects to our recent and upcoming innovations. Firstly, on AI and digital. We've further enhanced digital track, applying new advanced AI models, as you heard from Javed earlier, to capture and interpret online visual imagery to assess the ways nicotine products are portrayed and to deduce what consumers are enjoying, not enjoying or imagining better.

We've also developed a range of AI insights tools, as Javed mentioned, both internally and with agency partners, which are now available across our teams around the world. For example, AI assistance, answering business questions across data sources from both -- with both text and slides for huge time savings.

Synthetic segments, enabling conversations with virtual respondents from our target groups, answering questions that they were never asked as a stimulus for improving marketing executions and activation. And AI testing of communications and concepts with immediate results, saving many weeks from development time lines at negligible cost. This is accentuated by further efficiencies and modernization in all other aspects of consumer research and also the utilization of data from our connected devices to give real-time behavioral data.

Together, this program of modernization is already giving us now far more insights, far faster and enabling us to deliver a 20% overall consumer research cost saving. The use of data from connected devices enables analysis of real-time behavioral data in granular detail, giving, for example, deeper visibility into how consumers use different flavors and power settings in different occasions throughout the day, helping improve product design and assortments, moving us closer to real-time consumer

[Audio Gap]

understanding, shortening the time between insights and action and further driving cost efficiencies

secondly, demand moments. These have been helping us over the last few years to understand New Categories, poly-usage via the different moments of consumption, as we've said. We know the relative sizes of each moment as a whole and by category. And the reasons why consumers buy or reject brands and categories in each moment. This has fed into product development, brand activation and increasingly now into integrated portfolio planning, as Anniek will explain later. The progress on demand moments has been all about making it more and more actionable.

It's been important for portfolio planning to understand the multiple occasions that exist within each demand moment, each with their own context, as shown here with 3 examples. Socialize, where Vapour is the primary category with friends, but where Heated products also play a role in some markets where the occasion is time-bound or Modern Oral where, for example, hands-free flexibility is important. Similarly, consumers use different products while unwinding whether after meals, for time alone or while doing other things. And also, we're in commuting whether privately or publicly.

Understanding the roles of the different moments in the journey of category and brand development from initial discovery to the early stages of usage and exploration. And finally, more emotional connection and loyalty has helped us prioritize by brand, by market and to make activation more relevant and powerful.

Modern Oral is highly complementary to other New Categories with the vast majority poly-using across moments and occasions. And despite its strong growth, Modern Oral is still relatively underdeveloped in a range of moments that implies considerable further upside with appropriate offers and activation. This helps guide our portfolio focus.

Heated Products and Vapour, where both present are almost a mirror image of one another, with Vapour stronger in social moments and Heated Products resonating in moments that are closer to traditional smoking occasions. And both are modernizing in ways that take them closer to each other, and this is helping to guide our innovation.

I'd now like to show you a short video with some examples of real poly-use consumers talking about how and why they use different products and categories in different consumption moments.

[Presentation]

Our New Category journey panels show the transition that consumers make, highlighting the multiple pathways from cigarettes into New Categories, often by a period of experimentation eventually out of Combustibles into either single or often multiple New Categories. This helps us encourage that process, understanding consumption patterns and reasons for switching over time. Importantly, we also see how consumer requirements evolve over time, the longer they use New Categories.

In the early stages to varying degrees in each category, ease of use, familiarity and outward identity are key. And over time, different elements become more important in each category. Understanding this helps us support complete switching and improve loyalty. Our portfolio is now better geared towards encouraging consumers through these journeys.

We described our foresights process for powering consumer-centric innovation at the last Capital Markets Day. And this has further evolved now, utilizing AI to identify developing consumer signals earlier, and to quickly understand which trends have the potential to become meaningful growth opportunities. It's essentially the same process but now powered by digital listening and using AI. Where we previously interviewed 30 or 40 trends experts, we now identify and analyze comments by thousands of them across the world, combining that with broader trends and then quantifying potential and geographical nuance to refine the opportunities identified. This is augmenting and accelerating our foresights process, shaping innovation ideas and inspiring activation.

I'd now like to share with you a few examples of how our foresights shape innovations linked to some of our recent launches. Firstly, for Velo, our insights have been feeding into product development, enabling us to optimize our flavors, nicotine and moisture levels and the balances and interactions between these to achieve just right satisfaction immediacy and longevity as well as the in-mouth feel of the pouch design.

These combinations and just right balances are tailored the differing preferences of Modern Oral users based on how long they've been in the category and which products they are coming from, as well as for different market types for different moments of consumption and to address the previous gaps that we had in our U.S. portfolio. Velo Plus in the U.S. achieved significantly improved consumer response, extremely strong share growth, unrivaled trial to usage conversion and major improvements in brand equity.

The recent launches of Velo Shift in Sweden and Switzerland benefited from insights around in-mouth feel for pouch design and the ever wider geographical coverage of Velo around the world benefits from understanding of local nuances for tailored offers.

Secondly, for Vuse Ultra, we identified an unmet opportunity for premiumization in Vapour with consumers seeking greater personalization, enhanced features and more control over their experiences. Our insights guided the design towards a premium perception of quality, simplicity and elegance, guided the development of intuitive technology to ensure the product is simple to use and to customize via on-device control for different moments and guided the product development of new flavors and sensorial experiences and the addressing of consumer uncertainty around battery and pod levels.

Vuse Ultra has delivered successfully and continues to grow share at a premium price where launched, attracting consumers Beyond Vapour including Heated Products. Vuse brand equity has improved. Consumers appreciated the experiences of multiple flavors and enjoyed the connectivity, which has driven higher use of different flavors for different moments while improving loyalty.

Next, the Hilo launch, which addressed the gap for glo in premium for Heated Products. Insights guided the premium-oriented design and ergonomics as well as a faster, simpler user experience via new features such as fast ramp-up and the intuitive screen. Iterative product development enabled us to set a new benchmark for cigarette-like satisfaction among smokers, which was achieved both in prelaunch testing and post-launch tracking. Where launched, Hilo continues to gain share of premium Heated Products with excellent trial to purchase conversion, attracting premium users and significantly improving glo's overall brand equity perception.

Finally, you'll hear later about a new innovation already in test markets that is again shaped by consumer insights. This is aimed at smokers seeking ritual satisfaction and familiarity who have thus far rejected New Categories. It will address the limitations of current New Categories, inhalation products among smokers by delivering more familiar, simple and satisfying experiences, keeping the essence of combustibles-like sensorial satisfaction and ritual familiarity but without the negative perceived stigma of smoking. And it does so in a modern, innovative way, bringing together the best of Heated Products and Vapour appealing to consumers of both that also removes the elements of the experience that smokers are happy to leave behind. Early test results are very exciting, and you'll hear more from Anniek about that later.

So to conclude, our transformed consumer insights capabilities are deeply ingrained in the business as you'll see more throughout the day. We've been further enhancing it using AI and other technology for broader, faster insights at lower costs. And these capabilities and the insights we generate are now an increasing competitive advantage with consumer behavior progressively more dynamic, complex and personalized.

We're driving consumer inspired innovation, activation and improved results across categories, and there's more to come. Thank you very much, and I'll now hand over to Zafar, who with his team is the recipient of a lot of our innovation-related insights, and he'll talk about R&D and the innovation ecosystem. Thank you.

Good morning, everyone. I am delighted to be presenting to you on our R&D innovation ecosystem. At our 2024 Capital Markets Day, we introduced our innovation ecosystem. Today, we will talk about how we've amplified it further to enable BAT's 2030 goals. BAT is now a consumer-led technology-enabled company with cutting-edge capabilities. I'm Zafar Khan, Group Operations Director with over 30 years of professional experience at BAT. That would be a little too much. I've worked at local, regional and global levels in operations, commercial and R&D roles. It is my pleasure to be here with you today.

I will be showcasing why innovation is one of BAT's most important growth engines. Tadeu has shared our Horizon 2030 ambition. My role today is to explain how our world-class innovation capabilities are helping us turn that ambition into reality. It is an exciting time. Our world-class foresights are informing our pipeline. We are powering faster, better innovation with significantly faster time to market and backed by serious investment and growing scale.

Let me start with a short video to give you a sense of our R&D innovation ecosystem.

[Presentation]

As you've just seen, R&D is a core growth engine for BAT. Driven by an innovation-obsessed mindset, world-class science and cutting-edge technology, we are creating the next generation of smokeless experiences and accelerating our journey towards a predominantly smokeless business by turning consumer insights, advanced science and proprietary technologies into differentiated products that strengthen our competitive advantage.

Since CMD 2024, we have materially increased our focus on Modern Oral, recognizing its significant growth potential and strategic importance within our portfolio, and we are backing that opportunity with significant investment. In 2025, BAT and our strategic partners collectively invested around GBP 1 billion in innovation. That represents approximately 3.9% of group revenue and around 27% of smokeless revenue. Importantly, for our key innovation initiatives, we project returns in excess of 150% based on BAT's investment contribution.

This level of commitment reflects 2 important realities. First, innovation is critical to long-term growth. And two, we deliberately leverage partner investment to augment BAT innovation. This allows us to access capabilities, technologies and expertise at a scale that would be difficult to replicate internally. The result is a powerful innovation engine designed to deliver sustainable competitive advantage.

As Julian mentioned, everything starts with the consumer. World-class consumer insights and foresights are the fuel of our innovation engine. Our consumer and market understanding enables us to identify opportunity spaces earlier and with greater precision. These insights are then connected to a broader innovation ecosystem. Together, they create a leading product pipeline, and that pipeline is increasingly cross-category, scalable and repeatable.

Our strategy is intentionally multi-category with winning propositions catering to different consumer needs. Today, across our top markets, Modern Oral has achieved the #1 volume share position since Q4 2025. Vuse remains the #1 vapor brand by value share, and glo continues to strengthen its position through differentiated propositions in heated products. What is important is not only where these products are today, but also the pipeline behind to follow. Across all 3 new categories, we are developing breakthrough innovations to further amplify our position.

Our technology platforms continue to mature. We now operate a scalable technology menu. This is a library of proven technology blocks that can be deployed across the new categories. These technologies are no longer isolated innovations. They have become reusable platforms, and that gives us 3 major advantages: speed, scale and cost effectiveness.

Building on the technology menu, this slide shows how we convert modular technology platforms into differentiated consumer experiences across our portfolio. It starts with the consumer. Through insights and foresights, we identify moments, frustrations and unmet needs that matter most, then deploy the right technology platforms to address them.

As an example, for Velo, flavor and nicotine delivery technology to enhance product satisfaction without compromise. For Vuse, personalization technology enables consumers to tailor the experience to their mood, preference and moment. For glo, we are using our technology to remove friction from the journey, delivering a faster path to product satisfaction for adult smokers looking to switch. This demonstrates how we are turning reusable technology building blocks into differentiated consumer experiences at speed and scale. We now have more than 80 technologies ready for deployment and over 100 additional technologies under development. This gives us a strong menu of future consumer-led breakthroughs, which also helps us with consistent gains across all new categories.

We've improved product quality by more than 20% through relentless focus. At the same time, we've reduced time to market by approximately 30%. We've created a globally integrated innovation network, one system operating across multiple geographies. This ecosystem provides 3 critical advantages: access to world-class technologies, scale through industrial capability and speed through co-located innovation and scale-up resources. Together, these create a stronger pipeline, faster scale-up and a sustainable advantage.

The ecosystem only works if internal capabilities are equally strong. Today, our R&D organization consists of approximately 800 employees distributed across our innovation network. Our connected R&D centers work across multiple geographies. These teams are organized around technology centers of excellence, supported by strong leadership in IP, insights and foresights, science and fully integrated cross-functional capabilities. This structure gives us deep expertise, global reach and the ability to deliver breakthrough innovation consistently.

Strategic partnerships remain a critical differentiator for BAT. Our relationships with BYD and Smoore are deeply integrated into our innovation engine. We've expanded this relationship to support a multi-category environment. Since CMD 2024, these partnerships have evolved from category-specific collaborations into a truly multi-category innovation ecosystem. Smoore now supports both vapor and heated products. BYD works with us across all 3 new categories.

Our partner investment has nearly doubled, significantly extending the scale of innovation we can deliver. These partnerships provide access to technologies, specialist capabilities and scale, capabilities that help accelerate innovation across the 3 new categories. Most importantly, they provide differentiated access to technologies that strengthen our competitive position.

We also continue to expand our open innovation ecosystem. Today, we have over 100 active collaborations with more than 10 technologies progressing into development during the last 12 months. This enables us to access ideas, technology and capabilities well beyond our own organization and helps ensure BAT remains connected to emerging trends and breakthrough opportunities.

As David mentioned, one of the most significant changes since the last CMD is our progress in digital and AI. We have moved from experimentation to scaled deployment across modeling and simulation, artificial intelligence and enterprise data and systems. Digital testing is reducing iteration cycles by approximately 3 months. Agentic AI is expanding knowledge access across our 800 R&D employees and centralized data allows us to enter information once and use it everywhere. This is technology that improves speed, efficiency and impact.

Let me share a small video of how our R&D team is practically using these tools to improve our development [indiscernible].

[Presentation]

As innovation scales, the process becomes even more important. Our product life cycle management framework ensures disciplined delivery from idea to impact. It creates a direct link between innovation investment and value creation. And this is how we industrialize innovation repeatedly, globally and at scale.

As we've discussed throughout today, innovation is enabling growth across our smokeless portfolio, but innovation at BAT is not limited to smokeless categories. We continue to apply the same consumer-led approach to win in combustibles. Through world-class blending science, flavor technologies and packaging innovation, we are continuously improving our offers to meet adult smoker preferences and competitiveness across our portfolio. At the same time, simplification is helping us improve quality, consistency and efficiency with a more focused manufacturing and product footprint. And increasingly, digital and AI are helping us develop, test and deploy innovations faster and more effectively. The result is a combustibles business that is becoming simpler, more competitive and better positioned for sustainable value creation.

Let me close with 6 key messages. The consumer, world-class foresights informing our pipeline; the ecosystem, a global innovation and manufacturing network powering faster and better innovation. Speed, 30% faster time to market enabled by digital and AI. Investment, GBP 1 billion deployed with disciplined governance and superior returns. Scale, industrialization embedded early to accelerate growth and reduce cost and the future, a portfolio engine built to win through 2030 and beyond. When I look at our capabilities today, this gives us confidence. This gives us speed. This gives us scale. And most importantly, they make us ready to deliver a better tomorrow. Thank you very much.

We will now have a short coffee break, and please do visit the ride and moment pop-ups, and we will restart presentations at 10 past still. Thank you very much.

[Break]

Good morning, everyone, and welcome back. Last time we talked about how BAT was strengthening its consumer insights, rebuilding its innovation ecosystem and launching a new generation of products across our categories. Today, we are seeing the benefits of those investments. And the story is no longer about whether a multi-category model can work. It is about demonstrating that a consumer-led multi-category strategy creates a sustainable competitive advantage. From the outset, BAT chose a different path. Rather than building our future around a single category, we chose to follow consumers.

Over the next few minutes, I'll show you how our innovation pipeline is delivering, how multi-category leadership is becoming increasingly tangible and why we believe this positions PAT for sustainable quality growth.

At the CMD in 2024, we showed the pipeline. Today, we are showing delivery. Across every new category, innovations that were concepts 2 years ago are now in market and scaling. In Modern Oral, Velo Shift is already reshaping category expectations in the markets where it has launched and helping strengthen Velo's brand equity. After the initial success in Sweden, we will continue to roll out Velo Shift in our key markets. In the U.S., Velo has become the fastest-growing Modern Oral brand. Since January 2024, Velo volume share has expanded from 4.4% to more than 30% of the Modern Oral market nationally.

In Vapor, Vuse Ultra is helping establish a premium segment. Within a year of launch across 5 major markets, it already represents around 15% of the total Vuse revenue in those markets while strengthening the perception of both, trust and premiumness. In heated products, glo Hilo has now launched across the top 9 heated product markets, representing roughly 70% of the industry revenue and has already surpassed 8% premium share in Poland. And in combustibles, we have refreshed the portfolio of iconic brands to strengthen distinctiveness and relevance. We sharpened our commercial focus on where and how to win in the key 20 markets that represents 80% of the industry's revenue.

Collectively, these innovations demonstrate something bigger. They show how our innovation ecosystem is working from consumer insights and foresight through technology and partnerships to brand building and commercial execution. Most importantly, they show our ability to convert innovation into scalable commercial outcomes.

Now innovation only matters if it translates into leadership. Today, BAT holds leading positions across the portfolio. Velo is the #1 Modern Oral brand in volume share and number of consumers. With its differentiated positioning, Velo has the strongest brand equity in the category and is the market leader in brand equity across markets outside of the U.S.

Vuse is the #1 global brand in total vapor by value with 44.2% and in rechargeable close systems with 49.8%. Vuse is also improving equity in key markets, while our commitment to responsible vaping is reflected throughout the Vaping Done Right campaign now live in 15 markets, representing 65% of the non-U.S. Vuse contribution. glo is the #2 heated product brand globally. The total glo portfolio is now enabled through 2 competitive platforms with 100% of the consumables portfolio evaluated by consumers at par or superior versus the closest competitor.

And BAT remains the leading combustible manufacturer by revenue with iconic global brands powered by sustainable delivery of the growth algorithm. These positions are not accidental. They are the result of investing behind consumer understanding, building strong brands and allocating resources with discipline.

If there is one brand that best illustrates our approach, it is Velo. What started with a local Nordic business 9 years ago has become the world's leading Modern Oral brand by far. Its success has come through a series of deliberate strategic choices. The acquisition of Winnington in 2017, the expansion beyond the Nordics, the consolidation behind a single global Velo brand, a focused innovation agenda and a targeted market expansion. Today, Velo operates in 50 markets and stands as one of the strongest growth engines within BAT portfolio.

Importantly, this success was not driven by a single innovation. It was driven by consistently combining consumer understanding, brand building, innovation and execution over time. Velo demonstrates our ability to identify an attractive category early, build leadership and scale globally. And it provides a blueprint for how we approach growth across the broader BAT portfolio.

Velo growth story continues to accelerate. In 2024, we said that we wanted to lead this category globally. Today, we are the #1 Modern Oral manufacturer. In the United States here, driven by Velo, we are leaders in 16 states, having increased Velo volume share from 4.4% in early 2024 to over 30% today. And the gap versus our main competitor has reduced from 58 points in January '24 to less than 10 points. Velo class alone accounts for 80% of the category volume growth and has doubled its active consumer base to more than 6 million users since launch.

In Europe, our leadership is equally compelling. BAT holds 63.6% volume share and is roughly 7x larger than its nearest competitor. This demonstrates the power of combining globally developed innovations with locally tailored deployment. Modern Oral remains the fastest-growing nicotine category. Between 2022 and 2025, BAT estimates user growth of approximately 30%, outpacing both vapor and kitted products. By 2030, we expect Modern Oral to reach a similar revenue scale to the other 2 categories and to continue to grow faster.

For BAT, Velo is more than a successful brand. It is the proof that our multi-category model can create category leadership at scale. The advantage of multi-category is not simply having more products. It is having a system, a system built around rigorous category prioritization, powerful brands, innovation and strategic partnerships. Over time, we have built capabilities that connect these elements together. And this gives BAT more routes to grow, reduce the dependency on any single category outcome and a richer understanding of the evolving nicotine consumers.

Partnerships play an important role as well. They enable faster access to new technologies, materials and consumer experiences than any organization could develop entirely on its own. And as Tadeu said earlier, a good product only matters if you put it in front of the consumers, and we reached more than 11 million retail outlets in over 140 countries. Ultimately, multi-category is not just a portfolio strategy. It is a growth system designed to create lasting competitive advantages.

Looking ahead, our priorities are clear: continue generating sustainable growth and value from combustibles through our iconic global brands, supporting the overall resilience and delivery of the portfolio. Lead and develop Modern Oral. We believe Modern Oral remains one of the most attractive growth opportunities in nicotine. With Velo now the global category leader, we have the scale, brand equity, portfolio and innovation capabilities to continue driving future category development.

Through Vuse and glo, we will maintain a focused inhalation strategy as a complementary element of our nicotine consumer portfolio, ensuring we participate across consumer occasions while prioritizing investment that strengthen category positions and maximize returns. Together, these priorities support our ambition to deliver quality growth while maintaining balance across the portfolio with a multi-category portfolio built to serve both current and emerging patterns of new nicotine poly usage. We are creating a coherent system of nicotine experiences.

And with that, I will hand over to Emma to talk about the wonderful world of combustibles. Thank you.

Good morning, everyone. My name is Emma Dean, and I took over the Global Head of Combustibles role at the start of this year after 5 exciting years here at BAT and a career before that with Nestlé and Unilever, where I held a variety of commercial and marketing roles across key international markets.

Today, I'm really pleased to talk to you about the role combustibles continues to play in BAT's strategy as a consumer-relevant, highly contestable category, a major source of value and cash generation and an important enabler of our transformation towards a smokeless world.

You will hear me talk today about winning in combustibles. And that word matters. This category remains dynamic, contestable and value generating. Adult smokers who choose to continue to smoke are still making active choices. And our job is to compete for those consumers with rigor, focus and strong execution.

I want to leave you with 4 messages today. First, combustibles remains a vital value pool and a core enabler of BAT's transformation. Second, we've refocused, we've reenergized and we've honed a very clear strategy to win, focused on where we compete, how we invest and how we execute. Third, we have the capabilities to deliver through our brands, route to market strength, people and digital tools. And finally, together, these give us confidence in our ability to deliver the combustibles algorithm over the medium term.

Let me start with scale because in combustibles, our scale is a source of competitive advantage. BAT is the global revenue leader with around 80% of revenue from our global drive and strategic brands, complemented by strong local jewels. We are #1 in consumer share with more than 100 million daily consumers, 11 million retail outlets across more than 140 markets and #1 or 2 positions in 25 of our top 40 markets. Behind that reach is a supply chain built for quality and consistency with 36 factories serving our global consumer base every day. This gives us the brands, reach and infrastructure to compete from a position of strength.

We've seen a clear improvement in combustibles performance despite a challenging external environment. Last year delivered a step-up in results with the U.S. returning to growth, continued strong performances across other key markets and sharper execution helping to offset fiscal and regulatory headwinds in Bangladesh and Australia. Importantly, our stronger performance has also carried through into the first half of this year. This reinforces our confidence in the midterm algorithm, revenue growth of 1% to 2% and category contribution growth above 2%.

So the key point here is that combustibles business is now on a stronger footing with pricing, mix and execution, providing the levers to deliver sustained value growth and being able to do so even in a challenging environment. And this confidence is grounded in our recent performance, supported by the underlying dynamics of the category.

At industry level, combustibles volumes are expected to continue declining over the coming years, but at a relatively modest and steady rate. The important point is that volume decline does not translate directly into value decline. While industry volumes are forecast to be down by around 2.5% per year out to 2030, industry net turnover is still expected to continue to grow over the period. This reflects the underlying economics of the category. Combustibles remains large, resilient and highly cash generative with pricing and mix continuing to more than offset lower volumes. And as a result, the value pool remains more attractive than volume trends alone would suggest.

As you know, one of the biggest industry challenges is illicit trade, which sits around 17% of industry volume, roughly 350 billion sticks. This is not limited to developing markets. In Australia, frequent outsized excise increases and policy choices have pushed consumers away from the legal market, with illicit forecast to reach 80% of total volume by the end of this year. But illicit is not only a threat. It is also a source of recoverable value where excise regimes are sustainable, enforcement is effective, and we have the right portfolio offers, volume can return to BAT. Pakistan is a good example. Following stronger enforcement and awareness campaigns, illicit is forecast to fall below 50% by year-end, supporting volume, value and profit growth.

The key point is that with the right conditions, we can recover illicit volume, supporting growth, value and stronger category economics.

In 2030, combustibles is still expected to represent around 70% of total industry nicotine value. So while volumes will continue to decline, this category remains by far the largest value pool in nicotine. And consumer behavior reinforces the opportunity. For adult smokers who choose to continue to smoke, combustibles remains anchored in important demand moments, including reflection, reward and preparation, as Julian referenced earlier.

But this is not a static consumer base. Adult smokers are increasingly demanding and increasingly contestable, driven in part by poly usage behavior. 17% switch brands and 34% use more than one brand. That tells us consumers are still making active choices within the category. And those choices represent meaningful value that can be won or lost. For BAT, that contestability represents a revenue opportunity of over GBP 7.5 billion. With our portfolio strength, route to market reach and rigorous commercial execution, we are well positioned to compete for that value.

Our combustible strategy is built around 3 priorities: first, sharpened commercial focus, targeting where we compete, how we invest and how we manage price, mix and portfolio. Second, powerful brands, ensuring our portfolio remains relevant, distinctive and able to win across key consumer spaces and price tiers. And third, digital agility and seamless collaboration, making the organization faster, more connected and more precise in execution. And this strategy delivers the algorithm, 1% to 2% revenue growth and more than 2% in category contribution.

The first pillar is sharpened commercial focus, being very deliberate about where we focus our resources and how we create value. At a market level, we are concentrating our effort on the markets that matter most. 20 key markets account for around 80% of industry revenue across our global footprint. So this is where we're directing the greatest focus, capability and investment while continuing to serve the rest of our footprint efficiently. At a segment level, we are equally focused. We've identified the parts of the category where consumer choice is most active, value is most attractive and where BAT has the strongest opportunity to win. That includes capturing highly contestable opportunities in above-weighted average price, which remain highly relevant and attractive in many key markets. Whilst also responding to down trading into the low weighted average price offers and addressing opportunities in the growing freshness and flavor sensations segment.

By mapping priority markets against these high-value consumer spaces, we're much more precise about where we prioritize resources. This is the essence of our renewed focus, fewer, bigger priorities, clearer investment choices and sharper execution in the places that can create the greatest value.

Underpinning that focus is a distribution capability that very few companies can match. BAT has roughly twice the retail reach of large cap consumer goods companies. Our products are sold in more than 11 million retail outlets, supporting over 150 million transactions on average every day. This reach has been built over many years of targeted route-to-market investment and retail execution. And we're making that impressive footprint smarter. Through digital census and retail planning, we now map and serve outlets around 8x faster and 10x cheaper than before, powered by trade systems, data, analytics and AI. Crucially, we do this responsibly with responsible retailing and underage access prevention programs. We believe this best-in-class capability is what turns strategy on a page into excellence in execution at the point of sale.

The next focus area is our brands. I'd like to share a short video that brings our combustibles portfolio to life.

[Presentation]

As the video shows, our brand portfolio is a core strength of the Combustibles business. It gives us breadth across geographies, price tiers and consumer needs from premium and value for money through to the specific dynamics of the U.S. market. The important point is that these brands are not simply large. They each have a clear role in helping us compete for consumer choice and to create value. Starting with premium, we have 3 strong global platforms, Lucky Strike, Kent and Dunhill. Lucky Strike combines authentic tobacco credentials with strong momentum, including double-digit volume growth over the past 5 years.

Kent gives us a progressive platform with innovation across formats and price points from Kent Pro X to more accessible offers like Kent Beats. Dunhill brings a clear quality proposition with a more modern expression through ranges such as Dunhill Statement. Together, they give us strong premium platforms with distinct roles across consumer needs, occasions and price points. In value for money, Pall Mall and Rothmans give us the ability to compete effectively where affordability and value are most important. Pall Mall is our largest brand by volume and plays a critical role for adult smokers seeking strong sensorial delivery at an accessible price.

Rothmans complements this with a more modern and accessible proposition, helping us compete effectively as consumers seek value. Together, they help us win share, respond to downtrading and keep value for money spaces competitive and profitable. In the U.S., our portfolio gives us strong positions across key segments. Natural American Spirit gives us a highly differentiated premium proposition, including the only organic tobacco range in the U.S. Newport remains our largest brand by value and the #1 menthol brand in the market, supported by a laddered offer and renewed equity campaign. Camel continues to evolve through offers such as our new Camel Craft range, bringing a more contemporary tobacco experience at a relevant price point.

Lucky Strike delivers strong consumer value, supported by brand equity built on an enduring legacy in American culture. And Pall Mall is a trusted heritage brand, while Pall Mall Select modernizes that legacy, delivering trusted quality at a great price. David will cover the U.S. in more detail later. The key point here is that our U.S. portfolio gives us distinctive equities in a strategically important market. Now if you look at our portfolio as a whole, you can see we've built it deliberately around the consumer. A key strength of our combustibles business is that we have a range of distinctive brands, allowing us to better target the right offer for each consumer and segment by market.

Our brands are mapped across key segments and price tiers from premium through value for money into freshness and flavor sensations, so we can compete with relevant offers across the consumer spaces that matter most. The result is a well-balanced portfolio that has never been better equipped to win, designed to sustainably deliver value and share across the most attractive segments. You'll be able to see some of our newest offers later today at the Combustibles innovation stand. One of the things that makes our brands so powerful is consistency with local relevance. We develop our brand ideas and assets centrally to world-class standards, and then we deploy them faithfully across every relevant touch point from the point of sale to the pack in hand.

That means the consumer experiences the same strong coherent brand wherever they meet it, while we still flex for local tastes and rituals, globally developed, locally deployed. That's how we get both scale efficiency and maximum impact from every brand investment. This is where strategy translates into delivery. Across 3 of our most important combustibles markets, we are seeing consistent evidence that our approach is working. In Brazil, we've delivered sharper portfolio choices and focused execution in the most valuable segments, which has driven record high volume share above 70%. In Mexico, we have used our capabilities in execution to deliver strong volume share position despite the highly competitive environment post the recent excise hike in January this year.

And in Pakistan, we're showing that targeted pricing, mix management and focused investment are delivering revenue and profit growth with volume share consistently above 80%.

The specific dynamics differ by market, but the pattern is consistent, where we apply our strategy with rigor, focusing on the right markets, the right consumer spaces and the right execution levers, we win. But not every strategic market is yet delivering to its full potential. And in 3 important markets under recent pressure, we've been taking focused action to turn performance around.

In Germany, we've addressed our competitiveness in the low segment, supported by stronger execution. And this is building the foundation for share recovery. The recent launch of Pall Mall Classics has delivered 150 basis points of volume share in the East in 4 weeks. And total share performance in July is sitting at 22.9%.

In Romania, we have revamped the portfolio and launched new offers to respond to downtrading while rolling out new brand expressions to strengthen consumer relevance, delivering volume share above 50% since half 1 2025.

And in Japan, we've improved competitiveness in low through the launch of Luckies and the repositioning of Black Series, delivering early signs of share -- volume share stabilization. And we've reached 17.9% share of market in July.

The common thread is focus, clearer choices on where we prioritize, more targeted investment and stronger execution. This is how we improve performance where it matters most. Winning in Combustibles is not only about top line growth. It's also about building a simpler, more efficient business that we can invest behind what matters most. Between 2023 and 2025, simplification has contributed to BAT's GBP 1.2 billion savings. We've exited 12 markets and significantly reduced complexity across formats, leaf grades and blends. Importantly, this has not compromised product competitiveness. Around 90% of products tested met their competitiveness objectives. We remain relentlessly focused on cost discipline while ensuring our portfolio meets the evolving expectations of adult consumers.

Looking ahead, this simpler platform enables us to concentrate investment on the areas of product experience that matter most, including freshness, flavor sensations, modern smoothness and authentic cues. The third pillar is digital agility, using better data and tools to make execution faster, more precise and more efficient. In revenue growth management, modeling and simulation helps us make more precise pricing choices by market, supporting around 6.8% annual revenue growth from price and mix since 2022. In consumer insight, synthetic segments and AI-assisted tools are helping us test, learn and refine propositions in days rather than weeks and at a lower cost.

To support brand development, Brandverse is a digital platform that brings together our brand, product and packaging resource together in one place, helping teams move from idea to execution faster and more consistently. Brandverse reduces brief submission from more than 2 weeks to less than a day while supporting global consistency and faster local deployment, particularly for those markets that are outside of the top 20. Together, these tools help convert scale into speed, insight into action and efficiency into value. And combined with our distribution and execution capabilities, they make BAT faster, sharper and better equipped to win consistently in Combustibles.

So let me bring this together. Combustibles remains a large, resilient and highly cash-generative category, and it continues to play a key role in BAT's strategy. We've refocused, we've reenergized and we've honed a clear strategy to win. This is a business that we manage with rigor, focusing on the markets and segments that matter most, leveraging our global brands and route-to-market reach, simplifying the business and using digital tools to make execution faster and more precise. That combination gives us the confidence in the combustibles algorithm, revenue growth of 1% to 2% and category contribution growth above 2%. Managed well combustibles remains a value engine for BAT, a business where smart choices, strong brands and sharp execution can continue to deliver value today while helping fund the transformation towards a Smokeless World. Thank you.

And I'll now hand over to Anniek, who will take you through New Categories.

Thank you, Emma. Good morning. As you have heard from Luciano, we will continue driving a strong multi-category portfolio, assigning clear category priorities to accelerate our growth. And this is where I pick up for the New Categories. My name is Anniek Kindts. I am the Global Head of New Categories since the start of this year. I bring almost 3 decades of marketing experience in BAT and across the industry. I served in a wide variety of marketing and commercial positions in many markets across the world and in senior roles at head office level.

As you know, the industry transformation has been a reality for just over a decade now. BAT was the first to shape an explicit multi-category approach to creating a Smokeless World. Today, BAT leads the New Category transformation, and we are proving it at scale. We are leading in modern oral by a substantial margin. We are leading in Vapour by a substantial margin. We are the leaders in the Heated Products affordability segment and a strong runner-up in the overall category. As a result, we have consistently delivered against our targets and are committed to driving mid-teens NC revenue growth through to 2030.

We are also well on our way to reaching at least 30% NC contribution margin and 50 million Smokeless consumers by 2030. The conclusion is apparent. Our leadership today sets us up perfectly to accelerate our growth in the coming years. So what do we think growth will look like going forward? Let's step back. Today, all industry players are participating in multi-New Categories as consumers are adopting NC poly-usage behaviors. So multiple category participation is no longer competitively salient. And so we are taking our strategy to the next stage. BAT is shaping a diversified NC portfolio strategy. That's a portfolio that is focused on growth and diversified for robust and durable financial returns.

In this approach, each category is positioned to maximize its contribution. Modern Oral is the focal point of our growth strategy because we will be unlocking category full potential while building on our leadership to expedite our growth. Modern Oral will be complemented by our NC inhalation categories. Vapour and Heated Products combined will deliver sustainable revenue and margin expansion. I will unpack exactly how we plan to deliver this ambition in each of the following category sections. But first, a word, an important word about the consumer. Our strategy is grounded in category insights combined with deep consumer understanding and fast consumer learning, as Julian has demonstrated earlier.

This consumer-centric capability is put into action in 2 main ways. First, it informs how we build our category portfolios. Our NC portfolios are anchored in consumer demand moments and product choice drivers within and across NC categories. This ensures we are serving the widest reach of NC consumers with targeted propositions. Second, our operational growth is deployed along a consumer-centric flywheel model. This is an interconnected ecosystem that accelerates our growth momentum from brand recognition and reach to physical availability on to driving consumer adoption and retention at scale, of course, measuring our effectiveness along the way. Both consumer insight generation and deployment velocity are underpinned by ever-advancing digital and AI capabilities as outlined earlier as well. So clearly, the consumer is at the center of our strategy and the consumer is at the center of our execution.

So back to strategy. Let me take you to our world of Modern Oral. And let's start with the consumer and what drives their unique choice to adopt Modern Oral despite the initial usage and ritual barriers. The first choice driver is convenience, quoted by 60% of MO consumers. This includes the simplicity of usage, no devices, no batteries, no separate consumables, the wide distribution at traditional retail and online channels, affordability with the category typically priced at 40 to 100 index to the average Combustibles prices and also practicality of anytime, anywhere usage throughout the day. The next choice driver quoted by 51% of MO consumers is the category's progressive and trusted image. MO is the furthest removed from the pain points of the smoking ritual such as no smoke, no smell.

But this emerging category requires brands that are trusted and established. It may be surprising that the #1 reason for consumers to leave the MO category is lack of brand trust. And finally, quoted at 43%, consumers choose MO due to its risk -- reduced risk profile. So MO offers adult nicotine users numerous reasons for consideration and adoption. And those reasons are unique to this modern new category. And so more and more adult nicotine consumers are choosing Modern Oral. In just 3 years, active usage has doubled. Daily usage grew by 60% and average daily consumption by 40%.

The category now has the fastest-growing consumer base in the nicotine landscape estimated at 24 million users today, a number expected to double by 2030. The industry value is forecast to grow even faster to around 3x today's level up to GBP 11 billion by 2030. And note that both the MO consumer base and value are growing significantly ahead of the other New Categories, also driven by its more globalized footprint. So as a result, MO is the fastest-growing category today and for the foreseeable future, both in volume and in value. And wait, there is more. What makes the category potential even more attractive is the untapped opportunity beyond its current growth spaces.

First, in the places where MO is available today, incidence is on average still well below 5%. We expect this to grow by 60% by 2030, driven by category investment, category education and innovation. Also, today, almost half of the combustibles industry is not accessible for Modern Oral due to regulatory constraints. However, the number of countries with a bespoke regulatory framework is steadily increasing from just 4 in 2023 to 32 today. So with more markets opening up, the available MO consumer and value pools will further expand globally. In summary, Modern Oral unquestionably offers a generational opportunity for creating a new-to-the-world leading and global category, and we are well positioned to capture it.

In this fast-moving world of Modern Oral, one clear winner is emerging, and that is Velo. To start with, Velo captures the lion's share of the category growth offtake at about 75%. This translates into Velo reaching global brand leadership in Modern Oral retail share at the end of last year. Since then, we have only continued to build on our position as the #1 Modern Oral company. At last published read, BAT grew share to 41.4%. That's an impressive 16.5 percentage point share growth in only the last 18 months. In Europe, BAT is already 7x larger than the nearest competitor, and we are closing the gap to leadership in the U.S. at fast pace. On top of this, Velo brand leadership is anchored in strong consumer measured brand equity, surpassing all competition globally and fast catching up in the U.S. as well.

We have the leading brand in the fastest-growing category, a prime position from where to unlock its full potential. So how do we expedite our MO and Velo growth trajectory? There's 3 key pillars. The first pillar of our growth strategy is to double down on the Velo brand and continue shaping it as the most salient and trusted Modern Oral brand in the world. As the leading brand, Velo has the credentials to guide consumers to the right category information sources. This is where Velo translates our robust product stewardship and solid scientific evidence into consumer language. Velo is also educating new to the category consumers on its unique usage ritual and product experience.

This is our Pop It, Tuck It, Feel It campaign. Velo also helps consumers navigate a wide range of products along strengths and flavors. To further deepen the connection with our consumers, Velo leans in and celebrates significant cultural moments together. Our exceptional partnerships with McLaren and Tomorrowland are the most global expressions of this approach. They powerfully deliver significant contribution in brand equity and key imagery. Our latest brand expression brings our exciting Velo world to life. Our new Live Original campaign amplifies what is already unmistakably Velo. It will hit the market at the end of this year.

Our ambition is clear. It is to propel Velo into one of the world's most recognized and loved brands, singularly synonymous with the Modern Oral category. The second pillar where our growth strategy is put into action is our Velo product portfolio. Our portfolio is purposefully developed across the consumer adoption journey, and we consistently deliver on the 3 fundamentals for consumers: flavor experience, nicotine delivery and comfort of the pouch. First, we doubled down on the early stage of MO adoption to accelerate our growth. Velo helps consumers to switch into the category ritual, leveraging a milder sensation, and that's our Velo Mellow range.

Winning the nicotine consumer when they first try MO is critical because around 80% of the category growth comes from this space. Now once consumers have adopted to the MO ritual, they typically start a deeper discovery and experimentation. And it's in this stage that we lead with the most diverse flavor portfolio and more intense products. This is our Velo higher strength, flavor and fusion ranges. Flavor and strength diversification is important because this is how the category usage expands to other demand moments and facilitates more regular usage of the category and of our brand.

And finally, as the relationship with the category is established, we offer consumers differentiated premium propositions such as Velo Shift, and we expand our portfolio, including more complex flavors and exciting limited editions. Each proposition connects to a specific demand moment and plays a distinct role in the consumer adoption journey. All of this is underpinned by science-led innovation, proprietary technologies and IP.

So let's take a closer look now at some of our latest developments. And let's start with Velo Shift and how we are literally reshaping the category. Velo Shift combines a uniquely shaped can, the hex can, a uniquely shaped comfort pouch and original flavors such as Hot Dragon Fruit. This holistic premium proposition is a first of its kind, truly transformational. It is the perfect example of how we leverage our innovation capabilities to expand the portfolio into demand moments that are more emotional in nature, such as reward or unwind and therefore, represents a higher value to discerning users.

In our first launch in Sweden at the end of '25, Shift has positively reflected on the perception of the Velo brand. It garners high interest among source of business. 56% of trialists are competitor consumers. And Shift is driving up Velo share in our most mature markets. In Switzerland, Velo Shift was launched in April of this year, still early days, but it's already helping to build on our leadership there as well. Let me also share a few examples of what is in our pipeline of upcoming launches, each setting a new benchmark for the category. First, we are extending the Velo range. We are bringing a premium-priced mini hex at an optimum lower level -- lower nicotine level. Shift Mini will help consumers switch to MO by delivering a first user experience that is smoother and more refined with gentler nicotine delivery and improved comfort of a thinner pouch. The pilot for Shift Mini is planned for April next year in Switzerland.

In the U.S., we are expanding our range with the new Velo Max offer as we speak. This elevated range boasts higher moisture levels, tobacco-derived nicotine, a larger pouch and high nicotine strength SKUs. And in Sweden, our heartland, we have established an innovation ecosystem that we call Velo Wrks. This is a space where we can experiment rapidly with new ideas co-creating with our most experienced consumers. The first Velo Wrks drop features a dual can, 1 can, 2 flavor experiences, making flavor discovery more convenient and more exciting. Through our product portfolio and strong innovation pipeline, Velo keeps moving the category ahead and keeps fueling our growth.

The third pillar of the MO growth strategy brings it all together in how we prioritize our investments as we deploy this wide-ranging portfolio. First off, we set rigorous guardrails. Our portfolio choices and investment principles are specific depending on market maturity from category entry markets to evolving markets to established markets. These guardrails include both consumer tipping points such as incidence as well as commercial and operational KPIs, such as distribution levels and volume. Once the selected Velo proposition enters the market, the operational growth model, a flywheel concept is set in motion. This seamless ecosystem amplifies the discoverability of the brand and the offer with effective reach. It maximizes accessibility in terms of channel availability and ease of purchase.

And finally, it accompanies our consumers in their switching journey from trial to adoption into brand retention. This includes portfolio and pricing choices as well. As you can see, this integrated ecosystem creates a self-reinforcing flywheel of insight, engagement and growth momentum. It is powered by a combination of our strong traditional capabilities, for example, at retail and category-leading commercial and consumer engagement capabilities. It's underpinned by a connected data foundation and scaled through digital and AI.

Bringing all of this together, MO truly is a generational opportunity, and we are geared up to deliver its full potential. Our ambition is building from a strong and proven foundation. In Velo, we are creating an iconic brand, synonymous with the category and already a leader. We are shaping a superior product portfolio around the consumer adoption journey, and we're building a consumer moment led innovation pipeline that we are deploying with rigor and momentum. We have over 10 years of industry-leading nicotine science and R&D capabilities, amplified in our strategic partnerships, for example, with BYD.

This has already yielded the highest number of patent families in the MO industry. And BAT's global distribution power and scale complemented with our growing e-retail and marketplace ecosystem will be our growth multiplier. With Velo, we are set up to deliver the first pillar of our NC strategy, and that is accelerated growth on a global scale. We are poised to grow the MO category and outperform that growth with Velo, delivering an estimated GBP 4.3 billion in BAT revenue by 2030.

Now let me switch to the other 2 categories in our NC portfolio and enter the more established world of the NC inhalation categories. The combined category of Vapour and Heated Products is the counterpart to the Modern Oral consumption of nicotine. First, NC inhalation is the initial stage for almost 80% of smokers who transition into Smokeless alternatives. Second, the NC inhalation product experience is largely complementary to MO in terms of poly usage and usage occasions. In fact, only 10% of MO users today rely on MO alone. So based on these consumer choice dynamics, NC inhalation is innately relevant to a Smokeless transformation and to our strategy.

So let's have a closer look. Vapour and Heated Products have been the genesis and engines on which the Smokeless industry has been built. The combined category represents a truly sizable and valuable business of GBP 13 billion revenue in 2025, serving more than 100 million users worldwide. But the industry is concentrated. 80% of each category's value is generated in 10 markets that are mostly mutually exclusive. Vapour is showing possible future upside in volume by unlocking contestable space through improved enforcement, especially in the U.S., and David will expand on this later, but also in value by further opening up the premium segment opportunity.

HP, on the other hand, is showing maturation with incidence growth rates halved over the past 3 years, and the affordability segment is expected to grow significantly in the coming years. These consumer and category trends are leading us to carve out a clear role for NC inhalation in our diversified portfolio strategy. Vapour and HP will deliver sustainable financial returns, benefiting from a selective and value-centric approach.

Let me take you through what that means, starting with Vuse. Vapour is the largest category by consumer base and features the most predominant NC poly usage. This reinforces the role of Vapour across the wider Smokeless ecosystem. In this context, we have focused 80% of our investment on 10 markets where the return potential is the strongest. We are putting our efforts behind our targeted product and innovation portfolio, driving rechargeable closed system, RCS, premiumization agenda. And this is already yielding the intended results. Today, at 44.1%, Vuse is the largest brand with clear leadership in value share terms. Within our top 6 markets, Vuse is materially ahead of the nearest competitors.

The economics have continued to improve as well. Vuse has yielded revenue of GBP 1.5 billion in 2025. In the last 2 years, it has registered a gross margin improvement of 7 percentage points and a category contribution to revenue improvement of 10 percentage points. Our selective play in the Vapour category outside of the U.S. is showing the returns we are aiming for, and we will further amplify this momentum. Let me show you how. Fundamental to our Vapour strategy is our selectively built Vuse portfolio. Vapour consumers value a superior flavor experience, a frictionless device, intuitive personalization and important in the category, a responsible and trustworthy brand.

Vuse aims to respond to those consumer needs across 3 platforms. First, there is Vuse Ultra, our premium category pioneer. It delivers a connected and personalized ecosystem combined with elevated flavor pods and a sleek design. Vuse Pro One is our most intuitive RCS with a boost mode for flavor control and simple personalization. And Vuse GO serves single-use occasions. Our strategic emphasis clearly is on the rechargeable higher-quality platforms, Vuse Ultra and Vuse Pro One. So let's talk a little more about Vuse Ultra. We have clear insight that the Vapour segment holds untapped demand for a premium priced, high-performing modern proposition with an elevated identity. And this to set discerning Vapour users apart.

Purposely designed for this specific segment, Vuse Ultra was launched less than 1 year ago and is showing great momentum. Ultra already contributes 15% of the revenue in the key markets. It uplifts Vuse equity in premium and trusted inventory. And the source of business exceeded our expectations. 30% of Ultra users are smokers entering the NC arena. In markets where both Ultra and HP are available, we even see inflow from HP consumers, but more about that later.

So in just a year's time, we are achieving sizable value share within RCS across all launch markets, including Germany, France, Switzerland and Canada at 8.2%. And -- so you can see, Vuse Ultra does exactly what we intended it to do. It elevates the category and the brand. It draws from both adult vapor and combustible consumers. And it supports value growth. To amplify further the apparent success of Vuse Ultra, we are now elevating the sensory side of premiumization to yet another level. In Vuse Essence, we are leveraging the ceramic heater technology of Ultra with a proprietary flavor extraction technology, this to create a superior taste experience. And once again, we are choiceful in where we invest in our efforts. We are focusing on 2 flavor territories only: The true tobacco taste experience to further increase the appeal with smokers; and the true Mint experience to maximize appeal among existing vapor users and [ NC poly-users ]. This month, these new flavors made from real plant extracts will be available in 3 key markets.

The second major innovation territory is flavor modulation. This innovation draws on the insight that up to 38% of vapor consumers actively experiment with several flavors across different vaping moments throughout their day. Our new Vuse Pro Mix is built around the ability to switch between or mix 2 distinct flavors on the go with a fast charging, intuitive modern device. Winning modulation moments further unlocks premium differentiation and allow Vuse to increasingly drive personalization and an interactive vapor experience. Vuse Pro Mix will reach the first pilot markets next January. But Vuse leadership is not just an innovation or product story. Success in vapor really requires a meaningful brand that consumers trust. We are launching a new brand platform, Unwind Like You Mean It. This campaign taps into the growing consumer needs for purposeful downtime, a natural consumption moment for vapor. At the same time, we continue to build trust through our always-on Vapor Done Right campaign.

Vuse educates consumers on the science, the research and rigorous manufacturing standards behind our -- our innovations drive trial, resonant product experiences and brand equity drive consumer retention. This combination of products and brand leadership positions Vuse to sustainably build on its category leadership.

So to summarize the vapor story. Vuse is the global leader in the category with the largest consumer and poly usage pool. The economics are good and improving, and the portfolio is becoming more premium. Our innovation efforts are focused on scalable consumer opportunities and deployed and supported in selected high-value markets. So we have the brands, the portfolio and the innovation agenda to maximize value deliveries from the vapor category.

Now let's turn to the heated products category. This is the largest in terms of revenue pool. As I outlined earlier, the HP category is maturing and its growth is slowing down. The affordability segment is estimated to grow and HP consumers are increasingly poly-using within NCs. As per our posture in vapor, we have chosen to focus our investment and efforts where it counts the most. 80% of our investment is allocated to the top 10 value markets that are mostly complementary to our vapor footprint. We aim to hold our leadership position in the affordability segment. And we have selectively entered the premium segment to extract additional value. So how has this strategy landed so far.

glo today is nearly a GBP 1 billion brand in revenue. This is largely concentrated in our traditional stronghold, the glo Hyper affordability platform. We continue to lead in this highly competitive segment with 50% volume share and more than 10 million glo Hyper consumers. We have also now made our entry into the premium segment in the second half of last year with glo Hilo. glo Hilo has made a positive start and has already reached more than 2% premium share in the top 3 markets, up to 8.3% in Poland. Now that is quite a remarkable achievement in a very established premium segment, led by a strong leader brand. We are choiceful in our investment and purposeful in our portfolio to drive scale and unlock value. And that is starting to show up in the economics. glo gross margin has improved by 10 percentage points in the last 2 years.

Let me take you behind the scenes of how we drive our value maximization in HP further. As far as devices go, on the one side, we have glo Hyper, a competitive proposition to lead the affordability segment, securing our scale and revenue. On the other hand, we have glo Hilo a differentiated premium offer designed to maximize value by attracting the most discerning HP users who are open to a new experience. Underpinning both platforms, it's a range of consumables, which is a true revenue engine of this category. Our consumable ranges deliver to 2 objectives: First, we have the differentiated range, and that's for consumers to discover glo. We have built a strong capability in delivering a unique flavor portfolio. Often locally inspired such as the Japanese Sakura range, those outperformed the regular range by up to 2x in share. Secondly, there's our competitive glo core range. within the established territories. This is to ensure we deliver everyday superior product experiences and retain our consumers.

100% of our glo Hilo consumable portfolio is now evaluated at par or superior against the closest competitor. And we never stand still we have innovated an uplift to both the Hilo and Hyper platforms informed by consumer learning and technological advancement.

Let's start with our largest platform, glo Hyper. We are uplifting the game in the affordability segment with the new Hyper Pro+, which brings new consumer benefits such as a quick start with auto activation, a 5-minute session length and connectivity. We also ensured improved hygiene and an EU-compliant replaceable battery. Consumers have rated Hyper Pro+ as winning versus our competitor in critical areas such as ramp-up speeds, immediacy and taste liking. We are rolling out this upgraded technology across our hypermarkets as we speak.

When it comes to glo Hilo, we haven't been sitting still either. Hilo 2 is on its way. The new Hilo 2 offers a choice of switch mode. That delivers to either a smoother HP like experience or a more cigarette-like boost. For best sensory fit to consumer preferences and moments. In addition to the switch mode, we combined our 5 second ramp-up with auto start, and added enhanced connectivity for further personalization. Hilo 2 comes with an EU compliant replaceable battery as well. Once again, consumer research has confirmed the superiority of Hilo 2 versus the key competitor across critical device and sensory measures.

glo Hilo is built to make further inroads into the premium segment and will be launched in Q4 of this year. So in glo, we have 2 device platforms serving 2 different consumer segments, both completed by a competitive and differentiated range of consumables. Now equally important, we have understood the criticality of bringing further meaning to the glo brand in a way that supersedes the world of products and devices. The new glo expression, Feel your glo, elevates the brand for its authentic positive perspective, an uplifting and radiating brand message. Feel your glo will reach the market in the first half of next year. It will drive disciplined brand consistency, recognition that is truly distinctive in this category and meaningful across the glo ecosystem.

To summarize the glo story, we have a focused footprint and a clear plan to continue winning in affordability. Our premiumization journey has started and will continue. The financial returns are improving. And so we have the brands, the portfolio and the commercial focus to maximize value delivery from the HP category. But there is one more thing that I want to share with you. As a final chapter, I want to talk to you about a fast emerging trend across the entry inhalation categories. Tadeu referred to this in his opening. Vapor and HP users are becoming much less entrenched in their respective categories. Already, 35% of HP users and 22% of vape consumers combined multiple categories, and this to fulfill their usage needs. In addition, this point usage trend is the only growing trend with solid usage and dual usage with combustibles, is a year-on-year decline. The motivation for this poly usage is that consumers find the benefits of HP and vapor, highly complementary. They value the authentic taste of HP, but also the ease and convenience of use of vapor.

Combined use of both also enables a wider access to different demand moments throughout the day. As a result, as the new inhalation categories develop, consumers are increasingly driven by the sensory and easy-to-use aspects of the experience rather than by the technology itself. And this is already evident in the market. In our Vuse Ultra data in Germany, 44% of ultra trialists are HP competitor brand users, driven by everyday convenience and the complementarity in usage moments. Empowered by these unique insights, we challenged ourselves with the question. What is the authentic taste satisfaction of heated products meets the ritual, convenience and simplicity of vapor. What if we can deliver the best of both worlds in one platform. Through our agile R&D capabilities and leveraging our partnerships, we are answering that question.

Today, we have a few proof of concepts of disruptive propositions already in the pipeline, one of which I can share with you now. Let me introduce glo Infuse, a breakthrough innovation that reframes how we deliver an authentic tobacco experience. It was developed with a specific brief to combine the benefits of HP and vapor within the tobacco space. The authentic tobacco taste in glo Infuse is delivered through our proprietary flavor extraction technology applied to real tobacco leaves. This is truly a first of its kind. We combine this tobacco extract with a modern intuitive device anchored in advanced vapor technology. glo Infuse has been live as a test market in Zaragoza, Spain since June this year.

As I mentioned, this is a proof of concept so we can learn in the real world. And our first findings are very encouraging to say the least, and also surprising. Based on the Zaragoza test market and quantitative research in Germany, not only do we see smokers welcome the combined experience of great taste and ease of use. We also see high levels of interest among vapor and HP users. They make up over 40% of the source of business. Overall, consumers recognize glo Infuse as innovative and disruptive. This solidifies our confidence in this and other innovations in the pipeline. Consumers are set to reframe the anti inhalation category, and we will actively pursue this convergence opportunity.

In summary, I would like to offer you 5 takeouts. BAT is shaping a diversified NC portfolio strategy. It is focused on growth and is diversified for robust and durable financial returns. Modern oral is the focal point of our growth strategy with Velo as the fastest-growing brand in the fastest-growing category. We will unlock category full potential while building on our leadership to expedite our growth. Vuse and glo will deliver sustainable revenue growth and margin expansion. With focused investment meaningful innovation and strong brand equity, we will deliver sustainable quality growth in these combined categories. The NC inhalation category itself will be refrained by the evolving consumer dynamics. glo Infuse is our first promising proof of concepts, and we will further pursue this opportunity. And all of the above is anchored in a consumer-led growth strategy and a consumer-centric execution growth model.

So as I return to where we started, our 2030 ambition for the new categories remains solid. It is to grow NC revenue by mid-teens to deliver at least 30% NC contribution margin and to reach 50 million smokeless consumers. We will drive the sustainability growth of our smokeless business and deliver our Better Tomorrow agenda. And today, I have shown you how we will achieve this ambition.

Before I hand over to James, I have an invitation, I look forward to welcoming you in the breakout sessions where you will see our latest innovations, meet the teams, bringing them to life, and experience firsthand the strength of BAT's innovation engine. So let's conclude with one more look at Velo, Vuse and glo. Thank you for your time today.

Well, good morning. I'm James Barrett, Director of Business Development, and I have been with BAT for over 30 years now, mostly in finance roles. But more recently, as part of my portfolio, looking after our expansion into Beyond Nicotine. Now many of my colleagues have talked about BAT's journey to 2030. I am going to walk you through our plans for Beyond Nicotine through to 2035. Now BAT first mentioned exploration into Beyond Nicotine in 2021. And and it's a reasonable question to ask exactly what the group has been doing in that period. Much of it is exploration and learning, recognizing that it is entirely possible for a large company to become overly enthusiastic, overestimate its capabilities and deploy capital and resource in a haphazard fashion to little benefit. We were determined not to be that company.

So we have used this time to define where we believe BAT can genuinely compete, test propositions in market and begin strengthening the muscles that are required from those that are different to the nicotine business. So over the course of the next 20 minutes, I will unpack the nature of consumer demand in this space, explain why BAT is positioned to compete, update you on the progress that we have made so far, and give you a flavor of where we will head next. Finally, I will offer a short update on how the group is approaching the cannabis market as the category continues to shift toward legal and regulated markets.

I'll start with what we call well-being and stimulation and touch upon cannabis later in the presentation. We use well-being and stimulation to describe a broad and rapidly evolving set of consumer products designed to deliver functional benefit to consumers. In the past, there was caffeine in itself a significant industry. But today, we see the emergence of more multifaceted propositions catering towards multiple functional needs within the lives of busy consumers. The active ingredients that underpin this functional intervention are mostly natural and blended in such a way that they have an entourage effect. But they confer benefits beyond simple functional intervention. It is not unusual to find W&S products delivering daily vitamins also another well-being benefit in addition to their core purpose.

The category as we define it, is growing at a sustained pace with a proliferation of formats, ingredients and delivery mechanisms, which are constantly changing. We expect industry size, again, as we define it, to reach approximately GBP 430 billion by 2030. When you delve into consumer motivations, you find a broad spectrum of need states. So the W&S consumer is looking for products that help them cope with the stresses of daily life, be it increased energy, better sleep, or simple enhancement of focus in a cluttered world, something I'm sure that we can all identify with. It is no coincidence that one of our most successful channels for Ryde is hotels.

Consumers seek physical interventions, gut health, hydration weight loss, but we are seeing motivation skewed towards fast tracking in the moment impacts. And this is the area of our primary focus, although not exclusively, there is always an element of overlap in these products. From the start, we stressed efficacy. Our aim is to build products that are backed by research and designed to make a real difference. We also recognize that the moment of consumption should be pleasurable via taste and flavor as well as being in convenient formats. Importantly, consumers do not simply buy a functional benefit or a format. They buy brands that reflect their lifestyle. Success depends on what the product does how the brand resonates and engages consumers and shows up consistently across omnichannel.

BAT is ultimately well positioned to compete. We have unparalleled global reach. And this category is emerging at different paces in different forms across the globe. Our supply chain and science capabilities are world-class and something I have been astounded by is our ability to pivot our knowledge into new sectors, leveraging our skills in procurement, scientific exploration and R&D in ways that we have never done before.

So we are learning how to innovate fast and effectively, applying group experience to avoid some of the pitfalls associated with early-stage products. Our Ryde formulations were developed entirely in-house, including the innovative packaging, and we work closely with our CMOs to refine a mass scale manufacturing. We use our consumer understanding and well-being and stimulation, which is rooted in consumption moments to inform where and how we target the product. And we are learning fast in new ways of marketing.

Finally, our inorganic capability via both M&A and our corporate venturing vehicle, BTV, as well as our financial capacity allow us to create a pipeline for inorganic expansion, which is presently small scale and future focus but as we learn to scale accordingly with our capabilities. Our advantage is not that we already have every capability required to win. It is that we have a combination of transferable strengths financial headroom and multiple routes to close the gaps.

Well-being and simulation consumers are repeatedly seeking how to manage how they feel and function with the preparing focusing, sustaining, recovering, socializing or unwinding. Our understanding of these consumers and their needs allows us to extend into a broader range of solutions, combining different functional actives with the formats and experiences best suited to each moment, all of which brings us to what we are actually doing.

So our vanguard product is Ryde. We first launched Ryde on a pilot basis in 2023, not so much to take the world by storm but to understand what works and what does not work in what BAT is an entirely new category, and we have learned much. For those of you who are familiar with the product, Ryde is a shot-based format that is designed to rapidly bring consumer benefit through functional intervention, including energy, focus and sleep and is now available in 5 variants. The products are grounded in science combining ingredients with established evidence of efficacy and stacks designed to deliver a noticeable functional benefit to consumers.

Ryde is now present in 3 markets. And we know that we have created a successful product with increasing levels of trial, high repeat rates above 50% in certain of our key focus regions and strong consumer feedback especially on efficacy and credibility. We sell via an omnichannel model with increasing levels of D2C capability and a growing level of physical distribution. Our existing footprint gives us a head start, but the timing and phasing of rollout has to be carefully balanced against the life cycle of the product. It is not simply a case of putting the product across our existing estate.

In 2026, we completed the acquisition of our first BTV graduate Moment. in which we first invested in 2021. Moment is an adaptogens-led full-size beverage and is strong online with a deep and loyal female skewed consumer base. Moment brings capabilities to Ryde and vice versa, allowing us to expand both products via new routes to consumers, leveraging our future strengths. And I couldn't be happier with where we are barely 3 years into launch journey. Together, Ryde and Moment have generated more than $45 million in cumulative net revenue since launch and growth rates are approaching 65% year-on-year. And as can be seen, the group is developing new ways of reaching consumers that differ markedly from what we are used to in the nicotine space. Ryde and Moment are built for a combination of social and digital engagement, e-commerce and physical availability. That requires a different approach versus the nicotine business. Faster content creation, direct consumer feedback and continuous optimization of online acquisition and retention as well as channel-specific execution.

So we've made a promising start, but that is not the limit of our ambitions. As we learn and scale, we will continue to expand and grow our portfolio in a measured and sensible manner. We will continue to make inorganic moves, both small scale via venturing but also potentially via bolt-on M&A, allowing us to enter new markets, accelerate capability building, provide access to assets that would either be slower or less effective to create internally. We would also seek to acquire exciting brands or formats where they fit with our existing estate. At each point of this journey, we will continue to be choiceful in how we invest, balancing the growth of the area with wider group priorities.

One area that we have seen develop in recent years is the growth of pouch based well-being simulation solutions. And it is not lost on us that the pouches remain one of our greatest strengths within the core business. The challenge is that many of these pouches simply do not work as the active ingredients are not delivered effectively and hence, fail the consumer efficacy test. Again, using our science and R&D expertise, we have developed a proposition that does work and is now in the very final stages of testing. This is an example of where our superior innovation delivery platforms provide rapid development. The Ryde pouch was created entirely in-house over a relatively short period to address an emerging consumer need in a manner that delivers to that demand. We know how to make pouches work. We know how to deliver active ingredients.

The pouch format brings convenience to the nootropic space, and it fits occasions where a drink or a powder or an edible product is less practical, including productivity, physical activity and other hands-free moments. We are exploring a pilot in this format initially digitally and then followed by a phased retail rollout alongside our shots, providing consumer choice and a solution that actually works.

Finally, a comment on our cannabis investments. Now the cannabis plant holds over 100 separate active compounds, many of which are poor research for efficacy or effect. It is also on a nonlinear but growing pathway to legalization and regulation in many jurisdictions. Cannabis is fully legal in Canada and increasingly legal for medical purposes outside of North America as the benefits surrounding the treatment of pain, sleep and other therapeutic areas become more apparent. We're also seeing a definite shift away from traditional cannabis consumption formats, and we expect this shift to continue of existing cannabis consumers as well as new consumers increasingly adopt these formats.

For 5 years now, BAT has assembled an ecosystem of investments that provide a foothold in the cannabis space, augmented by collaborations in research and development that seek to create new consumption methods as well as more refined product types. The recent merger of Organigram with Sanity Group creates a balanced recreational in Canada and medicinal player in the market. With the production facilities of Organigram, augmenting the medicinal growth of Sanity, particularly in Central Europe. Across these investments, we cover the range of use cases from purely legal recreational, again, in Canada right through to pharmaceutical exploration via our investment in DeFloria.

This is consistent with our belief that the cannabis world changes at pace. And if we are ultimately to be successful, we need to keep all bases covered. Cannabis is several years away from being a meaningful contributor to BAT's story. But in a similar way to well-being and stimulation, we invest with care and humility, learning and building as we go, leveraging on the group's strengths where they are relevant and acquiring and developing new capabilities where we need them.

So, in conclusion, BAT is moving away from -- moving from exploration to disciplined execution in Beyond Nicotine, focusing investment where it has a genuine right to win, and where the opportunity can become material over time. Well-being and simulation is emerging as a credible midterm growth engine, tapping into growing consumer demands for functional benefits including focus, relaxation and stimulation. Ryde and Moment provides the first tangible proof points, combining science-backed propositions with developing brand, digital and commercial capabilities. These brands are only the start in play. The foundation strength in new formats, flavors and variants, including functional pouches, can extend the opportunity set, selective bolt-on M&As can further accelerate capability, building and scale.

Cannabis remains a compelling longer-term opportunity with Beyond Nicotine. It is already a large and growing category and its ongoing transition from illicit use towards legal and regulated markets creates a clear space for BAT to build optionality with discipline.

And I will now hand back to Victoria, ahead of our morning Q&A session.

Thank you, James. This morning, we have heard about some of the capabilities, innovations, brands and technology that are driving BAT's transformation. It is now time for our first Q&A session of the day to give you an opportunity to ask questions about the presentations you heard this morning. There will be another opportunity for Q&A later on today to cover this afternoon's content.

There are roving microphones within the room. So if you want to ask a question, please raise your hand and someone will bring a microphone to you. Please, may we request that you give your name and institution before asking a question and ask one question at a time, please. May I now welcome back on stage our morning presenters.

Who would like to go first? Yes, there at the front.

I'm Anthony, and I'm a shareholder of BAT. And I'm exhilarated to learn that 2 years ago, you're talking about managing combustible value. Now we are talking about winning in combustible. Yet I see a modest improvement in the guidance from 0% to 2% revenue increase for the growth algorithm to 1% to 2% increase in the growth algorithm for revenue.

So I want to know, what leads you to this humble improvement in your guidance? And how do you cascade down your vision to local execution to make sure that your vision gets executed? And what do you think would be the reasonable volume share improvement in the key markets. Especially, you mentioned the 20 markets, which accounts for 80% of your revenue?

Emma, I think that's for you.

Thank you for the question, Anthony. So as you rightly pointed out, in the 2024 Capital Markets Day, perhaps a slightly different positioning on how we were talking about combustibles. We're very clearly now understanding the role that combustibles plays within our longer-term strategy, and it's here to stay with us. And the piece that I talked about this morning around contestability is what's also driving our focus around winning versus extracting value. So this opportunity that we see within key consumer spaces is very much about how we win that space and as you talk about how we gain share in that space.

As we've moved the algorithm from the 0 to 2 to 1 to 2, I think it shows our improvement in this space, and we need to do that consistently, and we need to be able to deliver that consistency with the strategy that we have. We're certainly seeing that where we've put targeted investment in place. As I talked about Germany and Japan as very clear examples, that investment is paying off. And we're very clear that we need to do this in a surgical way across those key markets.

So winning in combustibles is about making sure that we don't go high and wide everywhere on everything because that's not what we need to be doing. It's focusing on those key markets with the right spaces, with the right offers and executing with absolute excellence in everything that we do. So that's the formula. We do expect that we can compete. As I talked about, we absolutely have a position of strength with our combustibles business, and now we're going to leverage that.

In the middle there, Simon?

It's Simon Hales from Citi. I wanted just to ask a little bit more about the 2030 target, just so I'm clear. You talked about a number of things this morning. But when you think about the growth in New Categories and the mid-teens revenue target, are you assuming within that, that in Modern Oral, some of the markets where Modern Oral is not available do open up? I think you referenced 45% currently.

As regards to the U.S. Vapour, I'm sure we'll talk about this afternoon, but you highlighted today again that you expect 30% of the illicit revenue to come back into the legal market. What's giving you that confidence? And then with regards to the contribution margin hitting 30%, how do we think about that evolving? Is that going to be a linear development from here, more back-end loaded? Just help us sort of think about the modeling of that.

Yes. Okay. What is behind the mid-teens is basically our assumptions that, first of all, the biggest driver will be Modern Oral. As you saw there, we expect the industry to triple. So it's a CAGR from GBP 4 billion to GBP 11 billion revenue by 2030. This is a CAGR of 23%. We expect to outperform that with Velo at close to 30%. So that's what is behind the numbers and reaching the GBP 4.3 billion that we presented here.

With Vapour, the biggest source of growth will come from the U.S. Our assumption is that there is a potential of 30% reduction in terms of illegality. And this is based on what we are already observing from the market now. We clearly see a step-up in enforcement mainly come from States. Today, 48% of the volume Vapour in the U.S. are sold in states that have passed some sort of legislation.

And when you deep dive into the performance of the legal Vapour category within those states and vis-a-vis outside those states, you clearly see the trend is completely different. So -- and this is giving some reassurance for us. Obviously, the instance of the FDA from May of this year to not use that discretion not to enforce in products that are under scientific review and the fact that now we are able to launch on a responsible manner, flavors in the convenience stores will help to be a mitigating factor in terms of the daily guide. That's our expectation that with that, we can recover some of the space that is today occupied by illegal irresponsible players. And these make up the 30% by 2030.

And then on top of that, we are seeing us progressing on the category contribution. We were 0 back in 2023. We finished the half year results with 14% of category contribution. It's -- obviously, it's not necessarily a linear trajectory. It, of course, depends on unlocking some markets. So we are not expecting necessarily to see some of these major markets being unlocked. This would be a plus, if you want. So the likes of Brazil, Turkey, for example, is not in our base assumption. But obviously, if one of them unlock, we have to invest more in those markets. Hence, you shouldn't expect a linear progression.

We spoke about the inhalation category, the fact that we expect to have reached the peak of loss in HP this year. From next year onwards, we start seeing some reduction in loss in HP. It's also supportive of the direction of travel. And so I think that is a combination of all that.

So to summarize, it's basically driver of Modern Oral, which, if anything, is a very, very healthy category contribution per se. And the driver behind U.S., that is, again, a healthier category contribution. The fact that we are taking a more, I would say, thoughtful and measured approach on the whole inhalation space focused not just on the top line, but also bottom line, that will be supportive. And the plus of that will be if we have some unlock of these big markets, let's say.

Richard, over there.

Richard Felton from Goldman Sachs. I'd like to follow up on the growth drivers for Modern Oral. And in particular, you mentioned some numbers on increasing incidence. I think you spoke about 3.7% in 2025, increasing to close to 6% in 2030.

I'd be really interested to hear a bit more detail about how you arrive at those numbers. What could cause surprise on the upside or the downside? And basically anything to sort of frame that opportunity?

Anniek, do you want to start, and maybe Tadeu can continue.

Yes. So basically, as I think I explained, we really look at markets in 3 different ways. They're the entry markets and the evolving and the maturing. And Sweden, of course, is the main example of a matured market. And we look back on how that market developed.

Now we full well understand that lives in its own environment, but we do understand through that consumer journey, how and why consumers will take up Modern Oral, and that's really, really critical because taking it up is 80% of the category growth. And that is the incidence, right, when consumers come in. And so through Julian's side, we really, really look in immediate learning and especially a lot of social media listening as well and what really drives consumers to take that on.

Now in one of the examples, what you saw was is that the social moment is very important. It's seeing other people use it. And that's because people don't quite know what it is and what to do with it. So when you see someone else open a can, take it, put it in your mouth, keep it there for 20 minutes or however long you do. So we understand not just why consumers would use it, but how they get to know it and how they actually start to experiment because that's very often what it is.

So learning from the few markets that have already really grown to proper, I would say, incidence as well as how that pans out in different environments. That's also where our local insight is really important. So if I take a market like Japan, we really are starting to learn what it means there, right, to publicly take something, put it in your mouth, take it out of your mouth later, it's not so obvious. But we're learning that very much at pace, and we have Julian and his team to really thank for that. So it's really based on consumer insight, and the numbers are based on the learnings so far worldwide and contrasting and comparing that.

Tadeu, do you want to add something?

Yes. Just to complement what Anniek is saying. What we have seen is that when the market reached 1% incidence in Modern Oral with a 50% awareness of the product, the growth starts coming exponentially. We saw that in a number of examples.

U.K. is a good example. When we launched the product was 4 years ago, the incidence was basically 0, no oral tradition. And when you saw this threshold of 1% starts growing really fast. And today, it's around 4% incidence already in the U.K.

And obviously, this is not just the driver of growth. It's also the everyday consumption. Every daily consumption, for example, in the U.S. before we launched Velo Plus was around 2.7 pouch. Today, it's around 4.3. So it's really growing. And as you offer a better product, you expect this every daily consumption to increase as well. And when you separate that between occasional users, more frequent users, even further for those that are using more frequently.

So all the indications are attached to the incidence plus every daily consumption. And this exponential, the impact of any single number of those, 1% incidence growing on an aggregated base. 1 more pouch on aggregated base, it's exponential, the impact that we have down the line.

Just one thing on daily average consumption. The thing is today, the big majority of Modern Oral users, they are poly-using, 90%. They're using Modern Oral and another category. But the solo users are growing, and they will continue to grow in the future. And we know that solo users are consuming more than poly users. As the number of solo usage increase, the daily average consumption will grow as well.

Owen, in the middle.

Owen Bennett, U.S. Bancorp, BTIG. I just wanted to comment to your comments on the value segment growing in Heated and what you're assuming in terms of how big that will get to by 2030? And then also alongside your hope to reduce category losses from 2027 onwards, and I'm assuming less than attractive economics in value in certain Heated markets where you perhaps don't have the scale. Can we assume that you perhaps exit more Heated markets into 2030?

Okay. Thank you, Owen. Well, what we are seeing is we are seeing some excise movements in big markets. So for example, Japan is a good example. We are going through this. We just have an announcement in Hungary as well with excise increasing in HP that is even higher than the ones that they are taking in cigarettes. So this all will put more pressure on affordability, and hence, the value side of the category, that has been very contested today. There's a lot of investment from different players in the value side. So I think that this, combined with the excise growth and hence, less affordability will naturally take this direction.

And obviously, we have a product there that is quite competitive, so with Hyper. And -- but we also believe that the value is still for the next few years is still predominantly come from premium, but not as concentrated as it is today. That is today, 80% of the value is there. So it will be more balanced, I would say, from the premium to the more value for money [ VA ], if you want.

In terms of my comments on loss, we had a very atypical year this year with the launch of Hilo. So we obviously will be leveraging that for the years to come. And also, like we said, we'll be approaching this whole inhalation space more selectively and not necessarily by category, but with the consumer more in mind. And what we are seeing is more and more poly users of HP, for example, using Vapour, consumers of HP using vapors.

And we have these fantastic products like Vuse Ultra, the new infusion product that we have just showcased today. So we're going to have more alternatives within inhalation. And the measure of success for us in inhalation will be within this Vapour/HP to grow top line and bottom line. So that's the way you should be measuring us in terms of success moving forward.

Any other questions? Damian?

Damian McNeela from Deutsche Bank. I've just got one question on the combustible business. I think the slide said that you sort of exited 12 markets over the last couple of years. If we're back here in a couple of years' time, what does the shape of the combustibles business look like? Are there likely to be more sort of markets to be exited from?

Emma or Tadeu?

Yes, I can take. Well, look, we have decided to be -- to approach the way the geographic exposure that we had at the same way that we approach SKUs. We are always trying to rationalize. And some of the markets that we exit were from sanctions reasons that we had to move out. Some others were conscious decision that was really not worth having the complexity in those markets because the return was not there.

We always try to address if there is potential for New Categories before we take decisions to exit markets. So in this case, we didn't see much potential for New Categories either, and was a way to simplify our portfolio. So I'm not saying that we don't exit anymore. That's because we keep reviewing the footprint.

I think that we are in a good space today. I'm not seeing major -- necessarily major areas of exit moving forward. But I think there is a disciplined approach that from time to time, you review your geographic exposure, you see you measured the return of your investment vis-a-vis the risks that you incur in being in that particular market, the potential of growth being combustible outside combustible and make decisions accordingly. But there is no necessarily a plan to exit many markets.

Anyone else? Faham?

Faham Baig from UBS. You sound more confident on New Categories trajectory supported by innovations, data, the ecosystem, et cetera. The question is, as the contribution from New Categories grows, both in terms of revenues and profitability, when you think about the midterm growth trajectory, is it possible to see BAT deliver the upper end of the targets by 2030 from currently being at the lower end this year?

Yes. Look, so it's -- we are very pleased to go back to the midterm algorithm. And like you point out, we see a lot of opportunities in the categories that we have today. We are very, very pleased with the progress we are making in Modern Oral in general. We are particularly pleased with the progress we are making in New Categories in the U.S. All those markets obviously require investments. So I'm not really in a hurry to get to the end of the algorithm.

I think that will be a missed opportunity for me, to be honest, to go now and start talking about the high end of the algorithm when we have all these massive opportunities ahead of us. So eventually, when you get to the end of this period of time, when you consolidate some more of these positions, you can consider this possibility at the moment that we have all these investments that need to be done.

And by the way, it's not just in New Categories. There is also Combustibles, there is a lot of the value there in terms of the value pool. We are strengthening our position in those markets. Clearly, there is change in terms of the consumer dynamics in some of those markets because we see a lot of the cost of living crisis everywhere, the consumers are down-trading in a number of those markets. We see some governments taking excise hikes, which put more pressure as well. So we have to prepare our portfolio to that reality, and we are doing exactly that.

We are here for the long run, not for the short term. The easiest thing for me would be to come here and talk about high end of the range in 2027. It would be the wrong thing to do, believe me, because what we need to say is -- to do is invest in the business. We have a fantastic opportunity ahead of us being in the U.S., being Modern Oral, being Combustible where we are strong in a number of key value pools. And we can do all that whilst delivering the algorithm, which is what is we promised 3 years ago and exactly what we'll be doing.

Okay. Thank you very much. I'm afraid we're out of time for this morning Q&A, but there will be another Q&A session this afternoon. And obviously, the BAT and Reynolds team will be around all day at dinner to answer any further questions you have.

That now concludes the morning session. The webcast will be paused shortly for our lunch break, and we will restart at 2:20 p.m. Please join me in thanking our morning speakers for their participation.

[Break]

Good afternoon, everyone. I hope you enjoyed your lunch and the interactive exhibitions. It's a pleasure to be with you here in Winston-Salem. I think this is a fitting location because last year, Reynolds marked 150 years. That's a powerful reminder of the endurance of the industry and our capacity to change with it.

And I think you'll also have seen how deeply woven Reynolds is into this city and how far its influence reaches. That history, of course, brings us to the next chapter, creating a sustainable future through science, evidence, engagement, and ultimately, proportionate regulation. Our message is simple. We have the scale, the experience and the patience to help build the conditions for tobacco harm reduction to fulfill its full potential. Scale to connect science, brands, capabilities and markets across a genuinely global footprint. Experience built over decades developing products, generating evidence and engaging policymakers. And patience because lasting regulatory change is rarely linear. It requires credibility, consistency and the willingness to stay engaged. Those 3 strengths come together in the story you will hear today.

Science creates the evidence, communication builds the understanding, and advocacy helps translate that understanding into practical proportionate regulation. Regulations create the conditions for responsible innovation and for adult consumer switching. And those conditions support sustainable value generation, creating durable advantage for the business and stronger outcomes as well for society.

We spent more than a decade building our New Category brands and innovation portfolio. Today, that business is fast approaching GBP 4 billion. The search for reduced risk products, which is back to Reynolds Premier in 1988, a pioneering attempt to offer something different to smokers who chose not to quit nicotine.

And as we invest in the innovation pipeline, we also need to ensure the landscape in which our brands and innovations land is conducive to our business performance. That's the purpose of our sustainable future pillar, bringing science, corporate affairs, regulation and sustainability together. And that external landscape has never mattered more. And I would argue BAT has never been better equipped to navigate it.

Let me introduce our formula for success in the sustainable future pillar. Starting from the right, the desired outcome of our equation is evidence-based regulation. Acceptance of THR as a core element of tobacco control grounded in science and evidence can help secure that future. Danni, our Group Head of Scientific Affairs, will be joining me shortly to focus on science and the evidence in more detail.

Of course, that science and evidence cannot exist in a vacuum. Progress depends on effective engagement with policymakers and relevant stakeholders and clear communication that turns evidence into understanding. That's why we launched Omni, and we have pivoted to a digital-first communication model. Regulatory outcomes are a function of science and evidence amplified by engagement and communication.

So what does the sustainable future mean in practice? Imagine a world where it is not only permissible to market and sell our smokeless products, but where their growth and faster transformation are actively encouraged. That's our destination. That entails working on 2 vectors, belief shaping through science, evidence and advocacy and communication and engagement with public health authorities, scientists and policymakers to help shift their behavior.

The relevant behavior shift is in policymaking, the design and implementation of smart and proportionate regulation. That process is influenced by public health authorities, scientists, healthcare professionals, the media and NGOs. It is a complex decision-making web, but it can be informed by credible evidence and open engagement.

Our starting point, though, is not where we want it to be. Each year, we run a multi-country THR survey across our markets. We've just completed the third wave. Whilst there are strong signs of progress, it remains true that half of the policymakers surveyed and nearly 2/3 of all medical professionals erroneously conflate nicotine with cancer, and in so doing, reject the fundamental principles of THR. This must and will change.

Across BAT, our teams are clearer, better organized and more aligned than ever. Our approach is built on 4 clear priorities: first, turning scientific leadership into evidence and advocacy; second, being courageous and persuasive in our communication and engagement to accelerate the acceptance of THR; third, converting evidence, advocacy and communications reach into evidence-based regulatory and fiscal outcomes; fourth, protecting and strengthening our enterprise reputation across our other sustainability pillars.

Corporate affairs has transformed since I joined the Management Board in 2012, but its core challenge has not. Transformation and a multi-category portfolio have changed the opportunity, digital and social media have changed the operating environment, but the need to tell our story clearly, credibly and influentially remains.

Last year, we pressure tested our operating model to ensure that it's fit for purpose. Think of it, if you like, as a relay race, an ecosystem where transformation leads to portfolio, portfolio to science, science to evidence, evidence to policy and advocacy, all underpinning communication and engagement, with the outcome being the regulatory landscape in which we operate. And then we make sure that we measure. Measurement creates momentum by helping us learn, adapt and repeat what works.

I'd now like to focus on the science and evidence part of the formula. So please give a big warm welcome to Danni Tower, our Group Head of Scientific Affairs.

Thank you, Kingsley, and good afternoon to you all. It is fitting to discuss tobacco harm reduction here in the U.S.A., 25 years after the initial publication of the [indiscernible] Institute of Medicines Clearing the Smoke. Its principles for assessing the scientific base for tobacco harm reduction still shape our thinking and are reflected through BAT's formula for success.

Our formula is built on the belief that transformation depends on confidence from all stakeholders, confidence from policymakers and regulators, from public health authorities and healthcare professionals, who in turn can build confidence in consumers and wider society. That confidence begins with science, science that answers important questions, creates understanding and informs decisions.

Today, I want to illustrate how we utilize science and evidence to drive BAT's formula for success to accelerate responsible innovation, underpin tobacco harm reduction evidence and address misconceptions that continue to hinder progress. Because for tobacco harm reduction to reach its full potential, belief must rest on evidence.

At BAT, we use science as a differentiator to power both our quality growth and our sustainable future ambitions. This year marked 70 years of science and innovation at BAT. Over these past 7 decades, we have built world-class scientific expertise across multiple disciplines, supported by a global network of scientific and innovation centers. That capability is particularly powerful in both its depth and its breadth. It allows us to generate and analyze evidence at scale, rigorously assess our products and engage credibly on important public health questions. As BAT transforms, that capability becomes an increasingly valuable strategic asset because credibility is earned, not claimed. And in science, credibility is earned through rigorous evidence, peer review and a commitment to continuous learning.

Now at its core, tobacco harm reduction depends on innovative smokeless products that meet the highest standards. And that is why we apply rigorous scientific stewardship before and after product market launch, ensuring that products are continually assessed throughout their life cycle against demanding scientific and regulatory standards. For us, stewardship is a key differentiator of responsible manufacturers and a fundamental part of how we discharge our duty of care to consumers while supporting the long-term sustainability of our business.

When it comes to scientific research, at BAT, our ambition as scientists is to generate robust evidence that shapes decisions and advances public health. An oversimplified question that we are often asked is, how do you determine whether a product has a reduced risk profile compared with smoking. More than a decade ago now, we published a weight of evidence framework to answer it.

This scientific assessment framework examines 3 critical areas. First, product characterization through combustion, emissions and toxicology studies. Second, consumer exposure through use behavior, pharmacokinetics and clinical exposure studies. And third, potential population level impact through population health modeling and the monitoring of real-world outcomes over time. Together, these findings support an evidence-based conclusion about our product risk profile.

Applying this disciplined approach across our smokeless portfolio, we have concluded that for smokers completely switching to any of our 3 smokeless product categories has a lower risk profile than continued smoking. This extensive body of evidence, supported now in 2026 by more than 280 peer-reviewed scientific publications, became the foundation for Omni, which combines BAT's THR science with findings from world-class independent researchers around the world. And importantly, that evidence base continues to grow every year.

As we look ahead to our next chapter, we are exploring new ways in which we can transform how this and new science itself is conducted. Evidence generation has traditionally been slow and resource-intensive. However, today, digital and mobile technologies, advanced data analytics and AI-enabled simulation are creating opportunities to collect real-world data more effectively and generate insights more rapidly. BAT is building a more connected and digitally empowered scientific ecosystem to scale scientific understanding in new ways and to accelerate learning and evidence-based decisions.

Ultimately, no matter how sophisticated our science becomes, one question matters more than any other: Does tobacco harm reduction reduce smoking and improve population health? The Institute of Medicine set out the theory of tobacco harm reduction. Sweden provides compelling real-world evidence. And that's because Sweden, often referred to as the vanguard THR country, offers one of the clearest and longest-running examples of tobacco harm reduction at population level.

And Sweden is not alone. Across multiple markets, as you can see here, for example, New Zealand, the U.K. and Japan, we see a remarkably consistent pattern: correlation between smokeless product adoption and declines in cigarette volume consumption or smoking prevalence. The crossover points on these graphs mark important moments in each country's tobacco harm reduction journey. Different markets, different cultures, different regulatory environments, yet the direction of travel remains strikingly similar. The next question is whether these behavioral changes can translate into meaningful public health outcomes. Encouraging signals are emerging, especially in early adopter markets of Smokeless products. Sweden continues to attract attention because widespread adoption of Smokeless products and reduced smoking prevalence has been associated with a lower smoking-related disease burden than in many comparable markets. The chart on the left here shows Sweden recording Europe's lowest level of smoking-related cancer deaths based on World Health Organization data.

Epidemiological signals are also beginning to emerge elsewhere. The middle chart here shows independent academic research from Japan, which has reported reductions in acute coronary syndrome hospitalizations in areas with a higher prevalence of Smokeless products. Now epidemiology takes time, but these observations are important because they point beyond behavioral change to the possibility of improved health outcomes. And if tobacco harm reduction can ultimately be realized at global scale, the potential impact could be profound. On the right here, third-party modeling suggests that more than 100 million lives could potentially be saved from premature smoking-related deaths by 2060 if tobacco harm reduction approaches were widely adopted.

And yet, despite decades of scientific progress and a growing body of evidence, two fundamental misconceptions continue to shape policy debate. The first misconception is that nicotine is the primary cause of smoking-related disease. The factor that corrects it is on the left. The scientific evidence referenced, as you can see here, by trusted independent voices such as the National Health Service and the Royal College of Physicians in the U.K. tells us otherwise. While nicotine is the addictive component of cigarettes, most smoking-related harm comes from the hundreds of other chemicals generated by combustion.

The second misconception is that all nicotine products carry the same level of risk. Again, the global body of scientific and real-world evidence suggests otherwise. Why does correction of these misconceptions matter? Because THR and transformation depend upon informed policymaking. If policymakers cannot distinguish between products, proportionate regulation becomes more difficult. If regulators, health authorities and health care professionals cannot distinguish between products, opportunities to accelerate harm reduction may be lost.

And if policy and regulation doesn't help smokers distinguish between products, complete switching is less likely. Evidence must lead to understanding and understanding into action. And that is why science remains a strategic capability for BAT. The challenge is no longer only to generate evidence, but to ensure that it is understood and acted upon. And that's perhaps the most important point to leave with you today.

Science creates evidence and evidence creates understanding and understanding creates the conditions for change. If we want to build understanding, science is where change begins. Thank you.

And now back to Kingsley.

So thank you, Danni. I think Danni has shown how decades of science create critical capability and competitive advantage. Science is a keystone of our business today and tomorrow, and we remain committed to advancing it. And of course, we must be equally innovative and front-footed in communication and engagement within our formula for success.

Through our communication engagement, we focus on building understanding and shaping beliefs of THR. We believe it should underpin Smokeless regulatory policy worldwide. Regulators have a choice. Regulate through [ sound's ] THR thinking now based on the weight of evidence or wait for the likely 2-decade emergence of epidemiology. Acting now can change the course of public health forever. And that's why we launched Omni, our manifesto for change and mandate for action. Omni was never just a book, a publication or a website. It's a dynamic strategic communication chassis with thought-leading narratives and compelling evidence.

In the recent launch of Omni 2.0, a major upgrade, the R-squared or correlation between the stringency of tobacco control measures and smoking incidence was just 0.2. That is to say there is hardly a correlation at all. Recent history suggests, however, that when smart progressive regulation allows access to responsibly manufactured and marketed Smokeless alternatives, smoking rates fall faster as we've seen in the United States, Sweden, Canada and the U.K. Omni was launched at London Science Museum in September '24. Some of you were there. In less than 2 years, it has become the central platform through which we bring together science, evidence, advocacy and communication. Its strength is focus.

Rather than dispersing our effort, Omni channels our investment and energy through a single strategic proposition. And we've deployed the proposition in a multifaceted way. An internal AI toolkit, Ask Omni, gives 40,000 employees direct access to its content and Omni now facilitates leadership development and transformation training across the business. Today, it was clear and has been clear since day one. We needed to become much more front-footed in our corporate-affairs ambitions than we have. Omni has become the focal point for that ambition, creating a global corporate platform through which we can communicate science, build understanding and engage relevant stakeholders at scale. Its impact extends beyond both the physical and digital worlds. Through activation and stakeholder engagement in more than 20 markets, we have brought together policymakers, regulators, health care professionals, scientists and other influential THR voices.

External recognition followed, including PR Campaign of the Year at the Platinum PR Awards. But I think the most important measure of success is Omni has helped create a more modern, more visible and more influential voice in support of evidence-based THR. One of the more distinctive expressions of Omni has been The Smokeless Word podcast. The objective was simple: create a platform for long-form, credible and open conversation with relevant stakeholders in an increasingly fragmented media environment, that matters. The program brings together 4 broad groups of voices. First, BAT leaders who can explain our transformation. Second, recognized experts in science, public health and THR. Third, policymakers, regulators and political leaders who help shape the external environment. And fourth, leaders from the worlds of transformation, innovation and high performance.

Across nearly 30 episodes, guests have included former prime ministers, a former health minister, serving politicians, business leaders and respected media figures. The result, I think, is more than just a successful podcast. It's a communication platform that reflects the type of company BAT is becoming, more open, more engaged and more willing to engage confidently.

[ Fittingly ], the last episode is a very special podcast outing with Tadeu in the hot seat. I'd encourage you also to watch it. Omni and the Smokeless Word can do so much, but the external debate demands more targeted interventions. Our front-footed approach means addressing specific industry issues directly. That's why we launched single issue corporate campaigns, starting with Vapers deserve better and followed quickly by Think Progress, Think Pouch. These campaign solutions have a consistent creative refrain, and they work under the banner of Let's Go Smokeless. 6 further campaigns already with more to follow. The models give the regions and markets a toolkit tailored for their local needs because communication is not the end in itself. Communication builds understanding, understanding shapes belief and belief creates the conditions for better regulatory outcomes.

As I mentioned, we are rigorous about measurement because belief shaping only matters if it changes perceptions in the real world. That is why we run an annual study now spanning 21 international markets, tracking attitudes among nicotine users, health care professionals and policymakers. 3 years in, the data has become an invaluable guide to where progress is made, where misconceptions remain and where we should focus. We've just completed the third wave and the direction of travel is encouraging. Among nicotine users, perceptions of THR have improved steadily over the period. And if these trends continue, we believe they point towards the future in which THR enjoys broad and growing public support by 2035.

More encouraging is the progress we are seeing among the policymakers in their understanding and acceptance of Modern Oral. Through our engagement efforts enabled by Omni, policymakers have remained a priority stakeholder group for us. Acceptance of the THR potential of Modern Oral has increased by 14 percentage points over the last 2 years among policymakers in tobacco markets. We believe that matters because perceptions shape policy and policy shapes smokers' perceptions. Of course, it has to be said the picture is not uniformly positive. Perceptions continue to improve, albeit some misconceptions remain. Nicotine is still wrongly associated with specific smoking-related harms by many respondents, and the perceptions of Vapour, particularly remain sensitive to shifts in public and the media debate. That said, we remain encouraged by this progress, but the broader point is this. We are measuring what matters, allowing us to focus our resources on the stakeholders, markets and messages where we can have the greatest impact.

Looking ahead, we're also embracing the opportunities of leading-edge technology and AI. We are developing Omni Brain, a modular AI system powering the key stages of our operating model. OMNI SIGNAL, a real-time communication tracking tool, will combine external signals with our information, data and policy within a walled LLM to monitor and interpret what the world is saying to us and what we should say to the world. OMNI CONTENT, an engine for rapid real-time content development and deployment, will pick up from OMNI SIGNAL. And OMNI METRICS, a comprehensive measurement module, will measure the outputs and outcomes of our work. Together, these modules make Omni Brain a leading corporate affairs technology solution, increasing pace, efficiency, impact while shifting resources from repetitive tasks to more frontline engagement.

Finally, we are -- we return to the critical output in our formula, regulatory outcomes. Regulation will be a critical enabler of our success. In corporate affairs, marketing -- market importance doesn't always follow the commercial Pareto. Let me explain. At the FCTC's COP, for example, each member has one vote, making every nation relevant. Likewise, in Europe, every member state matters in directives such as the TED and TPD. Our aim remains the same, smartly regulated orderly marketplaces, level playing fields where responsible companies are encouraged to transform. For us, smart regulation is not a loose concept. Building on work which actually began during Australia's plain packaging debate, we developed a 10-step framework that now anchors a dedicated campaign. The objective is not to prescribe a particular outcome, but to encourage regulatory approaches that are evidence-based, proportionate and workable.

Of course, in the real world, this is sadly much easier to say than to do as has been proven by the ideological dogmatic regulation such as Australia, itself a poster child for precisely how not to tax and regulate the tobacco and nicotine market. The experience has shown that the most effectively -- effective regulatory frameworks tend to share a common set of characteristics. Our framework assesses those characteristics systematically. And with them consistently applied, there is a greater likelihood of achieving balanced and effective regulatory outcomes.

Turning very briefly to the FDA before David covers it in more detail, while we welcome the FDA enforcement discretion and communication from May this year, significant challenges do remain. The PMTA system has created prolonged uncertainty for responsible manufacturers while illicit products have continued to proliferate. Moreover, the FDA's approach matters well beyond the United States, given its influence on regulatory thinking around the world.

Turning from the FDA to Europe. Europe remains a highly significant supranational regulatory arena. Both TED and TPD remain active policy discussions with substantial regulatory activity ahead. Progress on TED proved challenging despite 6 compromise proposals under the Cypriot Presidency. Unanimous agreement among the 27 member states is yet to be achieved. Progress was made across categories, albeit 19 member states raised concerns with at least one aspect of TED or the other. On TPD, we are awaiting publication of the impact assessment and currently expect a draft of the TPD from the commission by around December. An intensive period of discussion and negotiation is likely to follow through 2027. We'll continue to advocate for regulation that is evidence-based, proportionate and importantly, enforceable.

Turning now to regulatory progress itself. Of 80 focus markets, as Tadeu said, at least 70 of them have one or more legally available new category. Furthermore, the real-world evidence of Sweden and near smoke-free status is based both on their oral tradition and the pro-THR stance. The U.S., New Zealand and the U.K. also provide evidence of transformation supported by enabling regulation. 9 markets have risk proportionate category regulation, probably the gold standard, if you like, the smart regulation. However, there have not been positive outcomes everywhere. Markets like Germany and France in Europe, Turkey, Australia and Brazil remain challenging. Regulatory change in these markets matters as does smarter, more durable regulation in existing Smokeless markets. We'll continue to work hard advocating for smarter regulation, which brings me to Modern Oral, a critical focus for us in corporate affairs.

In 2021, only a handful of markets have Modern Oral regulation. Since then, it has become a top priority. New market regulation has been introduced at the pace of 6 to 7 markets per year. Today, more than 30 countries have regulation and a further 7 with emerging regulation covering at least one aspect of the regulatory ecosystem. 16 of the EU's 27 member states now regulate the category. That's notable because that is a numerical majority of EU countries. The World Customs Organization has preserved differentiated customs coding for Modern Oral, a possible precursor to regulatory recognition. And finally, in the U.S., the FDA's progressive position has enabled a more level playing field and a more innovative Velo lineup. We are extremely clear about the focus required on Modern Oral, and it's not simply about regulation. It's about helping create the conditions for category sustainability, stakeholder confidence and long-term growth, helping the foundations for future value generation.

To conclude then, evidence-based regulatory and fiscal outcomes are essential to a sustainable future and long-term value delivery. Since 2023, under Tadeu's leadership, we have reinvested in scientific, corporate and regulatory-affairs capability. Today, we are in much better shape to navigate the external environment, positioned for the future with clear thinking on our operating model, the right leadership, a clear focus on science and evidence and a stronger, more innovative corporate communication capability.

You've heard a lot today about the science, the evidence and our communication coming together to shape the external world. It's undoubtedly a story of ambition, progress, and I think, in many ways, determination. This effort is about creating a sustainable future, a prominent pillar of our group strategy, and we are making progress, albeit as I've said, it's not always linear. We feel very confident about the future of transformation and our ambition of a Smokeless World, a world where transformation is not only permissible but encouraged. Just imagine that world, and please take a look at this video before I hand over to David. Thank you.

[Presentation]

Well, good afternoon, and it's good to be back with you today. This morning, I welcome you to Winston-Salem and shared some of the history that connects Reynolds to this city. This afternoon, I want to focus on the opportunity ahead, why the U.S. is one of the most attractive nicotine markets in the world and why Reynolds is well positioned to win. The U.S. opportunity is substantial, and it will be won by those equipped to lead through change. The pace of transformation continues to accelerate. Consumer preferences are changing. Regulation is evolving and value pools are shifting. We have the brands, the capabilities and the scale to lead through that change while continuing to deliver sustainable value.

As the cornerstone of BAT strategy, Reynolds plays a pivotal role in achieving a better tomorrow and growing tomorrow is how we deliver that purpose in the United States. Reynolds has a clear mandate to deliver a winning performance and turn the U.S. opportunity into sustained financial returns. In February of this year, we stated our multiyear investment of GBP 2.5 billion by 2030 to strengthen our capabilities, expand capacity and support long-term growth. This investment is expected to create more than 2,000 direct and indirect American jobs across Reynolds and our U.S. supply network. And that commitment is already translating into action. Over the past 2 years, we've invested more than $200 million in U.S. manufacturing, including increased production capacity for Velo Plus.

Our contribution also extends beyond our own operations. In 2025, Reynolds was the largest purchaser of U.S. tobacco leaf from American farmers. Growing tomorrow is ultimately about disciplined investment, strengthening Reynolds' competitive position, supporting the U.S. economy and delivering sustainable shareholder returns. At our 2024 Capital Markets Day, the U.S. outlook contains several significant uncertainties. Since then, we have successfully navigated a dynamic environment, positioning the U.S. business to deliver the algorithm. The cigarette category decline has moderated. Reynolds has returned to revenue and profit growth in Combustibles and Velo Plus has built momentum. We're also seeing greater attention at both federal and state levels of enforcement against illicit Vapour products, a positive development for Vuse, our leading Vapour brand.

Not every issue is resolved, and we remain disciplined in how we plan for regulatory and category risk. But the direction of travel has improved considerably. We have moved from managing significant uncertainty to pursuing a clearer set of opportunities. The central message is simple. The U.S. is the cornerstone of BAT's strategy. With more than 60 million adult nicotine consumers, it is already the largest nicotine revenue pool and continues to grow. Consumer behavior is becoming increasingly multi-category with approximately 65% of adult nicotine consumers interacting with or migrating towards New Categories. Against that backdrop, Reynolds brings a multi-category portfolio of leading brands, trade scale and proven commercial capabilities.

Today, we have the fastest-growing New Categories brands aligned to where the adult consumers are moving. And the underlying market data reinforces that opportunity. Total nicotine in the U.S. has grown since 2023, driven by expansion in Vapour and Oral. While combustible volumes continue to decline, the category's value pool remains substantial and resilient. At the same time, Vapour and Oral are creating incremental industry value and are expected to grow through 2030. Altogether, the U.S. represents an estimated GBP 42 billion nicotine revenue pool with a projected annual growth of 4.3% from '25 to 2030. Our objective is to capture growth where the market is expanding while continuing to deliver value in traditional categories.

And Reynolds' strength comes from a multi-category portfolio positioned to capture that growth. The U.S. new category -- the U.S. New Categories revenue pool is already significant at an estimated GBP 12 billion in 2025. It is supported by approximately 40 million adult consumers with high levels of interaction and migration across categories. Adult consumer momentum is building, and we estimate this revenue pool could reach GBP 17 billion to GBP 25 billion by 2030. This opportunity is becoming more accessible as the regulatory process evolves and state enforcement increases. Vuse is strengthening its leadership and Velo Plus is demonstrating that we can translate a strong global proposition into the U.S. market. The prize is meaningful, but our confidence is based on observable momentum, not simply market projections. While the size of the opportunity matters, what is most compelling is how well positioned we are to capture it.

Reynolds brings scale, strong trade coverage, commercial execution and operational rigor. BAT adds leading brands, a global science and R&D ecosystem and increasingly sophisticated digital capabilities. Together, these capabilities give us the ability to identify consumer shifts, develop winning products and execute at scale. This positions us to capture a significant share of the growing U.S. nicotine revenue pool by 2030. The transformation of the U.S. market is already well underway. Since 2017, the number of adult cigarette consumers has decreased by approximately 20 million. Over the same period, the data indicates that Vapour and Modern Oral have expanded significantly. The overall number of adult nicotine consumers has not grown. Instead, we are seeing greater migration to New Categories and more consumers using multiple formats.

Reynolds portfolio is aligned with the choices adult consumers are making, enabling growth through our multi-category options. And the pace of change within the U.S. market has accelerated over the last 4 years. In 2022, 46% of adult nicotine consumers were either using New Categories exclusively or alongside traditional products. In 2026, that number has -- is projected to reach 68%. We're also seeing growth in new category solus adult consumers, not simply occasional trial. This reinforces the need for a portfolio that offers a range of product choices. Adult consumer migration to New Categories is not limited to one region or a small number of urban markets. The pace varies by state, but the direction of travel is consistent across the U.S. And Reynolds is advancing faster than the wider industry.

Looking deeper, you can see that we are outpacing the industry in 35 states. That performance reflects the strength of Vuse, the momentum of Velo and the breadth of our Smokeless portfolio. Combined with our national scale and trade infrastructure, these strengths give us a clear advantage across diverse market conditions. We are not waiting for the market to transform. We are at the forefront of that transformation. Today, 65% of U.S. adult nicotine consumers interact with or have migrated to New Categories. More than half of combustible consumers are using other nicotine products, reinforcing the importance of a multi-category portfolio. Reynolds leads the U.S. market in adult nicotine consumers with more than 22 million choosing our brands. We also lead among smokers and new category consumers. That breadth gives us multiple routes to build relationships as nicotine consumer preferences evolve. The clearest evidence of strategy working is total nicotine share.

Reynolds' total nicotine share has seen steady quarter-over-quarter growth since the first half of 2025, reaching 34% year-to-date, an increase of 119 basis points versus the full year of 2025. That growth reflects contribution across the portfolio rather than reliance on a single nicotine category. It demonstrates that we can deliver value in traditional categories while building stronger positions in faster-growing segments. This is the outcome we are focused on: sustained growth in our relevance to adult nicotine consumers, resulting in total nicotine share growth.

Modern Oral is the fastest developing segment in the U.S. nicotine market. Its growth is supported by two factors: more adult nicotine consumers are choosing the category and greater daily product adoption. The Modern Oral adult consumer base has more than doubled since 2022 and now sits above 16 million. Daily consumers are accounting for a greater share of the category, demonstrating deeper adoption. As a result, the volume of Modern Oral servings continues to grow. Our focus is to serve that growth responsibly and build Velo into a sustained national leader. And we are making significant progress towards leadership.

Velo Plus has delivered strong momentum since launch. Volume has increased 158% year-to-date compared to the same period last year, and the brand has captured 30% share of the market. As important, more than 70% of those who try Velo purchase it again. The brand's adult consumer numbers have nearly doubled from 3.4 million to 6.2 million. Momentum remains strong with Velo Plus, accounting for 80% of industry volume growth and 81% of industry value growth year-to-date. Velo is now the #2 Modern Oral brand nationally, giving us a strong platform for further growth. The numbers are strong, and we remain focused on sustained adult consumer resonance and disciplined value creation as we pursue market leadership.

Our Velo and Grizzly Modern Oral portfolios lead in 16 states, and together with our established traditional oral portfolio, have positioned Reynolds as the national leader in Total Oral. This demonstrates the value of our multi-category strategy, bringing established scale, trade relationships and category expertise to high-growth modern proposition. Combined, these strengths create a foundation for continued growth across our Oral portfolio.

As we referenced at CAGNY, we have a strong innovation pipeline. And this month, we launched Velo Max. Inspired by our leading global products, Velo Max offers a higher moisture, larger pouch format and a choice of strengths and flavors. We're taking a phased approach to distribution with plans to reach nearly 100,000 outlets by early next year. It is early days, but Velo Max broadens our proposition and gives adult nicotine consumers greater choice as we build upon Velo Plus' momentum. Modern Oral can play an important role in tobacco harm reduction by giving adult smokers an alternative to cigarettes. The insights shown here indicate that recent Velo purchases reported a substantial reduction in average daily cigarette consumption after 6 months and 64% of participating adult smokers reported switching completely to Velo. The results offer evidence of the role Modern Oral may play for adult smokers who choose to move away from cigarettes.

Our tobacco harm reduction efforts are grounded in evidence-based science, and we believe we have a responsibility to share that science and engage constructively with regulators to build understanding of relative risk and the role Modern Oral can play. This is how we create a mutual win for America's public health and our commercial business. An effective harm reduction agenda must be supported by a regulatory framework that is good for adult consumers, public health objectives and legitimate industry participants. We are seeing meaningful progress toward a clearer and more practical U.S. regulatory environment. Regulation should create a level playing field, support a regulated marketplace and protects consumers. Clear authorization standards and strong enforcement must work together. Regulation must prevent irresponsible marketing and exclude products with underage-appealing features or inadequate safety standards. Responsible manufacturers should be able to compete, innovate and invest with greater clarity.

Illicit disposable Vapour products have distorted the U.S. market for several years. We are now seeing more active enforcement at both federal and state levels. Today, state regulations cover 40% of weighted legal industry volume. Encouragingly, seizures and raids have also expanded and public discussion about how to address this issue continues to increase. Progress is evident but materially reducing the illicit market will require federal and state agencies to broaden enforcement and intensify their efforts. When rules are applied effectively, adult consumers are better protected from illicit and unauthorized brands can compete on a more level playing field.

The enforcement environment for illicit Vapour products is beginning to change meaningfully. What started with tighter import controls has developed into a more coordinated government-wide response across borders, distribution networks and retail. The scale of the actions is significant. This includes a nationwide sweep that removed 2.1 million illicit products across 7 states, followed by the largest federal seizure of its kind involving 4.7 million units.

In May of this year, FDA, Customs and Border Protection and the Coast Guard executed the largest maritime seizure of illegal Vapour products. The actions stopped more than 18 million unauthorized e-cigarettes valued at over $175 million from entering the country. Beyond the federal efforts, 22 states have now enacted directory or enforcement laws, strengthening controls closer to the point of sale. This is meaningful progress, but there is much more to do. Sustained coordinated enforcement by FDA, CBP, DOJ, ATF and state agencies will be critical to maintain pressure on the illicit market. State legislation is increasingly being matched by visible enforcement.

For responsible manufacturers, this supports a more level playing field and helps protect adult consumers from illicit products. As enforcement strengthens and the legal market becomes more clearly defined, we believe the best positioned authorized brands will capture a greater share of the category. And the numbers are starting to bear this out.

Disposable consumer and incidence trends began to decline in the second half of 2025 as enforcement actions began to take hold. This trend is continuing in 2026, which brings me to Vuse. Vuse is demonstrating what a responsibly marketed Vapour brand can achieve in a better enforced environment. The brand's volume is significantly outperforming in the closed systems segment, where we compete almost 8% versus an industry of 0.6%. Even more telling, the brand's volume has increased 20.3%, where enforcement is observable, nearly double the industry. With sustained enforcement, Vuse is poised to outperform.

Today, Vuse holds leadership positions in 39 states and has achieved more than 56% market share in closed systems nationally. Under the revised FDA guidance, we have now expanded the Vuse proposition into 4 new flavor variants. We are taking a phased distribution approach with select retail partners supported by stronger contractual requirements for age verification, purchase limits and clear adult-only messaging. These safeguards enhance our already very clear underage access prevention guidelines to ensure strong accountability as we bring flavored Vapour products to market.

We've also launched a campaign emphasizing the responsible marketing and selling of flavored Vapour products. As enforcement develops, we believe Vuse is well positioned to capture a greater share of the legal Vapour category, and we are committed to driving that growth responsibly. Together, Velo and Vuse demonstrate the strength and growing momentum of New Categories -- of our New Categories portfolio. And with a strong innovation pipeline, we aim to sustain that momentum in pursuit of national market leadership. From flavors to formats, our global R&D capabilities and experience across markets offer a range of pipeline opportunities for the U.S. Guided by consumer insight and supported by regulatory science, scale and commercial capabilities, we are well positioned to leverage innovations in the U.S. over the medium term.

Now turning to Combustibles. The macroeconomic environment remains challenging. Inflation, higher fuel costs and weaker consumer sentiment continue to pressure consumer purchasing power. Against that backdrop, the overall decline in combustible volumes has moderated in 2026. However, affordability pressures are driving further down trading. Deep discount volumes are up 16% versus the same period last year, making the low end an increasingly significant part of the category.

Reynolds first half volumes declined 5.2% versus the same period last year, partially benefiting from positive inventory movements. This resulted in first half combustible revenue increasing 5%, reflecting strong financial performance. While the inventory benefit will not repeat in the second half, we still expect to deliver year-on-year combustible revenue growth in 2026. This reflects the strength of our brands and our rigorous approach to portfolio and revenue growth management.

Competitive activity in the U.S. Combustibles has intensified significantly. Since late 2025, competitors have increased promotional investment, expanded lower-priced offerings and added distribution at the low end of the market. That activity began to affect our share in Q4 last year. We responded quickly with targeted investments. And since January, our total share has stabilized and increased by 25 basis points.

Across our operating segments, excluding deep discount, where our portfolio is well established, share has increased 54 basis points and strengthened further in August. Competition has intensified, but our response is working. We have stabilized total share, strengthened our position across the portfolio and remain confident in our ability to compete while protecting value. Combustibles will remain an important and sustainable source of value for our business. Our confidence is grounded in the strength and geographic breadth of our portfolio, supported by proven revenue growth management and trade capabilities. Our scale and international footprint provide additional levers to support performance.

Combined, these strengths give us the flexibility to respond as consumer and competitive dynamics evolve while competing profitably. We will continue to manage our combustible portfolio with discipline, delivering sustainable value while supporting investment in the categories of the future.

The transformation of Reynolds is increasingly visible in our revenue mix. Combustibles provide substantial value and cash generation, while our Smokeless brands position us to capture growth as consumer preferences evolve. Smokeless has grown from 16.8% of Reynolds revenue in 2022 to nearly 23% in the first half of 2026. That progress is supported by strong momentum in Velo together with our established oral portfolio.

In Vapour Vuse is positioned for continued growth as enforcement strengthens. The result is a more balanced portfolio with growing contributions from categories that deliver value today and position us for future consumer demand. The evolution of the portfolio is also strengthening the quality of our financial delivery. U.S. gross margin increased from 68% in 2022 to 73% in 2025. That 5 percentage point expansion demonstrates our ability to grow margin as we transform the business. Looking ahead, we see a pathway to gross margin of 75% to 78% by 2030. The result is a more balanced business with expanding margins supporting profitable growth.

Our progress in New Categories demonstrates how they are becoming an increasingly important growth and margin engine for Reynolds. New category gross margin increased from 47% in 2022 to 68% in 2025, a 21 percentage point improvement that substantially narrowed the gap to traditional categories. That progress reflects increasing scale, stronger product economics, productivity and rigorous commercial execution. As New Categories continue to scale, their growth will increasingly support total portfolio margin. This is the model we are building, growth and margin expansion reinforcing one another. And as the mix evolves, we expect Reynolds to remain a powerful engine of sustainable financial delivery for BAT.

The results we have shared today are ultimately driven by our people and the culture they create across Reynolds. Our latest employee Net Promoter Score reached 43, an improvement of 17 points from the previous survey and 22 points above the U.S. benchmark. That tells us our employees see Reynolds as a great place to work and importantly, would recommend it to others. That engagement is reflected in how we are building the organization. We're bringing in experienced leaders from across industries and discipline while investing in the growth and development of our existing talent.

We are also building a strong early career pipeline and encouraging employees across the business to bring forward ideas that improve how we work and compete. Our most recent U.S. leadership effectiveness survey also showed strong results in areas that matter to our high-performing organization, including trust, clear expectations and evidence-based decision-making. Together, our people are turning strategy into action. Their engagement, leadership and innovation are central to today's results and our confidence in winning in the United States.

In closing, let me reiterate why we are confident in Reynolds position in the U.S. market. First, we have integrated capabilities that are difficult to replicate, U.S. scale and trade coverage, world-class science and R&D, digital capabilities and international footprint and operational excellence.

Second, we have a winning multi-category portfolio with strong brands across the nicotine market. Velo and Vuse are gaining ground in 2 of the most attractive growth segments, supported by an established portfolio that continues to generate sustainable value.

Third, the financial opportunity is substantial. The U.S. developing segment's revenue pool is projected to reach between $17 billion to $25 billion by 2030. Together, our brands, capabilities and scale give us a strong foundation to capture a significant share of that growing value pool. The direction is clear. Reynolds is transforming and gaining momentum. We know success will require rigorous execution, responsible regulation and continued investment, and we are prepared to deliver. Reynolds is the cornerstone of BAT's strategy, operating from a position of strength and focused on converting the U.S. opportunity into sustainable growth and long-term shareholder returns.

Tomorrow, you will visit the Reynolds Operations Center or the ROC, as we call it, in Tobaccoville, North Carolina. The ROC is one of our 4 manufacturing sites and the heart of our U.S. operations. It is also the largest manufacturing facility in the BAT Group, covering approximately 2 million square feet across a 635-acre campus. It is a true multi-category manufacturing hub. We look forward to welcoming you to the ROC where you will meet some of approximately 1,800 employees who bring our products, our portfolio and strategy to life every single day. During your visit, you will see firsthand the operational foundation behind Reynolds transformation, performance and long-term growth.

I will now hand over to Fred Monteiro for an overview of AME. Thank you.

Hello, everyone. Good afternoon. My name is Fred Monteiro, Regional Director for the Americas and Europe region. Over my 27 years with BAT, I've had the opportunity to lead businesses across several markets and categories, including roles in general management, marketing and New Categories. I have also helped build successful business outside BAT in the e-commerce and media industries in my home country, Brazil.

Today, you have heard from Tadeu, Luciano and other colleagues about BAT's transformation and our path to higher quality growth. My role is to show how the AME region is helping lead that transformation. Across 85 markets, we are using the strength of our traditional business to accelerate New Categories and drive our quality growth agenda.

Let me start by putting the AME region into perspective. The Americas and Europe region is large, growing and exciting. It represents around 40% of total new category consumers worldwide and 40% of global nicotine industry revenues, which grew at a CAGR of 7% between 2022 and 2025. BAT is the volume share leader in Combustibles in 23 markets in the region.

Velo is the clear #1 modern oral brand by value and volume share. In the Vapour category, Vuse is the value share leader across key markets and glo is showing early positive signs in premium heated products. This is also a highly diverse region. We manage a portfolio of markets at different stages of business transformation. Europe is more advanced with new category consumer incidence approaching 10%. It provides insights from some of the world's most dynamic new category markets.

Canada, for instance, at almost 6% incidence shows how our transformation model can work in a more regulated environment. And Latin America represents a significant opportunity for future growth. This diversity is an advantage. It allows us to test, learn and scale faster across markets. Consumer behavior is evolving, too. Today, 1 in every 4 new category consumers in AME use more than one product category, and this trend is accelerating. This is why BAT's multi-category portfolio matters. And this is why we continue to sharpen our investment focus, supporting the right categories in the right markets with rigorous prioritization.

Our advantage is not only scale, it's also the ability to apply and replicate what works across the region. A natural question would be whether this advantage translates into performance. As you can see in the slide, we are strongly committed to delivering for today whilst transforming the business for the future. Over the last 4 years, we have delivered an up for growth CAGR of 9% in the region. And over the same period of time, new category revenues have grown at a CAGR of 17%. Behind that transformation, there is a simple but powerful growth model.

As Anniek highlighted earlier, growth comes from understanding adult consumer preferences, developing powerful brands and products and using the strength and scale of our combustible business. That scale provides broad market reach, strong customer relationships and valuable consumer insights. In AME, we apply 4 connected capabilities, driving physical availability, mental availability, direct-to-consumer and consumer engagement activities. Together, these capabilities support the growth of new category portfolio across different market and regulatory environments.

Physical availability is a starting point. Across AME, we service more than 1.7 million retail points. 1/3 of these customers are digitally connected to BAT through our B2B tools. This gives us reach, visibility and executional discipline whilst lowering our cost to serve. But reach alone is not enough. Growth comes from building brands that adult consumers would recognize and choose. We believe powerful brands are built into consumers' cultural repertoire and should be present where consumers' passion points are.

Across the region, we participate in more than 800 local events and brand activation initiatives every year, supporting our new category brands. This is complemented by over 50 partnerships with recognized cross-category premium brands, including McLaren Racing and the Tomorrowland Festival. This helps ensure our brands are visible, culturally relevant and differentiated. Our model also drives the conversion of brand awareness into product trial and adoption. One of our strengths is our ability to engage directly with adult consumers. We operate more than 1,200 flagship and experiential stores across the region.

These are brand hubs where adult consumers can discover our brands, receive guidance, immerse themselves in our brand world, build confidence in the category journey and buy our products. We complement this with more than 6,000 multi-category brand ambassadors. Together, this ecosystem reaches around 9 million adult consumers through guided trial each year.

Finally, we stay connected with adult consumers beyond the trial and purchase phase. Today, our first-party database includes more than 11 million consumers across AME in key markets, around 3.5 million of our new category consumers participate in our consumer reward programs, which gives us relevant [indiscernible] insights and enables more personalized engagement. One of the strengths of this model is its flexibility. Across AME, we apply this 360-degree growth model, adapting to each market's maturity, category dynamics, regulatory environment and consumer behavior.

Let me walk you through a few quick examples. Poland shows the model at scale in a dynamic multi-category market. Sweden demonstrates how the Modern Oral category can transform an entire market landscape. Canada is a great example of BAT's agility to transform in a highly regulated environment and Latin America highlights the potential for future growth. Let's look at the key learnings from these different and important markets. Poland is a strong example of our multi-category model at scale. 44% of all adult nicotine consumers in Poland already use new category products regularly. Consequently, New Categories command a higher share of total industry revenue in Poland than the European average.

BAT is capturing that opportunity through an integrated omnichannel ecosystem. For example, through our direct-to-consumer model, we reached 70% of all adult nicotine consumers in Poland. Approximately 45% of them are registered in our database. 2/3 of consumers of BAT brands actively participate in our consumer reward programs. And together, this gives us powerful first-party data, personalized engagement and a stronger pathway from product trial to brand retention. This also helps build stronger brands.

Velo leads the modern oral category with a 75% volume share. In Heated Products, glo leads the value segment and continues to grow in the premium segment space. Both Velo and glo have built the strongest brand equity in Poland amongst adult consumers under 30. As a result, New Categories have increased their share of BAT revenue in Poland from 43% in 2022 to 57% in 2025.

Sweden shows what is possible in a more advanced transformation market, where Modern Oral is leading the shift towards smoke-free alternatives. Modern Oral incidence in Sweden is currently at 10.2%, almost 2x higher than Combustibles incidence. Daily average consumption is the highest in the world at 12 pouches per day versus a global average of 4. These 2 data points demonstrate the headroom for further category growth worldwide.

Today, Smokeless products account for around 3/4 of total nicotine [ unified ] revenue in Sweden. In this highly developed market, Velo is the clear category leader. Velo is the #1 brand in Sweden and larger than any other nicotine brand in the country and continues to grow in terms of volume, value and market share. This leadership has been built through rigorous execution, continuous innovation and strong brand activation embedded in Scandinavian culture.

Retail execution provides visibility and strong in-store presence. Innovation and consumer co-creation help keep the proposition relevant, while digital and offline activation strengthen brand awareness and consideration. Together, these capabilities support Velo's leadership position in the category.

Today, Smokeless products account for 81% of BAT Sweden's revenue, demonstrating the scale of transformation already achieved in the country. And this transformation is creating value. Smokeless categories deliver 1.2x higher gross profit per unit than Combustibles, while our total profit in Sweden has doubled since 2022. Sweden demonstrates an important point. In advanced transformation markets, BAT can convert category leadership into brand equity, premium economics and accelerated value creation.

Canada represents a different operating environment from Poland and Sweden. Here, we are advancing our Smokeless opportunity through Zonnic, a nicotine replacement therapy offer licensed by Health Canada as a natural health product within a strict and unique regulatory framework. Since 2024, Zonnic has contributed to NRT category growth, which has increased 2.4x over the period. Our approach combines distribution through pharmacies, consumer support programs, scientific engagement, brand advocacy and consumer testimonials. Together, these capabilities create a model built on regulatory compliance and scientific credibility.

Today, Zonnic holds a 54.9% value share in the category with volumes that continue to grow sequentially. It is also delivering attractive economics with gross profit per unit 4.6x higher than Combustibles. Canada shows that even in a highly regulated environment, our disciplined and consumer-focused approach can accelerate profitable growth in our Smokeless business.

Latin America could represent the region's largest new category future growth opportunity, where BAT already has the scale, infrastructure and commercial capabilities to capture that opportunity as the regulatory landscape evolves. And as it starts to evolve, BAT is well positioned. Across Latin America, we have 78% retail share coverage and a 53% Combustibles volume share.

In Brazil, the largest market in the region, our Combustibles volume share is 70%. Importantly, our commercial ecosystem is already well advanced into a more digital, more efficient and more scalable model. Today, 61% of our total orders are placed through our connected B2B systems with customer satisfaction rates at 88%. Retailer reward programs cover 75% of the BAT volume and retail staff advocacy programs deliver more than 2 percentage points of market share improvement where deployed.

Data-driven investment tools improve returns by approximately 40%. These capabilities matter because they prepare the region for further scale. As New Categories unlock in some key markets, we can already see results. Velo holds 60% volume share in Colombia and 56% volume share in strategic key accounts in Mexico.

In Vapour, we have 69% value share in Chile through Vuse. Latin America, therefore, represents a significant long-term opportunity, supported by scale, infrastructure, commercial capabilities that are already in place. The impact of New Categories in our business is already visible across the broader region. Since 2022, we have improved our New Categories bottom line performance by approximately GBP 0.5 billion. In markets where we are present, New Categories have increased their share of revenue from 17% in 2022 to 25% in 2025. Today, 22 markets already exceed that 25% mark, including Sweden, U.K., Poland, France, Norway and Austria, amongst others.

New Categories are no longer just a future opportunity. They are already shaping the revenue mix across AME today. So in AME, we are not just growing New Categories, we're improving the quality of our portfolio, strengthening our profitability and building a more balanced platform for long-term value creation.

Now let me turn from markets to categories. And let me start with Modern Oral, the key driver of New Category growth in AME. BAT has established a strong leading position in Modern Oral across AME. Today, we hold a 63.6% volume share, around 7x larger than the nearest competitor. But this is not only leadership in scale. Our index value share is around 10x that of the next competitor, demonstrating the quality of our position. And importantly, around 70% of consumers entering the Modern Oral category choose BAT brands.

And that leadership extends across the region, as you can see by our share in key markets on the slide. The markets shown here are part of a much broader footprint with our Modern Oral portfolio now present in 42 markets across AME. Across that footprint, Velo has established the #1 brand equity position in most of our markets, supported by premium positioning and continuous innovation. In the Nordics, our leadership has expanded beyond Modern Oral into the total oral space with BAT share of total oral increasing from 26.7% in 2023 to 33.9% today. And importantly, this is translating into stronger financial delivery. Modern Oral, including NRT, revenues in the region have grown 2.3x since 2022, while delivering around 70% gross profit in 2025.

Together, these results demonstrate leadership that is broad, reputable and financially attractive. And if Modern Oral demonstrates our ability to build category leadership, Vapour demonstrates our ability to compete in one of the world's most dynamic categories. Vuse is the value share leader across AME with 32.3% share in key markets, more than double the nearest competitor. That leadership is built on a distinctive high-quality brand proposition, consistent execution and consumer-relevant innovation like Vuse Ultra, as you can see in the slide.

Profitability in Vapour is also improving. Since 2022, Vapour category contribution in AME has increased by GBP 133 million. We are strengthening the brand, deepening consumer engagement and translating leadership into sustainable value creation as we focus on selected markets. The same logic now applies to Heated Products, where glo Hilo is gradually opening up BAT's opportunity into the premium profit pool. We already have a 64% volume share in the Heated Products value segment, but around 81% of the industry revenues sit in the premium space. Glo Hilo gives us a platform to compete where the Heated Products value pool is concentrated.

Since launch, more than 20 million adult consumers have been exposed to glo Hilo across our launch markets. More than half of Hilo's source of business comes from Combustibles and other premium Heated Product consumers with trial to purchase conversion around 61%. We are deploying a highly selective and focused investment approach across a small number of priority markets. In these selected geographies, glo Hilo has achieved an average segment share of 3.6% despite being in the market for less than a year. And underpinning our transformation is the strength of our Combustibles business.

As Emma highlighted earlier, Combustibles remain a critical value engine for BAT. In AME, the Combustibles category is resilient with incidence broadly stable, moving from 21.2 in 2022 to 20.2 in 2025. We are actively improving our Combustibles portfolio, adapting brands, formats and price architectures to consumer preferences, especially as inflation and consumer disposable incomes are stressed. Today, BAT is the volume share leader of the Combustibles category in 23 markets in the region and is gaining share across key markets, including Brazil, Mexico, Colombia and Poland, amongst others. We are strengthening our execution in priority markets with new launches into growing segments.

Together, a resilient Combustibles business and a growing New Category portfolio are creating a stronger, more balanced and more valuable business for AME, which brings me to the summary of the AME story. Let me leave you with 3 messages. First, we have a proven transformation model, a scalable approach that works across categories and markets. Second, this is delivering results. Category leadership in Modern Oral and Vapour, early signs of progress in premium Heated Products and a resilient Combustibles business. Since 2022, we have improved New Categories bottom line performance by approximately GBP 0.5 billion.

Third, our transformation is already material. New Categories now represent around 25% of our total revenue in the region with a clear ambition to reach 50% by 2035. We are pursuing that ambition from a position of strength with focus and discipline. The AME region is not only just participating in BAT's transformation, AME is helping lead it.

Thank you very much. And I will now hand over to Pascale for an overview of the APMEA region.

Hello, everyone. My name is Pascale, and I'm here to talk about Asia Pacific, Middle East and Africa. I've been in consumer goods for over 2 decades, driving growth and transformation in most continents and in different categories. Since joining as Regional Director a year ago, my focus has been very clear, making APMEA structurally reshaped for growth, pivoting the region to consumer-centric volume-led growth to win in the marketplace.

So we become a significant contributor to the BAT algorithm. We were the growth engine of BAT years ago. We haven't been in recent years. And today, I'll share our plan how we'll become one again. The opportunity is big. We've already made good progress this year, and we're confident that our model is working, is accelerating and is repeatable across countries.

Let me start by setting the scene. Home to the many of the world's largest and fastest-growing cities and rising consumer spending, Asia Pacific, Middle East and Africa is structurally positioned for growth. The region is large and already accounts for 49% of the total nicotine consumers, 46% of the volume and 27% of the revenue. It's only 18% of BAT's group revenue.

Despite past headwinds, we are today a stronger, more focused and a simpler organization. In combustibles, we hold leadership positions in 28 markets, and we see significant growth opportunities across both emerging and developed economies. We're also excited about the potential of modern oral, currently the fastest-growing nicotine category globally, where BAT is holding volume share category leadership, and we're turning the tide on HP through a focused and sustainable investment model. 2026 is a year where we've been rebuilding the foundation for growth.

As you know, '25 was an extremely difficult year, driven by Australia, Bangladesh, fiscal and regulatory challenges, which resulted in a significant erosion of duty-paid combustible volumes. But the important thing is that we're making -- we have been making good progress, and we're now seeing an acceleration in the second half, driven by volume growth in all 3 categories.

We have a clear ambition and growth plan. Our ambition is to become the fastest-growing total nicotine player in APMEA. At the core of our plan is a clear strategic pivot to consumer-centric volume-led growth, which is our key overriding priority. We'll do so by focusing on the fundamentals, sharper execution and targeted investments.

At the same time, we're building deliberately a multi-category execution model to win in combustibles and new categories using the strength of both and accelerating Modern Oral further in attractive markets. Taken together, this will position us to deliver sustained midterm top and bottom line delivery, growing volume ahead of the market with solid profitability contributing to the overall group algorithm. And we have strong reasons to believe in the region's future.

As I said, the opportunity is big, and it's across categories. the nicotine category continues to grow both in combustibles and in new categories with increasing poly-usage. Combustibles remain resilient, while Modern Oral and heated products each account for 40% of the region's projected new category growth with heated products growing at a slower pace following the excise harmonization in Japan.

And as we've seen in other more established new category markets, we expect to see these numbers evolve over time with more consumers progressing towards new categories for use. So taken together, we see significant opportunities across multi-categories. So our APMEA growth plan is a fundamental pivot back to consumer-centric volume-led growth by transforming how we win to become the fastest-growing total nicotine player in APMEA by 2030.

It has 3 key principles at its core. First of all, it's about focusing our resources behind fewer markets, prioritizing high-impact growth opportunities where we can win. Second, we need to shift to consumer moments-led value creation to meet evolving consumer preferences, and we can best capture those with a multi-category portfolio.

This is a shift from a more internally oriented culture in the region to becoming much more consumer-centric. Third, to succeed, this requires stronger market focus and accountability. Therefore, we're further empowering our market leaders to adapt our go-to-market approach, ensuring that we're closer to consumers, more responsive to market dynamics whilst building capabilities to grow our brands at scale through our Growth Flywheel, as shown by Anniek.

Importantly and proudly, this plan was created bottom-up by regional leaders, together with the leaders of the global team, ensuring strong ownership, alignment and collaboration in a much more simplified and focused organization. Now at the heart of our transformation is our Growth Flywheel, which is all about lifting the execution in the markets. We believe that winning starts with knowing the consumer better than anyone else and meet their preferences across the demand moments with a competitive multi-category portfolio and scaling that all through a Growth Flywheel.

In the next section, I'll share how we deploy this model in Japan, our biggest developed market in APMEA, and then in Pakistan, our blueprint for multi-category growth in emerging markets. I think it's fair to say, we're back to winning in Japan, one of the most competitive markets in the world through multi-category execution at scale.

And the proof is in the numbers, growing total nicotine share by 0.5 percentage point in H1. Combustibles, heated products and Modern Oral are all pulling in the same direction. This is what multi-category at scale looks like with 57% of our revenue already coming from smokeless products.

It is all about reaching and engaging consumers in relevant ways, always connected wherever, whenever. It's about building brands immersed in culture with locally relevant products and superior sensorials. Brands that are experiential, demand moment led and digitally integrated. This is what is behind the success of Japan, combined with perfect stores because today, we believe that it's more than ever important to have unmissable activation in store.

When I joined BAT, I saw a significant opportunity to improve our execution. And in my last visit to Japan, I was so proud to see the breakthrough in convenience stores and in new channels through retail partnerships, which is thanks to the great work of our team over there. Having lived and worked in Japan for a number of years, you only get this when you're demonstrating you have a category vision and you're delivering on the execution.

So the model is working and it's also working in emerging markets with Pakistan leading the way. Pakistan is a true powerhouse, and it has become the blueprint for multi-category growth in emerging markets driven by 2 engines: sustained combustible growth with revenues up 13% since 2023, reaching 80% volume share with Pall Mall, the leading brand in the market.

And new category acceleration with Velo growing 43% in revenue, now the #1 brand -- oral brand in the market with the highest brand equity globally and amazing consumer reach. We see significant opportunities for the many more Pakistan-like markets in our portfolio using all of that combustible scale to drive NC adoption.

In Pakistan, we're also obsessed about going deeper in culture, meeting consumers where they are, whilst using all of that combustible scale in trade to drive new category adoption and converting all of that cultural energy into commercial execution.

To build new categories like Modern Oral, you not only need to be present in store, you have to be part of the conversation and scale that community to community. With Velo Sound Station, we're driving new ways of reach and demand generation at scale, going from mega key opinion leaders to now micro influencers to get to that community with user-generated content powered by AI.

Partnerships that go beyond communication are now also inspiring limited product additions in Modern Oral. Let's now go deeper into the categories. As you've heard from Emma, to grow APMEA winning in combustibles is essential. So we're ruthlessly focusing and investing where the growth is and where we can win. We are addressing evolving consumer preferences and changes to market dynamics by capturing the opportunities in the growing value for money segment.

secondly, expanding our flavor portfolio with superior sensorials whilst fighting against illicit to claw back volume. All this is expected to strengthen our leadership position and enable us to drive consistent growth again. This is essential for us as it's also going to fuel our Modern Oral acceleration. Talking Modern Oral, we already have clear leadership in Modern Oral in the region. Velo is the #1 brand with a market share of 76%, which is over 3x the share of the runner-up competitor, driving strong year-on-year momentum.

And we're just scratching the surface. We are obsessed with growing our Modern Oral business and unlocking new white space opportunities. We are confident that we have an algorithm that works. We see, we invest and we scale through digital and physical availability and going deeper in culture.

The model is working, and we estimate the market to significantly grow by 2030. On top of winning in combustibles and accelerating Modern Oral, we're taking a targeted approach to profitable growth in HP. Our strategy here is very clear, which is to create incremental value in the #1 category value pool in the region by focusing on the top 3 markets.

And we've started to turn the tide with glo Hilo supporting overall global performance and brand strength now stable at 14% volume share of category and growing to 3.5% volume share in the premium segment in Japan and reaching 41% volume share in Kazakhstan with very strong momentum year-to-date.

So in summary, the big message I want to leave you with is that APMEA is structurally reshaped for growth. We are confident in executing our strategy to drive consumer-centric volume-led growth through the interventions we're making across the portfolio and operating model.

We expect to further drive sequential performance recovery, accelerating our new category revenue contribution and returning the region to volume and top line growth in 2027, building back to the group algorithm in 2028. Our model to grow our brands at scale across categories is working, and it's working in both developed and emerging markets.

It is a repeatable model that will roll out across all of our priority markets to become the fastest-growing total nicotine player in the region and become BAT's growth engine again. Thank you. And we'll now have a short break for coffee. We'll meet again in the auditorium at 4:20 for our final presentation. Thank you so much.

[Break]

Good afternoon, everyone. It's a pleasure to be with you at our Capital Markets Day. As a brief introduction, I'm Johan Vandermeulen , and I've been with the group for more than 30 years. Throughout my career, I've held different leadership roles across the business, combining commercial, operational and financial accountability in both emerging and developed markets.

I joined the Management Board in 2014 and became Chief Operating Officer in 2023. Earlier, you heard how we are sharpening our strategic choices, strengthening execution and building the capabilities required to deliver sustainable growth. I want to bring those elements together and demonstrate how they translate into sustainable shareholder returns.

The central message is straightforward. We are on track to deliver our growth algorithm, supported by quality revenue growth, improving profitability, strong cash generation and disciplined capital allocation. And critically, we intend to deliver that algorithm in a way that balances investment in our transformation with attractive and sustainable cash returns to our shareholders.

Let me start with the progress we have made since our last Capital Markets Day. Our journey has moved through 3 deliberate phases. In 2024, our focus was on targeted investment. We strengthened the U.S. portfolio and execution, enhanced our R&D ecosystem to support faster and more agile innovation and continued to improve our new category profitability.

In 2025, that investment began to translate into progressive improvement. The U.S. returned to growth. Velo+ delivered strongly, reaching profitability within 1 year of launch, and we established glo Hilo and Vuse Ultra in the premium segments.

In 2026, our focus is to return to growth in our algorithm. We expect strong U.S. revenue and profit growth, mid-teens New Category revenue growth driven by Modern Oral and continued improvement in our New Category profitability. Throughout this investment and transition period, sharper execution has supported strong cash generation. This has enabled progressive dividends and sustainable share buybacks while supporting our return to the targeted leverage corridor.

Together, this is building a strong track record of delivery. What our journey has demonstrated is that deliberate choices create value, choices about how we prioritize, where we invest and where we allocate our capital. At the heart of those choices is a simple objective, sustainable shareholder returns, driven by quality growth that improves profitability, generate strong cash flows and gives us the flexibility to invest in our transformation whilst delivering attractive shareholder returns.

Together, these are the foundations of long-term shareholder value creation. And it all starts with making the right choices in the right places. That means being as deliberate about where we do not invest as where we do invest. We have sharpened our retail product strategy around the largest profit pools, reduced investment in vapour markets where the regulatory environment does not support sustainable returns and exited markets where we do not see a compelling long-term growth opportunity.

And we will continue to make these choices to allow us to concentrate resources behind the opportunities with the strongest potential for sustainable returns. One of BAT's greatest strengths is the breadth and diversity of our footprint, but we do not take a one-size-fits-all approach. We're increasingly deliberate in how we allocate resources and how we position each region to win.

In the U.S., we are investing to strengthen our position in the world's largest nicotine value pool, building on the strong momentum across both combustibles and new categories. In AME, we are leveraging our multi-category model and leading the smokeless transformation.

And in APMEA, we are resetting performance and concentrating investment behind the categories and markets with the strongest long-term growth opportunities. What links these regions together is excellence in execution. This means making targeted choices, allocating resources where sustainable returns are the greatest and finally, by leveraging our global scale while remaining locally relevant.

Our regional strengths are complemented by a portfolio in which each category has a distinct role to play. As Luciano, Emma and Anniek demonstrated earlier, we're all well positioned to win with our multi-category portfolio. Our recent performance demonstrates the quality growth momentum that we are building across the portfolio.

Our investments in combustibles are working. We have delivered resilient performances with improving revenue, gross profit and contribution. This is driven by our extensive global footprint, strong brand portfolio and sharper execution. Alongside the resilience in combustibles, new categories are becoming an increasingly meaningful contributor to the group's growth.

The progress shown here reflects the momentum that we are building across the business. Revenue growth is accelerating. Gross profit is increasing and the contribution margin is expanding. And most importantly, growth is increasingly translating into profitability. This improving performance reinforces our confidence in the choices we have made and in the opportunity for sustainable growth beyond 2026.

The value of our multi-category model is that each category plays a distinct role in delivering our group algorithm. In Modern Oral, we have the fastest-growing brand in the fastest-growing new category. Velo is growing strongly in U.S., holds clear leadership positions in AME and continues to expand in APMEA. Importantly, it combines attractive growth with attractive economics, making it one of the strongest value creation opportunities in our portfolio.

In Vapour, momentum is positive, and the portfolio is continuing to premiumise. The U.S. has returned to growth and remains the largest contributor in this category. Outside the U.S., our enhanced portfolio is improving our ability to compete across key consumer segments, with Vuse Ultra strengthening our premium position. In heated products, we are building glo Hilo in premium and are enhancing the value proposition with Hyper Pro+ as we reposition the business for targeted growth.

As these categories continue to scale, we expect new categories to deliver around mid-teens revenue through to 2030. Combustibles will continue to power our transformation. While performance may vary from year-to-year as we navigate regulatory and market dynamics, we remain confident in delivering sustainable revenue growth of 1% to 2% on average to 2030.

Together, the strength of our multi-category portfolio give us confidence in our ability to deliver 3% to 5% group revenue growth. Gross profit continues to increase across the portfolio. Combustibles continue to fund our transformation with resilient margins supported by sharper execution, stronger revenue growth management and continued productivity benefits.

New categories are becoming an increasingly meaningful contributor through gross profit. Importantly, as scale builds, the margin gap continues to close with new category margins already ahead of combustibles in more established markets. Productivity remains a significant opportunity. Having delivered GBP 1.2 billion of savings between 2023 and 2025, we expect a further GBP 2 billion by 2030.

Together, resilient combustibles, improving new category economics and continued productivity savings all give us confidence in our ability to continue growing gross profit over time. As new categories scale further, we expect them to contribute an increasing proportion of future gross profit growth. While the path will not be linear, year-on-year, reflecting our investment choices, the direction of travel is clear.

We have already reached an important inflection point in New categories, moving from an investment period to building scale and generating meaningful contribution. Modern Oral and Vapour are already profitable at scale. In heated products, 2026 represents the peak investment year before returns improve thereafter.

Together with targeted investment behind our strongest opportunities, this will support further acceleration in new category contribution. As scale continues to build and economics continue to strengthen, we expect New category contribution margin to increase to at least 30% by 2030.

We will, therefore, continue to invest behind innovation in the markets where we see the strongest combination of growth, contribution and returns. Bringing these elements together, quality growth, improving economics and increasing category contribution provide the foundations for sustainable profit growth.

We have progressively strengthened profit delivery since 2024 and expect to return to the lower end of our 4% to 6% growth algorithm in 2026. This growth is supported by better AI-enabled decisions and improving our new category mix. It is reinforced by a leaner cost base, simpler processes and greater use of strategic partnerships. And it is underpinned by sharper execution, focusing on the largest value pools and leveraging our excellent capabilities and world-class talent.

Fit2Win further strengthens this pathway, creating a leaner, faster and more agile BAT through structural simplifications, cost optimizations and route-to-market modernizations. Together, these drivers give us confidence in our ability to deliver sustainable adjusted profit from operations ahead of the top line growth.

Our growth ambition is sustainable adjusted diluted EPS growth of 5% to 8%. Beyond AFO growth, we expect 1 to 2 percentage points of additional EPS accretion over time, reflecting a sustainable share buyback, net finance cost optimization as we continue to reduce debt over time, a robust tax strategy and our underlying associates performance.

Historically, these factors have consistently enhanced EPS growth, contributing more than 1 percentage point annually in recent years. For 2026, we expect these drivers to contribute more than 2 percentage points. We're not dependent on any single lever. The model combines operating growth with disciplined financing and capital allocation to deliver sustainable growth in earnings per share.

Cash generation remains the foundation of our capital allocation framework. We have a strong record with cash conversion of around 100% for 6 consecutive years. Our confidence in the growth algorithm is underpinned by strong cash generation. We expect to generate more than GBP 50 billion of free cash flow between 2024 and 2030. 2025 and 2026 have been impacted by significant one-off cash outflows relating to the CCAA settlement and our Fit2Win program.

Beyond these items, the underlying cash-generating capability of the business becomes increasingly evident. We are confident in our ability to generate around GBP 8 billion of free cash flow annually through to 2030, supporting our cumulative ambition of more than GBP 50 billion. That delivery will be supported by profit expansion, disciplined capital expenditure, greater automation and AI-enabled analytics, stronger working capital management and last but not least, an embedded focus on cash across every function.

This gives us the flexibility to invest in the business, strengthen the balance sheet and deliver attractive shareholder returns. Our cash generation allows us to balance our capital allocation priorities. Since 2021, we have made significant progress in reducing our leverage whilst returning nearly GBP 36 billion to our shareholders.

First, we have strengthened the balance sheet by reducing gross debt by GBP 5 billion since 2021. That progress has increased our financial flexibility and supports the delivery of our leverage commitments. While leverage in 2025 was affected by the accounting treatment for Canada, we remain confident in returning to our targeted range of 2 to 2.5x by year-end.

Secondly, we have increased the dividend in sterling terms for 27 consecutive years. And by year-end, we expect to have repurchased GBP 3.1 billion worth of shares since 2024. We remain committed to a progressive dividend and sustainable share buybacks. That financial flexibility gives us greater choice in how we allocate capital going forward.

Our capital allocation priorities are clear and sequenced. It starts with strong cash generation, providing the capacity to invest in our transformation and strengthens the long-term growth of the business. We will continue to optimize our portfolio by actively reviewing our footprint and reallocate capital towards the strongest value creation opportunities.

Within that framework, we remain committed to a progressive dividend. We will operate within our target leverage corridor and maintain a sustainable share buyback. And with a stronger balance sheet, we can selectively assess bolt-on opportunities where they accelerate our transformation and create shareholder value.

Above all, we remain focused and disciplined, ensuring that we are investing for growth, maintaining financial strength and delivering shareholder returns that are sustainable. That discipline is not only reflected in how we allocate capital, it is also embedded in how management is measured and rewarded.

Our long-term incentive plan is directly aligned with our algorithm and the outcomes that drive shareholder value creation. Relative TSR and EPS growth, which accounts for 45% of the total weighting provides a clear link between management rewards and shareholder returns. Smokeless revenue and new categories contribution margins ensure we remain focused on both growth and profitable transformation. Strong cash conversion and improving returns on capital reinforce a disciplined approach to capital allocation and value creation. The measures reflect our strategy, the incentives reinforce execution and the outcome is sustainable shareholder value creation.

Overall, these measures reinforce the accountability to deliver the commitments we have set out today. In summary, we are building a stronger business, driven by quality growth, improved profitability, strong cash generation and disciplined capital allocation. This gives us the confidence in our ability to deliver our growth algorithm. And most importantly, the delivery of sustainable shareholder returns. Thank you very much.

I would like to invite Victoria to the stage for our final Q&A.

This afternoon, we have heard about shifting behavior for tobacco harm reduction. You had insights from each of our regions and our focus on driving a sustainable shareholder return. We will now move to the second Q&A session of the day where you will have the opportunity to ask questions from our afternoon speakers. [Operator Instructions].

And as a reminder, dinner tonight will be at Reynolda House, the former family home of the Reynolds family. Coaches will leave outside the Kimpton Hotel at the front at 6:20. I would like -- now like to welcome back on stage all of our afternoon speakers and Jeff Rayburn, who is General Counsel, Reynolds America, Executive Vice President, of law and external affairs. I think we have microphones at the ready. Andrei at the back.

It was great to hear that U.S. combustibles value share has been robust despite the increased activity you've been seeing in deep discounts. Could you tell us a bit more about the specific portfolio investments you've made to ensure this is the case? And also how you're planning to balance the premium portfolio with the scale-up of Camel Craft and Doral to avoid value cannibalization in U.S. combustibles?

David, I think that's for you.

Thank you, Andrei. It's working, yes. Yes, we've seen an increase in discounting in the market since last year, sort of started last year and it has continued. And obviously, the deep discount growth that we've seen. I mentioned it in the presentation, I think 16%, I said. It's a mixture of things. Some of that was distribution expansion late last year and early this year. And then obviously, the down-trading in the market is probably exacerbated by the macros, the general economic situation.

Look, we've obviously responded to that. We made a lot of changes in '24 going into '25 to reset the business. A lot of that is still valid in the investments that we made across the portfolio and also in the trade, rebuilding the team and obviously expanding the contracts and so on. That is a big part of how the Reynolds combustible model works. We've had to adjust some of those things as the course of the year went on, and you saw that in the share which took a bit of a dip in Q4 and into January with -- I would say, unusually large discounting activity going on. It wasn't -- at that point, it wasn't solely discount. It was elsewhere. And you saw how the portfolio responded.

Now in terms of the -- what we expect the discount this year going into next year, I think it will continue to grow. The down trading in the market is obviously being driven by those factors I mentioned. It's manageable. The important thing to remember is -- we have what's called EDLP contracts. So in case not everybody is aware of what they are, it's everyday low price. So we will ensure in those outlets that we have the most affordable price offer in there together with investment across the rest of the portfolio. That covers over 60% of industry volume. So that is a large part of the trade model that we have that allows us the flexibility to manage the relationship between the different brands within our portfolio. We have 5 investment brands. they are segmented across the country. We have a very sophisticated revenue growth management capability in the U.S. So we're using that all the time.

But the fact that 60% of the volumes in the industry are covered by EDLP. What you're really talking about outside of EDLP when it comes to deep discount, which is about 23% of the volume now is about 4% of the total industry's revenue and 2% of the industry's gross mining. So our approach will continue to be selective, we obviously will have to manage this for the time being. We expect it to grow. We have the brands, we have the capabilities, and we have our position in the market. that would allow us to address what we anticipate the current trends continuing. We will continue to address them selectively because the role of cigarettes or combustibles in Reynolds is sustainable value, and we'll continue to manage it accordingly.

Faham Baig, UBS. Too many questions if it's okay. Victoria, I think it's probably for David as well. The first one is how do you assess the potential of the heated tobacco category in the U.S. with the potential upcoming launch of a competitor product? And do you have anything in the pipeline that you may look to launch. And the second question, if I read the slide correctly, you forecast industry value for Modern Oral in the U.S. by 2030 of GBP 5 billion to GBP 10 billion. But the range is quite wide. I guess, what's the difference for the category getting to the top versus the bottom in that time frame?

Yes, the range is quite wide. For Modern Oral, it really hinges upon how big is big and how fast. So how much incidence growth do we see? How much ADC growth do we see? How much daily usage do we see? How much does that poly-use come down? It's about 87% of the category is poly-use. It's starting to decline now. The big unknown on that is really what is likely to change that. Now part of the answer to it is we've witnessed it in the last 18 months.

When significantly better products appear, you start to see the incidence and ADC moving. And as Tadeu mentioned, this has a massive compound effect going forward. Now we see with the May guidance that not just ourselves, but other companies can bring new differentiated products to market. Velo Max has just arrived. All these things will give an answer to us pretty soon about can we get to the top end of the range in Modern Oral by 2030 or the lower end of the range. So it's really those dynamics. I think the U.S. market has been restricted for some time in the normal development of this category that we see in Europe and so on. I'm not suggesting the U.S. gets to Scandinavian levels, but I think with the products that are coming to market now, including VELO Plus recently, I can see that developing rapidly as you see in Europe, okay?

So that really defines that range. The other question is on heated products, right. This is something that we obviously talk about and investigated a lot. It's a big market. There is -- you would expect an opportunity in this market for a variety of products. Certainly, we have, as you know, from the rest of the group, we have access to the latest products. We have PMTAs associated with those products, either in place or in development for submission very soon. But the question really is, where is there another market like the U.S. in the world because the cigarette tar in the U.S. is quite high, average is about 18. Europe is capped at 10. In Asia, as we know, tends to be dominated by light cigarettes. So that's a bit of an outlier. We have an enormous vapor market. Sadly a lot of it is illicit, 70% of it is, but it's very well established here in the U.S. And now we've got a strongly growing Modern Oral segments.

So we obviously -- with the opportunities we have to see what is the optimum product to bring in that space. There's some big question marks. Now we need to be ready. We need to be prepared. But I think we will also see some conversions between what we call heated products today and what we call vapor today. And I think that was alluded to in Anniek's presentation earlier. So I think there's multiple options assuming that, that is a significant growth opportunity within the U.S. market. So we'll remain vigilant. We'll get ready. But I think the opportunities are not quite as binary as they perhaps were.

I add something to -- I know that you -- some of you love models, just to be clear, but GBP 5 billion to GBP 10 billion is a big range. What I showed here was GBP 7 billion. So I spoke about Modern Oral reaching out to 2030, GBP 11 billion. This is coming from GBP 4 billion. The GBP 4 billion that I was referring to 2025, GBP 2.5 billion in the U.S. moving our way to GBP 7 billion.

In reality, the range is GBP 5 billion to -- and the other GBP 1.5 billion outside the U.S. going to another GBP 4 billion, adding to GBP 11 billion. So that's the first point because I know that you all -- some of you all our models. The second one and is about linking to the question of Andrei, we need as much temptation we should have around combustible. The role of combustible here in Reynolds is to generate the cash.

Like David said, we want to sustain the value. The growth is not coming from combustible. It's not. The growth is coming from these engines of growth, the GBP 5 billion to GBP 10 billion that we referred to in Modern Oral. We spoke about illicit vapor accounts to another GBP 7 billion, not just to mention the growth in vapor. And we are really well positioned to grow, to make inroads in that pool. That's where the growth will come from. We're going to navigate through the combustion, obviously, is important because a lot of cash we generate, and we use that to transform the business. But the growth is not from the combustible side.

Richard Felton from Goldman Sachs. I got to a 2-parter on the U.S. and the FDA. So one of the sort of criticisms of the PMTA process in recent years is that it has been a bit slow, and it has been an obstacle to bringing innovation to the market? Maybe sort of more recently, there's some signs of that changing with shifts in enforcement priorities. I noticed that the new head of CTP made some fairly constructive comments at GTNF a couple of weeks ago. So sort of part one of the question is, do you think there's a chance of a more substantive shift in how the FDA and the PMTA process operates? And then part 2, if that shift does occur, how much does that shift the opportunity set for BAT in the U.S.? And to what extent is that reflected in your guidance?

Yes. So I think it's -- I think you're referencing the May 8 guidance that came out. That was absolutely a positive what we would consider interim step to potentially a more fulsome fix to the process. You're right, it has been a slow process. That is one of the reasons for the litigation that's been recently filed, which is we need to fix the delay in getting applications through that process. Under the act, the Tobacco Control Act, it should be 180 days. You have applications that have been pending for over 5 years, right? So that needs to be fixed.

Was a recent report from The Wall Street Journal last week that FDA put out a press release late yesterday that just came across the transom today is that they are going to look at that rule that, that litigation has been filed about and potentially work to fix that process. So that there are many green shoots out there for us to think about and engage on. And obviously, we welcome that. The process what needs to happen is multifold, but primarily twofold, which is, one, you need enforcement of the rules. But what are those rules? You need clarity around those rules and you need an access, a pathway to the market. You can't have a rational regulated environment without both of those. You can't have one or the other. You need both of those.

And so what happens is the May 8 guidance, for instance, I think what you'll see in the marketplace now is now that responsible manufacturers have access to the market and that legal, responsible American retailers have access to those products, you'll see some demand shift from illicit products to those legal products. In turn, that will shrink the demand, so the law enforcement efforts to enforce should it be more effective, which should shrink that demand and shift that demand to legal retailers. So it's the virtuous circle that when you have a rationally regulated environment, you have government regulation, combined with marketplace regulation, and you end up in a very positive space in that regard. So we like what we're hearing. We have a long way to go. We need more enforcement. We need more access. We need those pathways. We need product standards, but good signs right now on the other part...

I can take your question on -- look, obviously, the U.S. is the driver behind most of our progress around the new categories. What we are estimating in our projection is a 30% enforcement on vapor. We talk a lot about enforcement coming from the state, federal level, but the culprit of the legality that exists today in vape in the U.S. is actually the lack of level playing field. So if you really have a more equilibrium around the level playing field, we will be probably in a position to overdeliver around the 30% margin contribution for new categories. So I think the expression at least has a lot to do with this possibility because the combination of Reynolds with the local capabilities that we have in the U.S. with the backing of BAT with a strong pipeline that you have seen today is quite powerful.

So if you have a possibility to deploy that pipeline of products in the U.S., which would be a normal request, a sensible one because at the end, we are in the U.S. And the U.S. consumers shouldn't be using a device like views of 10 years old shouldn't be the case. So they should be used the latest device. So if you can have that -- so I feel very good about this in the future. And that least 30% is exactly counting with this potential possibility as well.

Just on the new category guidance, so mid-teens growth, and you did give a number of GBP 4.3 billion in pouches in 2030. So then that would imply, if my math is correct, vape and heated growing by 4%. And then assuming you're getting 30% enforcement on vape in the U.S., I mean the balance there for heated does not look that great. I was just wondering if you could give some commentary around kind of that -- what that guidance implies for vape and heated into 2030.

I told they like models. We want some help in the spreadsheet. Look, at the end of the day, is the engine of growth for us will be Modern Oral. That's very obvious. And the -- not just the revenue side, the contribution side because Modern Oral is -- I read, and I mentioned this in some interactions before we are right above 30% in a number of markets with Modern Oral per seat. So I would say to you, I'm already above 30% category contribution, if I was just referring to Modern Oral.

Obviously, we have a very also strong paper category contribution here in the U.S., which is set to grow given the latest development. And we have a turnaround in terms of profitability in the HP. And we don't disclose category by margins by category, but obviously, vapor and Modern Oral are already in a very positive territory. HP has been loss-making for us. We are saying clearly that this will turn around from '27 onwards. The way that we'll be addressing is more into this inhalation space, not necessarily by category because like David just to answer the question around the potential HP response from our side in the U.S. We see more and more interaction between heated users and vapor users. So we are not really trying to see precise about by category because we have to see how this dynamic pans out over time.

We expect overall to grow top line and to grow bottom line that will be supportive for the algorithm. But I think that the dynamic of this will depend a lot in terms of how much progress we can make here in the U.S., it comes back to the question before, but also how those new innovations will succeed in the market. Anniek just showed the first frontier between vapor and HP. You saw some of that in the exhibition today. So there is a lot of optionality for BAT, let's put it that way. So that's why we don't want to be precise by category. But we feel very assertive about the possibility together where we need to be in terms of those numbers that we discussed with you.

[Damian McNeil], Deutsche Bank. We've talked about the sort of positive progress that the U.S. has made on a regulatory front. How do you assess the political risk of that being reversed if there's sort of a change in administration?

Well, I think you won't have a change of administration until 2029 at the earliest. I know a lot of people are focused on the midterms, but the administration will be there until January of '29. Of course, who knows what that election will bring us at that point. But if FDA is successful now, and based on their press release of last night, are able to get a finalized rule in place over the next couple of years, which should be possible, especially with the way the speed at which folks are acting right now, then that rule will be in place for a number of years. FDA can always redo a rule just like they're talking about redoing the rule from 2021, it's 5 years today from there. And if it takes a couple of years to do it, so you're talking about a 7-year runway. At that point, so if FDA is successful at that, you're looking at a fairly significant amount of time that, that rule will be in place. And then as you've heard everyone up here talk about, the market is changing and evolving, and it will be a new world in 4 to 7 years from now. So...

I think the other thing I'd add is, obviously, there is either dialogue or correspondence that goes on. I think you may have seen recently some correspondence between us and some of the senators. You'll see that we're basically agreeing on a lot tether, right? Many of the points that are made on either side are the same. They're the same points that we have. So I do expect that dialogue on that common ground to continue. Obviously, it's impossible to predict beyond the election and so on.

But I think the nature of that correspondence shows that there's a lot of common ground in delivering tobacco harm reduction in the United States.

Okay. I'm afraid we're out of time. Obviously, there'll be more time to ask questions over drinks and dinner this evening. But before I hand over to Tadeu, please join me in thanking all of our afternoon speakers.

Okay. Thank you for your questions. To conclude, I would like to thank my leadership team who delivered their presentations with passion, commitment and all of you who have joined us on our Horizon 2030 Capital Markets Day.

Next year, BAT will turn 125 years old. Born in 1902, BAT has lived and flourished through decades of change. And here we are today. Ambitious, successful, forward-looking and shaping our journey ahead. It's a journey that I'm immensely proud of. Reflect on BAT today, I believe that this is a rewarding business for multiple stakeholders, consumers, investors and employees. Each stakeholder group is in one way or another and investor in BAT. And to be an investor in our company requires belief and conviction. It requires a belief in the future. The reasons to believe in BAT as we navigate towards Horizon 2030.

When I became a CEO in 2023, there were plenty of challenges ahead of us. One of the first actions we took was a full review of our strategy, and that strategy has not fundamentally changed, but It has been sharpened. The strategy is one thing. The real challenge is the disciplined and precise execution of this strategy. Of course, the context in which our strategy and value is delivered has changed and will continue to evolve. The 3 big building blocks of our strategy, arrowhead are not just words. We are bigly committed to them, a commitment to deliver quality growth choiceful and valuable growth, shaping a sustainable future, ensuring that the future landscape is conducive to our transformation. And a deep commitment to a dynamic business, a fusion of what BAT has always done well with new tools and capabilities.

Back in South Hampton in 2024, I committed to focus on a few critical areas, and we have largely delivered on those commitments, chiefly returning BAT to our growth algorithm, 3% to 5% revenue, 4% to 6% profits, 5% to 8% earnings growth. Our first half demonstrates our momentum back to that corridor. And I'm confident in BAT's future delivery, transforming and performing at the same time. We also recommitted to the multi-category strategy because markets, regulators and consumers differ. That's not to say that all categories are created equally. We are clear today on the role of each category. Modern Oral has evolved and developed significantly at a real pace. It started from humble beginnings in 2017 with the acquisition of [Winston]. We pioneered the category. And today, we are the category leader. We will continue to build Velo as the Modern Oral reference. Our insights, innovation pipeline and market reach bode extremely well for the future. Even modest movements in incidence and daily consumption had an accelerating impact and economics are highly favorable. Supporting Modern Oral are vapor and heated products.

We have taken you through how we are being more focused, shifting premium and prioritizing value pools. If the enforcement environment in the U.S. improves beyond our base assumptions, well, we are well positioned to capture value return. Put simply, we want to lead in Modern Oral, win in vapor and compete meaningfully across inhalation. Resource will be allocated according to those priorities and Modern Oral has the first call and much of that resource flows from our combustibles business. The combustible business will deliver the value the group needs, funding the transformation and our shareholder returns. We have recognized a need to sharpen execution, and we are addressing it. Better portfolio laddering, digitally-enhanced RGM and the focus on product and pricing. We did enhance portfolio deployment focus on the 20 markets that deliver 80% of the value, we will deliver within the 1% to 2% range growth for combustibles.

Moving to geographic footprint. I'm proud of our performance turnaround in the U.S. Back in 2024, the business was not where it needed to be. Since then, we have improved in all areas. Leadership, regulatory engagement, a stronger portfolio and much better execution of quality. Good businesses are like a flywheel. They feed off the success, and that inspired them to go further. Most recently, Velo Plus has reached over 30% volume share of marketing under 2 years, and it's a source of genuine excitement. The U.S. will underpin the group's 2030 algorithm. Two years ago, the U.S. was a plan. Now it is delivery. And we are clear on the role of our other 2 regions. The external environment in APMEA has been especially turbulent. South Africa, Australia and Bangladesh have been facing headwinds. I'm delighted, therefore, with the leadership shown by the APMEA team. Consumer-centric growth is the right way forward.

And also to EEMEA, which in terms of transformation is our most advanced new category region, pioneers of our predominantly smokeless ambition. Just a few years ago, EEMEA was the star performer precisely when they needed most. That's the strength of diversified enterprise both category-wise and geographical. It allows the old source of profit to be reenergized and replaced by new source of growth. And that's the future I see for BAT. Four categories, three regions, all play in the role, contributing to group delivery in a sustainable and bright future, well within our reach and add to that optionality in Beyond Nicotine. As with early-stage Modern Oral, it is a modest business today. It has been built thoughtfully optimizing capital deployed.

As Beyond Nicotine is not built into today's glide path, it is a potential growth kicker beyond 2030. Our productive journey has been impressive, GBP 1.2 billion of productivity savings delivered and a further GBP 2 billion program between now and 2030. And add [indiscernible] and you have a powerful self-help story. Consumer-facing spend and innovation will always be my priority. So we will focus on the discretionary cost base. In technology, especially AI, you may have been surprised by some of what Javed showcased.

Perhaps a superficial view of BAT is that we are a well-run global enterprise yet not always modern and progressive. Well, I would dispute that. We are now deploying leading-edge technology solutions to partner the best of old BAT with the best of the new BAT, data-led and technology-driven. And another extremely high priority for me is a front-footed approach to scientific and corporate affairs. I see a world where tobacco harm reduction will become better understood and accepted, led by Omni, which is a game changer and a multiyear journey. However, I really can envisage a world where our transformation is not only permitted but also encouraged. That's critical because smart regulation is just as important as the portfolio itself. And lastly, let me reflect on our remarkable people and culture. BAT has always had a human quality throughout our history, we rightly hold the quality of people as an enduring form of competitive advantage. It's because I know just how impressive BAT's talented people are that I believe in Horizon 2030.

So I went where I started, our 125 years young business, still winning, still growing, full of ambition. Yet I prefer to focus on Horizon 2030 and the pathway from there to predominantly smokeless 2035. We have the ambition, the innovation, the leadership, the execution and the capabilities to succeed. I said in 2024 that we would deliver, and we will deliver again. And that delivery is hard-coded as an investment case and in how we are all measured and remunerated in BAT. Put simply, we are 100% aligned with you, our investors. If BAT delivers, which it will, we all win. Thank you very much.

Good morning, everyone. I'm delighted to welcome you to our 2026 Interim Results Presentation. With me this morning is Javed Iqbal, Interim CFO, and Victoria Buxton, Group Head of Investor Relations. I will begin with our transformation highlights. Javed will then take you through our financial results in more detail. Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead given the clear momentum we are building. We will then take your questions.

With that, I would like to draw your attention to the disclaimers on Slide 2 and 3. Let's begin by looking at our transformation momentum. Starting with some highlights from H1. Smokeless now represents 19.8% of group revenue, up 160 basis points versus last year. We added 4.1 million smokeless consumers over the last 12 months, taking the total to 35 million. This progress is mainly driven by Modern Oral industry growth, where the strength of the Velo brand continues to resonate strongly with consumers.

Our first half results were in line with expectations, supported by a strong multi-category delivery in the U.S., excellent Velo momentum across all 3 regions and a resilient combustibles performance in the U.S. and AME. Our disciplined focus on quality growth continues to improve returns through more targeted investments with New category contribution up 55% at constant rates. As previously guided, we expect adjusted profit from operations to accelerate in H2, driven by improvements in AME and APMEA. Our second half weighting will also benefit from the phasing of Fit2Win savings.

Finally, we continue to generate strong cash returns. We expect to be within our 2 to 2.5x target leverage corridor by year-end, while continuing to reward our shareholders with our progressive dividend and GBP 1.3 billion share buyback in 2026. I'm encouraged by the momentum we are building as we transform BAT. New categories are becoming an increasingly meaningful contributor to group performance, reinforcing our confidence in sustainable delivery moving forward. After a period of investment and transition, returning to our algorithm for the full year is an important milestone. It reflects the progress we have made in reshaping the business and provides a stronger foundation for long-term value creation.

With that, I will hand over to Javed, who will take you through our financial performance in more detail.

Thank you, Tadeu, and good morning, everyone. I'm pleased to share that we delivered results in line with expectations on a constant currency basis. This performance was mainly driven by strong U.S. multi-category delivery and the acceleration in new category growth. Our reported results reflect some adjusting items, the majority of which are noncash, including approximately GBP 800 million, primarily reflecting annual amortization of our U.S. trademarks, a GBP 370 million one-off adjustments related to Fit2Win, which around GBP 230 million is noncash and GBP 149 million credit following the settlement of historical litigation. To give you a clear view of our underlying performance, I will focus on constant currency adjusted and where relevant, adjusted for Canada metrics.

You can find further detail on adjusted items and share data in the appendix. We continue to build momentum in the first half, reinforcing our confidence in delivering our full year guidance. Group revenue increased by 2.9%. Adjusted gross profit rose 3.8%. Adjusted profit from our operations grew 3.5% and adjusted diluted EPS was up 7.9%. Let's now turn to New categories. Revenue growth accelerated to 18%, driven by another outstanding performance from Modern Oral, which was up 66%. Vapour revenue increased 5.3%, driven by the U.S., where we returned to double-digit volume and revenue growth. This was partially offset by a decline in heated products with glo revenue down nearly 12%, impacted by inventory movements and competitive intensity in the value segment.

We continue to deliver quality growth with gross profit up over GBP 120 million and category contribution up 55%, reaching GBP 269 million. This reflects our disciplined approach to investment and increasing scale benefits. We remain committed to investing behind profitable growth in Vapour and heated products, specifically where we are becoming increasingly selective where we deploy our resources, which Tadeu will talk more about later. Now turning to combustibles. Combustible volumes was down 4.7%, with growth in Pakistan and Turkey more than offset by continued industry volume decline in other key markets and the impact of market exits in Cuba and Mozambique. Revenue grew 2.1%, driven by robust price/mix of 6.8%. Growth in the U.S. and AME more than offset a slower-than-expected recovery in APMEA as fiscal and regulatory pressure persist.

Adjusted gross profit and category contribution both grew ahead of revenue, driven by a strong performance in the U.S. positive price/mix and our continued focus on cost optimization. Combustible remains a powerful value engine for the group, delivering robust returns and continuing to fund our transformation. Our resilient performance reflects the breadth of our global footprint, the strength of our portfolio and disciplined execution. Turning to our regions, starting with the U.S. We delivered a strong multi-category performance, driving total revenue up 8.5% and adjusted operating profit up 10.1%. New Category revenue increased by nearly 60%, driven by continued success of Velo Plus, which grew more than 200% and Vuse, which returned to double-digit volume and revenue growth.

In Combustibles, revenue grew 5%, driven by robust price mix, including the benefits of excise duty drawback and positive trade inventory movements. Value share declined by 40 basis points and volume share was down 80 basis points, reflecting continued industry growth in deep discount segment and heightened competitive activity since Q4 last year. We have actively responded to this trend, investing behind our portfolio and further strengthening our commercial execution. As a result, we have held our volume share since January. Looking into the second half, we expect an acceleration of investment to support the launch of Velo Max and Vuse flavor pods as well as behind our Combustible portfolio in a highly dynamic market. Tadeu will talk about this in more detail later.

In addition, we expect our strong H1 growth to moderate in H2 as positive inventory movements do not repeat, and we lap a stronger comparator. In AME, total revenue growth 0.9% with combustible up 2.5% and New Category up 1.9%. This was partially offset by lower direct leaf sales, reflecting our continued focus on higher return, more profitable areas. Combustible revenues was driven by strong delivery in Brazil, Turkey and Mexico and robust price/mix. This was partially offset by our exit from Cuba and increased competitive pressures in Germany and Romania, where we have taken targeted actions to strengthen our portfolio. In New Categories, Modern Oral revenue was up 22%, driven by the strength of our portfolio across both established oral markets in Scandinavia and newer growth markets, including U.K. and Poland, which now account for around 50% of our modern Oral revenue in the region.

Heated Product revenue declined by nearly 11%. Growth in Romania and Portugal was more than offset by lower revenue in Italy and Poland due to heightened competitive activity in the value segment. Looking ahead, we expect to strengthen our value proposition with the next-generation Hyper Pro+ in the second half of the year. We are also encouraged by the continued momentum of glo Hilo, which is performing well in the premium segment. Vapour revenue declined 14%, mostly impacted by regulatory changes in Poland as we continue to focus our investment on larger industry value pools. Adjusted operating profit increased 1.1%, supported by continued resilience in Combustibles and quality growth in Velo and Vuse. This was partially offset by investments in Heated Product behind our innovations rollout.

We expect performance to accelerate in H2, driven by our targeted commercial actions and the benefit of the rollout of new category innovations. Turning to APMEA, where our recovery has been slower than expected. Revenue was down 6.3%, primarily driven by combustibles. While we continue to drive growth in key markets, including Pakistan and Indonesia, this was more than offset by the challenging regulatory environment and the impact of illicit volume in Bangladesh and Australia, alongside the timing of inventory movements in Vietnam. Modern Oral revenue increased by 43%, driven by our first-mover advantage and category leadership across emerging growth markets. These include Japan, Pakistan, South Africa and Global Travel Retail, highlighting the increasing opportunity for the Category and for Velo.

Heated Product revenue declined 13%, impacted by material inventory movements and heightened competitive intensity in the value segment in Japan. Encouragingly, glo Hilo continues to build momentum in the premium segment. And with Hyper Pro+ launching in Japan in Q3, we expect an improving share performance in H2. Vapour revenue declined 28%, reflecting strategic market exits and more selective resource allocation. Adjusted profit declined 16.5%, mainly due to headwinds in key combustible markets. Looking ahead, we expect further sequential performance recovery in H2, supported by our commercial actions and investments in both Combustibles and New Category and a softer comparator in Australia.

Turning now to our group operating margin, which was up 30 basis points to 43.7%. We successfully offset inflationary pressures with a strong performance, higher profitability in New Categories and continued cost savings. At current rates, operating margin expanded by 10 basis points. We are making good progress with Fit2Win, our transformation program to build a leaner, faster and more data-driven BAT. We have identified a further GBP 100 million of optimization savings, resulting in an incremental one-off GBP 100 million cash investment to support delivery. In addition, to further drive New Category growth, we have also completed a comprehensive review of our manufacturing assets and machinery. Through this, we have identified opportunities to upgrade to more efficient next-generation technologies and state-of-the-art machinery to support future growth and productivity and to accelerate our transformation.

As a result, we have recognized a noncash charge of nearly GBP 230 million in the first half. Altogether, we now expect GBP 700 million of annualized savings by 2028 with GBP 500 million to be delivered by 2027. Total one-off costs are now GBP 950 million with GBP 840 million to be treated as adjusting. We continue to expect the majority of the cost to be incurred this year with balance in 2027. Bringing it all together, earnings per share increased by 7.9% as growth in operating profit was supported by 4.4% growth from earning kickers. This outperformance was primarily driven by lower net finance cost, reflecting repayment of debt with proceeds from the partial disposal of ITC stake in May last year and higher operating cash conversion in H1.

Looking ahead to the full year, we now expect net finance cost to be around GBP 1.65 billion with an underlying tax rate between 24% and 25%. As a result, we have upgraded our full year EPS guidance with earnings kickers expected to be moderate as we annualize the benefit of lower debt levels. Strong cash generation continues to enhance our financial flexibility and support disciplined capital allocation. We remain on track to be within our 2 to 2.5x leverage target range by year-end and to deliver more than GBP 50 billion of free cash flow by 2030. We continue to focus on our capital allocation priorities, which are: investing in transformation, balance deleveraging with progressive dividend and sustainable share buybacks and selective bolt-on M&A to support our transformation.

To summarize, H1 was in line with expectations, and we are on track to return to our midterm algorithm for the full year with profit second half weighted. Key drivers for H2 include mid-teens New Category revenue growth led by Velo and Vuse, driving a further improvement in New Category contribution, an acceleration in performance in AME, further sequential recovery in APMEA and strong H1 U.S. growth moderating due to increased investment, lapping a stronger comparator and as positive inventory movements do not repeat.

We expect H2 performance to be further supported by the positive phasing of Fit2Win benefits. As previously guided, we expect revenue and operating profit to be at the lower end of this range for the full year, absorbing around 1% transactional FX headwind and reflecting active investment choices, including the rollout of Velo Max and Vuse flavors in the U.S., scaling glo Hilo and Hyper Pro+ launches as well as increased combustible investment in the U.S. and other key markets. And finally, we now expect full year EPS growth to be towards the middle of our 5% to 8% range.

Thank you. And with that, I'll hand back to Tadeu.

Thank you, Javed. Looking ahead, I'm encouraged by the momentum we are building as we return to our algorithm and continue to transform BAT. We are entering the next phase of our journey from a position of strength with accelerating financial delivery, increasing New Category profitability and a clear pathway to long-term growth and value creation. With that context, I want to share more detail on our progress, looking at the topics we get asked about most by you, our investors. Starting with the sustainability of our multi-category delivery in the U.S. Across the market, adult nicotine consumer behavior is changing in a significant way. BAT is fully aligned to where these consumers are heading with our unique multi-category portfolio of #1 or #2 share positions across all categories. As a result, we are now the fastest-growing company in total nicotine.

Our total nicotine volume share increased by 110 basis points year-to-date, fueled by new categories, with Velo driving around 90% share of Modern Oral value growth and Vuse delivering over 100% share of Vapour value growth. My message here is clear. We believe we are the best positioned to win in total nicotine and continue to capture value in the world's largest nicotine value pool. I will now take you through the U.S. by category. Starting with Combustibles, where we continue to balance disciplined investment with sustainable value creation. Industry volume continued to improve in the first half, declining 4.9% on a sales to retail basis. This was supported by moderating solus consumption decline trends, slowing outflow to illicit Vapour supported by regulatory enforcement actions and the expansion of deeper discount into tracked channels, which we expect the industry to lap in the second half.

Our focus remains on driving value and share from our Combustibles business, and we continue to deliver strong financial performance in H1, as Javed highlighted. Against this backdrop, we have seen heightened competitive activity from Q4 last year. We have already taken actions to further sharpen our portfolio management, strengthen our route to market and leverage digital revenue growth management capabilities. In addition, we have been actively investing to strengthen our portfolio, and we are starting to see encouraging results. Target investments have been supporting Newport in premium, and we have also been strengthening Camel. Together, Lucky Strike and Pall Mall Select continue to drive both volume and value share gains in branded value, which combined with expanding our Doral brand coverage to 5 states is strengthening our presence and competitiveness at the low end of the market.

As a result, we have held our volume share since January, and we will continue to actively invest behind our portfolio in the second half. Second, I'm often asked about the regulatory and enforcement landscape in the U.S. And I'm pleased that we are starting to see recent actions having an impact on irresponsible illicit operators while also providing responsible legal manufacturers a pathway to bringing scientifically backed products to market. We are now seeing multiple government measures beginning to address the long-standing balance between the legal market and illicit operators. First, around half of Vapour industry volume is now covered by state directory and enforcement frameworks. Second, more than 18 million unauthorized Vapour products have been seized through federal cross-agency collaboration. Third, the FDA is taking actions to improve regulatory compliance for foreign manufacturers.

And finally, attorneys general continue to increase pressure on illicit Vapour sales channels and payment providers. Importantly, these actions have supported the legal Vapour industry return to growth in H1. We are also encouraged by the FDA's new prioritization guidance, which supports a pathway for both Vapour flavors and Modern Oral innovation. Taken together, these developments support a more level playing field. In U.S. Vapour, Vuse continues to strengthen its leadership position. We extended value share to a record 55.9% in the first half and now hold more than double the share of our nearest competitor. Building on this leadership, we will begin a phased rollout of new adult focused Vuse flavors, broadening consumer choice and leveling the competitive playing field, starting in Q3 with distribution to approximately 25,000 outlets.

We will execute this expansion in a disciplined manner, upholding our high standards of product quality, retailer compliance and underage access prevention. Distribution will be carefully targeted as we work with retailers to secure their commitment to adult-only sales supporting category sustainability. Altogether, this give us confidence in Vuse's ability to sustain growth and further strengthen its competitive advantage in the world's largest Vapour markets. Third, I'm often asked about the growth opportunity ahead in Modern Oral globally. In the U.S., I'm excited about expanding our Velo portfolio in the rapidly growing markets. Velo Plus continues to deliver an outstanding performance with our overall Modern Oral volume share now 31% and value share nearly 26%. In addition, we are capturing around 90% of category value growth, demonstrating both the strength of the product and brand together with the effectiveness of our commercial execution.

Building on this success, we are expanding the Velo portfolio to capture a broader range of adult consumer preference, including launching some limited editions, Velo Plus variants. And starting Q3, we will launch Velo Max, a higher moisture product and our latest innovation in the U.S. This will further expand our offer across 2 new strengths and 4 new flavors, complementing our existing portfolio and providing an incremental lever of growth. Velo is the clear global #1 brand in Modern Oral, the fastest-growing category with the lowest risk profile. We continue to expand Velo's footprint as regulatory clarity improves with 32 markets having now adopted category regulation, more than double the number versus 2024.

Our clear leadership position continues to strengthen, underpinned by strong growth across all 3 regions and the successful execution of our premiumization and innovation strategy. Our scale advantage continues to widen. In the first half, BAT shipped 7.9 billion pouches. And across our top markets, our Modern Oral volume share increased by over 8 percentage points to reach 39%. As the category continues to grow at pace, we believe our superior product portfolio supported by continuous innovation, scale, brand strength and regulatory capabilities will become increasingly important competitive advantages.

In AME, BAT is a clear category leader with 62% volume share across top markets, making us nearly 7x larger than our nearest competitor. This leadership position is underpinned by our superior brand equity scores, 40% higher than our closest competitor in Europe, supporting our premium brand positioning and reflected in our 68.5% value share. We continue to drive strong volume-led revenue growth. And importantly, this growth is becoming increasingly broad-based. Around 50% of our revenue comes from outside the Nordics, where the category continues to develop with growing incidence and consumption, supported by expanded distribution, growing category adoption and the strength of the Velo brand. Innovation remains a key differentiator. Through Velo Shift, we are expanding our premium positioning. Progress in Sweden and Switzerland is encouraging with Shift capturing 1% of value share in Sweden and 1.5% in Switzerland within a few months of launch.

Altogether, our strong momentum give us confidence in our ability to continue driving sustainable profitable growth and value creation in Modern Oral. Fourth, I'm asked about our key drivers of performance improvement in Heated Products. We are resetting glo's performance with a sharper, more disciplined approach. Industry volume growth moderated further in the first half, reflecting excise-driven disruption in Japan and continued consumer poly-usage across Vapour and increasingly Modern Oral globally. At the same time, competitive intensity has stepped up. Against this backdrop, we are focusing our investments where we see the strongest consumer opportunity and the best return potential in what remains a significant GBP 9 billion value pool.

We are scaling glo Hilo to build premium growth and strengthening our value proposition with Hyper Pro+. In addition, we are concentrating resource behind priority markets in a more selective way. Through this, our focus is clear. We set our performance and we build share momentum in H2 through innovation-led growth and disciplined execution. glo Hilo is becoming -- is beginning to demonstrate the benefits of our premiumization strategy. Launches across 9 target markets covering around 70% of industry volume. This provides a strong platform for future scale with around half of consumers new to the glo platform. In addition, we are strengthening glo's brand equity as we establish our presence in the premium segment. This is translating into tangible commercial progress with volume share increasing across key markets and particularly strong momentum in Poland.

We continue to focus on scaling glo Hilo through generating trial, targeting consumers of premium Combustibles and Heated Products while building awareness to unlock further growth. And finally, bringing it all together, as we build on our momentum, we see a clear pathway to improved growth in 2027. Our delivery will be supported by 4 key drivers: First, continued strong new category revenue growth led by continued momentum in Modern Oral, U.S.-led Vapour delivery and a more targeted approach in Heated Products. Second, consistent Combustibles delivery supported by further recovery in APMEA and targeted investment to sustainably drive Combustibles value and share globally. Third, continued strong profit conversion, reflecting improving new category returns and ongoing cost savings. And fourth, EPS accretion from share buybacks, lower finance costs and continued strong cash generation.

To conclude, by focusing investment on our highest return opportunities, we are delivering quality growth through our multi-category portfolio, supported by sharper execution, enhanced capabilities and disciplined resource allocation. Through this, we are driving higher returns and building a more resilient business. At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation together with delivering strong cash returns. And I'm confident in our strategy, our execution and that BAT is well positioned to deliver long-term value for our shareholders. Before we move to Q&A, let me leave you with some of the key themes shaping BAT's next phase of growth and value creation. We look forward to sharing more at our Capital Markets Day in September. Thank you for listening.

And I will now hand over to Victoria to introduce the questions-and-answer session.

Thank you, Tadeu and Javed, and good morning, everyone. [Operator Instructions] Tadeu and Javed will be very happy to take your questions, and I will now hand over to the conference call operator.

The first question is from Andrei Andon-Ionita from Jefferies.

Two for me, please. Firstly, on U.S. e-Vapour, do you see the illicit enforcement tailwind continuing into early H2? And also for the launch of Vuse Ultra in H2, could you give us a bit more color as to what we should expect in terms of number of outlets targeted and the types of flavors that we should expect to see on the market? And then on U.S. Combustibles, you registered plus 5% top line growth in H1, significantly ahead of the U.S. Combustibles framework of value flat to plus 1% growth. How should we think in the context of this H1 performance about the U.S. combustibles algo for the full year '26?

Okay. Thank you, Andrei, for the question. I'll start with the Combustible numbers. Yes, you rightly point out that the 5% performance in H1 is well ahead of what the algorithm would suggest. We highlight the fact that we had some trade movements that has been beneficial in H1 that will be unwind in H2. I will tell you that this equates for something close to 2% of the 5% if you -- so underlying performance actually is more of a 3%. Clearly, we have a momentum in the H1. Duty drawback is part of the 3%, but it's not a major part of it. Most of the performance is organic performance, let's put it that way. Obviously, as we highlighted in the presentation, we intend to invest -- continue to invest behind our portfolio as we progress in the second half of the year.

We are clearly seeing the dynamic of the low discount segment in the U.S. continues to grow, and we will try to become more competitive in that space as well. So I would expect to see a more moderate performance in the second half of the year, particularly in combustible in the U.S. that should reflect in a number that will be much closer to the algorithm, maybe a bit still higher than the 0 to 1 that we have, but not as high as we see in the first half of the year. So that's the combustible part. On the Vapour part, it's very encouraging what we are seeing from the state's enforcement. It's 50%. It's the first time that we saw the legal Vapour market coming back on a very modest base, but still we have seen in the last few years a decline of legal market year after year. We -- it's hard to predict exactly what happens next. I would suggest with all the initiatives that I highlighted during the presentation that we could expect to see at least a similar type of environment.

I don't think that will be, I would say, significant. I'm more encouraged by the prioritization guidance from the FDA because these allow the legal American manufacturers to offer substantiated high-quality products for adult nicotine smokers in the U.S. And this translates into our ability to bring back flavors in the market and having a more level playing field because you cannot forget the fact that from one side, there is an element of enforcement that is important, and there is clearly mainly from the state levels, an uptick on enforcement levels, but the root cause of illegality is not just about a lack of -- it's about a lack of level playing field. And having a higher level playing field will be also very important. So I would expect to continue to see some more traction from the legal Vapour market. In terms of your question on...

Flavors and how we roll out.

Yes. How we roll out? We mentioned that, that will be basically in 2 phase. We are -- in Q3, we'll be reaching out 25,000 outlets. And why we are doing that way? Because we have been very thoughtful in the way that we are rolling out flavors back in the market. We want to make sure that retailers do the ID scan before they sell the product to make sure that we have no youth accessing this product. There is a commitment and a compliance methodology that we have put in place. And that's the reason we are very thoughtful in the way that we are rolling this out. So the idea is to go in the Q3 with 25,000. In Q4, there is another round of 25,000, but we will be building from there, okay?

The next question is from Faham Baig from UBS.

A couple from me as well. Starting with nicotine pouches in the U.S. Could you maybe help us with the speed of launching Velo Max in terms of the distribution stores as well as the likely economics compared to Velo Plus. And of course, you've now seen competition launching their own improved versions of nicotine pouch products. How have you seen this impacting competitive and category dynamics thus far?

The second question is on full year '26 guidance. Maybe if you could just help elaborate on some of the moving parts that you expect to see in the second half in terms of how the 2.9% organic sales growth develops. What could maybe see it do better? What could maybe see it do worse? And what are the key items that you're going to be monitoring?

Okay, Faham. Look, on the nicotine pouch, we are -- well, we have a very well-established network from Velo Plus in the U.S. It's -- we'll be launching Velo Max in that -- and it's just a question of the normal time that takes to distribute in a continental country like the U.S. So this will be probably faster than what took us to do in terms of Velo Plus because we have now a well-established network. That was not necessarily the case when we first introduced Velo Plus, but takes some time to get to where we are with Velo Plus. But the idea is to use Velo Max as a complement to Velo Plus.

And commercially speaking, we are -- we will be considering our competitors' position, obviously, and we want to make the product as competitive as product, give the chance for consumers to try the product. We believe that it's an even enhanced product. But like I said, it has a higher moisture and different strengths and not necessarily it's a very -- it will be I think that we'll be addressing some consumer needs that not necessarily Velo Plus is currently positioned for when we think about, for example, higher levels of strength and obviously, also different flavors. That's the reason why we state that distinct flavors will complement the portfolio. We feel very, very, I would say, obviously are very, very supportive of Velo, very good about the product that we have in the market. It's a competitive market. Obviously, there is no doubt that will become more competitive.

We see the strength of Velo Plus supporting all these new launch from competition. And I do believe that there will be still -- will still be a very strong brand. We are now leaders in 11 states in the U.S. And so we have a retention rate of 7%. This hasn't changed. All the growth of the category basically in the first half is coming from Velo Plus. Independent of the launch that we have seen so far, I do believe that we have all it takes with the capabilities we have built and the products that we have and now complemented by Velo Max, all the conditions to support the position that we have in the market.

So in terms of the building blocks for the second half of the year, and obviously, APMEA, we expect to be better performance in the second half than in the first half. It's clearly a recovery story. H1 2026 for APMEA was already better than the H2 2025. H2 2026 will be better than H1 2026 because we will be lapping a more softer comparator, if you want, in places like Australia, for example. If you remember well, they implement a very draconian regulation that accelerates exponentially the illicit trade in Australia in the second half of last year. We'll be lapping that. So this will be more positive. So clearly, that will be the driver for the second half.

And that's why we say that second half weighted mainly because of the performance in APMEA. AME, we have been investing heavily behind mainly combustible and HP, and we expect also to have some improvement in the second half. And in the U.S., we just spoke about the U.S. So I don't expect the 5% should carry on in combustible for the rest of the year and because of the investments we need to do in the portfolio of combustible. And all in all, that's the reason why I expect a more positive second half overall for the group and leading to a full year in terms of top line in the low end of our range. Do you want to add something?

I think similarly, the same will be the case for the building blocks for the APFO line as well. As we guided that we see a very strong performance in the U.S., but we will see a more stronger performance from AME and APMEA versus H1 and slightly less performance in U.S. So if you add this all both together, then we are again at the lower end of our algorithm for the full year and -- but it is the first time we are entering the algorithm. And two, as I highlighted earlier, that EPS guidance, we will see the overall impact slow down over the full year, but we will see a strong kicker. That is why we have guided on the upgrade of our EPS guidance to the mid of the range.

Just on that point, Javed, I want to complement on the -- because I received some questions about the low end of the range. We are here thinking about the long-term sustainability of the algorithm. And we are doing the right investments for the business, for the sustainable growth of the business. We have to invest in combustible in the U.S., in some other key markets as well. We have to invest in this excellent performance that we have in Modern Oral across the world. We are resetting our HP business, which also requires investments with the launch of glo Hilo.

So -- and we obviously have an opportunity in Vapour in the U.S. that we haven't seen in many years. So we are doing the right things for the business for the long run. And as we always said, this is a year to go back to the algorithm, and we position in the low end to create us the possibility to make the right investments to make this a sustainable story moving forward, and I'm very confident that, that will be the case.

Our next question is from David Roux from Morgan Stanley.

My first question is just on Combustibles. At the trading updates in June, I think the business sort of downgraded its expectation for the global cigarette industry volumes from minus 2% to minus 2.5%. I think at the time, you noted this was predominantly driven by Bangladesh. It now seems the business has lowered its assumption again to now minus 3%. What is driving this latest sort of reduction in the outlook for cigarette volumes for the industry? Has Bangladesh deteriorated further? Or are you now seeing broader weakness across other markets?

And then my second question is just on Velo in the U.S. I guess it's a 2-part question. But if we take a step back, I mean, following the rollouts of Velo Max through the rest of this year, how many SKUs across strengths and flavors do you expect to have across the total Velo platform by the end of this year versus, say, where we are today? And then the second part of this is your key competitor in the U.S. on nicotine pouches recently received a modified grant order to market using a reduced harm claim. Do you think this modified grant order really moves the needle in terms of marketing? And is this something that you'll be pursuing for Velo?

So let's address the first, the combustible question. The 2.5% to 3% is basically Brazil-driven. We had a massive excise shock in Brazil. The prices come into place on the 1st of August. This is really a meaningful price increase, excise driven. And obviously, this will have implications in the size of the market and it's a big market, like Bangladesh is also a big market, but it's basically Brazil driven. On Velo, we have already 3 strengths in Velo Plus. We have another 2 now strengths. So we're going to have a total of 5 strengths in Velo. And obviously, this is the position we are today. What encouraged us in terms of this prioritization guidance from the FDA is that we will be able with more certainty to bring more innovative products to the market in due time, so -- which hasn't been really the case for many, many years. You know that we have been filing PMTAs and being there for a long, long time.

And this is about to change with the new guidance. So for the time being, we're going to be with the launch of Velo Max with 5 different strengths with the Velo family moving from -- as it stands today. In terms of your comments on the questions on...

The PM.

Yes PM. First of all, I think that the MRTPA for Modern Oral is welcome as a category. I don't think that there is any major commercial benefit for any particular, I would say, SKU or product in the market. We do have in our applications for Velo MRTPA applications as well. So we might be in a position to receive one of those in due time. But it's less about the commercial opportunity in the market, but more about what it means from the advocacy of the category, mainly coming from a market like the U.S. with the FDA. I think that is very important. As you know, we have been very, very ahead in terms of discussions with a number of stakeholders in order to properly regulate the category because we see the category as the lowest risk category within the new categories, if you want, because there is no inhalation.

There is no tobacco. It's the closest you can get to any RT type of products. And we have now 32 markets, like I mentioned in my presentation, more than are regulated. A number of those markets sits in Europe, which is also very important. And events like that with the MRTPAs being delivered by FDA is very positive overall. It's less about the commercial impact in the local market. It's more about the advocacy of the category outside -- even outside the U.S.

Our next question is from Damian McNeela from Deutsche Bank.

A few for me. Firstly, just on the new categories portfolio. I think you've made the decision to exit some markets in vape and reprioritized in heated. Can you just sort of indicate whether that work is now complete or whether there are sort of still markets that you're looking at around the viability of those categories? is the first question.

Second question is, can you provide a bit more information on what specifically is happening in the German Combustibles market with regards to sort of increased competition? And if there is anything you can do to sort of or what you are doing to sort of combat that increased competition? And then the last one is just a follow-up on Faham's question earlier. Are you able to provide any indication of relative pricing for Velo Max in the U.S. when it launches, please?

Okay. Yes. It starts for the last, no, the price, we are not giving any indication of price of Velo Max. On Germany, what we have seen over the last few -- couple of years mostly is the increase in trade-labels brands in the German market. More recently, this growth has more stabilized. And -- but this has created some, I would say, down-trading pressures in the market that we obviously had to react to that. We are not seeing the growth at the pace that we were seeing before in trade labels. It seems that we are coming now more to a more stable situation. But that's what has been the dynamic over the last couple of years, let's put it that way, more recently, 18 months, I would say. In terms of...

Vapour exits and refocus on HP.

Yes, the HP. -- yes, the Vapour markets, we -- mainly we decide to leave markets in Asia where we don't see either a proper regulatory environment and/or enforcement. So -- and as a consequence, there is no financial return for a company, a legal company like BAT because we have to compete with illegal products, which there is no level playing field, if you want. So we decide to pull out of a number of markets that we have entered in the first place when they have regulated with an expectation that regulation would be made compliant. This was not the case. We have to accept that. And then given that we will be constantly looking for best return for our investments in terms of resource allocation, we make the call to pull out. So that's why you see the Vapour numbers in APMEA in particular, negative as a consequence of these exits.

In AME, it's more a consequence of a change in legislation in Poland that basically make completely not viable to be present in the Vapour market anymore. And also in the U.K. that with the change in the policies, again, another market that is very difficult to assess compliance. The latest numbers that I saw there is showing a very, very strong presence of illegal products in the U.K. market. So this is something that we'll be continuing reassessing, I have to say. I'll tell you that most of it we have already act on. There will be probably some impact still coming across the H2 of this year. And as we lap this for next year onwards, become less evident about these market exit decisions, okay?

Our next question is from Pallav Mittal from Barclays.

I had a technical issue earlier, so apologies if I missed it. But firstly, starting on the U.S. Combustibles business, volumes are better and price mix is a touch lower versus what you were expecting. And I think in your comments, you said duty drawback is not a major part of it in terms of the mix. Can you quantify the volumes that are seeing the benefit from double duty drawback? And is it sequentially increasing? Or has that now stabilized? So that's the first one. And then secondly, on your Vapour business in Europe, it has been under pressure over the last couple of years. And recently, you highlighted issues in Poland, et cetera. But how should we think about that European vape business in the medium term?

Okay. On the Vapour in Europe, yes, the major drag for the numbers are related to Poland. And we have been in strong positions in places like Germany, which is a very, very important Vapour pool. Vuse Ultra, for example, is making big inroads there. In other markets like France, Spain, we have a lot of competition coming to the market. But we also have a very strong pipeline that will reach the market in H2. So we feel confident in our ability to sustain our leadership position in Vapour in Europe in the markets that we have selected to participate. So that's the first one.

On the Combustible, as I mentioned, Overall, the industry, I will talk about the industry first. We have seen a reduction in the levels of decline. And as I make the point in my presentation, a lot of that has to do with the growth of the low end of the segment of the category that actually, if anything, is growing, it's not declining, it's growing, continue to grow. And we see less migration out of cigarettes towards the illegal Vapours and for basically 2 reasons. One is the accessibility, availability of these products get more constrained when you have more states passing legislation, which is the case now of 50% where the volume is sold. And also the fact that we have more solo users combustibles that they don't want to migrate to the Vapour side.

So -- this overall is creating a dynamic that is more favorable than in the past. It's hard to predict how it goes moving forward because if anything, we still have to see the correlation with oil price and the conflict that is happening in the Middle East and how this could impact oil price because we know that there is a correlation between oil price and consumption of cigarettes in the U.S. We haven't seen this yet in the H1, but it's difficult to predict in the second half of the year.

And obviously, what we will be doing and will be reflected in our top line numbers, we will be increasing our competitiveness to be able to answer the fact that the lower end of the market is growing. So this is one element that will have an implication in the second half of the year. The other element, like I mentioned before, is the inventory movements that has an impact around 2% of revenue that will be lapped in the second half of the year. So it's not a reflection of the underlying performance, if you want, of the first half of the year. That's the main reason why in the case of U.S., we expect to be H1 skewed in terms of performance as opposed to the rest of the group that will be H2 skewed because of the performance of APMEA improving and AME improving more than offsetting the moderation that we'll be seeing in the U.S. in the second half.

Duty drawback.

And we don't do...

And the duty drawback, yes, in the first half, was not very meaningful. And in the second half, we will not be giving guidance about duty drawback, but this will be part of the elements that will be taking into consideration when we put in place our plans.

Our next question is from Rey Wium from Anchor Stockbrokers.

If I may just start off by saying Victoria actually look brilliantly in red. Shows there's an opening there. I Just want to get back to the guidance -- very strong performance on EPS, up 5.5%. Now if I look at your guidance, you've talked about EPS in the middle of the range. So that brings basically 6.5%. You talked about translation impact negative 2% to 3%. So that brings us back to sort of adjusted EPS around about 4%. Am I more or less correct doing that assumption? So actually overall implies a bit of a slowdown in the EPS growth for the year. And within that, you mentioned, obviously, the U.S. will be a bit slower and the other 2 regions will be a bit stronger. I just want to know whether that summary is spot on.

I think if you look at the profit performance of H1 and our guidance for the full year, so actually, it will move in the right direction, which means it will have more positive impact on EPS. But you're right that once we take into account the FX impact, our adjusted EPS would be in the range of 4%, 4.5%, which is just for a reminder, is one of the best EPS performance of BAT in recent years, and we are very confident. And as I highlighted earlier, that it is mainly driven by the kickers below operating profit, mainly net finance cost and also the cash conversion, and we do get benefit from being a high cash generative business. And even in H1, we are delivering a high cash conversion, and we are on target to remain -- deliver above 95% conversion for the full year. But yes, you are right that our adjusted EPS would be more than 4%, around 4.5%.

On a current basis, yes. Yes.

On the current basis, yes. Yes.

Yes. And just also on that, the new category growth, I mean, you guide for mid-teens growth. So you had 18% in the first half. So I just want to get a feel of -- do you expect an improvement in the Heated Products, which was down 12%. And then obviously, I'm just curious about the growth in Vapour, whether we can probably see a little bit of an acceleration there.

Yes. Look, on Vapour, obviously, we'll have the Vuse flavors coming in the market. But remember that I said that will be a phased approach. So most of the impact will be feeling in 2027. We also have to take into consideration that we'll be lapping the exit of one competitor in the U.S. that happened in the second half last year. And so that's the dynamics around the Vapour. In HP, I'm not expecting anything meaningful changing from the financial point of view. I do expect us to recover share from now until the end of the year with all the actions that we are putting in place.

And Velo, which is mainly the reason why we are calling in the mid-teens, we'll be lapping a much stronger comparator in the second half because remember that in the first half of this year, we had basically launched Velo Plus at the end of '24. They were still building up in the first half of '25. So we just lapped this half year now in '26. So they have a very, very strong numbers in terms of volume, in terms of revenue, triple digits in the U.S. And obviously, when it comes to the second half of the year, they are lapping a much stronger second half of '25. That's the only reason why we are saying mid-teens in the full year.

Our final question today is from Richard Felton from Goldman Sachs.

Two questions from me, please. The first one on U.S. Vapour specifically. As we think about the competition between Vuse and the illicit segment, what are the gaps as it relates to flavors, devices and price points? And which of those gaps can you now close as a result of the FDA prioritization guidance? I suppose...

Okay. You want to ask another question? So let's finish here. You have another question? I just...

Yes, sorry, that was the first one. Second one was on free cash conversion. Obviously, a little bit stronger than we would -- we normally see from BAT in H1. The question is, what are the drivers of that? Is it just phasing between periods? Or does that point to potentially better cash conversion on a full year basis, too?

Okay. On the Vapour, Javed covered the free cash flow. On the Vapour side, obviously, we are more interested on the channel, because you probably saw there in my slide that we talk about illicit presence in channels -- track channels being 12%. This is just 2% of the size of the illegal because most of the sales of illegal is done via independents and vape stores. And it's not just about the flavors, it's about they bring to market big device, big tanks device with a massive number of puffs that will never be allowed to do. And it's not just a question of FDA approving because we, as a responsible company, we never commercialize any Vuse product in the world with more than 10 ml in terms of cartridge that equates to something like 4,000 puffs because as you puff more and more, the metal degrades and contaminates the leak that you inhale. So it's a bad Vapour. And they don't care about that, those illegal players. So you go out there and you buy 10,000 puffs and 20,000 puffs device.

In my last market in the U.S., I saw one of 100,000 puffs device. And obviously, this has financial benefits when you consider the cost per puff of this device. I will never be able to compete there. And this is a gap that needs to be closed by enforcement. But clearly, they shouldn't be in the market in the first place because it doesn't bring any type of benefit health-wise, if not the contrary. So what we be closing the play field is on the convenience stores channels where we haven't been able to be present with flavors since 2021, January 2021. We'll be back. It's a very important channel as well. And more important is a channel where we feel very confident about our ability through the retailers to check IDs before selling these products, where not necessarily happens when you indiscriminately start selling in independent stores and other type of stores. So I think that this -- in that channel, we'll be closing the gap substantially. It will be competitive. Now the impact of this in the overall illicit market, we have to wait and see. I don't want to do a proper estimation on that now.

And I think on the cash conversion, 2 points from my side. One is because of the lower net financing cost, as I highlighted earlier, which was due to the debt repayment from the proceeds of ITC. But more importantly, also, I think I'm very proud of the work the finance team keeps on doing with our commercial colleagues to keep focus on cash as much as we do on profit. So hence, that focus on cash has delivered higher cash, which makes me very confident that for the full year, we will be delivering another year of more than 95% cash conversion for the full year.

Yes. I wouldn't assume much more that will be much better than previous year because we have a track record of a very strong cash conversion. The performance in H1 just give us more confidence that it can be another year of a very strong delivery in that place.

Thank you. With this, I'd like to hand the call back over to Victoria for any additional or closing remarks. Over to you, ma'am.

Thank you. Well, thank you very much for all the questions from the telephone lines. I'm afraid we are out of time, and therefore, we'll not be able to get to the online questions, but the IR team will respond directly to those who sent questions in.

And now I'd like to hand back to Tadeu for closing remarks.

Okay. Thank you all for listening today and for all your questions. And then just to close, our H1 results were in line with our expectations, and we are on track to deliver our full year guidance with EPS now expected to be towards the middle of our 5% to 8% range. We will continue to reward our shareholders through strong cash returns, including our progressive dividend and sustainable share buyback and deliver long-term growth and value creation. Thank you again for joining us. I look forward to see many of you in September at our Capital Markets Day.

Good morning, everyone. I'm delighted to welcome you to our 2026 Interim Results Presentation. With me this morning is Javed Iqbal, Interim CFO; and Victoria Buxton, Group Head of Investor Relations.

I will begin with our transformation highlights. Javed will then take you through our financial results in more detail. Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead given the clear momentum we are building.

We will then take your questions. With that, I'd like to draw your attention to the disclaimers on Slide 2 and 3.

Let's begin by looking at our transformation momentum. Starting with some highlights from H1. Smokeless now represents 19.8% of group revenue, up 160 basis points versus last year. We added 4.1 million smokeless consumers over the last 12 months, taking the total to 35 million. This progress is mainly driven by Modern Oral industry growth, where the strength of the Velo brand continues to resonate strongly with consumers.

Our first half results were in line with expectations, supported by a strong multi-category delivery in the U.S., excellent Velo momentum across all 3 regions and the resilient Combustibles performance in the U.S. and AME. Our disciplined focus on quality growth continues to improve returns through more targeted investments with New Category contribution up 55% at constant rates.

As previously guided, we expect adjusted profit from operations to accelerate in H2, driven by improvements in AME and APMEA. Our second half weighting will also benefit from the phasing of Fit2Win savings. Finally, we continue to generate strong cash returns. We expect to be within our 2x to 2.5x target leverage corridor by year-end, while continuing to reward our shareholders with our progressive dividend and GBP 1.3 billion share buyback in 2026.

I'm encouraged by the momentum we are building as we transform BAT. New Categories are becoming an increasingly meaningful contributor to group performance, reinforcing our confidence in sustainable delivery moving forward. After a period of investment and transition, returning to our algorithm for the full year is an important milestone. It reflects the progress we have made in reshaping the business and provides a stronger foundation for long-term value creation.

With that, I will hand over to Javed, who will take you through our financial performance in more detail.

Thank you, Tadeu, and good morning, everyone. I'm pleased to share that we delivered results in line with expectations on a constant currency basis. This performance was mainly driven by strong U.S. multi-category delivery and the acceleration in New Category growth.

Our reported results reflect some adjusting items, the majority of which are non-cash, including approximately GBP 800 million, primarily reflecting annual amortization of our U.S. trademarks, a GBP 370 million one-off adjustments related to Fit2Win, which around GBP 230 million is non-cash and GBP 149 million credit following the settlement of historical litigation.

To give you a clear view of our underlying performance, I will focus on constant currency, adjusted and, where relevant, adjusted for Canada metrics. You can find further detail on adjusting items and share data in the appendix.

We continue to build momentum in the first half, reinforcing our confidence in delivering our full year guidance. Group revenue increased by 2.9%. Adjusted gross profit rose 3.8%. Adjusted profit from our operations grew 3.5%. And adjusted diluted EPS was up 7.9%.

Let's now turn to New Categories. Revenue growth accelerated to 18%, driven by another outstanding performance from Modern Oral, which was up 66%. Vapour revenue increased 5.3%, driven by the U.S., where we returned to double-digit volume and revenue growth. This was partially offset by a decline in Heated Products with glo revenue down nearly 12%, impacted by inventory movements and competitive intensity in the value segment.

We continue to deliver Quality Growth, with gross profit up over GBP 120 million and category contribution up 55%, reaching GBP 269 million. This reflects our disciplined approach to investment and increasing scale benefits. We remain committed to investing behind profitable growth, in Vapour and Heated Products specifically, where we are becoming increasingly selective about where we deploy our resources, which Tadeu will talk more about later.

Now turning to Combustibles. Combustible volumes was down 4.7%, with growth in Pakistan and Turkey more than offset by continued industry volume decline in other key markets, and the impact of market exits in Cuba and Mozambique.

Revenue grew 2.1%, driven by robust price/mix of 6.8%. Growth in the U.S. and AME more than offset a slower-than-expected recovery in APMEA, as fiscal and regulatory pressure persist.

Adjusted gross profit and category contribution both grew ahead of revenue, driven by a strong performance in the U.S., positive price/mix, and our continued focus on cost optimization. Combustible remains a powerful value engine for the group, delivering robust returns and continuing to fund our transformation. Our resilient performance reflects the breadth of our global footprint, the strength of our portfolio and disciplined execution.

Turning to our regions, starting with the U.S. We delivered a strong multi-category performance, driving total revenue up 8.5% and adjusted operating profit up 10.1%.

New Category revenue increased by nearly 60%, driven by continued success of Velo Plus, which grew more than 200%, and Vuse which returned to double-digit volume and revenue growth.

In Combustibles, revenue grew 5%, driven by robust price mix, including the benefits of excise duty drawback and positive trade inventory movements. Value share declined by 40 basis points and volume share was down 80 basis points, reflecting continued industry growth in deep discount segment and heightened competitive activity since Q4 last year. We have actively responded to this trend, investing behind our portfolio and further strengthening our commercial execution. As a result, we have held our volume share since January.

Looking into the second half, we expect an acceleration of investment to support the launch of Velo Max and Vue flavored pods, as well as behind our combustible portfolio in a highly dynamic market. Tadeu will talk about this in more detail later.

In addition, we expect our strong H1 growth to moderate in H2 as positive inventory movements do not repeat, and we lap a stronger comparator.

In AME, total revenue growth, 0.9%, with combustible up 2.5% and New Category up 1.9%. This was partially offset by lower direct leaf sales, reflecting our continued focus on higher return, more profitable areas. Combustible revenues was driven by strong delivery in Brazil, Turkey and Mexico and robust price/mix. This was partially offset by our exit from Cuba and increased competitive pressures in Germany and Romania, where we have taken targeted actions to strengthen our portfolio.

In New Categories, Modern Oral revenue was up 22%, driven by the strength of our portfolio across both established oral markets in Scandinavia, and newer growth markets, including U.K. and Poland, which now account for around 50% of our Modern Oral revenue in the region.

Heated Products revenue declined by nearly 11%. Growth in Romania and Portugal was more than offset by lower revenue in Italy and Poland, due to heightened competitive activity in the value segment. Looking ahead, we expect to strengthen our value proposition with the next-generation Hyper Pro Plus in the second half of the year. We are also encouraged by the continued momentum of glo Hilo, which is performing well in the premium segment.

Vapour revenue declined 14%, mostly impacted by regulatory changes in Poland, as we continue to focus our investment on larger industry value pools. Adjusted operating profit increased 1.1%, supported by continued resilience in Combustibles and quality growth in Velo and Vuse. This was partially offset by investments in Heated Products behind our innovations rollout. We expect performance to accelerate in H2, driven by our targeted commercial actions and the benefit of the rollout of New Category innovations.

Turning to APMEA, where our recovery has been slower than expected. Revenue was down 6.3%, primarily driven by Combustibles. While we continue to drive growth in key markets, including Pakistan and Indonesia, this was more than offset by the challenging regulatory environment and the impact of illicit volume in Bangladesh and Australia, alongside the timing of inventory movements in Vietnam.

Modern Oral revenue increased by 43%, driven by our first-mover advantage and category leadership across emerging growth markets. These include Japan, Pakistan, South Africa, and Global Travel Retail, highlighting the increasing opportunity for the Category and for Velo.

Heated Products revenue declined 13%, impacted by material inventory movements and heightened competitive intensity in the value segment in Japan. Encouragingly, glo Hilo continues to build momentum in the premium segment. And with Hyper Pro Plus launching in Japan in Q3, we expect an improving share performance in H2.

Vapour revenue declined 28%, reflecting strategic market exits and more selective resource allocation. Adjusted profit declined 16.5%, mainly due to headwinds in key combustible markets. Looking ahead, we expect further sequential performance recovery in H2, supported by our commercial actions and investments in both Combustibles and New Category, and a softer comparator in Australia.

Turning now to our group operating margin, which was up 30 basis points to 43.7%. We successfully offset inflationary pressures with a strong performance, higher profitability in New Categories and continued cost savings. At current rates, operating margin expanded by 10 basis points.

We are making good progress with Fit2Win, our transformation program to build a leaner, faster and more data-driven BAT. We have identified a further GBP 100 million of optimization savings, resulting in an incremental one-off GBP 100 million cash investment to support delivery.

In addition to further drive New Category growth, we have also completed a comprehensive review of our manufacturing assets and machinery. Through this, we have identified opportunities to upgrade to more efficient, next-generation technologies and state-of-the-art machinery to support future growth and productivity and to accelerate our transformation.

As a result, we have recognized a non-cash charge of nearly GBP 230 million in the first half. Altogether, we now expect GBP 700 million of annualized savings by 2028, with GBP 500 million to be delivered by 2027. Total one-off costs are now GBP 950 million with GBP 840 million to be treated as adjusting. We continue to expect the majority of the cost to be incurred this year with balance in 2027.

Bringing it all together, earnings per share increased by 7.9% as growth in operating profit was supported by 4.4% growth from earning kickers. This outperformance was primarily driven by lower net finance cost, reflecting repayment of debt with proceeds from the partial disposal of ITC stake in May last year, and higher operating cash conversion in H1.

Looking ahead to the full year, we now expect net finance cost to be around GBP 1.65 billion with an underlying tax rate between 24% and 25%. As a result, we have upgraded our full year EPS guidance with earnings kickers expected to be moderate as we annualize the benefit of lower debt levels.

Strong cash generation continues to enhance our financial flexibility and support disciplined capital allocation. We remain on track to be within our 2x to 2.5x leverage target range by year-end and to deliver more than GBP 50 billion of free cash flow by 2030. We continue to focus on our capital allocation priorities, which are investing in transformation, balance deleveraging with progressive dividend and sustainable share buybacks, and selective bolt-on M&A to support our transformation.

To summarize, H1 was in line with expectations, and we are on track to return to our mid-term algorithm for the full year with profit second half weighted. Key drivers for H2 include mid-teens New Category revenue growth led by Velo and Vuse, driving a further improvement in New Category contribution, an acceleration in performance in AME, further sequential recovery in APMEA, and strong H1 U.S. growth moderating due to increased investment, lapping a stronger comparator and as positive inventory movements do not repeat.

We expect H2 performance to be further supported by the positive phasing of Fit2Win benefits. As previously guided, we expect revenue and operating profit to be at the lower end of this range for the full year, absorbing around 1% transactional FX headwind and reflecting active investment choices, including the rollout of Velo Max and Vuse flavors in the U.S., scaling glo Hilo and Hyper Pro Plus launches as well as increased Combustible investment in the U.S. and other key markets.

And finally, we now expect full year EPS growth to be towards the middle of our 5% to 8% range. Thank you. And with that, I'll hand back to Tadeu.

Thank you, Javed. Looking ahead, I'm encouraged by the momentum we are building as we return to our algorithm and continue to transform BAT. We are entering the next phase of our journey from a position of strength with accelerating financial delivery, increasing New Category profitability and a clear pathway to long-term growth and value creation.

With that context, I want to share more detail on our progress, looking at the topics we get asked about most by you, our investors.

Starting with the sustainability of our multi-category delivery in the U.S. Across the market, adult nicotine consumer behavior is changing in a significant way. BAT is fully aligned to where these consumers are heading, with our unique multi-category portfolio of #1 or #2 share positions across all categories.

As a result, we are now the fastest-growing company in total nicotine. Our total nicotine volume share increased by 110 basis points year-to-date, fueled by New Categories, with Velo driving around 90% share of Modern Oral value growth and Vuse delivering over 100% share of Vapour value growth.

My message here is clear. We believe we are the best positioned to win in total nicotine and continue to capture value in the world's largest nicotine value pool. I will now take you through the U.S. by category.

Starting with Combustibles, where we continue to balance disciplined investment with sustainable value creation. Industry volume continued to improve in the first half, declining 4.9% on a sales to retail basis. This was supported by moderating solus consumption decline trends; slowing outflow to illicit Vapour, supported by regulatory enforcement actions; and the expansion of deeper discount into tracked channels, which we expect the industry to lap in the second half.

Our focus remains on driving value and share from our combustibles business, and we continue to deliver strong financial performance in H1, as Javed highlighted.

Against this backdrop, we have seen heightened competitive activity from Q4 last year. We have already taken actions to further sharpen our portfolio management, strengthen our route to market, and leverage digital revenue growth management capabilities. In addition, we have been actively investing to strengthen our portfolio, and we are starting to see encouraging results.

Target investments have been supporting Newport in Premium, and we have also been strengthening Camel. Together, Lucky Strike and Pall Mall Select continued to drive both volume and value share gains in Branded Value, which combined with expanding our Doral brand coverage to 5 states, is strengthening our presence and competitiveness at the low end of the market. As a result, we have held our volume share since January, and we will continue to actively invest behind our portfolio in the second half.

Second, I'm often asked about the regulatory and enforcement landscape in the U.S. And I'm pleased that we are starting to see recent actions having an impact on irresponsible illicit operators, while also providing responsible legal manufacturers a pathway to bringing scientifically backed products to market.

We are now seeing multiple government measures beginning to address the long-standing imbalance between the legal market and illicit operators. First, around half of Vapour industry volume is now covered by state directory and enforcement frameworks.

Second, more than 18 million unauthorized Vapour products have been seized, through federal cost-agency collaboration. Third, the FDA is taking actions to improve regulatory compliance for foreign manufacturers. And finally, Attorney Generals continue to increase pressure on illicit Vapour sales channels and payment providers.

Importantly, these actions have supported the legal Vapour industry's return to growth in H1. We are also encouraged by the FDA's new prioritization guidance, which supports a pathway for both Vapour flavors and Modern Oral innovation. Taken together, these developments support a more level playing field.

In U.S. Vapour, Vuse continues to strengthen its leadership position. We extended value share to a record 55.9% in the first half and now hold more than double the share of our nearest competitor.

Building on this leadership, we will begin a phased rollout of new adult-focused Vuse flavors, broadening consumer choice and leveling the competitive playing field, starting in Q3 with distribution to approximately 25,000 outlets. We will execute this expansion in a disciplined manner, upholding our high standards of product quality, retailer compliance and underage access prevention.

Distribution will be carefully targeted, as we work with retailers to secure their commitment to adult-only sales supporting category sustainability. Altogether, this give us confidence in Vuse's ability to sustain growth and further strengthen its competitive advantage in the world's largest Vapour market.

Third, I'm often asked about the growth opportunity ahead in Modern Oral globally. In the U.S., I'm excited about expanding our Velo portfolio in the rapidly growing markets. Velo Plus continues to deliver an outstanding performance with our overall Modern Oral volume share now 31% and value share nearly 26%. In addition, we are capturing around 90% of category value growth, demonstrating both the strength of the product and brand, together with the effectiveness of our commercial execution.

Building on this success, we are expanding the Velo portfolio to capture a broader range of other consumer preference, including launching some limited editions, Velo Plus variants. And starting Q3, we will launch Velo Max, a higher moisture product and our latest innovation in the U.S. This will further expand our offer across 2 new strengths and 4 new flavors, complementing our existing portfolio and providing an incremental lever of growth.

Velo is the clear global #1 brand in Modern Oral, the fastest-growing category with the lowest risk profile. We continue to expand Velo's footprint as regulatory clarity improves, with 32 markets having now adopted category regulation, more than double the number versus 2024.

Our clear leadership position continues to strengthen, underpinned by strong growth across all 3 regions and the successful execution of our premiumization and innovation strategy. Our scale advantage continues to widen.

In the first half, BAT shipped 7.9 billion pouches. And across our top markets, our Modern Oral volume share increased by over 8 percentage points to reach 39%. As the category continues to grow at pace, we believe our superior portfolio supported by continuous innovation, scale, brand strength and regulatory capabilities will become increasingly important competitive advantages.

In AME, BAT is a clear category leader with 63% volume share across top markets, making us nearly 7x larger than our nearest competitor. This leadership position is underpinned by our superior brand equity scores, 40% higher than our closest competitor in Europe, supporting our premium brand positioning, and reflected in our 68.5% value share.

We continue to drive strong volume-led revenue growth. And importantly, this growth is becoming increasingly broad-based. Around 50% of our revenue comes from outside the Nordics, where the category continues to develop with growing incidence and consumption, supported by expanded distribution, growing category adoption and the strength of the Velo brand.

Innovation remains a key differentiator. Through Velo Shift, we are extending our premium positioning. Progress in Sweden and Switzerland is encouraging, with Shift capturing 1% of value share in Sweden and 1.5% in Switzerland within a few months of launch. Altogether, our strong momentum give us confidence in our ability to continue driving sustainable profitable growth and value creation in Modern Oral.

Fourth, I'm asked about our key drivers of performance improvement in Heated Products. We are resetting glo's performance with a sharper, more disciplined approach. Industry volume growth moderated further in the first half, reflecting excise-driven disruption in Japan and continued consumer poly-usage across Vapour and increasingly Modern Oral globally.

At the same time, competitive intensity has stepped up. Against this backdrop, we are focusing our investments where we see the strongest consumer opportunity and the best return potential in what remains a significant GBP 9 billion value pool. We are scaling glo Hilo to build premium growth and strengthening our value proposition with Hyper Pro Plus. In addition, we are concentrating resource behind priority markets in a more selective way.

Through this, our focus is clear. We set our performance and we build share momentum in H2 through innovation-led growth and disciplined execution.

glo Hilo is becoming -- is beginning to demonstrate the benefits of our premiumization strategy. Launched across 9 target markets covering around 70% of industry volume. This provides a strong platform for future scale with around half of consumers new to the glo platform.

In addition, we are strengthening glo's brand equity as we establish our presence in the premium segment. This is translating into tangible commercial progress with volume share increasing across key markets and particularly strong momentum in Poland. We continue to focus on scaling glo Hilo through generating trial, targeting consumers of premium Combustibles and Heated Products, while building awareness to unlock further growth.

And finally, bringing it all together, as we build on our momentum, we see a clear pathway to improved growth in 2027. Our delivery will be supported by 4 key drivers: First, continued strong New Category revenue growth led by continued momentum in Modern Oral, U.S.-led Vapour delivery and a more targeted approach in Heated Products.

Second, consistent Combustibles delivery supported by further recovery in APMEA, and targeted investments to sustainably drive Combustibles value and share globally.

Third, continued strong profit conversion, reflecting improving New Category returns and ongoing cost savings.

And fourth, EPS accretion from share buybacks, lower finance costs and continued strong cash generation.

To conclude, by focusing investment on our highest return opportunities, we are delivering Quality Growth through our multi-category portfolio, supported by sharper execution, enhanced capabilities, and disciplined resource allocation. Through this, we are driving higher returns and building a more resilient business.

At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation together with delivering strong cash returns. And I'm confident in our strategy, our execution, and that BAT is well positioned to deliver long-term value for our shareholders.

Before we move to Q&A, let me leave you with some of the key themes shaping BAT's next phase of growth and value creation. We look forward to sharing more at our Capital Markets Day in September. Thank you for listening.

And I will now hand over to Victoria to introduce the questions-and-answer session.

Thank you, Tadeu and Javed, and good morning, everyone. [Operator Instructions] Tadeu and Javed will be very happy to take your questions, and I will now hand over to the conference call operator.

The first question is from Andrei Andon-Ionita from Jefferies.

Tadeu, Javed and Victoria, thank you very much for taking my questions. Two for me, please. Firstly, on US e-Vapour. Do you see the illicit enforcement tailwind continuing into early H2? And also for the launch of Vuse Ultra in H2, could you give us a bit more color as to what we should expect in terms of number of outlets targeted and the types of flavors that we should expect to see on the market?

And then on U.S. Combustibles, you registered plus 5% top-line growth in H1, significantly ahead of the U.S. Combustibles framework of value flat to plus 1% growth. How should we think, in the context of this H1 performance, about the U.S. Combustibles algo for the full year '26?

Okay. Thank you, Andrei, for the question. I'll start with the Combustible numbers. Yes, you rightly point out that the 5% performance in H1 is well ahead of what the algorithm would suggest. We highlight the fact that we had some trade movements that has been beneficial in H1 that will be unwind in H2.

I would tell you that this equates for something close to 2% of the 5%. If you -- so underlying performance actually is more of a 3%. Clearly, we have a momentum in the H1. Duty drawback is part of the 3%, but it's not a major part of it. Most of the performance is organic performance, let's put it that way.

Obviously, as we highlighted in the presentation, we intend to invest -- continue to invest behind our portfolio as we progress in the second half of the year. We are clearly seeing the dynamic of the low discount segment in the U.S. continue to grow, and we'll try to become more competitive in that space as well.

So I would expect to see a more moderate performance in the second half of the year, particularly in Combustible in the U.S. that should reflect in a number that will be much closer to the argument, maybe a bit -- still higher than the 0 to 1 that we have, but not as high as we see in the first half of the year. So that's the Combustible part.

On the Vapour part, it's very encouraging what we are seeing from the states enforcement, it's 50%. It's the first time that we saw the legal Vapour market coming back on a very modest base, but still, we have seen in the last few years a decline of legal markets year-after-year.

It's hard to predict exactly what happens next. I would suggest with all the initiatives that I highlighted during the presentation that we could expect to see at least a similar type of environment. I don't think that will be, I would say, significant. I'm more encouraged by the prioritization guidance from the FDA because these allow the legal American manufacturers to offer substantiated high-quality products for adult nicotine smokers in the U.S.

And this translates into our ability to bring back flavors in the market and having a more level playing field, because you cannot forget the fact that from one side, there is an element of enforcement, that is important, and there is clearly mainly from the state levels, an uptick on enforcement levels, but the root cause of legality is not just about lack of enforcement, it's about a lack of level-playing field.

And having a higher level-playing field will be also very important. So I would expect to continue to see some more traction from the legal Vapour market.

In terms of your question on...

Flavors and how we roll out selectively.

Yes, how we roll out. We mentioned that, that will be basically in 2 phase. We are -- in Q3, we'll be reaching out 25,000 outlets. And why we are doing that way because we have been very thoughtful in the way that we are rolling out flavors back in the market. We want to make sure that retailers do the ID scan before they sell the product to make sure that we have no youth accessing these products. There is a commitment and a compliance methodology that we have put in place.

And that's the reason we are very thoughtful in the way that we are rolling this out. So the idea is to go in the Q3 with 25,000; in Q4, there is another round of 25,000, but we will be building from there. Okay?

The next question is from Faham Baig from UBS.

A couple from me as well. Starting with nicotine pouches in the U.S. Could you maybe help us with the speed of launching Velo Max in terms of the distribution stores, as well as the likely economics compared to Velo Plus? And of course, you've now seen competition launching their own improved versions of nicotine pouch products. How have you seen this impacting competitive and category dynamics thus far?

The second question is on full year '26 guidance. Maybe if you could just help elaborate on some of the moving parts that you expect to see in the second half in terms of how the 2.9% organic sales growth develops. What could maybe see it do better? What could maybe see it do worse? And what are the key items that you're going to be monitoring?

Okay, Faham. Look, on the nicotine pouch, we are -- well, we have a very well-established network from Velo Plus in the U.S. It's -- we'll be launching Velo Max in that -- and it's just a question of the normal time that takes to distribute in a continental country like the U.S. So this will be probably faster than what took us to do in terms of Velo Plus, because we have now a well-established network. That was not necessarily the case when we first introduced Velo Plus. But it takes some time to get to where we are with Velo Plus. But the idea is to use Velo Max as a complement to Velo Plus.

And commercially speaking, we are -- we will be considering our competitors' position, obviously, and then -- and we want to make the product as competitive as product, give the chance for consumers to try the product. We believe that it's an even enhanced product, like I said, it has a higher moisture and different strengths and not necessarily is -- it's a very -- it will be -- I think that we'll be addressing some consumer needs that not necessarily Velo Plus is currently positioned for when we think about, for example, higher levels of strength and obviously, also different flavors.

That's the reason why we say that distinct flavors will complement the portfolio. We feel very, very, I would say -- we, obviously, are very, very supportive of Velo, very good about the product that we have in the market. It's a competitive market. Obviously, there is no doubt that will become more competitive.

We see the strength of Velo Plus supporting all these new launch from competition. And I do believe that there will be, still -- it will still be a very strong brand. We are now leaders in 11 states in the U.S. And so we have a retention rate of 70%. This hasn't changed.

All the growth of the category basically in the first half is coming from Velo Plus. Independent of the launches that we have seen so far, I do believe that we have all it takes with the capabilities we have built and the product that we have and now complemented by Velo Max, all the condition to support the position that we have in the market.

So in terms of the building blocks for the second half of the year, and obviously, APMEA, we expect to be better performance in the second half than in the first half. It's clearly a recovery story. H1 2026 for APMEA was already better than the H2 2025. H2 2026 will be better than H1 2026, because we will be lapping a more softer comparator, if you want, in place like Australia, for example.

If you remember well, they implement a very draconian regulation that accelerates exponentially the listed trade in Australia in the second half of last year. We'll be lapping that. So this will be more positive. So clearly, there will be the driver for the second half. And that's why we say that second half weighted mainly because of the performance in APMEA.

AME, we have been investing heavily behind mainly Combustibles and HP, and we expect also to have some improvement in the second half. And in the U.S., we just spoke about the U.S. So I don't expect the 5% to carry on in Combustibles for the rest of the year and because of the investments we need to do in the portfolio of Combustibles. And all-in-all, that's the reason why I expect a more positive second half overall for the group and leading to a full year in terms of top line in the low end of our range.

You want to add something?

I think similarly, the same will be the case for the building blocks for the APFO line as well. As we guided that we see a very strong performance in the U.S., but we will see a more stronger performance from AME and APMEA versus H1 and slightly less performance in U.S. So if you add those all both together, then we are again at the lower end of our algorithm for the full year, but it is the first time we are entering the algorithm.

And two, as I highlighted earlier, that EPS guidance, we will see the overall impact slow down over the full year, but we will see strong kickers. That is why we have guided on the upgrade of our EPS guidance to the mid of the range.

Just on the point, Javed, I want to complement on the -- because I received some questions about the low end of the range. We are here thinking about the long-term sustainability of the algorithm. And we are doing the right investments for the business, for the sustainable growth of the business.

We have to invest in Combustible in the U.S., in some other key markets as well. We have to invest in this excellent performance that we have in Modern Oral across the world. We are resetting our HP business, which also requires investments with the launch of glo Hilo. So -- and we obviously have an opportunity in Vapour in the U.S. that we haven't seen in many years. So we are doing the right things for the business for the long run. And as we always said, this is a year to go back to the algorithm and reposition in the low end to create us the possibility to make the right investments to make this a sustainable story moving forward, and I'm very confident that, that will be the case.

Our next question is from David Roux from Morgan Stanley.

My first question is just on Combustibles. At the trading updates in June, I think the business sort of downgraded its expectation for the global cigarette industry volumes from minus 2% to minus 2.5%. I think at the time, you noted this was predominantly driven by Bangladesh. It now seems the business has lowered its assumption again to now minus 3%. What is driving this latest sort of reduction in the outlook for cigarette volumes for the industry? Has Bangladesh deteriorated further? Or are you now seeing broader weakness across other markets?

And then my second question is just on Velo in the U.S. I guess it's a two-part question. But if we take a step back, I mean, following the rollout of Velo Max through the rest of this year, how many SKUs across strengths and flavors do you expect to have across the total Velo platform by the end of this year versus, say, where we are today?

And then the second part of this is, your key competitor in the U.S. on nicotine pouches recently received a Modified Grant Order to market using a reduced harm claim. Do you think this Modified Grant Order really moves the needle in terms of marketing? And is this something that you'll be pursuing for Velo?

Okay. So let's address the first, the Combustible question. The 2.5% to 3% is basically Brazil driven. We had a massive excise shock in Brazil. The prices come into place on the 1st of August. This is really a meaningful price increase excise driven. And obviously, this will have implications in the size of the market, and it's a big market, like Bangladesh is also a big market, but it's basically Brazil driven.

On Velo, with the -- we have already 3 strengths in Velo Plus. We have another 2 now strengths. So we're going to have a total of 5 strengths in Velo. And obviously, this is the position we are today. What encourages us in terms of this prioritization guidance from the FDA is that we will be able with more certainty to bring more innovative products to the market in due time, so which hasn't been really the case for many, many years.

You note that we have been filing PMTAs and being there for a long, long time. And this is about to change with the new guidance. So for the time being, we're going to be with the launch of Velo Max with 5 different strengths with the Velo family moving from as it stands today.

In terms of your comments on the questions on...

The PMTA.

Yes, first of all, I think that the MRTPA for Modern Oral is welcome as a category. I don't think that there is any major commercial benefit for any particular, I would say, SKU or product in the market. We do have in our applications for Velo MRTPA applications as well. So we might be in a position to receive one of those in due time. But it's less about the commercial opportunity in the market, but more about what it means from the advocacy of the category, mainly coming from markets like the U.S. with the FDA.

I think that is very important. As you know, we have been very, very ahead in terms of discussions with a number of stakeholders in order to properly regulate the category because we see the category as the lowest risk category within the New Categories, if you want, but there is no inhalation. There is no tobacco. It's the closest you can get to NRT type of products.

And we have now 32 markets, like I mentioned in my presentation, are Modern Oral regulated. A number of those markets sits in Europe, which is also very important. And events like that with the MRTPAs being delivered by FDA is very positive overall. It's less about the commercial impact in the local market. It's more about the advocacy of the category outside -- even outside the U.S.

Our next question is from Damian McNeela from Deutsche Numis -- Deutsche Bank.

A few from me. Firstly, just on the New Categories portfolio. I think you've made the decision to exit some markets in Vapour and reprioritized in Heated. Can you just sort of indicate whether that work is now complete or whether there are sort of still markets that you're looking at around the viability of those Categories, is the first question.

Second question is, can you provide a bit more information on what specifically is happening in the German Combustibles market with regards to sort of increased competition? And if there is anything you can do to sort of or what you are doing to sort of combat that increased competition?

And then the last one is just a follow-up on Faham's question earlier. Are you able to provide any indication of relative pricing for Velo Max in the U.S. when it launches, please?

Okay. Yes. Let's start from the last. No, the price we are not giving any indication of price of Velo Max. On Germany, what we have seen over the last few couple of years mostly is the increasing trade labels brands in the German market. More recently, this growth has more stabilized. And -- but this has created some, I would say, down-trading pressures in the market that we obviously had to react to that. We are not seeing the growth at the pace that we were seeing before in trade labels. It seems that we are coming now more to a more stable situation. But that's what has been the dynamic over the last couple of years, let's put it in that way, more recently, 18 months, I would say.

In terms of...

Vapour exits and refocus on HP.

Yes. The HP -- Yes, the Vapour markets, we -- mainly we decide to leave markets in Asia where we don't see either a proper regulatory environment and/or enforcement. So -- and as a consequence, there is no financial return for a company, a legal company like BAT, because we have to compete with illegal products, which there is no level-playing field, if you want.

So we decided to pull out of a number of markets that we have entered in the first place when they had regulated with an expectation that regulation would be made compliant. This was not the case. We have to accept that. And then given that we will be constantly looking for best return for our investments in terms of resource allocation, we make the call to pull out.

So that's why you see the Vapour numbers in APMEA in particular, negative as a consequence of these exits. In AME is more a consequence of a change in legislation in Poland that basically make completely not viable to be present in the Vapour market anymore.

And also in the U.K. that with the change in the policies, again, another market that is very difficult to assess compliance. The latest numbers that I saw there is showing a very, very strong presence of illegal products in the U.K. market.

So this is something that we'll be continuing reassessing, I have to say. I'll tell you that most of it we have already act on. There will be probably some impact still coming across the H2 of this year. And as we lap this for next year onwards, become less evident about these market exit decisions, okay?

Our next question is from Pallav Mittal from Barclays.

I had a technical issue earlier, so apologies if I missed it. But firstly, starting on the U.S. Combustibles business, volumes are better and price mix is a touch lower versus what you were expecting. And I think in your comments, you said duty drawback is not a major part of it in terms of the mix. Can you quantify the volumes that are seeing the benefit from double duty drawback? And is it sequentially increasing? Or has that now stabilized? So that's the first one.

And then secondly, on your Vapour business, in Europe, it has been under pressure over the last couple of years. And recently, you highlighted issues in Poland, et cetera. But how should we think about that European Vapour business in the medium term?

Okay. On the Vapour in Europe, yes, the major drag for the numbers are related to Poland. And we have been in strong positions in place like Germany, which is a very, very important Vapour pool. The Vuse Ultra, for example, is making big inroads there.

In other markets like France, Spain, we have a lot of competition coming to the market. But we also have a very strong pipeline that will reach the market in H2. So we feel confident in our ability to sustain our leadership position in Vapour in Europe in the markets that we have selected to participate. So that's the first one.

On the Combustible, as I mentioned, the -- overall, the industry, I will talk about the industry first. We have seen a reduction in the levels of decline. And as I make the point in my presentation, a lot of that has to do with the growth of the low end of the segment, of the category, that actually, if anything, is growing, it's not declining, it's growing, continue to grow. And we see less migration out of cigarettes towards the illegal Vapours and for basically two reasons.

One is the accessibility, availability of these products get more constrained when you have more states passing legislation, which is the case now of 50% where the volume is sold. And also the fact that we have more solo users Combustibles that they don't want to migrate to the Vapour side.

So, this overall is creating a dynamic that is more favorable than in the past. It's hard to predict how it goes moving forward because if anything, we still have to see the correlation with oil price and the conflict that is happening in the Middle East and how this could impact oil price, because we know that there is a correlation between oil price and consumption of cigarettes in the U.S. We haven't seen this yet in the H1, but it's difficult to predict in the second half of the year.

And obviously, what we will be doing and will be reflected in our top line numbers, we will be increasing our competitiveness to be able to answer the fact that the lower end of the market is growing. So this is one element that will have an implication in the second half of the year.

The other element, like I mentioned before, is the inventory movements that has an impact around 2% of revenue that will be lapped in the second half of the year. So it's not a reflection of the underlying performance, if you want, of the first half of the year.

That's the main reason why in the case of U.S., we expect to be H1 skewed in terms of performance as opposed to the rest of the group that will be H2 skewed because of the performance of APMEA improving and AME improving more than offsetting the moderation that we'll be seeing in the U.S. in the second half.

And the duty drawback.

And we don't do...

And the duty drawback, yes, in the first half, was not very meaningful. And in the second half, I will not be giving guidance about duty drawback, but this will be part of the elements that will be taking into consideration when we put in place our plans.

Our next question is from Rey Wium from Anchor Stockbrokers.

If I may just start off by saying Victoria actually look brilliantly in red. Shows there's an opening there. I Just want to get back to the guidance. Very strong performance on EPS, up 5.5%.

Now if I look at your guidance, you've talked about EPS in the middle of the range. So that brings basically 6.5%. You talked about translation impact negative 2% to 3%. So that brings us back to sort of adjusted EPS around about 4%. Am I more or less correct doing that assumption? So actually overall implies a bit of a slowdown in the EPS growth for the year. And within that, you mentioned, obviously, the U.S. will be a bit slower and the other 2 regions will be a bit stronger. I just want to know whether that summary is spot on.

I think if you look at the profit performance of H1 and our guidance for the full year, so actually, it will move in the right direction, which means it will have more positive impact on EPS. But you're right that once we take into account the FX impact, our adjusted EPS would be in the range of 4%, 4.5%, which is just for a reminder, is one of the best EPS performance of BAT in recent years. And we are very confident.

And as I highlighted earlier, that it is mainly driven by the kickers below operating profit, mainly net finance cost and also the cash conversion, and we do get benefit from being a high cash generative business. And even in H1, we are delivering a high cash conversion, and we are on target to remain -- delivered above 95% conversion for the full year. But yes, you are right that our adjusted EPS would be more than 4%, around 4.5%.

On a current basis.

On the current basis, yes. Yes.

Yes. And just also on that, the New Category growth, I mean, you guide for mid-teens growth. So you had 18% in the first half. So I just want to get a feel of -- do you expect an improvement in the Heated Products, which was down 12%. And then obviously, I'm just curious about the growth in Vapour, whether we can probably see a little bit of an acceleration there?

Yes. Look, on Vapour, obviously, we'll have the Vuse flavors coming in the market. But remember that I said that will be a phased approach. So most of the impact will be feeling in 2027. We also have to take into consideration that we'll be lapping the exit of one competitor in the U.S. that happened in the second half last year. And so that's the dynamics around the Vapour.

In HP, I'm not expecting anything meaningful changing from the financial point of view. I do expect us to recover share from now until the end of the year with all the actions that we are putting in place.

And Velo, which is mainly the reason why we are calling in the mid-teens, we'll be lapping a much stronger comparator in the second half, because remember that in the first half of this year, we had basically launched Velo Plus at the end of '24. They were still building up in the first half of '25. So we just lapped this half year now in '26.

So they have a very, very strong numbers in terms of volume, in terms of revenue, triple digits in the U.S. And obviously, when it comes to the second half of the year, they are lapping a much stronger second half of '25. That's the only reason why we are saying mid-teens in the full year.

Our final question today is from Richard Felton from Goldman Sachs.

Two questions from me, please. The first one on U.S. Vapour specifically. As we think about the competition between Vuse and the illicit segments, what are the gaps as it relates to flavors, devices and price points? And which of those gaps can you now close as a result of the FDA prioritization guidance? I suppose...

Okay, look. You want to ask another question? So let's finish here. You have another question or I just...

Yes, sorry, but that was the first one. Second one was on free cash conversion. Obviously, a little bit stronger than we would -- we normally see from BAT in H1. The question is, what are the drivers of that? Is it just phasing between periods? Or does that point to potentially better cash conversion on a full year basis, too?

Okay. On the Vapour -- Javed, cover the free cash flow. On the Vapour side, obviously, we are more interested on the channel, because you probably saw there in my slide that we talk about illicit presence in channels, track channels being 12%. This is just 2% of the size of the illegal, because most of the sales of illegal is done via independent and vape stores.

And it's not just about the flavors, it's about they bring to market big device, big tanks device with a massive number of puffs that will never be allowed to do. And it's not just a question of FDA approving because we, as a responsible company, we never commercialize any Vuse product in the world with more than 10 ml in terms of cartridge that equates to something like 4,000 puffs, because as you puff more and more, the metal degrades and contaminates the liquid that you inhale. So it's a bad vapour. And they don't care about that, those illegal players.

So you go out there and you buy 10,000 puffs and 20,000 puffs device. In my last market in the U.S., I saw one of 100,000 puffs device. And obviously, this has financial benefits when you consider the cost per puff of this device. I will never be able to compete there. And this is a gap that needs to be closed by enforcement. But clearly, they shouldn't be in the market in the first place, because it doesn't bring any type of benefit health-wise, if not the contrary.

So what will be closing the play field is on the convenience stores channels where we haven't been able to be present with flavors since 2021, January 2021. We'll be back. It's a very important channel as well. And more important is a channel where we feel very confident about our ability through the retailers to check IDs before selling these products, where not necessarily happens when you indiscriminate, start selling in independent stores and other type of stores.

So I think that this -- in that channel, we'll be closing the gap substantially. It will be competitive. Now the impact of this in the overall illicit market, we have to wait and see. I don't want to do a proper estimation on that now.

And I think on the cash conversion, two points from my side. One is because of the lower net financing cost, as I highlighted earlier, which was due to the debt repayment from the proceeds of ITC. But more importantly, also, I think I'm very proud of the work the finance team keeps on doing with our commercial colleagues to keep focus on cash as much as we do on profit. So hence, that focus on cash has delivered higher cash, which makes me very confident that for the full year, we will be delivering another year of more than 95% cash conversion for the full year.

Yes. I wouldn't ask so much more that will be much better than previous year because we have a track record of a very strong cash conversion. The performance in H1 just give us more confidence that can be another year of a very strong delivery in that place.

Thank you. With this, I'd like to hand the call back over to Victoria for any additional or closing remarks. Over to you, ma'am.

Thank you. Well, thank you very much for all the questions from the telephone lines. I'm afraid we are out of time, and therefore, we'll not be able to get to the online questions, but the IR team will respond directly to those who sent questions in.

And now I'd like to hand back to Tadeu for closing remarks.

Okay. Thank you all for listening today and for all your questions. And then just to close, our H1 results were in line with our expectations, and we are on track to deliver our full year guidance with EPS now expected to be towards the middle of our 5% to 8% range. We will continue to reward our shareholders through strong cash returns, including our progressive dividend and sustainable share buyback and deliver long-term growth and value creation.

Thank you again for joining us. I look forward to see many of you in September at our Capital Markets Day.

Good morning, everyone. I'm Victoria Buxton, Group Head of Investor Relations. And with me this morning are Tadeu Marroco, our Chief Executive; and Javed Iqbal, our Interim Chief Financial Officer.

Welcome to our 2026 first half pre-close conference call. I hope that you are all well, and I would like to thank you for taking the time to join us this morning. Before we begin, I need to draw your attention to the cautionary statement regarding forward-looking statements as well as the notes and disclaimer contained in the trading update.

Unless stated otherwise, our comments will focus on constant currency adjusted measures, which include adjustments related to the profit from our Canadian combustibles business and average year-to-date share data is to March 2026 versus full year 2025 average.

I will now hand over to Tadeu with a reminder that as always, there will be an opportunity to ask questions later in the call.

Thank you, Victoria. Good morning, everyone, and welcome. We continue to drive momentum in 2026 and remain firmly on track to deliver our full year guidance. I would like to begin with our four key takeaways from today's update. First, we expect to deliver strong revenue and profit growth in the U.S. supported by ongoing combustibles delivery, growth in Vapour and an excellent performance in Modern Oral.

We are now the fastest-growing company in total nicotine, reflecting the strength of our multi-category portfolio and execution in the world's largest value pool. Our broad-based momentum, together with the FDA's recent prioritization guidance improving market access for scientifically substantiated reduced risk products reinforces my confidence in our sustainable financial delivery.

Second, we expect New Category revenue growth to accelerate to mid-teens in H1 and for the full year, driven by Modern Oral in all three regions. A return to growth in Vapour for the first time in 2 years and continued traction with our innovation rollouts across New Categories.

Third, we expect further improvement in New Category contribution, driven by Modern Oral and Vapour fully aligned with our quality growth discipline. And finally, we remain on track to reach our net debt to EBITDA leverage target of 2 to 2.5x by year-end while continuing to deliver sustainable shareholder value through our progressive dividend and a sustainable share buyback program with GBP 1.3 billion underway into 2026.

So let's start with New Category dynamics. The global nicotine industry continues to transform and grow as adult smokers increasingly switch to New Categories. Effective regulation and enforcement are critical to supporting sustainable New Category growth and advancing tobacco harm reduction.

We continue to engage proactively and on an evidence led basis with key stakeholders including government, health authorities and regulators to help shape effective regulatory enforcement frameworks for new categories. The tobacco harm reduction journey is already well advancing markets such as Japan, Sweden and the U.S., where the FDA has been at the forefront of recognizing the risk continuum.

We welcome the FDA's recently published prioritization guidance as an important step toward effective enforcement and expanding market access for responsible industry players. We have long advocated for increased enforcement and a return to a regulated marketplace that is not overrun with illicit products, providing a clear and consistent pathway for scientifically substantiated less risky products to reach the market will support continued progress towards Smokeless America.

We are reviewing the guidance in full assessing its implications and engaging with the FDA on implementation, while actively evaluating our commercial and resource allocation priorities. Leveraging Reynold's significant U.S. scale, precision execution, deep trade relationships, strong operations footprint and expanding digital capabilities puts us in a unique position to capitalize on this opportunity, drive growth and capture outsized value in the U.S.

We are actively preparing our future Modern Oral and Vapour portfolio for markets. Execution is scheduled to begin in H2 with a phased and disciplined rollout, balancing speed with rigor. We are scaling operational readiness and leveraging new regulatory pathways to accelerate delivery over time. Importantly, we remain committed to a science-led approach to ensure responsible and sustainable growth.

Reaching the scientific review stage of the PMTA process represents a meaningful quality threshold, and we believe this approach can support a more level playing field more target enforcement against bad actors and greater transparency across the industry. We are confident in the strength of our science and portfolio. Through our continued participation in the Modern Oral PMTA pilots, we see a clear pathway to marketing authorizations for our leading higher moisture products.

Additionally, we are encouraged that the Center for Tobacco Products has indicated it intends to use the learnings from this program to inform a broader replicable approach to expedite review beyond the Modern Oral category. Our sustainable growth in the expanding nicotine industry is driven by six core capabilities.

These are underpinned by over 120 years of tobacco industry expertise, enhanced by our leading science, technology and strategic partnerships. By leveraging our deep cross category insights, world-class science and stewardship, unique R&D ecosystem, global distribution, regulatory expertise and digital capabilities.

We have built a well-established and differentiated portfolio of global brands with premium products offerings across all three new categories. Modern Oral is by far the fastest-growing new category globally and the lowest risk containing 99% fewer toxicants when compared to cigarettes. We expect industry revenue to almost triple by 2030, with Velo outpacing category growth. Modern Oral is already a meaningful and growing contributor to group revenue and profit, supported by high levels of profitability and fast payback.

This year, we expect to deliver strong double-digit revenue growth as Velo extends our category volume share leadership gaining 740 basis points year-to-date to reach 38.2% across top Modern Oral markets. In the U.S., Velo Plus the fastest-growing Modern Oral brand has strengthened its #2 share position and continues to drive material share gains.

Year-to-date, we gained 10.4 percentage points of total volume share of Modern Oral to reach 28.4% and 9.9 percentage points of total value share reach 23.1%.

Encouragingly, Velo Plus is capturing 100% of category value growth year-to-date and has already achieved category share leadership in seven states. As a result, we expect strong U.S. Modern Oral financial performance this year. These excellent results reflect the strength of our products, branding and distribution capabilities, underpinned by a consistent 70% repurchase rate since launch at the end of 2024.

In AME, we are the clear category leader selling at a premium price point and strongly outperforming competitors at close to 6x the scale of the nearest peer and we continue to capture over 60% of category growth, highlighting the further opportunity ahead.

Our latest innovation Velo Shift is designed to reshape the modern or experience with a new comfort pouch design, five new distinct sensory flavors and the differentiated [ excan ] designed to stand out on the shelf. Trading at a premium to the core Velo range, Velo Shift is delivering incremental share gains in Sweden and early traction in Switzerland, supporting a target rollout strategy with further market expansion through 2026.

We are global leaders in Vapour, which remains the largest new category in terms of number of adults consumers and continues to demonstrate strong conversion effectiveness. Vuse continues to extend global value share leadership in tracked channels across top markets, up 1.3 percentage points to reach 44.4%. While the Vapour category continues to be impacted by the proliferation of illicit products, we are encouraged by continued performance recovery in the U.S., the world's largest Vapour market.

Year-to-date, Vuse has gained 4.2 percentage points of value share to reach 56%, driving positive volume and revenue growth in H1.

This recovery has been supported by a competitor exits last year, which benefited the second half and significant progress on state level enforcement which built through 2025 with Vapour directory and enforcement legislation covering around 50% of the industry by December versus just 8% in January. We now expect U.S. vapor to deliver double-digit revenue growth in H1 and full year.

Looking forward, we are confident that Vuse is well positioned to benefit from strong enforcement over time at both federal and state levels. In AME, while our value share declined 1.5 percentage points, we maintained European leadership and continue to build a premium segment through Vuse Ultra. We expect revenue delivering H1 to be adversely impacted by regulatory headwinds in the U.K. and Poland.

In APMEA, our performance will reflect the lapping of prior year strategic exits from markets where regulation and enforcement do not support a responsible level and competitive playing field. Altogether, we expect mid-single-digit revenue growth in H1 and full year driven by the U.S. In heated products, gross volume share was down 1.6 percentage points in top markets mainly driven by Japan, with APMEA down 2.1 percentage points.

In EMEA, volume share was down 70 basis points. While there is more work to do, our focus is clear. Delivering innovation-led performance improvement in the largest profit pools. We have streamlined our commercial footprint to accelerate scale with glo Hilo in priority markets, and initiated a hyper platform reset with Hyper Pro in the value segment.

We expect headline delivery to be adversely impacted by material inventory movements in Japan and continued competitive intensity in the value segment in key markets. As a result, H1 and full year revenue is expected to be down low double digits with an improvement in H2 share performance driven by greater glo Hilo scale and phased Hyper Pro Plus rollouts.

Glo Hilo is designed to establish glo in the premium segment, which represents over 70% of industry value. We continue to focus on generating trials, targeting premium consumers in the combustibles and HP spaces through online and in-person activations.

This is translating into premium share progress in key markets, reaching 2.6% in Japan, 8.8% in Poland, 1.5% in Italy and 1.1% in Romania in March. Glo Hyper Pro Plus further strengthens our value proposition, delivering meaningful upgrades to the consumer experience and reinforce competitiveness in the value segment offering quick start, longer standard session length and connectivity. We are rolling out in Q2 in Italy, Romania and Greece with broader expansion planned through the second half to markets, including Japan.

Turning to combustibles. While our volume share in top markets was down 30 basis points with value share down 20 basis points, we continue to deliver a resilient financial performance, offsetting volume declines with robust price mix and efficiency gains. Our U.S. value share declined 20 basis points and volume by 80 basis points, driven by growth in the deeper discount segment and heightened competitive activity in Q4 2025.

Since January, we have held share as we continue to actively invest in our brands, increasing target promotions across all price tiers and expanding Doral in key states where the deep discount segment is more active. The pace of industry decline has moderated, down by around 5% year-to-date on a sales to retail basis, mainly driven by deep discount brands.

Our portfolio continues to deliver value growth driven by our target commercial activities in the more profitable segments of the market. This is resulting in sustained positive momentum in both revenue and profit growth in H1. We expect our U.S. combustibles performance to be first half weighted as we lap a stronger prior year comparator in the second half, and we continue to invest in target commercial activities to drive sustainable value.

In AME, we have continued to deliver a resilient financial performance with robust pricing driving revenue and operating profit growth, led by strong delivery in Brazil and Turkey. We have also taken actions to strengthen our portfolio in Germany and Romania. In APMEA, while progress has been slower than previously anticipated in H1, we expect a sequential improvement versus H2 2025 and our performance to stabilize through the year.

Bangladesh remains a dynamic environment ahead of the upcoming budget. And while Australia continues to be a headwind, the drag is reducing year-on-year. Within our traditional portfolio, we expect a resilient H1 combustible performance to be partially offset by lower direct leaf sales versus the prior year reflecting our continued focus on higher return, more profitable areas.

Turning to cash. BAT is a highly cash-generative business with operating cash conversion expected to exceed 95% again in 2026, reflecting our strong cash discipline and a clear focus on returns. Due to the timing of leaf repurchase and MSA payments, our cash flow is always second half weighted.

Our financial flexibility continues to improve, and we are on track to deliver more than GBP 50 billion in free cash flow by the end of 2030. We continue to focus on the deleveraging, and we expect to be within our target 2 to 2.5x adjusted net debt to adjusted EBITDA range by year-end. As we transform, I remain committed to delivering sustainable shareholder returns through our progressive dividend which dates back 27 years and a sustainable share buyback program.

To conclude, before we move to Q&A, our full year guidance remains firmly on track, led by continued U.S. delivered and New Category momentum. We continue to expect an H2 weighted group profit driven by stabilizing our performance in APMEA and the increasing realization of Fit2Win savings through the year.

We are making good progress with our Fit2Win program and remain on track to deliver GBP 600 million of annualized savings by 2028, with GBP 500 million expected to be delivered by the end of 2027. We are closely monitoring developments in the Middle East. There is no significant impact on the group at this stage and we have comprehensive business continuity plans in place to manage cost and supply chain pressures.

However, the broader macroeconomic and geopolitical backdrop is dynamic, increasing the risk of volatility in consumer sentiment should uncertainty persist. While there is more to do, I'm confident that the choice we have made and the actions we are taking position BAT well for the future. I'm excited about the opportunities ahead and confident in our ability to deliver long-term sustainable growth and value for our shareholders.

Thank you for listening. Javed and I will now be very happy to take your questions.

[Operator Instructions] The first question is from Andrei Andon from Jefferies.

Two for me, please. Firstly, in the release today, you cited some down-trading trends in H1 '26 in U.S. combustibles. Could you perhaps give us a bit more color on how you expect these trends in U.S. combustibles to evolve in H2 '26?

And then secondly, in U.S. next-generation products, where is the company at the moment in terms of production capabilities for Velo Max and also for age-gated flavored vapes? And then could you also perhaps give us an indication about the expected timing of these innovations as to when they hit the market and then when we could potentially be seeing a tailwind from these innovations?

Yes, thank you Andrei for the question. On the U.S. combustible, what we saw at the end of last year was a very, very, I would say, intense competitive activity in the market. And on top of a lot of the activations of brands in the deeper discount throughout 2024 -- 2025, sorry. So the reflection on the share that you see in our numbers now in H1, in reality, materialized from these activities that happened more in Q4 last year. And since January, we start taking actions on that.

One of those is related to the rollout of Doral, where it makes sense. I always said that we have been very thoughtful in terms of how to deploy Doral because 95% -- 93% of the value of the category combustible seats outside the deeper discount. And we were very, very conscious not to promote a value destruction movement within our own portfolio. But we are confident with the pilots that we have done that there are opportunities to expand Doral in a value accretive basis, and we are doing this right now.

We also have been much more active in terms of promotions to cope with this intense activity that we saw in the market. And our shares a consequence has been stable since January. So I'm not expecting to see any different trend for the rest of the year. So I would expect the share to be stable at the back of all the initiatives that we have been taking on the combustible side.

In terms of the next generation, obviously, we have very, I would say, supportive of the latest movement done by the FDA. It's clearly is a regulatory pathway that should help to restore more balance regulated markets, reducing the impact of illicit products over time. As you know, we have always consistent advocate for strong enforcement and the progression to scientific review represents a meaningful quality threshold with a more level playing field. So we are actively engaged with the FDA, like I mentioned in my opening here.

And the idea is to bring Velo Max, as we said before, to the market. We should be in a position to do that by summer. The idea is to do between August, September. And we are also enhancing our age verification controls targeting high compliance retail environments and maintaining a clear audit focused position in order to activate flavor Vapour commercialization in order to ensure a responsible growth aligned with the regulatory expectation.

So we expect to see some flavors in Vuse in Q3 this year. And that's one of the reasons why, together with the higher levels of enforcement that is already happening at the state level, but now with the FDA now willing to publish a list of products that should be allowed in the market that should be contributing to enforcement as well on top of allowing products in scientific review. And we do have flavors vapor products in scientific review.

We are at the back of that raising our expectations some of performance of vape in the U.S. to double digit, which should translate into mid-digit growth for the group for the first time in the last 2 years, which is quite favorable for the whole New Category momentum.

I think just one addition that in terms of the question on capacity, we have done enough capacity investments across U.S. supply chain footprint. So we don't foresee any challenge of supplying the continuous growth of Velo Plus or any future launches in the second half of this year. So there is no capacity challenge we foresee right now.

Our next question is from Faham Baig from UBS.

Team, hope you can hear me clearly. I have two questions as well. Firstly, on your expectations on the FDA guidance on enforcement priorities. Could you maybe remind us of how you assess the size of this opportunity, particularly in Vapour, we were, as you said earlier, the illicit products currently dominate?

And the second question, is really on guidance. You've clearly delivered a strong start to the year, especially in New Categories. Could you maybe expand on your assumptions regarding the potential impact from Middle East uncertainties in the second half? And whether this is a conservative assumption given the limited disruption you have seen thus far.

Okay. Look, on the Vapour market, we always saw, and we have assessed, that the vast majority of the Vapour market in the U.S. is dominated by the irresponsible illegal players. And we always quote a number close to 7%. This hasn't changed. This translates into a number around GBP 7 billion of value related to that.

And we clearly see that states have passed some legislation, and remember that I referred to 50% of the Vapour market today sits in states where some sort of legislation has passed, but they vary among states. For those that have implemented a very comprehensive enforcement tools with directors and with fines and were clearly enforcement in place we clearly saw a decline in the illegal market and the consequence return to growth of the legal markets in a more meaningful way.

And this is very encouraging because even those states that hasn't been as comprehensive legislation, we can always refer back to those that has been more successful. So they are open to legislate and they'll probably be taking measures as we go along to improve even further.

So this is very supportive at federal level now with publishing a very clear list of products that are in the discretion of the FDA not to enforce, which are basically in scientific reviews or MGOs that they have in place, we will allow, for example, products that we are still seeing traditional channels be taking out completely.

So these are very supportive. Obviously, the more important measure on this is allowing the responsible players that have a products and scientific review to introduce in a responsible manner, some flavors back to the market with improves the level playing fields and emerging regulatory mechanisms such as the supplemental PMTAs provide also opportunities to expand portfolios more efficiently.

So these are all very positive and the size of the price, like I said, is very high. In terms of the guidance, we are -- what we are -- the reason why we are keeping the low end, we refer to the Middle East. You rightly point out that what I said, and we declared that in the trade update. We haven't seen a meaningful impact so far.

Remember that in terms of supply chain costs, 2/3 of our costs are either labor or leaf related that not immediately get impacted by the high energy cost of freight cost. But on the other hand, our major concern is impact on consumer sentiment. And despite the fact that we haven't seen any material change in that direction.

So far, we are all aware that there is correlation between gas price, for example, and sales of cigarettes in the U.S. And this is a watch out that we have to see how we progress through the year. And I'm not sure if I would call conservative. I think that we are sticking to what we said in terms of guidance. We have delivered exactly what we said and the scenario is still very uncertain in that direction.

The other element for -- that I mentioned is the fact that [ Air ] recover is not as fast as we first thought. We expect the region to stabilize throughout the year. And so H1 in '26 will be better than H2 '25. And the H2 '26 will be better than H1 '26. But -- and it's a drag. It's still a drag for 2026 which we don't expect to be the case anymore in '27 onwards. And that's the reason why we are keeping the guidance, which is exactly what we said.

We'll now turn to our next question from Pallav Mittal from Barclays.

A couple of questions. Firstly, on APMEA. So I mean, you have mentioned the performance is sequentially better, but it has been slower progress than expected. So can you just help us understand which markets have been worse versus your expectation? And then what gives you this confidence that you can stabilize the operations in the second half? That's the first one.

And then secondly, on heat-not-burn, low double-digit decline for the full year. Is it fair to assume -- does the change from low single-digit, mid-single-digit decline earlier to this low double-digit sort of guidance is mainly due to the issues in Japan destocking. And can you also comment within by whether Europe heat-not-burn is growing? Or is that declining as well?

Let me address the heat-not-burn and then I touched on the APMEA. Yes, heat-not-burn our underlying performance, which is a share loss of 1.6 percentage points. It's basically a consequence of the fact that we had launched glo Hilo just at the very end of last year. That's the first thing.

So we didn't have the presence in the premium subcategory as we do now. And also that we saw a much increased competitive activity and mainly in the value side of the category where we were pretty much present and dominant with the hyper pro.

And just now that we are now updating our offer in that particular subcategory. So we expect, as a consequence, to see share improvement in HP as we move along throughout the year. Hilo is doing the role that they were supposed to do, and this is growing in every single market that we have launched and the new hyper pro device, and together with consumers, will give us what we believe a very strong position on that.

Obviously, we are also taking some measures in terms of coping with this competitive activity with more discounts that end up impacting also the top line of the category. But the major driver behind this low double-digit decline is related to the adjustment in stocks in the main distributor in Japan. I don't think that will be a -- it will be a one-off, but it will not be a rebound in the second half. So this will carry on throughout the year, and that's the reason behind the low double-digit revenue decline in HP.

Now in terms of APMEA, we -- Bangladesh is the market that is already suffering the consequence of a massive excise hike last year, in a way, it's not a big surprise. We also need to see how the government will address the budget season that is coming out in a few weeks' time.

And but we are seeing a lot of softness in the market to a point that our global cigarette forecast now has reduced to -- from 2% to 2.5% is exactly Bangladesh driven. And obviously, we're exposed of it because of the leadership position that we have in Bangladesh.

And this is the major reason for a lower pace of recovery. As we come along the second half, we'll be lapping big issues that we face in Australia, that most of the decline we saw last year happened in the second half. So the comparator will be much softer compared with the first half of this year.

And on top of that, we still -- we are seeing good progress in other markets in APMEA that give us the confidence to see stabilization as we go along through the year.

Sure. If I can just squeeze one more in. A question on Vuse in the U.S. So clearly, at the full year results, you were talking about flattish expectations for the full year.

So now given that you are expecting double-digit growth, is it mainly due to the new product launches that you were highlighting could come in the third quarter? Or is the underlying market sort of improving?

No. The underlying market is actually improving. The level of enforcement that we are seeing from the state levels mainly is really having a favorable impact and give us some confidence that combined with the new offers we've come to the market as we go along. But remember that this year will be more the last quarter of the year.

But -- so we will not be the driver behind the double-digit expectation but will be helpful, obviously. But the underlying performance is the one that is supporting that.

We will now take our next question from Emanuele Sartori from Kepler Cheuvreux.

I have just two, please. So the first one on New Categories, and particularly U.S. Modern Oral, can you help us bridge the acceleration between volume and pricing? I'm pleased to see that Velo Plus driving very strong share gains, but how much of the expected mid-teens new categories revenue growth is volume-led versus pricing?

Or is there any promotional normalization? And especially in the U.S., just trying to see are you seeing value share converging towards volume share? Or there's still a meaningful gap and a strong promotional activity?

And my second one then will be on the global cigarette industry volume that you now see down 2.5% compared to the previous guidance at 2%. I hear you mentioned Bangladesh. Are you just -- is that the main driver? Or are there any key drivers behind the update?

Thank you for the question. So in the last one, yes, it's basically Bangladesh. The major reason behind this revised guidance for the global combustible business. On Velo Plus, I would say that most of the growth is volume driven, and we have -- remember that we have started Velo with the price index to the leading brand that's 65% because we need to activate the brand, and we need to generate trial.

And today, we sit between 90% to 95% of the price index. And obviously, this also has helped us to reduce the gap between market share and value share. I quote both of them in my script. We are in 28-ish in terms of market share, 23-ish in terms of value share. So it's much closer than it was before. But I have to say that most of the driver behind is the revenue generation is volume driven. The performance are pretty strong on a weekly basis.

If I just may add a follow-up there. Do you have any target in mind on market share in U.S. Modern Oral in the next?

Look, I think that -- the more exciting part of this category is the growth of the category as a whole. And this is a category that I have been saying that for a while. The potential of growth in terms of incidence growth and also average daily consumption growth is really -- is expressive in the U.S. because in terms of every average daily consumption, we see in the Nordics an average of 8 to 10 pouches -- 12 pouches in the Nordics in the likes of Sweden, and we see something like 6 to 8 in Europe.

And today, it's still 3.6 pouch per day on in the U.S. So we know that as the category gets better products and now with the pilot and the latest guidance from the FDA, you'll probably be seeing overall better products in the U.S. market. We expect the category to carry on growing and growing very fast.

And that's what will be behind our expectation to see the category to triple by 2030. That's for me is more important. We have taken leadership worldwide of the category. So Velo is the leading brand worldwide, with 38% category share in the major markets. And we have all the possibility to carry on in that leading position. And that's for me what's important and being -- having the fastest growing brand in the fastest-growing category of new categories in the world today.

[Operator Instructions] Our next question is from Bastien Agaud, Bank of America.

You just talked about both consumer and the difference between Europe and the U.S. Just on Europe, do you -- I mean the category growth that you see, is it no more driven by a slight increase in pouch consume per consumer? Or do you still manage to grow the consumer base?

And the second part of my question is since the U.S. should have better quality product, as you mentioned. Do you think that over the long term, the potential for the U.S. in terms of pouch consume per consumer it's possible that it can be higher than in Europe.

Sorry, can you repeat the second question?

Sure. Is it possible that number of pouch consume per consumer in the U.S. could be higher than in Europe over the long term, given that we should have a higher quality product in the U.S. -- yes.

I see. I see. I see what I mean. Okay. Look, just to address your first point, there is an increase in the base of consumption in the U.S. And actually, that's what is behind our numbers of noncombustible users that we have this target of 50 million, reach 50 million by 2030, we are well on track on that. And if you see the amount of users that we grew last year.

We saw a lot of that coming from Modern Oral specifically in the U.S. So clearly, there is an expansion of the base, not just the everyday consumption. If you go back when we launched Velo Plus where the early date concern was around 2.6 pouch, today is 3.6 pouch. So it's not the major driver behind it. The driver is actually the base of [indiscernible] of consumers. So that's the first thing. The second thing, the U.S., like the Nordics is a market where traditional auto was already present.

And when I say that Europe has an average of 6 pouch per day, there are a number of markets in Europe that has no oral tradition, like the U.K., for example, which is part of that. So in Sweden, there was a world tradition is a 12 pouch per day. So it wouldn't be impossible to imagine that U.S. that has a traditional oral base to go beyond Europe at 6 pouch per day. So if I have to guess, I would say something between what Europe is today and Sweden is today.

And we will now take our final question today from Simon Hales from Citi.

Two or three for me, if you don't mind, please. Firstly, today, obviously you said with regards to the Middle East, you haven't seen any significant impact to date. I suppose where you have potentially seen some impact is probably around the duty-free business.

Am I right to assume that's what you mean by no significant impact so far? Or have you seen any impact in changing or changing consumer behavior in the U.S. as a result of the movement in gas prices we've seen? So that's the first question.

Secondly, on the U.S., obviously, you've talked about the rollout, the selective rollout of Doral in the deep discount segment. How do we think about that as we move into the second half? Is the more you're going to do there? Or do you think you've made the selective rollout that you need to do?

And then just the final question was around profitability on the New Categories business, particularly U.S. for Velo and Vuse as we look forward, given that you're hopefully going to have Velo Max in the market in the second half at some point, some these flavors on Vuse. We expect to see some impact on profitability? From those products.

Okay. So the first point, just to be very clear, we haven't seen any impact so far in terms of the U.S. consumer behavior as a consequence of the higher price of gas. I was just referring that the past records.

Now if you go back, we saw some correlation around higher gas price and a more soft consumption. And that's the, I would say, watch out that we have to bear in mind. You're absolutely right. The biggest impact has been duty-free that end up impact APMEA as well. It's one of the reasons why we have seen some of the big cover, not be as speed as we first thought.

And obviously, some costs in the supply chain, which is more related to freight and some of these energy costs that start to flow through some of the raw material, which is not really at this point, meaningful for the business.

And given my point about most of the cost sits within labor and leaf, we don't see a major impact on the cost side this year. The only watch out is on the consumer confidence and hence, these previous correlation that we saw before. But again, it's still to be materialized. We haven't seen this yet. So that's the first point.

The second one, the rollout of Doral will be accelerated or not depending on the economics. As we have some price increase in some states, for example, we turn into a position where it becomes more feasible from our perspective to launch a deeper discount. So I would expect the rollout to states to carry on in the second half of the year. We are already seeing -- we had the two pilots in last year. We are now rolling out in additional six states.

And I wouldn't discount to roll out to more states as we go along, depending on the economics of all that. And obviously, it's not just about the Doral activation but also how we activate the rest of our portfolio. And -- but my point before is that we don't expect to see any further deterioration of our share position given the reaction that we have read start taking.

And lastly, in terms of the profitability, we don't see major change in terms of gross margin. If we have read a very, very healthy gross margin business in Vapour in the U.S., not just at the gross margin level, but EBITDA level. So these will be very accretive in terms of overall category contribution. And Velo Max also will have a dynamic which will be similar to Velo Plus on a per pouch base. So we are not expecting to see and we just probably be benefiting for more volume because this will be complementary to our portfolio in terms of the offers.

And I think that we'll be working on that direction of strengthening our portfolio of Modern Oral in the U.S. which is exactly what we want. I always get questions about, well, are you concerned about the competitive, the higher level of competitive in Modern Oral market in the U.S.?

And the answer is no because I have faced out this competition outside the U.S. And we have been able to carry on leading the category outside the U.S. So I don't see why there is no reason of not achieving that in the U.S. if we have the right level playing field. So I welcome that. And of course, we are very confident in the portfolio that we have.

This was the last question today. With this, I'd like to hand the call back over to Tadeu for any additional closing remarks. Over to you, sir.

Okay. Thank you for joining us today and for your questions. I'd like to leave you with this key message. The first, our U.S. business continues to drive strong revenue and profit growth driven by a truly multi-category performance.

This broader based momentum together with FDA recently published prioritization guidance providing a clear and consistent pathway for scientifically substantiated less risky products to enter the market, reinforce my confidence in our sustainable future delivery.

Second, our New Categories are gaining traction. We expect revenue growth to accelerate to mid-teens to both H1 and the full year, led by Modern Oral and the return to growth in Vapour for the first time in 2 years, alongside further improvement in profitability.

Third, we are on track to achieve our 2 to 2.5x net debt-to-EBITDA leverage target by year-end while continuing to deliver sustainable shareholder value through our progressive dividend and sustainable share buyback program.

And finally, while there is more to do with this momentum, I'm confident that we are -- we will sustainably deliver our midterm algorithm.

Thank you again for joining us, and I look forward to update you further at our half year results on July 3. And I hope many of you will join us at our Capital Markets Day at our U.S. headquarters in Winston-Salem at the end of September.

Hi, everyone. Thanks for joining us today. It's a pleasure to welcome British American Tobacco to CAGNY this year. Joining us today are Tadeu Marroco, Chief Executive Officer; and David Waterfield, President of Reynolds American. Also, please join me in thanking them for their sponsorship of the lunch following their presentation today.

Now it's been an exciting time for BAT as the company continues to invest in a smoke-free future while continuing to deliver solid organic top and bottom line growth and strong shareholder returns. Overall, BAT's momentum in new categories and strong execution with their combustible portfolio has driven strong free cash flow generation, which has allowed the company to return impressive levels of cash to shareholders in the form of dividends and share buybacks. And with that, I'm going to turn it over to the team to hear more about the company's transformation journey. Thank you.

Thank you. Thank you very much, Bonnie. So it's a real pleasure to be here with you today at CAGNY, and I'm delighted to share the exciting opportunity ahead for BAT. I'm joined today here by David Waterfield, President of Reynolds America, who will outline the significant opportunities ahead in our largest region. The U.S. is the cornerstone of BAT's strategy and is essential to delivering our group purpose of building a better tomorrow. Growing tomorrow is how we translate the ambition into sustained value creation in the U.S. With that, I would like to draw your attention to the disclaimers on Slide 2 and Slide 3.

Okay, so BAT is transforming, driven by our ambition to be a predominantly smokeless business by 2035. Today, I will take you through why we are uniquely positioned to win in the growing nicotine industry, driven by our global multi-category portfolio of leading brands and world-class capabilities with further significant white space opportunities ahead. David will then highlight why we are in pole position to win in the U.S., the world's largest nicotine value pool. Altogether, this gives me confidence that we will deliver sustainable long-term value and cash returns to our shareholders.

The nicotine industry is transforming and growing. In our addressable markets, we expect total industry revenue to grow at around a 4% CAGR over the next 5 years. This is increasingly driven by double-digit growth in new categories and underpinned by resilient low single-digit growth in combustibles. Within new categories, nicotine pouches are the fastest-growing category by far. We expect the nicotine pouch industry revenue to almost triple by 2030, creating a materially larger, highly attractive value pool, and I will return to this in a few minutes. We continue to see smokers increasingly switch to new categories. This is offsetting the decline in combustibles as smokers look for less risk alternatives and to unlock consumer moments, which has been lost due to the regulatory restrictions. We are committed to actively encouraging adult smokers who would otherwise choose to continue to smoke, to make a full switch to smokeless alternatives.

Poly-use for many smokers is part of a transitional period where those consumers move towards a complete switch away from cigarettes. Over the last 5 years, total poly-use has doubled and new category poly-use has increased by 5x as consumers choose different categories to match different moods and moments during their day. Importantly, these consumers generate almost double the revenue of a new category Solo user, driving 80% of total new category revenue growth. And as new categories gain traction, every daily consumption also rises as the products become part of a consumer's routine. These industry trends highlight the importance of our global multi-category strategy.

BAT has over a decade of multi-category experience, giving us deeper insights into consumers whose preference vary by market and moment. Cigarette taste profiles and strengths also differ by country, which influences which category a consumer will most likely adopt. And regulation is not homogeneous globally. This affects not only which products are legally available for consumers, but also communication freedom and excise levels. BAT has taken a consumer-led multi-category approach from the outset. While initially more complex and costly to execute, it has proven to be the right strategy. We have significantly invested in our science and R&D capabilities. Together with leveraging our brand-building expertise and global distribution reach, this enable us to maximize our opportunity to switch smokers who would otherwise choose to continue to smoke to drive harm reduction and create value.

There is also a significant white space opportunity to reach consumers in markets currently inaccessible for new categories. Today, all 3 new categories are regulated in markets that account for only 30% of global combustibles volumes. Meanwhile, in another 30%, these categories are either banned or not commercially viable. Almost all of today's accessible volume sits in just 5 markets where BAT is already well established in combustibles with strong brands, route to market capabilities and local expertise. And in the case of India, we benefit from our unique position as the only international player with a long-standing relationship with the market leader, ITC, through our associate investments. This is why we are working hard to elevate the role of new categories in delivering tobacco harm reduction with governments and regulators around the world to support the creation of fit-for-purpose regulatory and enforcement frameworks across new categories.

This will not only unlock significant further growth opportunities for BAT, but also supports our ambition to build a smokeless world. And BAT has built leading global positions across all 3 new categories. Our progress with Velo, Vuse and glo demonstrates the strength of BAT's innovation capabilities, operational excellence, proven brand building and marketing expertise, all executed at scale. In combustibles, we have a well-balanced portfolio of global and local heritage brands, which continue to deliver long-term value growth and fund our transformation. Now let's take a look to each category in more detail. Velo is the fastest-growing brand in the fastest-growing new category. Consumer numbers, volume and revenue have tripled over the last 3 years. And I'm delighted that in Q4 2025, Velo achieved global volume share leadership in our top markets, which accounts for approximately 90% of industry revenue, a significant milestone for Velo and BAT.

This has been driven by our continued success in Europe and the outstanding performance of Velo Plus in the U.S. Looking ahead, we expect nicotine pouch industry revenue to nearly triple by 2030 and Velo to outpace this given our strong global momentum. We expect industry growth to be driven by rising incidents, increased average daily consumption and attractive adult consumer demographics. Take each of these in turn. Adult consumer incidents across our top markets is low at just under 4%, but growing fast, having doubled over the last 4 years. Incidents vary significantly between more established oral tobacco markets like Sweden, close to 10% and newer markets like Poland at around 2%, growing rapidly.

Average daily consumption also varies by market maturity, with Sweden at around 12 pouch per day and Poland at around 4 pouch per day. Finally, the category benefits from a younger adult consumer age demographic relative to cigarettes with close to 50% of adult nicotine pouch consumers under the age of 30. We expect these drivers to underpin future category growth as consumers are increasingly drawn to the convenience, satisfaction, affordability and lower risk profile of nicotine pouches. In Europe, we are a clear category leader with close to 6x the volume share of our nearest competitor. Velo has a premium brand position with our value share at 68%, 5 percentage points above our volume share. This is supported by Velo's product superiority, achieving average brand equity scores around 40% higher than our closest competitor.

Nicotine pouches are our largest new category in the region by revenue. And the category is also highly profitable with gross profit per unit already 3x higher than combustibles and with a category contribution margin of 40%. Nicotine pouches also have the fastest payback period of all the new categories at only 12 months post launch. And based on the weight of evidence, nicotine pouches sit at the lower end of the tobacco risk continuum compared to smoking with less than 1% of the levels of certain key toxicants found in cigarette smoke. The category's potential to contribute to public health benefits is being increasingly recognized by governments and regulators around the world. There are now 24 countries with bespoke regulatory frameworks, up from only 4 in 2022. In the U.S., senior public health officials recognize the reduced risk potential of the category.

And in September 2025, the FDA launched a pilot program to accelerate the PMTA process for nicotine pouches. This will potentially enable a wider variety of authorized products to enter the market. This positive position is supported by the current low rates of underage usage, which based on data from the most recently published U.S. National Youth Tobacco survey is less than 2%. Put together, nicotine pouch are rapidly becoming one of the most powerful levers of our sustainable transformation. Turning to Vapour, the largest new category by consumer numbers and our largest revenue terms with GBP 1.5 billion delivered in 2025. Vuse is the global value share leader with 39% share, gaining 60 basis points last year in top markets. While the legal industry has recently been impacted by a lack of effective regulation and enforcement, we are seeing early signs of progress in key markets such as the U.S. that could open up a meaningful white space opportunity.

David will talk more about that -- about this fact later. In addition, we see premium Vapour done right as a highly attractive untapped segment for further value creation. Our latest innovation, Vuse Alto is our most advanced Vapour device yet. We started our target rollout last year, focused on largest profit pools and have already achieved meaningful value share gains in markets, including Canada, Germany and France. I'm pleased by the strength of this early performance with further launch planned in key markets in 2026. And turning to Heated Products, where we continue to sharpen our focus on the largest and most attractive profit pools. This is an estimated GBP 9 billion category growing high single digits annually with over 70% of the value concentrated in the premium segment. Enabled by our enhanced innovation ecosystem, we are establishing a premium position with our breakthrough innovation glo Hilo.

While still early days, we are starting to drive encouraging results in priority launch markets, Japan, Poland and Italy, with the majority of consumers new to glo coming from both premium combustibles and the broader heated products category. Looking ahead, we see a clear opportunity to strengthen glo's overall performance through consumer-led innovation, and we remain disciplined in our rollout approach. Maximizing value from combustibles is key to funding our transformation. The category remains a large and highly profitable value pool. Our strong portfolio of global and heritage brands is well balanced across price tiers with a broad geographic footprint and an integrated global supply chain.

Our growth algorithm is resilient as robust pricing and mix benefits have offset volume decline, supported by our digital revenue growth management tools. With our proven track record of driving efficiency and simplification, together with our focus on optimizing operational agility, I'm confident in the resilience of our combustible business and our ability to deliver sustainable value going forward. Our sustainable growth is in the expanding nicotine industry is driven by 6 core capabilities. These are built over 120 years of tobacco industry experience, enhanced by latest technology and science, leveraging the combined strengths of BAT and our strategic partners. We believe these 6 capabilities, together with our leading brands and global footprint, position us to win in today's transforming marketplace. First, we have transformed our insights and foresight capability fueled by a decade of multi-category experience.

We now have actionable insights to address current consumer moments. These are supported by a deeper understanding of poly-usage together with foresights to guide our future innovation pipeline. We've also significantly scale up and integrated our digital insights globally to enhance decision quality and execution speed. And we have embedding AI across the full insights value chain, accelerating decision-making and improving capital efficiency. Second, our world-class science and stewardship capability is based on many years of scientific research. This has enabled scientific evidence that supports our new category products having between 90% to 99% lower toxicant levels compared to cigarette smoke.

And studies indicate a substantial reduction in exposure to key harmful components that, in many cases, are close to quitting. With more than 270 peer-reviewed studies and over 9,400 patents, we believe we have one of the strongest evidence based in the industry, underpinning our science and providing a key competitive advantage. Third, over recent years, BAT has developed a very unique global R&D ecosystem. We have built 4 state-of-the-art innovation centers where we work collaborative with our strategic partners, BYD and Smoore together with over 50 development and open innovation partners. Combined with our decades of experience in tobacco leaf science, blending, liquids and flavors, this ecosystem give us a clear competitive edge, enabling us to accelerate the development of our innovation pipeline and introducing winning new products at speed. Fourth, our global multi-category portfolio is supported by the breadth of our distribution and retail reach across 140 markets.

Our brands are available to all nicotine consumers across 11 million retail outlets, double the coverage of large-cap CPGs, driving over 150 million daily consumer touch points. Importantly, 80% of these outlets are in convenience and traditional channels, making it more challenging and costly for competitors to replicate. Fifth, BAT has many decades of experience and expertise, successfully operating in complex regulatory environments. As I have already highlighted, effective regulation is critical to supporting sustainable new categories growth and our tobacco harm reduction agenda. We are proactively engaging in an evidence-based dialogue with key stakeholders, including governments, health authorities and regulators to help shape effective regulatory and enforcement frameworks for new categories. This is why we launched Omni in 2024, a compendium of both BAT and third-party world-class objective science as our go-to authority on tobacco harm reduction.

While I'm encouraged by the recent regulatory progress in nicotine pouches and in the U.S., we are clear that much more needs to be done to support tobacco harm reduction globally. And finally, we are significantly strengthening our digital and AI capabilities, enabling greater agility, efficiency and clarity. Let me highlight 4 areas of progress. First, with enhancing the consumer experience through a full connected digital ecosystem across glo Hilo and Vuse Ultra. Second, we have strengthened our consumer intelligence with AI-powered insights, synthetic segmentation and advanced analytics to deliver deeper, faster and more predictive intelligence. Third, we are advancing our commercial execution, deploying next-generation digital B2B platforms and AI-driven capabilities that support compliance, accuracy and operational excellence.

And fourth, we are embedding enterprise-wide digital and AI training to accelerate decision-making and support long-term sustainable growth. Together, these advancements provide a robust digital foundation for our future. Collectively, these 6 core capabilities combine it with our global leading brands of fundamental drivers for our sustainable transformation. Now let me play you a short video that brings this to life.

[Presentation]

To conclude, the nicotine industry is transforming and growing. BAT is uniquely positioned to win driven by our global multi-category portfolio of leading brands and world-class capabilities. I'm excited about the future for BAT, and I'm confident that we will sustainably deliver our midterm financial algorithm of 3% to 5% revenue growth, 4% to 6% adjusted profit from operations growth and 5% to 8% adjusted diluted EPS growth. We have a strong track record of cash returns with over 25 years of dividend growth alongside our sustainable share buyback. And I'm confident we will continue to create sustainable value for our shareholders. With that, I will hand over to David to talk about the opportunities ahead for Reynolds in the U.S. Thank you very much.

Thank you, Tadeu. Good morning, everyone. It's good to be here with you today to share why BAT is in pole position to win in the U.S. with our Reynolds American business. Reynolds' role is clear: deliver a winning performance and turn opportunity into sustained financial returns. The U.S. is the most valuable nicotine market in the world. And with more than 60 million adult nicotine consumers, it is the cornerstone of BAT's strategy. As U.S. adult smoker preferences continue to evolve, Reynolds is well positioned with the broadest multi-category portfolio of smokeless products. Our portfolio, combined with our scale, disciplined execution, digital capabilities and talent give us real competitive strength in this market.

Over the past year, we've delivered sustainable value growth in combustibles, expanded distribution of Velo Plus nicotine pouches, the fastest-growing brand in the fastest-growing category and gained meaningful Vapour share with Vuse as enforcement actions accelerated against illegal disposable products. The actions we took to reenergize the U.S. business in 2024 are working. We're seeing tangible results, and we've shown we can innovate, execute and compete diligently. Looking ahead, we see significant upside, and we'll continue to invest in our differentiated portfolio and U.S. operations to deliver quality growth. Now let me share more details. A look at the U.S. nicotine volumes tells the story of an industry undergoing a profound transformation. Total industry volumes have grown above 6% CAGR since 2023 as declining cigarette volumes have been more than offset by growth in Vapour and oral products.

As a result, the total U.S. nicotine revenue pool estimated at GBP 42 billion in 2025 is projected to keep growing above a 4% CAGR through to 2030. The U.S. represents 1/3 of the global value pool and sits at the forefront of industry transformation. This sizable contestable space is being driven by nearly 40 million adult consumers who are choosing alternative products like Vapour and nicotine pouches or using products across all categories. And Reynolds is positioned not just to participate in this evolving market, but to innovate, compete and win as a key driver of BAT Group's mission to build a smokeless world.

With Reynolds as its cornerstone, BAT is in pole position to win in the world's most valuable nicotine market. The combination of BAT's global expertise and innovation capabilities with Reynolds massive U.S. scale, precision execution, deep trade relationships, a strong operations footprint and expanding digital capabilities creates a unique position to drive growth and capture outsized value in the U.S. market. Combined, these strengths power the broadest multi-category portfolio in the U.S., a portfolio fully aligned to where adult nicotine consumers are heading. Reynolds operates at true scale. with a well-established commercial footprint across 185,000 contracted retail accounts. Over the past year, we've made a step change in our U.S. capabilities, expanding our digital reach to engage more than 17 million age verified adult nicotine consumers and investing in manufacturing capacity to meet increasing demand.

And Velo Plus is a strong proof point. It shows how our manufacturing, sales and marketing capabilities can deliver at scale in a highly competitive segment. In just 18 months, Velo Plus reached 93% weighted distribution, built a base of 5 million adult nicotine consumers and exited 2025 with 24% volume share. As I said at the start, Reynolds has a clear mandate: deliver winning performance and turn opportunity into sustained financial returns. As the cornerstone of BAT's strategy, we are essential to achieving a better tomorrow and growing tomorrow is how we deliver that purpose in the U.S. Growing tomorrow means investing in America by investing in growth that strengthens our competitive position and drives attractive returns. We are committing GBP 2.5 billion by 2030 to support U.S. growth for the long term. These investments build capability, expand scale and are expected to add more than 2,000 new jobs across Reynolds and our supply network.

And it's already happening. Over the past year, we invested GBP 150 million in our U.S. manufacturing operations and added 1,000 jobs to scale Velo Plus. We're also continuing to invest in evidence-based harm reduction science, expanding our smokeless pipeline and leveraging the global BAT network to accelerate innovation. And the impact extends beyond our business. Reynolds was the largest purchaser of U.S. tobacco leaf from American farmers in 2025. Growing tomorrow means we're committed to value creation across the board, strong returns for our shareholders, meaningful careers for our people and jobs that support the American economy. Across the U.S. market, adult nicotine consumer behavior is changing in a significant way. Today, 65% of adult consumers have interacted with or migrated to new categories and 53% of adult smokers are now poly-using across formats.

Reynolds multi-category portfolio is aligned to where adult smokers are heading. And you can see the impact of that alignment in our adult nicotine consumer share -- consumer leadership. Reynolds is #1 in total adult nicotine consumers with nearly 22 million choosing our products. We're also leading in a number of adult nicotine consumers purchasing our smokeless and new category products, driven by our proven brand building and scale. And every category in our portfolio is performing. In combustibles, we have returned to value share growth. The strength in combustibles continues to fund our momentum in new categories. In Vapour, Vuse is back to growth, leading in 37 states and gaining 2 percentage points of value share. Vuse remains the clear leader in the legal U.S. Vapour marketplace. In nicotine pouches, Velo continues to accelerate. It is now the fastest-growing brand in the category and the second largest brand in the market.

The strength of our multi-category portfolio is translating into share momentum. Reynolds total nicotine volume share increased by over 100 basis points between December 2024 and December 2025, with smokeless categories driving the growth. Vapour and oral increased more than 300 basis points over the same period. Together, our combustible Vapour and nicotine pouch brands are driving growth, supporting both near-term performance and long-term value creation. Let's take a closer look at each category. Starting with combustibles. Reynolds is competing from a position of strength. Our portfolio plays in more than 90% of the revenue pool and over 95% of the profit pool, excluding deep discount.

Our leading brands, Newport, Camel, Natural American Spirit, Lucky Strike and Pall Mall give us the flexibility and breadth to compete whether adult smokers are up-trading or down trading. And in a GBP 27 billion category that remains the largest -- the single largest U.S. nicotine revenue pool, that matters. We've taken actions to sharpen our portfolio management, strengthen our route to market and leverage digital revenue growth management capabilities. And we're seeing the results. Our total U.S. value share increased by 30 basis points, driven by the strength of our premium and popular segment brands. In the above weighted average price segment, which accounts for nearly 60% of the industry, we grew our value share by 50 basis points. Importantly, revenue and category contribution improved year-on-year with both accelerating in the second half of 2025.

And the U.S. growth opportunities in new categories is significant. Vapour and oral together represent a GBP 15 billion revenue pool today, and that pool is expected to grow to GBP 20 billion to GBP 25 billion by 2030. Behind that growth is a dynamic base of roughly 40 million adult nicotine consumers with migration rates that continue to accelerate. This isn't theoretical demand. It's real movement and it's happening at scale. To capture the opportunity in this market, companies need 3 things: strong brands, deep capabilities and meaningful scale. And that's exactly what we bring. We have credible reasons to believe new category growth will continue.

We already lead in legal U.S. Vapour with views, and we're building real momentum in nicotine pouches, mirroring the success we've delivered in other markets around the world. And while regulation is outside of our control, we're seeing material progress. The regulatory process is starting to become more efficient and enforcement against illegal products is increasing. In the U.S. Vapour market category, we clearly see the urgent need, how urgent the need for enforcement is. The Vapour revenue pool is sizable at an estimated GBP 10 billion, but the legal market can't fully participate due to the surge of illegal noncompliant disposables. This remains the category's single biggest headwind. Reynolds has continuously called for strong enforcement against illegal industry actors. And in 2025, we saw meaningful actions at both the federal and state level.

Federally high-level authorities oversaw nationwide operations, seizing millions of illegal vapes. At the state level, there was also progress with an expansion of state directory laws and enforcement programs. By December 2025, nearly 48% of the tracked legal Vapour industry was covered by state directories or active enforcement, up from 8% a year earlier. Against this backdrop, our Vapour brand Vuse has remained resilient. Vuse consolidated its category leadership, reaching a record value share of nearly 52% and Vuse volume performance returned to growth in the second half of last year, strongly supported by states with effective enforcement. So progress has been made and the picture remains clear. Effective enforcement is essential to keep illegal noncompliant products off the shelves.

Protecting the integrity of the U.S. Vapour category is a priority. Importantly, Congress has strengthened the FDA's authority and funding, allocating at least $200 million for enforcement and expanding the agency's powers to seize and destroy illegal imports. Reynolds will also continue to pursue legal action where needed, including efforts to protect our patents. In August, we received a favorable initial ITC ruling on a patent infringement case and now await the outcome of the full process. We are advocating for a level playing field, and we will protect our rights to ensure adult nicotine consumers have access to high-quality compliant Vapour products. I'd like now to turn to the fastest-growing category in the U.S. nicotine market, nicotine pouches.

In 2025, almost 16 million adult nicotine consumers use nicotine pouches. It's a 63% increase in just 2 years, and it's still accelerating. By 2030, we expect nicotine pouches to become the second largest adult nicotine consumer pool in the U.S., approaching 25 million adult consumers. Volume and revenue pools tell the same story. Both have more than doubled since 2023, and we expect significant growth to approximately GBP 7 billion revenue pool by the end of the decade. And Reynolds is well positioned to win. Launched in December 2024, Velo Plus delivered a 290% volume growth year-on-year and reached 24% volume share nationally. Importantly, nearly 30% of nicotine pouch adult consumers have tried the brand and 71% of them have come back, an exceptional repeat purchase rate. And Velo Plus underlying growth metrics are even more encouraging.

In 2025, the brand doubled its active adult nicotine consumer base from 2.5 million to 5 million. And that momentum allowed Velo Plus to capture 46% of the industry's volume growth and 45% of the value growth, both well above its current category share. And notably, Velo Plus' contribution to both industry volume and value growth showed a marked acceleration as we exited 2025. Velo is now the clear #2 nicotine pouch brand nationally. We're encouraged by Velo Plus' performance and continue to advance a strong pipeline of FDA submissions. In late 2025, the agency launched a new fast-track process to more efficiently review nicotine pouch premarket tobacco applications.

And a new product, Velo Max is in scope. Inspired by our leading global products, Velo Max features higher moisture levels, we are confident in the strength of our submissions and the opportunity Velo Max presents here in the United States. So let me bring this all together. In terms of financial delivery and the value Reynolds is creating for the group. Each category has a clear role to play for delivering value in combustibles and creating value in new categories. And that balance puts us in a strong position to deliver today while positioning the business for future growth. In 2025, Reynolds delivered 5.5% revenue growth and 5.9% profit growth, driven by a strong combustibles performance, price/mix realization and continued momentum in new categories.

Profitably transforming our business is the key focus. Over the past 4 years, we've improved our gross margin by roughly 8 percentage points, establishing the U.S. business as a margin expansion engine for BAT, and we expect this trend to continue. By the end of the decade, we are confident in our path to reach a gross margin between 75% and 78%. The important takeaway is this, Reynolds is delivering sustainably -- sustainable value today while growing an even more profitable future-ready portfolio for tomorrow.

In closing, I'd encourage you to see Reynolds American through a lens of growth. We're positioned to win in the U.S., the world's most valuable nicotine market in the world. Reynolds is the cornerstone of BAT's strategy, and we are in pole position to win. And how will we do that? Through the combined expertise and capabilities of BAT and Reynolds, through an unmatched multi-category portfolio of leading brands, through disciplined execution at scale, through a sustained commitment to invest GBP 2.5 billion in our U.S. operations and through talented people who lead responsibly and deliver results. And to learn more about how we're transforming and winning, Tadeu and I would like to invite you to BAT's 2026 Capital Markets Day this September in Winston-Salem, North Carolina, the home of Reynolds. Thank you, and please join us for lunch after the Q&A.

All right. Thank you. And thanks again for sponsoring lunch today. We really appreciate it. There's going to be a quick breakout before the lunch, and they'll take a couple of questions. Thanks again.

Good morning, everyone. I'm delighted to welcome you to our Full Year 2025 Results Presentation. With me this morning, Javed Iqbal, Interim CFO; and Victoria Buxton, Group Head of Investor Relations.

I will begin with our transformation highlights. Javed will then take you through our financial results in more detail. Finally, I will return to talk more about our performance outlook and why we are confident in the pathway ahead given the clear momentum we are driving. We will then take your questions.

With that, I would like to draw your attention to the disclaimers on Slides 2 and 3. So let's begin by looking at the positive transformation momentum we are driving. Starting with some key highlights. We added 4.7 million smokeless consumers, bringing our total to 34.1 million, mainly driven by our continued strong performance in Modern Oral. This marks our strongest growth acceleration to date and position us well for 2026.

We delivered 2025 group results at the top end of guidance, driven by resilient delivery in combustibles and an excellent performance from Velo in all three regions.

Our disciplined focus on quality growth continues to improve returns on more targeted investments with new category contributing now up 77% at constant rates. Alongside this, we remain committed to investing behind our premium innovation launches, supporting long-term value creation.

We continue to deliver strong cash returns for shareholders. In addition to our progressive dividend, in December, we announced an increase to our share buyback to GBP 1.3 billion in 2026. Looking ahead, we are confident in returning to our midterm algorithm this year with accelerated momentum through the second half of 2025, positioning us well for continued delivery.

I'm proud that we have delivered on all of our 2025 priorities. And I want to thank our teams around the world for driving these encouraging results. Our performance reflects the clear momentum we are driving as we continue to build a track record of delivery.

I'd like to take a moment to highlight two areas from last years that stand out to me. First, the return to both revenue and profit growth in the U.S. for the first time since 2022, a significant milestone driven by stronger combustibles performance, a return to revenue growth in Vapour in the second half and Modern Oral. As a result, we grew 30 basis points of combustibles value share.

Second, we are delivering quality growth in new categories, launching premium innovations in each category while delivering a return to double-digit revenue growth in second half and category contribution growth up 77% for the full year. The progress we made in 2025 reinforces my confidence in our future delivery.

And with that, I will hand over to Javed to take you through our 2025 performance in more detail.

Thank you, Tadeu. And good morning, everyone. I'm pleased to share that we delivered results at the top end of guidance on a constant currency basis. The performance was driven by return to growth in the U.S., a robust performance in AME and the strength of Modern Oral globally. Our reported numbers reflect some adjusting items, including nearly GBP 1.6 billion, mainly related to the annual amortization of our U.S. acquired trademarks, a net credit of GBP 524 million following a change in the forecasted outlook for the Canadian combustible industry. We also recognized a gain of nearly GBP 900 million from the partial monetization of our ITC stake.

To give you a clear view of our underlying performance, I will focus on constant currency adjusted and where applicable, adjusted for Canada metrics. You can find further detail on adjusting items and share data in the appendix.

We delivered group results at the top end of guidance, supported by accelerated momentum through the second half. Group revenue increased by 2.1%. Adjusted profit rose 3.4%. Adjusted profit from operations grew 2.3% and adjusted diluted EPS was up 3.4%.

Let's now turn to New Categories revenue grew by 7%, driven by outstanding growth in Modern Oral, which was up strongly by 48%, with heated products up 1%. This was partially offset by a nearly 9% decline in Vapour, mainly due to continued illicit pressures in the U.S. and Canada. Our second half use performance showed a clear improvement versus the mid-teens decline in H1, supported by early signs of strong enforcement activity in the U.S.

We continue to deliver quality growth with gross profit up over GBP 200 million and category contribution reaching GBP 442 million. This reflects our disciplined approach to return on investment, targeted investments in high-value markets and increasing scale benefit across our portfolio.

I am proud of the progress we are making. And I'm particularly pleased with our accelerated H2 momentum, where we returned to double-digit new category revenue growth.

Now turning to combustible. Revenue grew 1% with volume decline more than offset by continued robust price/mix across markets. We delivered quality growth here, too. Both gross profit and category contribution increased 2.5% driven by a strong performance in the U.S., positive price/mix and continued productivity and simplification gains, which I will speak to shortly.

Our performance highlights, the breadth of our global footprint, with strong delivery in the U.S. and AME, more than offsetting fiscal and regulatory headwinds in Bangladesh and Australia, which impacted total group revenue by around 1% and group adjusted profit from operations by around 2%. This resilience and increasing momentum in H2 reinforces our confidence in future delivery.

Turning to our regions, starting with the U.S. In Combustibles, we delivered a 4.6% increase in revenue with our strengthened portfolio, sharper execution and enhanced revenue growth management, driving price/mix, including excise duty drawback. Value share increased 30 basis points with volume share down 10 basis points.

In New Category, revenue grew nearly 20%, driven by the success of Velo Plus, which delivered over 300% growth. While Vapour revenue was down 3.4% for the full year, we are encouraged that Vuse returned to revenue growth in H2, supported by early signs of enforcement actions.

Overall, U.S. revenue increased 5.5% and adjusted profit grew 5.9%, mostly driven by a strong combustible performance. Importantly, Velo Plus reached positive category contribution within its first year, underscoring the scalability of our Modern Oral business model. Tadeu will share more detail on the U.S. shortly.

In AME, we delivered another robust performance. Revenue grew over 3% with Combustible up more than 2%, supported by strong delivery in Brazil, Turkey and Mexico with solid pricing. New Category revenue increased 4.3%, mainly driven by Modern Oral, which grew over 17%. We are the clear Modern Oral leaders in the region with over 60% volume share in top markets, selling at a premium and strongly outperforming peers, which Tadeu will expand on later.

Growth was further supported by heated products with revenue up over 6%, driven by Italy, Germany and Ukraine. This was partially offset by competitive dynamics in Romania as we reallocated resources ahead of the glo Hilo launch.

Vapour revenue declined more than 11%, mostly impacted by the lack of illicit enforcement in Canada and regulatory and excise changes in U.K., France and Poland. Adjusted operating profit grew by nearly 10%, driven by operating leverage and efficiency gains in Combustibles and scale benefit and resource allocation driving improved contribution across all three new categories.

AME is a true multi-category region, delivering high-quality growth and demonstrating the resilience and balance of our portfolio.

In APMEA, growth in key markets, including Pakistan, Nigeria and Indonesia was more than offset by fiscal and regulatory headwinds in Bangladesh and Australia. Total revenue declined 7.2% with Combustibles down 8.3%. New Category revenue was down 7.6%. Strong growth in Modern Oral was more than offset by heightened competitive activity in heated products in the value-for-money segment in South Korea and Japan, along the phaseout of our super-slim platform.

Our Vapour performance reflects strategic decisions taken to reduce our footprint and reallocate resources away from markets where regulation and enforcement do not support a responsible competitive landscape. Adjusted profit was down 17.9%, mainly due to challenges in Bangladesh and Australia.

As we continue to navigate headwinds into 2026, we expect our performance to stabilize for the full year, supported by Bangladesh as we lap last year's decline and with the drag from Australia becoming progressively less material year-on-year.

Turning now to our group operating margin, which was broadly flat at 44%. We successfully offset inflationary and FX pressures through a strong U.S. performance, higher profitability in New Categories and continued cost savings.

Transactional FX headwinds on adjusted profit of approximately 1% were primarily driven by Turkey, Japan and Nigeria. At current rate, operating margin expanded by close to 10 basis points.

BAT has a strong track record of disciplined and cost savings, and we continue to build on that foundation. Since 2023, we have delivered GBP 1.2 billion in productivity savings. These efficiencies help us offset inflationary pressures and foreign exchange headwinds, while continue to fund innovations and growth in New Categories.

In 2025 alone, we absorbed around GBP 300 million of inflationary cost increases in addition to transactional FX. Looking ahead, we remain focused on simplifying Combustibles and scaling new categories, targeting a further GBP 2 billion in productivity savings by 2030. In addition, we now expect our Fit2Win program to deliver GBP 600 million of annualized incremental savings by 2028. We expect around GBP 500 million of these savings to be delivered by 2027, with the remaining benefits realized by the end of 2028. We are committed to reinvesting these savings to support further sustainable growth initiatives.

Fit2Win is a transformational project that is reinventing BAT. As outlined at our 2025 half year results, it is centered on optimizing processes and ways of working to create a leaner, faster and more data-driven organizations. Since half year, we have made strong progress. We have expanded the program to include organizational streamlining to sharpen our focus and improve speed of execution, allowing us to raise total annualized savings by a further GBP 100 million.

To unlock these benefits, we now expect around GBP 600 million of associated costs over the next 2 years. As a structured time-bound program, GBP 500 million will be treated as adjusting, including around GBP 100 million of non-cash items. As previously guided, this spend is already underway with the majority of costs expected to be incurred this year and concluding in 2027.

Bringing it all together, earnings per share increased by 3.4% as operating profit growth and lower share count was partly offset by net finance costs, our reduced share of ITC profits and tax. Our underlying tax rate was 24.5%.

Our strong cash generation continues to enhance our financial flexibility. This has enabled us to announce a 2% increase in our dividend and increase our share buyback by GBP 200 million to GBP 1.3 billion for 2026. Alongside this, we continue to delever to 2.55x adjusted net debt to adjusted EBITDA at the end of 2025, and we remain on track to be within our 2x to 2.5x target range by year-end.

While our 2025 cash delivery was impacted by the CCAA upfront payment and the prior year deferral of tax payments in the U.S., we remain on track to deliver more than GBP 50 billion in free cash flow by the end of 2030. And we continue to focus on our capital allocation priorities, which are investing in transformation, balancing, deleveraging with progressive dividends and sustainable share buybacks and selective bolt-on M&A to support our transformation.

I am excited about the future and confident in our ability to deliver our midterm algorithm of 3% to 5% revenue growth, 4% to 6% adjusted profit from operations growth and 5% to 8% adjusted diluted EPS growth. Our return to this midterm algorithm in 2026 marks a major milestone in our transformation journey and reinforces the strength and resilience of our strategy.

Our confidence is underpinned by continued growth in the U.S., robust multi-category delivery in AME, low double-digit New Category revenue growth led by Velo globally, a further improvement in New Category contribution and continued savings from our productivity programs.

Although we still have more work to do, and it will take time to stabilize performance in APMEA, we will continue to invest in our premium innovations rollout. As a result, we expect 2026 to be at the lower end of these ranges and our profit performance to be second half weighted, driven by the phasing of New Category investment and as Fit2Win savings build through the year.

And with that, I'll hand it back to Tadeu.

Thank you, Javed. So moving on now to the positive transformation momentum we are driving. In 2023, when I became Chief Executive, I committed to sharpening our focus and execution guided by a refined strategy and ambition to become a predominantly smokeless business by 2035. And I'm proud to say that we have made significant progress across all three strategic pillars as we continue to build a track record of delivery.

While there is still more to do, I'm confident that our focused investments and sharp execution are driving real momentum, as you can see from our 2025 results. Our progress underpins our confidence in sustainably delivering our midterm algorithm, while continuing to reward shareholders with strong cash returns.

I'd now like to highlight five points that demonstrate this. First, we have successfully reset our U.S. business, returning to revenue and profit growth in 2025. While the U.S. macroeconomic environment remains dynamic, the pace of Combustibles industry volume decline started to moderate in 2025, down 7.4%. Against this backdrop, driven by the actions we have taken to strengthen our portfolio and sharpen execution, our U.S. Combustibles business delivered strong revenue and profit growth in 2025.

Driving value from our Combustible business is essential to funding our transformation, and the U.S. is a key driver of this. In line with this strategy, we gained 30 basis points of total industry value share.

I'm particularly encouraged that our financial performance accelerated in the second half. This positive momentum reinforces my confidence in the resilience of our U.S. Combustible business and our ability to deliver sustainable value going forward.

Velo Plus is the fastest-growing Modern Oral brand in the largest Modern Oral value pool globally. Since launch at the end of 2024, it has already reached the #2 position in both volume and value share, gaining nearly 18 percentage points of volume share and nearly 14 points of value share. And we are pleased to -- that our share momentum has continued into the start of 2026.

Velo Plu has more than doubled its consumer base and driven over 300% Modern Oral revenue growth, capturing around 70% of industry volume growth and 80% of industry value growth in December. All of this is underpinned by a consistent repurchase rate of around 70% throughout the year. Importantly, we achieved positive category contribution within the first 12 months of launch, fully aligned with Velo's global payback profile.

The total U.S. Modern Oral category continues to grow strongly and has already overtaken the size of the legitimate Vapour category at over GBP 2 billion of revenue in 2025. Velo Plus is a great product. And these results demonstrate this in what remains a highly dynamic category. Its impressive. It's impressive success also highlights the broader strength of our U.S. capabilities and executional excellence from consumer insights and branding to enhanced digital analytics and distribution enabled by a rejuvenated Reynolds.

Our performance was further enhanced by the successful launch of Grizzly Modern Oral in the summer, which achieved close to 2% volume share by year-end, taking our total volume share of U.S. Modern Oral to 25.8%. Through this momentum, I'm delighted to announce that at the end of the year, we reached global volume share leadership in Modern Oral, measured across the top Modern Oral markets, representing around 90% of total industry revenue.

Second, we are premiumizing our new category portfolio. Velo is already the clear European leader around 6x larger than our nearest competitor. We continue to focus on consumer-led innovation to strengthen product satisfaction among adult consumers and extend Velo's success.

At the start of this year, we began the nationwide rollout of our latest innovation, Velo Shift in Sweden, following a successful pilot with key retailers and online partners. Velo Shift is reshaping the Modern Oral experience, featuring a new comfort pouch design, five distinct sensory flavors and a differentiated hexagonal can that stands out on shelf.

Trading at a premium to the core Velo range, Velo Shift is already driving incremental share in the channels where it has launched with further market rollouts planned through 2026. These results highlight not only the strength of Velo brand and innovation pipeline, but also the quality of our execution across European markets.

We see premium Vapour Done Right as a highly attractive untapped segment for further value creation. Vuse Ultra is our most advanced Vapour device yet, driving meaningful performance improvement for Vuse in markets where we have launched, including value share gains of nearly 80 percentage points in Canada, close to 4 percentage points in Germany and above 2 percentage points in France.

As Javed highlighted, we have made proactive strategic decision to focus our execution on the largest profit pools with more supportive regulation and enforcement. Vuse Ultra is central to this approach, and I'm encouraged by the strength of its early performance with further launch planned in the key markets in 2026.

Our breakthrough innovation platform, glo Hilo, introduced our first showpiece device and is designed to establish glo in the premium segment. While still early days, we are starting to drive encouraging results in priority launch markets, Japan, Poland and Italy, with the majority of consumers new to glo coming from both premium Combustibles and the broader Heated Products category.

We are also strengthening glo's overall brand equity across key consumer metrics. This consumer response is translating to early volume share momentum. We are encouraged by early trial to retention rates of around 50%, providing further confidence in the platform's potential.

In 2026, our focus will be on accelerating trial among premium consumers across both Combustibles and Heated Products, supported by target online and in-person activations. We will continue to scale glo Hilo through additional market rollouts in the largest Heated Product profit pools where we can generate the strongest returns. Overall, we remain confident in the strength of this innovation platform and expect to progressively build share within the premium segment over time.

As Javed highlighted, the Heated Products category remain highly competitive, and this has impacted our 2025 performance in the value for money segment where we are present with glo HYPER. Introducing glo Hilo into the premium space allow us to further differentiate our tier -- our portfolio.

We see a clear opportunity to strengthen glo's overall performance across both premium and value for money segments. Central to this is the launch of our next-generation glo HYPER device from Q2. The new glo HYPER delivers a step change offering, quick starts, longer started session length, new connectivity and a replaceable battery. These innovations significantly improved the consumer experience, and we are also further enhancing the consumables range. Taken together, these upgrades create a much stronger proposition designed to reinforce our competitiveness in the value for money segment.

Third, I'm proud of the strong progress we have made improving New Category profitability. Since 2021, we have driven a GBP 1.4 billion improvement in Category contribution with all three New Categories contributing to this momentum. Importantly, we have achieved this, while continuing to invest in our transformation to drive future sustainable growth.

Our new categories are meaningfully contributing to group results as we benefit from increased scale, reflecting traction in established markets while continuing to invest in new market launches. This supported by more consistent and constructive regulatory frameworks, such as those in place for Modern Oral in 24 markets, up from just 4 markets in 2022. We have sequentially improved our performance each year. And through our quality growth approach, we remain committed to driving sustainable profitability improvement moving forward.

Fourth, I'm encouraged by the signs of positive progress we are seeing in the regulation and enforcement of new categories, especially in the U.S. While the Vapour category continues to be impacted by the proliferation of illicit products, Vuse returned to revenue growth in the second half after 18 months of decline. This has been supported by increased state level enforcement with Vapour directory and enforcement legislation representing around 50% of tracked industry volume by year-end.

In addition, Vuse performance in the second half benefited from a competitor exit, further strengthening our market position. Our recovery has also been supported by early signs of increased federal enforcement targeting borders and larger distributors, resulting in high levels of seizures and fines.

Looking ahead, we are encouraged by the increased focus and funding directed towards strengthening the FDA's enforcement capabilities. We were also pleased to receive a favorable initial determination on our International Trade Commission complaint from the administrative law judge who has recommended a general exclusion order on imported illicit Vapour device. We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review.

With an estimated 7% of the U.S. Vapour industry value still illicit, we are hopeful the authorities will continue with enforcement initiatives in 2026. Reynolds continues to advocate for a level playing field so that adult nicotine consumers have access to high-quality compliant Vapour products. Over time, we believe Vuse is well positioned to benefit from strong enforcement at both the federal and state levels.

In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping adult smokers who would otherwise continue to smoke to transition to less risk alternatives, reinforcing their role in tobacco harm reduction. We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. This is an important step towards keeping underage appealing illicit products out of the market, while giving responsible manufacturers a more predictable path to PMTA authorization.

We are confident in the strength of our science and portfolio, and we look forward to being able to complement our existing U.S. portfolio with Velo Max, a higher moisture Modern Oral product in 2026, and we have increased capacity to support our sustainable growth agenda.

And the final point I would like to highlight is that our financial flexibility continues to strengthen, and we remain on track to generate more than GBP 50 billion of free cash flow by 2030. BAT is a highly cash-generative business, delivering at least 100% operating cash conversion annually since 2020, 100% of operating cash conversion, reflecting our strong cash discipline and clear focus on returns and enabling us to return GBP 34 billion of cash to shareholders over the same period.

We remain committed to delivering sustainable shareholder returns with a 25-year track record of dividend growth and our sustainable share buyback program. I'm confident that we will sustainably deliver our midterm algorithm as we are firmly committed to growing revenue sustainably and improving profitability.

To conclude, we are carrying momentum into 2026, underpinned by a robust innovation pipeline, strong strategic partnerships and confidence in our future fit capabilities. We are executing with discipline and delivering against our priorities. At the same time, we are enhancing financial flexibility, enabling continued investment in our transformation together with strong cash returns. I'm excited about the future for BAT and believe we are well positioned to deliver long-term sustainable growth and value for our stakeholders.

Thank you for listening. We will now be joined on stage by Victoria for the question-and-answer session.

Thank you, Tadeu, and good morning, everyone. [Operator Instructions] Tadeu and Javed will be very happy to take your questions and I will now hand over to the conference call operator.

Our first question is from Andrei Andon-Ionita from Jefferies.

First of all, two questions on Modern Oral, please. Number one, what are your expectations in terms of performance in the U.S. in fiscal '26 for Modern Oral specifically?

And secondly, are these expectations underpinned by the FDA approving the European Velo product for sale in the U.S.? Or are they mainly driven by the existing Velo Plus product?

And perhaps finally, in terms of profitability, could you tell us a bit more about how you expect New Categories profitability to evolve in fiscal '26?

Okay, Andrei, thank you for the question. We have -- look, we have a very strong product with Velo Plus in the U.S. The levels of retention has been 70% throughout the year, which is really, really a very strong rate when you compare with other offers in the market. So basically, at the back of that, we believe that the product is competitive enough to continue growing in the U.S. market, has all the indications from that.

Today, we still have a low level of awareness in the brand around 30%. And we are present now in 150-plus outlets, 1,000 outlets, which accounts for something like 93% of the total oral revenue. We are also seeing that the average daily consumption as new products start to be more satisfying for consumers in the U.S. is increasing. So it used to be around 2.8 pouch per day. Today is around 3.6 pouch per day. If you compare that with the European market, which is around 6 pouch per day, you see a lot of potential growth still in the U.S. and the Nordics is 12 pouch per day. So when you pull all this together, a strong product and the dynamics of the market evolving at the pace that it is in the U.S. So the expectation is that we will continue growing. That's why we are investing in capacity, like I mentioned during my presentation.

We mentioned Velo Max, which is even higher moisture product that we have as part of the pilot that the FDA is running. We welcome the, first of all, that FDA is embracing nicotine pouch as a key category to address tobacco harm reduction in the U.S. because it's the lowest risk profile, if you want. There is no inhalation, there is no tobacco. There is no smelt that is much easier for consumers of cigarettes to convert into a much lower risk profile product. So they are put in place these pilots. We hope that for the next few months, we see our products, and we are cautious that other competitors will come with other products as well.

And for us, there is no problem with that. But when I look outside the U.S. where everyone is free to compete, the leading brand outside the U.S. is Velo. Like we said, in Europe, our volumes in Velo are 6x higher than the second largest competitor. So what we want to see in the U.S. is a level playing field, because in a level playing field, we know that we can win. So that's the first question on Velo.

In terms of profitability, we have made a very strong profitability to -- improvement in profitability when you compare that not long ago, back in 2023, we're just reaching breakeven in this category. And today, we have a 12% category contribution.

Obviously, I always said that this will not be linear year-after-year because there will be years where we're going to reinvest back in the business at the back of exciting innovations. And 2026 is one of these years because as I said during my presentation, we have now premium innovation in every single of those categories. So we want to roll out glo Hilo. We want to roll out Velo Shift. We want to carry on rolling out Vuse Ultra. So we are not concerned about stipulating a specific pace of category growth year-on-year, because this will vary over time, but the trend is very clearly, the category will continue to grow.

We'll now take our next question from Faham Baig from UBS.

The first one is on guidance for full year '26. You've guided for the lower end of the midterm targets. Could you maybe share factors that could result in the performance, whether in '26 or beyond that, getting you to the middle or even upper half of the range would be helpful.

And then the second question is on heated tobacco. I guess it was a tough year in 2025 from a share perspective. How do you think about share progressing through 2026, particularly as competition in the category is intensifying?

Okay. Thank you, Faham. Look, I'm going to start with the second one first, and then we address the guidance. Yes, we clearly see areas of improvement in our performance in Heated Products. What we saw throughout '26 is that the below WAP, which is basically where we were present until the launch of glo Hilo later in the year has been very competitive in some of the key markets. And that's the reason why I have just made the point today that we are coming with a revamped hyper product that we believe that together with revamped consumables, will strengthen our position in that particular segment.

So we are very encouraged by what we have seen of the performance of this product and in initial tests that we have been doing. And we believe that this will support our performance moving forward. And obviously, glo Hilo will complement that, because it's the first attempt that we have done in the -- where 7% of the value of the category sits, which is the AWAP, the premium part of it, which is -- and we are extremely pleased with the performance.

We are growing week-after-week with a level of retention of 50%. And this complemented by a revamped value for money proposition gives us the confidence that we can revert this trend and start growing from here.

Now in terms of the guidance, I think that Javed can explain a bit more about 2026. I just want to call the attention that after 2 years of investing, resetting our business, the U.S. business, our innovations pipeline, BAT is ready to go back to the midterm algorithm that we have always had in the company around a 3% revenue, 5% revenue, leading to a 4% to 6% operating profit with a kick around 1% to 2% for EPS. That's the range of 5% to 8%.

Obviously, our targets have incorporated the transactional FX. I always try to make this disclaimer about BAT's target. And -- but the profile of growth of this range will differ now from where we were, I would say, several years ago because the New Category will be even more prominent on that.

Out of the 3% to 5%, we have mentioned before that Combustible, we expect to be delivering around 1% to 2%. And with the U.S. being in the medium term between 0% to 1% and the rest of the group, the international part, I would say, the other two regions above 2%. And in 2025, we have, despite all the difficulties that we face, mainly in the APMEA region, we were able to deliver 1%. And we said that Bangladesh and Australia had an impact of 1% at top line, which otherwise will be high end of this range.

So I'm very confident that moving forward, we can comfortably be delivering within those range. And when you move to New Categories for the algorithm to work, we had to deliver double-digit New Category, hasn't been the case in 2025, basically because of the headwind we face in Vapour. There are a number of reasons for that, but mainly related to the illegal market in the U.S. that now we are seeing signs that the authorities, be federal or state level addressing. So we expect moving forward to have less of a drag and eventually even a tailwind coming from Vapour that will be supportive of the category for BAT.

THP, we just spoke about, and we expect to accelerate our growth from now on with those offers. And obviously, Modern Oral, we have a leading brand now, and we expect to grow from strength-to-strength.

So I'm very confident about being able to deliver the double-digit New Category revenue growth to deliver 1% to 2% on the Combustible side. This will flow through to the 4% to 6% in terms of increasing margins that is supported by all the productivity savings that we have already mapped out until 2030.

And specifically in '26, I would like to Javed to comment about.

Thank you, Tadeu. I think on 2026, specifically, if I go region-by-region, and then we can look at overall. In case of APMEA, as I highlighted, that we expect Bangladesh to be not a big drag, but Australia still remain a meaningful drag, which is becoming smaller and smaller every year. So in 2026, Australia will still be a drag, but will be less meaningful in '27. Having said that, also, we will continue to invest in the rollout of premium innovations in APMEA as well, as you saw in terms of glo Hyper. So that where we'll be there as well.

The other thing in that area is that in case of AME, we still face headwinds from the illicit environment in Vapour and also the regulation changes in Poland, which happened at the end of the year, which has made the legal Vapour out of the market, which is again a drag for us.

Coming to U.S. You have to keep in mind that comparative from '24 to '25 versus '25 to '26 is very different. We are -- we had a very good performance in '25, so that comparatives changes. And also, we are assuming for now stable volumes in Vuse in U.S. So we are expecting that the enforcement level as we've seen so today will stop that decline, but we'll keep the volume overall stable.

And lastly, also we highlighted in our pre-close trading update that we are exiting certain geographies, which are not adjusted, but they will have an impact on our numbers in 2026. So I hope this all gives you an idea why the lower end of 2026. But having said that, we are all very proud and confident in the business that we are entering the first year of our midterm algorithm.

Our next question is from Rey Wium from Anchor Stockbrokers.

I just want to get back to -- I mean, it's quite interesting to listen to your optimism around the New Categories. And I just had a quick look at the numbers. Obviously, Modern Oral is doing exceptionally well. You have the opportunity for Vapour to at least stabilize and heated tobacco. I don't know whether the jury is still out there. But I don't know if you can just talk high-level stuff here to give us an idea how do you -- which of these categories give you or makes you the most excited in terms of the future growth in terms of that, I mean, especially now into 2026, you talk of a double-digit revenue growth?

And then just a follow-up. Just on Australia, I mean, it's quite interesting because I sit in this market. I mean, the legal market is now down to like 3 billion, 6 billion or less. Now clearly, I mean, if I look at Japan, I mean, that's basically what Japan will consume in the space of 7 days. So I mean, I struggle to understand why do you say it will still be a drag. Is it not a time that you could consider to exit this market? So I'm just curious to hear your thoughts around that.

Okay. On the New Categories, obviously, Modern oral is the exciting category out of the three. The pace of growth of Modern Oral around the world is very clear. And even in markets where there is no oral tradition, you take, for example, the U.K., when we launched Velo here 4 years ago, the incidence of nicotine and oral was zero. And today is around 3%. sporadically, it can go all the way to 4% in terms of use.

And this is happening also in the likes of Poland. It's happening in emerging markets because it's very affordable and like Pakistan that is doing extremely well. South Africa doing extremely well, Kenya. So there is a massive potential, and we are very pleased with the fact that now we have 24 markets already that have passed legislation. The last one has actually been Argentina a few weeks ago. Portugal has just passed legislation as well. So we see clearly a lot of potential in this category, and we are obviously very pleased that we have a leading brand in this category.

In terms of tobacco heating product, it is a GBP 9 billion revenue category in which BAT has just below GBP 1 billion. So there is a lot of white space for us. And it has been more and more competitive. But we have now a product that is being present in the value side of the category, if you want, on the premium side that has never been the case before.

So with glo Hilo, we are tapping a very, very -- has been an untapped subcategory within the category for BAT. And we are extremely excited about this possibility of occupy some of that white space in a category that is still growing, not at the same rate of Modern Oral, obviously, but it still grows at a mid-single digit -- high single digit, so.

And Vapour is a difficult category because of lack of enforcement and/or regulation. And that's the reason why we have -- there is actually difficult to compete with some of these illegal products or products that doesn't have concerns in terms of responsible way of doing Vapour. That's why we came with this campaign. Because you see a proliferation of device with thousands of puffs that have a very different negative risk profile than the ones that we sell. So there is no level playing field.

And the reason why we are addressing a premium subcategory within Vapour with the likes of Vuse Ultra, is exactly a recognition of that. We are not really competing for volume. We are competing for value and offering consumers a responsible way to do Vapour. And obviously, the U.S. is the largest Vapour market. So all the attention is to the FDA that I think that has given some indications now that they understand that the root cause also of the problem is the lack of level playing field.

And hopefully, we can see some of the pilots that they are doing now in nicotine pouch into Vapour in the future as well. So that's the New Categories.

Australia. Look, Australia has, as you know, come with -- since the introduction of plain packaging in 2012 with a very misguided and illogical regulations year-after-year and increasing excise at much higher than inflation to a point today that the average price of cigarette legal market in the Australia is more than 20 -- equivalent of GBP 20, GBP 22 and whereas the illicit products is around GBP 6.

So as a consequence of that, 65% of the combustible market now is illegal. They have, in essence, reduced the average price for consumers. And for the first time in many years, we see an uptick of incidence of smokers in Australia. Not just they decimated the tax collection, but also with this illogical regulation, they are seeing now incentivizing consumers to smoke a product that is much cheaper than the legal market and obviously carry on with all the criminality as we know, have seen in many different markets.

Now the impact for us is that has always been a very important market for BAT. And -- but like Javed said, we'll come to a point that becomes insignificant. So the drag in '26 will not be the same as '25. It's still a drag, but it's not been the same. And from there on, if the government carries on doing that, which seems to be heading towards 100% illegality anyway. We don't even need to take this issue leave because the direction of travel has been very clear. If you add the Vapour category that has an incidence of 9% of adult consumer and is 100% illegal today, 85% of nicotine consumption in Australia today is illegal. So it's just a question of a couple of years and unless they decide to do something more reasonable.

Our next question is from Pallav Mittal from Barclays.

So, two of them. Firstly, on the U.S. business, clearly, your price mix is pretty strong at 12% plus. Can you help us understand what percentage of your U.S. volume portfolio is right now benefiting from the excise duty drawback? And how much scope does it have to increase in the future given your global business? That's the first one.

And then secondly, I appreciate all the commentary on your NGP guidance for 2026. But your low double-digit growth, it still -- I mean, seems like you're factoring a pretty sharp normalization versus what we can see in data, especially on nicotine pouches and the e-Vapour side of things. So can you just help us understand the moving parts for your low double-digit guidance for '26?

Okay. Javed will cover your second question. On the duty drawback, this is a long-standing legislation in the U.S. to incentivize local manufacturing and promote export from the U.S. So obviously, what we are doing is exactly that. Reynolds has invested more than $200 million in terms of manufacturing over the last couple of years. We have generated more than 800 jobs, and we increased our purchase of leaf in the U.S. by 65%. And today, Reynolds is the #1 company in terms of volume of leaf purchase in the U.S. market.

So we are not making disclosure specifically about the duty clawback impact. But one data point for you to consider is the fact that our revenue in Combustible would have been positive independent of the duty drawback. So it's important to mention that because at the end of the day, when you go back to what I was referring to in terms of the long-term algorithm, we expect the U.S. market in terms of combustible to be declining at rates around 6% to 7%. And this should be, given the elasticity and that still exist in the market, the possibility for Reynolds to get to a positive revenue around 0% to 1%.

In the current years, it has been more than that because the company is doing extremely well in terms of the strength of the portfolio, but also the duty drawback is helping for those in that sense as well. But independent of the drawback, we are positive, and I feel very comfortable with the range that we have set ourselves for our long-term algorithm.

I think on the overall New Category revenue guidance of low double teens is one thing is one -- a couple of points. One, in the U.S., even as I explained in my presentation, that we had a negative number for the full year on Vuse. So what we are expecting in the Vuse numbers to be flattish. Because it will require a more meaningful and more stronger enforcement. And given a very complex and long supply chain, even those measures will take time to have a meaningful impact. So even the ITC regulation, which today was talking about, if it gets passed through, it will be much later in the year when we'll see some meaningful impact.

And having said that, also, as I highlighted, the regulations, for example, in Poland and Europe, which has put a drag on the Vuse volume, because it has made the whole illegal business negative in that number, so that's not possible to enter that market.

And also the highly competitive environment we see in the BWAP segment within the Heated Product portfolio, as we were talking about earlier, that competitiveness will continue to be there for the short term. So if you put all these together, that's why our guidance on the low end of the teens. But having said that, we are very confident in midterm that Velo will lead the charge of New Category revenue growth, being the fastest-growing brand in the fastest-growing nicotine category globally, including U.S. However said that, given all these points, that's why we have guided on this front as the low teens for now.

Our next question is from Simon Hales from Citi.

So a couple for me. I wonder if I could just first come back to some of those comments you just made on the U.S. business on a go-forward basis. Javed, just back to the point in terms of the Vapour performance and the flat Vapour expectation for 2026. I'm still just trying to square that circle given you've had pretty strong exit rate momentum through the second half of the year. I appreciate enforcement actions in vapour aren't a straight upward line, but we're still probably going to annualize at least through the first half, some of the building enforcement we saw in 2025, and that should help the Vapour category, one would imagine or the legal Vapour category in the first half.

So are you, therefore, expecting as we come into H2 of 2026 to see your Vuse business down year-on-year to get you back to that flat guidance for the year? That's the first point.

And then secondly, on the U.S. today, you talked about 6% to 7% being the normal run rate of decline on Combustibles volumes. Is that something you expect to see in 2026? And could you also perhaps talk a little bit about what you're doing in discount at the moment, the performance of Doral last year and your plans on that brand going forward?

Okay. So if I take the first one. So I think one thing which I have to highlight further on the second half performance of 2025 of Vuse in U.S., other than the enforcement, there is also one item which will not see repetition was the delisting of competition product in which Vuse gained. So 63% of those consumers stayed within the closed systems.

And in RCS system, Vuse gained more than their fair share of our category. So that is one thing, which is also boosting Vuse performance in the second half. So I wouldn't be reciprocating that second half into the full year of '26. Full year of '26 is more focused and will be more dependent upon the level of enforcement we see.

And as also highlighted by Tadeu that although we have seen regulation covering 40% of the legal volume, but level of enforcement varies from state-to-state. So one, not having that one-off of the exit of a competition, which we gained more than fair share. And enforcement still seems to be early days. So that's why our guidance on the Vuse comment was made by me.

Yes. On the volume side, my comment is more, I would say, hypothetical situation. It's not a 2026. What's happening in the U.S. market is before. If you go back to 2020, 54% of the nicotine users were using traditional nicotine products, combustible traditional oral. You go now to 2025, it is 34%. So the balance is happening -- what's happening is the transition of these consumers to either poly using or using solo users of becoming solo users of smokeless products, either Modern Oral or Vapour products. So obviously, the secular decline that was related to ADC and level of incidents reducing over time around 4% will not be coming back. That's my point.

So even if you see a meaningful enforcement in Vapour in disposables that we know that has currently plays a role in terms of the level of decline of cigarettes, even if we see that, even if we see improvement in the macroeconomics in the U.S., it's very hard to imagine the market going back to 4% decline because of the dynamic of the poly users and solo users in New Categories that I was referring to.

So my point is that in the long run, with a meaningful enforcement in disposable with macroeconomics is strengthening between 6% to 7%. I think that where we see today in the next couple of years in the scenario that we are seeing, I think that the performance in '25 around 7% to 8% is a more reasonable one to assume. So that's what I would assume.

Now obviously, this is overall market. When you separate from the overall market, the deeper discount has a very different dynamic. We are seeing more activity there from competitors. And as a consequence, we saw the deeper discount growing by 10% in 2025 was even higher than the 7% that they grew in 2024.

So we have been piloting Doral to your question. We have been always very mindful because despite the fact that the deeper discount is growing as opposed to the general market, the 95% of the value continues to be outside the deeper discount. So we are very mindful in terms of testing the product.

In this case, it's Doral. We did pilots in Louisiana, in West Virginia. And what we are seeing in those pilots is suggesting that we'll be able to expand Doral for other states as well, taking into consideration the source of business, the potential down trades of our own brands. We are doing that with the value in mind. We are not doing that for the sake of market share. We want to expand Doral in the states where that makes sense from the value point of view.

Our next question is from Richard Felton from Goldman Sachs.

Two, please. First one is on Vapour. So look, great news that the U.S. is starting to take some proper enforcement action against illicit Vapour. But your comments point to, I suppose, a challenging environment in markets ex U.S. So thinking about those ex U.S. markets, are you seeing any shifts in appetite from governments or regulators to start to enforce against that illicit segment a little bit more stringently? Or does that remain very challenging? Any comments on some of your top Vapour markets ex U.S. on that topic would be very helpful.

And then the second one, sorry to come back on the duty drawback question. I appreciate you don't want to give us the exact numbers for 2025. But just sort of, I suppose, from a high-level perspective, thinking about duty drawback into 2026, is the tailwind going to be more or less than it was in 2025 at a similar level? Any high-level comments just to sort of help us triangulate on that would be very helpful.

Okay, Richard. Look, Vapour is -- I don't think that there is a one size fits all here. There are -- we know based on our own experience that when we have geographies where we have retail license, we have proper regulation and proper enforcement. I would say, for example, France is one of the case. You just can sell Vapours in tobacconist stores. And if you are caught selling, for example, disposable now, you have a massive fine in euros. And this helps with the discipline in the market.

And in the U.K., for example, despite the fact that we have been asking for a retail license, and we haven't seen the movement in that direction. There is a tobacco Vapour bill being discussed as we speak. And hopefully, they will address that. But the attempt to ban disposable has failed because the manufacturers that are not responsible, they try to circumvent in the case these regulations. So 50% of the market is illegal today in Vapour, and this is a demonstration of how difficult the governments find to either regulate, but more important to enforce regulation in some markets.

We have -- as much as we can, and we have promoted this Vapour deserves better campaign, we have been very vocal about what are the measures that government should be taking into consideration to try to discipline that. And this, with no surprise, you will see us talking about retail license, hefty fines if they got caught, a more stringent discussion in terms of age verification when you buy the product and a negative lease to avoid things like sucralose in the liquids to sweet the liquids.

So there is -- in our webcast and all that, there is a plenty of -- but there is still a lot of work to be done on that. And as a consequence, we are trying to -- as part of our resource allocation, return of investment mindset, the quality growth, which is not just about top line, but also bottom line, we have been focus on more important markets, the likes of France, like I said, the likes of Germany, the likes of Italy, which is standing out from others and then pulling back in markets like Malaysia, for example, and South Korea and so on and so forth. So that's the situation on Vapour and outside the U.S.

In terms of duty drawback, look, I'm not giving guidance specifically for the drawback. There is -- we see that the benefits that we generate for the economy, for example, is the driver behind as much as we can start to grow employment and growing the activities in the farmers, domestic in the U.S. We carry on, obviously, this is not forever. This will be like you suggest, a peak.

And in the meantime, we are strengthening our portfolio in Combustible. We are seeing the overall market decline being more supportive, which is also important for the future. And more important is us being able to create a strong position outside Combustible, because I understand the concern on the Combustible side, but overall nicotine in the U.S. is growing. It's growing value and is growing volume.

So despite the fact that you see consistent decline in cigarettes, you see massive increase in the Modern Oral space, you see a strong increase still in Vapour, unfortunately, on the illegal side, but it's very encouraging the signs that the new administration is giving to address that. Because in untapping this potential there, there is not much concern about the direction of the cigarette, because what we want in essence, is exactly to migrate smokers out of cigarettes towards those products. But what is needed is a level playing field.

Our next question from Bastien Agaud from Bank of America.

Bastien from Bank of America. I just have a quick one on the buyback. Your net debt is close to your target GBP 2.5 billion, and your free cash flow in '25 was quite strong. So my question is regarding the buyback, GBP 1.3 billion for 2026, what kind of margin do you have to potentially increase it at some point or another during the year? I understand that your debt is approximately 70% in dollar. So could be quite volatile on that. So -- but just to understand the moving parts on your buyback for full year '26.

I think, Bastien, thank you very much. We started a sustainable share buyback program in 2024, and we started it with GBP 700 million. And now we are at GBP 1.3 billion with an increase of GBP 200 million for 2026. We remain our focus on cash and also delever. We have to enter into the range of 2 to 2.5. And also, we want to make sure that we continue to deliver additional incremental dividend in sterling terms and continue our 25 years plus record on that front and continue a sustainable share buyback. What we want to ensure is to create more optionality for capital allocation in medium to long term for the business.

So for now, I'm very comfortable with the increase we have done of GBP 200 million from GBP 1.1 billion to GBP 1.3 billion for 2026, and we keep on focusing on generating cash to bring us back into our range of 2 to 2.5 and continue a sustainable buyback.

Our next question is from Damian McNeela from Deutsche Numis.

First question is just on U.S. combustible and particularly on pricing. I was wondering if you could provide any more granularity on the pricing within the subsegments that you operate in and what the sort of outlook for '26 might be for pricing given the very strong year last year.

And then the second question is on CapEx. You've indicated a step-up this year. I was just wondering whether that level of CapEx is what we should be expecting for outer years past 2026.

Look, on the CapEx side, we are increasing at the back of investments mainly on the Modern Oral space. Most of the CapEx today is being reverted back to the New Categories and giving the space for us to continue growing. We don't have huge expectations to be much beyond the level that is currently. And this is suiting us well because at that level, we still can be very close to the 100% of operating conversion. It's not a limitation, but it's just a fact that with this level of CapEx, address the business needs at the same time, it puts us in a strong position to continue having high levels of operating cash conversion, which is very helpful for the financial flexibility and capital allocation that Javed was referring to.

On the U.S. combustibles, look, I cannot be talking about pricing. And we -- what I can say to you is that the price elasticity is still very benign in the U.S. when you compare the price of cigarette vis-a-vis the average household income. And obviously, there is a dynamic that because of the specific tax that when we increase the price of a pack of cigarettes, the manufacturer have a higher benefit than the consumer perceive as a price increase, which is also helpful.

And -- but what Reynolds has been doing is laddering some of our brands. We did that very successfully with Newport. We have launched Pall Mall Select as well, which is another laddering. And we have now Doral, like I said, in pilot phase that we probably will expect to roll out to more states. But I cannot speculate with you about future price.

That was the last question today over the phone. With this, I'd like to hand the call back over to Victoria. Over to you.

Thank you very much, everybody, for your questions. I'm afraid that's all we have time for today. So if you put a question into the web, then the IR team will be delighted to answer the question as soon as we can.

I'd now like to hand back to Tadeu today for closing remarks.

Okay. Thank you all for listening today and for your questions. To close, I'm confident we have the right building blocks in place to deliver our midterm algorithm supported by delivering 2025 results at the top end of guidance. We will continue to reward our shareholders through strong cash returns, including our progressive dividend and sustainable share buyback and enabling us to deliver long-term growth and value creation.

Thank you again for joining us. I look forward to see many of you at the CAGNY Conference next week, where we are presenting on the 18th of February.

Good morning, everyone. I'm Victoria Buxton, Group Head of Investor Relations. And with me this morning are Tadeu Marroco, our Chief Executive; and Javed Iqbal, our Interim Chief Financial Officer. Welcome to our 2025 Full Year Pre-Close Conference Call. I hope you're all well, and I'd like to thank you for taking the time to join us this morning.

Before we begin, I need to draw your attention to the cautionary statement regarding forward-looking statements as well as the notes and disclaimer contained in the trading update. Unless otherwise stated, our comments will focus on constant currency adjusted measures, which include adjustments related to profit from our Canadian Combustibles business. And average year-to-date share data is to September 2025 versus full year 2024 average.

I will now hand over to Tadeu with a reminder that as always, there will be an opportunity to ask questions later on in the call.

Thank you, Victoria. Good morning, everyone, and welcome. We remain firmly on track for full year results and now expect to deliver around 2% revenue and adjusted operating profit growth. I would like to begin with four key takeaways from today's update. First, I'm particularly pleased that our U.S. business has continued to deliver positive momentum in the second half, driven by ongoing combustibles delivery and an excellent Velo Plus performance. As the world's largest nicotine value pool, the U.S. is an important growth engine for our business.

Second, we expect an acceleration in our New Category revenue growth to double-digit in the second half, driven by Modern Oral across all three regions and recent improvement in U.S. vapor. We expect to deliver mid-single-digit New Category revenue growth for the full year. Third, we expect New Category contribution growth to accelerate in H2, driven by our quality growth discipline. Together, this reinforce our confidence in delivering our midterm algorithm in 2026.

And finally, I remain fully committed to achieving our 2 to 2.5x net debt-to-EBITDA leverage target for the full year 2026, while delivering sustainable shareholder value through our progressive dividend and a sustainable share buyback program with GBP 1.3 billion announced for 2026.

Let's start with New Category dynamics. The global nicotine industry is growing and rapidly transforming, with adult smokers increasingly switching to new categories. We are well positioned to benefit from these consumer trends, leveraging our world-class insights, enhanced innovation ecosystem, brand building and regulatory expertise and distribution capabilities. We have invested to build a well-established and differentiated portfolio of global brands with premium product offerings across all three new categories. Modern Oral is by far the fastest-growing New Category globally and is highly profitable with a fast payback. It is now our second largest new category and is becoming a meaningful contributor to our group delivery as Velo continues to go from strength to strength.

We expect to deliver double-digit revenue growth for the full year as Velo continues to gain volume share, up 590 basis points to 31.8% across top modern oral markets. It's also positioned as the lowest risk new category containing 99% less toxicants when compared to cigarettes. A recent peer-reviewed clinical study confirmed that oral nicotine pouch can deliver nicotine quickly and effectively to satisfy smokers.

In addition, the FDA has recently recognized the positive role that nicotine pouches can play in helping adults transition away from combustibles, reinforcing their role in tobacco harm reduction. We are also encouraged that the FDA has committed to providing accurate, science-based information about the relative risks of different nicotine products in order to combat consumer misconceptions that may prevent switching to reduced harm products. We welcome the FDA's new pilot program to streamline the PMTA review process for nicotine pouches. We are confident in the strength of our science and portfolio, and we look forward to being able to launch our leading high moisture modern oral products in the U.S. market.

In the U.S., the Modern Oral category value is expected to almost double over the next 2 years, and has already overtaken the size of the legitimate vapor category at around GBP 2 billion. Velo Plus is the fastest-growing U.S. modern oral brand. It has already reached the #2 volume and value share category position, gaining 15 percentage points of volume share since launch. Encouragingly, despite the heightened competitive promotional activity we have seen in the last few months, our latest volume share is 21.9% in October, up from 6.9% in November last year, prior to the launch of Velo Plus.

Velo Plus has continued to drive triple-digit U.S. Modern Oral revenue growth in H2. And importantly, we remain confident that it will deliver positive category contribution for the full year. These results reflect the strength of our products, branding and distribution capabilities and the sharper execution that a rejuvenated Reynolds is delivering.

In AME, we are clear leaders, selling at a premium price and strongly outperforming our peers across the region. We are close to 6x the size of our closest competitor and continue to capture around 60% of category growth, highlighting the further opportunity ahead. Our latest innovation, Velo Shift, was recently launched in key accounts and online in Sweden. It's a premium product designed to reshape the modern oral experience with a new comfort pouch design, five new distinct sensory flavors and a differentiated hex can design to stand out on the shelf. Velo Shift is driving incremental share in channels where it has been launched with a full national rollout planned for January and further market rollouts planned during 2026.

In Heated Products, our year-to-date performance reflects a transitional period ahead of key innovation rollouts. glo's volume share was down 1.2 percentage points in top markets, primarily driven by heightened competitive pressures in the value for money segment in Japan and the continued strategic phaseout of our legacy super-slims platform. In AME, volume share was down 60 basis points with continued strong performance in Czech Republic, Spain and Portugal, more than offset by competitive dynamics in Germany, Italy and Romania as we reallocated resource ahead of the launch of glo Hilo.

Our new breakthrough innovation platform, glo Hilo, includes our first two-piece device and is designed to establish glo in the premium segment, which represents over 80% of industry value. In September, we launched nationally in Japan with a 360-degree target marketing campaign, including a new flagship store in Central Tokyo, immersive pop-up experience with digital art collaborations and strong retail visibility through convenience store takeovers. We are focused on driving trial, targeting premium consumers in the combustibles and HP spaces through online and in-person activations. Early performance indicators are positive with an increase in brand awareness together with emotional and functional imagery resonating strongly with consumers. We are encouraged by early trial to retention rates around 50% from both smokers and HP consumers.

While the Heated Products category remains highly competitive, we are confident in the strength of this innovation and expect to progressively gain share in the premium space over time. In line with our quality growth strategy, we are focused on rolling out glo Hilo in the largest Heated Product profit pools where we can generate the strongest returns. We launched it in Poland in October, in Italy in November, and will continue the market rollout next year. Altogether, we expect broadly flat glo revenue growth for the full year.

Vapor remains the largest new category in terms of number of adult consumers and continues to demonstrate strong conversion effectiveness. Vuse maintained global value share leadership in tracked channels across top markets at 38.3%, up 10 basis points versus full year '24. While the vapor category continues to be impacted by the proliferation of illicit products, we are encouraged by early signs of performance recovery in the U.S., where Vuse has returned to volume and revenue growth in recent months after 18 months of decline and gained 70 basis points of value share year-to-date to reach 50.4%.

This has been supported by early signs of increased federal enforcement targeting borders and larger distributors, leading to increased seizures and fines together with enforcement at state level with vapor directory enforcement legislation now enacted in 18 states, representing around 50% of tracked industry volume. While we estimate around 70% of U.S. vapor industry value is illicit, over time, we believe Vuse is well positioned to benefit from stronger regulatory enforcement at both the federal and state levels.

We are pleased to receive a favorable initial determination on our International Trade Commission complaint from the administrative law judge who has recommended a general exclusion order on imported illicit vapor device. We expect a final determination from the ITC in the coming weeks, which will then be subject to a 60-day presidential review. In AME, our value share in tracked channels declined 50 basis points, mainly driven by the impact of illicit headwinds in Canada. Early consumer response to the phased rollout of our new premium product has been strong with Vuse Ultra gaining nearly 80% value share in rechargeable consumables in Canada, close to 5% in Germany and 2% in France in October, reflecting the appeal of its differentiated offer supported by position the Vuse brand as Vapor Done Right.

While we expect a high single-digit revenue decline for the full year, this is a clear improvement versus the mid-teens decline in H1, primarily driven by the early signs of enforcement actions in the U.S. The full year performance will also be impacted by a strategic decision to reduce our footprint and reallocate resources away from markets where regulation enforcement do not support a responsible level and competitive playing field.

Turning to combustibles, where we have continued to offset volume declines with robust price and mix and efficiency gains. We expect an improving H2 revenue performance led by the U.S. In our top markets, volume share declined by 10 basis points and value share was flat, with U.S. gains offset by APMEA and heightened competitive activity in some AME markets. While the U.S. macroeconomic environment remains dynamic, the pace of industry decline has improved versus prior years, down around 8% year-to-date on a sales to retail basis. Against this backdrop, I'm delighted that our U.S. combustibles business is expected to deliver both revenue and profit growth this year for the first time since 2022.

In the U.S., our commercial actions, portfolio investments and sharper execution has driven value share growth of 20 basis points with flat volume share. In AME, we have continued to deliver a resilient combustibles performance with robust pricing driving revenue and operating profit growth led by strong delivery in Brazil, Turkey and Mexico. We are also taking targeted actions to rejuvenate key portfolio offers in Germany and Romania. In APMEA, growth in key markets, including Pakistan, Nigeria and Indonesia is expected to be more than offset by previously guided fiscal and regulatory headwinds in Bangladesh and Australia. Both markets are seeing significant double-digit industry volume declines year-to-date.

In Bangladesh, January's interim budget introduced a broad-based increase in VAT and supplementary duties alongside the largest ever hike in minimal cigarette pricing, materially impacting consumer affordability. In Australia, years of excise increases above inflation now compounded by sweeping regulatory reforms, the most extensive since plain package rules in 2012 are accelerating industry volume declines in the legal market. We expect these ineffective policies to further erode the legal market and fuel illicit trade, which already accounts for over 85% of nicotine usage when combined with illegal vapor use.

Worryingly, these policies have also driven a return to growth in smoking incidents for the first time in 20 years by establishing a lower tier of affordable illicit cigarette offers and a more than 50% reduction in government excise collection over the last 5 years. As a result, there has been a significant rise in criminality in addition to the increased burden of associated enforcement costs as widely reported in the media. Together, we continue to expect these headwinds to impact full year group revenue growth by around 1% and group adjusted operating profit growth by around 2%.

Turning to cash. BAT is a highly cash-generative business with operating cash conversion expected to exceed 95% again in 2025, reflecting our strong cash discipline and a clear focus on returns. Our financial flexibility continues to improve, and we are on track to deliver more than GBP 50 billion in free cash flow by the end of 2030. We continue to focus on the deleveraging, and we expect to be within our target 2x to 2.5x adjusted net debt to adjusted EBITDA range by year-end 2026. Our progress has been further supported by the partial disposal of our ITC Hotels stakes last week. As we transform, I remain committed to delivering sustainable shareholder returns through our progressive dividend, which dates back over 25 years and the sustainable share buyback program, including GBP 1.3 billion announced for 2026 starting in January.

To conclude before we move to Q&A, we are making good progress and remain firmly on track for full year delivery. Looking ahead, while there is more to do, I'm confident that the strategic choice we have made and the investment actions we are taking are the right way forward to BAT. I'm excited about the future and confidence that we will return to our midterm algorithm of 3% to 5% revenue growth and 4% to 6% adjusted profit from operations growth, with 2026 expect to be at the lower end of this range as we continue to invest to drive sustainable financial delivery and transformation.

Our confidence is underpinned by continued growth in the U.S., accelerating New Category revenue growth led by Velo globally, and the rollout of our premium innovations in the largest profit pools, continued robust delivery in AME, lapping Bangladesh combustibles headwinds, further improvement in New Category contribution, and stepping up efficiencies delivered by our new Fit to Win program in addition to the GBP 2 billion cost of goods sold savings targets announced at our Capital Markets Day. Moving forward, we expect all going to drive 5% to 8% adjusted diluted EPS growth. Therefore, to better align our guidance with investor returns from 2026, we will be guiding to revenue and adjusted diluted EPS growth at constant rates on an annual basis.

Thank you for listening. Javed and I will now be very happy to take your questions.

[Operator Instructions] And our question is from Andrei Andon-Ionita from Jefferies.

A couple for me, please. First of all, in U.S. Modern Oral, you have alluded to a positive category contribution for fiscal '25. Beyond that, how do you expect profitability to evolve as you continue to gain scale there? And then the second question for me is in U.S. combustibles, the share gains have continued into H2. Could you give us a bit more color in terms of the key dynamics driving this? And how much is attributable to a better end market versus BAT's improved execution in the U.S. market?

Okay. Look, the U.S. Modern Oral, absolutely, we are expecting to close the year already in the positive territory in terms of category contribution. Obviously, moving forward, as I said in my introduction, we are expecting a very strong growth of the new categories. And we'll be leveraging our operational efficiencies and the volumes and the brand in that environment. We have made huge progress over the last year in terms of positioning ourselves as a second player in the market.

And I just give you some interesting headlines. If you take Velo outside the U.S., our category margin is already equivalent to the group margin. So we have a group margin around 44%. If you go for Velo outside the U.S., it's 39% at category level, not talking about gross margin. As a percentage, I'm talking about category margin. So obviously, the U.S. is just turning positive in the first year, which indicates how fast is the payback around Modern Oral category. And I don't see any reason why over time, we cannot get to those levels.

In terms of combustible, our performance is a bit of everything that you just referred to. We are seeing slightly more supportive market. The level of decline has reduced a bit compared with the previous year despite the fact that low-income consumers are -- the consumer confidence is still very low in the U.S., but we are seeing some support coming from oil price mainly, and this could be a factor. And we haven't -- although despite the fact that we are seeing encouraged signs in terms of enforcement in the vapor, still some way to go to make a potential impact on combustible, but this might happen in the future, but it hasn't explained the performance of 2025 clearly.

And I think that the performance is attributed more to what we have done in Reynolds over the last few years. And I mentioned about the commercial activities that we have put in place in terms of coverage, in terms of increasing our sales force, increasing our database of consumers, reach out direct to consumers, improve our competitiveness in the market through our laddering in some brands. So there's a lot to do with that. We also have some benefits coming from the door-to-door bag generates more employment in the U.S. And Reynolds now is the largest buyer of leaf in the U.S. market, just to give some insights on that. So I think that is a combination of all, and that's the reason why we are very positive about the momentum can carry on for the next years.

Our next question is from Faham Baig from UBS.

I have two as well. The first one on glo Helo. Could you maybe talk a bit more about the early consumer sourcing signals you're seeing in Japan and Poland, whether from existing glo users, competitive products or combustibles? And what early learnings gives you the confidence as you sort of plan broader rollouts in 2026? Any share figures that you can share here would be much appreciated. And my second question on FY '26, you've guided towards the lower end of your midterm growth algorithm. As you look into next year and maybe even beyond, what are the key drivers or variables that could help you migrate toward the upper half of that range?

Okay. Thanks, Faham. Look, I'm very excited about glo Hilo. I think that we have a fantastic product. It resonates quite nicely with consumers. The level of retention is -- and I mentioned that in my introduction, is 50%, which is quite high. It's obviously a big change in terms of what we have had in the market, trying to establish a real truly premium brand. In Japan, that is, as you know, a very highly competitive market. We have achieved 1% of market share with glo Hilo. It's about 2% of the premium segment. In Poland that the brand health indicators of glo is very -- is even stronger than in Japan. We have already achieved 1% in a much shorter period of time. And in Italy that we have been very -- in a month or so, we have achieved 0.5%. So all those are very good early indications of glo Hilo, which is a demonstration that we really have a differentiated offer in the market.

Obviously, glo as a whole, we have to look after that. We have to look also to our platform Hyper as we go along because we see a lot of competitive activities in many of these markets in the BWAP as well. And this will demand extra investments behind glo in 2026. So -- but we are really, really positive about the prospects of glo Hilo, and us being able to establish a credible offer in the premium segment where most of the value sits.

In terms of our guidance, well, look, at the end of the day, we are -- as you know, we have -- in terms of revenue, we have just guided around 2%. Obviously, if we're not for Bangladesh, Australia, this number will be around 3%. For next year, we expect to lap Bangladesh, not necessarily Australia because this misguided policy will probably carry on. And we also have some exit markets to lap like Mozambique. And as you know, we have the expectation to leave Cuba as well. And that's the reason why we are getting -- guiding to the low end of the range. Obviously, in terms of PFO already shows that we expect operating margin continue to be accretive for the group next year. The low end is basically our desire to keep investing behind these innovative products. That, in my view, is the best momentum that we have ever had.

Velo Shift is doing extremely well in Sweden. And we want to roll out this premium innovation of Velo elsewhere. Velo Plus, obviously, we have to carry on investing in the brand behind the brand. glo Hilo, we just spoke about. Vuse Ultra is doing extremely well in Germany and France and Canada, and we want now to roll out this premium offering vapor to other markets. So that's the reason why we are guiding the low end of the range.

I would say on the sensitivity side, the U.S. vapor market is so huge and the legality is still so big that any type of a further crack down, be from the federal level, or the state level or the ITC that I just referred to in my opening, this could result in an upside. But it's too early days for us to call on that. Hence, the guidance that we are giving right now.

Our next question is from Damian McNeela from Deutsche Bank.

First question is just back on the U.S. Vuse performance. Clearly, it's pleasing that we're back in volume and revenue growth. I was wondering if you could provide a little bit more color on the sort of -- on a state level performance and whether that performance is concentrated or the positive performance is concentrated on a small number of states or whether you're seeing a more broad-based improvement for the brand across the U.S. is the first question. And then the second one is just on -- I think previously, you've talked about sort of running pilots with Doral in deep discount. I was just wondering if you could provide an update on, a, how that's going; and b, whether there's plans to expand that pilot of Doral, please?

Okay. So Damian, look, on the Vuse U.S., we clearly see a better performance on the states that have implemented directory. And as I said before, the levels of legislation varies by state. There are some that are going deeper than others. And hence, our level of performance also varies. But I would say, overall, it's -- we have an upside around 7% that we are seeing around those states with a range of high and lower depending on which state and this particularity of the legislation. So what we expect in next year is that vapor in the U.S. will not be a drag anymore in our New Category numbers. Now from not being a drag to be an engine of growth depends on how much more we can see in terms of enforcement. And hence, I'm trying to be cautious here when I guide for 2026.

Doral, we are in two states with Doral. And we are being very thoughtful in how we roll out Doral across the states in the U.S. and being very thoughtful about the source of business in order to avoid any type of cannibalization with our own brands, which will be detrimental for the financial or the margins of the company. We expect to carry on rolling out Doral in some further states next year. And this will be a consequence of a price increase eventually. And then if the case to launch Doral in a way that doesn't compromise our contribution margins are favorable. And then we carry on rolling out. So there are in the plans expectations that we can carry on rolling out Doral, but like I said, in a measured and thoughtful way.

Our next question is from Philip Spain from JPMorgan.

I had two, please. The first one was just on the guide for 2026. I appreciate your comments on the profit, why you're guiding towards the lower end. But just wondered if you could provide a bit more color on why for the top line, you're also expecting at the lower end? And also wondering how much of a benefit you expect the drawback in the U.S. to be for your top line next year as well -- isn't using that more next year?

And then my second question is just on the -- going back to the illicit vape crackdown in the U.S. I just wondered in terms of what you're seeing in terms of consumers where -- in states where the enforcement is occurring, what they're switching back to and if they're mostly switching back into the legal vapor options or if they're switching more into pouches or back into cigarettes as well? Just kind of interested to hear that shape.

Okay. Yes, the guidance -- on the top line of the guidance, like I mentioned to you before, we will be exiting some markets like Mozambique and we have a desire to exit the Cuban market, like we have said before. And obviously, this doesn't trigger any type of organic adjustment. And we are also expecting Australia to carry on with this misguided policy towards the 100% legality, if you want, of the use of nicotine. They are already 85%. So these are -- this needs to be offset by, obviously, the momentum that we have in the U.S. by the new categories that we are now expecting to go back to double digits next year as opposed to this year that has been mid-single digits, like I said before. And eventually, there will be a potential upside depending on the circumstance of the -- mainly on the vapor illegal market in the U.S. So that's basically what is triggering the guidance for 2026 on the top line.

Obviously, the operating profit, like I said, will be impacted by our desire to keep investing for the long term of the business, not to make 1 year looking brilliantly. I would -- obviously, I could have delivered much higher number in 2026, but this would be the wrong call for the business in the long term. So now that we have very competitive products in every single category, like I said before.

In terms of in vapor, -- the crackdown that we are seeing in some of the states, we are not seeing a return to cigarettes. What we are seeing is basically a return to legal vapor market and also some of the pouches where the flavors are still there. Because one thing that we would like to see happening in the U.S. is not just about the crackdown on the illegality of the market, but reestablishing flavors in vapor back in the market because that's the root cause of why the traction of vapor illegal was there in the first place. The reason why this illegal vapor market in the U.S. went up so much is basically the absence of flavors in the legal market. And eventually, the FDA could consider in the approval process to reestablish that at the back of a age-verified gate, for example, be in the device or be in the trade.

So that's our hope that this could materialize. But as this is not there yet, what we'll be seeing is that probably some of these users of vapor illegal that don't find the product anymore migrating more towards the pouch and some of them going to the legal vapor, like I said, but not in its totality. Okay?

Maybe could I just add one follow-up to that final point? In your conversations with the FDA, are they being more open towards introducing flavors in the legal vapor market again?

I think that they understand that the major root cause is this absence of the flavors. And -- but it's up to them and how they proceed on that. But I think that, obviously, we have some previous files of a device with technology that prevents -- that allows age verification, and that could be one route. But I don't have any further information on that. I note that they understand the problem.

Our next question comes from Rey Wium from Anchor Stockbrokers.

Just a question around the rollout of glo Hilo. You mentioned, obviously, full rollout in Japan in September and then October, November for Poland and Italy. I'm just curious how long will this rollout take place. Will you be able to get like a full-scale rollout, let's say, by the end of 2026? Or are there any capacity constraints around the product availability?

Yes. We expect to make big progress in 2026. We are not seeing constraints in terms of product availability. Obviously, every time you get into a new market, very different from the pouches where the payback is very fast. In HP, it takes longer. But like I said, we are entering a premium segment of HP, which means higher margins, which is positive for us. But we have to do it in a way that is also considered our resource allocation decisions in everything that we see out there in terms of the other categories and the other geographies as well. But definitely, we expect to make a big progress in terms of rollout in 2026.

So is it fair to assume that THP will probably be the slowest growing unit of the three new categories?

Well, look, if you consider the glo Hilo, we expect to carry on growing. But overall, glo is not just about Hilo, it's about Hyper. We know that it's very competitive in the BWAP, like I said. And hence, our objective for next year is to stop the share decline in the category and stabilize and start to come back to growth. That success looks like as a glo as a family at the back of an increase in glo Hilo moving forward.

Good. And maybe just a quick follow-up, talk about the combustible business. You indicated an improvement into the second half. So is this just a marginal improvement on the first half? I mean the first half revenue, I think, in constant currency was up 0.8%. So I just want to get sort of an idea of the improvement that you expect in the combustibles in the second half.

Yes. You have to consider that the first half, we were lapping a very easy comparator from the first half of 2024. But even that, I still -- we are still expecting an improvement in the second half compared with the first half. It will be a marginal improvement, but considering that the comparator is much harder in the second half of '24 is a very good momentum.

Our next question is from Morayo Adesina from Barclays.

Apologies if I missed this earlier. I was just wondering if you could quantify the benefit that you've seen from the duty drawback.

Look, we are not quantifying the benefit. What I'm saying to you is that our performance will still be positive in terms of revenue of combustible, excluding the drawback. Obviously, there is an element there that is helping with the results that we have achieved in H1 will be the same for the full year. For next year, we expect to see some further accretion coming from the drawback. But more important that our underlying numbers will still be positive given the fact that we are growing value share in the U.S. market at the back of all the commercial activities that we have done.

Our next question is from Bastien Agaud from Bank of America.

Bastien from Bank of America. I have one on Velo -- Velo pricing. So in Europe, the product is priced at a premium over your main competitor. And I understand that you have not received PMTA yet for Velo in the U.S. But going forward, if we should expect pricing for Velo in the U.S. in case you receive PMTA for the product, should we expect to trade in line with your main competitor at a premium or continue to price the product at a slight discount compared to the competitors?

Look, as you would expect, I cannot be making inference or discussions about future pricing. What I can say to you is that our Velo product can confirm that it is positioned at a premium price outside the U.S. The introduction of Velo Plus has been done with a discount, which is normal because when you introduce a product to get some traction in key accounts and with their consumers and the fact that we always knew that this would be a very competitive product and hence, we need trial. We applied some discount to the price list. And what we happened is that we have been reducing this discount throughout this 1 year of Velo. But I cannot comment on you about future pricing strategy.

There are no further questions on the call. And with that, I'd like to hand the call back over to Tadeu for his closing remarks.

So thank you for joining us today and for your questions. I'd like to leave you with this key message. First, our U.S. business has continued to deliver strong growth in the second half, and I'm encouraged by the sustained momentum resulting from the commercial actions we have taken in combustibles. This reinforce my confidence for future delivery. Second, our new categories are gaining traction. We expect full year revenue growth to accelerate to mid-single digits, led by Velo Plus in the U.S. and supported by recent improvement in U.S. vapor alongside accelerated improvement in profitability. And third, I remain fully committed to achieving our 2x to 2.5x net debt-to-EBITDA leverage target for the full year 2026, while delivering sustainable shareholder value through our progressive dividend and a sustainable share buyback program with GBP 1.3 billion announced today for 2026.

Finally, with this momentum, I'm confident that we will sustainably return to our midterm algorithm next year. Thank you again for joining us, and I look forward to update you further at our full year results on February 12 and at the CAGNY Conference the following week.