British American Tobacco Stock

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.