$BATS (+1.09%) has published its half-year trading update. HY1 is somewhat boring, as the new products GLO HILO and VUSE Ultra will only be launched on the broad market in HY2.

Velo Plus is performing very strongly, while VUSE has not yet been able to stabilize due to the difficult market situation.

- Sales growthSales are slightly above the previous forecast, with expected growth of 1-2 % for the year as a whole, which supports adjusted operating profit growth of 1.5-2.5 %.

- USA: Return to sales and profit growth in the first half and full year, driven by strong performance in the tobacco business (Combustibles) and excellent results from Velo Plus.

- New categories: Low single-digit sales growth in the first half, accelerating to mid-single-digit growth for the full year, driven by innovation in key markets from mid-year. Velo shows strong global growth, while illegal vapor products in the US and Canada impact performance.

- RegionsStrong performance in AME (Africa, Middle East, Europe); APMEA (Asia Pacific) suffers from tax increases and regulatory challenges in Bangladesh and Australia.

- Cash flow and capital allocationStrong cash generation with a cash flow conversion rate of over 90%. Target is to reduce debt to 2.0-2.5x adjusted net assets/EBITDA by end 2026. Dividend policy remains progressive, share buybacks will be increased to GBP 1.1bn in 2025.

- Strategic focus: Quality growth through investment in most profitable markets, supported by partial monetization of ITC share for more financial flexibility.

- Outlook 2026: Confidence to achieve the medium-term target of 3-5% sales growth and 4-6% adjusted operating profit growth.

Product categories:

1. Combustibles: Return to growth in the USA, stable market shares despite declining industry volumes (-9 %). Strong performance of brands such as Natural American Spirit and Lucky Strike.

2. Velo (Modern Oral)Strong growth with market share gains (+550 bps in the US to 11.9% and triple-digit sales growth). Leading position in AME, especially in Scandinavia, the UK and Poland.

3. glo (Heated Tobacco)Challenging environment in Japan, but encouraging results from glo Hilo in Serbia. Planned launch in key markets from the second half of the year.

4. Vuse (Vapour): continued global leadership, but declines due to illegal products in the USA and Canada. Introduction of Vuse Ultra should improve performance in the second half of the year.

Technical forecast for 2025:

- Global tobacco industry volume: decline of approx. 2%.

- Sales growth: 1-2 % (H1 and full year, at constant exchange rates).

- New category growth: Low single digits in H1, mid single digits in full year.

- Adjusted operating profit growth: 1.5-2.5%, with an H2 weighting.

- Exchange rate effects: Transactional headwind of approx. 1.5%, translational headwind of approx. 4%.

- Net financing costs: c. GBP 1.8 bn.

- Capital expenditure: Approx. GBP 650 million.