British American Tobacco Regulatory News (BATS)

Half-Year summary

- Revenue up 4.4% (being +2.6% at constant FX), driven by New Categories (revenue up 26.6%, at constant FX) - good progress towards our £5 billion New Category target by 2025

- Revenue from Non-Combustibles now 16.6% of Group revenue, up 180 bps vs FY22

- Continued strong revenue performance of Vuse and Velo - commercial plans activated for glo, launch of glo Hyper X2 Air a first step in an enhanced innovation pipeline

- New Categories financial delivery significantly improved - contributing £201 million increase to Group profit as losses reduce, on track to achieve our New Category profitability target in 2024

- Combustible pricing remains strong - good revenue performances in AME and APMEA offset the U.S., demonstrating the benefit of our global footprint

- Sequential performance improvement in our U.S. premium combustibles volume share in 2023 - with sharper portfolio management driving early signs of stabilisation

- Reported profit from operations up 61.4% (with reported operating margin up 1,560 bps to 44.2%) - as prior period impacted by charges related to Russia/Belarus, the U.S. DOJ/OFAC provision and Quantum

- Adjusted profit up 3.6% at constant FX, adjusted operating margin up 40 bps to 44.3%

- Reported diluted EPS up 118% to 176.0p; adjusted diluted EPS up 5.3% at constant FX

- Restructured Management Board - driving sharper execution, greater collaboration and agility

- Further strengthened sustainability delivery, building on Double Materiality Assessment1, including increased collaboration across our value chain to drive progress towards our sustainability targets, including Scope 3 emissions and biodiversity

Tadeu Marroco, Chief Executive

"Having been in my new role for 10 weeks, I'm pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organisation.

It is a challenging external environment. High inflation and slower global growth are impacting consumers and business. Yet our revenue, profit from operations and earnings are all up.

We are making great progress in New Categories. Revenues are up by 29% and we are now close to breakeven, with consumers of Non-Combustible products up by 1.5 million versus FY 2022 . While it's encouraging to see continued good performance in Vapour and Modern Oral, we recognise more work is required in heated tobacco.

I remain confident that New Categories will deliver a positive contribution in 2024. However, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms.

While more focus is required in the U.S., our sequential performance improvement in the critical premium U.S. combustibles business since January 2023 is encouraging.

These results are thanks to the hard work by BAT people around the world. To help ensure we continue to deliver, the recently announced Management Board structure is designed to enhance our strategic capabilities and further embed the collaborative and inclusive culture I want to see everywhere across the Group.

While more needs to be done, I'm excited by BAT's future. Our full-year guidance remains unchanged."

The use of non-GAAP measures, including adjusting items and constant currencies, are further discussed from page 50 , with reconciliation from the most comparable IFRS measure provided.

Notes: 1. Although financial materiality has been considered in the development of our Double Materiality Assessment ("DMA"), our DMA and any related conclusions as to the materiality of sustainability or ESG matters do not imply that all topics discussed therein are financially material to our business taken as a whole, and such topics may not significantly alter the total mix of information available about our securities. 2. See page 28 for discussion on adjusting items. 3. Organic measures exclude the performance of businesses sold (including the Group's Russian and Belarusian businesses as those are held-for-sale) or acquired, or that have an enduring structural change impacting performance that may significantly affect the users' understanding of the Group's performance in the current and comparator periods to ensure like-for-like assessment across all periods. 4. Internal estimate, see page 44. 5. This represents an improvement in New Categories contribution as losses reduced by 94.4% (or 90.7% at constant rates of exchange). 6. Includes lease liabilities.

Group Operating Review

Total Group volume and revenue

Prior year data is provided in the tables on pages 49 and 51

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Movement in Revenue

The following chart is in £m

Reported revenue increased 4.4% to £13,441 million, largely due to:

- New Categories, up 29.0%, with volume growth in all three categories;

- Robust delivery in combustibles in AME and APMEA, offsetting the U.S., demonstrating the benefit of the Group's global footprint; and

- A translational foreign exchange tailwind due to the relative weakness of sterling, particularly against the US dollar.

Cigarette volume declined 5.7%, largely due to the U.S. (down 12.4%) which itself was negatively impacted by macro-economic pressures affecting the industry (down 8.4%). In the U.S., the Group underperformed the industry due to the premium skewed portfolio, although the premium segment began to return to more normalised decline rates in H1 2023. Our U.S. business was also negatively impacted by the implementation of the flavour ban in California, while lapping a comparator that included the short-term inventory build related to the SAP roll out. Global duty paid industry cigarette volume was down by c.3%.

Group cigarette volume share grew 10 bps, with value share 40 bps lower.

The following analysis is on a constant currency basis, which we believe reflects the operational performance of the Group:

- In the U.S., revenue was down 5.4% as combustibles pricing and the growth of New Categories (up 21.7%, underpinned by pricing, which more than offset a decrease in volume of 6.5%) were more than offset by lower cigarette volume. Vuse extended leadership in value share (of total Vapour in tracked channels) by 570 bps to 46.7%. We welcome the recent FDA actions with regards to the illicit synthetic nicotine disposables in the U.S. (now estimated to be more than 50% of the U.S. Vapour market) and continue to engage with stakeholders to facilitate the removal of unauthorised products;

- In AME, revenue grew 9.1% driven by combustibles (up 5.0%, underpinned by a robust volume performance) and New Categories (up 35.9%) where the Group continued to grow revenue in all three categories. On an organic basis, excluding the results of Russia and Belarus, revenue increased by 10.3% to £4,273 million; and

- In APMEA, revenue was up 9.8%, driven by combustibles pricing in Bangladesh, Pakistan and Australia. New Categories revenue increased by 15.0%, largely due to higher Vapour revenue (up 76.6%) largely due to South Africa and New Zealand.

Please refer to pages 5 to 6 for a further discussion on the performance by category and pages 7 to 9 for discussion on regional performance.

Group Operating Review

Continued

Profit from operations, operating margin and category contribution

Reconciliation of Profit from Operations and Operating Margin, to adjusted profit from operations at constant rates of exchange

Prior year data is provided in the table on page 53

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

^This represents an improvement in New Categories contribution as losses reduced by 94.4% (or 90.7% at constant rates of exchange).

Movement in Profit from Operations

The following chart is in £m

Profit from operations and operating margin

Profit from operations on a reported basis was up 61.4% to £5,935 million, with reported operating margin up 1,560 bps to 44.2%, due to:

- A significant reduction in one-off charges (£85 million in HY23 compared to £1,967 million in HY22). The movement was largely due to the decision to transfer the Group's Russian and Belarusian businesses, the U.S. Department of Justice's ("DOJ") and Department of the Treasury's Office of Foreign Assets Control's ("OFAC") investigations into suspicions of sanctions breaches and the Group's restructuring programme Quantum, which negatively impacted the prior year;

- A translational foreign exchange tailwind due to the relative weakness of sterling against the Group's operating currencies; and

- Growth in combustibles revenue in AME and APMEA, and an improvement in New Categories performance (as losses reduced from £222 million in the prior period to £21 million at constant rates of exchange). However, these were partially offset by the absorption of a 2% transactional foreign exchange headwind in the period and a decline in U.S. combustibles volume and revenue.

For a full discussion on the performance by region, please see pages 7 to 9.

However, in summary, excluding the impact of adjusting items and the impact of translational foreign exchange (as we believe this provides an understanding of the operational performance on a comparable basis):

- In the U.S., adjusted profit from operations was marginally lower than HY22 (down 0.2% to £3,130 million), driven by the lower volume in combustibles (described earlier) and associated decline in revenue, which more than offset the continued improved performance in Vapour;

- In AME, adjusted profit from operations increased 7.8%, driven by good pricing in combustibles which provided the fuel to further increase investment in New Categories, including further geographical expansion mainly in Vapour. Notably, the Group performance improved in Germany, Ukraine, Brazil, Mexico, Poland, Norway and the Czech Republic. On an organic basis, adjusted profit from operations increased 4.4% at constant rates of exchange; and

- In APMEA, adjusted profit from operations increased 9.3%, driven by Australia, Sri Lanka and Global Travel Retail (GTR), which more than offset a decline in Japan, largely due to the highly competitive pricing environment in combustibles and THP (including the impact of the final step in the five-year excise harmonisation programme in THP).

In aggregate, adjusted profit from operations at constant rates was up 3.6%, or 2.7% on an organic basis, with adjusted operating margin up 90 bps at current rates and 40 bps at constant rates of exchange.

Group Operating Review

Continued

Cash/Capital allocation

We are making good progress reducing our leverage towards the middle of our 2-3x adjusted net debt/adjusted EBITDA range by the end of 2023, driven by continued strong cash generation. While cash flow is always weighted to the second half, mainly due to timing of Master Settlement Agreement ("MSA") payments and leaf purchases, we are on track to deliver another year of operating cash conversion in excess of our 90% guidance. We continue to expect the Group to generate c.£40 billion of free cash flow before dividends over the next five years.

Liquidity remains strong with average debt maturity close to 10 years, and a fixed debt profile of c.95% and close currency matching. Our medium-term rating target remains Baa1/BBB+, with a current rating of Baa2 (stable outlook)/BBB+ (negative outlook). The Group expects gross capital expenditure in 2023 of approximately £550 million, mainly related to the ongoing investments in the Group's operational infrastructure, including the expansion of our New Categories portfolio.

Our active capital allocation framework considers the continued investment in our transformation, the macro environment, and potential future litigation and regulatory outcomes. In April 2023, we reached agreements with the DOJ and OFAC to resolve previously disclosed investigations into suspicions of sanctions breaches. The total amount payable to the U.S. authorities is $635 million plus interest. In Canada, the confidential CCAA mediation process is still ongoing and the outcome remains uncertain. At 30 June 2023, Canada had a balance of £1,653 million related to restricted cash and cash equivalents and £302 million related to investments held at fair value. Given the above issues, and a more challenging and dynamic macro environment, in 2023 the Board has taken a pragmatic approach to prioritise strengthening our balance sheet. At the same time, we understand the importance of cash returns to shareholders, and remain committed to our 65% dividend payout ratio over the long term.

In addition, once the middle of our target leverage range has been reached, we will review and consider our objective to sustainably return excess cash to shareholders.

ESG Performance update

We continue to embed sustainability in our business and across our value chain guided by our focus on materiality*. In the first half we made particular progress in our collaboration with key supply partners:

- Climate Change: With Scope 3 emissions representing over 90% of the Group's GHG emissions, we have continued to strengthen our supplier engagement to drive emission reduction towards our targets and further build resilience in our supply chain. In H1 2023, we engaged with over 600 suppliers, representing over 90%1 of our purchased goods and services emissions, for them to participate in the 2023 CDP Supply Chain programme. This level of engagement presents a threefold increase vs prior year (FY2022: over 200 suppliers).

- Biodiversity: We have launched a new Biodiversity Operating Standard to support our Group commitments on reducing our impact on forests and natural ecosystems. This provides guidance on due diligence and traceability to help protect biodiversity in our tobacco supply chain, including the use of traceable wood that is Deforestation and Conversion-Free2 and Biodiversity Management Plans3.

- Human Rights and Farmer Livelihoods: As part of the work we do with over 80,000 of our directly contracted farmers in enhancing their livelihoods, we have further developed our Living Income Guidance and training for directly contracted farmers, in order to help them implement tailored improvement plans.

*Refer to page 48 of this document for a full description of key terms and definitions.

1. Excluding Russia and Belarus. More details about changes to the Group related to Russia and Belarus are available on page 15 of this document.

2. Deforestation and Conversion-Free (DCF) refers to the sourcing or production of a commodity that does not cause or contribute to deforestation or conversion of natural ecosystems.

3. Biodiversity Management Plans (BMP) are implementation plans for conserving, restoring and enhancing areas of high biodiversity value.

On track for Full-Year 2023 guidance

- Global tobacco industry volume expected to be down c.3.0% partly due to the U.S., Pakistan and uncertainty over Russia/Ukraine.

- Organic constant currency revenue growth of 3-5% and continued strong progress towards £5 billion New Category revenue in 2025.

- Mid-single figure constant currency adjusted EPS growth, including continued expectation of c.2% transactional FX headwind.

- Expected translational foreign exchange headwind of 3% on full year adjusted diluted EPS growth.

- Operating cash flow conversion in excess of 90%.

- Progress towards the middle of our 2-3x Adjusted net debt/Adjusted EBITDA corridor*.

- Commitment to dividend growth in sterling terms and our long-term 65% dividend pay-out ratio*.

* at constant rates of exchange

Enquiries

Webcast and Q&A session:

BAT will hold a live webcast for investors and analysts at 9.30am (BST) on 26 July 2023, hosted by Tadeu Marroco, Chief Executive, and Javed Iqbal, Interim Finance Director and Director, Digital & Transformation. The presentation will be followed by a Q&A session. The webcast and presentation slides will be available to view on our website at www.bat.com/latestresults.

If you prefer to listen via conference call, please use the following dial-in details (participant passcode: BAT).

Category Performance Review

Please see page 51 for a full reconciliation to constant currency and organic metrics, including prior year data.

All references to volume share or value share movement in the following discussion are compared FY 2022. See page 43 for a discussion on the use of this measure.

Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Vuse - Vapour: Extending global value share* leadership

- Vuse value share up 240 bps, reaching 38.3% in key Vapour markets**, with the modern disposables continuing to accelerate total category growth. Vuse Go now in 46 markets.

- Vuse extended leadership in value share (of total Vapour in tracked channels) by 570 bps to 46.7% in the U.S. and leading in 36 states.

- Vapour revenue up 35.5% (at constant rates), delivered by volume growth of 9% and pricing.

- Three of the five key Vapour markets are profitable1, driven by increased scale and marketing spend effectiveness.

Our Vapour portfolio performed well, driven by Vuse which increased value share by 240 bps, reaching 38.3%, and which continued its strong performance across all three regions.

Group consumables volume grew 9.0% vs H1 2022, with revenue up 40.3% to £866 million, or 35.5% at constant rates of exchange.

Modern disposables continue to accelerate category growth with their convenient format, driving consumer trial and conversion. Vuse Go is now in 46 countries, with positive regulatory developments enabling our entrance into a number of emerging markets (Colombia, Paraguay, Peru). We continue to approach the growing modern disposables product category in a responsible way (including youth access prevention programmes and enhanced product Take-Back schemes).

In the U.S., the world's largest Vapour market, Vuse extended leadership in value share (of total Vapour in tracked channels) by 570 bps to 46.7%, with revenue up 29.4%, or 23.0% on a constant currency basis, despite a decrease in consumables volume (down 6.5%) with the market down 15%2, due to the growth of illicit synthetic nicotine disposables which we estimate to be more than 50% of the total Vapour market. We welcome the recent FDA actions with regards to the illicit synthetic nicotine disposables in the U.S. and we continue to engage with stakeholders to facilitate the removal of unauthorised products. Furthermore, we remain confident in our Premarket Tobacco Product Authorisation ("PMTA") submission for Vuse Alto, which further built on the foundational science of our successful applications for Solo, Ciro and Vibe tobacco flavour.

In AME, Vuse continued to grow both revenue (up 60.1%, or 56.5% on a constant currency basis) and volume (up 28.6%) with broad based growth across key European markets, partly offset by a marginal decline in volume in Canada.

In APMEA, total Vuse consumables volume grew 35.0%, with revenue up 65.5%, or 76.6% on a constant currency basis, driven by South Africa and New Zealand.

* Based on Vuse estimated value share from RRP in measured retail for Vapour (i.e., total Vapour category value in retail sales) in the U.S., Canada, France, the UK and Germany.

** Key Vapour markets are defined as the Top 5 markets by industry revenue in tracked channels, being the U.S., Canada, France, the UK and Germany. The Top 5 account for c.80% (2022: c.80%) of Global industry vapour revenue (rechargeable closed systems and disposables).

1. On a market contribution basis. 2. Source: Marlin

glo - Tobacco Heating Products (THP) - Activating commercial plans in Japan and Italy

- glo revenue growth up 10.2% at constant rates, driven by continued strong performance in some key THP markets* in AME.

- glo THP category volume share in our key THP markets declined 110 bps to 18.2%, glo volume share of total THP and combustibles up 20 bps to reach 4.0%

- Activating commercial plans in highly competitive markets Japan and Italy.

- glo Hyper X2 Air, our first step in an enhanced innovation cadence, already launched in nine markets with further H2 roll-outs planned.

glo revenue was up 10.7%, or 10.2% at constant rates of exchange (or 11.8% on an organic basis). Consumables volume grew by 9.8%, or 15.7% on an organic basis, as THP category growth continued to drive our volume share of total THP and combustibles up 20 bps to reach 4.0%.

Continued category volume share momentum in key AME THP markets, including Poland and the Czech Republic, was offset by the highly competitive markets in Japan and Italy, with glo's THP category volume share in key THP markets down 110 bps to 18.2%.

As part of our enhanced innovation pipeline, our latest platform, glo Hyper X2 Air (our lightest device to date), is delivering positive early results in new launch markets with further roll-outs planned in H2 2023. We continue to expand our geographic footprint with glo now available in 33 markets. Notably, glo's volume share in Japan started to recover in Q2 2023, driven by the activation of our commercial plans, ahead of the launch of glo Hyper X2 Air in July 2023.

In AME, volume was up 8.8%, as growth in Poland, the Czech Republic and Romania was partly offset by Russia. Revenue was up 18.9%, or 14.3% at constant currency driven by the volume momentum, partially offset by Italy. On an organic basis, volume was up 23.4% with revenue growth of 19.6% at constant currency.

In APMEA, volume grew 10.9%, driving revenue up 3.0%, or 6.3% at constant currency, although this was partly offset by the highly competitive Japanese market, which included the impact of the final step in the five-year excise harmonisation programme.

* Key THP markets are defined as the Top 12 markets (excl Russia) by industry volume. They were adjusted in 2023, with more established THP markets Kazakhstan, Romania, Switzerland and Malaysia introduced and Russia removed in advance of the planned exit this year. Accordingly, glo's category volume share for 2022 was rebased on the new definition from 19.4% to 19.2%. Top 12 markets are Japan, South Korea, Italy, Greece, Hungary, Kazakhstan, Ukraine, Poland, Switzerland, Romania, Malaysia and the Czech Republic. The Top 12 account for c.70% of total industry THP volume in 2022.

Category Performance Review

Continued

VELO - Modern Oral - AME leadership continues, unlocking emerging markets

- Revenue up 42.4% at constant rates, ahead of volume growth of 32.7%.

- Volume share of total oral category in key markets* grew 70 bps to 8.1%.

- BAT's volume share of the Modern Oral category in key markets* down 190 bps, driven by U.S. market.

- Continued AME Modern Oral category volume leadership, with Velo now the largest oral nicotine pouch brand in Sweden.

- Strong growth in Pakistan and Kenya, providing valuable insights to guide our development in emerging markets.

Velo volume was up 32.7% and revenue up 41.8%, or 42.4% at constant rates. BAT's volume share of the total oral category grew 70 bps to 8.1%, while our category share of Modern Oral in key markets was 28.4%, down 190 bps, mainly driven by the U.S.

Outside the U.S., the Group maintained clear volume share leadership of the Modern Oral category, with Mini pouches and Max ranges driving strong growth.

In the U.S., volume declined 37.7%, with volume share down 160 bps and revenue down 15.5% (or 19.7% at constant rates) as promotional support was redirected behind Vuse in the much larger Vapour category. We continue to await the outcome of our PMTA submission for our new Velo product.

In AME, we remain the volume share leader in 15 Modern Oral markets, with volume growth of 39.0% and revenue growth of 44.4% at constant rates. From a high base, volume share was lower at 66.7%, down 210 bps. As the Modern Oral category continues to grow and becomes more established in AME, we continue to see strong growth in average daily consumption. In Sweden, Velo is now the largest of any snus or Modern Oral nicotine pouch brand.**

In APMEA, our volume grew 49.3% and our revenue grew 83.0% (being 98% at constant rates). In Pakistan, growth continued as we leveraged our category insights to drive consumer acquisition and deepen conversion. In addition, in H1 2023 we rolled out nationally in Kenya following successful pilots last year.

*Key Oral and Modern Oral markets are defined as the Top 5 markets by industry revenue, being the U.S., Sweden, Norway, Denmark and Switzerland and accounting for c.85% (2022: c.85%) of total industry Modern Oral revenue.

**Source: Kantar New Category Tracker.

Value through combustibles

- Group value share down 40 bps, with gains in AME (up 10 bps), offset by APMEA (down 40 bps) and the U.S. (down 70 bps).

- Group volume share up 10 bps, driven by AME (up 30 bps), a flat share in APMEA, offset by the U.S. (30 bps down).

- U.S. commercial plans driving sequential volume share growth in 2023.

- Reinvigorated portfolios, refreshed brands and sharpened execution deliver strong performance outside the U.S., demonstrating benefit of global footprint.

Group cigarette volume was down 5.7% to 286 billion sticks (30 June 2022: 303 billion sticks), as volume growth in Bangladesh, Brazil and Turkey was more than offset by lower volume in the U.S., Russia and the impact of significant excise increases in Pakistan.

In the U.S., volume declined 12.4%, compared to an industry which was down 8.4%, largely driven by macro-economic pressures impacting consumer behaviour. This included downtrading which had a greater proportional effect on the Group due to the premium skewed portfolio. The decline in the premium sector began to normalise in the first half of 2023 (compared to H2 2022) as pricing moderated. The Group's combustible volume was also negatively impacted by the implementation of the flavour ban in California and lapping a comparator period that included an inventory build in relation to the implementation of SAP.

Revenue from combustibles grew 1.8% to £10,967 million (30 June 2022: £10,774 million), benefiting from a translational foreign exchange tailwind. Revenue at constant rates of exchange was up 0.2% to £10,796 million, being an increase of 0.4% on an organic basis. Optimised pricing across all regions, most notably in Australia, Pakistan, Turkey, Canada and Germany, more than offset negative geographic mix (driven by the U.S.), delivering an overall price/mix of 6.0%.

Traditional Oral

Group volume declined 15.9% to 3.3 billion stick equivalents. Total revenue was £571 million (30 June 2022: £598 million), down 4.5% or 9.0% at constant rates. Continued strong pricing in the U.S. drove Group price/mix of 6.9%. This was more than offset by the reduction in volume in both AME (down 5.3%) and the U.S. (down 17.2%) in the first half of 2023.

In the U.S. (which accounts for 97% of revenue from the category), revenue declined 9.5% (at constant rates of exchange) as pricing was insufficient to offset the volume decline. This was largely due to inventory movements (mainly related to the SAP implementation in the first half of 2022) and the implementation of menthol regulations in California. Value share in Traditional Oral increased 10 bps, with volume share down 10 bps.

Beyond nicotine

BTV has completed 22 investments (with three successful exits) since its launch in 2020 and continues to invest in innovative, consumer-led new sciences and technologies.

In April 2023, we announced a joint venture agreement between a Group subsidiary, AJNA BioSciences PBC and Charlotte's Web that reinforces our commitment to Charlotte's Web and represents another step for us in our exploration beyond tobacco and nicotine. The Group contributed US$10 million to this joint venture as an initial investor in exchange for 20% of the equity in the new entity (De Floria LLC).

Please see page 15 for more information on our investment in Charlotte's Web.

Regional Review

The performances of the regions are discussed below. The following discussion is based upon the Group's internal reporting structure.

All references to volume share or value share movement in the following discussion are compared to FY 2022. See page 43 for a discussion on the use of this measure. Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance.

United States (U.S.):

- Vuse revenue growth of 29.4%, or 23.0% at constant rates of exchange, and extended value share leadership

- Combustibles volume down, driven by macro-economic pressures, the negative impact of the flavour ban in California and lapping prior year's inventory build (related to SAP implementation)

- Moderated cigarette pricing in H1 2023, driven by investments to support our premium portfolio

- Sequential growth in our U.S. volume share in 2023, with sharper portfolio management driving early signs of stabilisation

Volume/Revenue

Please see page 51 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Reported revenue decreased 0.4%, driven by the translational foreign exchange tailwind. On a constant currency basis, revenue declined 5.4%. Continued growth in New Categories was driven by Vuse with revenue up 29%, or 23% at constant rates of exchange, but was more than offset by combustibles, driven by the decline in volume (see below).

Non-Combustibles now represent 18.3% of total revenue.

On a constant currency basis (excluding translational foreign exchange), which we believe reflects the operational performance:

- In Vapour, the U.S. is the world's largest Vapour market. Vuse extended leadership in value share (of total Vapour in tracked channels) by 570 bps to 46.7% and leads in 36 U.S. states. Revenue was up 23.0% despite a 6.5% decline in consumables volume, with the market down 15%2 due to the growth of illicit synthetic nicotine disposables which we estimate to be more than 50% of the total Vapour market. We welcome the recent FDA actions with regards to the illicit synthetic nicotine disposables in the U.S. and we continue to engage with stakeholders to facilitate the removal of unauthorised products. Furthermore, we remain confident in our PMTA submission for Vuse Alto;

- Modern Oral revenue declined 19.7%, driven by lower volume (down 37.7%) as promotional support was redirected behind Vuse in the much larger Vapour category;

- Traditional Oral revenue declined 9.5%, as pricing was more than offset by lower volume (down 17.2%). This was largely due to inventory movements (mainly related to the SAP implementation in the first half of 2022) and the implementation of menthol regulations in California. Volume share was down 10 bps while value share was up 10 bps; and

- Combustibles revenue declined 7.4%, as moderated pricing was more than offset by a reduction in volume of 12.4%, largely due to:

- The continued pressure of macro-economic headwinds in the U.S., with industry volume down 8.4%. The Group underperformed the industry due to the premium skewed portfolio. The premium segment began to return to more normalised decline rates in H1 2023;

- The negative impact of the flavour ban in California, impacting Newport; and

- Lapping a prior year comparator that included the positive impact of the SAP-related inventory phasing.

Combustibles volume share fell 30 bps with value share down 70 bps as affordability pressures on consumers impacted the Group's more premium skewed portfolio.

Profit from operations and operating margin

Please see page 49 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Reported profit from operations rose by 13.1%, largely due to a translational foreign exchange tailwind of 6.0% and lower amortisation of brands (treated as an adjusting item in both periods). Accordingly, reported operating margin was up 640 bps to 53.6%.

On a constant currency basis, and excluding adjusting items, the performance was negatively impacted by the decline in combustible volume (described above), more than offsetting the continued improved financial performance in Vapour. Adjusted profit from operations, at constant rates of exchange (which excludes the impact of adjusting items and translational foreign exchange) was down 0.2% to £3,130 million.

2. Source: Marlin

Regional Review

Continued

Americas and Europe (AME):

- Multi-category region with Non-Combustibles now representing 17.4% of revenue

- New Category revenue growth of 39%, or 36% at constant rates of exchange

- Resilient combustibles performance led by pricing

- Combustibles volume share up 30 bps and value share up 10 bps

Volume/Revenue

Please see page 52 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Reported revenue was up 11.5% at current rates, driven by New Category revenue growth of 38.9%, a robust performance in combustibles and a translational foreign exchange tailwind.

Non-Combustibles now represent 17.4% of total revenue.

On a constant currency basis (excluding translational foreign exchange), which we believe reflects the operational performance, revenue increased by 9.1%, driven by:

- Higher revenue from combustibles (up 5.0%), driven by a favourable pricing environment across the region coupled with volume performance in Brazil, Turkey and Germany, which more than offset the impact of lower volume in Canada and Chile;

- Continued growth in Vapour revenue (up 56.5%), largely due to the performance of Vuse in the UK, Germany, Italy, Poland, Greece, France, Spain, Romania and the Czech Republic. Modern disposables continued to grow across all key markets;

- A good performance in THP (up 14.3%), as revenue was higher in the Czech Republic, Poland and Romania, despite a decline in volume in Russia. On an organic basis, volume was up 23.4%, with revenue up 19.6%; and

- Modern Oral revenue growth of 44.4%, driven by Norway, the Czech Republic and Sweden, where Velo is now the largest of any snus or Modern Oral nicotine pouch brand.**

On a constant currency, organic basis (excluding the results of Russia and Belarus), revenue increased by 10.3% to £4,273 million.

** Source: Kantar New Category Tracker.

Profit from operations and operating margin

Please see page 49 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Reported profit from operations increased by 248%, with the prior year impacted by charges related to the proposed transfer of the Group's operations in Russia and Belarus (which continue to be classified as held-for-sale) and Quantum-related restructurings (including the closure of the factory in Switzerland), while H1 2023 also benefited from a translational foreign exchange tailwind.

Excluding the impact of foreign exchange and adjusting items, the increase was driven by an improved financial performance in:

- Germany, due to a combination of higher volume and pricing;

- Ukraine, where the Group had temporarily suspended operations in the first six months of 2022;

- Brazil, largely due to higher volume in line with the industry-wide volume growth; and

- Mexico, Poland, Norway and the Czech Republic, which all increased profit from operations.

The continued good pricing in combustibles provided the fuel to further increase investments in New Categories, including further geographical expansion mainly in Vapour.

Adjusted profit from operations was up 7.8% at constant rates of exchange, or 4.4% on an organic basis.

In June 2023, the Group's new Innovation Hub in Trieste, Italy, was opened. The Hub will manufacture Velo, supporting our global supply chain. It also houses an Innovation Lab (our first in Europe) and a Digital Boutique (to accelerate BAT's digital transformation). The facility uses 100% of its energy from renewable sources and a biomass plant which is Programme for the Endorsement of Forest Certification (PEFC) certified.

Regional Review

Continued

Asia-Pacific, Middle East and Africa (APMEA):

- New Category revenue growth up 10.7%, or 15.0% at constant rates of exchange, driven by the growth of Vapour in South Africa

- Robust combustibles performance led by pricing

- Combustibles value share down 40 bps with volume share flat

Volume/Revenue

Please see page 52 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Reported revenue increased 4.0% despite a translational foreign exchange headwind. Constant currency revenue was 9.8% higher, driven by combustibles pricing (notably in Pakistan and Australia) and combustibles volume growth (in Bangladesh).

Non-Combustibles now represent 11.5% of total revenue.

On a constant currency basis (excluding translational foreign exchange), which we believe reflects the operational performance, New Categories increased by 15.0%, driven by growth in revenue from:

- Vapour, driven by increases in South Africa, New Zealand and Indonesia, largely due to the growth of modern disposables;

- THP, mainly due to higher volume in both Japan (up 14.7%) and South Korea (up 10.3%); and

- Modern Oral, due to continued growth in Pakistan and the roll-out in Kenya.

Profit from operations and operating margin

Please see page 49 for a full reconciliation to constant currency and organic metrics, including prior year data.

Constant currency measures are calculated based upon a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Profit from operations was 171% higher, as the prior year was adversely affected by charges related to the DOJ and OFAC investigations into suspicions of sanctions breaches described on page 14 (30 June 2023: £66 million; 30 June 2022: £450 million) and other charges (in respect of Quantum and the proposed exit from Egypt) that did not repeat in 2023. H1 2023 was impacted by a translational foreign exchange headwind.

Excluding adjusting items and translational foreign exchange, the performance was driven by:

- Australia, driven by pricing which more than offset a reduction in combustibles volume;

- Sri Lanka, largely due to pricing in combustibles as macro-economic stability returned; and

- GTR which has recovered to be 68% of the pre-COVID levels.

These more than offset a decline in Japan, largely due to the highly competitive pricing environment in combustibles and THP (including the final step in the five-year excise harmonisation programme).

Adjusted profit from operations at constant rates of exchange (which excludes the impact of adjusting items and translational foreign exchange) increased by 9.3%.

Other Financial Information

Analysis of profit from operations and diluted earnings per share by segment

Prior year data is provided in the table on page 49.

1. Adjusting items represent certain items which the Group considers distinctive based upon their size, nature or incidence.

2. CC: constant currency - measures are calculated based on a re-translation, at the prior year's exchange rates, of the current year's results of the Group and, where applicable, its segments.

Net finance costs

Net finance costs for the six months were £921 million, compared to £817 million in the same period in 2022. This was an increase of 12.7%, largely due to:

- Higher interest expense, as the Group's average cost of debt has increased to 4.3% (compared to 4.0% in 2022) in line with higher interest rates in the market;

- A translational foreign exchange headwind due to the relative weakness of sterling; and

- Partly offset by higher interest income, driven by higher interest rates on local deposits and an increase in interest income in Canada due to the cash build up in that market.

The Group has debt maturities of around £4 billion annually in the next two years. Due to higher interest rates, net finance costs are expected to increase as debts are refinanced.

Also in 2023, in line with IAS 33 Earnings Per Share, £22 million (30 June 2022: £23 million) has been recognised as a deduction to EPS related to the perpetual hybrid bonds issued in 2021, as the coupons paid on such instruments are recognised in equity rather than as a charge to the income statement in net finance costs.

On a constant currency basis, and after adjusting for items including finance costs related to the Franked Investment Income Group Litigation Order (FII GLO, as described on page 39), adjusted net finance costs were £859 million, an increase of 10.7% (30 June 2022: £776 million). Please refer to page 31 for discussion of the adjusting items within net finance costs. For a full reconciliation of net finance costs to adjusted net finance costs at constant rates, see page 53.

Results of associates and joint ventures

The Group's share of post-tax results of associates and joint ventures increased from £200 million to £289 million which largely relates to the performance of the Group's main associate, ITC Ltd (ITC) in India. The Group's share of ITC's post-tax results was 21.8% higher at £319 million (30 June 2022: £262 million). The movements are largely due to the economic recovery in India in 2023 from COVID-19 which led to difficult trading conditions in 2022, more than offsetting a translational foreign exchange headwind.

The Group recognised an impairment charge of £33 million (net of tax) in respect of the Group's investment in Organigram, after having recognised an impairment charge of £59 million (net of tax) in the first half of 2022. The charge was treated as an adjusting item in both periods.

Included above is other adjusting income of £18 million (30 June 2022: adjusting costs of £3 million). It is mainly related to a deemed income of £16 million (30 June 2022: £8 million gain) on dilution of the Group's holding in ITC.

Excluding these adjusting items and the impact of translational foreign exchange, on an adjusted constant currency basis, the Group's share of post-tax results from associates and joint ventures was higher than 2022, up 18.8% to £312 million. Please refer to page 31 for discussion of the adjusting items within the Group's share of post-tax results from associates and joint ventures.

Taxation

The tax rate in the income statement was a charge of 23.9% for the six months to 30 June 2023 (30 June 2022: 36.7%). The Group's tax rate is affected by the impact of the adjusting items referred to on pages 28 to 32 and by the inclusion of the share of associates and joint ventures post-tax profit in the Group's pre-tax results.

Excluding these, the Group's underlying tax rate for subsidiaries reflected in the adjusted earnings per share on page 36 was 24.7% for the six months to 30 June 2023 (30 June 2022: 25.1%).

A full reconciliation from taxation on ordinary activities to the underlying tax rate is provided on page 54.

The effective and underlying rate in the six months to 30 June 2023 reflects the mix of profits.

Other Financial Information

Continued

Earnings per share

The following chart is in pence per share

Basic earnings per share were up 117% to 176.6p (30 June 2022: 81.2p) driven by the improvement in operational performance and translational foreign exchange tailwinds (partly offset by higher net finance costs), whilst the prior period was impacted by higher one-off charges (mainly related to the proposed transfer of the Group's businesses in Russia and Belarus, the DOJ and OFAC investigations into suspicions of sanctions breaches and Quantum restructuring).

Before adjusting items and including the dilutive effect of employee share schemes, adjusted diluted earnings per share increased 8.5% to 181.6p (30 June 2022: 167.4p). On a constant translational foreign exchange basis, adjusted diluted earnings per share were 5.3% higher at 176.3p. For a full reconciliation of diluted earnings per share to adjusted diluted earnings per share, at constant rates, see page 55.

Cash flow

Note - Adjusted net debt of £39,761 million as at June 2022 is revised to include net debt items included within asset held-for-sale of £229 million. The amount disclosed in prior year was £39,990 million.

In the Group's cash flow, prepared in accordance with IFRS and presented on page 27, net cash generated from operating activities increased by 4.8% to £3,375 million (30 June 2022: £3,221 million), primarily driven by the realisation of tax credits in Brazil (related to the previously disclosed VAT on social contributions) and higher dividends received from the Group's associate ITC. These were partly offset by lower receivables factoring across the Group, lower working capital in APMEA and higher payments of tax. In the six months ended 30 June 2023, the Group paid £179 million related to litigation payments (30 June 2022: £31 million) which included, in both 2023 and 2022, payments in respect of Engle and, in 2023, payments related to the settlement of the investigation by the FCCPC in Nigeria, as described on page 38.

Operating cash conversion and free cash flow (before and after dividends paid to shareholders)

The Group's operating cash conversion rate (based upon adjusted profit from operations and defined on page 55) was 72% (30 June 2022: 77%), due to the impact of lower receivables factoring across the Group and lower working capital in APMEA.

We expect our operating cash conversion in 2023 to exceed our target of at least 90%, demonstrating the ongoing strength of the Group in turning operating performance into cash.

Free cash flow (before the payment of dividends), as defined on page 56, was £2,326 million for the six months ended 30 June 2023(30 June 2022: £2,277 million), an increase of 2.2%. This was driven by the improvement in net cash generated from operations and lower net capital expenditure (30 June 2023: £107 million; 30 June 2022: £125 million), partly offset by higher net interest paid due to the increase in interest rates.

After paying dividends of £2,479 million (30 June 2022: £2,476 million), free cash flow (after dividends paid to shareholders), as defined on page 56, was an outflow of £153 million for the six months ended 30 June 2023 (30 June 2022: £199 million outflow).

For a full reconciliation of net cash generated from operating activities to free cash flow before and after dividends, see page 56.

Other Financial Information

Continued

Borrowings and net debt

Borrowings (which includes lease liabilities) were £42,169 million at 30 June 2023, a decrease of 6.0% compared to £44,875 million at 30 June 2022 (31 December 2022: £43,139 million). This was partly due to the foreign exchange movements, mainly related to the US dollar and sterling. The decrease was also due to lower short-term borrowings (including commercial paper) in the first six months of 2023, combined with the net reduction in borrowings in the second half of 2022 as the Group repaid, on maturity a US$750 million bond in August 2022.

The Group remains confident of its ability to access the debt capital markets successfully and reviews its options on a continuing basis.

The Group's average centrally managed debt maturity was 9.5 years at 30 June 2023 (30 June 2022: 10.1 years; 31 December 2022: 9.9 years), and the highest proportion of centrally managed debt maturing in a single rolling 12-month period was 18.5% (30 June 2022: 18.3%; 31 December 2022: 18.6%).

The Group defines net debt as borrowings (including related derivatives and lease liabilities), less cash and cash equivalents (including restricted cash) and current investments held at fair value. Closing net debt was £38,345 million at 30 June 2023 (30 June 2022: £40,806 million; 31 December 2022: £39,281 million). A reconciliation of borrowings to net debt is provided below.

The movement in net debt includes the free cash outflow, after payment of dividends to shareholders, of £153 million (30 June 2022: £199 million outflow), as described on page 56. Also impacting the carrying value of net debt at the balance sheet date are:

- Cash payments related to share schemes and investing activities of £276 million (30 June 2022: £206 million), which, in 2023, was higher mainly due to the movement in foreign exchange dividend hedges due to the devaluation of sterling, predominantly against the US dollar;

- Other non-cash movements of £104 million;

- The classification of certain balances as held-for-sale related to the proposed sale of the Group's operations in Russia and Belarus of£4 million (30 June 2022: £229 million); and

- Foreign exchange impacts related to the revaluation of foreign currency denominated net debt balances being a net tailwind of £1,473 million (30 June 2022: £2,582 million headwind).

In the six months ended 30 June 2022, the Group purchased £1,256 million of own shares under the Group's £2 billion share buy-back programme, which ended in December 2022, by which time the Group had purchased £2,012 million of own shares.

These movements can be summarised as follows:

Investments held at fair value through profit and loss above include restricted amounts of £302 million (31 December 2022: £396 million) due to investments held by subsidiaries in CCAA protection, as well as £100 million (31 December 2022: £78 million) subject to potential exchange control restrictions.

Cash and cash equivalents include restricted amounts of £1,653 million (31 December 2022: £1,411 million) due to subsidiaries in CCAA protection, as well as £239 million (31 December 2022: £324 million) principally due to exchange control restrictions.

Other Financial Information

Continued

Borrowings and net debt (continued)

Adjusted net debt

The Group also adjusts net debt for items held-for-sale and for the purchase price allocation adjustment to the debt, included within borrowings, acquired as part of the acquisition of Reynolds American Inc. This is an accounting adjustment and does not reflect the enduring repayment of the instrument. The Group Management Board believes that this additional measure, which is used internally to assess the Group's financial capacity, is useful to the users of the financial statements in helping them to see how the Group's financial capacity has changed over the year. The adjusted net debt position is provided below:

Note - Adjusted net debt of £39,761 million as at June 2022 has been revised to include net debt items included within assets held-for-sale of £229 million. The amount disclosed in the prior year was £39,990 million.

Foreign currencies

The principal exchange rates used to convert the results of the Group's foreign operations to pounds sterling for the purposes of inclusion and consolidation within the Group's financial statements are indicated in the table below. Where the Group has provided results "at constant rates of exchange" this refers to the translation of the results from the foreign operations at rates of exchange prevailing in the prior period - thereby eliminating the potentially distorting impact of the movement in foreign exchange on the reported results.

The principal exchange rates used were as follows:

Other Information

Risks and uncertainties

The Board carried out a robust assessment of the Principal Risks and uncertainties facing the Group for the period, including those that would threaten its business model, future performance, solvency, liquidity and viability. The Board also maintained close oversight of the Group's response to critical external uncertainties, recognising current macro-economic and geopolitical challenges.

All Group risks are reviewed biannually by the Audit Committee and annually by the Board. ESG is core to the Group's long-term business strategy and ESG risk factors are embedded across the Group's risks in accordance with the Risk Management Framework within the Group. In 2022, following the conclusion of a Double Materiality Assessment, the Board identified "Climate and circularity", now renamed to "Climate change and circular economy", as a Principal Risk to the Group, recognising the Group's existing commitments to climate change and circular economy matters. In 2023, the Board identified "Cyber Security" as a Principal Risk to the Group reflecting the general heightened cyber-threat landscape, the increased digital interactions with consumers, combined with changes to regulation.

The Principal Risks facing the Group are summarised under the headings of:

- Competition from illicit trade;

- Geopolitical tensions;

- Tobacco, New Categories and other regulation interrupts the growth strategy;

- Litigation;

- Significant increases or structural changes in tobacco, nicotine and New Categories related taxes;

- Inability to develop, commercialise and deliver the New Categories strategy;

- Injury, illness or death in the workplace;

- Disputed taxes, interest and penalties;

- Foreign exchange rate exposures;

- Solvency and liquidity;

- Climate change and circular economy; and

- Cyber security.

A summary of all the risk factors (including the Principal Risks, except for the newly added Cyber Security Principal Risk) which are monitored by the Board through the Group's risk register are set out on pages 340 - 361 of the Group's Annual Report and Accounts and Form 20-F for the year ended 31 December 2022. All the Group's risks should be read in the context of the forward-looking statements on page 46 of this Half-Year Report.

Update on investigations into misconduct allegations

From time to time, the Group investigates, and becomes aware of governmental authorities' investigations into allegations of misconduct, including alleged breaches of sanctions and allegations of corruption, against Group companies. Some of these allegations are currently being investigated. The Group cooperates with the authorities' investigations, where appropriate.

On 25 April 2023, the Group announced that it had reached an agreement with the DOJ and OFAC to resolve previously disclosed investigations into suspicions of sanctions breaches. These concerned business activities relating to the Democratic People's Republic of Korea between 2007 and 2017. British American Tobacco p.l.c. (the "Company") entered into a three-year deferred prosecution agreement (DPA) with the DOJ and a civil settlement agreement with OFAC. The DOJ's charges against the Company - one count of conspiring to commit bank fraud and one count of conspiring to violate sanctions laws - were filed and will later be dismissed if the Company abides by the terms of the DPA. In addition, a BAT subsidiary in Singapore, British-American Tobacco Marketing (Singapore) Private Limited, pleaded guilty to the same charges. The total amount payable to the U.S. authorities is US$635 million (£499 million) plus interest, which will be paid by the Company.

Having recognised an initial provision of £450 million (US$540 million), in line with the International Accounting Standards 37 requirements, in the 2022 interim and full year results, the Group has recognised an additional charge of £66 million in 2023. Having made a payment of £4 million (US$5 million) in H1 2023, the remainder will be paid in equal instalments in H2 2023 and H1 2024.

Update on Quebec class action and CCAA

There have been no substantial developments in respect of the Quebec Class Action and subsequent grant of protection of the Group's subsidiary, Imperial Tobacco Canada Ltd (ITCAN), under the Companies' Creditors Arrangement Act (CCAA). The stays are currently in place until 29 September 2023. While the stays are in place, no steps are to be taken in connection with the Canadian tobacco litigation with respect to ITCAN, certain of its subsidiaries or any other Group company.

In accordance with the CCAA process, the parties continue to work towards a plan of arrangement or compromise in a court-ordered confidential mediation. The length and ultimate outcome of the CCAA process, including the resolution of the underlying legal proceedings, remains uncertain.

In line with IFRS 10 (Consolidated Financial Statements), ITCAN is consolidated in the Group's results. For ease of reference and to assist the users of this interim announcement, in the six months ended June 2023, ITCAN's contribution to the financial performance of the Group was:

- Revenue: £473 million;

- Profit from operations: £247 million;

- Adjusted profit from operations: £250 million; and

- Adjusted EBITDA: £255 million.

At 30 June 2023, restricted cash in ITCAN was £1,653 million and restricted investments held at fair value are £302 million, with goodwill recognised on the balance of the Group at £2,460 million.

Please refer to "Contingent Liabilities and Financial Commitments" below (page 37) and the Group's Annual Report and Accounts and Form 20-F for the year ended 31 December 2022 (note 12 Intangible Assets and note 31 Contingent Liabilities and Financial Commitments) for a full discussion of the case and the assessment of goodwill. There has been no trigger to reassess the impairment position at 30 June 2023.

Other Information

Continued

Changes in the Group

Russia and Belarus

On 11 March 2022, as discussed on page 30, the Group announced the intention to transfer its Russian business in compliance with international and local laws. The Group has two subsidiaries in Russia (BAT Russia), being JSC British American Tobacco-SPb and JSC International Tobacco Marketing Services. Due to operational dependencies between Russia and the Group's subsidiary in Belarus (International Tobacco Marketing Services BY) (BAT Belarus), as previously announced, the Belarusian business will be included in the transfer. Upon completion, the Group will no longer have a presence in Russia or Belarus. The Group is working as quickly as possible to transfer the businesses.

At the date of writing, no agreement to transfer the shares in these subsidiaries has been entered into. Further, any transaction that is agreed will be subject to regulatory approvals. In accordance with IFRS, the assets and liabilities of the subsidiaries comprising BAT Russia and BAT Belarus continue to be classified as held-for-sale at 30 June 2023 and presented as such on the balance sheet at an estimated recoverable value. Impairment charges (and associated costs) of £612 million were recognised in 2022 (and treated as a non-cash adjusting item). Similarly, another £17 million of associated costs have been recognised in the first six months of 2023. Management has reassessed the carrying values assets and liabilities held-for sale at 30 June 2023, noting the assessment considers a range of internal assumptions, including those regarding the impact, extent and duration of sanctions, likely transaction terms, the likelihood of any consideration being significantly deferred, including the ability to remit funds, and ongoing macro-economic developments, including the impact of inflation and interest rates. All assumptions are based on current expectations and are subject to a high degree of volatility and uncertainty. Management concluded that, as at 30 June 2023, there was no requirement to change the previous assessment of values.

On completion of the proposed transfer, certain other items, including foreign exchange previously recognised in the Statement of Other Comprehensive Income (which was £500 million at 30 June 2023), will be reclassified to the Income Statement in the period in which completion occurs. The financial impact of these items will be treated as non-cash, adjusting items. Refer to page 30 for a detailed analysis of the charge.

The transfer of the business will not have a material impact on the remainder of the Group's supply chain.

The Group continues to monitor sanction developments to ensure that it is compliant with international and local laws, and that it has the necessary business controls in place to operate effectively. The Group has taken steps to remain compliant with all new measures and continues to assess their implications.

To supplement the Group's results presented in accordance with IFRS, the Group's Management Board, as the chief operating decision-maker, reviews the Group's results, including volume, revenue, profit from operations and operating margin excluding businesses sold or to be held-for-sale. Although the Group does not believe that these measures are a substitute for IFRS measures, the Group does believe that such presentation of the results (excluding the impact of businesses sold or to be held-for-sale, and referred to as "on an organic basis") provides additional useful information to investors regarding the underlying performance of the business on a comparable basis and in the case of the expected sale of the Group's businesses in Russia and Belarus, the impact these businesses have on revenue and profit from operations. Accordingly, the organic financial measures appearing in this document should be read in conjunction with the Group's results as reported under IFRS.

Please see the reconciliations of volume to organic volume, revenue to organic revenue, profit operations to adjusted organic profit from operations and operating margin to adjusted organic operating margin on page 49.

At 30 June 2023, on a constant currency basis, Russia and Belarus accounted for approximately 2.7% of Group revenue, and approximately 2.5% of Group adjusted profit from operations.

Other changes

In April 2023, the Group announced a strategic joint venture agreement between a Group subsidiary, AJNA BioSciences PBC and Charlotte's Web. Under the terms of the transaction, a Group subsidiary acquired a 20% stake in the new JV entity (DeFloria LLC) at a cost of c.£7.9 million (US$10 million).

External Audit Tender Process

Earlier this year, it was announced that during 2023 the Audit Committee would undertake a formal competitive audit tender process in respect of the audit for the 2025 financial year. That process has now concluded and the Board has approved the re-appointment of KPMG LLP. A resolution proposing the appointment of KPMG LLP as external auditors for the 2025 financial year will be put forward to shareholders for approval at the 2025 Annual General Meeting. Details of the external audit tender process and evaluation criteria will be reported in the Group's Annual Report and Form 20-F 2023.

Other Information

Continued

Changes to the Main Board

As previously announced, the following Board changes have taken place:

- Savio Kwan stepped down from the Board as a Non-Executive Director with effect from 19 April 2023.

- Jack Bowles stepped down from the Board as Chief Executive with effect from 15 May 2023.

- Tadeu Marroco was appointed as Chief Executive with effect from 15 May 2023.

Changes to the Management Board

As previously announced, the following Management Board changes have taken place:

Dr James Murphy joined the Management Board as Director, Research and Science Designate, on 1 February 2023 and he assumed the role of Director, Research and Science on 1 March 2023. Dr David O'Reilly, Director, Research and Science, stepped down from the Management Board on 28 February 2023 and left BAT with effect from 31 May 2023.

With effect from 1 April 2023:

- Johan Vandermeulen was appointed to the role of Chief Transformation Officer.

- Luciano Comin was appointed to the role of Director, Combustibles.

- Frederico (Fred) Monteiro was promoted to the Management Board as Regional Director, Americas and Europe Region (AME).

- Michael Dijanosic took on an expanded role as Regional Director, Asia Pacific, Middle East and Africa (APMEA).

- Tadeu Marroco's role was redesignated as Finance Director.

With effect from 15 May 2023:

- Javed Iqbal was appointed Interim Finance Director until a permanent successor is appointed. He retained his role as Director, Digital & Information.

With effect from 30 June 2023:

- Guy Meldrum, President & CEO, Reynolds American Inc., stepped down from his role and from the Management Board.

- Paul Lageweg, Director, New Categories, stepped down from his role and from the Management Board.

- Hae In Kim, Director, Talent, Culture & Inclusion, stepped down from the Management Board and was appointed as Strategic Talent Director from 1 July 2023.

With effect from 1 July 2023, Johan Vandermeulen was appointed to the new role of Chief Operating Officer, reporting to the Chief Executive. Reporting to Johan will be:

- David Waterfield, promoted to the Management Board as President & CEO, Reynolds American Inc.

- Fred Monteiro (Director, Americas & Europe) and Michael Dijanosic (Director, Asia Pacific, Middle East & Africa).

- Zafar Khan (Director, Operations) and Javed Iqbal (Director, Digital & Information). Javed also continues to serve as Interim Finance Director.

With effect from 1 September 2023, Kingsley Wheaton, currently Chief Growth Officer, will be appointed to the new role of Chief Strategy & Growth Officer, reporting to the Chief Executive. Reporting to Kingsley will be:

- Luciano Comin, appointed to the new role of Marketing Director, Combustibles & New Categories, with effect from 1 July 2023.

- Paul McCrory, currently Assistant General Counsel, Corporate & Group Company Secretary, appointed to the new role of Director, Corporate & Regulatory Affairs, with effect from 1 September 2023.

- James Barrett, currently Commercial Director, Wellbeing & Stimulation, appointed to the new role of Director, Business Development, with effect from 1 September 2023.

James Murphy, Director, Research & Science and Jerome Abelman, Director, Legal Affairs & General Counsel, continue in their roles reporting directly to the Chief Executive.

Other Information

Continued

Dividends

On 9 February 2023, the Company announced that the Board had declared an interim dividend of 230.9p per ordinary share of 25p, for the year ended 31 December 2022, payable in four equal quarterly instalments of 57.72p per ordinary share in May 2023, August 2023, November 2023 and February 2024.

The May 2023 quarterly dividend was paid to shareholders on the UK main register and South Africa branch register on 3 May 2023 and to holders of American Depositary Shares (ADSs) on 8 May 2023. The three remaining quarterly dividends will be paid to shareholders registered on either the UK main register or the South Africa branch register, and to holders of ADSs, each on the applicable record dates set out below.

General dividend information

Under IFRS, the interim dividend is recognised in the period that it is paid. Therefore, the results for the six months ended 30 June 2023 reflect the fourth quarterly dividend from the declaration made on 11 February 2022, of 54.45p per ordinary share and the first quarterly dividend from the declaration made on 9 February 2023 of 57.72p per ordinary share as this was paid in May 2023.

Holders of ADSs

For holders of ADSs listed on the New York Stock Exchange (NYSE), the record dates and payment dates are set out below. The equivalent quarterly dividends receivable by holders of ADSs in US dollars will be calculated based on the exchange rate on the applicable payment date. A fee of US$0.005 per ADS will be charged by Citibank, N.A. in its capacity as depositary bank for the BAT American Depositary Receipt (ADR) programme in respect of each quarterly dividend payment.

South Africa Branch register

In accordance with the JSE Limited (JSE) Listing Requirements, the finalisation information relating to shareholders registered on the South Africa branch register (comprising the amount of the dividend in South African rand, the exchange rate and the associated conversion date) will be published on the dates stated below, together with South Africa dividends tax information. The quarterly dividends are regarded as 'foreign dividends' for the purposes of the South Africa Dividends Tax. For the purposes of South Africa Dividends Tax reporting, the source of income for the payment of the quarterly dividends is the United Kingdom.

Key dividend dates

In compliance with the requirements of the London Stock Exchange (LSE), the NYSE and Strate, the electronic settlement and custody system used by the JSE, the following salient dates for the quarterly dividends payments are applicable.

Notes:

1. All dates are 2023, unless otherwise stated.

2. The dates set out above may be subject to any changes to public holidays arising and changes or revisions to the LSE, JSE and NYSE timetables. Any confirmed changes to the dates will be announced.

3. JSE finalisation information published on 4 July 2023 can be found on the BAT website www.bat.com.

Other Information

Continued

Going concern

A description of the Group's business activities, its financial position, cash flows, liquidity position, facilities and borrowings position, together with the factors likely to affect its future development, performance and position, as well as risks associated with the business, are set out in the Strategic Report and in the Notes on the Accounts, all of which are included in the Group's Annual Report and Accounts and Form 20-F for the year ended 31 December 2022, and available on the Group's website, www.bat.com. This Half-Year Report provides updated information regarding the business activities, including cash flow, for the six months to 30 June 2023 and of the financial position and liquidity position at 30 June 2023.

The Group has, at the date of this announcement, sufficient existing financing available for its estimated requirements for at least 12 months from the date of approval of this condensed consolidated financial information. This, together with the ability to generate cash from trading activities, the performance of the Group's Strategic Portfolio, its leading market positions in a number of countries and its broad geographical spread, as well as numerous contracts with established customers and suppliers across different geographical areas and industries, provides the Directors with the confidence that the Group is well placed to manage its business risks successfully through the ongoing uncertainty, the current macro-economic financial conditions and the general outlook in the global economy.

After reviewing the Group's forecast financial performance and financing arrangements, the Directors consider that the Group has adequate resources to continue operating for at least 12 months from the date of approval of this condensed consolidated financial information and that it is therefore appropriate to continue to adopt the going concern basis in preparing this Half-Year Report.

Directors' Responsibility Statement

The Directors confirm that, to the best of their knowledge, this condensed consolidated financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and as issued by the International Accounting Standards Board (IASB), and that this Half-Year Report includes a fair review of the information required by both DTR 4.2.7R and DTR 4.2.8R of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.

The Directors of British American Tobacco p.l.c. are as listed on pages 124 to 127 in the British American Tobacco Annual Report and Form 20-F for the year ended 31 December 2022, with the exceptions of Savio Kwan who stepped down on 19 April 2023, Jack Bowles who stepped down on 15 May 2023 and Tadeu Marroco who was appointed as Chief Executive with effect from 15 May 2023.

Details of all the current Directors of British American Tobacco p.l.c. are maintained on www.bat.com.

For and on behalf of the Board of Directors:

Independent Review Report to British American Tobacco p.l.c.

Conclusion

We have been engaged by British American Tobacco p.l.c. (the "Company") to review the condensed consolidated financial information in the Half-Year Report for the six months ended 30 June 2023 which comprises the Group Income Statement, the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Group Balance Sheet, the Group Cash Flow Statement and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial information in the Half-Year Report for the six months ended 30 June 2023 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK and the Disclosure Guidance and Transparency Rules (the "DTR") of the UK's Financial Conduct Authority (the "UK FCA"). 

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the Half-Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated financial information.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the basis for conclusion section of this report, nothing has come to our attention that causes us to believe that the Directors have inappropriately adopted the going concern basis of accounting, or that the Directors have identified material uncertainties relating to going concern that have not been appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Group to cease to continue as a going concern, and the above conclusions are not a guarantee that the Group will continue in operation.

Directors' responsibilities

The Half-Year Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-Year Report in accordance with the DTR of the UK FCA.

As disclosed in the Accounting Policies and Basis of Preparation note, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and UK-adopted international accounting standards.

The Directors are responsible for preparing the condensed consolidated financial information included in the Half-Year Report in accordance with IAS 34 as adopted for use in the UK and as issued by the IASB.

In preparing the condensed consolidated financial information, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated financial information in the Half-Year Report based on our review. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the basis for conclusion section of this report.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Philip Smart

for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square, London E14 5GL

25 July 2023

Contents

Interim Financial Statements (unaudited)

Group Income Statement

All of the activities during both years are in respect of continuing operations.

The accompanying notes on pages 28 to 42 form an integral part of this condensed consolidated financial information.

1. Revenue is net of duty, excise and other taxes of £18,721 million and £18,190 million for the six months ended 30 June 2023 and 30 June 2022, respectively, and £38,527 million for the year ended 31 December 2022.

Interim Financial Statements (unaudited)

Continued

Group Statement of Comprehensive Income