#1Preliminary Results 2019 27 February 2020 Jack Bowles Chief Executive Tadeu Marroco Finance Director LAKO LYFT BRITISH AMERICAN TOBACCO 1#2Important Information The information contained in this presentation in relation to British American Tobacco p.l.c. ("BAT") and its subsidiaries has been prepared solely for use at this presentation. The presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. BRITISH AMERICAN References in this presentation to 'British American Tobacco', 'BAT', 'Group', 'we', 'us' and 'our' when denoting opinion refer to British American Tobacco p.l.c. and when denoting tobacco business activity refer to British American Tobacco Group operating companies, collectively or individually as the case may be. The information contained in this presentation does not purport to be comprehensive and has not been independently verified. Certain industry and market data contained in this presentation has come from third party sources. Third party publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of accuracy or completeness of such data. Forward-looking Statements 00 This presentation does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any BAT shares or other securities. This presentation contains certain forward-looking statements, made within the meaning of Section 21E of the United States Securities Exchange Act of 1934, regarding our intentions, beliefs or current expectations concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates. These statements are often, but not always, made through the use of words or phrases such as "believe," "anticipate," "could," "may," "would," "should," "intend," "plan," "potential," "predict," "will," "expect," "estimate," "project," "positioned," "strategy," "outlook", "target" and similar expressions. TOBACCO It is believed that the expectations reflected in this presentation are reasonable but they may be affected by a wide range of variables that could cause actual results to differ materially from those currently anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this presentation and BAT undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are uncertainties related to the following: the impact of competition from illicit trade; the impact of adverse domestic or international legislation and regulation; changes in domestic or international tax laws and rates and the impact of an unfavourable ruling by a tax authority in a disputed area; adverse litigation and dispute outcomes and the effect of such outcomes on the Group's financial condition; changes or differences in domestic or international economic or political conditions; adverse decisions by domestic or international regulatory bodies; the impact of market size reduction and consumer down-trading; translational and transactional foreign exchange rate exposure; the impact of serious injury, illness or death in the workplace; the ability to maintain credit ratings and to fund the business under the current capital structure; the inability to develop, commercialise and deliver New Category products; and changes in the market position, businesses, financial condition, results of operations or prospects of the Group. 2#3Important Information BRITISH AMERICAN Forward-looking Statements (continued) Additional information concerning these and other factors can be found in BAT's filings with the U.S. Securities and Exchange Commission ("SEC"), including the Annual Report on Form 20-F filed on 15 March 2019 and Current Reports on Form 6-K, which may be obtained free of charge at the SEC's website, http://www.sec.gov, and BAT's Annual Reports, which may be obtained free of charge from the British American Tobacco website www.bat.com. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. Readers are cautioned not to place undue reliance on such forward-looking statements. Additional Information All financial statements and financial information provided by or with respect to the US or Reynolds American Inc. ("RAI") are initially prepared on the basis of U.S. GAAP and constitute the primary financial statements or financial records of the US business/RAI. This financial information is then converted to International Financial Reporting Standards as issued by the IASB and as adopted by the European Union (IFRS) for the purpose of consolidation within the results of the BAT Group. To the extent any such financial information provided in this presentation relates to the US or RAI it is provided as an explanation of, or supplement to, RAI's primary U.S. GAAP based financial statements and information. Our vapour product Vuse (including Alto and Vibe), and certain products including Grizzly, Granit, Camel Snus, Velo and Kodiak, which are sold in the US, are subject to FDA regulation and no reduced-risk claims will be made as to these products without agency clearance. No Profit or Earnings Per Share Forecasts No statement in this presentation is intended to be a profit forecast and no statement in this presentation should be interpreted to mean that earnings per share of BAT for the current or future financial years would necessarily match or exceed the historical published earnings per share of BAT. Audience The material in this presentation is provided for the purpose of giving information about BAT and its subsidiaries to investors only and is not intended for general consumers. BAT, its directors, officers, employees, agents or advisers do not accept or assume responsibility to any other person to whom this material is shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. The material in this presentation is not provided for product advertising, promotional or marketing purposes. This material does not constitute and should not be construed as constituting an offer to sell, or a solicitation of an offer to buy, any of our products. Our products are sold only in compliance with the laws of the particular jurisdictions in which they are sold. TOBACCO#4Delivering a stronger, simpler, faster organisation COMBUSTIBLE VALUE GROWTH STEP-CHANGE IN NEW CATEGORIES SIMPLIFY THE COMPANY BRITISH AMERICAN TOBACCO 4#5Reported results impacted by adjusting items Revenue New Category Revenue Operating Margin Profit From Operations Diluted EPS Leverage Source: Company data REPORTED FY 2019 @ Current rates +5.7% +36.9% -320 bps -3.2% -5.4% Adjusting items incl: • Canada (Quebec) BRITISH AMERICAN Quantum (simplification) TOBACCO • Other litigation (including Engle) Russia (excise dispute) Indonesia (Goodwill impairment) 5 сл#6A strong operational performance drives deleveraging * Strong adj revenue and profit at upper end of guidance* ||||| Group value share up +30bps in key markets, volume up +20bps New Category revenue growth* +32% De-leveraging of 0.4x (ex currency) and 0.5x (current rates) Dividend up 3.6% to 210.4p; 65% pay-out ratio** High Single Figure constant currency earnings** growth constant rate basis. Profit: Adjusted profit from operations. See Appendix A1-A2. **Adjusted diluted earnings per share at constant rates. See Appendix A1-A2. BRITISH AMERICAN TOBACCO 6#7* Delivered on our commitments Revenue |||| New Category Revenue Operating Margin Profit From Operations Diluted EPS Leverage Adjusted and constant rate basis. See Appendix A1-A2. Source: Company data 2019 Guidance Mid-Upper end +3-5%* of range +30-50%* +50-100 bps Upper end of +5-7%* range High Single Figure* -0.4x ex-currency ADJUSTED FY 2019 @ Constant rates +5.6% +32.4% +50 bps Current rates +6.6% +8.4% -0.4x BRITISH AMERICAN TOBACCO 7#8Creating value CO₂ EXCELLENCE IN ENVIRONMENTAL MANAGEMENT 24% reduction in CO2e scope 1&2 emissions v 2010 60% reduction in waste to landfill v 2010 34% reduction in water withdrawn v 2010 DELIVERING A POSITIVE SOCIAL IMPACT KO Source: Company data. * Markets exempted where guidelines conflict with local law Supplier code of conduct defines minimum standards ~11m consumers using non- combustibles in 45 markets Policy of 100% suppliers subject to Human Rights due diligence OWN B BRITISH AMERICAN GOVERNANCE TOBACCO ROBUST CORPORATE 100%* adherence to our Youth Access Prevention guidelines Global Speak Up line: +35% cases v FY18 100% employees completed annual SoBC sign-off ∞#9... in a sustainable way * ESG: Environmental Social Governance A STRONG APPROACH TO ESG* COMMITMENT TO TOBACCO HARM REDUCTION CREATING VALUE Shareholders glo ISS QualityScore Highest Rating By INSTITUTIONAL SHAREHOLDER SERVICES MEMBER OF O Consumers glo SOCIAL M GLOBAL CHILD FORUM EXTERNAL RECOGNITION FOR Jones PROGRESS TO DATE Sustainability Indices CDP In Collaboration with RobecoSAM DISCLOSURE INSIGHT ACTION EPUK MAT m LYFT Society ISS QualityScore ENVIRONMENTAL SEAL AWARD WINNER VELO Highest Rating By INSTITUTIONAL SHAREHOLDER SERVICES 2019 Employees M Freeeeee BRITISH AMERICAN TOBACCO#10Delivering on our priority areas... COMBUSTIBLE VALUE GROWTH STEP-CHANGE IN NEW CATEGORIES SIMPLIFY THE COMPANY * Adjusted and constant rate basis. See Appendix A1-A2. > +4.6% Revenue growth* from combustibles > Product roll-outs across New Categories > Simpler, faster, more agile organisation BRITISH AMERICAN TOBACCO 10#11Combustibles | Delivering value growth Revenue* from Combustibles +4.6% 21.9 2018 £bn 22.9 2019 £bn *Adjusted and constant rate basis. See Appendix A1-A2 ** See Appendix A4.. Growth drivers: ● ● Value share growth Strong brands Cigarette Price/Mix** 9% Improved geographic mix BRITISH AMERICAN TOBACCO 11#12Combustibles | Value growth driven by strong brands +110bps 2012 +100bps +20bps 2013 +120bps +10bps 2014 +100bps +40bps 2015 +110bps +50bps 2016 +180bps +40bps 2017 +20bps 2018 Combustible Strategic Brands Volume share Value share +40 bps 2019 +70bps Strategic brand volume share +20bps Group volume share p +70bps +30bps Excl. migrations Share growth versus FY18. Source: Company data The BAT Group does not own all brands referred to in this presentation in all markets e.g. BAT is the owner of the Camel and Natural American Spirit brands in the United States only M DUNHILL TOBACCO OF LONDON LTD TERSON LUCKY STRIKE NATURAL AMERICAN BRITISH AMERICAN SPIRIT CIGANITTES TOBACCO KENT CAMEL PALLMALL Rothmans Group Combustibles Value share Volume share +20 bps +20 bps Newport 12#13US Combustibles | Value growth and share gains +30 bps +50bps +50bps Value share 36.8% Premium share 34.5% -10 bps Volume share 34.6% Strategic Brands value share 34.6% +20bps +30 bps ASU30 share 44.1% Strategic Brands volume share 33.0% AMERICAN SPIRIT CIGARETTES CAMEL Share growth versus FY18 See Appendix A3. Source: Company data The BAT Group does not own all brands referred to in this presentation in all markets e.g. BAT is the owner of the Camel and Natural American Spirit brands in the United States only Newport PALL MALL 13#14Step-change in New Categories | Strong progress THP +23% FY revenue growth* Vapour +23% FY revenue growth* *Adjusted and constant rate basis. See Appendix A1-A2. Modern Oral +273% FY revenue growth* BRITISH AMERICAN K TOBACCO +32% New Category FY revenue growth* 14#15Vapour | Strengthening our position in Vapour > Category returning to sequential growth in all key markets in Q4 following the US vapour slowdown › Growing volume and value share across all markets including US through H2 > Well placed to meet PMTA May deadline BRITISH AMERICAN TOBACCO 15#16THP | Category growth has slowed Industry volume split Japan & South Korea 63% ROW 37% * When compared to conventional cigarettes BRITISH AMERICAN › Opportunity is correlated with a unique set of characteristics: TOBACCO > Fewer potentially reduced risk* alternative products > Lower cigarette strength delivery levels > Our focus: › Targeted geographic expansion (ENA) › Increasing consumer satisfaction 16#17Modern Oral | Global category leader ENA Modern Oral Category 1,728m pouches BAT share 62% Source: category size in number of pouches based on company US Modern Oral Category 794m pouches data BAT share 10% BAT Global volume share 47% BRITISH AMERICAN TOBACCO 17#18Delivering sustainable High Single Figure EPS growth Guidance 3-5% Revenue growth* £5bn New Category Revenue^ in 2023/24 Increased New Category Investment Continued margin growth Cash generation Continued deleveraging 65% Dividend pay-out ratio High Single Figure EPS Growth** › Dynamic New Category regulation > Agile and responsive › Retain flexibility to invest BRITISH AMERICAN TOBACCO *Adjusted, Constant currency basis. See Appendix A1-A2. ^ Adjusted basis. See Appendix A1. Stated at 2019 budget rates. **, *Adjusted diluted earnings per share at constant rate basis. See Appendix A1-A2 18#19Looking into 2020 › Vapour markets yet to return to previous levels › Modern Oral sales suspension in Russia; Vapour ban in Mexico > First signs of Coronavirus impact BRITISH AMERICAN TOBACCO Guidance 3-5% Revenue growth* £5bn New Category Revenue^ in 2023/24 Increased New Category Investment Continued margin growth Cash generation Continued deleveraging 65% Dividend pay-out ratio High Single Figure EPS Growth** *Adjusted, Constant currency basis. See Appendix A1-A2. ^ Adjusted basis. See Appendix A1. Stated at 2019 budget rates. **, *Adjusted diluted earnings per share at constant rate basis. See Appendix A1-A2 19#20Long-term sustainable growth > Delivering on our three priorities > Investment in expanding New Category business > Quantum provides the efficiencies and capabilities Creating a Better Tomorrow High Single Figure constant currency earnings** growth ** Adjusted diluted earnings per share at constant rate basis. See Appendix A1-A2 BRITISH AMERICAN TOBACCO 20#21Delivering today while investing in the future Margin growth* Investment Strong Cash-Flow De-leveraging on track ✓ Dividend *Adjusted basis See Appendix A1. Source: Company data +50bps £1.9bn free cashflow after dividends £500m incremental marketing investment 0.4 x (constant rates) BRITISH AMERICAN 65% pay-out ratio TOBACCO 21#22Strong revenue growth Strategic Combustible revenue up +5.6%* Improved pricing Good progress on New Categories growth *2019 Adjusted and constant rate basis V 2018 adjusted and current rate basis. See Appendix A1-A2. Source: Company data 24.3 FY18 £bn +5.6% 25.7 FY19 £bn Total Revenue BRITISH AMERICAN TOBACCO 22#23Strong profit* growth Strong profit* growth across all regions Pricing and cost management focus Significantly increased investment in New Categories 10.3 +6.6% 11.0 FY18 £bn FY19 £bn Adj Profit from Operations * Adjusted profit from operations. 2019 Adjusted and constant rate basis V 2018 adjusted and current rate basis. See Appendix A1-A2. Source: Company data BRITISH AMERICAN TOBACCO 23#24Strong financial results* across each region APME AMSSA ΕΝΑ US *Adjusted and constant rate basis. See Appendix A1-A2. Value share of cigarettes (APME: cigs+THP). Source: Company data Adjusted Revenue* +5.6% +9.2% +5.0% +4.4% Value Share +30bps +20bps Flat +30bps Adjusted Profit from operations* +7.9% +10.0% +3.3% +6.4% BRITISH AMERICAN TOBACCO 24#25US | Strong results in the US Revenue* +4.4% 9.5 2018 £bn 9.9 2019 £bn Adj. Profits from Ops.* +6.4% 4.5 2018 £bn 4.8 2019 £bn *2019 Adjusted and constant rate basis V 2018 adjusted and current rate basis. See Appendix A1-A2. Source: Company data Driven By: ● ● Improved Pricing Reduced discounting Strong brands Efficiency savings 2020 Estimates: ~5% Volume Decline Source: Internal Estimates 25#26US Vapour | Strong growth in Vuse value share Vuse value share +8.7 ppts Vuse Alto value share +12.7 ppts 12.5 2.7 Dec '18 Source: Retail value share data Dec 19 with growth v Dec 18. See Appendix A3. 21.2 15.4 Dec '19 V vuse 26#27Vapour | Great products driving growth Market leaders in ENA ePen3 reached 10.3% Value share; 2nd product of the year win for Vype with ePOD Vype is market leader in closed systems; fastest growing brand with 23.3% Value share Vype reached 17% share of total vapour consumers Source: Nielsen (FR: Strator). Value share in vapour segment based on scan in measured channels. See Appendix A3. BRITISH AMERICAN TOBACCO Building momentum in AMSSA ePOD driving Vype's value share recovery to 28.2% Twisp acquisition: National distribution, 70 dedicated stores and e-commerce 27#28THP | glo launches completed Q4 glo Pro - good initial results. Encouraging consumer response 910 ajo Boost function Induction heating Faster ramp up O glo glo Sens - work to do > Consumer interest in the hybrid category glo > Limited traction for our offer to date O BRITISH AMERICAN glo glo TOBACCO 28#29THP | Growing share of total nicotine in Japan Latest Total Nicotine volume share of 19.2% 15.9 Latest weekly share of glo of 5.2% Jan '18 16.8 Dec '18 18.9 19.2 +2.4 ppts Dec '19 Jan '20 Source: CVS BC Share data based on FY19 with growth v FY18. glo exit share is Jan 20. See Appendix A3. Russia (Moscow) >1% volume share of FMC+THP Kazakhstan (Nur-Sultan) BRITISH AMERICAN TOBACCO +1.5ppts 1.9% volume share +1.5 ppts 1.9% volume share (Kiev) Source: Share data based on Dec 19 with growth v Dec 18 +1.2 ppts Ukraine 1.5% volume share 29#30Modern Oral | Global leadership achieved Traditional Oral Markets Sweden Norway Denmark +1.8 ppts 3.2% volume share +5.2 ppts 14% volume share +75ppts 75% volume share Source: Modern oral FY volume share of total oral category data. SWE, NOR, DEN: Nielsen. SWITZ: scan data. New Modern Oral Markets Switzerland Russia Kenya Pakistan BRITISH AMERICAN TOBACCO +15.5ppts 41% volume share +27 ppts 27% volume share Encouraging early results from city tests 30 30#31Modern Oral | Growing share in a growing category in the US VELO 10.1% Volume share of Modern Oral > Over-indexing* share in key states > National distribution at >100k outlets › Top 5 Velo share in states approximating 13% of US total nicotine volumes > <6mg strength segment grew 6% to 34% of the Modern oral category Ĵ Top 5** Velo shares Ĵ Ĵ BRITISH AMERICAN TOBACCO Source: Company data. * Key states ranked in terms of total nicotine volume being: Texas, California & Florida. Velo share is growing at a higher rate than the National average growth. ** Velo volume share of Modern Oral by US state Jan 20 58.0% New Jersey 48.4% Maryland 33.8% Indiana 31.4% Georgia 28.7% Wisconsin 31#32Increasing investment and growing margin +50bps growth v FY18 42.6% 2018 Adjusted Operating Margin 3.9% Changes in underlying business +0.5% -3.0% Incremental New Categories investment impact -0.4% Impact of transactional FX BRITISH AMERICAN TOBACCO 43.1% 2019 Adjusted Operating Margin 32#33Strong cash generation driving de-leveraging Adj. Net Debt / Adj. EBITDA £bn 4.0x 43.4 1.8 Adj. Net Debt 2018 Free Cash Flow after Dividends @CONR USD rates Closing: 1.2736 -0.4x 0.4 Other cash & non cash @CONR 0.6 IFRS16 Adoption @CONR 3.6x +4.02% 42.6 Adj. Net Debt FY 2019 @ CONR -0.1x 0.9 FX 3.5x -0.5x 41.7 Adj. Net Debt FY 2019 @ CURR BRITISH AMERICAN USD rates Closing: 1.32475 TOBACCO 33#34Committed to de-lever to below 3.0x by end of 2021 Adj Net Debt*/Adj EBITDA** 4.0 x 2018 IIIII 3.5 X 2019 c.3.2 x 2020e <3.0 x 2021e 2020 Guidance FY Operating cash conversion target above 90% Dividend - 65% pay-out ratio / growth in GBP terms BRITISH AMERICAN TOBACCO *Adjusted Net Debt is total borrowings, including related derivatives, less cash and cash equivalents and current available-for-sale investments, excluding the impact of the revaluation of RAI acquired debt arising as part of the purchase price allocation process. **Adjusted EBITDA is not a measure defined by IFRS. Adjusted EBITDA is defined as profit for the year (earnings) before net finance costs, taxation on ordinary activities, share of post-tax results of associates and joint ventures, depreciation, amortisation, impairment costs and adjusting items. e Company guidance for FY20/21 34#35Continued High Single Figure earnings growth* +8.4%* *000 296.7 2018 FY 22.1 Adjusted Profit from Operations 2.6 Net Finance Costs 3.4 *FY18 Adjusted basis. FY19 Adjusted and constant rate basis. See Appendix A1-A2. Source: Company data +8.4% 1.0 Associates Taxation 0.7 Non- Controlling Interests 0.1 Number of Shares 321.6 BRITISH AMERICAN +9.1% 2.2 TOBACCO 323.8 2019 FY at FX Impact 2019 FY at Constant Current FX FX 35#36A strong year of delivery COMBUSTIBLE VALUE GROWTH STEP-CHANGE IN NEW CATEGORIES SIMPLIFY THE COMPANY BRITISH AMERICAN › Continued strong combustibles performance TOBACCO › Delivering earnings and dividend growth for shareholders › Good progress on our priority areas, with more to come › Capital Markets Day on March 18th 36#37H Q&A 71 27 February 2020 Jack Bowles Chief Executive Tadeu Marroco Finance Director LAKO LYFT BRITISH AMERICAN TOBACCO#38Appendix A1: Adjusting (Adj.) Adjusting items represent certain items which the Group considers distinctive based upon their size, nature or incidence. BRITISH AMERICAN TOBACCO A2: Constant currency 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. A3: Share metrics Volume share: The number of units bought by consumers of a specific brand or combination of brands, as a proportion of the total units bought by consumers in the industry, category or other sub-categorisation. Sub categories include, but are not limited to, the total nicotine category, modern oral, vapour, traditional oral or cigarette. Value share: The retail sales value of the product sold as a proportion of total retail sales value in that category. Premium share: The retail sales volume of the premium product sold as a proportion of total retail sales volume of premium products in that category. Nicotine share: The retail sales volume of the nicotine product sold as a proportion of total nicotine product volume in that category. A4: Price/Mix Price mix is a term used by management and investors to explain the movement in revenue between periods. Revenue is affected by the volume (how many units are sold) and the value (how much is each unit sold for). Price mix is used to explain the value component of the sales as the Group sells each unit for a value (price) but may also achieve a movement in revenue due to the relative proportions of higher value volume sold compared to lower value volume sold (mix). 38#39Top BAT Market Share Movements (1) Market Argentina Australia Bangladesh Belgium Brazil Bulgaria Canada Chile Colombia Czech Republic Denmark SOM FY19 (%) 23.3 41.5 68.4 24.8 75.8 37.8 48.7 97.4 52.3 21.9 71.6 Movement (ppt) 0.0 0.4 1.1 (0.5) (1.4) (1.8) 0.3 (0.1) 1.7 0.0 (0.5) Source: Retail Audit except for Bangladesh, Belgium, Canada, Indonesia and Japan Market France Germany Indonesia Italy Japan Kazakhstan KSA Malaysia Mexico Netherlands SOM FY19 (%) 17.4 20.0 7.9 18.9 17.9 15.9 36.8 54.4 35.0 22.5 Movement (ppt) 0.1 (0.4) (0.2) 0.2 1.7 (1.0) (2.0) (1.8) 1.0 (1.1) BRITISH AMERICAN TOBACCO#40Top BAT Market Share Movements (2) Market New Zealand Pakistan Poland Romania Russia South Africa South Korea SOM FY19 (%) 72.1 74.9 28.6 58.9 23.8 77.2 12.0 Movement (ppt) 0.4 1.6 0.3 0.2 0.4 (0.2) (0.4) Source: Retail Audit except for New Zealand, Switzerland and Vietnam Market Spain Switzerland Taiwan Turkey UK Ukraine Vietnam SOM FY19 (%) 11.9 35.0 10.0 22.9 9.3 28.1 28.0 Movement (ppt) 0.4 (0.5) 0.0 (0.1) (0.1) 0.4 0.9 BRITISH AMERICAN TOBACCO 40