Good morning, everyone. I'm Jack Bowles, Chief Executive, and with me this morning to present our full year 2019 results is Tadeu Marroco, our Group Finance Director. Before I start the presentation, I will take it that you have all seen and read the disclaimer on Page 2 and Page 3. As usual, at the end of the presentation, there will be an opportunity for you to ask questions. Last March, we set out three clear priorities to transform our business. I am pleased to say that we have made good progress over the last year. We delivered value growth from our combustible business, gaining share globally with enhanced profitability. We are driving a step change in New Categories by launching new products and entering new markets, providing potentially reduced risk products to close to 11 million consumers. Lastly, in September, we announced some important organizational changes, which are largely completed. We have removed a net of 2,300 roles and recruited an additional 350 managers across the organization, creating the capabilities and resources to continue investing in new categories. This marks a significant first step in the journey towards making BAT a stronger, simpler, faster organization better equipped for the future. And this is just the beginning of our journey. Our purpose is clear, we aim to build a better tomorrow by reducing the health impact of our business through offering a greater choice of enjoyable and less risky products. Our 2019 results reflected a strong operational performance across all our key financial and strategic objectives. As you will have seen from this morning's announcement, reported results were impacted by a number of adjusting items, the majority of which were noncash. To help you better understand the key drivers of the strong operational performance, we will focus on constant currency…

Thank you, Jack. As we said at the beginning of the presentation, in 2019, we have again delivered on our financial commitments and we have done this while continuing to invest significant additional resource in our future. Margin improvement of 50 basis points was delivered alongside an incremental £500 million market investment in new categories. Strong free cash flow after dividends of £1.9 billion exceeded our guidance of £1.5 billion. This underscores our ability to sustainably grow the dividend, maintain a 65% dividend payout ratio and simultaneously reduce our leverage by 0.4 times at constant rates. Total revenue grew 5.6%, ahead of our guidance range of 3.5%, driven by the strong performance in combustibles and our growth in New Categories. Profit growth of 6.6% was also at the top end of our guidance range, with growth in revenue and operating margin driven by strong performance across our markets. There was a good performance across the regions. In APME, total revenue grew by more than 5%, driven by good price/mix and growth in New Categories. Value share increased by 30 basis points, led by gains in Japan. Profit from operations grew nearly 8%, with strong growth in Japan and the Middle East alongside additional investments in New Categories. In AMSSA, revenue was up over 9% and value share increased 20 basis points, with a particularly strong performance in South Africa, returning to volume, revenue and profit growth with a reduction in illicit trade. Profit from operations grew 10%, driven by growth in Brazil, Canada, Chile, Nigeria and Mexico. In ENA, revenue grew 5%, driven by strong pricing across the region. Cigarette value share was marginally higher with strong performance from Romania, Ukraine and Russia. Profit from operations was up 3% with good results in Germany, Turkey, Romania and Poland, offset by…

Thank you very much, Tadeu. To sum up, the business is performing well. We are delivering on our financial commitments and another year of high single-figure constant currency earning growth, whilst at the same time, making significant additional investment for the future. We will continue to focus on our three core priorities to create a better tomorrow. We are transforming the company with the consumer as its center, building strong brands and delivering value from our combustible business, providing the resources to invest significantly behind a multi-category business. Looking ahead to 2020, we are confident of another good year of high single-figure earnings growth. Our confidence in the future of BAT is reflected in another increase in the dividend. Thank you, and I will now open up for questions. Yes?

Gaurav Jain from Barclays. I have a few questions which are all interlinked. So can you talk of the U.S. cigarette volume performance year-to-date? You mentioned that there is a supply constraint, which is now happening in e-cigarettes in the U.S. So is it happening for you as well as for competition? And if it persists, is there a benefit that might happen to U.S. cigarette volumes?

Sorry, we stop there and then we continue after, if you don't mind. Yes, I mean, related to the U.S. market. So of course, I'm not going to go further and beyond what we said earlier, but I think that we do not see any material difference between Q4 and the performance of the business in the beginning of the year. So I think that the U.S. market is coming out nicely of the crisis related to e-cigarettes. Of course, the growth that is happening at the moment did not recover fully what has happened in the second half of last year. But we see a good potential for the U.S. market. On your second question related to the supply disruption, first of all, we have to be cognizant of the fact that it's a terrible thing that is happening related to that coronavirus, and there is lots of dead persons. And we're doing all the support and we're giving all the support that we can to our teams first, but also to all the partners that we're working with, all the manufacturers that we're working with. Most of the factories are now open, yet we see here and there some attention in terms of supply chain and some limited out of stocks in retailers in some geographies. You just have to remember that I'm not going to comment on the potential out of stocks of competition. But as I said, we see some in different places. First of all, we have a very strong business worldwide. The weight of China in our all revenue base is extremely limited. And most, nearly all, our factory footprint on manufacturing for cigarettes is outside of the area of China. And we do not see, at the moment, any inflection point apart from duty-free, which, of course, is impacted by the reduction of number of travelers, but this is extremely marginal in our total business. So that was your first 2 questions. You had more?

Yes. So switching to Modern Oral in the U.S. So you have a 10 percentage share now after 6 months of, or 7 months of being in the market. And there will be the bigger competitor, which will enter the market later this year. So how do you assess success in that market?

Yes. I think what's very important to us is that we're present in 3 categories worldwide and we're growing share in these 3 categories. That's the starting point. So we are not only delivering growth in these 3 categories but also a very strong growth in combustible business. I think that, specifically to oral tobacco, as we said, we are the leader worldwide in terms of oral tobacco and even Scandinavia, that is, I would say, the starting ground of all these products, we are winning against all competition in terms of modern oral. In the U.S. specifically, we have very good performance with the Velo brand, and I said I'm very pleased with the results. We have no constraint in terms of supply. And as Tadeu explained earlier, we took the opportunity to learn on that category, as we do all the time, and we have now a distribution of more than 70% but an active distribution of around 15%. If you take the position that we have, for instance, where all the different categories are present in Georgia and also in Atlanta, we have close to 40% share in oral tobacco. So I think that we have the potential and the runway to continue to accelerate in terms of New Categories.

Nico Von Stackelberg from Liberum. I had a quick question on the dividend growth. My impression was, in a relatively bad year, the dividend would grow about 4%. So it grew a little bit below that. And I was just wondering, could you explain what the rationale was?

As was always, to deliver what we committed, a 65% payout ratio, that's exactly that 65% payout. We have, for sure, very diligence of cash, as you can imagine, and we are striving to deleverage the company. And we assess that it's a good remuneration in terms of the dividend, and we are sticking to the policy that we have set ourselves.

I guess, my second question. I'm curious about product applications in the U.S. and the PMTA...

What, sorry?

The product applications for PMTA. Could you give an overview of what your priorities are in terms of PMTA? Are there certain major categories that you see that you won't be PMTA-ing, for example, tobacco heating products, THP? Will that be lead PMTA product there? And yes, just generally speaking, could you talk about modern oral PMTA?

Yes. I think that our first priority lies on e-cigarette and oral tobacco. We said, repeatedly, we will do tobacco mint and other flavors and we'll select these ones. We want to make sure that we're strong in this environment. And in terms of THP, we already have a product that is in review with the FDA. What's the most important to us is the fact that from, the market that was extremely segmented or extremely atomized in terms of number of players and number of SKUs and open system, now you have in the U.S. a market where 60% of the sales are done in closed system, which plays to our strength. And the second thing is we see that there's a contestable space that is going to happen by consequence of the filtering of the FDA process of $1.5 billion, to which you will have most of the benefit that will come rather in '21 and most of it in '22. Why? Because it will take time to, for the FDA to process all the information that we'll receive. I remind you that we've already put some PMTA applications in the system in order to test the grounds more for the administrative side of it, and just these SKUs represent 150,000 documents and took more than 27 hours to download. So it's going to be a heavy process, and we're going to support the FDA as much as we can, and we are already in contact with the FDA to make sure that this goes as smoothly as possible.

And my final question is on the vapor opportunity in the U.S. for profitability. I mean, I can see how this becomes a profitable segment after PMTA, but could you give any sort of color from your side in terms of how you see the profitability of this category developing, say, on a 5-year view, please?

There are a number of levers that we can action to improve profitability in vapor. One of those is related to the product costs and the whole supply chain. And it's a constant topic for us to review what are the opportunities out there to improve and reduce the cost and improve gross margins. The second one is how can we improve our direct-to-consumer assets, and we're putting a lot of efforts in terms of e-commerce and be more able to reduce the trade margins that as a consequence of that. And there is already a trend, as I explained, in the closed system, which helps us. And for sure, PMTA will open up a contestable space around $1.5 billion. And we believe that we are very well positioned with the products that we have currently and the momentum is there. So I think that this all will play together because this will generate more scale and also revert in improved profitability.

I guess the question is, for my model, in five years from now, what should I be modeling, roughly speaking? Could you provide maybe a range on profitability for the segment?

£5 billion in New Categories. We have to take it step by step. The regulatory environment is evolving rapidly. The level of taxation in the different categories, the three categories, THP, you see that they are growing more and more towards full taxation on tobacco. You have that already in North Asia, you have that already in the U.S. In terms of e-cigarettes, there was a fragmentation of the market that was very important. And now we see that there's a concentration in closed system. There's more product so watch it, that will create a concentration. And as Tadeu said, the fact of having bigger brands, more economies of scale and distribution, that will cost you less because now that we have age verification competitors that has applied, then suddenly, I'm in agreement with our marketing colleagues to go for e-cigarettes into e-commerce. But we have to make sure that we understand, and it's not the time to give guidance related to these things, it's the time for us to take leadership in these different categories and to make sure that we have the right products on the right consumer. What is the most important to me is that because we have been multi-category since many years now, we have reinforced our capabilities. As I said, we've recruited 350 managers in all these areas of New Categories going from product development to design, to insights. We are the only one to have four categories in site that are available to us and have done pilots, market tests and launches that have been successful. Just from memory, ePen 3 and the equivalent of the Alto in Europe is product of the year. That means that the reception from the consumer is extremely good. From that base, we grow share in these three categories and we'll continue to do so.

And final question for me, please. On -- when I look at the large gap between adjusted and reported profits, obviously, a lot of these one-offs are -- they're genuinely one-off in nature, and I appreciate that you've quantified them, which is quite useful, so thank you for that. But I guess the question is, for the year ahead and maybe for the couple of years ahead, could you provide us any sort of color on what the sort of like gap maybe? Or what is the restructuring charge you may foresee? Just generally, if you could explain your thinking on that going forward.

Yes. I think it's important to see on the restructuring. We are increasing from 2018, mainly as a consequence of the project Quantum in the restructuring side. The element of that is just being on the restructuring side. Other than that, the vast majority, like you said, is noncash item and that is difficult to predict. And we -- one of the biggest ticket item there was related to the charge in respect of Québec case, like we have disclosed already in the half year. In terms of cash flow, in 2019, we saw a slight decline in terms of adjusting items compared with the year before. And although we have bigger ticket items to cover in 2020, which is the Quantum itself plus tax case in Russia, we have already been working, and we are not expect to have, to be a bigger trend in terms of cash for next year, given the other actions that we are making. From then, if we have to continue with Quantum, which is a restructuring progress. But it's difficult to estimate the overall adjusting item for there are elements there that are, like you said, very one-off. Yes, San.

Sanath from Morgan Stanley. I have 3 questions, largely on the U.S. market. First of all, you shared your views about the U.S. cigarette volumes for 2020, where you expect it to be, about 5%. Could you just help us understand how you're thinking about the drag or the reduced drag from vaping and the impact of Tobacco 21 on your numbers. And maybe just...

Can I start on that one? Then we go to the other question. So the 2021, it's a very good question. Thank you very much for asking. There, you have already 15 states in the U.S. that are above 21 years old, and we saw that the impact was very minimal. But for a responsible company like us, it's a very good regulation coming forward. Then the second thing is you have to remember that in the U.S., we have a share above 21 years old of 44% annual [indiscernible] so we are better positioned than our current total market share in the U.S. So that was for your first question. Then your second question?

So basically, also from a longer-term perspective, you always said historically that you're adding consumers of nicotine, too. How do you see that evolving in the U.S.? Or have you seen it in 2020 or 2019? And going forward, post '21, Tobacco 21 post-PMTA, how do you see this consumer acquisition going forward?

Yes. I mean, without going too much into detail because that's forward-looking, but what we saw in 2019, with the crisis in terms of e-cigarettes, is that it was not that consumers from e-cigarettes were rushing back to cigarettes, but rather consumers from combustible were less going to e-cigarettes because they had the doubt in terms of the product. I think that the regulatory framework that's been put in by the FDA is a valid one. It's a first step, a very big first step in the right direction and there might be more to come.

And so one of your competitors put out a comment at CAGNY saying by the end of this decade, probably, they'll end up being equal-sized revenues in NGP and combustible in the U.S. Do you feel very strongly about that? Or how do you see the evolution of that market there?

I think I've been very clear at the beginning of my presentation for the first time in terms of our purpose, and I take you back to that one. What's important is we believe, we strongly believe in the quality of our tobacco business, and we strongly believe that you have to have, at the same time, a strong arm in New Categories. We have 3 categories that are important because we don't believe that one size fits all. We do believe that the consumers are having some aspirations in terms of risk-reduced products and that, depending on geographies, depending on culture, depending on excise environment and depending on regulatory environment, you need multiple approaches. Of course, it takes a lot of energy, a lot of resources in order to cope with that. But I think it gives us a head start on all competition across the industry in terms of being successful for the future. And that's why I reiterate, despite the crisis and the scale measures that have happened last year and this year, that we will achieve the £5 billion moving forward as an ambition.

And then I'm cheekily just asking last one. On the leverage you highlighted, you'll be below 3 turns by 2021. Is there a target internally in terms of where you would like to be? Or what's the optimum rate you would like to have?

No, it's a very good question. I'm not going to give a target related to that. What I'm saying is one of the main reasons why we reduced guidance this year, the number of guidance, that we say 3% to 5% in terms of revenue, high single-digit in terms of EPS, the 65% in terms of dividend and the deleveraging is because I want to have a little bit more space to be able to take the opportunities in the market whilst continuing to deliver on the financial metrics of the company and we'll continue to do so. The first year last year, we had a situation that was more difficult. We gave more guidance. I think it's more reasonable now to be in a situation where we have a little bit more space in order to make the right calls for the business and to invest. I'll just remind you that in 2019, we are delivering the financial results, and at the same time, we invested £500 million more in terms of marketing investments, £500 million more. And I will continue to invest in the New Categories at the right pace in order to make sure that our multi-category approach is the right one and it is showing the right approach from the consumers. Thank you. Adam, yes? Sorry, Adam.

Can, as always, can I ask you sort of 3 questions?

Go one by one because they're always very sharp, your questions, I want to make sure.

The first question, can you talk about the, in Japan, you've been very successful in the little cigar category.

Sorry, in the?

With little cigars. This new...

Oh, yes, yes, yes.

Can you talk about how you don't see, well, then, more importantly, how you expect that going forward? That's the first question.

Okay. So let's start with that one. Thank you, Adam. I think that there was, there was a historical thing that was there in Japan, which was, first, low taxation for some cigarette products, normal cigarette products. And that has been closed and it will be closed gradually by the government in Japan. The second thing is there was that opportunity related to these, I would say, mini cigars, it goes in a way but more in the sense of cigarettes and we took that opportunity because, to the difference of other players, we consider that the combustible business is extremely important. And that's why when we speak about our results in Japan, we say 19.1 a share in terms of total nicotine offer on the market. That category, the same way as the lower taxation that has happened historically in Japan, will close and it goes around. That gives us, and it has given us the possibility to continue to grow in that category. I think it was a very useful step towards having a better value share and a better market share in Japan. Did that answer your question, Adam?

I think so, very clearly. Next question, probably the most important question is trade, well, I'll start with another one. In menthol regulation by state...

In menthol regulation by state, are you talking about the U.S.?

Yes. So talking about the U.S., we're now seeing more states at least threatening to ban menthol. How concerned should we be about that?

I think there are 2 things. One is, it's a very good question. One is the fact that the FDA, after so many years, is still allowing menthol in cigarettes and also still allowing menthol in e-cigarettes. And that is extremely recent, so there is no new science related to that. At state level or city level, some decide to ban menthol. Okay, what's happening is that the U.S. is 50 states and the borders are what they are in the U.S. So you see a, I would say, potential acceleration of cross borders. And I don't think that this is going to be something that is extremely sustainable in the future. But I understand why cities or states are taking the view. Are we for it? The answer is no, because we believe in consumer choice, and there is no material scientific evidence that has said that there is a problem related to menthol. Did that answer your question, Adam?

I think so, yes. So the third question, more general. You've spoken before about creating a better process for innovation and a better -- and perhaps more sharp commercial execution around the next-generation products. So can you just talk about how the process of developing new products, how the process is improving? Has any change happened in the last 12 months? How do you expect that to change...

Yes. For sure. I mean, what we have done is we've put a lot of investment in terms of insight. The area also where we've accelerated quite sharply is everything that's related to big data. And the social listening is also a part that is very important. Now further and beyond that, on the definition -- that's about the consumer. Further -- and remember, we're the only ones to have data and information and insight on four categories. Yes? Further and beyond that, what's very important for us is the four Ds of R&D were split in the company before, now they're all in the same place. So there is one body, which is the new category group that is looking at all this, with strong support from IDT, so digital and technology. I think that what it gives us is the possibility to work much better and to understand much better the consumer needs. I think that one of which that is maybe the most important one is the satisfaction that consumers get out of these products. And you know that in THP, for instance, there is 25% of segment share of total nicotine in Japan, and that's the only country in the world. You know that in Korea, it has peaked at a point and it has reduced now to 8% despite players that are there, which includes the local strong company. We know that in Europe, there is only traction in a very limited number of countries. We know that the more you go into the scale of tar and nic, if you go to Canada, for instance, despite the fact that THP has been there three years earlier than e-cigarette, e-cigarette is now much bigger than THP. We know that in the U.S., but that's only the -- in this infancy, we'll see how it will develop. And I'm not undermining the possibility of THP that can grow in the U.S., but the environment does not seem very, I would say, favorable in the sense that you have two other categories that are extremely well-established already. And when we see that two other categories are well established, it's very difficult for the third category to grow. So I think that what we've done in terms of our R&D and our understanding of the consumer has been massively stepped up and we've invested much more money in the course of 2019 in order to make sure that we deliver related to that.

And just to follow up on that, should we expect the same vapor to see important new products? And how, when are we going to see some results of a better process?

Yes. I think, I don't want to go, it's a very good question, Adam. I don't want to go in product definition because then I would give away too much. But yes, the reality is you have now the segment, we're a leader worldwide. You look at the segment itself, the number or the percentage of closed system is there, increasing and very strong. It has a very, very important consequence, which is the regulatory framework and the product stewardship. You have a device that goes with the liquid that goes with the system. This is the future moving forward. After that, you have to make sure that you continue to develop these products. And the products that we have at the moment in the market will evolve in the next 2, 3, 4 years because there are a lot of cost opportunities and improvement opportunities in terms of satisfaction moving forward. Other questions? That would be potentially the last question or last 2 questions from what Mike is telling me from the back.

It's Chas Manso from SocGen. A couple of few, if I may. I'll take one at a time. First of all, a quick one.

I'm French, so you have to go slow.

In Canada, has there been any progress in the discussions? And is it possible to break out what the profitability of Canada was in...

CCAA, CCAA?

Yes.

Yes.

Has there been any progress in terms of forming a resolution?

Yes, we have, the industry is in the process of negotiation through a mediator that was established with the plaintiffs in the, not just in the Ontario but all provinces. We, the latest news we heard is that there was this stay of all the process, it was extended until September. And we are confident that we can be able to come up with a negotiation that represent a growing concern for all the players moving forward. But I cannot say much more about that because it's quite confidential in the process now.

Is there any sort of, you mentioned the extension until September. Is that there for the beginning of the process? Or is there a time frame for a potential resolution?

No, it's just the fact that they have a stay in place, trying to come to a type of agreement. But to be honest, I don't expect anything happening in the short term. I mean, end of the year, eventually a couple of years.

Okay. Secondly, going back to aged tobacco. Clearly, your focus seems to be on Eastern Europe. So just to be clear, in 2020, when the, your investment outside of Japan in tobacco is going to be very much focused on Russia, Kazakhstan, Ukraine.

Yes, I mean, we're going to expand our footprint for the 3 different categories, and we're going to make sure that we're so successful where we're going. I think we'll go step by step. And as I said earlier to the question of Adam, what's extremely important, and so I like the question, what's extremely important is that we have created, in 2018 and 2019, the capabilities and the resources, put in place the resources, so that we are able to continue to grow. Even with the THP and oral, you remember I said last year, we are using our current tobacco machines to do our THP products because I don't want to be in a situation whereby I'm ending up with the CapEx exposure that is much too high compared to the regulatory framework. So I think that Tadeu said very clearly that the CapEx will be in line with depreciation. First year in many years that we are able to do that in 2020, and that's a very good news related to that. So our geographical footprint will continue to expand but we'll speak more about that at the Investor Day.

And lastly, on the sort of regulatory front and such. Is there any sign that people like, organizations like the WHO are moving much more towards the sort of harm reduction view of the world? Or do we remain stuck in a sort of differential world where, in particular, transnational organization still believe in quit or die?

Yes. I think what you have to do, it's a very good question. I think what you have to do is to follow the consumer first. And the consumers are buying the products that we're selling. We have very good products you want ship on these products, and we'll continue to do so. Secondly, we have a very responsible marketing approach to all the activities that we do. Why? Because that is about the sustainability of the group moving forward. And the third thing that is also very important is that we will go step-by-step in the development of these products, and we engage with regulators as required, both the FDA or other bodies across the geographies in which we operate, in order to have the right scientific base that is put forward to them and the right benefit of these categories that is put to them. Okay. Last one? No. So thank you very much. I mean, I must say, as you know, it's my first year as CEO, and before that, I was COO so I know this company very well. I know the muscle that this company has. We have done a lot of restructuring in our business to become faster, simpler and more agile. We're doing it. We're doing it in short terms of time. Why? Because I want to transform this company fast. We have created the foundations in 2018 and 2019 to have a strong base on our tobacco business, very strong base on our tobacco business with huge revenue growth and with value share growth, and we are taking the resources from there in order to grow our New Categories. We have invested £500 million more in 2019 in the New Categories. We grew share in the 3 categories. We have delivered within…

Thank you very much.