Hello, and welcome to the British American Tobacco 2020 Full Year Preclose Trading Update. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded. And for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions.
I would now like to hand the call over to your host, Mike Nightingale, Head of Investor Relations, to begin today's conference. Thank you.
Thank you, Molly. Good morning, everyone. I'm Mike Nightingale, Head of Investor Relations. And with me this morning is Thadeau Morocco, our Finance Director. Welcome to our full year 2020 pre closed conference call.
Just before we begin, I need to draw your attention to the cautionary statements regarding forward looking statements contained in the trading update. I will now hand over to Thade, who will say a few short words on the current trading before we open up to questions. Unless otherwise stated, our comments will focus on constant currency adjusted measures. Over to you, Stefan.
Thank you, Mike. Good morning, everyone, and welcome. Thank you for joining us this morning. In 2020, we are transforming BAT and continuing to grow the business against the challenging global backdrop caused by COVID. Throughout the year, our priority has been the health and well-being of our employees.
We have made no redundancy or follows as a result of the crisis and we have continued to pay all our employees in full. It is the commitment and dedication of our people around the world that has ensured that we are on track to deliver a strong set of results in 2020. We are committed to building a better tomorrow, delivered by our continued focus on the 3 strategic priorities: reducing the health impact of our business through providing a range of enjoyable and less risky products is the greatest contribution we can make to society. We continue to be clear that combustible cigarettes pose serious health risks and the only way to avoid this is to not start or to quit. VAT encourages those who would otherwise continue to smoke to switch completely to scientifically substantiated reduced risk alternatives.
We are continuing to increase investments and to drive a step change in new categories. We are very proud to now have around 30,000,000 consumers in non combustible products. We are growing value sharing vapor, volume sharing THP and delivering strong revenue growth in modern auto. Our new category revenue performance is accelerating in the second half despite a strong prior period comparator. We are continuing to drive value in our combustible business and are on track to deliver savings of at least BRL300 1,000,000 from Quanto.
In addition, the radical transformation of the organization and increased agility brought about by new ways of working have enabled us to quickly and effectively adapt to navigate the challenge caused by COVID. The business is performing strongly against an environment which remains uncertain due to the global pandemic. We are on track to deliver on our 2020 guidance. Cigarette and THP volume has improved over the second half, driven by continued resilience in the developed markets and some improvements in emerging markets such as Brazil, Bangladesh and Turkey. We expect to outperform industry volume, which we now expect to be down around 5% decline with U.
S. Industry volume broadly flat. Given this continued strong pricing and the reduced full year revenue headwind for COVI of around minus 2.5 percent, we now expect to deliver revenue growth at the top end of the 1% to 3% guidance range. In this improving trade environment and thanks to our strong cash generation and tight cost management, we have taken the opportunity to further increase new category investments in the second half by close to £200,000,000 This represents a total additional new category investments of around £450,000,000 in 2020. We continue to expect to deliver mid single figure constant currency adjusted diluted EPS growth.
This is despite the further increase in new category investments, absorption of a one off impact of new category revenue of $50,000,000 following our decision to withdraw GlowSense from the Japanese markets, the effect of a strong prior period comparator and associate income from ITC that is significantly negatively impacted by COVID. We expect a translation headwind of 3.3% on full year 2020 adjusted diluted EPS, with the impact expect to be between 2% to 3% for the full year 2021 applying current foreign exchange spot rates. Turning now to trading in the new categories. In vapor, Vuz Vipe is fastest growing international vapor brand, growing value share of its top 5 markets by over 7% points to 26% year to date. The brand has now achieved value share leadership in closed systems in 4 of the 5 largest vapor markets, exceeding 50% value share in 2 of them.
Vios Vipe is number 1 in device sales in all top 5 markets with device volume share in excess of 50%. In the U. S, VEUS is the fastest growing brand with 24% value share of total vapor year to date, driven by auto at 19%. Vieus continues to close the gap leader and has achieved value share leadership in 7 states. Vyuz also took market leadership in Canada in August, having commenced the brand migration from Vybe in May.
Canada is the 1st market within the top 5 to migrate to Vuys and achieved a 100% retention rate. Market share for Vues at the end of October reached 64%, driven by the success of ePort. Migration to Vuz in the remaining top 5 markets will be completed during 2021. In THP, the continued success of Hyper was reflected in Globe reaching record total nicotine volume share in Japan of nearly 6% in October, with Hyper reaching 2.3% nicotine share. Hyper has maintained a conversion rate in excess of 50 percent, two times higher than any previous Glow product.
Glow continues to grow volume share in NENA with a THP category share of around 15% across the top 8 markets. In Moscow, Hyper drove gross volume share of total nicotine to a record 3.3% in October and was the top performing THP brand across all tracked social performance metrics. We expect growth of close to 20% in THP volume in 2020, reflective of the successful launch of Hyper in Japan in April and its subsequent rollouts into key cities in Imele. THP revenue is expected to be down mainly due to the year on year impact of the withdrawal of SENSE and excise amortization in Japan. In Mona Nora, we continue to grow strongly and to consolidate our leadership position outside the U.
S. In the U. S, in November, we announced the acquisition of DRIFT. The acquisition significantly strengthens our position, expanding our portfolio from 4 to 28 nicotine strengths and flavors. It also enable us to participate in the segment above 6 milligram nicotine, which represents 6% of the category.
The modern oral category in the U. S. Has benefited mostly from geographic expansion by all the key market participants and currently represents around 1% of the U. S. Nicotine market.
VILO branded DRIFT products have now been launched online and into distribution in Circle K stores in the U. S. We expect to expand the distribution of the DRIP products from 20,000 to around 100,000 outlets by the end of the first half. We are of 2021. We are building capacity and expect to be unconstrained around mid-twenty 21.
In EMEA, we are consolidating our clear leadership position with share growth in all key markets. We are achieving conversion rates from dry to regular users of over 50% and have higher average daily pouch consumption than the category average. In summary, we are entering 2021 with good momentum across all three new categories, with some exciting new launches planned. In Vapor, we are launching a Bluetooth enabled version of Vuz, providing electronic age verification. The product will be launched in Canada as a pilot market in the first half of twenty twenty one.
Our ViuS Auto PMTA submission in September also included age verification technology. Also in early 2021, in line with our ambitions explore and to broaden our portfolio beyond nicotine, we are planning a CT test of a CBD vaping product in the U. K. And in modern oral, to better meet consumer needs, we are leading with the launch of the first mini pouches with a recyclable can in Sweden, Norway, Slovakia and Switzerland. We plan to expand to at least 10 markets by Q1 2021.
We also aim to make all our modern oral cans outside the U. S. Recyclable in the first half of twenty twenty one. We will continue to lead innovation in our multi category approach. Moving to driving value from combustibles.
Our excellent performance is underpinned by resilient industry volumes, particularly in developed markets, with BAT outperforming the industry. Continued strong pricemix drove global value share and sub-twenty basis points and our strategic brands value share up 40 basis points. The U. S. Business continues to perform strongly with an excellent performance from Vuz and good price in combustibles.
Corporate value share is up 40 bps and premium share is up 50 bps year to date. This is driven by Natural America Spirits and Newport. We are growing share in the Branded Value segment and to date we have seen no accelerated down trading. Moving to the balance sheet, We maintain our strong liquidity profile following recent successful debt issuances. We remain committed to our targets to reduce adjusted net debt to adjusted EBITDA to around 3x by end 2021 and maintain our 65% dividend payout ratio.
This will be achieved through continued strong operational cash conversion in excess of 90 percent of adjusted profit from operations. Turning now to ESG, which is central to our strategy. I'm pleased to report that we have recently received further external recognition, building on our BBB MSCI rating and the recent improvement on our Sustainalytics score from 28.2 to 27.8. BET has again been named in the Dow Jones Sustainability Index for the 19th consecutive year and is the only tobacco company to be included in the JSI World Index. BAT has been included in the Financial Times Diversity Leaders List for a 2nd consecutive year with our score increasing from 7.08 to 7.23.
We have also been included in the A List by the Carbon Disclosure Project, CDP, for climate change action for the 2nd year in a row. Finally, tomorrow, we are launching a sustainability focused report on human rights, the first by any company in the tobacco industry. In conclusion, the business is performing strongly during this challenging circumstance, and we are on track to deliver on our guidance. We are investing, delivering and transforming the business, thanks to our continued focus on our 3 strategic priorities. We are growing share in new categories driven by innovation and increasing investments, supported by continued value growth in combustible and the benefits of Project Quantum.
This enabled us to both deliver on our financial commitments and become a faster, simpler, more agile business. In summary, we are delivering on our 3 strategic priorities. We now have around 30,000,000 consumers in non combustible. We are investing additional 450,000,000 in new categories and continue to deleverage the company. We are committed to our A Better Tomorrow purpose.
Thank you. I will now open the call to questions.
The next question comes from the line of John Leinsburg calling from Societe Generale. Please go ahead.
Good morning, gentlemen. Hi, John.
Hi. Yes, no, few questions, if I may. First question is on Glow in Japan. I think at the interim results, you said your exit rate in June was sort of 5.9%. And then you say here
it's good to hit a
sort of high in October, 5.9% with hyper having risen from 1.3% to 2.3%. I mean, does that imply that hyper is just cannibalizing existing Glow? And why is the market share why is the total share of Glow not really risen in a segment that has clearly risen within the total market? That would be my first question.
Okay. John, look, the point, the reading in the middle of the year was one ad hoc reading, weekly reading that we quoted at that time of 5.9. And this one now in October is a more robust reading throughout the end of the month. We are clearly growing as a family. There is some cannibalization, but our total category market share is growing as well in Japan.
We're now slightly above the 20% mark and we were below that by the mid of the year. So there is clearly a growth expansion on the whole GLOW family and the GLOW hyper is outperforming within that.
Okay. And secondly, I think you mentioned that you don't expect to be capacity constrained in U. S. Modern oral by the middle of 2021. Can you give us some idea of what that capacity would be?
Well, we have a rather very well established capacity in our current SKUs. And as part of the drift position, we are also inheriting a 3rd part supply capacity for the current drift volumes and we are bringing machine from an also to reinforce our capacity in the U. S. So, what we mean to be unconstrained is basically a combination of all those 3 eventually move some capacity from the current one to the drift format, but also being able to reach at least EUR 60,000,000 by mid of next year, which we believe that will be a good capacity to fulfill our plans and go above that in the subsequent period.
Thanks. And lastly, if I may, obviously, South Africa was rather bizarrely shut for a long time. Now it's reopened. Has the market moved back to the legal market? Or is there still significant problems with illicit trade?
Well, the South Africa market, we have to consider that before the crisis, the government was doing massive inroads in illicit. In 2019, for the first time in many, many years, we saw a reduction on the illicit trade given the enforcement of the new government that has been assuming power at that time. And clearly for the first time BAT in many, many years was growing volume, was growing turnover, was growing share, growing profit. And all of a sudden this came to a halt in the end of Q1 this year. So the leases at that time has been dropped back to the likes of 52%.
And then you have this extended period of time without being able to sell any cigarettes, the illicit dominate the market. New networks were established as a consequence of that. And now the level of elasticity is higher than was before as you would expect. It could take some time for these networks to be disassembled again and the government to be refocused on what they have done before. So as we speak today, we saw an increase in listed rates from the likes of 52% before to close to 60%.
And the government now needs to go back and do what they have done before the pandemic, which is a clear demonstration that when we have the willingness, there are ways to tackle that. And we'll be supporting for sure.
Okay. Well, thank you very much.
The next question comes from the line of Gaurav Jain calling from Barclays. Please go ahead.
Good morning, Tayo. Thank you for taking my questions. Thank you. Number 1 is, would you be can you share your initial thoughts on FY 2021 volume outlook, especially in the U. S?
Well, Garif, 2021, you know that today is still very volatile for us to make predictions. We have a new government in the U. S. There are now discussions about fiscal stimulus. The COVID crisis is nowhere near the end.
We have a bright light at the end of the tunnel, but it's still a long month to go in terms of the vaccine, but it's still a long month to go to be the vaccine should be rolled out. And it's very difficult to at this point in time to have a firm prediction about the volumes. The fact is that 2020, we saw as you saw in our statements, a very solid U. S. Market.
It's a number of factors impacting in a favorable way the U. S. Market, but it's very early to call. We expect to do a more firm view on the U. S.
Market by our year end results in February.
Thank you. My next question is, you have 2 long term objectives. 1 is high single digit EPS growth and the second is new category revenue of $5,000,000,000 by 2025. That would imply that annual new category revenue growth would be like GBP 700,000,000 per annum versus GBP 200,000,000
GBP 300,000,000 growth
that we have seen in the last year, 2, 3 years. It doesn't require a significant step up in SCR growth rate and investment. And again, the question I'm trying to ask is that, are these 2 goals incompatible with each other?
No, I don't think that they are. We clearly have prepared the company to allow us to continue to generating the savings that we need. That's why we launched Project Quantum. We also have a very strong combustible business, as you know. And these both factors will be generating the funds necessary to fulfill the growth of new categories.
You have to take into considerations that 2020 is a very particular year. We had, for example, a number of headwinds in 2020 new categories that materialize. The core impact on supply chain in the Q1 as a consequence of the shutdown in China like we spoke in the half year results. The closure of shops in China and Japan happened again in the 2nd lockdown in Europe. In marketing activation disruption, we have the modern auto ban in Russia at the end of '19, beginning of this year that we had to lap.
And we had also the impact of GlowSense that we quote about. So there were a number of factories, the vapor industry is still recovering from the Vale price in the U. S. And also the new legislation that FDA had beginning of the year. So I think that we cannot read much through the numbers in absolute terms in 2020 in terms of NTO.
But the most important thing is just to understand and to recognize the momentum that we have in all those categories. As we quote before, we are growing share in every single of those categories. In vapor, we are really leading 4 out of the 5 top markets and making big growth in the U. S. In modern Oro, it's just solidifying our leadership outside the U.
S. In the U. S. Now with Drift, we have a much more competitive offers to consumers. And in THP, we are getting close to 20% volume growth despite the headwind of GlowSense.
So I think that this gives us the reassurance that we'll be able to achieve our €5,000,000,000 target by 2025 And at the same time, continue delivering our financial algorithm as soon as the pandemic is over.
Sure. Thank you.
And my last question is just on share repurchases, like you're issuing that it may be like 2%, 3% cost of debt and your equity free cash flow yield is north of 10%. The leverage once we adjust for the associates, I mean it's not really 3.2x, the economic leverage is much lower. So why not start buying back the stock today?
Well, look, this the capital allocation is a subject that we'll be reviewing on a constant basis. We believe that the best thing we can do for the next year is to strengthen our balance sheet. We have done a very good exercise recently in terms of liability management that changed the shape of profile of the debt moving forward quite nicely like we point out in the announcement. We believe that the best way to remunerate our shareholders at this point in time is to keep the dividends as it is. It's part of the DNA of the company.
And we also want to continue investing in our M and A business and new categories business through eventually some M and As like we just did with Drift in the U. S. So by the time we get to the end of 2021 and we have reached there around 3 times leverage, we'll be reviewing again the capital allocation. And if the circumstance persists as it is today, because I agree with you about the undervalue of the company, we'll be reconsidered all those points again by them, okay?
Thanks a lot.
The next question comes from the line of Alicia Forry calling from Investec. Please go ahead.
Hi, good morning, Taejoo. My first question is on the guidance. The global volumes look to have been about 2% better than you're previously expecting and that's with a skew to higher price mix developed market. So I'm surprised that the top line guidance was not raised by more than the roughly 1% you've indicated. So I appreciate you've touched on a few factors holding back revenue growth this year, but could you perhaps keep a bit more specific on which factors have primarily held back?
Yes, sure, Adi. Look, like we articulated a bit in the half year, there are 3 major drags for BAT this year. The first one is the global travel retailer. Although the volume is not that much material, there is a massive value intrinsic to those volumes and the business, if anything, was completely decimated. The second one is South Africa is a big market for us in terms of because we are leaders and we couldn't sell one stick of cigarettes since end of April until in the second half of August.
So it was a big blow in terms of revenue and weakness that we saw many emerging markets. There are a lot of disruption, many that happened in the first half of the year, the likes of Mexico, the likes of Pakistan and Sri Lanka, markets where stick sales are predominant. And this was a big drag that was difficult to recover. We had some upsides like you referred to. The developed markets clearly outperformed in this crisis and our performance in the U.
S. In particular as well was very beneficial. But this all nets to this 2.5% impact that we are quoting in terms of turnover. And so that's why it lies behind the numbers.
Okay. Thank you. My second the space. Can you characterize the competitive landscape that you're seeing there? And has there been any change in competitive dynamics there, in particular with regard to price mix?
Yes. Look, the yes, you said it's a very fast growing segment, although it's still 1% of the U. S. Nicotine pool. And it's important to quote that because we have to put things into perspective.
We if you look from the other more developed traditional oral markets, the likes of Norway, for example, Modernaural is now reaching 20% of the a bit more of 20% of the market. And in Sweden, for example, is something like 8 percent. We had similar to the West that's closer to that's 10%. It's a very competitive category like we refer to. We have players investing with new products.
And we in our case in particular, we were not able to compete freely across the whole scope of the category because we were limited with the offers that we had in place. So we are testing. And in and in order to be able to roll out the rest of the country from beginning of next year onwards. I think that we will see how this pans out. And we are very optimistic in terms of the possibility to extend our range of offers from 4 SKUs to 28, as you can imagine, and be able to compete in a segment of above 6 milligrams that we were not before.
So we have to see and I think that is a bit early to make predictions in terms of price mix. I think at the moment is all players are trying to compete, trying to increase distribution and more important now is to have the right marketing mix in place.
Thank you. And if I could just ask a final one. Can you update on anything that you're seeing in the U. S. Market with respect to various local menthol bans?
What impact, if any, are you seeing on consumer behavior in those areas where there has been local menthol bans?
Well, where they have been, in reality, we haven't seen much impact because at the end of the day, the consumer end up circumvent that and buying in other geographies, close buys or buy by commerce if possible. So there are there was no really implications in terms of sales. And we still believe that the FDA is the body that is the one responsible to make this type of calls. And we and in seeing in the priority list of the FDA, we are not expecting to see either menthol ban or nicotine control enforcement anytime soon. In reality, we are seeing, for example, based on the latest youth research incidents in terms of use of menthol in cigarettes and vaping, that was a remarkable reduction from the compared with the previous year, which just takes the pressure off.
And another point that I would like to make around that is that as time pass by and you start having examples of mental ban outside the U. S, you can use this as a kind of reference for the future. And we just saw this year, for example, the introduction of mental ban in Turkey in January this year and as you know in May in Europe. And both of these counts in Turkey, the level of retention was even higher than 100%. In our case, we gained our market share because we had a differentiated product in Turkey with a differentiated format and differentiated filter.
In Europe, we had also make a retention above 100%, because we were present in the new category space. And we saw that out of the cigarettes, we had a retention of 91%, some 2%, 3% decide to quit completely the category. And the balance decide to move to new categories where 7% move to vapor, where like we just spoke about, we were very strong. As a consequence of that, in terms of nicotine retention, we were more than 100% than we were before the mental ban. And if you now make an analogy of those circumstances back to the U.
S, you'll see that Newport, which our largest mental brand in the U. S, is the one that has a 70% of the franchise in a differentiated format with 100 millimeters length that cannot be copied. As you know, the FDA has frozen all specification of cigarettes since 2007, so you cannot launch new SKUs in the market. And it has also the lowest level of methylation in the market. And we are present and making big inroads in the new categories.
So I think that in future, if we see a mental brand coming in the U. S, we'll be well prepared and those facts already happening outside the U. S. Is a clear indication for that.
Your next question comes from the line of Samat Suttasam calling from Morgan Stanley. Please go ahead.
Hello. Good morning, all. A quick question on the level of investment. You've done a very good job recruiting more consumers this year. But the levels keep higher.
How should we think about what seems to be the right level of overall in this category going forward? I'm particularly interested about you still maintaining the $5,000,000,000 revenue ambition by 2025. But what should it mean in terms of profits for the shareholders? And then secondly, could you just briefly touch upon how your MLP market base is shaping up post all the restrictions? Are they are you seeing down trading?
Are you seeing brand migration? Are you seeing more coming away from the illicit market? Could you just give us more general view emerging market consumer, please? Thank you.
Okay. So there's a lot of questions. So Sanath, let me try to address them. Look, we have yes, we are very pleased with the performance on the non combustible consumers base. We have EUR 30,000,000.
It's almost 30% more than a year ago. As you know, we have the ambition to reach EUR 50,000,000 by 2,030 that we set out in our revised strategy back in the same day March. And it's important that to recognize that today there are already more than 80,000,000 of those non combustible consumers out there. And we have 30,000,000 out there. So there is already today a massive contestable space for us to go after.
And this is what means that gives the confidence that we are able to achieve the €5,000,000,000 by 2025 because given the strength of our portfolio of in the new categories and the contestable space that already is there today. And if anything, we'll continue increasing over time, will give us all the indications that we are able to achieve that and start accelerating our growth from next year. In terms of profit for shareholders, I do believe that we have done the we have invested a lot in the new categories in the 1st years in building the necessary capabilities to be successful, the likes of IPs, designs, digital innovations and so on and so forth. More recently, we have resource allocated this level of investments to more consumer facing type of investments. And we think that we have the right level.
It's a consequence now of year after year. It's a consequence now to see the revenue growing faster. And in reality, we expect that we have reached the peak in terms of losses in our P and L in new categories in 2020, which means that for 2021 onwards, the new categories we expect to be more EPS accretive. And this together with our cost agenda that we articulated at midyear in terms of the quarter and the full year last year, We expect to generate the 2 levers necessary for us to continue delivering our financial algorithm while transforming the business. Now in terms of your emerging markets, as it is today, it's a bit of a mixed some basket case here in terms of mix is a mixed case because we have countries like Brazil, for example, perform extremely well.
We are seeing double digit volume growth in Brazil this year as a consequence of interruption of illicit flow from Paraguay. Remember that a lot of those emerging markets has been impacted by illicit and illicit if anything is still grow, It's growing slightly lower this year, but it's still above the previous year. The likes of Pakistan, for example, is growing. The likes of Indonesia now more recently because of the exercise and so on. So we have markets where we can control at least, let's say, Brazil is a typical example, performing extremely well.
And where you cannot like South Africa was an extreme example, still with a lot work to do in terms of recovering that space that we lost. So I think that's at the end of the day, it's at the end of the day, it's a very mixed picture out there. And but overall, we are seeing some spots of good performance. We quoted Turkey, we talked Bangladesh and Brazil, which is trying to offset some others that is a more negative fuel. Okay?
Thank you very much.
Before we move to the next question, please be reminded. The next question comes from the line of Ray Weier calling from SBG Securities. Please go ahead.
Hi, Taro. Good day. Hello. I'm just curious if you maybe can just elaborate a little bit more on South Africa. I mean, if we now take since you have been allowed back in the market, what is your market share, for instance, relative to what it was in the same months in the prior year?
Are you down? Or because what I understood is that the illicit side is still while it has gained some foothold and it's struggling to dismantle that. Is this a correct assumption?
Yeah. There is though actually we the problem with the South African market is not about market share. The problem is the whole market. Of course, the illicit, like I mentioned before, we had this problem related to the incidence of illicit growing from the likes of 52% to very close to 6%. Our share is pretty much flattish throughout the period when you saw our performance.
And we have been growing share like I mentioned before until Q1 2020. So we enter in a very strong momentum just before the COVID crisis. And we are able to we were able to cap at that level broadly after the crisis went through. The problem is the size of the market because of the illicit now got some make some inroads because of these networks that were established in those months that there was no legal sales of cigarettes. This needs to be dismantled.
And but I have to say the problem to tackle illicit in South Africa, the government has demonstrated in the past that this base is possible to be done. So we are very optimistic that with the learnings that they had before the COVID, they could reassess that and making again inroads tackling illicit problem in South Africa.
Good. Then I just have a question regarding the overall new products category revenue. I know your longer term or medium term target, I think, is 30% to 50% a year. In the first half, I think it was like 15%. So based on what you've said about the £50,000,000 hit in Japan and tobacco heating products revenue down.
Are we going to get a bit of an acceleration into the second half revenue versus the first half and probably still falling short of that 30% target. I just want to get an idea sort of the ramp up until we get to sort of growth rates a little bit 30%?
Yes. No, we didn't provide guidance for new categories into revenue growth for this year 2020. We had a 12% increase in the first half of the year and we are saying that we accelerate in the second half and despite the headwinds coming from Glosense, for example, we are and all the points that I mentioned before, we are expecting to perform better in the second half than we did in the first half. And that's is the comment that is we want to make at this point in time. But my points that I raised before is that we had to be cautious that this was a very particular year, a very difficult year given all the backdrop that I highlighted before.
We were, for example, in until recently with all our vapor stores closed again and across Europe, a second lockdown. And we have problems in the first half and so on. So we have to put this into context.
Okay. And then finally, I just want to put you back on the spot about the share buybacks. Did I understand it correctly that you said that once you get to a net debt to EBITDA around about 3 times, you would probably then put it back on the table to consider. I just want to get a sort of a broad idea at what sort of levels share buybacks could be a feature again?
Well, I think that we are getting very ahead of the game here. As I said, capital allocation is constantly being reviewed. We are very clear for the year to come that we want to strengthen our balance sheet, hence the leverage the company to the levels that we have said before. And we want to continue investing in new categories and continue doing the deep dense of the 6%, 5% payout as we have been saying for a while. So what I said is that for sure by the time to get to this level of the leverage around 3 times, you'll get more we will get more flexibility.
And hence, you have to put all those things back on the table, but this will depend a lot in terms of the evaluation of the company at that time as well. So a lot a number of factors are in play.
Yes. Okay, excellent. Thank you.
Thank you.
The next question comes from the line of Alan Okskin calling from Credit Suisse. Please go ahead.
Good morning, everyone. Just two questions for me. One, a point of clarification of the 2.5% impact of COVID-nineteen. Obviously, some elements are very easy to quantify like travel retail, etcetera, somewhat harder to quantify. I mean, I would imagine that certainly some of the better performance in the U.
S. Is because people have more discretionary income to spend. They have more home time. And similarly, Northern Europe will have benefited from tourists staying at home. So I think, Tadeo, you indicated that the 2.5% was a net number, that was your best guess of what all of those easy to quantify and less easy to quantify impacts were.
So I just want to clarify that, that is the case. And then my second question is just what learnings have you had from the failure of GloSens? I mean, clearly, you did work going into the launch of that. What can what disappointed you? What went wrong with that product?
Thank you.
Thank you, Alan. Yes. Look, your first question, you're absolutely right. It's very hard to then zentangle all those different elements. You see the U.
S, for example, market that is performing quite well this year. And we saw that one of the big impacts that is responsible for that is related to the vaping slowdown and stopping the outflow to cigarettes. We know that. There were, for example, shipment days that were beneficial this year, oil price, a very low price and we know about the correlation between our price and the sales of cigarettes. So there are a number of effects other than the potential fiscal stimulus and all that.
Because you saw that the fiscal stimulus withdraw in July and the volume was still holding on very nicely throughout the second half. And the same happened in many other markets. For example, we were in Mexico or Argentina, where it was very, very badly hit by COVID and hence the sales. We were able to be able to come back to the markets in a much more agile way and making inroads in terms of share that mitigate some of that. So this 2.5% is a really, really consolidated figure related to that.
So that's the first question. The second point, well, look, I think that the growth sense just to remind us, the GlowSense was the use of basically 2 different consumables. 1 is tobacco and the other is the liquid parts that were running out at different times and were clearly complicated for consumers, while the satisfaction was not optimal either. So we gave all the support to increase the penetration that was the key metric for us in the first half of the year. But we find the sites with the other product to avoid being distracted to a very successful global hyper launch.
I think we have fundamentally changed our beta testing, our consumer validation methods to prevent such failures in the future. But one point that is important, because this is a consequence of trying to be leading, leaders in innovating. We can be successful as we demonstrate being through the Glow Hyper being the first in the market with the induction technology or not as was the fact of GlowSense. The important is to learn fast and to improve for the following launches.
Thanks guys. Thank you.
We have no further questions coming through on the phone lines. So I'd like hand the call back over to Tito Marroco to close the call. Thank
you. So thank you everyone. So in summary, just to leave the mess with you all. The business is performing well in challenging circumstance. We are guiding to the top end of our 1% to 3% revenue range and we capitalizing on strong momentum in the business to invest further BRL450 1,000,000 in our new categories.
We have been, as you saw, making big, big inroads in terms of our non consumable combustible product consumers, growing almost 30 percent to €30,000,000 now. VaporVues has increased substantially its value share across the top 5 markets. In THP, We expect in the top 8 markets now to be above 50% of the category. And the modern order of Velolift has concerned the leadership outside the U. S.
And the Drift acquisition significant strength of our U. S. Position. The business is performing well. We are on track to deliver on our mid single digit constant currency EPS growth guidance.
Let me tell you, if we we could have delivered high singleed, figured EPS this year in 2020. However, we are clear that continuing to invest behind new categories is the right thing to do for the business and we want to leverage on the momentum that we have. We are investing, we are delivering, we are transforming the business and we are committed to our purpose to build a better tomorrow. So thank you. I look forward to speaking to you all in February at the prelims and I wish you and your families a very happy Christmas.
Thank you, everyone.