Wrap Text
Half-year report to 30 June 2018
British American Tobacco p.l.c.
Incorporated in England and Wales
(Registration number: 03407696)
Short name: BATS
Share code: BTI
ISIN number: GB0002875804
("British American Tobacco p.l.c." or "the Company")
26 July 2018
BRITISH AMERICAN TOBACCO p.l.c.
HALF-YEAR REPORT TO 30 JUNE 2018
ON TRACK FOR ANOTHER GOOD YEAR
“Our strategy is to continue to grow our combustible business while investing in the exciting potentially reduced
risk categories of THP, vapour and oral. As the Group expands its portfolio in these categories, we will continue to
drive sustainable growth.
In the first six months of 2018, the Group continued to perform well. The cigarettes and THP portfolio has
outperformed the industry as market share grew 40 basis points (bps) with a tobacco price mix of approximately
4% which is expected to strengthen in the second half of the year. The performance of Reynolds American Inc.
(RAI) since acquisition is encouraging and the Group’s diverse NGP portfolio has grown strongly. The foreign
exchange impact on the Group’s results was a headwind of 8% for the first six months of the year and is estimated
to be 5-6% for the full year, based upon the current foreign exchange rates.
Despite the recent slowdown in the THP category in some markets, including Japan and South Korea, we remain
confident of exceeding £1 billion of reported revenue in NGP in 2018 as we expect a range of new launches to re-
energise growth in THP in the second half of the year. We anticipate another good year of adjusted earnings
growth at constant rates of exchange”.
Nicandro Durante, Chief Executive
KEY FINANCIALS 2018 Change vs 2017
Six Months Results – unaudited Current Constant Current Constant
rates rates Rates rates
Revenue £11,636m +56.9%
Profit from operations £4,438m +72.4%
Basic earnings per share (EPS) 117.7p -3.4%
Diluted EPS 117.4p -3.3%
Net cash generated from operating activities £3,858m +126.1%
Borrowings £48,512m -1.9%
Non-GAAP:
Adjusted revenue on a representative basis* £11,533m £12,553m -6.4% +1.9%
Adjusted profit from operations on a representative basis* £4,818m £5,216m -5.4% +2.4%
Adjusted diluted EPS 137.2p 148.4p +2.1% +10.4%
Adjusted cash generated from operations £2,953m £3,147m +204% +224%
Net debt £45,679m +0.2%
The use of non-GAAP measures, including adjusting items and constant currencies, are further discussed on page
50 to 51, with reconciliations from the most comparable IFRS measure provided.
* Representative basis – see page 3 for explanation of this metric. All variances above are against equivalent
2017 information for the six-month period ended 30 June 2017, except for borrowings and
net debt which are against the 31 December 2017 position.
1
- On an IFRS reported basis, due to the inclusion of the results from acquisitions completed in 2017, notably RAI
(contributing approximately 40% to revenue and profit from operations), which was partially offset by a
translational foreign exchange headwind of approximately 8%:
o Revenue increased by 56.9% with revenue from the strategic portfolio up 128%;
o Volume from cigarettes and THP grew 11.0%;
o Profit from operations was up 72.4%; and
o Operating margin increased 340 bps to 38.1%
Key financials continued…
- On a representative basis (as if BAT had owned RAI and the other acquisitions, completed in 2017, from 1
January 2017, and defined on page 3):
o Cigarettes and THP volume fell 2.2% to 348 billion (including 3 billion of THP), outperforming the industry
which is estimated to be down 3-4% in the first half of 2018;
o Cigarettes and THP market share1 in the Key Markets2 increased by 40 bps driven by strategic cigarette
and THP volume growth of 11.7%;
o Adjusted revenue, at constant rates, increased by 1.9%, driven by robust price mix (4% on cigarettes and
THP, which is expected to strengthen in the second half of the year as the impact of Pakistan and GCC
unwinds);
o Adjusted revenue would have grown by 2.6% on a representative, constant currency basis, excluding an
estimated £89 million of revenue recognised by RAI in the first six months of 2017, largely related to the
sale of inventory associated with the international brand rights of Natural American Spirit;
o Revenue from the strategic portfolio (defined on page 3) was up 8.5% on a constant rate basis, driven by
a 5.0% growth in revenue from the strategic combustible brands and the growth of THP revenue (up over
750% at £305 million) driven by glo in Japan;
o Adjusted profit from operations grew 2.4% at constant rates as the adjusted revenue growth was partly
offset by increased investment in NGP; and
o Adjusted operating margin, at current rates, grew 50 bps.
- Basic earnings per share fell 3.4%, with diluted earnings per share 3.3% down, as the net effect from the
inclusion of the operating performance of RAI was more than offset by higher financing costs, an increase in
costs associated with the amortisation of acquired trademarks, provisions for tax claims and the foreign
exchange headwinds;
- Adjusted diluted earnings per share rose 10.4% at constant rates of exchange; and
- The next quarterly dividend payment of 48.8p will be paid in August 2018, as part of the previously announced
interim dividend of 195.2p per share which is payable in four equal instalments.
The Group expects foreign exchange to be a headwind on the full year financial results of approximately 5-6%.
1 - Key Market offtake share, as independently measured by retail audit agencies (including Nielsen), shipment share estimates,
and share of retail for the US business, based upon latest available validated data.
2 - The Group’s Key Markets represent over 80% of the Group’s cigarette volume.
2
Definition of key terms
Adjusting items and constant currency measures
To provide a more comprehensive understanding of the performance of the Group, this announcement also presents the adjusted
performance of the Group, at current and constant translational rates of exchange. This excludes the adjusting items explained on
pages 27 to 31 and without the potentially distorting impact of foreign exchange on the Group’s results.
Adjusting items within this interim report represent certain items of income and expense which the Group considers distinctive
based upon their size, nature or incidence.
As explained on page 50, the Group does not adjust for normal transactional gains or losses in profit from operations which are
generated by exchange rate movements.
Inclusion of results on a “representative basis”
Where appropriate, the Group is also presenting (as a supplement to the results) the 2018 performance against 2017, as though the
Group had owned the acquisitions made in 2017 for the whole of that year. Comparison of results on this basis will be termed “on a
representative basis” and will provide shareholders with a results comparison representative of the position as if the Group had
owned the acquisitions throughout 2017 and 2018.
Results on a representative basis are not deemed to be equivalent to proforma financial information as it is derived from an adjusted
measure, which will exclude the adjusting items, that may arise in the context of a pro forma presentation due to the requirements
of such areas as purchase price allocation adjustments (to inventory, amortisation of the fair value adjustment to debt and the
amortisation of trademarks).
As previously announced, in 2017, the Group withdrew from the Philippines. No adjustment to the 2017 representative basis
information has been included as this is immaterial to the Group’s results.
For a reconciliation from the most directly comparable IFRS measures to the Group’s adjusted results on a representative basis, see
the appendix on pages 51 and 52.
Revenue from the Strategic Portfolio
As previously announced, from 1 January 2018, the Group introduced a new measure called Revenue Growth of our Strategic
Portfolio, as part of the short-term incentive scheme. The strategic portfolio is comprised of:
- Kent, Dunhill, Lucky Strike, Pall Mall and Rothmans (previously referred to as the Global Drive Brands, or GDBs);
- the 3 main brands from the US combustibles business (Camel, Newport and Natural American Spirit); and
our Potentially Reduced Risk Products portfolio, including our NGP business of THP and vapour, as well as the snus and
moist snuff brands.
Strategic Cigarettes
The strategic cigarettes comprise the brands Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Newport, Camel and Natural American
Spirit.
Strategic Combustibles
Strategic combustibles comprise the strategic cigarette brands and volume of OTP associated with the strategic brands (mainly
Dunhill, Lucky Strike, Pall Mall and Rothmans).
Potentially reduced risk products (PRRP)
PRRP comprises the THP and vapour products (collectively referred to as NGP) and oral products.
Oral
Oral comprises the moist snuff brands (Granit, Mocca, Grizzly, Kodiak) and other oral products (including Camel Snus and Epok).
Other tobacco products (OTP)
OTP comprises largely the sales of roll your own (RYO), make your own (MYO), pipe and cigarillos.
Revision of 2017 results for IFRS 15 (Revenue from Contracts with Customers), effective 1 Jan 2018
The Group’s results for the six months ended 30 June 2018 are presented in accordance with IFRS 15 (Revenue from Contracts with
Customers). The 2017 results have been revised for IFRS 15 (as previously announced on 2 May 2018) which the Group adopted on a
fully retrospective basis.
3
PERFORMANCE IN NUMBERS
Six Months ended 30 June 2018
Reported Adjusted[2] Adjusted[2] at CC[3]
2018 Vs 2017[1] 2018 Vs 2017[1] 2018 Vs 20171
representative representative
basis[4] basis[4]
Cigarettes and THP Volume (bn sticks)
Cigarettes 345.0 +10.0% -3.1%
Strategic cigarettes 213.0 +37.4% +10.2%
Other 132.0 -16.7% -18.8%
THP 3.3 +855% +855%
348.3 +11.0% -2.2%
By region:
US 38.6 - -5.5%
APME 116.0 +3.5% +3.5%
AMSSA 77.0 -5.9% -5.9%
ENA 116.7 -2.6% -3.9%
Total 348.3 +11.0% -2.2%
Other volume
Oral - bn sticks equivalent 4.4 +1,093% +2.0%
Vapour – mn 10ml units 77.6 +160% +16.5%
OTP (incl RYO and MYO) – bn 10.3 -6.9% -8.5%
sticks equivalent
Revenue (£m):
US 4,525 - 4,525 -8.5% 4,943 0.0%
APME 2,384 -4.2% 2,384 -3.9% 2,620 +5.6%
AMSSA 1,951 -9.2% 1,951 -9.0% 2,206 +2.9%
ENA 2,776 -0.1% 2,673 -2.8% 2,784 +1.3%
Total 11,636 +56.9% 11,533 -6.4% 12,553 +1.9%
Revenue from:
Strategic combustibles 7,286 +110% 7,286 -3.1% 7,894 +5.0%
NGP 405 +400% 405 +153% 427 +167%
Vapour 116 +152% 116 -7.2% 122 -2.4%
THP 289 +726% 289 +726% 305 +771%
Oral 434 +3,517% 434 +2.1% 473 +11.3%
PRRP 839 +802% 839 +43.4% 900 +53.7%
Strategic Portfolio 8,125 +128% 8,125 +0.2% 8,794 +8.5%
Other 3,511 -8.8% 3,408 -19.1% 3,759 -10.7%
Total Revenue 11,636 +56.9% 11,533 -6.4% 12,553 +1.9%
Profit from operations (£m):
US 1,875 - 2,089 -3.8% 2,295 +5.6%
APME 920 -9.5% 950 -12.7% 1,033 -5.0%
AMSSA 796 -1.2% 829 -6.1% 920 +4.1%
ENA 847 +12.6% 950 +0.2% 968 +2.2%
Total 4,438 +72.4% 4,818 -5.4% 5,216 +2.4%
4
PERFORMANCE IN NUMBERS
Six Months ended 30 June 2018
Reported Adjusted[2] Adjusted[2] at CC[3]
2018 Vs 2017[1] 2018 Vs 20171 2018 Vs 2017[1]
representative representative
basis[4] basis[4]
Operating Margin
US 41.4% - 46.2% +220 bps 46.4% +240 bps
APME 38.6% -220 bps 39.8% -400 bps 39.4% -440 bps
AMSSA 40.8% +330 bps 42.5% +130 bps 41.7% +50 bps
ENA 30.5% +340 bps 35.5% +100 bps 34.8% +30 bps
Total 38.1% +340 bps 41.8% +50 bps 41.6% +20 bps
Earnings per share (pence)
Basic 117.7p -3.4%
Diluted 117.4p -3.3% 137.2p +2.1% 148.4p +10.4%
Cash flow
Six months to June
2018 2017 Variance
£m £m %
Net cash generated from operating activities 3,858 1,706 +126%
Net cash impact of adjusting items 229 352 -35%
Restructuring costs 129 220 -41%
Non-tobacco litigation (Fox River) 9 2 +350%
Tobacco litigation (Engle, Quebec deposit) 91 130 -30%
Dividends paid to non-controlling interests (96) (106) -9.4%
Net interest paid (723) (326) +122%
Net capital expenditure (231) (187) +24%
not meaningful
Dividends from associates (1) (465)
Trading loans to third parties (83) - not meaningful
Other - (4) +25%
Adjusted cash generated from operations 2,953 970 +204%
Cash conversion ratio 86.9% 66.3%
(Net cash generated from operating activities as a
% of profit from operations)
Operating cash flow conversion 96.7% 70.0%
(Net cash generated from operating activities before the impact of adjusting items, trading loans, pension shortfall funding, taxes
paid and after net
capital expenditure and dividends from associates as a % of adjusted profit from operations)
1. The results for the six-months period ended 30 June 2017 have been amended (“Revised”) following the Group’s retrospective
application of IFRS 15 (Revenue from Contracts with Customers). 2017 also reflects the new regional structure, effective
1 January 2018. See page 61.
2. Adjusting items represent certain items which the Group considers distinctive based upon their size, nature or incidence.
See pages 50 and 51. Reconciliations from the most comparable IFRS measures have been provided, for revenue, on page 51, for
profit from operations on page 52, for tax, on page 53, for diluted earnings per share, on page 36, and for cash conversion,
on page 53.
3. CC – constant currency – measures are calculated based on a retranslation, at the prior year’s exchange rates, of the current
year’s results of the Group and, where applicable, its segments.
4. Representative basis – as though BAT had owned RAI and other acquisitions, undertaken in 2017, from 1 January 2017. This
measure is presented on an adjusted basis at constant rates of exchange. A reconciliation to the 2017 adjusted “representative”
results is provided in the attached appendices starting on page 61.
Note: In respect of the United States region, all financial statements and financial information provided by or with respect to
the US business or RAI (and/or the RAI Group) are prepared on the basis of US GAAP and constitute the primary financial statements
or financial information of the US business or RAI (and/or the RAI Group). Solely, for the purpose of consolidation within the
results of BAT p.l.c. and the BAT Group, this financial information is then converted to
International Financial Reporting Standards as issued by the IASB and adopted by the European Union (IFRS). To the extent any
such financial information provided in these financial statements relate to the US
business or RAI (and/or the RAI Group), it is provided as an explanation of the US business’ or RAI’s (and/or the RAI Group’s)
primary US GAAP based financial statements
and information.
5
PERFORMANCE REVIEW
The following review presents the Group’s performance for the six-months period ended 30 June 2018.
Revenue
On a reported basis, revenue increased by 56.9% to £11,636 million. This was driven by an 11.0% growth in
volume from cigarettes and THP, which was mainly due to both the inclusion of RAI as a wholly-owned subsidiary
and good pricing, partly offset by an estimated translational foreign exchange headwind of 8%.
On a representative basis, adjusted revenue was up 1.9% at constant rates of exchange. This excludes the
distorting effect on revenue discussed on page 28 related to excise on products acquired under short-term
contract manufacturing arrangements and includes the impact of acquisitions undertaken in the prior year.
2017’s revenue comparator included a number of other non-recurring items recognised by RAI prior to the
acquisition, including revenue from the sale of inventory related to the international brand rights of Natural
American Spirit. Excluding these items, adjusted revenue would have increased by 2.6% on a representative,
constant currency basis.
The drivers of growth in revenue are summarised below:
- Robust pricing in cigarettes and THP (with approximately 70% of pricing taken in the year so far) which more
than offset the decline in mix due to both the growth in volume in Pakistan and Bangladesh, and
downtrading in Malaysia and GCC – resulting in an aggregate price mix from cigarettes and THP of 4%;
- The growth of the NGP portfolio (with adjusted revenue up 167% to £427 million on a constant rate,
representative basis). NGP revenue comprises:
o THP revenue of £305 million, up over 750% compared to the first six months of 2017; and
o Vapour revenue of £122 million (in line with 2017, on a representative basis), which was impacted by
the product recall related to an isolated consignment of batteries in the US. Excluding the recall, vapour
revenue would have been up 8% on a representative basis; and
- The growth of the oral category (up 11.3%) driven by the US.
These drivers more than outweighed a 2.2% reduction in volume, on a representative basis. The movement in
volume was due to an increase in Pakistan, as the market recovered following the revision to excise, and increases
in Turkey, Bangladesh and Egypt being more than offset by lower volume in GCC (due to trade inventory
movements in the first six months 2017), Brazil (due to down-trading) and Russia due to both market contraction
and inventory movements in the supply chain and lower volume in the US.
Revenue from our Strategic Portfolio grew by 128% (to £8,125 million) mainly due to the inclusion of RAI. On a
representative constant currency basis, this was an increase of 8.5% driven by pricing and the performance of
the Group’s strategic brands which grew share over 160 bps.
The strategic cigarette and THP brands collectively grew volume 11.7% on a representative basis:
- Dunhill’s overall market share was down 10 bps (despite a strong performance in South Africa and Brazil)
with volume 9.3% lower. The volume decline was driven by the down-trading in the GCC following the excise
changes, as well as a reduction in volume in both Indonesia and South Korea which were a result of the
contraction in those combustible markets;
- Kent’s market share was up 50 bps, with volume increasing 8.7%, driven by the growth of glo in Japan and
higher volume and market share in Turkey and Brazil. This more than offset lower volume in Russia (despite
an increase in market share), which was affected by trade inventory movements;
- Lucky Strike grew market share 10 bps and volume increased by 2.0% driven by Indonesia, Colombia, and
Japan, more than offsetting lower volume in France;
6
Performance summary cont…
- Rothmans’ market share continued to grow, increasing a further 80 bps with volume up 34.4% driven by
Russia and Malaysia, and supported by migrations in Poland, Brazil and Colombia;
- Pall Mall market share grew 30 bps, with volume up 46.6% due to the inclusion of RAI (as the Group now
includes the volume of Pall Mall in the US). This was an increase of 20.9% on a representative basis, due to
strong post-excise revision volume performance in both Pakistan and the GCC and successful launch in Egypt;
- Newport grew market share 10 bps in the US. Volume fell 5.6%, on a representative basis, mainly due to
inventory movements within the supply chain;
- Natural American Spirit’s share momentum continued in the US, up 10 bps, with volume lower by 4.0% on a
representative basis, outperforming the market (estimated to be 5% down) due to a strong performance in
the premium segment;
- Camel’s market share fell 10 bps in the US. Volume was lower by 3.2%, on a representative basis, partly due
to a strong comparator period which was impacted by various brand launches; and
- In Japan, glo grew market share to 4.3% (from 3.3% at the end of 2017) and to a share of the category of
20%, against a backdrop of slowing category growth after an initial rapid expansion driven by early adopters.
New product developments are planned for the second half of 2018 and we expect to see category growth in
Japan during this period. Elsewhere, glo reached 6.4% category share in South Korea (which will also benefit
from new product and device developments) and is present in five other markets with several more market
launches planned for the second half of 2018 and early 2019.
Vapour volume increased 16.5% on a representative basis. The Group continues to perform well in a number of
markets and is the closed system market leader in the UK and Germany. Exciting new product launches are
planned for the second half of 2018 with Vype ePen3 launched earlier this month in the UK and Canada where
initial indicators have been extremely positive regarding consumer acquisition, conversion and retention. In the
US, Vuse grew volume of consumables (up over 20%) despite a decline in market share to 21%.
Oral tobacco volume was significantly higher, due to the inclusion of the RAI portfolio and EPOK. This was an
increase of 2.0% on a representative basis, as oral volume was in line with prior year in the US and EPOK drove
growth in Sweden, Norway and Switzerland, where EPOK achieved 14% market share ten weeks after launch.
Volume of other tobacco products (OTP) fell 6.9% (or 8.5% on a representative basis) to 10 billion sticks
equivalent (being less than 3% of the Group portfolio), driven by a reduction in the US and competitive pricing in
France and Hungary.
Profit from operations and operating margin
Profit from operations, on a reported basis was up 72.4% at £4,438 million with operating margin up
approximately 340 bps. This was largely due to the growth in revenue described above, partly offset by:
- Raw materials and other consumables were £474 million higher due to the inclusion of RAI and an increase in
Japan due to the growth in THP;
- Employee benefit costs, increased by 23.2% to £1,409 million due to the inclusion of RAI;
- Depreciation, amortisation and impairment costs, up 26.3% to £437 million, driven by higher amortisation
and impairment charges related to the previous acquisitions (including RAI) and an increase in depreciation
due to the consolidation of RAI’s manufacturing infrastructure; and
- Other operating expenses, higher by £1,636 million or 111% to £3,105 million. RAI accounted for over 95% of
the increase, which was largely due to the charges in relation to the master settlement agreement (MSA),
whilst the increased investment across the Group in NGP was partly offset by the ongoing cost efficiency
programmes throughout the organisation.
Adjusted profit from operations and adjusted operating margin
Adjusted profit from operations, on a representative basis and at constant rates of exchange was 2.4% higher at
£5,216 million, reflecting the ongoing performance whilst investing behind the expansion of NGP. On a
representative basis, adjusted operating margin, at current rates, was 50 bps higher.
7
REGIONAL REVIEW
The performances of the regions are discussed below. The following discussion is based upon the Group’s internal
reporting structure announced in 2017 and effective from 1 January 2018, as discussed and disclosed in the
Group’s Annual Report and Accounts and Form 20-F for the period ended 31 December 2017. Prior period
comparators have been revised accordingly. Prior periods have also been revised for the impact of IFRS 15.
Regional Summary information
Cigarettes and THP Revenue Profit from operations
(bn sticks) (£m) (£m)
2018 Vs 2017 2018 Vs 2017 2018 Vs 2017
Actual Adj Repres Actual Adj Repres Actual Adj Repres
at cc at cc at cc
US 38.6 - -5.5% 4,525 - 0.0% 1,875 - +5.6%
APME 116.0 3.5% +3.5% 2,384 -4.2% +5.6% 920 -9.5% -5.0%
AMSSA 77.0 -5.9% -5.9% 1,951 -9.2% +2.9% 796 -1.2% +4.1%
ENA 116.7 -2.6% -3.9% 2,776 -0.1% +1.3% 847 +12.6% +2.2%
Total 348.3 +11.0% -2.2% 11,636 +56.9% +1.9% 4,438 +72.4% +2.4%
Variance termed “Adj Repres at cc” refers to the variance between the 2018 adjusted performance, at 2017 exchange rates, against the
adjusted 2017 performance on a representative basis – as though the Group had owned the acquisitions undertaken in 2017 for the full
financial year. A reconciliation of the 2017 performance to adjusted representative is provided on page 61.
UNITED STATES (US):
Cigarette volume in the six months to June 2018 was 39 billion sticks. On a representative basis, this was 5.5%
lower than in 2017. This was in line with the industry decline driven by movements in trade inventory in 2017
related to the change in excise in California and the impact of higher gasoline prices on disposable income. The
industry is expected to be down around 5% for the full year. RAI volumes were further impacted by a strong
comparator due to Camel and Newport product launches in the first six months of 2017. The Group’s market
share was down 10 bps (based upon sales to retail), as the premium brands grew share 20 bps but were more
than offset by a reduction in the remainder of the portfolio, on a representative basis.
The vapour category continues to experience strong growth (up approximately 20%) which the Group estimates
has resulted in a total volume decline in cigarettes of 0.4% during the first half of 2018.
While new competitor vapour brands have taken market share, Vuse continued to grow volume of consumables
on a representative basis (up over 20%), despite a product recall arising from an isolated issue related to a
consignment of batteries. The issue has largely been resolved. Excluding the recall, the Group estimates that
revenue from vapour would have grown by 12% in the six months ended 30 June 2018.
The Group is making good progress with the product applications to the US Food and Drug Administration.
Clearance has been received for the SE application for our improved carbon tipped tobacco heating product. The
SE application related to glo, filed in February, has passed into scientific review.
Oral volume was marginally lower on a representative basis, with market share down against the prior period
which, on a representative basis, benefited from market disruption due to a competitor’s product recall.
8
Regional review continued…
Reported revenue was £4,525 million, which was in line with the prior year on a constant currency, representative
basis as pricing in both the combustibles and oral categories, and higher Vuse consumables volume was offset by
the reduction in combustibles and oral volume (noted above) and the impact of the recall. Excluding the revenue
recognised in 2017 from the sale of inventory related to the international brand rights of Natural American Spirit
and other non-recurring items, revenue would have been 1.8% higher in 2018, on a representative, constant
currency basis.
Reported profit from operations was £1,875 million, or £2,295 million on an adjusted constant currency basis.
This is an increase of 5.6% on an adjusted, constant currency, representative basis, and is driven by the timing of
expenditure and cost reductions since the acquisition of RAI.
Cost synergies are progressing well, with annualised savings of approximately US$140 million delivered to date.
The Group continues to expect to deliver over US$400 million of synergies by the end of 2020.
ASIA-PACIFIC AND MIDDLE EAST (APME):
Volume was up 3.5% at 116 billion sticks driven by a recovery in the combustible volume in Pakistan (following the
revision to the excise structure that negatively impacted the equivalent period in 2017), continued growth in
Bangladesh and the performance of glo in Japan with sales of 3 billion sticks in the period. This growth in volume
was partly offset by the impact of lower industry volume and trade inventory movements in GCC following the
implementation of a new sales tax in 2017, and a combination of market contraction and the growth of illicit trade
in Malaysia.
Market share in the region was up 110 bps– driven by Japan (increasing the share of total tobacco by 80 bps),
Saudi Arabia (due to the growth of Pall Mall), Malaysia (driven by Rothmans which more than outweighed a
decline in Dunhill) and in Bangladesh due to up-trading to the premium segment. This growth was partially offset
by lower share in South Korea (due to a reduction in Dunhill driven by the growth of the THP segment).
Reported revenue fell 4.2% to £2,384 million, as pricing, higher volume (discussed above) and the positive mix
effect - largely in Japan through the growth in glo, was offset by a combination of inventory movements in the
prior year and down-trading in GCC and negative mix in Malaysia, and by the foreign exchange headwinds related
to the relative strength of sterling. Excluding currency, adjusted revenue, on a representative basis at constant
rates of exchange grew 5.6%.
Reported profit from operations declined 9.5% to £920 million, partly due to the foreign exchange headwinds and
the higher investment behind THP in Japan and South Korea. On a representative constant currency basis,
adjusted profit from operations was down 5.0% to £1,033 million, as growth in Australia, Pakistan and Bangladesh
was more than offset by increased investment behind THP and the negative mix effects described above.
AMERICAS AND SUB-SAHARAN AFRICA (AMSSA):
Volume was 5.9% lower at 77 billion sticks, largely driven by the growth of illicit trade in Brazil and South Africa
and market contraction in Mexico, Canada, Colombia and Venezuela.
Market share was 10 bps lower as growth driven by Kent in Brazil, Dunhill in South Africa, Rothmans (in Brazil,
Colombia and Argentina), and Pall Mall in Mexico was more than offset by declines in the local portfolio.
In May, Vype was launched in Canada and early signs are encouraging. Distribution partnerships have been
secured with the top 4 key accounts covering 30% of volume weighted distribution nationally.
9
Regional review continued…
Reported revenue fell 9.2% to £1,951 million, due to the translational foreign exchange headwind of 12%. On a
constant currency, representative basis, adjusted revenue grew by 2.9% to £2,206 million, as pricing across the
region (notably in Canada, Chile and Nigeria) more than offset the lower total volume and the impact of mix in a
number of markets, which was largely driven by the growth of the lower priced products following the significant
excise-led price increases.
Reported profit from operations was down 1.2% to £796 million, as the effect of currency headwinds more than
offset growth across the region. Excluding adjusting items and the effect of currency, adjusted profit from
operations on a representative, constant currency basis grew by 4.1% to £920 million, driven by Canada, Nigeria
and Chile, partly offset by the continued difficult trading environment in South Africa.
EUROPE AND NORTH AFRICA (ENA):
Volume fell 2.6% to 117 billion sticks, which was a decline of 3.9% on a representative basis, as volume from
acquired assets in the prior year combined with growth in Turkey and North Africa was more than offset by lower
volume in Russia (due to both market contraction and trade inventory movements related to the implementation
of graphical health warnings), lower volume in Ukraine (driven by an increase in illicit trade), Italy (partly due to
higher prices) and France (following the excise-led price increase).
Market share was flat as growth in Kent (Ukraine, Russia and Turkey) and Rothmans (Ukraine, Russia, Poland and
Italy) was offset by the continued discount-led down-trading environment in Switzerland, the impact of a short-
term price disadvantage in Romania and a decline in the low-priced portfolio in Russia.
Our NGP portfolio continued to expand, with glo now present in Russia, Switzerland, Romania and Italy. Volume
of vapour (devices and consumables) grew, notably in the UK (driven by Vype, Ten Motives and ViP). Through
Chic, the Group is the market leader in vaping in Poland. Further launches and product developments are planned
across the portfolio during 2018.
In oral, volume grew 29.6%, mainly driven by EPOK which is the fastest growing premium oral brand in both
Sweden and Norway, with both countries achieving record oral category market share of 12% and 8%
respectively. In Switzerland, EPOK grew to a 14% share of the oral category three months after launch.
Reported revenue was in line with 2017 at £2,776 million as improved mix in Russia and Romania and pricing
(notably in Romania, Germany and Ukraine) was outweighed by the impact of lower regional volume, continued
excise absorption in France and the translational foreign exchange headwinds.
Adjusted revenue, on a constant currency, representative basis was 1.3% higher at £2,784 million (30 June 2017:
£2,749 million). This excludes excise on bought-in goods, acquired and sold under short term contract
manufacturing arrangements (which distorts revenue and operating margin on a temporary basis), and the impact
of currency on revenue.
Reported profit from operations grew 12.6% to £847 million, largely due to the acquisitions in the prior year and
the timing of expenditure. Excluding adjusting items and the impact of the foreign currency headwind, adjusted
profit from operations at constant rates, on a representative basis was up 2.2%, at £968 million. This was driven
by Romania, Germany and Ukraine offsetting France and Italy.
10
FINANCIAL INFORMATION AND OTHER
NET FINANCE COSTS
Net finance costs for the six months to 30 June 2018 were £701 million, compared to £325 million in the same
period last year, driven by the increase in borrowings (up £27,605 million to £48,512 million) due to the acquisition
of RAI and subsequent consolidation of the RAI borrowings into the Group. Net adjusted finance costs increased
by 141% or 163% on a constant currency basis.
Net finance (costs)/income comprise:
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Finance costs (763) (381) (1,197)
Finance income 62 56 103
Net finance costs (701) (325) (1,094)
Less: adjusting items (see below) 35 49 205
Hedge ineffectiveness - 10 9
Interest on adjusting tax payable, see below 35 12 43
Acquisition of RAI - 27 153
Net adjusted finance costs (666) (276) (889)
Comprising:
Interest payable (786) (347) (1,094)
Interest and dividend income 40 36 84
Fair value changes – derivatives 40 82 149
Exchange differences 40 (47) (28)
Net adjusted finance costs (666) (276) (889)
Impact of foreign exchange (61) -
Net adjusted finance costs (at constant rates of exchange) (727) (276)
In the six months ended 30 June 2018, the Group incurred interest on adjusting tax payables of £35 million,
including interest of £12 million (2017: £12 million) in relation to the Franked Investment Income Group Litigation
Order (FII GLO), as described on page 41, and a £22 million charge in respect of withholding tax in Russia as
explained on page 12.
In 2017, the Group incurred pre-financing costs related to the acquisition of RAI of £153 million, of which £27
million was incurred in the six months ended 30 June 2017. As this related to the pre-financing of the acquisition,
and will not repeat, the costs were treated as an adjusting item.
Also in 2017, the Group realised a charge in relation to the reversal of a gain recognised in 2016, related to hedge
ineffectiveness on external swaps following the referendum regarding “Brexit”. This was deemed to be adjusting
as it is not representative of the underlying performance of the business.
All of the charges noted above have been included in the adjusted earnings per share calculation on page 36.
11
RESULTS OF ASSOCIATES AND JOINT VENTURES
The Group’s share of post-tax results of associates and joint ventures fell by £546 million to £232 million, largely
due to RAI being a wholly-owned subsidiary from 25 July 2017. For the Group’s other main associate, ITC Ltd (ITC)
in India, the Group’s share of post-tax results was down by 0.9% to £227 million which was impacted by the
foreign exchange headwind. On an adjusted constant rate basis, the Group’s share of post-tax results from ITC
was an increase of 5.6% to £206 million.
TAXATION
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
UK
- current year tax 68 12 26
Overseas
- current year tax expense 1,136 635 1,615
- adjustment in respect of prior periods 62 5 2
Current tax 1,266 652 1,643
Deferred tax (73) 28 (9,756)
1,193 680 (8,113)
Adjusting items (see below) (75) 48 10,220
Net adjusted tax charge 1,118 728 2,107
The tax rate in the income statement was a charge of 30.1% for the six months to 30 June 2018, compared to a
charge of 22.5% for the six months to 30 June 2017, and a credit of 27.4% for the full year 2017. The credit in 2017
was due to the revaluation of net deferred tax liabilities following the change to the Federal tax rate in the US
(£9.6 billion), as disclosed on page 36 of the Group’s Annual Report and Accounts and Form 20-F for the year
ended 31 December 2017. The increase in the tax rate in 2018 to 30.1% from 22.5% was largely due to the
inclusion of RAI as a wholly-owned subsidiary following the acquisition (previously RAI was included within post
tax results of associates) and was also affected by the impact of the adjusting items referred to below.
The Group’s tax rate is also affected by the inclusion of the share of associates’ and joint ventures’ post-tax profit
in the Group’s pre-tax results and by other adjusting items. Excluding these items, the underlying tax rate for
subsidiaries reflected in the adjusted earnings per share on page 36 was 26.9% in 2018 and 28.4% for the six
months to 30 June 2017. For the year to 31 December 2017, it was 29.7%.
Adjusting items relate to:
- a £69 million charge due to changes in the US State tax rates in the period, relating to the revaluation of
deferred tax liabilities arising on trademarks recognised on the RAI acquisition in 2017; and
- a £77 million charge related to recent guidelines issued in Russia where higher withholding taxes could
apply from 2015 onwards. A provision for the associated tax change and £22 million of interest has been
recognised in the period for 2015 through to 2017.
As both of the above items are not reflective of the ongoing business, these have been recognised as adjusting
items within taxation. This is partially offset by £71 million for the six months to 30 June 2018 (30 June 2017: £48
million, 31 December 2017: £454 million) in respect of the taxation on other adjusting items, as described on
pages 29 and 30.
Refer to page 41 for the Franked Investment Income Group Litigation Order update.
12
CASH FLOW
In the Group’s cash flow, prepared in accordance with IFRS and presented on page 25, net cash generated from
operating activities grew by 126% to £3,858 million due to the cash generated by RAI, including the timing of the
MSA payment. The Group’s conversion rate (as defined as net cash generated from operating activities as a
proportion of profit from operations) increased from 66% to 87% in the first half of 2018.
Adjusted cash generated from operations (ACGFO)
Before the effect of adjusting items and the receipt of dividends from associates, and excluding interest, receipts
in relation to a trading loan to a third party, net capital expenditure, and dividends paid to non-controlling
interests, the Group generated £2,953 million adjusted cash from operations, an increase on the six months
ended 30 June 2017 of over 200%, with an operating cash conversion rate (based upon adjusted profit from
operations, and defined on page 53) of 97% (30 June 2017: 70%). Normalising the timing of the MSA payment
(£1.4 billion) that was brought forward to December 2017, ACGFO would have increased by 60% compared to the
same period in 2017, with a conversion rate of 68%.
ACGFO is reconciled from net cash generated from operating activities as follows:
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Net cash generated from operating activities (page 25) 3,858 1,706 5,347
Cash impact of adjusting items 229 352 685
Adjusted net cash generated from operating activities 4,087 2,058 6,032
Dividends paid to non-controlling interests (96) (106) (167)
Net interest paid (723) (326) (1,004)
Net capital expenditure (231) (187) (767)
Dividends from associates (1) (465) (903)
Trading loans to third parties (83) - 101
Other - (4) (10)
ACGFO 2,953 970 3,282
Exchange 194
ACGFO at constant rates of exchange 3,147
13
BORROWINGS AND NET DEBT
Total borrowings were £48,512 million at 30 June 2018, an increase over 30 June 2017 (£20,907 million) due to the
debt related to the acquisition of RAI. The movement from 31 December 2017 (£49,450 million) mainly relates to the
repayment and issuance of debt as explained on page 33. The Group defines net debt as borrowings including
related derivatives, less cash and cash equivalents and current investments held at fair value. Closing net debt
was £45,679 million (30 June 2017: £18,481 million and 31 December 2017: £45,571 million). A reconciliation of
borrowings to net debt is provided below.
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Total borrowings 48,512 20,907 49,450
Derivatives in respect of net debt:
Assets (627) (540) (640)
Liabilities 107 159 117
Cash and cash equivalents (2,125) (2,019) (3,291)
Current investments held at fair value (188) (26) (65)
Net debt 45,679 18,481 45,571
Maturity profile of net debt:
Net debt due within one year 2,904 3,891 2,048
Net debt due beyond one year 42,775 14,590 43,523
Net debt 45,679 18,481 45,571
Borrowings includes £940 million (30 June 2017: £nil, 31 December 2017: £947 million) in respect of the purchase
price adjustments related to the acquisition of RAI. The Group remains confident about its ability to access the
debt capital markets successfully and reviews its options on a continuing basis.
FOREIGN CURRENCIES
The principal exchange rates used to convert the results of the Group’s foreign operations to pound sterling, for
the purposes of inclusion and consolidation within the Group’s financial statements are indicated in the table
below. Where the Group has provided results “at constant rates of exchange” this refers to the translation of the
results from the foreign operations at rates of exchange prevailing in the prior period – thereby eliminating the
potentially distorting impact of the movement in foreign exchange on the reported results.
The principal exchange rates used were as follows:
Average Closing
30.6.18 30.6.17 31.12.17 30.6.18 30.6.17 31.12.17
Australian dollar 1.784 1.670 1.681 1.787 1.693 1.730
Brazilian real 4.712 4.006 4.116 5.080 4.304 4.487
Canadian dollar 1.758 1.681 1.672 1.737 1.687 1.695
Euro 1.137 1.163 1.142 1.131 1.139 1.127
Indian rupee 90.351 82.766 83.895 90.457 83.961 86.343
Japanese yen 149.588 141.509 144.521 146.237 145.950 152.387
Russian rouble 81.805 73.005 75.170 82.783 76.987 77.880
South African rand 16.931 16.632 17.150 18.096 17.019 16.747
US dollar 1.376 1.260 1.289 1.320 1.299 1.353
Please refer to page 54 for pound sterling expressed in US dollar per pound sterling, as certified for customs
purposes by the Federal Reserve Bank of New York.
14
RISKS AND UNCERTAINTIES
The principal risks and uncertainties which may affect the business activities of the Group were identified under
the heading ‘Principal Group risk factors’, set out on pages 48 to 54 of the Annual Report and Form 20-F for the
year ended 31 December 2017, a copy of which is available on the Group’s website www.bat.com.
In the view of the Board, the principal risks and uncertainties for the Group have remained broadly unchanged
over the last six months. However, the risk relating to the inability to obtain price increases and the impact of
price increases on consumer affordability thresholds is no longer considered a principal risk, as the likelihood has
decreased following improved pricing delivery over recent years and through recognition that the RAI acquisition
has resulted in better geographical diversity. Additionally, the previously stated principal risk relating to the
failure to successfully develop and commercialise Next Generation Products now includes all innovation across
the Group’s portfolio of brands.
The principal Group risks and applicable sub-categories are summarised under the headings of:
- Competition from illicit trade;
- Tobacco and nicotine regulation inhibits growth strategy;
- Significant excise increases or structure changes;
- Litigation;
- Geopolitical tensions;
- Disputed taxes, interest and penalties;
- Market size reduction and consumer down-trading;
- Foreign exchange rate exposures;
- Injury, illness or death in the workplace;
- Solvency and liquidity; and
- Inability to lead the development and roll-out of BAT innovations (NGP and Combustible).
A summary of other risks for the Group which are not considered principal risks, but are monitored by the Board
through the Group’s risk register is set out on pages 226 to 227 of the Annual Report and Form 20-F for the year
ended 31 December 2017. In addition to those disclosed, following the change to the NGP risk above, the non-
principal risks also include associated NGP risks in respect of manufacturing and marketing. The risk relating to the
inability to obtain price increases and the impact of price increases on consumer affordability thresholds will also
be included as a non-principal risk. The risk associated with failing to successfully integrate RAI companies into the
Group’s business is no longer considered a risk to the Group. These and all of the Group’s risks should be read in
the context of the forward-looking statements on page 56 of this Half-Year Report.
UPDATE ON ONGOING INVESTIGATION INTO MISCONDUCT ALLEGATIONS
As previously reported, we are investigating, through external legal advisers, allegations of misconduct and have
been liaising with the UK’s Serious Fraud Office (“SFO”) and other relevant authorities. It was announced in
August 2017 that the SFO had opened an investigation in relation to the Company, its subsidiaries and associated
persons. We are co-operating with the SFO’s investigation. A sub-Committee of the Board has oversight of these
matters, providing support for the investigation between Board meetings.
UPDATE ON QUEBEC CLASS ACTION
On 27 October 2015, the Quebec Court of Appeal made an Order for Security in the amount of CAD$984 million,
of which Imperial Tobacco Canada’s (“ITCAN”) share was CAD$758 million paid in seven equal quarterly
instalments. ITCAN appealed the substantive decision awarding CAD$15.6 billion to the plaintiffs, of which
ITCAN’s share was CAD$10.4 billion. This appeal was heard by a panel of five judges of the Quebec Court of
Appeal on 21-25 November 2016 with a decision pending. As at the date of this release, no judgment has been
made. Please refer to the 2017 Annual Report and Form 20-F, note 28 Contingent Liabilities and Financial
Commitments for a full discussion.
15
BANGLADESH
On 25 July 2018, the Appellate Division of the Supreme Court of Bangladesh has reversed the decision of the High
Court Division against BAT Bangladesh in respect of the retrospective demands for VAT and Supplementary Duty
amounting to approximately £170 million. The Attorney General’s Office has 30 days from receipt of the certified
Court Order in which to seek a review of this decision.
GOING CONCERN
A full description of the Group’s business activities, its financial position, cash flows, liquidity position, facilities
and borrowings position together with the factors likely to affect its future development, performance and
position, as well as the risks associated with the business, are set out in the Strategic Report and in the notes to
the accounts, all of which are included in the 2017 Annual Report and Form 20-F that is available on the Group’s
website, www.bat.com. This Half-Year Report provides updated information regarding the business activities,
including cash flow, for the six months to 30 June 2018 and of the financial position and liquidity position at 30
June 2018.
The Group has, at the date of this report, sufficient financing available for its estimated existing requirements for
at least the next 12 months. This, together with the proven ability to generate cash from trading activities, the
performance of the Group’s Strategic Portfolio, its leading market positions in a number of countries and its
broad geographical spread, as well as numerous contracts with established customers and suppliers across
different geographical areas and industries, provides the Directors with the confidence that the Group is well
placed to manage its business risks successfully in the context of the current financial conditions and the general
outlook in the global economy.
After reviewing the Group’s annual budgets, plans and financing arrangements, the Directors consider that the
Group has adequate resources to continue operating for the foreseeable future and that it is therefore
appropriate to continue to adopt the going concern basis in preparing this Half-Year Report.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge, this condensed financial information has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union, and that this
Half-Year Report includes a fair review of the information required by the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority, paragraphs DTR 4.2.7 and DTR 4.2.8.
The Directors of British American Tobacco p.l.c. are as listed on pages 56 and 57 in the British American Tobacco
Annual Report and Form 20-F for the year ended 31 December 2017, with the exception of Ann Godbehere and Dr
Pedro Malan, both of whom retired as Directors at the conclusion of the Annual General Meeting on 25 April
2018.
Details of all the current Directors of British American Tobacco p.l.c. are maintained on www.bat.com.
For and on behalf of the Board of Directors:
Richard Burrows Ben Stevens
Chairman Finance Director
25 July 2018
16
ENQUIRIES:
INVESTOR RELATIONS: PRESS OFFICE:
Mike Nightingale +44 (0)20 7845 1180 Press Office +44 (0)20 7845 2888
Rachael Brierley +44 (0)20 7845 1519
John Harney +44 (0)20 7845 1263
Webcast and Conference Call Participant PIN code: 19617517#
A live webcast of the results is available via www.bat.com/ir to be held on Thursday 26 July 2018, at 09.30 BST.
Dial in number(s) UK Toll Number: +44 (0) 3333000804
UK Toll-Free Number: 08003589473
International dial in details can be accessed via the following URL:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf.
Conference Call Playback Facility Passcode: 301231035#
A replay of the conference call will also be available from 1:00 p.m. for 48 hours.
Dial in number(s): UK Toll Number: +44 (0) 333 300 0819
UK Toll-Free Number: 0800 358 2049
US Toll Free Number: +1 (844) 307-9361
17
INDEPENDENT REVIEW REPORT TO BRITISH AMERICAN TOBACCO p.l.c.
Conclusion
We have been engaged by the company to review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2018 which comprises Group Income Statement, the Group
Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Group Balance Sheet, the
Group Cash Flow Statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
financial statements in the Half-Year financial report for the six months ended 30 June 2018 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure
Guidance and Transparency Rules (“the DTR”) of the UK’s Financial Conduct Authority (“the UK FCA”).
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland)
2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the
Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. We read the other information contained in the Half-Year financial report and consider whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of
financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors’ responsibilities
The Half-Year financial report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the Half-Year financial report in accordance with the DTR of the UK FCA.
As disclosed in Account Policies and Basis of Preparation the annual financial statements of the group are
prepared in accordance with International Financial Reporting Standards as adopted by the EU and as issued by
the IASB. The directors are responsible for preparing the condensed set of financial statements included in the
Half-Year financial report in accordance with IAS 34 as adopted by the EU and as issued by the IASB.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the
Half-Year financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our engagement to assist the company
in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to
the company those matters we are required to state to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have reached.
Mark Baillache
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square, London E14 5GL
25 July 2018
18
Interim Financial Statements
GROUP INCOME STATEMENT - unaudited
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Revenue 1 11,636 7,418 19,564
Raw materials and consumables used (2,355) (1,881) (4,520)
Changes in inventories of finished goods and work in progress 76 (59) (513)
Employee benefit costs (1,409) (1,144) (2,679)
Depreciation, amortisation and impairment costs (437) (346) (902)
Other operating income 32 55 144
Other operating expenses (3,105) (1,469) (4,682)
Profit from operations 4,438 2,574 6,412
Net finance costs (701) (325) (1,094)
Finance income 62 56 103
Finance costs (763) (381) (1,197)
Share of post-tax results of associates and joint ventures 232 778 24,209
Profit before taxation 3,969 3,027 29,527
Taxation on ordinary activities (1,193) (680) 8,129
Profit for the period 2,776 2,347 37,656
Attributable to:
Owners of the parent 2,690 2,261 37,485
Non-controlling interests 86 86 171
2,776 2,347 37,656
Earnings per share
Basic 117.7p 121.8p 1,833.9p
Diluted 117.4p 121.4p 1,827.6p
All of the activities during both years are in respect of continuing operations.
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated financial
information.
1
Revenue is net of duty, excise and other taxes of £18,250 million and £17,377 million for the six months ended 30 June 2018 and
2017 respectively, and £37,780 million for the year ended 31 December 2017.
The results for the six-month period ended 30 June 2017 and the year ended 31 December 2017 have been amended (“Revised”)
following the Group’s retrospective application of IFRS 15 (Revenue from Contracts with Customers). See page 26.
19
Interim Financial Statements
GROUP STATEMENT OF COMPREHENSIVE INCOME – unaudited
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Profit for the period (page 19) 2,776 2,347 37,656
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss: 978 (536) (3,809)
Differences on exchange
– subsidiaries 1,358 (216) (3,084)
– associates (70) (393) (923)
Cash flow hedges
– net fair value losses - (166) (264)
– reclassified and reported in profit for the period 8 13 109
– reclassified and reported in net assets 7 (13) (16)
Investments held at fair value
– net fair value losses in respect of subsidiaries - - (27)
– net fair value gains in respect of associates, net of tax 12 5 5
Net investment hedges
– net fair value (losses)/gains (192) 237 425
– differences on exchange on borrowings (136) (56) (68)
Tax on items that may be reclassified (9) 53 34
Items that will not be reclassified subsequently to profit or loss: 287 115 681
Retirement benefit schemes
– net actuarial gains in respect of subsidiaries 346 119 833
– surplus recognition and minimum funding obligations in respect
of subsidiaries (3) (1) (6)
– actuarial gains in respect of associates, net of tax - 36 25
Tax on items that will not be reclassified (56) (39) (171)
Total other comprehensive income/(expense) for the period, 1,265 (421) (3,128)
net of tax
Total comprehensive income for the period, net of tax 4,041 1,926 34,528
Attributable to:
Owners of the parent 3,952 1,853 34,361
Non-controlling interests 89 73 167
4,041 1,926 34,528
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated financial
information.
The results for the six-month period ended 30 June 2017 and the year ended 31 December 2017 have been amended (“Revised”)
following the Group’s retrospective application of IFRS 15 (Revenue from Contracts with Customers). See page 26.
20
Interim Financial Statements
GROUP STATEMENT OF CHANGES IN EQUITY – unaudited
At 30 June 2018
Attributable to owners of the parent
Share premium, Total attributable Non-
Share capital redemption Other Retained to owners controlling
capital and merger reserves reserves earnings of parent interests Total equity
£m £m £m £m £m £m £m
Balance at 31 December 2017 - revised 614 26,602 (3,392) 36,935 60,759 222 60,981
Accounting policy change (IFRS 9) – see
page 26 - - (9) (29) (38) - (38)
Revised balance at 1 January 2018 614 26,602 (3,401) 36,906 60,721 222 60,943
Total comprehensive income for the
period, net of tax (page 20) - - 975 2,977 3,952 89 4,041
Profit for the period (page 19) - - - 2,690 2,690 86 2,776
Other comprehensive income for the
period, net of tax (page 20) - - 975 287 1,262 3 1,265
Employee share options
– value of employee services - - - 64 64 - 64
– proceeds from shares issued - 3 - - 3 - 3
Dividends and other appropriations -
– ordinary shares - - - (2,224) (2,224) - (2,224)
– to non-controlling interests - - - - - (93) (93)
Purchase of own shares
– held in employee share ownership
Trusts - - - (143) (143) - (143)
Other movements - - - 28 28 - 28
Balance at 30 June 2018 614 26,605 (2,426) 37,608 62,401 218 62,619
At 30 June 2017 (Revised) Attributable to owners of the parent
Share premium, Total attributable Non-
Share capital redemption Other Retained to owners controlling
capital and merger reserves reserves earnings of parent interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2017 507 3,931 413 3,331 8,182 224 8,406
Total comprehensive (expenses)/income
for the period, net of tax (page 20) - - (523) 2,376 1,853 73 1,926
Profit for the period (page 19) - - - 2,261 2,261 86 2,347
Other comprehensive (expense)/income
for the period, net of tax (page 20) - - (523) 115 (408) (13) (421)
Employee share options
– value of employee services - - - 36 36 - 36
– proceeds from shares issued - 2 - - 2 - 2
Dividends and other appropriations
– ordinary shares - - - (2,181) (2,181) - (2,181)
– to non-controlling interests - - - - - (105) (105)
Purchase of own shares
– held in employee share ownership
trusts - - - (215) (215) - (215)
– deferred tax on employee share
schemes - - - 42 42 - 42
Other movements - (1) (1) (2) - (2)
Balance at 30 June 2017 507 3,933 (111) 3,388 7,717 192 7,909
21
Interim Financial Statements
GROUP STATEMENT OF CHANGES IN EQUITY - unaudited cont…
At 31 December 2017 (Revised)
Attributable to owners of the parent
Total
Share premium, attributable Non-
Share capital redemption Other Retained to owners controlling
capital and merger reserves reserves earnings of parent interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2017 507 3,931 413 3,331 8,182 224 8,406
Total comprehensive (expense)/income for
the year, net of tax (page 20) - - (3,805) 38,166 34,361 167 34,528
Profit for the year (page 19) - - - 37,485 37,485 171 37,656
Other comprehensive (expense)/income for
the year, net of tax (page 20) - - (3,805) 681 (3,124) (4) (3,128)
Employee share options
– value of employee services - - 105 105 - 105
– proceeds from shares issued - 5 - - 5 - 5
Dividends and other appropriations
– ordinary shares - - - (4,465) (4,465) - (4,465)
– to non-controlling interests - - - - - (169) (169)
Purchase of own shares
– held in employee share ownership
trusts - - - (205) (205) - (205)
Shares issued – RAI acquisition 107 22,666 - - 22,773 - 22,773
Other movements - - - 3 3 - 3
Balance at 31 December 2017 614 26,602 (3,392) 36,935 60,759 222 60,981
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated financial information.
22
Interim Financial Statements
GROUP BALANCE SHEET - unaudited
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Assets
Non-current assets
Intangible assets 120,006 12,177 117,785
Property, plant and equipment 4,849 3,636 4,882
Investments in associates and joint ventures 1,775 9,438 1,577
Retirement benefit assets 1,200 615 1,123
Deferred tax assets 423 468 333
Trade and other receivables 722 758 756
Investments held at fair value 50 44 42
Derivative financial instruments 539 576 590
Total non-current assets 129,564 27,712 127,088
Current assets
Inventories 6,339 5,177 5,864
Income tax receivable 49 71 460
Trade and other receivables 4,039 3,833 4,053
Investments held at fair value 188 26 65
Derivative financial instruments 193 312 228
Cash and cash equivalents 2,125 2,019 3,291
12,933 11,438 13,961
Assets classified as held-for-sale 4 36 5
Total current assets 12,937 11,474 13,966
Total assets 142,501 39,186 141,054
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated
financial information.
The results for the six-month period ended 30 June 2017 and the year ended 31 December 2017 have been amended (“Revised”)
following the Group’s retrospective application of IFRS 15 (Revenue from Contracts with Customers). See page 26.
23
Interim Financial Statements
GROUP BALANCE SHEET - unaudited cont…
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Equity
Capital and reserves
Share capital 614 507 614
Share premium, capital redemption and merger reserves 26,605 3,933 26,602
Other reserves (2,426) (111) (3,392)
Retained earnings 37,608 3,388 36,935
Owners of the parent 62,401 7,717 60,759
Non-controlling interests 218 192 222
Total equity 62,619 7,909 60,981
Liabilities
Non-current liabilities
Borrowings 43,225 15,085 44,027
Retirement benefit liabilities 1,489 827 1,821
Deferred tax liabilities 17,612 659 17,129
Provisions 347 395 354
Trade and other payables 1,059 1,036 1,058
Derivative financial instruments 100 79 79
Total non-current liabilities 63,832 18,081 64,468
Current liabilities
Borrowings 5,287 5,822 5,423
Income tax payable 739 622 720
Provisions 330 330 399
Trade and other payables 9,498 5,948 8,908
Derivative financial instruments 196 474 155
Total current liabilities 16,050 13,196 15,605
Total equity and liabilities 142,501 39,186 141,054
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated financial
information.
The results for the six-month period ended 30 June 2017 and the year ended 31 December 2017 have been amended (“Revised”)
following the Group’s retrospective application of IFRS 15 (Revenue from Contracts with Customers). See page 26.
24
Interim Financial Statements
GROUP CASH FLOW STATEMENT - unaudited
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Cash flows from operating activities
Cash generated from operating activities (page 32) 4,670 1,788 6,119
Dividends received from associates 1 465 903
Tax paid (813) (547) (1,675)
Net cash generated from operating activities 3,858 1,706 5,347
Cash flows from investing activities
Interest received 36 34 83
Purchases of property, plant and equipment (205) (198) (791)
Proceeds on disposal of property, plant and equipment 9 23 95
Purchases of intangibles (35) (99) (187)
Purchases of investments (124) (90) (170)
Proceeds on disposals of investments 48 85 160
Acquisition of RAI net of cash acquired - - (17,657)
Investment in associates and acquisitions of other subsidiaries net
of cash acquired (14) (52) (77)
Net cash used in investing activities (285) (297) (18,544)
Cash flows from financing activities
Interest paid (752) (379) (1,114)
Proceeds from increases in and new borrowings 1,650 3,839 40,937
Inflows/(outflows) relating to derivative financial instruments 25 (108) (406)
Purchases of own shares held in employee share ownership trusts (143) (215) (205)
Reductions in and repayments of borrowings (3,067) (2,365) (20,827)
Dividends paid to owners of the parent (2,114) (2,179) (3,465)
Dividends paid to non-controlling interests (96) (106) (167)
Other 4 2 6
Net cash (used in)/from financing activities (4,493) (1,511) 14,759
Net cash flows (used in)/from operating, investing and financing
activities (920) (102) 1,562
Differences on exchange (148) (139) (391)
(Decrease)/increase in net cash and cash equivalents in the
period (1,068) (241) 1,171
Net cash and cash equivalents at 1 January 2,822 1,651 1,651
Net cash and cash equivalents at period end 1,754 1,410 2,822
Cash and cash equivalents per balance sheet 2,125 2,019 3,291
Overdrafts and accrued interest (371) (609) (469)
Net cash and cash equivalents at period end 1,754 1,410 2,822
The accompanying notes on pages 26 to 47 form an integral part of this condensed consolidated financial
information. The net cash outflows relating to the Quebec Class action and adjusting items on pages 29 and
30, included in the above, are £229 million (30 June 2017: £352 million, 31 December 2017: £685 million).
The results for the sixmonth period ended 30 June 2017 and the year ended 31 December 2017 have been amended (“Revised”)
following the Group’s retrospective application of IFRS 15 (Revenue from Contracts with Customers). See page 26.
25
Notes to the Interim Financial Statements
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information comprises the unaudited interim financial information for
the six months to 30 June 2018 and as revised for IFRS 15 for both the six-month period ended 30 June 2017
and the year ended 31 December 2017, approved on 25 July 2018. This condensed consolidated financial
information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the
European Union (EU) and as issued by the International Accounting Standards Board (IASB), and the
Disclosure Guidance and Transparency Rules issued by the Financial Conduct Authority. The condensed
consolidated financial information is unaudited but has been reviewed by the auditor and its review report is
set out on page 18.
The condensed consolidated financial information does not constitute statutory accounts within the meaning
of the UK Companies Act 2006 and should be read in conjunction with the Annual Report and Form 20-F,
including the audited financial statements for the year ended 31 December 2017, which were prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by the IASB, IFRS as adopted by
the EU, and in accordance with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU
differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the Group’s
consolidated financial statements for the periods presented. The Annual Report and Form 20-F for 2017
represent the statutory accounts for that year and have been filed with the Registrar of Companies. The
auditor’s report on those statements was unmodified and did not contain an emphasis of matter paragraph
and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.
This condensed consolidated financial information has been prepared under the historical cost convention,
except in respect of certain financial instruments, and on a basis consistent with the accounting policies as
set out in the Annual Report and Form 20-F for the year ended 31 December 2017, except where noted
below.
With effect from 1 January 2018, the Group has adopted IFRS 15 Revenue from Contracts with Customers.
The Group has revised prior periods, as permitted by the Standard, to ensure comparability of the income
statement across prior periods. This Standard has changed the way the Group accounts for consideration
payable to customers, and requires certain payments to indirect customers, previously shown as marketing
expenses, to be shown as deductions from revenue. This has reduced revenue for the six months to 30 June
2017 and the twelve months to 31 December 2017 by £299 million and £664 million, respectively, with a
corresponding reduction in operating costs. In addition, due to the timing of the recognition of certain
payments to indirect customers, revenue and operating profit for the twelve months ended 31 December
2017 has been reduced by a further £64 million (£nil for the six-month period ended 30 June 2017).
In addition, with effect from 1 January 2018, the Group has adopted IFRS 9 Financial Instruments with no
revision of prior periods, as permitted by the Standard. The cumulative impact of adopting the Standard,
including the effect of tax entries, has been recognised as a revision of opening reserves in 2018, and is £38
million arising from the impairment of financial assets under the expected loss model required under IFRS 9,
which accelerates recognition of potential impairment on loans and trade receivables when compared with
the incurred loss model under IAS 39. A simplified “lifetime expected loss model” has been used for balances
arising as a result of revenue recognition, as permitted by the Standard, by applying a standard rate of
provision on initial recognition of trade debtors based upon the Group’s historical experience of credit loss
modified by expectations of the future, and increasing this provision to take account of overdue receivables.
Applying the requirements of IFRS 9 has resulted in a decrease of trade and other debtors of £45 million as at
1 January 2018.
26
Notes to the Interim Financial Statements
Accounting policies and basis of preparation cont…
IFRS 9 also changes the classification and measurement of financial assets. The category of available-for-sale
investments (where fair value changes were deferred in reserves until disposal of the investment) has been
replaced with the category of financial assets at Fair Value through Profit and Loss (for most investments) and
the category of financial assets at Fair Value through Other Comprehensive Income (for qualifying equity
investments). The available-for-sale reserve at 1 January 2018 has been reclassified as appropriate into
retained earnings. In addition, certain loans and receivables which do not meet the recognition and
measurement tests for amortised cost classification under IFRS 9 have been reclassified as financial assets at
Fair Value through Profit and Loss at the same date.
Given the immateriality of the various investment classes and to avoid clutter on the face of the balance
sheet, the Group will use the term “investments held at fair value” to refer to all of these financial assets
both pre- and post- the adoption of IFRS 9.
For further details on the impact on the Group’s balance sheet of these changes are provided on page 38. The
Group has adopted the hedge accounting requirements of IFRS 9 prospectively from 1 January 2018.
In addition, with effect from 1 January 2018, the Group has changed certain estimates of useful economic
lives for plant and machinery across the Group, harmonising depreciation rates used by the International
Businesses and by RAI from 14 years and 30 years, respectively, to a standard 20-year life. The effect of the
change is not material to the Group, and will be slightly less than £60 million (£30 million for the period
ended 30 June 2018). RAI recognised an impairment charge of £13 million in compliance with the new
estimate.
The preparation of this condensed consolidated financial information requires management to make
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities at the date of this condensed consolidated financial information. Such
estimates and assumptions are based on historical experience and various other factors that are believed to
be reasonable in the circumstances and constitute management’s best judgement at the date of the
condensed consolidated financial information. The key estimates and assumptions were the same as those
that applied to the consolidated financial information for the year ended 31 December 2017, apart from
updating the assumptions used to determine the carrying value of liabilities for retirement benefit schemes.
In the future, actual experience may deviate from these estimates and assumptions, which could affect this
condensed consolidated financial information as the original estimates and assumptions are modified, as
appropriate, in the period in which the circumstances change.
ADJUSTING ITEMS
Adjusting items are significant items of income or expense in revenue, profit from operations, net finance
costs, taxation and the Group’s share of the post-tax results of associates and joint ventures which
individually or, if of a similar type, in aggregate, are relevant to an understanding of the Group’s underlying
financial performance because of their size, nature or incidence. In identifying and quantifying adjusting
items, the Group consistently applies a policy that defines criteria that are required to be met for an item to
be classified as adjusting. These items are separately disclosed in the segmental analyses or in the notes to
the accounts as appropriate.
The Group believes that these items are useful to users of the Group financial statements in helping them to
understand the underlying business performance and are used to derive the Group’s principal non-GAAP
measures of adjusted revenue, adjusted profit from operations, adjusted diluted earnings per share,
operating cash flow conversion ratio and adjusted cash from operations, all of which are before the impact of
adjusting items and which are reconciled from revenue, profit from operations, diluted earnings per share,
cash conversion ratio and net cash generated from operating activities.
27
Notes to the Interim Financial Statements
ANALYSIS OF REVENUE BY SEGMENT
2018 2017
Reported Adj Items1 Adjusted Exchange Adjusted Revised* Adj Items1 Adjusted
at CC2
Revenue £m £m £m £m £m £m £m £m
US 4,525 - 4,525 418 4,943 - - -
APME 2,384 - 2,384 236 2,620 2,489 - 2,489
AMSSA 1,951 - 1,951 255 2,206 2,149 - 2,149
ENA 2,776 (103) 2,673 111 2,784 2,780 (69) 2,711
Total Region 11,636 (103) 11,533 1,020 12,553 7,418 (69) 7,349
ADJUSTING ITEMS INCLUDED IN REVENUE
Adjusting items in revenue relate to certain third-party contract manufacturing arrangements. The Group will
acquire and sell goods inclusive of excise, acquired from a third party under short-term arrangements, and
then passed on to customers. This increases both revenue and cost of sales, with no impact to profit from
operations but distorts operating margin. To better reflect the underlying performance of the Group, this
uplift from excise in both revenue and cost of sales has been adjusted for, given the temporary nature of the
arrangement.
ANALYSIS OF PROFIT FROM OPERATIONS AND DILUTED EARNINGS PER SHARE BY SEGMENT
2018 2017
Reported Adj Items1 Adjusted Exchange Adjusted Revised* Adj Items1 Adjusted
at CC2
£m £m £m £m £m £m £m £m
Profit from Operations
US 1,875 214 2,089 206 2,295 - - -
APME 920 30 950 83 1,033 1,016 45 1,061
AMSSA 796 33 829 91 920 806 54 860
ENA 847 103 950 18 968 752 168 920
Total Region 4,438 380 4,818 398 5,216 2,574 267 2,841
Net finance costs (701) 35 (666) (61) (727) (325) 49 (276)
Associates and
232 (37) 195 18 213 778 (22) 756
joint ventures
Profit before tax 3,969 378 4,347 355 4,702 3,027 294 3,321
Taxation (1,193) 75 (1,118) (90) (1,208) (680) (48) (728)
Non-controlling
(86) - (86) (8) (94) (86) (2) (88)
interests
Profit
attributable to 2,690 453 3,143 257 3,400 2,261 244 2,505
shareholders
Diluted number
2,291 2,291 2,291 1,863 1,863
of shares (m)
Diluted earnings
117.4 137.2 148.4 121.4 134.4
per share (pence)
Notes to the analysis of revenue and profit from operations above:
(1) Adjusting items represent certain items which the Group considers distinctive based upon their size, nature or incidence.
(2) CC: constant currency – measures are calculated based on a retranslation, at the prior year’s exchange rates, of the current year’s
results of the Group and, where applicable, its segments.
* 2017 results have been revised for the impact of IFRS 15 (Revenue from Contracts with Customers), effective 1 January 2018 with
retrospective application, and for the change to the regions, effective 1 January 2018, as previously announced.
28
Notes to the Interim Financial Statements
ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS
Adjusting items are significant items in the profit from operations that individually or, if of a similar type, in
aggregate, are relevant to an understanding of the Group’s underlying financial performance. These items
are separately disclosed in the segmental analyses.
(a) Restructuring and integration costs
Restructuring costs reflect the costs incurred as a result of initiatives to improve the effectiveness and the
efficiency of the Group as a globally integrated enterprise, including the relevant operating costs of
implementing the new operating model. These costs represent additional expenses incurred that are not
related to the normal business and day-to-day activities. The new operating model includes revised
organisation structures, standardised processes and shared back office services underpinned by a global
single instance of SAP. These initiatives also include a review of the Group’s manufacturing operations, supply
chain, overheads and indirect costs, organisational structure and systems and software used. The costs of
these initiatives, together with the costs of integrating acquired businesses into existing operations, including
acquisition costs, are included in profit from operations under the following headings:
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Employee benefit costs 36 50 193
Depreciation and impairment costs 27 6 85
Other operating expenses 42 77 330
Other operating income (6) - (8)
Total 99 133 600
The adjusting charge in the six-months ended 30 June 2018 relates to the integration costs associated with
the acquisition of RAI and ongoing costs of implementing the revisions to the Group’s operating model. This
includes the cost of packages in respect of permanent headcount reductions and permanent employee
benefit reductions in the Group. The costs also cover the downsizing activities in Germany, partially offset by
the income from sale of certain assets that have become available as part of the downsizing activities.
Restructuring and integration costs in the six months to 30 June 2017 include advisor fees and costs incurred
related to the acquisition of the remaining shares in Reynolds not already owned by the Group, that
completed on 25 July 2017. It also includes the implementation of a new operating model and the cost of
packages in respect of permanent headcount reductions and permanent employee benefit reductions in the
Group. The costs also cover the downsizing activities in Germany.
(b) Amortisation and impairment of trademarks and similar intangibles
The acquisition of trademarks from RAI, Bulgartabac Holdings and previous business combinations, including
TDR, Chic and ST, have resulted in the capitalisation of trademarks and similar intangibles that are amortised
over their expected useful lives, which do not exceed 20 years. The charge of £189 million is included in
depreciation, amortisation and impairment costs in the profit from operations for the six months to 30 June
2018 (30 June 2017: £134 million). For the year to 31 December 2017, the charge was £383 million.
29
Notes to the Interim Financial Statements
Adjusting items included in profit from operations cont…
(c) Fox River
In 2011, a Group subsidiary provided £274 million in respect of claims in relation to environmental clean-up
costs of the Fox River. On 30 September 2014, a Group subsidiary, NCR, Appvion and Windward Prospects
entered into a Funding Agreement with regard to the costs for the clean-up of Fox River. Based on this
Funding Agreement, in the six months to 30 June 2018, £9 million has been paid (30 June 2017: £2 million,
31 December 2017: £25 million).
In January 2017, NCR and Appvion entered into a consent decree with the US Government to resolve how the
remaining clean-up will be funded and to resolve further outstanding claims between them. The Consent
Decree was approved by the District Court of Wisconsin in August 2017. The US Government enforcement
action against NCR was terminated as a result of that order and contribution claims from the Potentially
Responsible Parties (“PRPs”) against NCR were dismissed. One of the PRPs, P.H. Glatfelter has filed an appeal
against the approval of the Consent Decree in the US Court of Appeals. This hearing will be heard in late
2018. Considering these developments, the provision has been reviewed. No adjustment has been proposed,
other than as related to the charge above, with the provision standing at £129 million at 30 June 2018 (30
June 2017: £161 million, 31 December 2017: £138 million).
In July 2016, the High Court ruled in a Group subsidiary’s favour that a dividend of €135 million paid by
Windward to Sequana in May 2009 was a transaction made with the intention of putting assets beyond the
reach of the Group subsidiary and of negatively impacting its interests. On 10 February 2017, further to a
hearing in January 2017 to determine the relief due, the Court found in the Group subsidiary’s favour,
ordering that Sequana must pay an amount up to the full value of the dividend plus interest which equates to
around US$185 million, related to past and future clean-up costs. The Court granted all parties leave to
appeal and Sequana a stay in respect of the above payments. The appeal was heard in June 2018 with a
judgment expected by the end of 2018. Due to the uncertain outcome of the case no asset has been
recognised in relation to this ruling. In February 2017, Sequana entered into a process in France seeking court
protection (the “Sauvegarde”), exiting the Sauvegarde in June 2017. No payments have been received.
(d) Other
In the six months ended June 2018, the Group incurred £92 million of other adjusting items, including £77
million related to Engle progeny litigation offset by credits related to the Non-Participating Manufacturers
settlement, which have been adjusted within “other operating expenses”.
In the year ended 31 December 2017, the release of the fair value acquisition accounting adjustments to
finished goods inventories of £465 million has been adjusted within “changes in inventories of finished goods
and work in progress”.
Also included in 2017 is the impairment of certain assets (£69 million) related to a third-party distributor
(Agrokor) in Croatia, that has been adjusted within “other operating expenses”.
ADJUSTING ITEMS INCLUDED IN NET FINANCING COSTS
In the six months ended 30 June 2018, the Group incurred interest on adjusting tax payables of £35 million,
including interest of £12 million (2017: £12 million) in relation to FII GLO, as described on page 41, and a £22
million charge in respect of withholding tax in Russia as explained on page 31.
30
Notes to the Interim Financial Statements
ADJUSTING ITEMS INCLUDED IN SHARE OF POST-TAX RESULTS OF ASSOCIATES AND JOINT
VENTURES
The following is a summary of the adjusting items incurred in respect of the Group’s associates and joint
ventures, shown reflecting the Group’s share of post-tax results:
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Gain on deemed disposal of RAI as an associate - - 23,288
Costs incurred by RAI related to its acquisition by BAT - (33)
Other adjusting items incurred by RAI pre-acquisition - (12) (60)
Tisak/Agrokor adjustment - - (27)
Reversal of tax claim in ITC 10 - -
Dilution of interest in ITC 27 34 29
Total 37 22 23,197
The Group’s interest in ITC decreased from 29.71% to 29.66% as a result of ITC issuing ordinary shares under
the company’s Employees Share Option Scheme. The issue of these shares and change in the Group’s share
of ITC resulted in a gain of £27 million, which is treated as a deemed partial disposal and included in the
income statement. ITC also recognised an adjusting gain related to the release of certain provisions related to
a tax claim, the Group’s share of which, net of tax, was £10 million.
The share of post-tax results of associates and joint ventures is after the adjusting items shown above which
are excluded from the calculation of adjusted earnings per share as set out on page 36.
ADJUSTING ITEMS INCLUDED IN TAXATION
Adjusting items relate to a:
- £69 million charge due to changes in the US State tax rates in the period, relating to the revaluation
of deferred tax liabilities arising on trademarks recognised on the RAI acquisition in 2017; and
- £77 million charge related to recent guidelines issued in Russia where higher withholding taxes could
apply from 2015 onwards. A provision for the associate tax change and £22 million of interest has
been recognised in the period for 2015 through to 2017.
As both of the above items are not reflective of the ongoing business, these have been recognised as
adjusting items within tax. This is partially offset by £71 million for the six months to 30 June 2018 (30 June
2017: £48 million, 31 December 2017: £454 million) in respect of the tax on other adjusting items, as
described on pages 29 and 30.
31
Notes to the Interim Financial Statements
CASH FLOW
Net cash generated from operating activities
Net cash generated from operating activities in the IFRS cash flows on page 25 includes the following items:
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Profit from operations 4,438 2,574 6,412
Depreciation, amortisation and impairment 437 346 902
(Increase)/decrease in inventories (582) 539 1,409
Increase in trade and other receivables (78) (151) (732)
Increase in amounts receivable in respect of the Quebec - (130) (130)
Class Action
Increase/(decrease) in provision for MSA 719 - (934)
Decrease in trade and other payables (189) (1,312) (685)
Decrease in net retirement benefit liabilities (77) (36) (131)
Decrease in provisions (66) (74) (78)
Other non-cash items 68 32 86
Cash generated from operating activities 4,670 1,788 6,119
Dividends received from associates 1 465 903
Tax paid (813) (547) (1,675)
Net cash generated from operating activities 3,858 1,706 5,347
Net cash generated from operating activities increased by £2,152 million due to the cash generated from
operating activities by RAI in 2018, offsetting the reduction in dividends received from associates as this was
predominantly RAI’s dividend to the Group in 2017. The increase in inventory in 2018 was predominantly related
to the timing of leaf purchases and inventory movements in Australia, Russia and Bangladesh. The lower
decrease in trade and other payables, compared to the six months ended 30 June 2017, was driven by a
reduction in excise payable which is impacted by the timing of inventory movements in the supply chain. 2017
was also impacted by the final quarterly payments in relation to the Quebec Class Action.
Expenditure on research and development was approximately £112 million in the six months ended June 2018
(30 June 2017: £77 million) with a focus on products that could potentially reduce the risk associated with
smoking conventional cigarettes.
Net cash used in investing activities
Net cash used in investing activities was largely in line with prior year at £285 million (30 June 2017: £297 million)
and includes the purchase of treasury instruments in certain markets. 2017 included a number of acquisitions
including Winnington Holdings AB in Sweden and certain assets from Must Have Limited in the UK, including the
electronic cigarette brand ViP.
Included within investing activities is gross capital expenditure which includes purchases of property, plant and
equipment and purchases of intangibles. This includes the investment in the Group’s global operational
infrastructure (including, but not limited to, the manufacturing network, trade marketing and IT systems). In the
six months ended June 2018, the Group invested £241 million, an increase of 14.8% on the prior year (30 June
2017: £210 million).
32
Notes to the Interim Financial Statements
Cash flow cont…
Net cash used in financing activities
Net cash used in financing activities was £4,493 million in the period ended 30 June 2018 (30 June 2017: £1,511
million). This was due to the reductions and repayment of borrowings, partly offset by proceeds from increases in
and new borrowings, as the Group:
- repaid a €0.4 billion bond (in March 2018) and three bonds totalling US$2.5 billion (in June 2018) at
maturity;
- repaid the £0.6 billion, that was drawn under the revolving credit facility, and £1.2 billion of commercial
paper that were both outstanding at 31 December 2017; and
- issued and repaid commercial paper with a net amount of £2.6 billion outstanding at 30 June 2018.
The Group also paid the two quarterly interim dividends in February (43.6p per share) and May (48.8p per share)
to shareholders.
LIQUIDITY
The Treasury function is responsible for raising finance for the Group, managing the Group’s cash resources
and the financial risks arising from underlying operations. All these activities are carried out under defined
policies, procedures and limits.
The Group has targeted an average centrally managed bond maturity of at least five years with no more than
20% of centrally managed debt maturing in a single rolling year. As at 30 June 2018, the average centrally
managed debt maturity of bonds was 9.2 years (30 June 2017: 8.5 years; 31 December 2017: 9.2 years) and
the highest proportion of centrally managed debt maturing in a single rolling 12-month period was 14.0% (30
June 2017: 19.7%; 31 December 2017: 13.2%).
The Group continues to maintain investment-grade credit ratings, with ratings from Moody’s/S&P at Baa2
(stable outlook)/BBB+ (stable outlook) respectively. The strength of the ratings has underpinned debt
issuance and the Group is confident of its ability to successfully access the debt capital markets. All
contractual borrowing covenants have been met and none are expected to inhibit the Group’s operations or
funding plans.
It is Group policy that short-term sources of funds (including drawing under both the US$4 billion and £3
billion euro commercial paper programmes) are backed by undrawn committed lines of credit and cash.
In July 2018, the Group exercised a one-year extension option for the £3 billion 364-day revolving credit
facility, extending the final maturity to 2019. The Group also has access to a £3 billion revolving credit facility
with a maturity date in 2021. These facilities were undrawn at 30 June 2018.
BORROWINGS
The maturity profile of borrowings, which were higher due to the acquisition of RAI, is as follows:
6 months to Year to
30.6.18 30.6.17 31.12.17
£m £m £m
Due within one year: 5,287 5,822 5,423
Due beyond one year: 43,225 15,085 44,027
Total borrowings 48,512 20,907 49,450
33
Notes to the Interim Financial Statements
FAIR VALUE MEASUREMENTS AND VALUATION PROCESSES
The Group held certain financial instruments at fair value at 30 June 2018. The definitions and valuation
techniques employed for these as at 30 June 2018 are consistent with those used at 31 December 2017 and
disclosed in Note 23 on pages 161 to 164 of the 2017 Annual Report and Form 20-F:
- Level 1 financial instruments are traded in an active market and fair value is based on quoted prices at
the period end.
- Level 2 financial instruments are not traded in an active market, but the fair values are based on quoted
market prices, broker/dealer quotations, or alternative pricing sources with reasonable levels of price
transparency. The Group’s level 2 financial instruments include OTC derivatives.
- The fair values of level 3 financial instruments have been determined using a valuation technique where
at least one input (which could have a significant effect on the instrument's valuation) is not based on
observable market data. The Group’s level 3 financial instruments primarily consist of interest free loans
and an equity investment in an unquoted entity which is valued using the discounted cash flows of
estimated future dividends.
While the carrying values of assets and liabilities at fair value have changed since 31 December 2017, the
Group does not consider the movements in value to be significant, and the categorisation of these assets and
liabilities in accordance with the disclosure requirements of IFRS 7 has not materially changed. In accordance
with the adoption of IFRS 9, as shown on page 38, the Group has reclassified £146 million from trade and
other receivables to investments held at fair value. The values of level 1 assets and level 3 assets are not
material to the Group and were £88 million and £150 million respectively at 30 June 2018 (30 June 2017: £26
million and £44 million respectively and 31 December 2017: £91 million and £16 million respectively).
Level 2 assets and liabilities are shown below.
30.6.2018 30.6.2017 31.12.2017
Level 2 Level 2 Level 2
£m £m £m
Assets at fair value
Derivatives relating to
– interest rate swaps 141 209 166
– cross-currency swaps 436 528 450
– forward foreign currency contracts 155 151 202
Assets at fair value 732 888 818
Liabilities at fair value
Derivatives relating to
– interest rate swaps 82 212 91
– cross-currency swaps 16 132 -
– forward foreign currency contracts 198 209 143
Liabilities at fair value 296 553 234
Borrowings are carried at amortised cost. The fair value of borrowings is estimated to be £47,527 million (30
June 2017: £21,718 million and 31 December 2017: £50,449 million). The value of other assets/liabilities held
at amortised cost are not materially different from their fair values.
34
Notes to the Interim Financial Statements
RELATED PARTY DISCLOSURES
There were no material changes in related parties or related party transactions. The Group’s related party
transactions and relationships for 2017 were disclosed on page 170 of the Annual Report and Form 20-F for
the year ended 31 December 2017.
EARNINGS PER SHARE
Basic earnings per share were 3.4% lower at 117.7p (2017: 121.8p) as the increase in the Group’s operating
performance was more than offset by the translational foreign exchange headwind, increased financing
charges and withholding tax charge in Russia. Adjusted diluted earnings per share grew by 2.1% to 137.2p
(2017: 134.4p) as the Group’s improved operating performance before adjusting items was partially offset by
the higher interest charges, reduced profit from associates and joint ventures and the transactional foreign
exchange headwind.
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
pence pence pence
Earnings per share
- basic 117.7 121.8 1,833.9
- diluted 117.4 121.4 1,827.6
Adjusted earnings per share
- basic 137.5 134.9 283.1
- diluted 137.2 134.4 282.1
Headline earnings per share
- basic 117.2 126.4 699.8
- diluted 116.7 126.0 697.3
Basic earnings per share are based on the profit for the year attributable to ordinary shareholders and the
weighted average number of ordinary shares in issue during the period (excluding treasury shares). For the
calculation of the diluted earnings per share, the weighted average number of shares reflects the potential
dilutive effect of employee share schemes.
35
Notes to the Interim Financial Statements
Earnings Per Share cont…
Adjusted diluted earnings per share are calculated by taking the following adjustments into account (see
pages 29 to 31):
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
pence pence pence
Diluted earnings per share 117.4 121.4 1,827.6
Effect of restructuring and integration costs 3.9 5.1 22.8
Effect of amortisation of trademarks and similar intangibles 6.6 6.4 14.3
Effect of other adjusting items 6.5 - 17.1
Effect of associates’ adjusting items (1.7) (1.2) (1,131.0)
Effect of adjusting items in net finance costs 1.5 2.7 7.5
Effect of adjusting items in respect of deferred taxation 3.0 - (476.2)
Adjusted diluted earnings per share 137.2 134.4 282.1
The presentation of headline earnings per share, as an alternative measure of earnings per share, is mandated
under the JSE Listing Requirements. It is calculated in accordance with Circular 4/2018 ‘Headline Earnings’ as
issued by the South African Institute of Chartered Accountants.
Diluted headline earnings per share are calculated by taking the following adjustments into account:
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
pence pence pence
Diluted earnings per share 117.4 121.4 1,827.6
Effect of impairment of intangibles and property, plant 1.1 3.2 6.9
and equipment and held-for-sale assets
Effect of gains on disposal of property, plant and (0.2) (0.4) (1.7)
equipment and held-for-sale assets
Effect of share of associates’ gain on disposal of asset (1.2) 1.8 (1.4)
held-for-sale, and effect of issue of shares and change in
shareholding in associate
Gain on deemed disposal of an associate (RAI) - - (1,135.4)
Other (0.4) - 1.3
Diluted headline earnings per share 116.7 126.0 697.3
36
Notes to the Interim Financial Statements
Earnings Per Share cont…
The following is a reconciliation of earnings to headline earnings, in accordance with the JSE Listing
Requirements:
6 months to Year to
30.6.18 30.6.17 31.12.17
Revised Revised
£m £m £m
Earnings 2,690 2,261 37,485
Effect of impairment of intangibles and property, plant 29 59 144
and equipment and held-for-sale assets
Effect of gains on disposal of property, plant and (5) (8) (35)
equipment and held-for-sale assets
Effect of share of associates’ gain on disposal of asset (27) 34 (29)
held-for-sale, and effect of issue of shares and change in
shareholding in associate
Gain on deemed disposal of an associate (RAI) - - (23,288)
Other (10) - 27
Headline earnings 2,677 2,346 14,304
The earnings per share are based on:
30.6.18 30.6.17 31.12.17
Earnings Shares Earnings Shares Earnings Shares
Revised Revised
£m m £m m £m m
Earnings per share
- basic 2,690 2,285 2,261 1,858 37,485 2,044
- diluted 2,690 2,291 2,261 1,863 37,485 2,051
Adjusted earnings per
share
- basic 3,143 2,285 2,505 1,858 5,786 2,044
- diluted 3,143 2,291 2,505 1,863 5,786 2,051
Headline earnings per
share
- basic 2,677 2,285 2,346 1,858 14,304 2,044
diluted 2,677 2,291 2,346 1,863 14,304 2,051
37
Notes to the Interim Financial Statements
IMPLEMENTATION OF IFRS 15 and IFRS 9
31 December 2017 Impact of IFRS 9 01 Jan 2018
Reported Adoption Revised Financial Expected Revised for
of IFRS 15 assets loss IFRS 9
reclass impairment
£m £m £m £m £m £m
Assets
Non-current assets
Deferred tax assets 317 16 333 - 7 340
Trade and other receivables 756 - 756 (2) - 754
Investments held at fair value 42 - 42 2 - 44
Other 125,957 - 125,957 - - 125,957
Total non-current assets 127,072 16 127,088 - 7 127,095
Current assets
Trade and other receivables 4,053 - 4,053 (144) (45) 3,864
Investments held at fair value 65 - 65 144 - 209
Other 9,848 - 9,848 - - 9,848
Total current assets 13,966 - 13,966 - (45) 13,921
Total assets 141,038 16 141,054 - (38) 141,016
Equity
Capital and reserves
Share capital 614 - 614 - - 614
Share premium, capital 26,602 - 26,602 - - 26,602
redemption and merger
reserves
Other reserves (3,395) 3 (3,392) (9) - (3,401)
Retained earnings 36,983 (48) 36,935 9 (38) 36,906
Owners of the parent 60,804 (45) 60,759 - (38) 60,721
Non-controlling interests 222 - 222 - - 222
Total equity 61,026 (45) 60,981 - (38) 60,943
Liabilities
Non-current liabilities
Other 64,468 - 64,468 - - 64,468
Total non-current liabilities 64,468 - 64,468 - - 64,468
Current liabilities
Trade and other payables 8,847 61 8,908 - - 8,908
Other 6,697 - 6,697 - - 6,697
Total current liabilities 15,544 61 15,605 - - 15,605
Total equity and liabilities 141,038 16 141,054 - (38) 141,016
38
Notes to the Interim Financial Statements
CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS
The Group has contingent liabilities in respect of litigation, taxes and guarantees in various countries, as
described in Note 28 to the 2017 Annual Report and Accounts and Form 20-F, pages 172 to 188. The Group is
subject to contingencies pursuant to requirements that it complies with relevant laws, regulations and
standards. Failure to comply could result in restrictions in operations, damages, fines, increased tax,
increased cost of compliance, interest charges, reputational damage or other sanctions. These matters are
inherently difficult to quantify.
In cases where the Group has an obligation as a result of a past event existing at the balance sheet date, it is
probable that an outflow of economic resources will be required to settle the obligation and the amount of
the obligation can be reliably estimated, a provision will be recognised based on best estimates and
management judgement. There are, however, contingent liabilities in respect of litigation, taxes in some
countries and guarantees for which no provisions have been made. While the amounts that may be payable
or receivable could be material to the results or cash flows of the Group in the period in which they are
recognised, the Board does not expect these amounts to have a material effect on the Group’s financial
condition.
Taxes
The Group has exposures in respect of the payment or recovery of a number of taxes. The Group is and has
been subject to a number of tax audits covering, among others, excise tax, value-added taxes, sales taxes,
corporate taxes, withholding taxes and payroll taxes. The estimated costs of known tax obligations have been
provided in these accounts in accordance with the Group’s accounting policies. In some countries, tax law
requires that full or part payment of disputed tax assessments be made pending resolution of the dispute. To
the extent that such payments exceed the estimated obligation, they would not be recognised as an expense.
There are disputes that may proceed to litigation in a number of countries including Brazil, South Africa and
the Netherlands. In the Netherlands, the Dutch tax authority has issued further assessments related to a
number of intra-group transactions and reorganisations. The assessments issued to date primarily covers the
years between 2008 to 2014 in the sum of €978 million (£865 million) including tax, interest and penalties.
The Group has appealed against the assessments in full.
In Bangladesh, on 25 July 2018, the Appellate Division of the Supreme Court in Bangladesh reversed the
decision of the High Court against BAT Bangladesh in respect of the retrospective demands for VAT and
Supplementary Duty amounting to approximately £170 million. The Attorney General has 30 days from
receipt of the certified Court Order in which to seek a review of this decision.
The Group is also appealing the ruling in respect of sales taxes and penalties in South Korea.
Group litigation
Group companies, as well as other leading cigarette manufacturers, are defendants in a number of product
liability cases. In a number of the cases, the amounts of compensatory and punitive damages sought are
significant.
While it is impossible to be certain of the outcome of any particular case or of the amount of any possible
adverse verdict, the Group believes that the defences of the Group’s companies to all these various claims
are meritorious on both the law and the facts, and a vigorous defence is being made everywhere. If an
adverse judgment is entered against any of the Group’s companies in any case, an appeal will be made. Such
appeals could require the appellants to post appeal bonds or substitute security in amounts that could in
some cases equal or exceed the amount of the judgment. At least in the aggregate, and despite the quality of
defences available to the Group, it is not impossible that the Group’s results of operations or cash flows in a
particular period could be materially affected by this and by the final outcome of any particular litigation.
39
Notes to the Interim Financial Statements
Contingent liabilities and financial commitments cont…
In Canada, following the implementation of legislation enabling provincial governments to recover healthcare
costs directly from tobacco manufacturers, ten actions for recovery of healthcare costs arising from the
treatment of smoking and health-related diseases have been brought and are proceeding in ten provinces.
Damages sought have not yet been quantified by all ten provinces; however, in respect of five provinces, the
damages quantified in each of the provinces range between CAD$10 billion and CAD$118 billion. Legislation
in two of the three territories has received the Royal Assent but is not yet in force. On 15 June 2018, the
province of Ontario delivered an expert report quantifying its damages in the range of CAD$280 billion and
CAD$630 billion in 2016/2017 dollars for the period 1954 – 2060. The province is seeking to amend its
Statement of Claim to claim damages of CAD$330 billion from CAD$50 billion.
In respect of the two class actions against the Group’s subsidiary Imperial Tobacco Canada (“ITCAN”) in
Quebec, in 2015 the Quebec Court of Appeal upheld the Order for Security, of which ITCAN’s share is CAD
$758 million, which has been paid in full to the Court escrow account as required by the judgment. ITCAN
continues to retain strong legal grounds to appeal the original judgment. No charge against profit has been
made with regards to the deposit, as ITCAN continues to assess that the deposits are fully recoverable upon a
successful appeal of the original judgment.
As at 30 June 2018 the Group’s subsidiary, R. J. Reynolds Tobacco Company (“RJRT”), had been served in
2,427 pending Engle progeny cases filed on behalf of approximately 3,072 individual plaintiffs. Many of these
are in active discovery or nearing trial. Since 1 January 2016 through to 30 June 2018, RJRT or Lorillard
Tobacco Company has paid judgments in 20 Engle progeny cases and have cumulatively paid US$116.6
million in compensatory or punitive damages and US$56.9 million for attorneys’ fees and statutory interest,
for a total of US$173.5 million in these cases. In addition, since 1 January 2016 through to 30 June 2018,
outstanding jury verdicts in favour of the Engle progeny plaintiffs had been entered against RJRT or Lorillard
Tobacco Company for US$137.2 million in compensatory damages (as adjusted) and US$176.3 million in
punitive damages. A significant majority of these verdicts are in various stages in the appellate process and
have been bonded as required by Florida law under the US$200 million bond cap passed by the Florida
legislature in 2009. Although the Group cannot currently predict when or how much it may be required to
bond and pay, RJRT will likely be required to bond and pay additional judgments as the litigation proceeds.
Criminal investigations
As previously reported by the Group, it has been investigating, through external legal advisors, allegations of
misconduct and has been liaising with the UK’s Serious Fraud Office (SFO) and other relevant authorities. It
was announced in August 2017 that the SFO had opened an investigation in relation to the Company, its
subsidiaries and associated persons. The Group is cooperating with the SFO’s investigation. The outcomes of
these matters will be decided by the relevant authorities or, if necessary, the courts. It is too early to predict
the outcomes, but these could include the prosecution of individuals and/or of a Group company or
companies. Accordingly, the potential for fines, penalties or other consequences cannot currently be
assessed. As the investigation is ongoing, it is not yet possible to identify the timescale in which these matters
might be resolved.
Summary
Having regard to all these matters, with the exception of Fox River, the Group does not consider it
appropriate to make any provision or charge in respect of any pending litigation. The Group does not believe
that the ultimate outcome of this litigation will significantly impair the Group’s financial condition. If the facts
and circumstances change, then there could be a material impact on the financial statements of the Group.
Full details of the litigation against Group companies and tax disputes as at 31 December 2018 will be
included in the Annual Report and Form 20-F for the year ended 31 December 2018. Whilst there has been
some movement on new and existing cases against Group companies, there have been, except as otherwise
stated, no material developments to date in 2018 that would impact on the financial position of the Group.
40
Notes to the Interim Financial Statements
FRANKED INVESTMENT INCOME GROUP LITIGATION ORDER
The Group is the principal test claimant in an action in the United Kingdom against HM Revenue and Customs
(“HMRC”) in the FII GLO. There are 25 corporate groups in the FII GLO. The case concerns the treatment for
UK corporate tax purposes of profits earned overseas and distributed to the UK. Full details are provided in
the 2017 Annual Report and Accounts and Form 20-F, note 6(b), page 127. The Supreme Court judgment in
the CFC & Dividend Group Litigation Order, of which Prudential is the test case, was delivered on 25 July
2018. It is possible that certain matters arising in the Prudential judgment, which are common to both Group
Litigation Orders, will have an impact on the Group’s FII claim.
Due to the uncertainty of the amounts and eventual outcome the Group has not recognised any impact in
the Income Statement in the current or prior period in respect of the receipt which, net of the deduction by
HMRC, is held as deferred income. Any future recognition as income will be treated as an adjusting item, due
to the size of the order, with interest of £12 million for the six months to 30 June 2018 (30 June 2017: £12
million, 31 December 2017: £25 million) accruing on the balance, which was also treated as an adjusting item.
41
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following consolidating financial information is required by the rules of the Securities and Exchange
Commission and is provided in anticipation of the exchange offer required by the registration rights
agreement entered into in connection with the bond offering related to the acquisition of RAI.
Note: In respect of the United States region, all financial statements and financial information provided by or with respect to the US business or RAI (and/or the RAI
Group) are prepared on the basis of US GAAP and constitute the primary financial statements or financial information of the US business or RAI (and/or the RAI
Group). Solely, for the purpose of consolidation within the results of BAT p.l.c. and the BAT Group, this financial information is then converted to International
Financial Reporting Standards as issued by the IASB and adopted by the European Union (IFRS). To the extent any such financial information provided in these
financial statements relate to the US business or RAI (and/or the RAI Group), it is provided as an explanation of the US business’ or RAI’s (and/or the RAI Group’s)
primary US GAAP based financial statements and information.
CONDENSED CONSOLIDATING INCOME STATEMENT
Period ended 30 June 2018 BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Revenue - - - 11,636 - 11,636
Raw materials and consumables used - - - (2,355) - (2,355)
Changes in inventories of finished goods and
work in progress - - - 76 - 76
Employee benefit costs (5) - (3) (1,406) 5 (1,409)
Depreciation, amortisation and impairment
costs - - - (437) - (437)
Other operating income - - 11 21 - 32
Other operating expenses (11) (1) (6) (3,098) 11 (3,105)
(Loss)/Profit from operations (16) (1) 2 4,437 16 4,438
Net finance income/(costs) 36 223 (163) (243) (554) (701)
Share of post-tax results of associates and
joint ventures - - - 232 - 232
Profit before taxation 20 222 (161) 4,426 (538) 3,969
Taxation on ordinary activities - (76) 44 (1,161) - (1,193)
Equity income from subsidiaries 2,776 - 1,625 - (4,401) -
Profit for the period 2,796 146 1,508 3,265 (4,939) 2,776
Attributable to:
Owners of the parent 2,796 146 1,508 3,179 (4,939) 2,690
Non-controlling interests - - - 86 - 86
2,796 146 1,508 3,265 (4,939) 2,776
Period ended 30 June 2017 (revised) BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Revenue - - - 7,418 - 7,418
Raw materials and consumables used - - - (1,881) - (1,881)
Changes in inventories of finished goods and
work in progress - - - (59) - (59)
Employee benefit costs (8) - (2) (1,142) 8 (1,144)
Depreciation, amortisation and impairment
costs - - - (346) - (346)
Other operating income - - - 55 - 55
Other operating expenses (3) - - (1,469) 3 (1,469)
(Loss)/Profit from operations (11) - (2) 2,576 11 2,574
Net finance income/(costs) (31) (22) (74) (96) (102) (325)
Share of post-tax results of associates and
joint ventures - - - 778 - 778
Profit before taxation (42) (22) (76) 3,258 (91) 3,027
Taxation on ordinary activities - 8 3 (691) - (680)
Equity income from subsidiaries 2,347 - - - (2,347) -
Profit for the period 2,305 (14) (73) 2,567 (2,438) 2,347
Attributable to:
Owners of the parent 2,305 (14) (73) 2,481 (2,438) 2,261
Non-controlling interests - - - 86 - 86
2,305 (14) (73) 2,567 (2,438) 2,347
42
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING STATEMENT OF OTHER COMPREHENSIVE INCOME
Period ended 30 June 2018 BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Profit for the period 2,796 146 1,508 3,265 (4,939) 2,776
Other comprehensive income/(expense)
Items that may be reclassified subsequently
to profit and loss - 19 10 949 - 978
Differences on exchange - - - 1,288 - 1,288
Cash flow hedges - 19 10 (14) - 15
Investments held at fair value - - - 12 - 12
Net investment hedges - - - (328) - (328)
Tax on items that may be reclassified - - - (9) - (9)
Items that will not be reclassified
subsequently to profit or loss: - - - 287 - 287
Retirement benefit schemes - - - 343 - 343
Tax on items that will not be reclassified - - - (56) - (56)
Total other comprehensive income for the
period, net of tax - 19 10 1,236 - 1,265
Share of subsidiaries OCI (other reserves) 287 - - - (287) -
Share of subsidiaries OCI (retained earnings) 978 - - - (978) -
Total comprehensive income/(expense) for
the period, net of tax 4,061 165 1,518 4,501 (6,204) 4,041
Attributable to:
Owners of the parent 4,061 165 1,518 4,412 (6,204) 3,952
Non-controlling interests - - - 89 - 89
4,061 165 1,518 4,501 (6,204) 4,041
Period ended 30 June 2017 (revised) BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Profit for the period 2,305 (14) (73) 2,567 (2,438) 2,347
Other comprehensive income/(expense)
Items that may be reclassified subsequently
to profit and loss - - 108 (644) - (536)
Differences on exchange - - - (609) - (609)
Cash flow hedges - - (63) (103) - (166)
Investments held at fair value - - - 5 - 5
Net investment hedges - - 171 10 - 181
Tax on items that may be reclassified - - - 53 - 53
Items that will not be reclassified
subsequently to profit or loss: - - - 115 - 115
Retirement benefit schemes - - - 154 - 154
Tax on items that will not be reclassified - - - (39) - (39)
Total other comprehensive income/(expense)
for the period, net of tax - - 108 (529) - (421)
Share of subsidiaries OCI (other reserves) 115 - - - (115) -
Share of subsidiaries OCI (retained earnings) (536) - - - 536 -
Total comprehensive income/(expense) for
the period, net of tax 1,884 (14) 35 2,038 (2,017) 1,926
Attributable to:
Owners of the parent 1,884 (14) 35 1,965 (2,017) 1,853
Non-controlling interests - - - 73 - 73
1,884 (14) 35 2,038 (2,017) 1,926
43
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET
As at 30 June 2018 BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Assets
Non-current assets
Intangible assets - - - 120,006 - 120,006
Property, plant and equipment - - 1 4,848 - 4,849
Investments in subsidiaries 31,511 - 35,190 - (66,701) -
Investments in associates and joint ventures - - - 1,775 - 1,775
Retirement benefit assets - - 27 1,173 - 1,200
Deferred tax assets - 43 - 380 - 423
Trade and other receivables - 15,152 21,896 (37,194) 868 722
Investments held at fair value - - - 50 - 50
Derivative financial instruments - 34 564 (16) (43) 539
Total non-current assets 31,511 15,229 57,678 91,022 (65,876) 129,564
Current assets
Inventories - - - 6,339 - 6,339
Income tax receivable - - 527 (478) - 49
Trade and other receivables 5,129 808 21,849 (15,474) (8,273) 4,039
Investments held at fair value - - - 188 - 188
Derivative financial instruments - 5 345 (147) (10) 193
Cash and cash equivalents 5 - 182 1,943 (5) 2,125
5,134 813 22,903 (7,629) (8,288) 12,933
Assets classified as held-for-sale - - - 4 - 4
Total current assets 5,134 813 22,903 (7,625) (8,288) 12,937
Total assets 36,645 16,042 80,581 83,397 (74,164) 142,501
Equity
Capital and reserves
Share capital 614 - 14,163 614 (14,777) 614
Share premium, capital redemption and
merger reserves 22,853 258 3,401 34,927 (34,834) 26,605
Other reserves 376 (105) (820) (2,426) 549 (2,426)
Retained earnings 8,008 94 9,520 37,608 (17,622) 37,608
Owners of the parent 31,851 247 26,264 70,723 (66,684) 62,401
Non-controlling interests - - - 218 - 218
Total equity 31,851 247 26,264 70,941 (66,684) 62,619
Liabilities
Non-current liabilities
Borrowings 1,571 15,095 27,051 (1,437) 945 43,225
Retirement benefit liabilities - - 42 1,447 - 1,489
Deferred tax liabilities - - 26 17,586 - 17,612
Provisions 1 - - 347 (1) 347
Trade and other payables 8 - 99 960 (8) 1,059
Derivative financial instruments - 9 140 (6) (43) 100
Total non-current liabilities 1,580 15,104 27,358 18,897 893 63,832
Current liabilities
Borrowings 2,060 584 23,536 (12,596) (8,297) 5,287
Income tax payable - 79 - 660 - 739
Provisions - - - 330 - 330
Trade and other payables 1,154 24 3,144 5,243 (67) 9,498
Derivative financial instruments - 4 279 (78) (9) 196
Total current liabilities 3,214 691 26,959 (6,441) (8,373) 16,050
Total equity and liabilities 36,645 16,042 80,581 83,397 (74,164) 142,501
44
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET cont…
As at 30 June 2017 (revised) BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Assets
Non-current assets
Intangible assets - - - 12,177 - 12,177
Property, plant and equipment - - - 3,636 - 3,636
Investments in subsidiaries 6,172 - 4,365 - (10,537) -
Investments in associates and joint ventures - - - 9,438 - 9,438
Retirement benefit assets - - 69 546 - 615
Deferred tax assets - 45 - 423 - 468
Trade and other receivables - - 8,989 (11,229) 2,998 758
Investments held at fair value - - - 44 - 44
Derivative financial instruments - - 489 87 - 576
Total non-current assets 6,172 45 13,912 15,122 (7,539) 27,712
Current assets
Inventories - - - 5,177 - 5,177
Income tax receivable - - - 71 - 71
Trade and other receivables 4,860 13 30,339 (22,331) (9,048) 3,833
Investments held at fair value - - - 26 - 26
Derivative financial instruments - - 435 1 (124) 312
Cash and cash equivalents 5 - 130 1,889 (5) 2,019
4,865 13 30,904 (15,167) (9,177) 11,438
Assets classified as held-for-sale - - - 36 - 36
Total current assets 4,865 13 30,904 (15,131) (9,177) 11,474
Total assets 11,037 58 44,816 (9) (16,716) 39,186
Equity
Capital and reserves
Share capital 507 - 322 507 (829) 507
Share premium, capital redemption and
merger reserves 182 6 3,401 1,595 (1,251) 3,933
Other reserves 204 (78) (677) (111) 551 (111)
Retained earnings 6,478 (15) 2,551 3,388 (9,014) 3,388
Owners of the parent 7,371 (87) 5,597 5,379 (10,543) 7,717
Non-controlling interests - - - 192 - 192
Total equity 7,371 (87) 5,597 5,571 (10,543) 7,909
Liabilities
Non-current liabilities
Borrowings 1,571 17 14,984 (2,439) 952 15,085
Retirement benefit liabilities - - - 827 - 827
Deferred tax liabilities - - 17 642 - 659
Provisions - - - 395 - 395
Trade and other payables 8 - 4 1,032 (8) 1,036
Derivative financial instruments - - 95 (16) - 79
Total non-current liabilities 1,579 17 15,100 441 944 18,081
Current liabilities
Borrowings 2,058 - 23,675 (12,926) (6,985) 5,822
Income tax payable - - - 622 - 622
Provisions - - 1 329 - 330
Trade and other payables 29 4 15 5,908 (8) 5,948
Derivative financial instruments - 124 428 46 (124) 474
Total current liabilities 2,087 128 24,119 (6,021) (7,117) 13,196
Total equity and liabilities 11,037 58 44,816 (9) (16,716) 39,186
45
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING BALANCE SHEET cont…
As at 31 December 2017 (revised) BATIF, BATNF,
BATHTN and All other
BAT p.l.c. BATCAP RAI companies BAT Group
Parent Subsidiary Non-guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Assets
Non-current assets
Intangible assets - - - 117,785 - 117,785
Property, plant and equipment - - 2 4,880 - 4,882
Investments in subsidiaries 58,255 - 33,570 - (91,825)
Investments in associates and joint ventures - - - 1,577 - 1,577
Retirement benefit assets - - 52 1,071 - 1,123
Deferred tax assets - 49 16 268 - 333
Trade and other receivables - 14,787 13,193 (27,699) 475 756
Investments held at fair value - - - 42 - 42
Derivative financial instruments - 68 594 (4) (68) 590
Total non-current assets 58,255 14,904 47,427 97,920 (91,418) 127,088
Current assets
Inventories - - - 5,864 - 5,864
Income tax receivable - - 339 121 - 460
Trade and other receivables 7,365 56 31,382 (25,490) (9,260) 4,053
Investments held at fair value - - - 65 - 65
Derivative financial instruments - - 339 (111) - 228
Cash and cash equivalents 5 122 752 2,417 (5) 3,291
7,370 178 32,812 (17,134) (9,265) 13,961
Assets classified as held-for-sale - - - 5 - 5
Total current assets 7,370 178 32,812 (17,129) (9,265) 13,966
Total assets 65,625 15,082 80,239 80,791 (100,683) 141,054
Equity
Capital and reserves
Share capital 614 - 13,831 614 (14,445) 614
Share premium, capital redemption and
merger reserves 22,850 258 3,401 32,005 (31,912) 26,602
Other reserves 770 (129) (809) (3,392) 168 (3,392)
Retained earnings 36,635 (52) 8,941 36,935 (45,524) 36,935
Owners of the parent 60,869 77 25,364 66,162 (91,713) 60,759
Non-controlling interests - - - 222 - 222
Total equity 60,869 77 25,364 66,384 (91,713) 60,981
Liabilities
Non-current liabilities
Borrowings 1,571 14,783 28,085 (1,364) 952 44,027
Retirement benefit liabilities - - 42 1,779 - 1,821
Deferred tax liabilities - - 51 17,078 - 17,129
Provisions - - - 354 - 354
Trade and other payables 8 - 106 952 (8) 1,058
Derivative financial instruments - - 158 (11) (68) 79
Total non-current liabilities 1,579 14,783 28,442 18,788 876 64,468
Current liabilities
Borrowings 2,058 160 24,300 (11,408) (9,687) 5,423
Income tax payable - 2 7 711 - 720
Provisions - - 1 398 - 399
Trade and other payables 1,119 54 1,839 6,049 (153) 8,908
Derivative financial instruments - 6 286 (131) (6) 155
Total current liabilities 3,177 222 26,433 (4,381) (9,846) 15,605
Total equity and liabilities 65,625 15,082 80,239 80,791 (100,683) 141,054
46
Notes to the Interim Financial Statements
CONDENSED CONSOLIDATING CASH FLOW STATEMENT
Period ended 30 June 2018 BATIF,
BATNF,
BATHTN All other
BAT p.l.c. BATCAP and RAI companies BAT Group
Non-
Parent Subsidiary guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Net cash (used in)/generated from operating activities (47) (221) 299 3,781 46 3,858
Net cash generated/(used in) from investing activities 103 572 1,430 (2,253) (137) (285)
Net cash (used in)/generated from financing activities (56) (471) (2,276) (1,909) 219 (4,493)
Net cash flows (used in)/generated from operating, - (120) (547) (381) 128 (920)
investing and financing activities
Differences on exchange - (2) 22 (168) - (148)
(Decrease)/increase in net cash and cash equivalents - (122) (525) (549) 128 (1,068)
in the period
Net cash and cash equivalents at 1 January* 5 122 559 2,141 (5) 2,822
Net cash and cash equivalents at 30 June 5 - 34 1,592 123 1,754
Period ended 30 June 2017 (revised) BATIF,
BATNF,
BATHTN All other
BAT p.l.c. BATCAP and RAI companies BAT Group
Non-
Parent Subsidiary guarantor
guarantor Issuer guarantors subsidiaries Eliminations Consolidated
£m £m £m £m £m £m
Net cash (used in)/generated from operating activities (22) 6 75 1,625 22 1,706
Net cash generated/(used in) from investing activities - - 170 (437) (30) (297)
Net cash generated/(used in) from financing activities 22 (6) (380) (1,229) 82 (1,511)
Net cash flows (used in)/generated from operating, - - (135) (41) 74 (102)
investing and financing activities
Differences on exchange - - 15 (154) - (139)
(Decrease)/increase in net cash and cash equivalents - - (120) (195) 74 (241)
in the period
Net cash and cash equivalents at 1 January* 5 - (56) 1,707 (5) 1,651
Net cash and cash equivalents at 30 June 5 - (176) 1,512 69 1,410
* The opening balance of net cash and cash equivalents represents external cash held by the parent guarantor, issuer, subsidiary guarantors
and non-guarantor subsidiaries.
47
Other Information
DIVIDENDS
Declaration
On 22 February 2018, the Company announced that the Board had declared an interim dividend of 195.2p
per ordinary share of 25p, payable in four equal quarterly instalments of 48.8p per ordinary share in May
2018, August 2018, November 2018 and February 2019.
The May 2018 dividend was paid to shareholders on the UK main register and South Africa branch register on
9 May 2018 and to holders of American Depositary Shares (ADSs) on 14 May 2018. The three remaining
quarterly dividends will be paid to shareholders registered on either the UK main register or the South Africa
branch register and to holders of ADSs, each on the applicable record dates set out under the heading ‘Key
Dates’ below.
South Africa Branch Register
In accordance with the JSE Limited (JSE) Listing Requirements, the finalisation information relating to
shareholders registered on the South Africa branch register (comprising the amount of the dividend in South
African rand, the exchange rate and the associated conversion date) will be published on the dates stated
below, together with South Africa dividends tax information.
The quarterly dividends are regarded as ‘foreign dividends’ for the purposes of the South Africa Dividends Tax.
For the purposes of South Africa Dividends Tax reporting, the source of income for the payment of the quarterly
dividends is the United Kingdom.
Holders of ADSs
For holders of ADSs listed on the New York Stock Exchange (NYSE), the record dates and payment dates are
also set out below. The equivalent quarterly dividends receivable by holders of ADSs in US dollars will be
calculated based on the exchange rate on the applicable payment date. A fee of US$0.005 per ADS will be
charged by Citibank, N.A. in its capacity as depositary bank for the British American Tobacco American
Depositary Receipts (ADRs) programme in respect of each quarterly dividend payment.
General dividend information
The Group recognises interim dividends in the period that they are confirmed by the Directors. Therefore, the
results, for the six-months ended 30 June 2018 reflect the first two quarterly dividends, of 48.8p per ordinary
share as these were confirmed in March and June respectively.
For the six months ended June
2018
Pence per
US$ per ADS
share
Quarterly payment 1 – paid in May 2018 48.8 0.661142
Quarterly payment 2 – to be paid in August 2018 48.8 *
97.6
* On 22 February 2018, a preliminary dividend announcement was made to the NYSE and other market
participants with an amount of US$0.679198 per ADS using the exchange rate on that date. The final ADS
amount will be announced on 8 August 2018, using the rate of exchange on that date.
Key Dates
In compliance with the requirements of the London Stock Exchange (LSE), the NYSE and Strate, the electronic
settlement and custody system used by the JSE, the following salient dates for the remaining quarterly dividend
payments are applicable. All dates are 2018, unless otherwise stated.
48
Other Information
Dividends cont…
Event Payment No.2 Payment No.3 Payment No.4
Preliminary Announcement
(included declaration data 22 February 2018
required for JSE purposes)
Publication of finalisation 19 June* 25 September 13 December
information (JSE)
No removal requests 19 June to 29 25 September to 5 13 December to 28
permitted between the UK June (inclusive) October (inclusive) December
main register and the South (inclusive)
Africa branch register
Last Day to Trade (LDT) cum 26 June 2 October 21 December
dividend (JSE)
Shares commence trading ex- 27 June 3 October 24 December
dividend (JSE)
No transfers permitted 27 June to 29 3 October to 5 24 December to 28
between the UK main register June (inclusive) October (inclusive) December
and the South Africa branch (inclusive)
register
No shares may be 27 June to 29 3 October to 5 24 December to 28
dematerialised or June (inclusive) October (inclusive) December
rematerialised on the South (inclusive)
Africa branch register
Shares commence trading ex- 28 June 4 October 27 December
dividend
(LSE and NYSE)
Record date 29 June 5 October 28 December
(JSE, LSE and NYSE)
Last date for receipt of 18 July 25 October 17 January 2019
Dividend Reinvestment Plan
(DRIP) elections (LSE)
Payment date (LSE and JSE) 8 August 15 November 7 February 2019
ADS payment date (NYSE) 13 August 20 November 12 February 2019
*JSE finalisation information published on 19 June 2018 can be found on the British American Tobacco
website www.bat.com.
49
Other Information
NON-GAAP MEASURES
To supplement the presentation of the Group’s results of operations and financial condition in accordance
with IFRS, the Group also presents several non-GAAP measures used by management to monitor the Group’s
performance. The Group’s management regularly reviews the measures used to assess and present the
financial performance of the Group and, as relevant, its geographic segments. Please refer to the 2017
Annual Report on Form 20-F for a full description of each measure, pages 218 to 222.
The principal non-GAAP measures which the Group uses are adjusted revenue, adjusted profit from
operations, adjusted diluted earnings per share, operating cash flow conversion ratio and adjusted cash
generated from operations which are before the impact of adjusting items and are reconciled from revenue,
profit from operations, diluted earnings per share, cash conversion ratio and net cash generated from
operating activities. Adjusting items, as identified in accordance with the Group’s accounting policies,
represent certain items of income and expense which the Group considers distinctive based on their size,
nature or incidence. These include significant items in revenue, profit from operations, net finance costs,
taxation and the Group’s share of the post-tax results of associates and joint ventures which individually or,
if of a similar type, in aggregate, are relevant to an understanding of the Group’s underlying financial
performance. The adjusting items are used to calculate the non-GAAP measures of adjusted revenue,
adjusted profit from operations, adjusted operating margin, adjusted net finance costs, adjusted taxation,
adjusted share of post-tax results of associates and joint ventures, underlying tax rate and adjusted diluted
earnings per share. Although the Group does not believe that these measures are a substitute for IFRS
measures, the Group does believe such results excluding the impact of adjusting items provide additional
useful information to investors regarding the underlying performance of the business on a comparable basis.
The Group also includes measures of volume, revenue and profit from operations on a “representative
basis” to ensure a full understanding of the underlying performance of the Group, including the impact of
acquisitions undertaken in 2017 from 1 January 2017. Although the Group does not believe that these
measures are a substitute for IFRS measures, the Group does believe such results including the impact of
acquisitions as though the acquisitions had occurred at the beginning of 2017 provide additional useful
information to investors regarding the underlying performance of the business on a comparable basis.
The Management Board, as the chief operating decision maker, reviews a number of our IFRS and non-GAAP
measures for the Group and its geographic segments at constant rates of exchange. This allows comparison
of the Group’s results, had they been translated at the previous year’s average rates of exchange. The Group
does not adjust for the normal transactional gains and losses in operations that are generated by exchange
movements. Although the Group does not believe that these measures are a substitute for IFRS measures,
the Group does believe that such results excluding the impact of currency fluctuations year-on-year provide
additional useful information to investors regarding the operating performance on a local currency basis.
The Group also supplements its presentation of cash flows in accordance with IFRS by presenting the non-
GAAP measures of adjusted cash generated from operations and operating cash flow conversion ratio. The
Group’s management believes these measures, which are used internally, are useful to the users of the
financial statements in helping them understand the underlying business performance and can provide
insights into the cash flow available to, among other things, reduce debt and pay dividends. Adjusted cash
generated from operations and operating cash flow conversion ratio have limitations as an analytical tool.
They are not presentations made in accordance with IFRS and should not be considered as an alternative to
net cash generated from operating activities determined in accordance with IFRS. Adjusted cash generated
from operations and operating cash flow conversion ratio are not necessarily comparable to similarly titled
measures used by other companies. As a result, readers should not consider these measures in isolation
from, or as a substitute analysis for, the Group’s results of operations or cash flows as determined in
accordance with IFRS.
50
Other Information
Non-GAAP measures cont…
The Group also presents net debt, a non-GAAP measure, on page 14. The Group uses net debt to assess its
financial capacity. The Management Board believes that this additional measure, which is used internally, is
useful to the users of the financial statements in helping them to see how business financing has changed
over the year. Net debt has limitations as an analytical tool. It is not a presentation made in accordance with
IFRS and should not be considered as an alternative to borrowings or total liabilities determined in
accordance with IFRS. Net debt is not necessarily comparable to similarly titled measures used by other
companies. As a result, this measure should not be considered in isolation from, or as a substitute analysis
for, the Group’s measures of financial position or liquidity as determined in accordance with IFRS.
Due to the secondary listing of the ordinary shares of British American Tobacco p.l.c. on the main board of
the JSE Limited (JSE) in South Africa, the Group is required to present headline earnings per share and diluted
headline earnings per share, as alternative measures of earnings per share, calculated in accordance with
Circular 4/2018 ‘Headline Earnings’ issued by the South African Institute of Chartered Accountants. These are
shown on page 35.
The Group also presents underlying tax rate, a non-GAAP measure, on page 12 and page 53. The Group uses
underlying tax rate to assess the tax rate applicable to the Group’s underlying operations, excluding the
Group’s share of post-tax results of associates and joint ventures in BAT’s pre-tax results and adjusting items.
The Management Board believes that this additional measure, which is used internally, is useful to the users
of the financial statements because it excludes the contribution from the Group’s associates, recognised after
tax but within the Group’s pre-tax profits, and adjusting items, thereby enhancing users’ understanding of
underlying business performance. Underlying tax rate has limitations as an analytical tool. It is not a
presentation made in accordance with IFRS and should not be considered as an alternative to the Group’s
effective tax rate as determined in accordance with IFRS. Underlying tax rate is not necessarily comparable to
similarly titled measures used by other companies. As a result, this measure should not be considered in
isolation from, or as a substitute analysis for, the Group’s underlying tax rate as determined in accordance
with IFRS.
Adjusted Revenue
Definition: Revenue before the impact of adjusting items
6 months to
30.6.18 30.6.17
Revised
£m £m
Revenue 11,636 7,418
Less: Excise on goods bought-in on short-term arrangements (103) (69)
Adjusted revenue 11,533 7,349
Impact of foreign exchange 1,020 -
Adjusted revenue re-translated at 2017 exchange rates 12,553 7,349
Impact of acquisitions - 4,968
Adjusted revenue on a representative basis, at constant exchange rates 12,553 12,317
51
Other Information
Non-GAAP measures cont…
Adjusted profit from operations
Definition: Profit from operations before the impact of adjusting items
6 months to
30.6.18 30.6.17
Revised
£m £m
Profit from operations 4,438 2,574
Restructuring and integration costs 99 133
Amortisation of trademarks and similar intangibles 189 134
Other 92 -
Adjusted profit from operations 4,818 2,841
Impact of foreign exchange 398 -
Adjusted profit from operations re-translated at constant exchange rates 5,216 2,841
Impact of acquisitions - 2,251
Adjusted profit from operations on a representative basis, at constant 5,216 5,092
exchange rates
Adjusted diluted earnings per share, at constant rates of exchange
Definition: diluted earnings per share before the impact of adjusting items, presented in the prior year’s rate
of exchange
6 months to
30.6.18 30.6.17
Revised
pence pence
Diluted earnings per share 117.4 121.4
Effect of restructuring and integration costs 3.9 5.1
Effect of amortisation of trademarks and similar intangibles 6.6 6.4
Effect of other adjusting items 6.5 -
Effect of associates’ adjusting items (1.7) (1.2)
Effect of adjusting items in net finance costs 1.5 2.7
Effect of adjusting items in respect of deferred taxation 3.0 -
Adjusted diluted earnings per share 137.2 134.4
Impact of foreign exchange 11.2 -
Adjusted diluted earnings per share, at constant exchange rates 148.4 134.4
52
Other Information
Non-GAAP measures cont…
Underlying tax rate
Definition: Tax rate incurred before the impact of adjusting items and to adjust for the inclusion of the
Group’s share of post-tax results of associates and joint ventures within the Group’s pre-tax results
6 months to
30.6.18 30.6.17
Revised
£m £m
Profit before taxation 3,969 3,027
Less: Share of post-tax results of associates and joint ventures (232) (778)
Adjusting items within profit from operations 380 267
Adjusting items within finance costs 35 49
Adjusted profit before taxation, excluding associates and joint ventures 4,152 2,565
Taxation on ordinary activities 1,193 680
Adjusting items within taxation (146) -
Taxation on adjusting items 71 48
Adjusted taxation 1,118 728
Underlying tax rate 26.9% 28.4%
Operating cash flow conversion ratio
Definition: net cash generated from operating activities before the impact of adjusting items, trading loans to
third parties, pension short fall funding, taxes paid and after net capital expenditure and dividends from
associates, as a proportion of adjusted profit from operations
6 months to
30.6.18 30.6.17
Revised
£m £m
Net cash generated from operating activities 3,858 1,706
Cash related to adjusting items 229 352
Dividends from associates (1) (465)
Tax paid 813 547
Net capital expenditure (231) (187)
Pension short fall funding 72 40
Trading loans to third parties (83) -
Other 2 (4)
Operating cash flow 4,659 1,989
Adjusted profit from operations 4,818 2,841
Operating cash flow conversion ratio 96.7% 70.0%
53
Other Information
US$ EXCHANGE RATE
The following table sets forth the high and low noon buying rates of each month of the last six months, as
certified for customs purposes by the Federal Reserve Bank of New York, for the pound sterling expressed in
US dollars per pound sterling.
High Low
January 2018 1.4264 1.3513
February 2018 1.4247 1.3794
March 2018 1.4236 1.3755
April 2018 1.4332 1.3751
May 2018 1.3611 1.3258
June 2018 1.3429 1.3095
The following table sets forth for each interim period the average of the noon buying rates on the last
business day of each month the period, as certified for customs purposes by the Federal Reserve Bank of
New York, for the pound sterling expressed in US dollars per pound sterling for each of the five most recent
fiscal interim periods.
Average
Six-month period ended 30 June 2014 1.6771
Six-month period ended 30 June 2015 1.5276
Six-month period ended 30 June 2016 1.4148
Six-month period ended 30 June 2017 1.2731
Six-month period ended 30 June 2018 1.3708
On 23 July 2018, the latest practicable date prior to the publication of this Half-Year Report, the noon buying
rate was £1.00 = US$1.3105.
The rates presented above may differ from the actual rates used in preparation of financial information
appearing in this Half-Year report. The presentation of such rates is not meant to suggest that the US dollar
amounts actually represent the pound sterling amounts or that such amounts could have been converted to
US dollars at any particular date.
ADDITIONAL INFORMATION
British American Tobacco is one of the world's leading consumer products businesses, with brands sold in
more than 200 markets. We have strategic combustible and THP brands – Dunhill, Kent, Lucky Strike, Pall
Mall, Rothmans, Newport (in the US), Camel (in the US) and Natural American Spirit (in the US) – and over
200 brands in our portfolio, including a growing portfolio of other potentially reduced risk products. We hold
robust market positions in each of our regions and have leadership positions in more than 55 markets.
References in this document to information on websites, including the web address of BAT, have been
included as inactive textual references only. These websites and the information contained therein or
connected thereto are not intended to be incorporated into or to form part of this report.
54
Other Information
PUBLICATION OF HALF-YEAR REPORT
This Half-Year Report is released or otherwise made available or notified to the London Stock Exchange, the
JSE Limited and the New York Stock Exchange and filed in accordance with applicable regulations. It may be
viewed and downloaded from our website www.bat.com.
Copies of the announcement may also be obtained during normal business hours from: (1) the Company’s
registered office; (2) the Company’s representative office in South Africa; (3) British American Tobacco
Publications; and (4) Citibank Shareholder Services. Contact details are set out below.
ANNUAL REPORT: Statutory Accounts
The information for the year ended 31 December 2017 does not constitute statutory accounts as defined in
s434 of the Companies Act 2006. A copy of the statutory accounts for that year 2017 has been delivered to
the Registrar of Companies. The auditor’s report on the 2017 accounts was unmodified, did not draw
attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of the
Companies Act 2006.
OTHER TOBACCO PRODUCTS
The Group reports volumes as additional information. This is done with cigarette sticks as the basis, with usage
levels applied to other tobacco products to calculate the equivalent number of cigarette units.
The usage rates that are applied:
Equivalent to one cigarette
Roll-your-own (RYO) 0.8 grams
Make-your-own (MYO)
- Expanded tobacco 0.5 grams
- Optimised tobacco 0.7 grams
Cigars 1 cigar
Oral
- Pouches 1 pouch
- Loose 2.8 grams
Roll-your-own (RYO)
Loose tobacco designed for hand rolling, normally a finer cut with higher moisture, compared to cigarette
tobacco.
Make-your-own (MYO)
MYO expanded tobacco; also known as volume tobacco.
Loose cigarette tobacco with enhanced filling properties – to allow higher yields of cigarettes/kg - designed
for use with cigarette tubes and filled via a tobacco tubing machine.
MYO non-expanded tobacco; also known as optimised tobacco.
Loose cigarette tobacco designed for use with cigarette tubes and filled via a tobacco tubing machine.
55
Other Information
Forward looking statements
This announcement contains certain forward-looking statements, including “forward-looking” statements
made within the meaning of Section 21E of the United States Securities Exchange Act of 1934. 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. These include
statements 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.
All such forward-looking statements involve estimates and assumptions that are subject to risks,
uncertainties and other factors that could cause actual future financial condition, performance and results to
differ materially from the plans, goals, expectations and results expressed in the forward-looking statements
and other financial and/or statistical data within this announcement. 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; 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 lead the development and roll-out of BAT innovations (NGP and Combustible); and
changes in the market position, businesses, financial condition, results of operations or prospects of the
Group.
It is believed that the expectations reflected in this announcement 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. Past performance is no guide to future performance and persons needing advice should consult
an independent financial adviser. The forward-looking statements reflect knowledge and information
available at the date of preparation of this announcement and the Group undertakes no obligation to update
or revise these forward-looking statements, whether as a result of new information, future events or
otherwise. Readers are cautioned not to place undue reliance on such forward-looking statements.
No statement in this communication is intended to be a profit forecast and no statement in this
communication 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.
Additional information concerning these and other factors can be found in the Company’s filings with the U.S.
Securities and Exchange Commission (“SEC”), including the Annual Report on Form 20-F filed on 15 March
2018 and Current Reports on Form 6-K, which may be obtained free of charge at the SEC’s website,
http://www.sec.gov, and the Company’s Annual Reports, which may be obtained free of charge from the
British American Tobacco website www.bat.com.
Paul McCrory
Secretary
25 July 2018
56
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
Wednesday 12 December 2018 Pre-close Trading Update
Thursday 28 February 2019 Preliminary Statement 2018
PROPOSED DATES FOR QUARTERLY DIVIDEND PAYMENTS FOR THE YEAR ENDING 31
DECEMBER 2018
Event Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Last day to trade 18 March 2019 25 June 2019 1 October 2019 20 December 2019
(JSE)
Ex-dividend date 19 March 2019 26 June 2019 2 October 2019 23 December 2019
(JSE)
Ex-dividend date 21 March 2019 27 June 2019 3 October 2019 24 December 2019
(LSE)
Ex-dividend date 21 March 2019 27 June 2019 3 October 2019 26 December 2019
(NYSE)
Record date 22 March 2019 28 June 2019 4 October 2019 27 December 2019
(JSE, LSE and NYSE)
Payment date 8 May 2019 8 August 2019 14 November 2019 6 February 2020
(LSE and JSE)
ADS payment date 13 May 2019 13 August 2019 19 November 2019 11 February 2020
(NYSE)
Notes:
(1) A complete timetable for the quarterly dividend payments for the year ending 31 December 2018 and the
declared amount will be included in the Preliminary Results Announcement in February 2019.
(2) The dates set out above may be subject to any changes to public holidays arising and changes or revisions
to the LSE, JSE and NYSE timetables. Any confirmed changes to the dates will be announced.
57
CORPORATE INFORMATION
Premium listing
London Stock Exchange (Share Code: BATS; ISIN: GB0002875804)
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, UK
tel: 0800 408 0094; +44 370 889 3159
Share dealing tel: 0370 703 0084 (UK only)
Your account: www.computershare.com/uk/investor/bri
Share dealing: www.computershare.com/dealing/uk
Web-based enquiries: www.investorcentre.co.uk/contactus
Secondary listing
JSE (Share Code: BTI)
Shares are traded in electronic form only and transactions settled electronically through Strate.
Computershare Investor Services Proprietary Limited
PO Box 61051, Marshalltown 2107, South Africa
tel: 0861 100 634; +27 11 870 8216
email enquiries: web.queries@computershare.co.za
American Depositary Receipts (ADRs)
NYSE (Symbol: BTI; CUSIP Number: 110448107)
BAT’s shares are listed on the NYSE in the form of American Depositary Shares (ADSs) and these are evidenced by
American Depositary Receipts (ADRs), each one of which represents one ordinary share of British American Tobacco
p.l.c. Citibank, N.A. is the depositary bank for the sponsored ADR programme.
Citibank Shareholder Services
PO Box 43077, Providence, Rhode Island 02940-3077, USA
tel: 1-888-985-2055 (toll-free) or +1 781 575 4555
email enquiries: citibank@shareholders-online.com
website: www.citi.com/dr
Publications
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS, UK
tel: +44 20 7511 7797; facsimile: +44 20 7540 4326
e-mail enquiries: bat@team365.co.uk or
The Company’s Representative office in South Africa using the contact details shown below.
British American Tobacco p.l.c.
Registered office
Globe House, 4 Temple Place, London, WC2R 2PG, UK
tel: +44 20 7845 1000
British American Tobacco p.l.c. is a public limited company which is listed on the London Stock Exchange, New York
Stock Exchange and the JSE Limited in South Africa. British American Tobacco p.l.c. is incorporated in England and
Wales (No. 3407696) and domiciled in the UK.
British American Tobacco p.l.c.
Representative office in South Africa
Waterway House South
No 3 Dock Road, V&A Waterfront, Cape Town 8000
South Africa
(PO Box 631, Cape Town 8000, South Africa)
tel: +27 21 003 6576
58
DEFINITIONS and GLOSSARY
The following is a summary of the key definitions and terms used within this interim report:
Term Definition
AMSSA Americas (excluding US) and Sub-Saharan Africa. The key markets are:
Argentina, Brazil, Canada, Chile, Colombia, Mexico, Nigeria, South Africa
APME Asia Pacific and Middle East. The key markets are:
Australia, Bangladesh, GCC, Indonesia, Iran, Iraq, Japan, Malaysia, New Zealand,
Pakistan, South Korea, Taiwan, Vietnam
ENA Europe and North Africa. The Key Markets are:
Algeria, Belgium, Czech Republic, Egypt, Denmark, France, Germany, Italy,
Kazakhstan, Morocco, the Netherlands, Poland, Romania, Russia, Spain, Switzerland,
Turkey, UK, Ukraine
NGP Next Generation Products, comprising vapour and THP categories
Oral Moist Snuff (Granit, Mocca, Grizzly, Kodiak) and other snus products (including
Camel Snus, Epok)
PRRP Potentially Reduced Risk Products – NGP and Oral categories
Representative Results communications in 2018 include presentation of results (volume, revenue
and profit from operations) against 2017, as though the Group had owned the
acquisitions made in 2017 for the whole of that year. Comparison of results on this
basis are termed “on a representative basis” and provide users of the
communications with a comparison representative of the position as if the Group
had owned the acquisitions throughout 2017 and 2018. For these comparison
purposes, the Group has previously issued the 2017 results on such a basis for both
the six months ended 30 June 2017 and the full year ended 31 December 2017. See
appendix I for a reconciliation from the most directly comparable IFRS measure
Revised Prior period results are revised to take account of changes to IFRS, including the
impact of IFRS 15 (Revenue from Contracts with Customers), effective 1 January 2018
with retrospective application
US United States of America
Strategic cigarette Includes Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Newport (US), Natural
and THP brands American Spirit (US), Camel (US), glo
Strategic Portfolio Includes Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Newport (US), Natural
American Spirit (US), Camel (US), Vype, Vuse, glo, Chic, Ten Motives, ViP, Epok,
Granit, Mocca, Grizzly, Camel Snus, Kodiak
THP Tobacco heating products, which include glo
Vapour Rechargeable, battery-powered devices that heat liquid formulations – e-liquids – to
create a vapour which is inhaled. Vapour products include Vype, Vuse, Chic and Ten
Motives
Company
BAT p.l.c. British American Tobacco p.l.c. – parent company
BATCAP B.A.T Capital Corporation – issuer
BATIF B.A.T. International Finance p.l.c. – guarantor
BATNF B.A.T. Netherlands Finance B.V. – guarantor
BATHTN British American Tobacco Holdings (The Netherlands) B.V. – guarantor
RAI Reynolds American Inc. – guarantor
59
APPENDICES
The following appendices reflect the 2017 results of the Group, after revision for IFRS 15 (effective 1 January
2018 with retrospective application), the new regional structure (effective 1 January 2018) and to provide
the users of these results with a comparable (representative) base, inclusive of the results of acquisitions for
the full comparable period, upon which to assess the Group’s results in 2018.
The use of the term representative basis is not deemed to be the same as proforma as it excludes adjusting
items including, where relevant, certain impacts from the purchase price allocation process.
These appendices also provide the 2017 comparator data for the new performance measure “Revenue from
the Strategic Portfolio”.
APPENDIX I
REVENUE FROM OUR STRATEGIC PORTFOLIO - unaudited
SIX-MONTH PERIOD ENDED 30 JUNE 2017 – including revision for IFRS 15
Adjusting
IFRS Adjusted Acquisitions Adj Repres
items
£m £m £m £m £m
Combustible Tobacco 3,476 - 3,476 4,045 7,521
Potentially Reduced Risk:
Vapour 46 - 46 79 125
THP 35 - 35 - 35
Total NGP 81 - 81 79 160
Oral 12 - 12 413 425
Total Potentially Reduced 93 - 93 492 585
Risk
Total Revenue from the 3,569 - 3,569 4,537 8,106
Strategic portfolio
Other brands / business 3,849 (69) 3,780 431 4,211
Total Revenue 7,418 (69) 7,349 4,968 12,317
2017 FULL YEAR – including revision for IFRS 15
Adjusting
IFRS Adjusted Acquisitions Adj Repres
items
£m £m £m £m £m
Combustible Tobacco 10,842 - 10,842 4,553 15,395
Potentially Reduced Risk:
Vapour 168 - 168 90 258
THP 202 - 202 1 203
Total NGP 370 - 370 91 461
Oral 402 - 402 453 855
Total Potentially Reduced 772 - 772 544 1,316
Risk
Total Revenue from the 11,614 - 11,614 5,097 16,711
Strategic portfolio
Other brands / business 7,950 (258) 7,692 480 8,172
Total Revenue 19,564 (258) 19,306 5,577 24,883
Note – The term “Adj repres” refers to Adjusted results on a representative basis.
60
APPENDIX II
SIX-MONTH PERIOD ENDED 30 JUNE 2017 – VOLUME – unaudited
Reported Acquisitions Repres
Bn sticks Bn sticks Bn Sticks
Cigarettes 314 42 356
Key Strategic Brands 155 38 193
Other 159 4 163
THP - - -
Cigarettes and THP 314 42 356
US - 41 41
APME 112 - 112
AMSSA 82 - 82
ENA 120 1 121
314 42 356
SIX-MONTH PERIOD ENDED 30 JUNE 2017 revised for IFRS 15, on regional structure (effective
1 Jan 2018) and including acquisitions for comparison purposes - unaudited
Revenue
IFRS Adj items Adjusted Acquisitions Adj repres
£m £m £m £m £m
US - - - 4,943 4,943
APME 2,489 - 2,489 (7) 2,482
AMSSA 2,149 - 2,149 (6) 2,143
ENA 2,780 (69) 2,711 38 2,749
7,418 (69) 7,349 4,968 12,317
Profit from operations
IFRS Adj items Adjusted Acquisitions Adj repres
£m £m £m £m £m
US - - - 2,173 2,173
APME 1,016 45 1,061 27 1,088
AMSSA 806 54 860 23 883
ENA 752 168 920 28 948
2,574 267 2,841 2,251 5,092
Operating Margin
IFRS Adjusted Adj repres
US - - 44.0%
APME 40.8% 42.6% 43.8%
AMSSA 37.5% 40.0% 41.2%
ENA 27.1% 33.9% 34.5%
34.7% 38.7% 41.3%
Note – The term “Adj repres” refers to Adjusted results on a representative basis.
61
APPENDIX III
2017 FULL YEAR Volume (Cigarettes and THP) - unaudited
Reported Acquisitions Repres
Bn sticks Bn sticks Bn Sticks
Cigarettes 684 48 732
Key Strategic Brands 380 43 423
Other 304 5 309
THP 2 - 2
Cigarettes and THP 686 48 734
US 36 46 82
APME 226 - 226
AMSSA 166 - 166
ENA 258 2 260
686 48 734
2017 FULL YEAR revised for IFRS 15, on regional structure (effective 1 Jan 2018) and including
acquisitions for comparison purposes - unaudited
Revenue
IFRS Adj items Adjusted Acquisitions Adj repres
£m £m £m £m £m
US 4,160 - 4,160 5,531 9,691
APME 4,973 - 4,973 (4) 4,969
AMSSA 4,323 - 4,323 (3) 4,320
ENA 6,108 (258) 5,850 53 5,903
19,564 (258) 19,306 5,577 24,883
Profit from operations
IFRS Adj items Adjusted Acquisitions Adj repres
£m £m £m £m £m
US 1,165 763 1,928 2,502 4,430
APME 1,902 147 2,049 25 2,074
AMSSA 1,648 134 1,782 22 1,804
ENA 1,697 473 2,170 29 2,199
6,412 1,517 7,929 2,578 10,507
Operating Margin
IFRS Adjusted Adj repres
US 28.0% 46.3% 45.7%
APME 38.2% 41.2% 41.7%
AMSSA 38.1% 41.2% 41.8%
ENA 27.8% 37.1% 37.3%
32.8% 41.1% 42.2%
Note – The term “Adj repres” refers to Adjusted results on a representative basis.
Sponsor: UBS South Africa (Pty) Ltd
62
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