Wrap Text
HALF-YEARLY REPORT TO 30 JUNE 2012
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")
BRITISH AMERICAN TOBACCO p.l.c.
HALF-YEARLY REPORT TO 30 JUNE 2012
GOOD RESULTS DESPITE CURRENCY HEADWINDS
Six Months Results - unaudited 2012 2011 Change
Revenue £7,452m £7,438m -
Adjusted profit from operations £2,839m £2,760m +3%
Profit from operations £2,740m £2,691m +2%
Adjusted diluted earnings per share 102.4p 96.1p +7%
Basic earnings per share 98.9p 94.5p +5%
Interim dividend per share 42.2p 38.1p +11%
• The Group’s organic revenue at constant rates of exchange grew by 4 per cent as a result
of continued good pricing momentum. Reported Group revenue was in line with last year
as a result of adverse exchange rate movements.
• Adjusted Group profit from operations increased by 3 per cent and 6 per cent at constant
rates of exchange.
• The reported profit from operations was 2 per cent higher at £2,740 million. The adjusting
items are explained on pages 24 to 25.
• Group volumes were 344 billion, in line with last year. This strong performance was
achieved against a comparator period which benefited from one-off events in Japan.
• The four Global Drive Brands achieved good volume growth of 4 per cent. Dunhill was up
3 per cent, Kent 2 per cent, Lucky Strike 19 per cent and Pall Mall grew by 3 per cent.
• Adjusted diluted earnings per share rose by 7 per cent, principally as a result of the growth
in profit from operations. Basic earnings per share were up 5 per cent at 98.9p (2011:
94.5p).
• The Board has declared an interim dividend of 42.2p, an 11 per cent increase on last year,
to be paid on 26 September 2012.
• 18 million shares were bought back at a cost of £553 million, excluding transaction costs.
• The Chairman, Richard Burrows, commented “Despite the global economic uncertainty
and the adverse impact of exchange rates, British American Tobacco has delivered
another good set of results. The underlying business continues to perform well and we are
confident of another year of good earnings growth.”
ENQUIRIES:
INVESTOR RELATIONS: PRESS OFFICE:
Mike Nightingale 020 7845 1180 Kate Matrunola/ 020 7845 2888
Rachael Brierley 020 7845 1519 Jem Maidment/
Maya Farhat 020 7845 1977 Will Hill
BRITISH AMERICAN TOBACCO p.l.c.
HALF-YEARLY REPORT TO 30 JUNE 2012
CONTENTS
PAGE
BUSINESS REVIEW:
Chairman's statement 2
Regional review 3
Cigarette volumes 6
Results of associates 7
Dividends 8
Risks and uncertainties 9
Implementation of a new operating model 9
Going concern 9
Directors’ responsibility statement 10
Independent review report to British American Tobacco p.l.c 11
FINANCIAL STATEMENTS:
Group income statement 12
Group statement of comprehensive income 13
Group statement of changes in equity 14
Group balance sheet 16
Group cash flow statement 18
Accounting policies and basis of preparation 19
Non-GAAP measures* 20
Foreign currencies 21
Segmental analyses of revenue and profit 21
Adjusting items included in profit from operations 24
Other changes in the Group 25
Net finance costs 26
Associates and joint ventures 26
Taxation 27
Earnings per share 28
Cash flow and net debt movements 30
Litigation: Franked Investment Income Group Litigation Order 34
Contingent liabilities 35
Related party disclosures 35
Share buy-back programme 35
SHAREHOLDER INFORMATION:
Financial calendar 36
Calendar for the interim dividend 2012 36
Corporate information 36
Disclaimers 38
Distribution of report 38
APPENDIX
Appendix 1 – Analyses of revenue and profit from operations 39
*Non-GAAP measures referred to and used in these condensed consolidated financial
statements, such as adjusted profit from operations, organic growth and adjusted diluted
earnings per share, are explained on page 20.
Page 1
CHAIRMAN’S STATEMENT
Good Results Despite Currency Headwinds
Performance in the first half of the year has been good, with continued pricing momentum, Global
Drive Brand growth and stable overall volumes.
Despite currency weaknesses in key markets and tough comparator one-off events in 2011, the
underlying business is performing well.
Adjusted profit from operations at constant rates of exchange grew by 6 per cent to £2,929 million.
Adjusted diluted earnings per share rose 7 per cent to 102.4 pence.
We repurchased some 18 million shares in the first half of the year through our buy-back programme
at a cost of £553 million and at an average price of £31.47 per share.
The Board has declared an Interim Dividend of 42.2 pence per share, an increase of 11 per cent. As
usual, the Interim Dividend has been set at one third of last year’s total dividend and will be paid on
26 September to shareholders on the Register on 17 August 2012.
Despite the global economic uncertainty and the adverse impact of exchange rates, British
American Tobacco has delivered another good set of results. The underlying business
continues to perform well and we are confident of another year of good earnings growth.
Richard Burrows
24 July 2012
Page 2
REGIONAL REVIEW
The Group delivered a good performance during the first half of the year, laying the foundation for
another year of good results. This was achieved despite industry contraction in Southern Europe,
instability in some EEMEA countries and tough comparators impacted by one-off events during 2011.
The Group has been exposed to adverse exchange rate movements, in particular, weakness against
Sterling of the Brazilian real, euro, South African rand and Russian rouble.
Reported revenue was in line with last year as the impact of the continued good pricing momentum
and stable volumes were offset by adverse exchange rate movements. At constant rates of exchange,
organic revenue was up 4 per cent.
Organic adjusted Group profit from operations, at constant rates of exchange, increased by 6 per cent.
All regions contributed to this good profit performance. The reported profit from operations was 2 per
cent higher at £2,740 million with a 3 per cent increase in adjusted profit from operations, as explained
on pages 24 and 25.
Group cigarette volumes from subsidiaries was 344 billion, in line with the first half of last year.
Excluding Protabaco in Colombia, organic volumes were 0.6 per cent lower. This is a strong
performance against a comparator period which benefited from the one-off increased sales volumes in
Japan and despite contracting industry volumes in some markets, notably Southern Europe.
The Group’s cigarette market share in its Top 40 markets, excluding the impact of Japan, is essentially
flat compared to full year 2011 and is showing a growing trend in 2012. Share of the premium
segment continued to improve.
Other tobacco products performed well with a growth of 7 per cent to 6,954 tonnes in Fine Cut in
Western Europe, mainly in Germany, Hungary, the Netherlands and the United Kingdom. Market
share grew strongly and profit was higher. Pall Mall is by far the largest Fine Cut brand in Western
Europe.
The four Global Drive Brands achieved good volume growth of 4 per cent following the successful
geographic roll-out of innovations, resulting in continued improvement in market share. This growth
would be 6 per cent if the one-off benefit of the additional sales in Japan last year was excluded.
Dunhill increased volumes by 3 per cent with growth in Malaysia, Indonesia, the GCC, South Africa,
Nigeria and Romania, partially offset by a decline in South Korea. Kent volumes were higher in
Russia, Ukraine and Switzerland, however, declines in Uzbekistan and Chile, as well as the high
comparator in Japan, limited the growth to 2 per cent.
The excellent growth of 19 per cent by Lucky Strike was driven by increased volumes in Germany,
Spain, France, Poland, Argentina, Chile and Brazil, partially offset by the lower volumes in Italy and
Japan. Pall Mall volumes rose by 3 per cent with strong growth in Pakistan, Romania, Russia, Taiwan
and Canada, partially offset by lower volumes in Chile, Italy and Spain.
Adjusted profit from operations* at constant and current rates of exchange is as follows:
30.6.12 30.6.11
Adjusted
Adjusted profit from profit from
operations* operations*
Constant Current
rates rates
£m £m £m
Asia-Pacific 792 815 766
Americas 803 754 768
Western Europe 583 558 572
EEMEA 751 712 654
2,929 2,839 2,760
*Adjusted profit from operations (page 12) is derived after excluding adjusting items from profit from
operations. Adjusting items include restructuring and integration costs and amortisation of
Page 3
trademarks, as explained on pages 24 and 25.
Page 4
Regional review cont...
In Asia-Pacific, profit was up £49 million to £815 million as a result of strong performances in Japan,
Malaysia, New Zealand, Pakistan, Bangladesh and Vietnam and favourable exchange rates. At
constant rates of exchange, profit would have increased by £26 million or 3 per cent. If adjusted by
Japan’s one-off sales in the first half of 2011, profit at constant rates of exchange would have grown
by 10 per cent. Volumes at 95 billion were in line with last year, with increases in Pakistan,
Bangladesh, Malaysia, Taiwan and Vietnam, offset by lower volumes in South Korea, Japan and
Indonesia.
In Australia, profit was up as a result of favourable exchange rate movements while the impact of
lower volumes were partially offset by cost savings and higher pricing. Market share was lower, mainly
as a result of increased competition in the low-priced segment. Profit was much higher in New
Zealand, the result of volume growth, price increases and cost savings. A strong performance by Pall
Mall contributed to the higher volumes.
Market share grew strongly in Malaysia, strengthening the Group’s market leadership position, with an
excellent performance from Dunhill. The improved product mix and increased volumes led to a
significant rise in profit.
In Japan, volumes and market share were lower, following the additional one-off sales in the same
period last year. Underlying market share was up, while profit for the period also benefited from cost
savings and favourable exchange rate movements.
In Vietnam, volumes and market share grew, driven by Kent and State Express 555. Profit increased
strongly as a result of higher pricing and volumes, as well as cost saving initiatives. In South Korea,
the benefit of higher pricing and tight control of costs were offset by the impact of lower volumes due
to competitor pricing activities.
In Indonesia, the launch of Dunhill Fine Cut Mild, an international kretek offer, performed well. The
change in excise structure and the excise-driven price increases adversely impacted volumes,
especially the low-priced brands. This, together with the significant marketing investment and higher
clove prices, resulted in a decline in profit.
In Taiwan, both Dunhill and Pall Mall contributed to a growth in market share. Increased volumes and
higher pricing resulted in a profit increase.
Volume growth in Pakistan led to a strong increase in market share. There was growth in profit as a
result of higher margins, volumes and cost reductions. In Bangladesh, market share, profit and
volumes grew due to the strong performances of Benson & Hedges and John Player Gold Leaf.
In Americas, profit declined by £14 million to £754 million, mainly due to exchange rate movements in
Brazil. The results benefited from the acquisition of Protabaco in the fourth quarter of 2011. At
constant rates of exchange, profit rose by £35 million or 5 per cent. Good performances from Brazil
and Chile were partially offset by lower contributions from Mexico and Canada. Volumes were up
1 per cent at 71 billion, mainly as a result of the Protabaco acquisition and increases in Canada and
Chile, partially offset by decreases in Mexico, Brazil, Argentina and Venezuela. On an organic basis,
volumes were 2 per cent lower at 69 billion.
In Brazil, good profit growth was driven by an improved product mix and higher pricing. However, this
was largely offset by exchange rate movements of the Brazilian real. Market share rose due to solid
performances by Dunhill and Lucky Strike. Volumes were lower due to market contraction following
the excise-led price increases.
Industry volumes increased in Canada as a result of more moderate pricing, driven by limited excise
increases and stable illicit trade. Although market share was essentially flat, volumes were higher,
mainly in the low-priced segment. Down-trading from the premium segment impacted profits, despite
higher volumes and lower costs.
Page 5
Regional review cont...
In Mexico, industry volumes declined substantially as a result of high excise-led price increases during
2011, fuelling illicit trade. Market share was essentially flat against 2011 with the recent strong
performance of Pall Mall. Profit was lower in line with the volume decline.
In Argentina, profit was stable as a result of higher pricing and cost savings, offset by lower volumes.
Market share declined despite Lucky Strike’s and Dunhill’s strong growth. In Chile, Lucky Strike
continued to deliver outstanding growth. Overall volumes increased, resulting in a significant rise in
profit.
Profit in Venezuela grew strongly as a result of higher pricing, partially offset by increased costs, the
adverse impact of down-trading and lower volumes, while market share was higher. In Colombia, the
acquisition of Protabaco in the last quarter of 2011, resulted in increases in profit and volumes
compared to last year. Profit benefited from the integration of the two businesses.
Profit in Western Europe decreased by £14 million to £558 million but at constant rates of exchange,
increased by £11 million or 2 per cent. Profit was affected by difficult economic conditions, leading to
market contraction and volume decline. There were strong performances in Germany, Switzerland,
Denmark, the United Kingdom, France and Romania, partially offset by declines in Italy, Greece and
Belgium. Regional volumes were 4 per cent lower at 62 billion, mainly as a result of market
contractions in Italy, Spain, Poland and Belgium.
In Italy, market share was down on last year. However, Dunhill and Lucky Strike performed well.
Overall volumes were lower mainly as a result of market contraction and declines in the tail brands.
Despite price increases and lower costs, profit decreased due to the effect of the volume decline.
Profit in Germany increased as a result of improved margins and lower costs. Market share was
higher, driven by excellent performances from Lucky Strike, Pall Mall and Vogue, with volumes stable
in a declining overall market.
In France, good profit growth was the result of higher market share and growing volumes driven by
Lucky Strike and Dunhill benefiting from the launch of innovations. In Spain, profit was up, driven by a
stabilisation of the pricing environment and the excellent growth of Lucky Strike.
A strong increase in profit in Switzerland was the result of reduced costs, increased margins and
higher volumes. Volumes rose with market share up through the performances of Kent and
Parisienne. Profits in Belgium and the Netherlands were lower as industry volumes declined. Market
share in the Netherlands rose on good performances by Kent and Lucky Strike.
In Romania, increases in profit, volumes and market share were achieved through good performances
by Dunhill and Pall Mall. The decline in volumes in Poland was due to lower industry volumes, despite
an increase in market share. Profit at constant rates of exchange was stable as a result of the lower
cost base and good performances from Lucky Strike and Viceroy. Despite growth in market share in
Greece, competitor pricing activity and the challenging economic conditions drove a decline in industry
volumes and resulted in lower profit. In the United Kingdom, Pall Mall performed well and together
with Vogue, resulted in market share growth. Price increases and cost management led to higher
profit despite lower volumes.
Profit grew in Denmark as a result of price increases, although volumes and market share were lower.
In Sweden, profit rose as a result of price increases and higher volumes, with market share also up.
Profit in the Eastern Europe, Middle East and Africa region increased by £58 million to £712 million.
This was principally due to higher volumes and price increases, partly offset by the adverse impact of
exchange rate movements. At constant rates of exchange, profit would have increased by £97 million
or 15 per cent. Volumes at 116 billion were 2 billion higher than last year with the increases in GCC,
South Africa and Ukraine, partially offset by the declines in Turkey and Egypt. Due to International
sanctions the Group withdrew from the Syria market.
Page 6
Regional review cont...
In Russia, market share grew compared to the full year 2011 with volumes stable. Premium share
grew substantially driven by Kent. Strong profit growth was the result of price increases and an
improved mix.
Higher market share in Ukraine led to volume growth. Competitor pricing activities in the low-priced
segment and increased marketing investment resulted in lower profit. Profit improved in Kazakhstan
due to pricing and market share gains.
In Turkey, volumes and market share declined mainly as a result of competitor pricing activities in the
low-priced segment and volume losses of tail brands. Profit was up due to savings initiatives and
higher margins resulting from last year’s excise-driven price increase.
In the GCC, volumes and market share increased mainly due to good performances by Dunhill and
Rothmans. Profit grew strongly with higher volumes, improved margins and cost savings. Trading
conditions in the Egyptian market have rapidly deteriorated and combined with multiple excise
increases, resulted in a steep increase in illicit trade and a corresponding decline in volumes.
In Nigeria, market share grew substantially while volumes were lower as industry volumes declined
largely due to political and social unrest. Premium brands posted impressive growth with Dunhill,
Benson & Hedges and Rothmans the main contributors. The lower volumes, partially offset by an
improved product mix and cost savings, led to lower profit.
At constant rates of exchange, profit was higher in South Africa, following higher prices and increased
volumes, driven by strong performances by Dunhill and Peter Stuyvesant. Industry volumes are still
significantly behind previous years as a result of the major increase in the incidence of illicit trade.
CIGARETTE VOLUMES
The segmental analyses of the volumes of subsidiaries are as follows:
3 months to 6 months to Year to
30.6.12 30.6.11 30.6.12 30.6.11 31.12.11
bns bns bns bns bns
50 51 Asia-Pacific 95 95 191
34 34 Americas 71 70 143
33 35 Western Europe 62 65 135
61 60 EEMEA 116 114 236
178 180 344 344 705
Page 7
Regional review cont...
RESULTS OF ASSOCIATES
Associates principally comprise Reynolds American Inc. and ITC Limited.
The Group’s share of the post-tax results of associates increased by £15 million, or 5 per cent, to
£344 million. The Group’s share of the adjusted post-tax results of associates increased by 10 per
cent to £347 million, with a rise of 14 per cent to £358 million at constant rates of exchange. The
adjusting items in 2011 and 2012 are explained on pages 26 and 27.
The segmental analyses of the Group’s share of the adjusted* post-tax results of associates and joint
ventures are as follows:
30.6.12 30.6.11
Adjusted
Adjusted share of post-tax share of post-
results* tax results*
Constant Current
rates rates
£m £m £m
Asia-Pacific 143 126 112
Americas 214 220 201
Western Europe - - 1
EEMEA 1 1 1
358 347 315
*Adjusted share of post-tax results of associates and joint ventures is after the adjusting items, as
shown on page 12 and explained on pages 26 and 27, have been eliminated from the share of post-
tax results of associates and joint ventures.
The adjusted contribution from Reynolds American increased by 9 per cent to £219 million. This
excludes restructuring costs, the financing of a smoking cessation programme in Louisiana, tax credits
and interest, and costs related to a number of Engle progeny cases. At constant rates of exchange
the increase was 7 per cent.
The Group’s associate in India, ITC, contributed £122 million to the Group, up 12 per cent, after
adjusting for the impact of the dilution in the shareholding. At constant rates of exchange, the
contribution would have been 27 per cent higher than last year.
Page 8
DIVIDENDS
Declaration
The Board has declared an Interim Dividend of 42.2 pence per ordinary share of 25 pence for the six
months ended 30 June 2012. The Interim Dividend will be payable on 26 September 2012 to
shareholders registered on either the UK main register or the South African branch register on
17 August 2012 (the record date).
Key Dates and South Africa Branch Register
In compliance with the requirements of Strate, the electronic settlement and custody system used by
the JSE Limited (JSE), the following salient dates for the payment of the Interim Dividend are
applicable:
Event Date 2012
Last Day to Trade (LDT) cum dividend (JSE) Friday 10 August
Shares commence trading ex dividend (JSE) Monday 13 August
Shares commence trading ex dividend (LSE) Wednesday 15 August
Record date (JSE and LSE) Friday 17 August
Payment date Wednesday 26 September
As the Group reports in sterling, dividends are declared and payable in sterling except for
shareholders on the branch register in South Africa whose dividends are payable in rand. A rate of
exchange of £:R = 13.10720 as at 23 July 2012 (the closing rate on that date as quoted by
Bloomberg), results in an equivalent Interim Dividend of 553.12384 SA cents per ordinary share. From
the commencement of trading on 25 July 2012 until the close of business on 17 August 2012, no
removal requests between the UK main register and the South African branch register will be
permitted and no shares may be dematerialised or rematerialised between 13 August 2012 and
17 August 2012, both days inclusive.
South Africa Branch Register: Dividend Withholding Tax Information
South African Dividend Withholding Tax will be withheld from the gross Interim Dividend of
82.96858 SA cents per ordinary share paid to shareholders on the South African branch register at the
rate of 15 per cent unless a shareholder qualifies for an exemption. After Dividend Withholding Tax
has been withheld, the net dividend will be 470.15526 SA cents per ordinary share.
At the close of business on 24 July 2012 (the latest practicable date prior to the date of the declaration
of the Interim Dividend), British American Tobacco p.l.c. (the “Company”) had a total of
1,948,105,224 ordinary shares in issue (excluding treasury shares). The Company held
78,149,808 ordinary shares in treasury giving a total issued share capital of 2,026,255,032 ordinary
shares.
The Company, as a South Africa non-resident, was not subject to the secondary tax on companies
(STC) regime which used to operate before the introduction of Dividend Withholding Tax. No STC
credits are available for set-off against the Dividend Withholding Tax liability on the Interim Dividend
which is regarded as a ‘foreign dividend’ for the purposes of the South Africa Dividend Withholding
Tax.
British American Tobacco p.l.c. is registered with the South African Revenue Service (SARS) with tax
reference number 9378193172.
For the avoidance of doubt, Dividend Withholding Tax and the information provided above is only of
direct application to shareholders on the South African branch register. Shareholders on the South
African branch register should direct any questions regarding the application of Dividend Withholding
Tax to Computershare Investor Services (Pty) Ltd, contact details for which are given in the ‘Corporate
Information’ on page 36.
General Dividend Information
The Interim Dividend amounts to £824 million. The comparative dividend for the six months to 30 June
2011 of 38.1 pence per ordinary share amounted to £738 million.
In accordance with IFRS, the Interim Dividend will be charged in the Group results for the third
quarter. The condensed consolidated financial information for the six months to 30 June 2012
includes the final dividend paid in respect of the year ended 31 December 2011 of 88.4 pence per
share amounting to £1,723 million (30 June 2011: 81.0 pence amounting to £1,620 million).
Page 9
RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting the business activities of the Group were identified
under the heading ‘Key Group risk factors’, set out on pages 40 to 47 of the Annual Report for the
year ended 31 December 2011, a copy of which is available on the Group’s website www.bat.com.
The Key Group risks are summarised under the headings of:
- Illicit trade;
- Excise and tax;
- Financial;
- Marketplace; and
- Regulation.
The Group continues to review its risks and exposures in the eurozone as part of the management of
its ongoing exposure to foreign exchange rates and under the Key Group risk – Marketplace:
Geopolitical tensions.
In the view of the Board, the key risks and uncertainties for the remaining six months of the financial
year continue to be those set out in the above section of the 2011 Annual Report. These should be
read in the context of the cautionary statement regarding forward looking statements on page 38.
Although the Group operates in all eurozone countries and has significant long-term debt, derivatives,
and trade creditor and debtor balances, denominated in euros, the Board is satisfied that reasonable
precautions have been taken to protect the Group, as far as is possible, to any potential adverse
consequences of the risks related to the eurozone.
IMPLEMENTATION OF A NEW OPERATING MODEL
The Group has embarked on a medium-term programme to implement a new operating model. This
includes revised organisation structures, standardised processes and shared back office services
underpinned by a global single instance of SAP. The new organisation structures and processes are
currently being implemented and the new SAP system will start to be deployed in the third quarter of
2012 and will take around four years to fully roll-out.
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, are set out in the Regional Review and Financial Review and in the notes
to the accounts, all of which are included in the 2011 Annual Report that is available on the Group’s
website, www.bat.com. This Half-Yearly Report provides updated information regarding the business
activities for the six months to 30 June 2012 and of the financial position, cash flow and liquidity
position at 30 June 2012.
The Group has, at the date of this report, sufficient financing available for its estimated existing
requirements for at least the next twelve months. This, together with the proven ability to generate
cash from trading activities, the performance of the Group’s Global Drive Brands, 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, current forecasts and financing arrangements, as
well as the current trading activities of the Group, 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 the Annual Report and this Half-Yearly Report.
Page 10
DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors confirm that this condensed consolidated financial information has been prepared in
accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union, and that this
Half-Yearly Report includes a fair review of the information required by the Disclosure and
Transparency Rules of the Financial Services 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 48 and 49 in the British
American Tobacco Annual Report for the year ended 31 December 2011:
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 and Chief Information Officer
24 July 2012
Page 11
INDEPENDENT REVIEW REPORT TO BRITISH AMERICAN TOBACCO p.l.c.
Introduction
We have been engaged by the Company to review the condensed consolidated financial information
in the Half-Yearly Report for the six months ended 30 June 2012, which comprises the Group income
statement, the Group statement of comprehensive income, the Group statement of changes in equity,
the Group balance sheet, the Group cash flow statement, the accounting policies and basis of
preparation and the related notes. We have read the other information contained in the Half-Yearly
Report and considered whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed consolidated financial information.
Directors' responsibilities
The Half-Yearly Report is the responsibility of, and has been approved by, the Directors. The
Directors are responsible for preparing the Half-Yearly Report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed on page 19, the annual financial statements of the Group are prepared in accordance
with IFRSs as adopted by the European Union. The condensed consolidated financial information in
the Half-Yearly Report has been prepared in accordance with International Accounting Standard 34,
‘Interim Financial Reporting’, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed consolidated financial
information in the Half-Yearly Report based on our review. This report, including the conclusion, has
been prepared for and only for the Company for the purpose of the Disclosure and Transparency
Rules of the Financial Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
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 United Kingdom. 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. A review is substantially
less in scope than an audit conducted in accordance with International Standards on Auditing (UK and
Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed
consolidated financial information in the Half-Yearly Report for the six months ended 30 June 2012 is
not prepared, in all material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
1 Embankment Place
London
24 July 2012
Page 12
GROUP INCOME STATEMENT - unaudited
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Gross turnover (including duty, excise and other taxes of £14,837
million (30.6.11: £14,740 million; 31.12.11: £30,494 million)) 22,289 22,178 45,893
Revenue 7,452 7,438 15,399
Raw materials and consumables used (1,770) (1,716) (3,507)
Changes in inventories of finished goods and work in progress 138 50 81
Employee benefit costs (1,167) (1,177) (2,501)
Depreciation, amortisation and impairment costs (246) (262) (817)
Other operating income 124 129 233
Other operating expenses (1,791) (1,771) (4,167)
Profit from operations 2,740 2,691 4,721
Analysed as:
– adjusted profit from operations 2,839 2,760 5,519
– restructuring and integration costs (68) (40) (193)
– amortisation of trademarks (31) (29) (58)
– goodwill impairment - - (273)
– Fox River - - (274)
2,740 2,691 4,721
Finance income 37 57 117
Finance costs (248) (290) (577)
Net finance costs (211) (233) (460)
Share of post-tax results of associates and joint ventures 344 329 670
Analysed as:
– adjusted share of post-tax results of associates and joint ventures 347 315 659
– issue of shares and change in shareholding 24 34 28
– smoking cessation programme - (23) (23)
– gain on disposal of businesses - - 22
– restructuring and integration costs (25) (2) (4)
– other (see page 26) (2) 5 (12)
344 329 670
Profit before taxation 2,873 2,787 4,931
Taxation on ordinary activities (787) (781) (1,556)
Profit for the period 2,086 2,006 3,375
Attributable to:
Owners of the parent 1,929 1,870 3,095
Non-controlling interests 157 136 280
2,086 2,006 3,375
Earnings per share
Basic 98.9p 94.5p 157.1p
Diluted 98.4p 94.0p 156.2p
Adjusted diluted earnings per share 102.4p 96.1p 194.6p
All of the activities during both years are in respect of continuing operations.
The accompanying notes on pages 19 to 35 form an integral part of this condensed consolidated financial
information.
Page 13
GROUP STATEMENT OF COMPREHENSIVE INCOME - unaudited
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Profit for the period (page 12) 2,086 2,006 3,375
Other comprehensive income
Differences on exchange
– subsidiaries (182) (5) (411)
– associates (68) (59) (109)
Differences on exchange reclassified and reported in profit for the
period - - (4)
Cash flow hedges
– net fair value gains/(losses) 4 13 (21)
– reclassified and reported in profit for the period 22 (5) 38
– reclassified and reported in net assets 6 (8) (5)
Available-for-sale investments
– net fair value gains 1 - 26
– reclassified and reported in profit for the period - - (1)
Net investment hedges
– net fair value gains/(losses) 64 (43) 62
– differences on exchange on borrowings 44 (48) (104)
Retirement benefit schemes
– net actuarial losses in respect of subsidiaries (255) (118) (462)
– surplus recognition and minimum funding obligations in respect
of subsidiaries - (11) 2
– actuarial (losses)/gains in respect of associates net of tax (47) 23 (67)
Tax on items recognised directly in other comprehensive income 33 (23) 20
Total other comprehensive income for the period, net of tax (378) (284) (1,036)
Total comprehensive income for the period, net of tax 1,708 1,722 2,339
Attributable to:
Owners of the parent 1,566 1,588 2,094
Non-controlling interests 142 134 245
1,708 1,722 2,339
The accompanying notes on pages 19 to 35 form an integral part of this condensed consolidated financial
information.
Page 14
GROUP STATEMENT OF CHANGES IN EQUITY - unaudited
At 30 June 2012
Attributable to owners of the parent
Share
premium,
capital Total
redemption attributable Non-
Share and merger Other Retained to owners controlling Total
capital reserves reserves earnings of parent interests equity
£m £m £m £m £m £m £m
Balance at 1 January 2012 506 3,913 1,112 2,636 8,167 307 8,474
Total comprehensive income for
the period (page 13) - - (111) 1,677 1,566 142 1,708
Profit for the period (page 12) - - - 1,929 1,929 157 2,086
Other comprehensive income for
the period (page 13) - - (111) (252) (363) (15) (378)
Employee share options
– value of employee services - - - 37 37 - 37
– proceeds from shares issued 1 3 - 1 5 - 5
Dividends and other appropriations
– ordinary shares - - - (1,723) (1,723) - (1,723)
– to non-controlling interests - - - - - (143) (143)
Purchase of own shares
– held in employee share
ownership trusts - - - (121) (121) - (121)
– share buy-back programme - - - (676) (676) - (676)
Non-controlling interests -
acquisitions - - - (21) (21) (3) (24)
Other movements - - - (10) (10) - (10)
Balance at 30 June 2012 507 3,916 1,001 1,800 7,224 303 7,527
At 30 June 2011
Attributable to owners of the parent
Share
premium,
capital Total
redemption attributable Non-
Share and merger Other Retained to owners controlling Total
capital reserves reserves earnings of parent interests equity
£m £m £m £m £m £m £m
Balance at 1 January 2011 506 3,910 1,600 3,190 9,206 342 9,548
Total comprehensive income for the
period (page 13) - - (172) 1,760 1,588 134 1,722
Profit for the period (page 12) - - - 1,870 1,870 136 2,006
Other comprehensive income for
the period (page 13) - - (172) (110) (282) (2) (284)
Employee share options
– value of employee services - - - 38 38 - 38
– proceeds from shares issued - 2 - 3 5 - 5
Dividends and other appropriations
– ordinary shares - - - (1,620) (1,620) - (1,620)
– to non-controlling interests - - - - - (139) (139)
Purchase of own shares
– held in employee share
ownership trusts - - - (122) (122) - (122)
– share buy-back programme - - - (410) (410) - (410)
Other movements - - - 20 20 - 20
Balance at 30 June 2011 506 3,912 1,428 2,859 8,705 337 9,042
Page 15
GROUP STATEMENT OF CHANGES IN EQUITY - unaudited cont…
At 31 December 2011
Attributable to owners of the parent
Share
premium,
capital Total
redemption attributable Non-
Share and merger Other Retained to owners controlling
capital reserves reserves earnings of parent interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2011 506 3,910 1,600 3,190 9,206 342 9,548
Total comprehensive income for the
year (page 13) - - (488) 2,582 2,094 245 2,339
Profit for the year (page 12) - - - 3,095 3,095 280 3,375
Other comprehensive income for
the year (pages 13) - - (488) (513) (1,001) (35) (1,036)
Employee share options
– value of employee services - - - 76 76 - 76
– proceeds from shares issued - 3 - 2 5 - 5
Dividends and other appropriations
– ordinary shares - - - (2,358) (2,358) (2,358)
– to non-controlling interests - - - - - (279) (279)
Purchase of own shares
– held in employee share
ownership trusts - - (123) (123) - (123)
– share buy-back programme - - - (755) (755) - (755)
Non-controlling interests -
acquisitions - - - (10) (10) - (10)
Other movements - - - 32 32 (1) 31
Balance at 31 December 2011 506 3,913 1,112 2,636 8,167 307 8,474
The accompanying notes on pages 19 to 35 form an integral part of the condensed consolidated financial information.
Page 16
GROUP BALANCE SHEET - unaudited
30.6.12 30.6.11 31.12.11
£m £m £m
Assets
Non-current assets
Intangible assets 11,795 12,673 11,992
Property, plant and equipment 2,919 3,064 3,047
Investments in associates and joint ventures 2,522 2,809 2,613
Retirement benefit assets 42 113 105
Deferred tax assets 304 366 343
Trade and other receivables 319 311 305
Available-for-sale investments 39 30 40
Derivative financial instruments 185 110 179
Total non-current assets 18,125 19,476 18,624
Current assets
Inventories 3,984 3,824 3,498
Income tax receivable 95 71 127
Trade and other receivables 2,699 2,517 2,423
Available-for-sale investments 45 46 57
Derivative financial instruments 184 136 159
Cash and cash equivalents 1,749 1,717 2,194
8,756 8,311 8,458
Assets classified as held-for-sale 53 22 37
Total current assets 8,809 8,333 8,495
Total assets 26,934 27,809 27,119
The accompanying notes on pages 19 to 35 form an integral part of this condensed consolidated
financial information.
Page 17
GROUP BALANCE SHEET - unaudited cont…
30.06.12 30.06.11 31.12.11
£m £m £m
Equity
Capital and reserves
Share capital 507 506 506
Share premium, capital redemption and merger reserves 3,916 3,912 3,913
Other reserves 1,001 1,428 1,112
Retained earnings 1,800 2,859 2,636
Owners of the parent 7,224 8,705 8,167
after deducting
– cost of treasury shares (2,259) (1,207) (1,539)
Non-controlling interests 303 337 307
Total equity 7,527 9,042 8,474
Liabilities
Non-current liabilities
Borrowings 9,526 8,713 8,510
Retirement benefit liabilities 1,076 786 1,003
Deferred tax liabilities 498 527 556
Other provisions for liabilities and charges 417 181 458
Trade and other payables 173 194 184
Derivative financial instruments 81 97 87
Total non-current liabilities 11,771 10,498 10,798
Current liabilities
Borrowings 1,836 2,303 1,766
Income tax payable 475 465 494
Other provisions for liabilities and charges 346 314 236
Trade and other payables 4,871 4,937 5,174
Derivative financial instruments 108 250 177
Total current liabilities 7,636 8,269 7,847
Total equity and liabilities 26,934 27,809 27,119
The accompanying notes on pages 19 to 35 are an integral part of the these consolidated financial
statements.
Page 18
GROUP CASH FLOW STATEMENT - unaudited
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Cash flows from operating activities
Cash generated from operations (page 32) 1,714 2,099 5,537
Dividends received from associates 176 159 476
Tax paid (708) (744) (1,447)
Net cash from operating activities 1,182 1,514 4,566
Cash flows from investing activities
Interest received 46 34 79
Dividends received from investments 2 2 2
Purchases of property, plant and equipment (136) (106) (510)
Proceeds on disposal of property, plant and equipment 20 38 45
Purchases of intangibles (77) (42) (107)
Proceeds from associate’s share buy-back 117 - 71
Purchases and proceeds on disposals of investments 12 13 3
Purchase of Protabaco - - (295)
Net cash used in investing activities (16) (61) (712)
Cash flows from financing activities
Interest paid (290) (326) (580)
Interest element of finance lease rental payments (1) (1) -
Capital element of finance lease rental payments (3) (7) (13)
Proceeds from issue of shares to owners of the parent 4 2 3
Proceeds from the exercise of options over own shares
held in employee share ownership trusts 1 3 2
Proceeds from increases in and new borrowings 2,601 1,265 1,361
Movements relating to derivative financial instruments (7) (64) 5
Purchases of own shares (536) (317) (755)
Purchases of own shares held in employee share ownership trusts (121) (122) (123)
Purchases of non-controlling interests (24) - (10)
Reductions in and repayments of borrowings (1,475) (820) (1,304)
Dividends paid to owners of the parent (1,723) (1,620) (2,358)
Dividends paid to non-controlling interests (135) (139) (275)
Net cash used in financing activities (1,709) (2,146) (4,047)
Net cash flows used in operating, investing and financing
activities (543) (693) (193)
Differences on exchange (43) 7 (48)
Decrease in net cash and cash equivalents in the period (586) (686) (241)
Net cash and cash equivalents at 1 January 1,942 2,183 2,183
Net cash and cash equivalents at period end 1,356 1,497 1,942
The accompanying notes on pages 19 to 35 form an integral part of this condensed consolidated financial
information.
Page 19
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information comprises the unaudited interim financial
information for the six months to 30 June 2012 and 30 June 2011, together with the audited results for
the year ended 31 December 2011. This condensed consolidated financial information has been
prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union
and the Disclosure and Transparency Rules issued by the Financial Services Authority. The
condensed consolidated financial information is unaudited but has been reviewed by the auditors and
their review report is set out on page 11.
The condensed consolidated financial information does not constitute statutory accounts within the
meaning of Section 434 of the UK Companies Act 2006 and should be read in conjunction with the
annual consolidated financial statements for the year ended 31 December 2011, which were prepared
in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European
Union (EU) and implemented in the UK. The annual consolidated financial statements for 2011
represent the statutory accounts for that year and have been filed with the Registrar of Companies.
The auditors’ report on those statements was unqualified and did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
These condensed consolidated financial statements have been prepared under the historical cost
convention, except in respect of certain financial instruments, and on a basis consistent with the IFRS
accounting policies as set out in the Annual Report for the year ended 31 December 2011.
The Group has not adopted any new and amended IFRSs and IFRIC interpretations with any
significant effect on reported profit or equity or on the disclosures in the financial statements with effect
from 1 January 2012.
The preparation of these condensed consolidated financial statements 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 these condensed consolidated
financial statements. 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 statements. The key estimates
and assumptions were the same as those that applied to the consolidated financial statements for the
year ended 31 December 2011, 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 these condensed consolidated financial
statements as the original estimates and assumptions are modified, as appropriate, in the period in
which the circumstances change.
Page 20
NON-GAAP MEASURES
In the reporting of financial information, the Group uses certain measures that are not required under
IFRS, the generally accepted accounting principles (GAAP) under which the Group reports. The
Group believes that these additional measures, which are used internally, are useful to users of the
financial information in helping them understand the underlying business performance.
The principal non-GAAP measure which the Group uses is adjusted diluted earnings per share, which
is reconciled to diluted earnings per share. Adjusting items are significant items in the 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. While the disclosure of adjusting items is not
required by IFRS, these items are separately disclosed either as memorandum information on the
face of the income statement and in the segmental analyses, or in the notes to the accounts as
appropriate. The adjusting items are used to calculate the additional non-GAAP measures of
adjusted profit from operations and adjusted share of post-tax results of associates and joint
ventures. All adjustments to profit from operations and diluted earnings per share are explained in
this announcement.
The Management Board as the chief operating decision maker, reviews current and prior year
adjusted segmental income statement information of subsidiaries and associates and joint ventures at
constant rates of exchange which provides an approximate guide to performance in the current year
had they been translated at last year’s rate of exchange. The constant rate comparison provided for
reporting segment information is based on a retranslation, at prior year exchange rates, of the current
year results of the Group’s overseas entities but other than in exceptional circumstances, does not
adjust for the normal transactional gains and losses in operations which are generated by exchange
movements.
In the presentation of financial information, the Group also uses another measure, organic growth, to
analyse underlying business performance. Organic growth is the growth after adjusting for mergers
and acquisitions and discontinued activities. Adjustments are made to current and prior year
numbers, based on the 2012 Group position as explained on page 39.
The Group also prepares an alternative cash flow, which includes a measure of ‘free cash flow’, to
illustrate the cash flows before transactions relating to borrowings. The Group also provides gross
turnover as an additional disclosure to indicate the impact of duty, excise and other taxes.
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 3/2009 ‘Headline Earnings’ issued by the South African
Institute of Chartered Accountants. These are shown on pages 28 and 29.
Page 21
FOREIGN CURRENCIES
The income and cash flow statements of overseas subsidiaries and associates and joint ventures
have been translated at the average rates for the respective periods. Assets and liabilities have been
translated at the relevant period end rates. For hyper-inflation countries, the local currency results
are adjusted for the impact of inflation prior to translation to sterling at closing exchange rates.
The principal exchange rates used were as follows:
Average Closing
30.6.12 30.6.11 31.12.11 30.6.12 30.6.11 31.12.11
US dollar 1.577 1.617 1.604 1.568 1.605 1.554
Canadian dollar 1.586 1.579 1.586 1.599 1.549 1.583
Euro 1.216 1.152 1.153 1.236 1.107 1.197
South African rand 12.521 11.146 11.632 12.828 10.883 12.547
Brazilian real 2.941 2.636 2.683 3.166 2.508 2.899
Australian dollar 1.528 1.564 1.554 1.530 1.500 1.516
Russian rouble 48.255 46.239 47.116 50.876 44.817 49.922
Japanese yen 125.689 132.429 127.826 125.147 129.656 119.572
Indian rupee 82.267 72.744 74.802 87.574 71.768 82.531
SEGMENTAL ANALYSES OF REVENUE AND PROFIT
The four geographic regions are the reportable segments for the Group as they form the focus of the
Group’s internal reporting systems and are the basis used by the chief operating decision maker,
identified as the Management Board, for assessing performance and allocating resources.
The Management Board reviews current and prior year segmental revenue, adjusted profit from
operations of subsidiaries and adjusted post-tax results of associates and joint ventures at constant
rates of exchange. As a result, the 2012 segmental results are translated using the average rates of
exchange for the six months to 30 June 2011. The 2011 comparative figures are also stated at the
2011 actual average rates of exchange.
The analyses of revenue for the six months to 30 June 2012, 30 June 2011 and the year to
31 December 2011, based on location of sales, are as follows:
30.6.12 30.6.11 31.12.11
Revenue Revenue
Constant Translation Current
rates exchange rates Revenue Revenue
£m £m £m £m £m
Asia-Pacific 2,015 35 2,050 2,025 4,251
Americas 1,803 (97) 1,706 1,744 3,558
Western Europe 1,742 (93) 1,649 1,719 3,600
EEMEA 2,197 (150) 2,047 1,950 3,990
Total 7,757 (305) 7,452 7,438 15,399
Page 22
Segmental analysis of revenue and profit cont…
The analyses of profit from operations and the Group’s share of the post-tax results of
associates and joint ventures for the six months to 30 June 2012, reconciled to profit before tax,
are as follows:
30.6.12
Adjusted* Adjusted*
segment segment Segment
result result result
Constant Translation Current Adjusting Current
rates exchange rates items* rates
£m £m £m £m £m
Asia-Pacific 792 23 815 (22) 793
Americas 803 (49) 754 (29) 725
Western Europe 583 (25) 558 (42) 516
EEMEA 751 (39) 712 (6) 706
Profit from operations 2,929 (90) 2,839 (99) 2,740
Net finance costs (211)
Asia-Pacific 143 (17) 126 24 150
Americas 214 6 220 (27) 193
Western Europe - - - - -
EEMEA 1 - 1 - 1
Share of post-tax
results of associates
and joint ventures 358 (11) 347 (3) 344
Profit before taxation 2,873
*The adjustments to profit from operations and the Group’s share of the post-tax results of associates
and joint ventures are explained on pages 24 to 27.
Page 23
Segmental analysis of revenue and profit cont…
The analyses of profit from operations and the Group’s share of the post-tax results of associates
and joint ventures for the six months to 30 June 2011 and the year to 31 December 2011, reconciled to
profit before tax, are as follows:
30.6.11 31.12.11
Adjusted* Adjusted*
Segment Segment Segment Segment
result result result result
Current Adjusting Current Current Adjusting Current
rates items* rates rates items* rates
£m £m £m £m £m £m
Asia-Pacific 766 (22) 744 1,539 (58) 1,481
Americas 768 12 780 1,441 (15) 1,426
Western Europe 572 (49) 523 1,228 (153) 1,075
EEMEA 654 (10) 644 1,311 (298) 1,013
2,760 (69) 2,691 5,519 (524) 4,995
Fox River** (274) (274)
Profit from
operations 2,760 (69) 2,691 5,519 (798) 4,721
Net finance costs (233) (460)
Asia-Pacific 112 34 146 225 28 253
Americas 201 (20) 181 432 (17) 415
Western Europe 1 - 1 - - -
EEMEA 1 - 1 2 - 2
Share of post-tax
results of associates
and joint ventures 315 14 329 659 11 670
Profit before taxation 2,787 4,931
*The adjustments to profit from operations and the Group’s share of the post-tax results of associates
and joint ventures are explained on pages 24 to 27.
** The Fox River provision made in 2011 (see page 25), has not been allocated to a segment or
segments as it relates to a 1998 settlement agreement. It is presented separately from the segmental
reporting which is used to evaluate segment performance and to allocate resources.
Page 24
ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS
Included in profit from operations are the following adjusting items:
(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. These initiatives include a review of the
Group’s manufacturing operations, 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
30.6.12 30.6.11 31.12.11
£m £m £m
Employee benefit costs 25 23 100
Depreciation, amortisation and
impairment costs 21 10 39
Other operating expenses 22 24 72
Other operating income - (17) (18)
Total 68 40 193
Restructuring and integration costs in the six months to 30 June 2012 principally relate to the
continuation of factory closure and downsizing activities in Australia and restructuring in Argentina.
The costs also cover the social plan and other activities relating to the Bremen factory closure in
Germany, integration of Productora Tabacalera de Colombia, S.A.S. (Protabaco) into existing
operations, as well as other restructuring initiatives directly related to implementation of a new
operating model (see page 9).
Restructuring and integration costs in the six months to 30 June 2011 principally relate to the
continuation of the factory closure in Denmark, a voluntary separation scheme and the closure of the
printing unit in Argentina, the continued integration of Tekel into existing operations and downsizing
activities in Australia. In addition, the costs also include the closure of the Jawornik factory in Poland,
the Lecce factory in Italy and the Tire factory in Turkey.
Other operating income in 2011 includes gains on sale of surplus land and buildings in Argentina.
For the year ended 31 December 2011, the charge of £193 million for restructuring and integration
costs includes the activities referred to in respect of the six months to 30 June 2011. In addition, the
costs also cover the social plan and other closure activities relating to the Bremen factory closure in
Germany, integration of Productora Tabacalera de Colombia, S.A.S. (Protabaco) into existing
operations, including acquisition costs, as well as other restructuring initiatives directly related to
improving the efficiency and effectiveness of the Group as a globally integrated enterprise.
Page 25
Adjusting items included in profit from operations cont…
(b) Amortisation of trademarks
The acquisitions of Protabaco, Bentoel, Tekel and ST resulted in the capitalisation of trademarks
which are amortised over their expected useful lives, which do not exceed 20 years. The amortisation
charge of £31 million is included in depreciation, amortisation and impairment costs in the profit from
operations for the six months to 30 June 2012 (30 June 2011: £29 million). For the year to
31 December 2011, the amortisation charge was £58 million.
(c) Impairment of goodwill and trademarks
During the second half of 2011, the Group impaired the remaining balance of the goodwill in respect of
the Tekel acquisition in 2008, amounting to £273 million. Although cost saving initiatives in the
acquisition plan have been delivered successfully, the impairment charge arose as a result of further
increases in excise announced by the Turkish government effective from October 2011 and an
additional increase effective from January 2013. The excise increases to date have resulted in the
growth of illicit trade and a loss of volumes and market share and this is expected to continue.
(d) Fox River
For the year ended 31 December 2011 a provision of £274 million was made for a potential claim
under a 1998 settlement agreement entered into by a Group subsidiary in respect of the clean up of
sediment in the lower Fox River. More details of the claim are provided in note 30 of the Annual
Report for the year ended 31 December 2011.
OTHER CHANGES IN THE GROUP
(a) Productora Tabacalera de Colombia, S.A.S. (Protabaco)
On 11 October 2011, the Group acquired from Flentex Holdings Limited and Trioumvir Enterprises
Limited, both private investor shareholders, a 100 per cent stake in Productora Tabacalera de
Colombia, S.A.S. (Protabaco). The purchase price was subject to the final agreement of adjustments
for working capital and net debt with the vendors. This was finalised in July 2012 with a reduction of
£2 million to the previously reported purchase price and goodwill.
The goodwill of £132 million on the acquisition of the cigarette business of Protabaco, stated at the
exchange rates ruling at the date of the transaction, arises as follows:
Final Fair Value
£m
Net assets acquired 164
Goodwill 132
Total consideration (US$458m) 296
The goodwill of £132 million on the acquisition of the business represents a strategic premium to
strengthen the Group’s position in Latin America’s fourth largest market, building on British American
Tobacco’s existing business and anticipated synergies, that will arise from combining the businesses
in Colombia, post-acquisition.
(b) Termination of distributor arrangement
With effect from 1 July 2011, the arrangement by which the Group acted as a distributor for a third
party in Norway, was terminated. This arrangement contributed £24 million to revenue and less than a
£1 million to profit from operations in the Western Europe region in the six months ended 30 June
2011.
(c) British American Tobacco Bangladesh
On 27 June 2012, the Group acquired a further 7 per cent interest in British American Tobacco
Bangladesh Company Limited at a cost of £24 million. This increased the Group’s total shareholding
to 73 per cent as at 30 June 2012.
Page 26
NET FINANCE COSTS
Net finance costs comprise:
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Finance costs (248) (290) (577)
Finance income 37 57 117
(211) (233) (460)
Comprising:
Interest payable (283) (287) (567)
Interest and dividend income 50 42 82
Net impact of fair value and exchange 22 12 25
- fair value changes - derivatives 32 (88) (12)
- exchange differences (10) 100 37
(211) (233) (460)
Net finance costs at £211 million were £22 million lower than last year, principally reflecting higher
interest income from derivatives.
The net £22 million gain (2011: £12 million) of fair value changes and exchange differences reflects a
£6 million loss (2011: £2 million) from the net impact of exchange rate movements and a gain of
£28 million (2011: £14 million) principally due to interest related changes in the fair value of derivatives.
ASSOCIATES AND JOINT VENTURES
The Group’s share of the post-tax results of associates and joint ventures was £344 million
(2011: £329 million) after net adjusting items (see page 12), amounting to a £3 million loss (2011: £14
million gain) and after tax of £180 million (2011: £157 million). For the year to 31 December 2011, the
share of post-tax results was £670 million after net adjusting income of £11 million and after tax of
£331 million. For the six months to 30 June 2012, excluding the adjusting items, the Group’s share of
the post-tax results increased by 10 per cent to £347 million (2011: £315 million). The Group’s share is
after the adjusting items explained below, which are excluded from the calculation of adjusted diluted
earnings per share (page 28).
In the six months to 30 June 2012:
Reynolds American recognised restructuring charges of US$93 million in respect of its overall
activities. The Group’s share of these charges is £25 milion (net of tax).
In addition, Reynolds American has recognised costs of US$7 million in respect of a number of Engle
progeny lawsuits and the Group’s share of these costs is £2 million (net of tax).
The Group’s interest in ITC decreased from 31.04 per cent to 30.86 per cent as a result of ITC issuing
ordinary shares under the Company’s Employee Share Option Scheme. The issue of these shares
and change in the Group’s share of ITC resulted in a gain of £24 million, which is treated as a partial
deemed disposal and included in the income statement.
Page 27
Associates and joint ventures cont…..
In the six months to 30 June 2011:
Reynolds American, with other tobacco companies, was refused by the US Supreme Court a request
to revoke a 2009 order requiring them to finance a US$278 million smoking cessation programme in
Louisiana (Scott case). The Group’s share of this charge amounts to £23 million (net of tax).
Reynolds American recognised restructuring charges of US$15 million in respect of a factory closure.
The Group’s share of the restructuring charges amounted to £2 million (net of tax). Reynolds
American reported US$16 million of tax credits and interest respectively. The Group’s share of these
tax credits amounts to £5 million (net of tax).
The Group’s interest in ITC decreased from 31.43 per cent to 31.18 per cent as a result of ITC issuing
ordinary shares under the Company’s Employee Stock Option Scheme. The issue of shares and
change in the Group’s share of ITC resulted in a gain of £34 million, which is treated as a partial
deemed disposal and included in the income statement.
For the year ended 31 December 2011:
Reynolds American, with other tobacco companies, was refused by the US Supreme Court a request
to revoke a 2009 order requiring them to finance a US$278 million smoking cessation programme in
Louisiana (Scott case). The Group’s share of this charge amounts to £23 million (net of tax).
Reynolds American sold Lane Limited for US$205 million in cash. The Group’s share of the gain on
disposal of this business amounts to £22 million (net of tax). Reynolds American recognised
restructuring costs of US$23 million. The Group’s share of these charges amounts to £4 million (net
of tax).
Reynolds American has also recognised the following amounts which have been combined in adjusting
items and reported as other: Reynolds American reported a charge of US$64 million in respect of four
Engle progeny lawsuits that have proceeded through the appellate process in the state of Florida. The
amount includes compensatory and punitive damages as well as attorneys’ fees and statutory interest.
The Group’s share of this charge amounts to £10 million (net of tax). Reynolds American recognised
trademark amortisation and impairment of US$47 million and the Group’s share of these charges
amounted to £8 million (net of tax). Reynolds American reported US$16 million and US$11 million of
tax credits and interest respectively. The Group’s share of these credits amounts to £6 million (net of
tax).
The Group’s interest in ITC decreased from 31.43 per cent to 31.04 per cent as a result of ITC issuing
ordinary shares under the company’s employee stock option scheme. The issue of shares and
change in the Group’s share of ITC resulted in a gain of £28 million, which is treated as a partial
deemed disposal and included in the income statement.
TAXATION
The tax rate in the income statement of 27.4 per cent for the six months to 30 June 2012 (30 June
2011: 28.0 per cent; 31 December 2011: 31.6 per cent) is affected by the inclusion of the share of
associates’ post-tax profit in the Group’s pre-tax results and by adjusting items. The underlying tax
rate for subsidiaries reflected in the adjusted earnings per share below was 30.8 per cent in 2012 and
31.4 per cent for the six months to 30 June 2011. For the year to 31 December 2011 it was 31.2 per
cent. The decrease is mainly due to a change in the mix of profits. The charge relates to taxes payable
overseas.
Page 28
EARNINGS PER SHARE
6 months to Year to
30.6.12 30.6.11 31.12.11
pence pence pence
Earnings per share
- basic 98.9 94.5 157.1
- diluted 98.4 94.0 156.2
Adjusted earnings per share
- basic 102.9 96.6 195.8
- diluted 102.4 96.1 194.6
Headline earnings per share
- basic 98.4 93.0 168.7
- diluted 97.9 92.5 167.7
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.
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 3/2009
‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants.
Earnings have been affected by a number of adjusting items which impact profit from operations (see
pages 24 and 25) and share of post-tax results of associates and joint ventures (see pages 26 and
27). For the year to 31 December 2011 earnings were also affected by the write-off of deferred tax
assets of £43 million, which has also been treated as an adjusting item. In order to illustrate the
impact of these items, the adjusted diluted earnings per share are shown below:
Adjusted diluted earnings per share
6 months to Year to
30.6.12 30.6.11 31.12.11
pence pence pence
Unadjusted earnings per share 98.4 94.0 156.2
Effect of restructuring and integration costs 2.7 1.7 7.4
Effect of impairment of goodwill and trademarks - - 13.3
Effect of deferred tax asset written off - - 2.2
Effect of amortisation of trademarks 1.2 1.1 2.2
Effect of Fox River - - 13.8
Effect of associates’ adjusting items 0.1 (0.7) (0.5)
Adjusted diluted earnings per share 102.4 96.1 194.6
Similar types of adjustments would apply to basic earnings per share.
The earnings per share are based on:
30.6.12 30.6.11 31.12.11
Earnings Shares Earnings Shares Earnings Shares
£m m £m m £m m
Earnings per share
- basic 1,929 1,951 1,870 1,979 3,095 1,970
- diluted 1,929 1,961 1,870 1,990 3,095 1,982
Adjusted earnings per
share
- basic 2,008 1,951 1,912 1,979 3,857 1,970
- diluted 2,008 1,961 1,912 1,990 3,857 1,982
Headline earnings per
share
- basic 1,920 1,951 1,841 1,979 3,323 1,970
- diluted 1,920 1,961 1,841 1,990 3,323 1,982
Page 29
Earnings per share cont…
The diluted headline earnings per share are calculated by taking the following adjustments into
account:
Diluted headline earnings per share
6 months to Year to
30.6.12 30.6.11 31.12.11
pence pence pence
Unadjusted earnings per share 98.4 94.0 156.2
Effect of impairment of intangibles and property, plant
and equipment 0.7 0.9 14.4
Effect of gains on disposal of non-current assets held-
for-sale - (0.6) (0.5)
Effect of gains reclassified from the available-for-sale
reserve - - (0.1)
Effect of share of associates’ trademark and other asset
impairments and termination of joint venture - - 0.4
Effect of share of associates’ gains on disposal of assets
held-for-sale - (0.1) (1.3)
Effect of issue of shares and change in shareholding in
associate (1.2) (1.7) (1.4)
Diluted headline earnings per share 97.9 92.5 167.7
An alternative measure of headline earnings per share has
been presented below to take account of the effect of Fox
River (see page 25); this measure is in addition to that
mandated by the JSE Listing Requirements.
Diluted headline earnings per share amended for
Fox River 97.9 92.5 181.5
Page 30
CASH FLOW AND NET DEBT MOVEMENTS
(a) Alternative cash flow
The IFRS cash flow statement on page 18 includes all transactions affecting cash and cash
equivalents, including financing. The alternative cash flow statement below is presented to illustrate
the cash flows before transactions relating to borrowings.
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Adjusted profit from operations (page 12) 2,839 2,760 5,519
Depreciation, amortisation and impairment 194 223 447
Other non-cash items in operating profit 23 33 68
Profit from operations before depreciation, amortisation
and impairment 3,056 3,016 6,034
Increase in working capital (1,247) (802) (281)
Net capital expenditure (190) (110) (566)
Gross capital expenditure (210) (148) (611)
Sale of fixed assets 20 38 45
Operating cash flow 1,619 2,104 5,187
Net interest paid (253) (309) (469)
Tax paid (708) (744) (1,447)
Dividends paid to non-controlling interests (135) (139) (275)
Restructuring costs (95) (115) (217)
Dividends and other appropriations from associates 293 159 547
Free cash flow 721 956 3,326
Dividends paid to shareholders (1,723) (1,620) (2,358)
Share buy-back (including transaction costs) (536) (317) (755)
Net investment activities (27) - (311)
Purchases of subsidiaries, non-controlling interests and
other intangibles (27) - (311)
Net flow from share schemes and other (85) (107) (93)
Net cash flow (1,650) (1,088) (191)
External movements on net debt
Exchange rate effects* 140 (372) 123
Change in accrued interest and other 43 40 (19)
Change in net debt (1,467) (1,420) (87)
Opening net debt (7,928) (7,841) (7,841)
Closing net debt (9,395) (9,261) (7,928)
* Including movements in respect of debt related derivatives.
Free cash flow is the Group’s cash flow before dividends, share buy-back and investing activities.
Operating cash flow decreased by £485 million or 23 per cent to £1,619 million, primarily reflecting
working capital movements and the increase in net capital expenditure, partially offset by growth in
underlying operating performance. Taking into account the reduced outflows relating to taxation and
interest paid of £36 million and £56 million respectively, as well as higher dividends and other
appropriations from associates (increase of £134 million), mainly due to the Reynolds share buy-back,
the Group's free cash flow was £235 million or 25 per cent lower at £721 million.
Page 31
Cash flow cont…
The ratio of free cash flow per share to adjusted diluted earnings per share was 36 per cent
(2011: 50 per cent), with free cash flow per share decreasing by 23 per cent.
Below free cash flow, the principal cash outflows for the six months to 30 June 2012 comprise the
payment of the prior year final dividend which was £103 million higher at £1,723 million, as well as an
outflow of £536 million due to the increased level of the on-market share buy-back programme in 2012
(2011: £317 million). Also reflected below free cash flow are the cash outflows of £27 million
(2011: £nil) in respect of investing activities.
The other net flows principally relate to the impact of the level of shares purchased by the employee
share ownership trusts and cash flows in respect of certain derivative financial instruments.
The above flows resulted in net cash outflows of £1,650 million (2011: £1,088 million). After taking
account of exchange rate movements and the charge in accrued interest and other, total net debt was
£9,395 million at 30 June 2012 (30 June 2011: £9,261 million and 31 December 2011: £7,928 million).
(b) Net debt
The Group defines net debt as borrowings including related derivatives, less cash and cash
equivalents and current available-for-sale investments. The maturity profile of net debt is as follows:
30.6.12 30.6.11 31.12.11
£m £m £m
Net debt due within one year:
Borrowings (1,836) (2,303) (1,766)
Related derivatives 72 (34) 5
Cash and cash equivalents 1,749 1,717 2,194
Current available-for-sale investments 45 46 57
30 (574) 490
Net debt due beyond one year:
Borrowings (9,526) (8,713) (8,510)
Related derivatives 101 26 92
(9,425) (8,687) (8,418)
Total net debt (9,395) (9,261) (7,928)
The Group remains confident about its ability to access the debt capital markets successfully and
reviews its options on a continuing basis.
Page 32
Cash flow cont...
(c) IFRS cash generated from operations
The cash generated from operating activities in the IFRS cash flows on page 18 include the following
items:
6 months to Year to
30.6.12 30.6.11 31.12.11
£m £m £m
Profit from operations 2,740 2,691 4,721
Adjustments for:
Amortisation and impairment of trademarks 31 29 58
Amortisation and impairment of other
intangible assets 27 35 365
Depreciation and impairment of property,
plant and equipment 188 198 394
(Increase) in inventories (593) (171) (47)
(Increase) in trade and other receivables (382) (85) (87)
(Decrease)/increase in trade and other payables (167) (459) 46
(Decrease) in net retirement benefit liabilities (116) (104) (208)
(Decrease)/increase in provisions for liabilities
and charges (37) (64) 232
Other non-cash items 23 29 63
Cash generated from operations 1,714 2,099 5,537
(d) IFRS Investing and financing activities
The investing and financing activities in the IFRS cash flows on page 18 include the following items:
The purchases and proceeds on disposals of investments (which comprise available-for-sale
investments and loans and receivables) comprises a net cash inflow in respect of current investments
of £12 million for the six months ended 30 June 2012 (30 June 2011: £13 million and 31 December
2011: £3 million).
The proceeds from associates’ share buy-backs reflects proceeds of £117 million (30 June 2011: £nil
and 31 December 2011: £71 million) in respect of the Group’s participation in the share buy-back
programme conducted by Reynolds American Inc.
In 2012, the purchase of the non-controlling interest of £24 million relates to the acquisition of part of
non-controlling interests in British American Tobacco Bangladesh. For 2011, the £10 million relates to
the acquisition of non-controlling interests in Chile.
In 2011, the cash outflow of £295 million arising on the purchase of Protabaco reflects the settlement
of the purchase consideration of £298 million less acquired net cash and cash equivalents of
£3 million.
The movement relating to derivative financial instruments is in respect of derivatives taken out to
hedge cash and cash equivalents and external borrowings, derivatives taken out to hedge inter
company loans and derivatives treated as net investment hedges. Derivatives taken out as cash flow
hedges in respect of financing activities are also included in the movement relating to derivative
financial instruments, while other such derivatives in respect of operating and investing activities are
reflected along with the underlying transactions.
Page 33
Cash flow cont...
(e) IFRS net cash and cash equivalents
The net cash and cash equivalents in the Group cash flow statement comprise:
30.6.12 30.6.11 31.12.11
£m £m £m
Cash and cash equivalents per balance sheet 1,749 1,717 2,194
Overdrafts (393) (220) (252)
Net cash and cash equivalents 1,356 1,497 1,942
(f) Liquidity
The Central Treasury Department is responsible for managing, within an overall policy framework, the
Group’s exposure to funding and liquidity, interest rate, foreign exchange and counterparty risk arising
from the Group’s underlying operations.
The Group has a target average centrally managed debt maturity of at least 5 years with no more than
20 per cent of centrally managed debt maturing in a single rolling year. As at 30 June 2012, the
average centrally managed debt maturity was 7.1 years (31 December 2011: 7.0 years, 30 June
2011: 7.2 years) and the highest proportion of centrally managed debt maturing in a single rolling year
was 19.4 per cent (31 December 2011: 18.3 per cent, 30 June 2011: 19.3 per cent).
In June 2012, the Group repaid a €337 million bond due in June 2012, repaid and cancelled a
US$690 million syndicated term credit facility due September 2012, repaid a Mexican Peso 1,444
million borrowing due September 2014 and repaid a Mexican Peso 1,025 million borrowing due
December 2014. These repayments were financed from Group cash balances.
In June 2012, the Group issued new US$2 billion bonds, US$500 million with a maturity of June 2015,
US$600 million with a maturity of June 2017 and US$900 million with a maturity of June 2022.
During the period to 30 June 2012, the Group’s subsidiary in Brazil received proceeds of £548 million
(2011 full year: £401 million, to 30 June 2011: £342 million) from short-term borrowings in respect of
advance payments on leaf export contracts and repaid £464 million (31 December 2011: £519 million,
30 June 2011: £311 million).
In July 2012, post the 30 June 2012 balance sheet date, the Group repaid and cancelled a
€450 million syndicated term credit facility due October 2013. This repayment was financed from
Group cash balances.
In June 2011, the Group established a US$2 billion commercial paper programme. It is Group policy
that short-term sources of funds (including drawings under both the US$ programme and the existing
Group £1 billion euro commercial paper (ECP) programme) are backed by undrawn committed lines of
credit and cash. At 30 June 2012, £589 million of commercial paper was outstanding (31 December
2011 £85 million, 30 June 2011 £729 million).
In June 2011, the Group repaid a €530 million bond due in June 2011. The repayment was financed
from Group cash balances.
In August 2011, the Group extended the maturity date of a US$200 million facility from August 2011 to
August 2016, and simultaneously increased the size of the facility to US$240 million. This facility is
drawable in Chilean pesos and was drawn to the value of US$225 million at 30 June 2012. The
undrawn element is available for drawing until February 2013.
In September 2011, the Group repaid a Mexican Peso 1,444 million borrowing which was due in
September 2011 with a new Mexican Peso 1,444 million borrowing due 2014.
In November 2011, the Group issued a new €600 million bond with a maturity of November 2021.
Page 34
LITIGATION: FRANKED INVESTMENT INCOME GROUP LITIGATION ORDER
British American Tobacco is the principal test claimant in an action in the United Kingdom against HM
Revenue and Customs in the Franked Investment Income Group Litigation Order (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. The claim was filed in 2003 and the
case was heard in the European Court of Justice (ECJ) in 2005 and a decision of the ECJ received in
December 2006. In July 2008, the case reverted to a trial in the UK High Court for the UK Court to
determine how the principles of the ECJ decision should be applied in a UK context.
The High Court judgment in November 2008 concluded, amongst many other things, that dividends
received from EU subsidiaries should have been exempt from UK taxation. It also concluded that
certain dividends received before 5 April 1999 from the EU, and in some limited circumstances after
1993 from outside the EU, should have been treated as franked investment income with the
consequence that advance corporation tax need not have been paid. Claims for the repayment of UK
tax incurred where the dividends were from the EU were allowed back to 1973. The tentative
conclusion reached by the High Court would, if upheld, produce an estimated receivable of about
£1.2 billion for British American Tobacco.
The case was heard by the Court of Appeal in October 2009 and the judgment handed down in
February 2010. The Court of Appeal determined that various questions, including which companies in
the corporate tree can be included in a claim, should be referred back to the ECJ for further
clarification. In addition, the Court determined that the claim should be restricted to six years and not
cover claims dating back to 1973. The issue of time limits was heard by the Supreme Court in
February 2012 and in May 2012 the Supreme Court decided in the company's favour, that claims
submitted before 8 September 2003 can go back to 1973. A hearing took place in February 2012 at
the ECJ on the questions referred from the Court of Appeal. The decision of the ECJ is awaited.
No potential receipt has been recognised in the current year or the prior year, in the results of the
Group, due to the uncertainty of the amounts and eventual outcome.
Page 35
CONTINGENT LIABILITIES
As noted on pages 177 to 190 of the Annual Report for the year ended 31 December 2011, there are
contingent liabilities in respect of litigation, overseas taxes and guarantees in various countries.
Group companies, as well as other leading cigarette manufacturers, are defendants in a number of
product liability cases. In a number of these cases, the amounts of compensatory and punitive
damages sought are significant. At least in the aggregate and despite the quality of the defences
available to the Group, it is not impossible that the results of operations or cash flows of the Group in
particular quarterly or annual periods could be materially affected by this.
Having regard to these matters, the Directors (i) do not consider it appropriate to make any provision
in respect of any pending litigation, save insofar as stated in the 2011 Annual Report and (ii) do not
believe that the ultimate outcome of this litigation will significantly impair the financial condition of the
Group.
RELATED PARTY DISCLOSURES
In the six months to 30 June 2012, there were no material changes in related parties or related party
transactions. The Group’s related party transactions and relationships for 2011 were disclosed on page
176 of the Annual Report for the year ended 31 December 2011.
SHARE BUY-BACK PROGRAMME
The Board has approved the continuation of the on-market share buy-back programme in 2012 with a
value of up to £1,250 million, excluding transaction costs. During the six months to 30 June 2012, 18
million shares were bought at a cost of £553 million, excluding transaction costs of £3 million (30 June
2011: 13 million shares at a cost of £333 million, excluding transaction costs of £2 million). For the
year ended 31 December 2011, 28 million shares were bought at a cost of £750 million excluding
transaction costs of £5 million.
The purchase of own shares in the Group statement of changes in equity, includes an amount of
£120 million (30 June 2011: £75 million) provided for the potential buy-back of shares during July 2012
under an irrevocable non-discretionary contract.
Page 36
FINANCIAL CALENDAR
Wednesday 24 October 2012 Interim Management Statement
Thursday 28 February 2013 Preliminary Statement
CALENDAR FOR THE INTERIM DIVIDEND 2012
2012
Wednesday 25 July Declaration of interim dividend: amount of dividend per share
in both sterling and rand; applicable exchange rate and
conversion date – 23 July 2012; plus additional applicable
information as required in respect of South African Dividend
Tax(1).
Wednesday 25 July to Friday 17 August From the commencement of trading on Wednesday 25 July
2012 to Friday 17 August 2012, no removal requests in either
direction between the UK main register and the South African
branch register will be permitted.
Friday 10 August Last Day to Trade or LDT (JSE)
Monday 13 August to Friday 17 August No transfers between the UK main register and the South
African branch register will be permitted; no shares may be
dematerialised or rematerialised between these inclusive
dates.
Monday 13 August Ex-dividend date (JSE)
Wednesday 15 August Ex-dividend date (LSE)
Friday 17 August Record date (LSE and JSE)
Wednesday 26 September Payment date (sterling and rand)
Note:
(1) Details of the applicable exchange rate and the South African Dividend Tax information can be
found under the heading ‘Dividends’ on page 8.
For holders of American Depositary Receipts (ADRs), the record date for ADRs is also 17 August
2012 with an ADR payment date of 1 October 2012.
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 (0)870 889 3159
Share dealing tel: 0870 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
Page 37
Corporate information cont…
Secondary listing
JSE (Share Code: BTI)
Shares are traded in electronic form only and transactions settled electronically through Strate.
Computershare Investor Services (Pty) Ltd
PO Box 61051, Marshalltown 2107, South Africa
tel: 0861 100 925; +27 11 870 8222
e-mail enquiries: web.queries@computershare.co.za
American Depositary Receipts (ADRs)
NYSE MKT (Symbol: BTI; CUSIP Number: 110448107)
Sponsored ADR programme; each ADR represents two ordinary shares of British American Tobacco
p.l.c.
Citibank Shareholder Services
PO Box 43077
Providence, Rhode Island 02940-3077, USA
tel: 1-888-985-2055 (toll-free) or +1 781 575 4555
e-mail 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 (0)20 7511 7797; facsimile: +44 (0)20 7540 4326
e-mail enquiries: bat@team365.co.uk or
Computershare Investor Services (Pty) Ltd in South Africa using the contact details shown above.
British American Tobacco p.l.c.
Registered office
Globe House
4 Temple Place
London
WC2R 2PG
tel: +44 (0)20 7845 1000
British American Tobacco p.l.c. is a public limited company which is listed on the London 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
34 Alexander Street
Stellenbosch
7600
South Africa
(PO Box 631, Cape Town 8000, South Africa)
tel: +27 (0)21 888 3722
Page 38
DISCLAIMERS
This announcement does not constitute an invitation to underwrite, subscribe for, or otherwise acquire
or dispose of any British American Tobacco p.l.c. shares or other securities.
This announcement contains certain forward looking statements which are subject to risk factors
associated with, among other things, the economic and business circumstances occurring from time to
time in the countries and markets in which the Group operates. It is believed that the expectations
reflected in this announcement are reasonable but they may be affected by a wide range of variables
which 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.
DISTRIBUTION OF REPORT
This Half-Yearly Report is released to the London Stock Exchange and the JSE Limited. It may be
viewed and downloaded from our website www.bat.com.
Copies of the Half-Yearly Report may also be obtained during normal business hours from: (1) the
Company’s registered office; (2) the Company’s representative office in South Africa; and (3) British
American Tobacco Publications, as above.
Nicola Snook
Secretary
24 July 2012
Page 39
APPENDIX 1
ANALYSES OF REVENUE AND PROFIT FROM OPERATIONS
REVENUE
30.6.12 30.6.11
Impact Organic Organic Organic
Reported of Revenue adjust- revenue Reported adjust- Organic
revenue exchange at CC(1) ments(3) at CC(1) revenue ments(3) revenue
£m £m £m £m £m £m £m £m
Asia-Pacific 2,050 (35) 2,015 - 2,015 2,025 - 2,025
Americas 1,706 97 1,803 (32) 1,771 1,744 - 1,744
Western
Europe 1,649 93 1,742 - 1,742 1,719 (24) 1,695
EEMEA 2,047 150 2,197 - 2,197 1,950 - 1,950
Total 7,452 305 7,757 (32) 7,725 7,438 (24) 7,414
PROFIT FROM OPERATIONS
30.6.12 30.6.11
Organic
Adjusted Organic Adjusted Organic Organic
Adjusting Adjusted Impact of Profit(2) adjust- Profit(2) Adjusted adjust- Adjusted
Profit(2) items Profit(2) exchange at CC(1) ments(3) at CC(1) Profit(2) ments(3) Profit(2)
£m £m £m £m £m £m £m £m £m £m
Asia-Pacific 793 22 815 (23) 792 - 792 766 - 766
Americas 725 29 754 49 803 (11) 792 768 - 768
Western
Europe 516 42 558 25 583 - 583 572 - 572
EEMEA 706 6 712 39 751 - 751 654 - 654
Total 2,740 99 2,839 90 2,929 (11) 2,918 2,760 - 2,760
Notes:
(1) CC: Constant currencies
(2) Profit: Profit from operations
(3) Organic adjustments: Mergers and acquisitions and discontinued activities - adjustments are made to the 2011 numbers, based
on the 2012 Group position. This means that:
* the results of any discontinued operations in 2011 are excluded entirely for that year
* for any mergers or acquisitions in 2011, only the results for the corresponding period are included for 2012
* for any discontinued operations in 2012, only the results for the corresponding period are included for 2011
* the results of any mergers or acquisitions in 2012 are excluded entirely for that year.
25 July 2012
Sponsor: UBS South Africa (Pty) Ltd
Page 40
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