To view the PDF file, sign up for a MySharenet subscription.

BRITISH AMERICAN TOBACCO PLC - Preliminary Announcement Year Ended 31 December 2012

Release Date: 28/02/2013 09:32
Code(s): BTI     PDF:  
Wrap Text
Preliminary Announcement – Year Ended 31 December 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. 

PRELIMINARY ANNOUNCEMENT  YEAR ENDED 31 DECEMBER 2012 
PROVEN STRATEGY CONTINUES TO DELIVER 

KEY FINANCIALS                               2012         2011    Change   
Revenue at constant currency           GBP15,999m   GBP15,399m      +4%   
Adjusted profit at constant currency    GBP5,970m    GBP5,519m      +8%   
Profit from operations                  GBP5,412m    GBP4,721m     +15%   
Adjusted diluted earnings per share        207.5p       194.6p      +7%   
Basic earnings per share                   198.1p       157.1p     +26%   
Dividends per share                        134.9p      126.5p      +7%   

The non-GAAP measures, including adjusting items and constant currencies, are set out on page 18.
 
FULL YEAR HIGHLIGHTS 
                                                                                                                     
-       Revenue at constant rates of exchange grew by 4% with continued good pricing momentum.
-       Reported revenue was down 1% due to adverse currency movements.
-       Adjusted profit from operations at constant rates of exchange increased by 8%. 
-       Reported profit from operations increased by 15%.
-       All four regions grew operating margin, contributing to the excellent growth of 160 basis points at 
         Group level, to 37.4%. 
-       Group volumes were 694 billion, down 1.6%, mainly due to industry contractions in some of our 
         larger markets.  
-       The four Global Drive Brands grew volume by 3%. Dunhill volumes were up 2%, Kent was up 1%, 
         Lucky Strike grew 11%, and Pall Mall 3%. 
-       Adjusted diluted earnings per share rose by 7% and at constant rates, adjusted diluted earnings 
         per share would have been up by 12%, principally as a result of the growth in profit from 
         operations. 
-       Basic earnings per share were up 26% at 198.1p (2011: 157.1p). 
-       Recommended final dividend of 92.7p, taking the total dividend in respect of 2012 to 134.9p, an 
         increase of 7%. 
-       Free cash flow was 81% of adjusted earnings. 
-       38.9 million shares were bought back at a cost of GBP1.25 billion, excluding transaction costs. The 
         Board agreed a GBP1.5 billion share buy-back programme for 2013. 
-       New Management Board appointees announced. Des Naughton, currently Group Operations 
         Director, appointed as Managing Director Next Generation Product, and Alan Davy to take over as 
         Group Operations Director, effective 1 March 2013. 
 
Richard Burrows, Chairman, commenting on the year ended 31 December 2012 

BAT delivered strong profit growth in 2012, achieved through good pricing and an outstanding 
improvement in operating margin, partially offset by adverse exchange rate movements. Despite the 
difficult trading conditions in many parts of the world, particularly southern Europe, these results 
demonstrate the Company is in excellent shape and we remain confident that our strategy will continue 
to deliver superior shareholder returns. 

CHIEF EXECUTIVE'S REVIEW 
 
Very good business performance 
We exceeded all of our financial objectives in 2012. We delivered organic revenue growth on a constant 
currency basis of 4% and adjusted profit from operations of 8% at constant rates of exchange. Despite the 
adverse exchange rates, once again we delivered excellent returns to shareholders, with adjusted diluted 
earnings per share up by 7% on last year, with an increase of 12% at constant exchange rates. 
 
We grew our underlying market share in 2012, with good share momentum in the second half of the year. 
Pricing remains strong and, while our cigarette volumes were down slightly, this was mainly due to 
industry declines in some of our major markets. 
 
Outstanding operating margin improvements 
We achieved a substantial improvement in operating margin of 160 basis points, exceeding our target of 
increasing operating margin by 50 to 100 basis points each year. In addition to a strong price mix of 6%, 
we have continued to focus on productivity improvements, addressing our cost base through factory 
rationalisation, systems standardisation and productivity savings.  
 
Innovations driving growth  
Our Global Drive Brands (GDBs)  Dunhill, Lucky Strike, Kent and Pall Mall  continued to perform well, 
driven by our innovations, recording both volume and share growth. We saw outstanding volume growth 
of 11% for Lucky Strike in 2012. Dunhill volumes grew by 2%, Kent by 1% (or 4% adjusting for the one-off 
comparator in Japan) and Pall Mall by 3%. Collectively, our four GDBs achieved volume growth of 3% (or 
4% excluding the impact of Japan) and now account for over one third of our total volumes. GDBs grew 
market share by 30 basis points. 
 
Fine Cut tobacco grew volume by 8% in Western Europe and increased market share. This was driven by 
Pall Mall, by far the largest brand in this category.  
 
Next-generation products 
Alongside the innovations in the cigarette market, we are developing a portfolio of next-generation 
products. Nicoventures, a company we set up in 2011, is aiming to launch nicotine-based products. In 
December 2012, we acquired CN Creative, a UK-based company specialising in the development of e-cigarette 
technologies. 
 
Management Board changes 
I am pleased to announce the creation of a new role on the Management Board, that of 'Managing 
Director  Next Generation Products', encompassing Nicoventures and CN Creative. Des Naughton, 
currently Group Operations Director, will be appointed to this position from 1 March 2013. Des joined the 
group in 1995 and has extensive experience in Marketing, General Management and Operations.  
 
Furthermore, it is a pleasure to announce that Alan Davy, currently Group Head of Supply Chain, will be 
promoted to Group Operations Director and join the Management Board also with effect from 1 March 
2013. Alan joined the group in 1988 and has held various roles in Manufacturing, Supply Chain and 
General Management. 
 
Challenges and opportunities ahead 
Our geographic diversity, powerful brands, investment in innovations and strong positions in emerging 
markets remain key strengths and we are confident in the future of the tobacco business. We also believe 
that building a portfolio of next-generation products alongside our main tobacco business will provide us 
with significant new opportunities in the years ahead. 
 
We ended 2012 with share growth in the majority of our markets. Pricing remains good and our GDBs get 
stronger every year. While we cannot underestimate the challenges ahead in 2013, I am confident that 
we have robust plans in place and the resources to succeed. We have momentum, proven capabilities and 
passionate people to deliver another year of good growth and I look forward to 2013 with optimism. 
 
Nicandro Durante 
27 February 2013 

REGIONAL REVIEW 
 
Profit references in the regional review are based on adjusted profit from operations. 
 
Adjusted profit from operations* at constant and current rates of exchange and volumes are as follows 
for the twelve months ended 31 December: 

                   Adjusted profit from operations*                Cigarette Volumes
                    2012                          2011         31.12.12    31.12.11

                 Constant      Current                                     
                     rates         rates 
                     GBPm         GBPm          GBPm          Bns           Bns 
                                                                           
Asia-Pacific        1,653        1,666            1,539            188           191
Americas            1,544        1,415         1,441          142           143 
Western Europe      1,262        1,186            1,228            129           135
EEMEA               1,511        1,414            1,311            235           236
                    5,970        5,681            5,519            694           705

* Refer to page 18 for the Group's non-GAAP measures. Adjusted profit from operations is derived after 
excluding adjusting items from profit from operations. Adjusting items include restructuring and 
integration costs, amortisation of trademarks and similar intangibles and the 2011 goodwill impairment 
and Fox River provision as explained on page 22. 
 
The Group delivered a very good performance in 2012. Exchange rate movements, especially the euro, 
Brazilian real, South African rand and Russian rouble, had an adverse impact on reported results.  
 
Reported revenue was 1% lower. At constant rates of exchange, revenue was 4% higher, reflecting 
continued good pricing momentum. 
 
The reported profit from operations was 15% higher at GBP5,412 million, with a 3% increase in adjusted 
profit from operations. At constant rates of exchange, the adjusted profit was 8% higher.  
 
Group volumes from subsidiaries were 694 billion, down by 11 billion or 1.6%. This was principally as a 
result of industry volume declines in Western Europe, Brazil and Egypt, together with volume losses in low 
value brands in Indonesia and Turkey. Organic volumes were down 2.0% or 1.7%, excluding the effect of 
the one-off comparator in Japan in 2011. 
 
Other tobacco products performed well. Fine Cut tobacco grew by 8% to 14,494 tonnes in Western 
Europe, mainly in Germany, Spain, the United Kingdom, the Netherlands and Italy. Market share was up 
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 overall volume growth of 3% and increased market share by 
30 basis points, driven by the successful roll-out of innovations. GDBs now account for over one third of 
total volumes.  Dunhill volumes increased by 2% as strong growth in Indonesia, Malaysia, South Africa, 
Romania, Hungary and Chile was partially offset by a decline in South Korea. Kent was 1% higher than last 
year with increased volumes in Ukraine, Russia, Azerbaijan and Vietnam, offset by reduced volumes in 
Japan. Adjusting for the one-off comparator in Japan, Kent grew by 4%. 
 
Lucky Strike increased volumes by 11% with growth in Argentina, France, Germany and Chile. Pall Mall 
volumes rose by 3%, with outstanding growth in Pakistan and increases in Canada, Romania and the 
United Kingdom partially offset by lower volumes in Italy, Spain and Uzbekistan. 
 
Asia-Pacific: adjusted profit at constant rates of exchange increased by GBP114 million or 
7% 
Adjusted profit was up GBP127 million to GBP1,666 million as a result of strong performances by a 
number of markets in the region and favourable exchange rates. However, this was partially offset by 
lower profit from South Korea and the increased level of investment in the Indonesian business. Volumes 
at 188 billion were down 2%, with increases in Bangladesh, Pakistan, Taiwan and Vietnam more than 
offset by lower volumes in South Korea, Indonesia and Japan. Adjusting for the one-off comparator in 
Japan, volumes would have been stable. 

Country                Performance  
Malaysia               The growth in volumes, market share, profit and Global Drive Brands strengthened
                        the Group's market leadership position. Dunhill achieved record share growth. 
Australia              Profit was up as a result of cost saving initiatives, favourable exchange rate 
                        movements and higher pricing, partially offset by lower volumes. Market share was 
                        slightly down but ended the year with good momentum. 
Japan                  Profit grew, while volumes and market share were down, following the one-off 
                        sales in the same period last year. However, underlying market share reached a 
                        record high, driven by the success of new innovations in Kent and Kool.  
Vietnam                Volumes and market share grew, driven by Kent, State Express 555 and Craven A. 
                        Profit increased as a result of productivity savings, higher pricing and increased 
                        volumes. 
South Korea            Volumes and market share were down due to competitor pricing activities. Higher 
                        marketing investment stabilised market share during the last quarter impacting 
                        profits. 
Taiwan                 Strong performances by Dunhill and Pall Mall contributed to a record performance
                        in market share. Increased volumes coupled with higher pricing resulted in a strong 
                        increase in profit.   
Pakistan               A strong performance by Pall Mall and John Player Gold Leaf drove market share to 
                        a record high, strengthening the Group's leadership. Pall Mall is now the largest 
                        brand in the market. Higher volumes and pricing, coupled with productivity savings, 
                        drove a signficant profit increase. 
Bangladesh             A significant increase in profi was the result of both market share and volume 
                        growth due to the strong performances of Benson & Hedges and the local brands.  
Indonesia              The Group continues to invest behind strategic brands. Launched in March, Dunhill 
                        became the fastest growing and most successful launch of an international kretek 
                        brand in the market. Profit declined, however, due to lower volumes in low margin 
                        brands and higher marketing investment and clove prices.  
 
Americas: adjusted profit at constant rates of exchange rose by GBP103 million or 7% 
Adjusted profit declined by GBP26 million to GBP1,415 million, mainly attributable to adverse exchange 
rate movements and lower profit from Mexico. Volumes were down 1 billion to 142 billion, mainly as a 
result of industry decrease in Brazil, partially offset by increases in Colombia, following the Protabaco 
acquisition. Organic volumes were down 4 billion to 139 billion. 
                                      
Country              Performance  
Brazil               Strong profit growth was driven by an improved product mix and higher pricing. This 
                      was offset by the adverse exchange rate movement. Market share rose strongly but 
                      volumes were lower due to market contraction after a significant excise increase and 
                      a subsequent rise in illicit trade. 
Canada               Volumes and market share increased, consolidating leadership in each of the 
                      segments. The company wa the only on to increase market share. Profit was 
                      stable. Illicit trade was flat. 
Mexico               There was good market share growth but lower volumes as a result of an increase in 
                      illicit trade following a significant excise-led price increase in 2011. Profits were down 
                      due to a tough comparator resulting from an excise windfall.  
Argentina            Profit was higher, while volumes and market share were stable. The growth of Lucky 
                      Strike led to an increase in market share of the premium segment. 
Chile                Higher volumes were achieved as a result of the strong performance of Lucky Strike 
                      and this led to an increase in profit. 
Venezuela            Market share was higher and profit rose strongly as a result of price increases. This 
                      was partially offset by the inflationary pressure on costs and adverse product mix. 
                      Volumes were stable despite the growth in illicit trade. 
Colombia             The integration of the companies following the acquisition resulte in a significant 
                      increase in volumes and profit. There was good growth from the Global Drive Brands 
                      and Mustang, the main brand acquired in the acquisition. 
 
Western Europe: adjusted profit at constant rates of exchange increased by GBP34 million or 3% 

Adjusted profit decreased by GBP42 million to GBP1,186 million, mainly as a result of adverse exchange 
rate movements and tough market conditions in southern Europe. This was partially offset by good 
performances in Germany, Romania, Switzerland, Sweden and the United Kingdom. Regional volumes 
were 5% lower at 129 billion mainly as a result of market contractions in Italy, Spain, Poland, Hungary and 
Denmark. 
 
Country              Performance  
Italy                The difficult economic environment resulted in lower industry volumes, with market 
                      share and profit declines. However, market share and profit in the Fine Cut segment 
                      grew strongly. 
Germany              Profit increased as a result of higher pricing and good cost management. Volumes 
                      rose in a declining market as a result of the good performances of Lucky Strike and 
                      Pall Mall, leading to an increase in market share. In the Fine Cut segment, share grew 
                      strongly due to the performance of Pall Mall. 
France               Industry volumes were lower but market share increased. This was achieved through 
                      a strong performance of Lucky Strike. Profit increased due to improved pricing. 
Switzerland          Profit grew strongly as a result of higher pricing and lower costs. Volumes were 
                      stable but market share rose due to strong performances of Parisienne, Lucky Strike 
                      and Pall Mall. 
Spain                Industry volumes continued to decline sharply. Despite the strong growth of Lucky 
                      Strike, market share was down. Profit grew on the back of both pricing and a lower 
                      cost base.  
Romania              Higher market share was the result of strong performances of Dunhill and Pall Mall. 
                      Profit grew as a result of both higher volumes and pricing.  
Poland               Industry volumes continued to decline, reducing volumes and profit. Lucky Strike and 
                      the international brands performed well despite difficult trading conditions. 
United Kingdom       Strong performances from Pall Mall and Rothmans led bot to increased volumes 
                      and market share. Profit grew strongly due to price increases and cost management. 
Denmark              Significant market contraction led to a decline i volumes, however, exit market 
                      shar grew compared to the previous year. Profit grew strongly and margins 
                      improved.  

Sweden               Profit increased strongly as a result of lower costs and higher prices, with volumes 
                      stable. Market share grew due to the performances of Pall Mall and Lucky Strike. 
 
Eastern Europe, Middle East and Africa: adjusted profit at constant rates of exchange 
increased by GBP200 million or 15% 
Adjusted profit increase by GBP10 million to GBP1,414 million. This was principally due to stable 
volumes and price increases, partially offset by the adverse impact of exchange rate movements. Volumes 
were marginally lower than last year at 235 billion with increases in a number of markets including South 
Africa and Ukraine, partially offset by the declines in Egypt, Turkey and Nigeria. 
 
Country              Performance  
Russia               Kent maintained its leadership of the premium segment and the successful launch 
                      of Rothmans drove market share higher. Strong profit growth was the result of 
                      higher pricing, an improved mix and productivity savings, with volumes essentially 
                      flat. 
Ukraine              Volumes and market share increased with a good performance from Kent. 
                      However, profit was lower due to a competitive pricing environment and increased 
                      marketing investment. 
Turkey               Continued volume declines in low margin brands impacted profit and market share, 
                      despite growth by Kent and Lucky Strike. 
GCC markets          Profit was up strongly due to a better product mix and price increases across all 
                      markets. Good growth in market share was mainly due to the performance of 
                      Dunhill and Rothmans. Volumes were in line with last year. 
Egypt                Market instability led to record levels of illicit trade following multiple and 
                      significant excise increases over the past three years. Both profit and volumes 
                      decreased as a result.  
Nigeria              Political and social unrest resulted in a substantial reduction in industry volumes, 
                      which led to lower profits. 
South Africa         Profit in local currency grew but was more than offset by the adverse exchange rate 
                      movement. Volumes increased despite the continuing high incidence of illicit trade. 
                      Dunhill and Peter Stuyvesant confirmed their positions as market leaders. 

                                                                   Western                      
For the year ended 31 December (GBPm)    Asia-Pacific  Americas    Europe    EEMEA     Total   
SUBSIDIARIES                                                                                     
2012 (billions)                                   188       142      129     235       694   
2011 (billions)                                   191       143      135     236       705   
Change*                                        (1.7%)     (0.4%)    (4.6%)   (0.4%)    (1.6%)   
Organic volumes                                                                                 
2012 (billions)                                   188       139      129     235       691   
2011 (billions)                                   191       143      135     236       705   
Change*                                        (1.7%)     (2.8%)    (4.6%)   (0.4%)    (2.0%)   
2012 (at constant)                              4,224     3,742    3,682   4,351    15,999   
2012 (at current)                               4,214     3,460    3,442   4,074    15,190   
2011                                            4,251     3,558    3,600   3,990    15,399   
Change (at constant)                             (1%)         5%        2%       9%        4%   
Change (at current)                              (1%)       (3%)      (4%)       2%      (1%)   
2012 (at constant)                              4,224     3,696    3,682   4,351    15,953   
2011                                            4,251     3,558    3,576   3,990    15,375   
Change                                           (1%)         4%        3%       9%        4%   
2012 (at constant)                              1,653     1,544    1,262   1,511     5,970   
2012 (at current)                               1,666     1,415    1,186   1,414     5,681   
2011                                            1,539     1,441    1,228   1,311     5,519   
Change (at constant)                               7%         7%        3%      15%        8%   
Change (at current)                                8%       (2%)      (3%)       8%        3%   
2012 (at constant)                              1,653     1,527    1,262   1,511     5,953   
2011                                            1,539     1,441    1,228   1,311     5,519   
Change                                             7%         6%        3%      15%        8%   
2012 (at constant)                              39.1%      41.3%     34.3%    34.7%     37.3%   
2012 (at current)                               39.5%      40.9%     34.5%    34.7%     37.4%   
2011                                            36.2%      40.5%     34.1%    32.9%     35.8%   

*Based on absolute volumes. 

REGIONAL INFORMATION                                                     Western                    
For the year ended 31 December (GBPm)        Asia Pacific   Americas    Europe   EEMEA    Total   
ASSOCIATES AND JOINT VENTURES                                                                       
Share of post-tax results of associates
and joint ventures                                                             
2012 (at current)                                     265       425        -      2       692   
2011                                                  253       415        -      2       670   
Change                                                 5%         2%         -     0%        3%   
Adjusted share of post-tax results of
associates and joint ventures                                                                 
2012 (at constant)                                    277       445        -      2       724   
2012 (at current)                                     245       450        -      2       697   
2011                                                  225       432        -      2       659   
Change (at constant)                                  23%         3%         -     0%       10%   
Change (at current)                                    9%         4%         -     0%        6%   
GROUP                                                                                               
For the year ended 31 December                                                             Total   
Underlying tax rate of subsidiaries (%)                                                            
2012                                                                                       30.6%   
2011                                                                                       31.2%   
Adjusted diluted earnings per share (pence)                                                         
2012 (at constant)                                                                         217.8   
2012 (at current)                                                                          207.5   
2011                                                                                       194.6   
Change (at constant)                                                                         12%   
Change (at current)                                                                           7%   

RESULTS OF ASSOCIATES 
The Group's share of post-tax results of associates increased by GBP22 million, or 3%, to GBP692 million.  
The Group's share of the adjusted post-tax results of associates increased by 6% to GBP697 million, with 
a rise of 10% at constant rates of exchange. 
 
The adjusted contribution from Reynolds American increased by 4% to GBP448 million. At constant rates 
of exchange the increase was 3%. The Group's adjusted contribution from its associate in India, ITC, was 
GBP237 million, up 9%. At constant rates of exchange, the contribution would have been 23% higher 
than last year. 
 
See page 23 and 24 for the adjusting items. 
 
NET FINANCE COSTS 
Net finance costs at GBP456 million were GBP4 million lower than last year, reflecting the Group's strong 
cash flow. 

Net finance costs comprise:                                  
                                            2012     2011    
                                            GBPm     GBPm    
Finance costs                              (505)    (577)   
Finance income                                49      117    
                                           (456)    (460)   
Comprising:                                               
Interest payable                           (580)    (567)   
Interest and dividend income                  84       82    
Net impact of fair value and exchange         40       25    
- fair value changes - derivatives            71     (12)   
 exchange differences                       (31)       37   
                                           (456)    (460)   
                                            2012     2011  
   
TAXATION                                    GBPm      GBPm   
UK                                                        
- current year tax                            13       14    
- double tax relief                         (13)     (14)   
Overseas                                                  
- current year tax expense                 1,556    1,449   
- adjustment in respect of prior periods     (18)       21   
Current tax                                1,538    1,470   
Deferred tax                                (12)       86   
                                           1,526    1,556   
                                                                                              
The tax rates in the income statement of 27.0 per cent in 2012 and 31.6 per cent in 2011 are 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 was 30.6 per 
cent in 2012 and 31.2 per cent in 2011. The decrease is mainly due to a change in the mix of profits. 
 
Refer to page 33 for the Franked Investment Income Group Litigation Order. 
 
FREE CASH FLOW AND NET DEBT 
Operating cash flow decreased by GBP240 million or 5% to GBP5,087 million, reflecting working capital 
movements and higher net capital expenditure partially offset by the growth in underlying operating 
performance. The higher cash outflows in respect of taxation and the net movements relating to pension 
funds, were offset by lower net interest and higher dividends and other appropriations from associates 
due to the Reynolds share buy-back. These led to the Group's free cash flow reducing by GBP67 million or 
2% to GBP3,259 million. 
 
The ratio of free cash flow per share to adjusted diluted earnings per share was 81% (2011: 86%). 
 
Closing net debt at GBP8,473 million was up GBP545 million from GBP7,928 million as at 31 December 
2011. 
 
The Group's alternative cash flow statement is shown on page 25 and explained on page 19 under non-
GAAP measures. 
 
RISKS AND UNCERTAINTIES 
The Board's assessment of the key risks and uncertainties facing the Group has remained broadly 
unchanged over the past year, particularly with regard to illicit trade, excise and tax and financial risk. 
However, as a consequence of the Board's continuing reappraisal of Group risks and the activities in place 
to address them, some risks which have in previous years been considered as key Group risks are no 
longer assessed as such in terms of their impact and likelihood. They are nevertheless still addressed as 
Group risks, remain on the Group risk register and continue to be reviewed in ccordance with the 
Group's risk management procedures. This applies, for example, to the management of the Group's cost 
base, which was considered to be a key risk last year but is no longer this year.  
 
Conversely, the Group's internal audit procedures in 2012 identified a number of opportunities for the 
Group to enhance its Environment Health and Safety standards in multiple sites and operations. After a 
detailed consideration of the risks faced by operational employees, the Board decided to elevate the risk 
of injury, illness, or death in the workplace to the status of a key Group risk in the course of the year, in 
order to recognise this as a fundamental concern of the Group and to drive improvements.    
 
Regulatory risks facing the Group have been addressed in the Group's risk management governance for a 
number of years, and reported as key risks previously. As this category of risk has become more 
important in the context of the future development of the Group's business, so has the need to ensure 
that all aspects of regulatory risk are specifically identified and addressed effectively. This year the Group 
has identified a number of sub-categories of regulatory risk that the Directors now consider to be key. 
 
Full details of all key Group risks will be included in the Annual Report for the year ended 31 December 
2012. 
 
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 process 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 deployment of the new SAP system was piloted in the third quarter 
of 2012. This will take around four years to fully roll-out. 
 
GOING CONCERN 
A 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 outin this announcement. Further information will be provided in the 
Directors' Report and in the notes to the financial statements, all of which will be included in the 2012 
Annual Report. 
 
 
The Group has, at the date of this report, sufficient existing financing available for its estimated 
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 current financial conditions and the general outlook in the global economy. 
 
After reviewing the Group's annual budget, plans 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. 
 
BOARD CHANGES 
Sir Nicholas Scheele (Senior Independent Director) and Robert Lerwill (Chairman of the Audit Committee) 
will both be standing down as Non-Executive Directors of the Company at the conclusion of the Annual 
General Meeting on 25 April 2013, each having served eight years on the Board. At that time, Christine 
Morin-Postel, who has extensive experience as a director of publicly listed companies and who has been a 
Non-Executive Director of the Company since 2007, will become the Senior Independent Director. 
Further, Kieran Poynter, a former practising accountant until 2008 and a Non-Executive Director of the 
Company since 2010, will assume the responsibilities of Chairman of the Audit Committee. 
 
In addition, Karen de Segundo, Robert Lerwill, Anthony Ruys and Sir Nicholas Scheele have all stood down 
as members of the Remuneration Committee with effect from 27 February 2013. Dr Gerry Murphy 
(Chairman of the Remuneration Committee), Ann Godbehere,Christine Morin-Postel and Kieran Poynter 
will all continue as members of the Committee; the slimmed-down membership brings this Committee 
into alignment with the other principal Committees of the Company's Board and with best practice. It will 
facilitate the Company's continuing review and focus on Directors' remuneration in the light of the 
Government's reforms on executive pay. 
 

DIRECTORS' RESPONSIBILITY STATEMENT 
The responsibility statement below has been prepared in connection with the company's full Annual 
Report for the year ended 31 December 2012. Certain parts thereof are not included within this 
announcement. 
 
We confirm to the best of our knowledge: 
 
-     the financial statements, prepared in accordance with UK GAAP and IFRS as adopted by the 
      European Union, give a true and fair view of the assets, liabilities, financial position and profit or 
      loss of the Company and the Group respectively; and 
 
-     the Directors' report (which incorporates the Business Review), includes a fair review of the 
      development and performance of the business and the position of the Group and the Company, 
      together with a description of the principal risks and uncertainties that they face. 
 
This responsibility statement was approved by the Board of Directors on 27 February 2013 and is signed 
on its behalf by: 
 
For and on behalf of the Board of Directors: 
 
Richard Burrows                                   Ben Stevens 
Chairman                                          Finance Director and Chief Information Officer 
 
27 February 2013 
 
ENQUIRIES: 

INVESTOR RELATIONS:                               PRESS OFFICE: 
Mike Nightingale           020 7845 1180          Kate Matrunola                     020 7845 2888 
Rachael Brierley           020 7845 1519         Jem Maidment 
                                                 Will Hill  
 
Webcast and Conference Call 
A live webcast of the results is available via www.bat.com/ir. 
If you wish to listen to the presentation via a conference call facility please use the dial in details below: 
Dial in number +44 (0) 20 3139 4830 
Please quote Passcode: 6961450# 
 
Conference Call Playback Facility 
A replay of the conference call will also be available from 1:00 p.m. for 48 hours. 
Dial in number: +44 (0) 20 3426 2807 
Please quote passcode: 636263# 

GROUP INCOME STATEMENT
For the year ended 31 December                                                                      
                                                                                  2012         2011   
                                                                                 GBPm        GBPm   
Gross turnover (including duty, excise and other taxes of GBP30,682 million                            
(2011: GBP30,724 million))                                                     45,872      46,123   
Revenue                                                                        15,190      15,399   
Raw materials and consumables used                                            (3,445)     (3,507)   
Changes in inventories of finished goods and work in progress                     133          81   
Employee benefit costs                                                        (2,386)     (2,501)   
Depreciation, amortisation and impairment costs                                  (475)       (817)   
Other operating income                                                            245         233   
Other operating expenses                                                      (3,850)     (4,167)   
Profit from operations                                                          5,412       4,721   
Analysed as:                                                                                        
 adjusted profit from operations                                               5,681       5,519   
 restructuring and integration costs                                           (206)        (193)   
 amortisation of trademarks and similar intangibles                              (63)         (58)   
 goodwill impairment                                                                -        (273)   
 Fox River                                                                         -        (274)   
                                                                                5,412        4,721   
Net finance costs                                                               (456)        (460)   
Finance income                                                                     49          117   
Finance costs                                                                   (505)        (577)   
Share of post-tax results of associates and joint ventures                         692          670   
Analysed as:                                                                                       
 adjusted share of post-tax results of associates and joint ventures              697          659   
 issue of shares and change in shareholding                                        20           28   
 smoking cessation programme                                                       -         (23)   
 gain on disposal of business                                                      -           22   
 restructuring and integration costs                                            (24)          (4)   
 change in post-retirement obligations                                             24            -   
 other                                                                          (25)         (12)   
                                                                                  692          670   
Profit before taxation                                                          5,648        4,931   
Taxation on ordinary activities                                               (1,526)      (1,556)   
Profit for the year                                                             4,122        3,375   
Attributable to:                                                                                    
Owners of the parent                                                            3,841        3,095   
Non-controlling interests                                                         281          280   
                                                                                4,122        3,375
Earnings per share   
Basic                                                                          198.1p       157.1p   
Diluted                                                                        197.1p       156.2p   
Adjusted diluted                                                               207.5p       194.6p   


All of the activities during both years are in respect of continuing operations.
 
The accompanying notes on pages 8 and 18 to 34 form an integral part of this condensed consolidated 
financial information. 

GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December                                                                  
                                                                            2012          2011   
                                                                           GBPm           GBPm   
Profit for the year (page 12)                                             4,122         3,375   
Other comprehensive income
Differences on exchange                                                                         
 subsidiaries                                                            (379)         (411)   
 associates                                                              (145)         (109)   
Differences on exchange reclassified and reported in profit for the year       -           (4)   
Cash flow hedges                                                                                
 net fair value losses                                                    (11)          (21)   
 reclassified and reported in profit for the year                            71            38   
 reclassified and reported in net assets                                     12           (5)   
Available-for-sale investments                                                                  
 net fair value (losses)/gains                                             (3)            26   
 reclassified and reported in profit for the year                           (1)           (1)   
Net investment hedges                                                                           
 net fair value gains                                                      106            62   
 differences on exchange on borrowings                                       49         (104)   
Retirement benefit schemes                                                                      
 net actuarial losses in respect of subsidiaries                          (415)         (462)   
 surplus recognition and minimum funding obligations in respect                                  
   of subsidiaries                                                           54              2   
 actuarial losses in respect of associates net of tax                      (55)          (67)   
Tax on items recognised directly in other comprehensive income                28            20   
Total other comprehensive income for the year, net of tax                  (689)        (1,036)   
Total comprehensive income for the year, net of tax                       3,433         2,339   
Attributable to:
Owners of the parent                                                      3,163         2,094   
Non-controlling interests                                                   270           245   
                                                                          3,433         2,339   

The accompanying notes on pages 8 and 18 to 34 form an integral part of this condensed consolidated 
financial information. 


GROUP STATEMENT OF CHANGES IN EQUITY
At 31 December                                                                                                                   
                                                                                                                                 
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 
                                                GBPm                GBPm       GBPm       GBPm             GBPm         GBPm           GBPm 
                                                                                                                    
Balance at 1 January 2012                        506               3,913      1,112      2,636            8,167          307          8,474 
Total comprehensive income for the year            -                   -      (316)       3,479            3,163          270          3,433 
Profit for the year (page 12)                      -                   -          -       3,841            3,841          281          4,122 
Other comprehensive income for the 
 year (page 13)                                    -                   -      (316)       (362)             (678)         (11)           (689)
Employee share options                                                                                             
 value of employee services                       -                   -          -         73               73            -             73 
 proceeds from shares issued                      1                   3          -          1                5            -              5 
Dividends and other appropriations                                                                                 
 ordinary shares                                  -                   -          -    (2,538)           (2,538)            -        (2,538)
 to non-controlling interests                     -                   -          -          -                -        (267)           (267)
Purchase of own shares                                                                                             
 held in employee share ownership 
trusts                                             -                   -                 (121)             (121)            -          (121)
 share buy-back programme                         -                   -          -    (1,258)           (1,258)            -        (1,258)
Non-controlling interests - acquisitions           -                   -          -       (21)              (21)          (3)            (24)
Other movements                                    -                   -          -          2                2            -              2 
Balance at 31 December 2012                      507               3,916        796      2,253            7,472           307         7,779 


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 
                                            GBPm            GBPm       GBPm         GBPm         GBPm         GBPm          GBPm 
                                                                                                        
Balance at 1 January 2011                    506           3,910      1,600       3,190        9,206          342         9,548 
Total comprehensive income for the year        -              -     (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 
(page 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 8 and 18 to 34 form an integral part of this condensed consolidated financial 
information. 

GROUP BALANCE SHEET			
At 31 December			
	                                    		     2012                 2011   
                                                             GBPm                 GBPm  
Assets			
Non-current assets			
Intangible assets	                                   11,710 		11,992 
Property, plant and equipment	                            3,201 		 3,047 
Investments in associates and joint ventures                2,330 		 2,613 
Retirement benefit assets	                              105 		   105 
Deferred tax assets	                                      327 		   343 
Trade and other receivables	                              224 		   305 
Available-for-sale investments	                               37 		    40 
Derivative financial instruments	                      207 		   179 
Total non-current assets	                           18,141 		18,624 
			
Current assets			
Inventories	                                            4,026 		 3,498 
Income tax receivable	                                       83 		   127 
Trade and other receivables	                            2,741 		 2,423 
Available-for-sale investments	                               26 		    57 
Derivative financial instruments	                      166 		   159 
Cash and cash equivalents	                            2,081 		 2,194 
	                                                    9,123 		 8,458 
Assets classified as held-for-sale	                       63 		    37 
Total current assets	                                    9,186 		 8,495 
Total assets	                                           27,327 		27,119 
			

The accompanying notes on pages 8 and 18 to 34 form an integral part of this condensed consolidated financial information.


GROUP BALANCE SHEET
At 31 December                                                                                                    
                                                                             2012           2011   
                                                                             GBPm           GBPm    
Equity
Capital and reserves
Share capital                                                                 507            506    
Share premium, capital redemption and merger reserves                       3,916          3,913   
Other reserves                                                                796          1,112   
Retained earnings                                                           2,253          2,636   
Owners of the parent                                                        7,472          8,167   
after deducting                                                                                                   
- cost of treasury shares                                                  (2,824)        (1,539)   
Non-controlling interests                                                      307            307   
Total equity                                                                 7,779          8,474
Liabilities
Non-current liabilities    
Borrowings                                                                   9,083          8,510   
Retirement benefit liabilities                                               1,152          1,003   
Deferred tax liabilities                                                       500            556   
Other provisions for liabilities and charges                                   419            458   
Trade and other payables                                                       166            184    
Derivative financial instruments                                                86             87   
Total non-current liabilities                                               11,406         10,798
Current liabilities   
Borrowings                                                                   1,636          1,766    
Income tax payable                                                             404            494   
Other provisions for liabilities and charges                                   210            236   
Trade and other payables                                                     5,827          5,174    
Derivative financial instruments                                                65            177   
Total current liabilities                                                    8,142          7,847   
Total equity and liabilities                                                27,327         27,119    

The accompanying notes on pages 8 and 18 to 34 form an integral part of this condensed consolidated    
financial information.
               
GROUP CASH FLOW STATEMENT                                                                            
For the year ended 31 December                                                                                 
                                                                                        2012            2011   
                                                                                        GBPm            GBPm    
Cash flows from operating activities
Cash generated from operations                                                         5,437            5,537   
Dividends received from associates                                                       486             476    
Tax paid                                                                              (1,496)         (1,447)   
Net cash generated from operating activities                                           4,427           4,566 
Cash flows from investing activities   
Interest received                                                                         72              79   
Dividends received from investments                                                        2               2   
Purchases of property, plant and equipment                                              (664)          (510)   
Proceeds on disposal of property, plant and equipment                                     56              45   
Purchases of intangibles                                                                (140)          (107)   
Purchases and proceeds on disposals of investments                                        24              3    
Proceeds from associates' share buy-backs                                                262              71   
Purchases of subsidiaries                                                                (12)          (295)   
Net cash used in investing activities                                                   (400)          (712)
Cash flows from financing activities   
Interest paid                                                                           (564)          (580)   
Interest element of finance lease rental payments                                         (1)              -   
Capital element of finance lease rental payments                                          (5)           (13)   
Proceeds from issue of shares to owners of the parent                                      4               3   
Proceeds from the exercise of options over own shares                                                          
held in employee share ownership trusts                                                    1              2    
Proceeds from increases in and new borrowings                                          2,539           1,361   
Movements relating to derivative financial instruments                                    93              5    
Purchases of own shares                                                               (1,258)          (755)   
Purchases of own shares held in employee share ownership trusts                         (121)          (123)   
Purchases of non-controlling interests                                                   (24)           (10)   
Reductions in and repayments of borrowings                                            (1,821)        (1,304)   
Dividends paid to owners of the parent                                                (2,538)        (2,358)   
Dividends paid to non-controlling interests                                             (259)          (275)   
Net cash used in financing activities                                                 (3,954)        (4,047)   
Net cash flows generated from/(used in) operating, investing and financing                
activities                                                                                73           (193)   
Differences on exchange                                                                 (176)           (48)   
Decrease in net cash and cash equivalents in the year                                   (103)          (241)   
Net cash and cash equivalents at 1 January                                             1,942           2,183   
Net cash and cash equivalents at 31 December                                           1,839           1,942   

The accompanying notes on pages 8 and 18 to 34 form an integral part of this condensed consolidated    
financial information.                                                                                         


ACCOUNTING POLICIES AND BASIS OF PREPARATION 
The financial information  has  been  extracted from the Annual Report, including the  audited  financial 
statements for the year  ended  31  December  2012. This financial information  does  not  constitute 
statutory accounts within the meaning of Section 434 of the Companies Act 2006. 
 
The Group has prepared its annual consolidated financial statements in accordance with  International 
Financial Reporting Standards (IFRS) as adopted by the European Union. 
 
These 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. 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. 
 
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 measures  which the Group  uses are adjusted profit from  operations  and 
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 analysis, 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. See pages 22 to 24 and page 28. 
 
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. As an 
additional measure  to  indicate  the  impact of  the exchange  rate movement on  the Group  results,  the 
principal measure of adjusted diluted earnings per share is also shown at constant rates of exchange. See 
page 21. 
 
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. See page 20. 
 
The Group prepares an alternative cash flow, which  includes a measure of 'free cash flow', to  illustrate 
the  cash  flows before  transactions  relating  to borrowings. A net debt  summary  is  also provided.  See 
pages 25 and 26. The Group publishes 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 3/2012 'Headline Earnings' issued by the South African Institute of Chartered 
Accountants. These are shown on page 29. 
 
    ANALYSIS OF REVENUE, PROFIT FROM OPERATIONS AND DILUTED EARNINGS PER SHARE 
    REVENUE 
                                                                                     2012 
                                                               Impact                                                                      Organic 
                                         Reported                  of                Revenue                     Organic                   revenue 
                                          revenue            exchange                 at CC(2)             adjustments(3)                  at CC(2) 
                                             GBPm                GBPm                   GBPm                        GBPm                      GBPm 
    Asia-Pacific                            4,214                  10                   4,224                          -                     4,224 
    Americas                                3,460                 282                   3,742                        (46)                    3,696
    Western Europe                          3,442                 240                   3,682                          -                     3,682 
    EEMEA                                   4,074                 277                   4,351                          -                     4,351
    Total                                  15,190                 809                  15,999                        (46)                   15,953 
                                                                                                                             
                                                           2011 
                                          Reported               Organic                 Organic 
                                           revenue          adjustments(3)               revenue
                                              GBPm                  GBPm                    GBPm 
    Asia-Pacific                             4,251                     -                   4,251 
    Americas                                                                                                                 
                                             3,558                     -                   3,558 
    Western Europe 
                                             3,600                   (24)                  3,576 
    EEMEA                                                                                                                    
                                             3,990                     -                   3,990 
    Total                                   15,399                   (24)                 15,375                                  

     
    PROFIT FROM OPERATIONS  

                                                                                 2012 
                                                                                                   Adjusted                                Organic 
                        Reported         Adjusting              Adjusted            Impact of              PFO(1)         Organic            PFO(1) 
                          PFO(1)             items                  PFO(1)           exchange              @ CC(2)  adjustments(3)          @ CC(2) 
                           GBPm               GBPm                  GBPm                 GBPm                GBPm            GBPm             GBPm 
    Asia-Pacific           1,586                80                 1,666                 (13)               1,653               -            1,653 
    Americas               1,351                64                 1,415                 129                1,544             (17)           1,527
    Western Europe         1,087                99                 1,186                  76             1,262                  -            1,262 
    EEMEA                  1,388                26                 1,414                  97             1,511                  -            1,511 
    Total                  5,412               269                 5,681                 289                5,970              (17)          5,953 

                                                                      2011                                                            
                                Reported             Adjusting               Adjusted                   Organic           Adjusted 
                                   PFO(1)                items                  PFO(1)            adjustments.(3)             PFO(1)
                                    GBPm                  GBPm                   GBPm                     GBPm               GBPm 
                                                                
    Asia-Pacific                   1,481                    58                   1,539                       -              1,539 
    Americas                       1,426                    15                   1,441                       -              1,441 
    Western Europe                 1,075                   153                   1,228                       -              1,228 
    EEMEA                          1,013                   298                   1,311                       -              1,311 
    Total Regions                  4,995                   524                   5,519                       -              5,519 
    Fox River (4)                  (274)                   274                       -                       -                  - 
    Total                          4,721                   798                   5,519                       -              5,519
 

                           
DILUTED EARNINGS PER SHARE                                                                                          
                                                                                 2012                               
                                                              Adjusting                  Impact of     Adjusted     
                                              Reported            items     Adjusted      exchange        @ CC(2)   
                                                  GBPm             GBPm         GBPm          GBPm         GBPm     
Profit from subsidiaries                         5,412              269        5,681           289        5,970     
Net Finance costs                                 (456)               -         (456)          (23)        (479)    
Associates and joint  ventures                     692                5          697            27          724     
Profit before tax                                5,648              274        5,922           293        6,215     
Taxation                                        (1,526)             (70)      (1,596)          (71)      (1,667)    
Non controlling interest                          (281)              (1)        (282)          (21)        (303)    
Profit attributable to shareholders              3,841              203        4,044           201        4,245   
Diluted number of shares                         1,949                         1,949                      1,949     
Diluted earnings per share (pence)               197.1                         207.5                      217.8     
                                                                    2011                                            
                                                               Adjusting                                             
                                               Reported            items     Adjusted                                
                                                   GBPm             GBPm         GBPm                                
Profit from subsidiaries                          4,721              798        5,519                              
Net Finance costs                                  (460)               -         (460)                                 
Associates and joint  ventures                      670              (11)         659                                  
Profit before tax                                 4,931              787        5,718                              
Taxation                                         (1,556)             (24)      (1,580)                              
Non controlling interest                           (280)              (1)        (281)                              
Profit attributable to shareholders               3,095              762        3,857                                  
Diluted number of shares                          1,982                         1,982                                
Diluted earnings per share (pence)                156.2                         194.6                                

Notes: 
(1)    PFO: Profit from operations 
(2)    CC: Constant currencies 
(3)    Organic adjustments: Mergers and acquisitions and discontinued operations - adjustments for 2012 are made for the 
       Protabaco acquisition during 2011, while 2011 is adjusted for the termination of the distribution agreement in Norway 
       (see page 23). 
(4)    The Fox River provision made in 2011 (see page 23), was not 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 



ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS 
Adjusting items are significant items in the profit from operations which individually or, if of a similar type, 
in aggregate, are  relevant to an  understanding of the Group's underlying  financial  performance.  See 
page 18. These items are separately disclosed as memorandum  information on the face of the income 
statement and 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 initiatives 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: 
                                                                                            2012               2011
                                                                                           GBPm                GBPm
                                                                                                      
Employee benefit costs                                                                       96                 100
Depreciation and impairment costs                                                            26                  39
Other operating expenses                                                                    100                  72 
Other operating income                                                                      (16)                (18) 
Total                                                                                       206                 193
 
Restructuring and integration costs in 2012 principally relate to the implementation of the new operating 
model, the continuation of the factory closure and downsizing activities in Australia and the restructuring 
in  Argentina.  The  costs  also  cover  the  social  plan  and  other  activities  relating  to  the  Bremen  factory 
closure in Germany, the integration of Productora Tabacalera de Colombia, S.A.S. (Protabaco) into existing 
operations, as well as the  write-off of  non-compliant  products and materials related to the 
implementation of plain packaging in Australia. In addition they also include separation packages in 
respect of permanent headcount reductions and permanent employee benefit reductions in the Group. 

Restructuring and integration costs in 2011 principally relate to factory closure and downsizing activities 
in Denmark and Australia respectively; a voluntary separation scheme and closure of the printing unit in 
Argentina; the closure of the Jawornik factory in Poland, the Tire factory closure in Turkey and the Lecce 
factory in Italy. The costs also cover the social plan and other closure activities relating to the Bremen 
factory closure in Germany and the 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. In 
addition, they also  include  separation  packages in  respect of permanent headcount reductions and 
permanent employee benefit reductions in the Group. 

Other operating income in 2012 includes gains from the sale of land and buildings in the UK and South 
Africa and the release of deferred income from a disposal in 2007. In 2011, other operating income 
includes gains from sale of surplus land and buildings in Argentina and the release of deferred income 
from a disposal in 2007. 

(b) Amortisation of trademarks and similar intangibles 
The acquisitions of Protabaco, Bentoel, Tekel, ST and CN Creative Limited resulted in the capitalisation of 
trademarks and similar intangibles which are amortised over their expected useful lives, which do not 
exceed 20 years. The amortisation charge of GBP63 million (2011: GBP58 million) is included in 
depreciation, amortisation and impairment costs in the profit from operations. 

(c) Goodwill impairment 
In 2011, the Group impaired the remaining balance of the goodwill in respect of the Tekel acquisition in 
2008, amounting to GBP273  million. Although  cost  savings  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. Turkey remains an important strategic market for the Group. 

Adjusting items included in profit from operations cont 
 
(d) Fox River 
In 2011, a provision of GBP274 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. See 
note 30 on contingent liabilities on page 182 of the 2011 Annual Report for full details. 
 
OTHER CHANGES IN THE GROUP 
 
(a) CN Creative Limited 
 
On 18 December 2012, the Group acquired CN Creative Limited, a UK-based start-up company specialising 
in the  development of e-cigarette technologies. The company's entire share capital was acquired  for 
GBP40 million, of which GBP14 million was paid at year end. The only material asset acquired was the 
company's intellectual property. 
 
(b) Productora Tabacalera de Colombia, S.A.S. (Protabaco) 
 
On  11 October 2011, the Group acquired a 100 per cent stake in 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 GBP2 million  to  the  previously  reported  purchase  price  and 
goodwill. 
 
Goodwill of GBP132 million arose on the acquisition of the cigarette business of Protabaco, stated at the 
exchange rates ruling at the date of the transaction. 
  
(c)  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  GBP24 million to revenue  and  less than  a 
GBP1 million to profit from operations in the Western Europe region in the six months ended 30 June 
2011. 
 
ADJUSTING ITEMS INCLUDED IN SHARE OF POST-TAX RESULTS OF ASSOCIATES AND JOINT 
VENTURES 

The share of post-tax results of associates and joint ventures is after the following adjusting items which 
are excluded from the calculation of adjusted earnings per share as set out on page 28. 

In 2012, the Group's  interest  in ITC decreased from 31.04% to 30.72% 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 GBP20 million, which is treated as a deemed partial disposal and 
included in the income statement.  

During the year, Reynolds American recognised restructuring charges of US$149 million  in respect of  its 
overall activities. The Group's share of these charges is GBP24 million (net of tax). 
 
In addition, Reynolds American amended a post-retirement medical plan that resulted in a gain of 
US$157 million and the Group's share of this gain is GBP24 million (net of tax).  

Reynolds American has  also  recognised  amounts which have been  combined  in  the  table of  adjusting 
items and reported in other. These mainly consist of a charge of US$37 million in respect of a number of 
Engle  progeny  lawsuits;  the Group's  share  of  these  costs  is GBP6 million  (net of tax); and trademark 
amortisation  and  impairment  of  US$86 million; the Group's share of these charges amounts to 
GBP16 million (net of tax). 

In 2011, the Group's interest  in ITC decreased from 31.43% to 31.04% as a result of ITC  issuing ordinary 
shares under  the company's employee  stock option  scheme.  This resulted in a gain of GBP28 million, 
which was treated as a deemed partial disposal and included in the income statement. 
 
During 2011, Reynolds American, along 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 amounted to GBP23 million (net of 
tax). 

In March 2011, Reynolds American sold Lane Limited for US$205 million in cash.  The Group's share of the 
gain on the disposal of this business amounted to GBP22 million (net of tax). 

In addition, during 2011, Reynolds American  recognised restructuring charges of US$23 million and  the 
Group's share of these charges amounted to GBP4 million (net of tax).  

In the year ended 31 December 2011, Reynolds American recognised amounts which have been 
combined in the table of adjusting items and reported in other. These include of 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  Group's share  of  this  charge  amounted to  GBP10 million (net of tax). It also includes 
trademark amortisation and impairment of US$47 million; the Group's share of these charges amounted 
to GBP8 million (net of tax); and US$16 million and US$11 million of tax credits and interest, respectively, 
the Group's share of these credits amounted to GBP6 million (net of tax). 
 
   
CASH FLOW AND NET DEBT MOVEMENTS 
 
a) Alternative cash flow 
 
The IFRS cash flow statement on page 17 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.  
                                                                                      2012               2011
                                                                                                     Restated*
                                                                                     GBPm                GBPm
                                                                                                    
Adjusted profit from operations (page 12)                                           5,681              5,519
Depreciation, amortisation and impairment                                             385                447
Other non-cash items in operating profit                                               45                 68
Profit from operations before depreciation and impairment                           6,111              6,034
Increase in working capital                                                          (282)              (141)
Net capital expenditure                                                              (742)              (566)
Gross capital expenditure                                                            (798)              (611)
Sale of fixed assets                                                                   56                 45
                                                                                                      
Operating cash flow                                                                 5,087              5,327  
Pension funds' shortfall funding net of one-off receipts                             (164)              (140)
Net interest paid                                                                    (429)              (469)
Tax paid                                                                           (1,496)            (1,447) 
Dividends paid to non-controlling interests                                          (259)              (275)
Cash generated from operations                                                      2,739              2,996
Restructuring costs                                                                  (228)              (217)
Dividends and other appropriations from associates                                    748                547  
Free cash flow                                                                      3,259              3,326
Dividends paid to shareholders                                                     (2,538)            (2,358)
Share buy-back (including transaction costs)                                       (1,258)              (755)
Net investment activities                                                             (43)              (311) 
Net flow from share schemes and other                                                 (57)               (93)
Net cash outflow                                                                     (637)              (191)
                                                                                              
External movements on net debt                                                                
                                                                                              
Exchange rate effects**                                                                89                123
Change in accrued interest and other                                                    3                (19) 
Change in net debt                                                                   (545)               (87)
Opening net debt                                                                   (7,928)            (7,841)
Closing net debt                                                                   (8,473)            (7,928) 
 
*   2011 numbers have been restated to separately show the pension funds' shortfall funding 
** Including movements in respect of debt related derivatives. 
 
Operating cash flow decreased by GBP240 million, or 5%, to GBP5,087 million, reflecting working capital 
movements and the increase in net capital expenditure partially offset by growth in underlying operating 
performance. The higher cash outflows in respect of taxation, and the net movement relating to pension 
funds, were offset by lower net interest and  higher dividends and other appropriations  from  associates 
due to the Reynolds American share buy-back - GBP262 million (2011: GBP71 million). These led to  the 
Group's free cash flow reducing by GBP67 million or 2% to GBP3,259 million. 
 
The ratio of free cash flow per share to adjusted diluted earnings per share was 81% (2011: 86%), with 
free cash flow per share decreasing by 0.4% (2011: increasing by 3%).                                        


Below  free cash flow,  the  principal  cash  outflows  for  2012 comprise the  payment of the prior year final 
dividend and the 2012  interim dividend, which was GBP180 million higher at GBP2,538 million, as well as a 
GBP1,258 million  outflow  due to  the continuation  of  the on-market share  buy-back  programme in 2012, 
including transaction costs.  

During 2012,  the  cash outflow  from net  investing activities of GBP43 million  relates mainly  to  the GBP14 
million cash consideration paid on the purchase of CN Creative Limited and a cash outflow of GBP24 million 
for  the acquisition of non-controlling  interests  in Bangladesh. In 2011, the cash outflow of GBP311 million 
mainly relates to the GBP295 million purchase of Protabaco, comprising the purchase price less acquired net 
cash and cash equivalents. In addition, there was a cash outflow of GBP10 million for the acquisition of non-
controlling interests in Chile and GBP6 million in respect of the purchase of trademarks.  

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. 

These  flows resulted  in a net cash outflow of GBP637 million  (2011: GBP191 million outflow). After  taking 
account of other changes, especially exchange rate movements, total net debt was GBP545 million higher at 
GBP8,473 million at 31 December 2012 (2011: GBP7,928 million). 

During 2012 it was decided to separately show the additional cash flows in respect of the funding of pension 
funds in deficit, or where  one-off  amounts have  been  repaid from  pension  fund surpluses to the Group 
companies. The amount is shown after operating cash flow but  is included in the free cash  flow. 2011 has 
been restated accordingly. 

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: 
 
                                                                                          2012              2011  
                                                                                          GBPm               GBPm
Net debt due within one year:                                                                     
Borrowings                                                                              (1,636)           (1,766)
Related derivatives                                                                         41                 5
Cash and cash equivalents                                                                2,081             2,194
Current available-for-sale investments                                                      26                57
                                                                                           512               490
Net debt due beyond one year:                                                                     
Borrowings                                                                              (9,083)           (8,510) 
Related derivatives                                                                         98                92
                                                                                        (8,985)           (8,418)
                                                                                                  
Total net debt                                                                          (8,473)           (7,928)
 
The Group remains confident about its ability to access the debt capital markets successfully and reviews 
its options on a continuing basis. 
 
c) IFRS cash generated from operations  
 
The cash generated from operating activities in the IFRS cash flows on page 17 includes the following 
items: 
                                                                                            2012                2011  
                                                                                            GBPm                GBPm  
                                                                                                      
Profit from operations                                                                     5,412               4,721  
Adjustments for:                                                                                                     
Amortisation of trademarks and similar intangibles                                            63                  58  
Amortisation and impairment of intangible assets                                              53                 365  
Depreciation and impairment of property,                                                                             
 plant and equipment                                                                         359                 394  
Increase in inventories                                                                     (755)                (47) 
Increase in trade and other receivables                                                     (329)                (87) 
Increase in trade and other payables                                                         840                  46  
Decrease in net retirement benefit liabilities                                              (200)               (208) 
(Decrease)/increase in provisions for liabilities and charges                                (45)                232  
Other non-cash items                                                                          39                  63  
Cash generated from operations                                                             5,437               5,537  
 
d) IFRS net cash and cash equivalents 
 
The net cash and cash equivalents in the IFRS Group cash flow statement on page 17 comprise: 
 
                                                                                           2012                2011
                                                                                           GBPm                GBPm
                                                                                                    
Cash and cash equivalents per balance sheet                                               2,081               2,194
Overdrafts                                                                                 (242)               (252)
Net cash and cash equivalents                                                             1,839               1,942

 
e) Liquidity 
 
The Group has a target average centrally managed debt maturity of at least 5 years with no more than 
20% of centrally managed debt maturing in a single rolling  year. As at 31 December 2012, the average 
centrally managed debt maturity was 7.2 years (2011: 7.0 years) and the highest proportion of centrally 
managed debt maturing in a single rolling year was 19.3% (2011: 18.3%). 
 
It is Group policy that short-term sources of funds (including drawings under both the US$2 billion 
commercial paper programme and the GBP1 billion euro commercial paper programme) are backed by 
undrawn committed lines of credit and cash. At 31 December 2012, no commercial paper was 
outstanding (2011: GBP85 million). 

In the year ended 31 December 2012, the Group continued with transactions in the capital markets.  
In June 2012, the Group issued new US$2 billion bonds; US$500 million with a maturity of 2015, 
US$600 million with a maturity of 2017 and US$900 million with a maturity of 2022. In June 2012, the 
Group repaid a maturing EUR337 million bond and prepaid and cancelled a $690 million syndicated facility 
due October 2012, a Mexican Peso 1,444 million borrowing due 2014 and a Mexican Peso 1,025 million 
borrowing due 2014. In July 2012 the Group also prepaid and cancelled a EUR450 million syndicated facility 
due October 2013.  The  repayments were financed  from  Group cash balances. In November 2012, the 
Group issued a new EUR750 million bond with a maturity of January 2023. 
 
In June 2011, the Group repaid a maturing EUR530 million bond with the repayment financed from Group 
cash balances.  In August 2011,  the Group extended  the maturity date of a US$200 million  facility  from 
2011  to  2016,  and  simultaneously  increased  the  size  of  the  facility  to  US$240 million.  The  facility  is 
drawable  in Chilean peso and was drawn  to  the value of US$225 million at 31 December 2012  (2011: 
US$225 million). 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 September  2014.  In 
November 2011, the Group issued a new EUR600 million bond with a maturity of November 2021. 
 
EARNINGS PER SHARE 
Adjusted diluted earnings per  share  rose by 7% at 207.5p  (2011: 194.6p), principally as a  result of  the 
growth in profit from operations.  Basic earnings per share were up 26% at 198.1p (2011: 157.1p). 
 
                                 2012         2011 
                                pence        pence
Earnings per share                       
- basic                         198.1        157.1 
- diluted                       197.1        156.2
Adjusted earnings per share              
- basic                         208.6        195.8 
- diluted                       207.5        194.6
Headline earnings per share              
- basic                         197.4        168.7
- diluted                       196.4        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  3/2012 
'Headline Earnings', as  issued by  the South African Institute of Chartered Accountants. Circular 3/2012 
superseded Circular 3/2009 for periods ending on or after 31 July 2012 and requires comparative figures 
to be restated. The comparative headline earnings per share for 2011, however, remain unchanged when 
calculated in accordance with the new Circular. 
 
Adjusted diluted earnings per share are calculated by taking the following adjustments into account: 
                                                                2012       2011   
                                                               pence      pence   
Unadjusted diluted earnings per share                          197.1      156.2   
Effect of restructuring and integration costs                    8.3        7.4   
Effect of goodwill impairment                                      -       13.3     
Effect of deferred tax (credit)/write offs                      (0.6)       2.2   
Effect of amortisation of trademarks and similar intangibles     2.4        2.2   
Effect of Fox River                                                -       13.8   
Effect of associates' adjusting items                            0.3      (0.5)   
Adjusted diluted earnings per share                            207.5      194.6   

As well as the adjusting items explained on pages 22 to 24, the above adjustments also take into account 
a tax credit/write offs  to the income statement, included in  the taxation of ordinary activities. In 2012, 
the merger of  the  Group's Colombian companies  resulted  in  a  reduction  of  GBP11  million against a 
deferred tax liability set up on the  acquisition of Protabaco  in  2011. In 2011, following the goodwill 
impairment of Turkey, the Group wrote off deferred tax assets of GBP43 million. 
                                         
Diluted headline earnings per share are calculated by taking the following adjustments into account: 
                                                                                      
                                                                                 2012            2011  
                                                                                pence           pence
                                                                                          
Diluted unadjusted earnings per share                                           197.1           156.2
Effect of impairment of intangibles and property, plant and equipment             0.4            14.4
Effect of gains on disposal of property, plant and equipment and                          
 held for sale assets                                                            (0.8)           (0.5) 
Effect of gains reclassified from the available-for-sale reserve                 (0.1)           (0.1)
Effect of share of associates' trademark and other asset impairments              0.8             0.4  
Effect of share of associates' gains on disposal of assets held-for-sale            -            (1.3)
Effect of issue of shares and change in shareholding in associate                (1.0)           (1.4) 
Diluted headline earnings per share                                             196.4           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 23); this measure is in addition to that mandated by the JSE Listing 
Requirements. 
                                                                                          
Diluted headline earnings per share amended for Fox River                       196.4           181.5
 
The earnings per share are based on: 
 
                                                 2012                          2011 
                                       Earnings        Shares        Earnings         Shares 
                                           GBPm             m            GBPm              m
Earnings per share                                                              
- basic                                   3,841         1,939           3,095          1,970 
- diluted                                 3,841         1,949           3,095          1,982
Adjusted earnings per share                                                     
- basic                                   4,044         1,939           3,857          1,970
- diluted                                 4,044         1,949           3,857          1,982
Headline earnings per share                                                     
- basic                                   3,828         1,939           3,323          1,970
- diluted                                 3,828         1,949           3,323          1,982

DIVIDENDS 
 
Recommendation 
The Board recommends a final dividend of 92.7 pence per ordinary share of 25p for the year ended 
31 December  2012.  If  approved  by  shareholders  at  the  Annual  General  Meeting  to be held on 25 April 
2013, the final dividend will be payable on 8 May 2013 to shareholders registered on either the UK main 
register or the South African branch register on 15 March 2013 (the record date). 
 
General Dividend Information 
The  following  is a summary of the  dividends  declared/recommended for the years ended 31 December 
2012 and 2011: 

 
                                         2012                           2011 
                                  Pence                           Pence 
                                    per           GBPm              per          GBPm 
                                  share                           share 
Ordinary shares                                                                      
Interim                                                                              
- 2012 paid 26 September 2012      42.2            815                                
- 2011 paid 28 September 2011                                      38.1           738 
Final                                                                                
- 2012 payable 8 May 2013          92.7          1,789                                 
- 2011 paid 3 May 2012                                             88.4         1,723 
                                  134.9          2,604            126.5         2,461 

Key Dates and South Africa Branch Register 
In  compliance  with  the  requirements  of  the  London  Stock  Exchange  (LSE)  and  of  Strate,  the  electronic 
settlement and custody system used by the JSE Limited (JSE), the following salient dates for the payment 
of the final dividend are applicable: 
 
  Event                                                                     Date 2013
  Last Day to Trade (LDT) cum dividend (JSE)                                Friday 8 March
  Shares commence trading ex dividend (JSE)                                 Monday 11 March 
  Shares commence trading ex dividend (LSE)                                 Wednesday 13 March 
  Record date (JSE and LSE)                                                 Friday 15 March 
  Payment date                                                              Wednesday 8 May 
 
  No  removal  requests  permitted  between  the  UK  main                  Thursday  28  February  to  Friday 
  register and the South Africa branch register                             15 March (inclusive) 
  No transfers permitted between the UK main register and                   Monday 11 March to Friday 15 March 
  the South Africa branch register                                          (inclusive) 
  No shares may be dematerialised or rematerialised                         Monday 11 March to Friday 15 March 
                                                                            (inclusive) 
 
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 GBP:R = 
13.34290  as  at  26  February  2013  (the  closing  rate  on  that  date  as  quoted  by  Bloomberg), results in an 
equivalent final dividend of 1236.88683 SA cents per ordinary share.  
 
South Africa Branch Register: Dividend Tax Information 
South  Africa  Dividend  Tax  will  be  withheld  from  the  gross  final  dividend  of  1236.88683 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 Tax has been withheld, the net dividend will be  
1051.35381 SA cents per ordinary share. 
                                      
At the close of business on 26 February 2013 (the latest  practicable  date  prior  to  the date of the 
recommendation  of  the final dividend), British American Tobacco p.l.c. (the "Company")  had a total of  
2,026,389,292 ordinary  shares  in  issue  (excluding  treasury  shares). The  Company  held  95,892,487 
ordinary shares in treasury giving a total issued share capital of 1,930,496,805 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 Tax.  No STC credits  are  available for 
set-off against Dividend Tax liability on the final dividend which is regarded as a 'foreign dividend' for the 
purposes of the South Africa Dividend 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 Tax and the information provided above is of only 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 Tax to Computershare Investor Services 
(Pty) Ltd, contact details for which are given in the 'Corporate Information' section below.   
 
RETIREMENT BENEFIT SCHEMES 
The Group's subsidiaries operate around 180 retirement benefit arrangements worldwide.  The majority 
of  the  scheme  members  belong  to  defined  benefit  schemes,  most  of  which  are  funded  externally and 
many are closed to new entrants.  The Group also operates a number of defined contribution schemes. 
 
The present total value of funded scheme liabilities was GBP6,217 million (2011: GBP5,675 million), while 
unfunded  scheme  liabilities  amounted  to  GBP378  million  (2011: GBP346 million).  The  scheme  assets 
increased from GBP5,200 million in 2011 to GBP5,563 million in 2012.  
 
After  excluding  unrecognised  scheme  surpluses  of  GBP15  million (2011: GBP77 million),  the overall net 
liability  for  all  pension  schemes  and  healthcare  schemes  amounted  to  GBP1,047  million at the end of 
2012, an increase from GBP898 million at the end of 2011.  
 
Contributions to  the defined benefit schemes are determined after consultation with the respective 
trustees  and actuaries of the individual externally funded schemes, taking into account the regulatory 
environment. 
 
With  effect  from  1 January  2013  the  Group  will  adopt  the  revised  accounting for employee  benefits 
(IAS 19). Had IAS 19 (Revised) been applied to the 2012 results, profit from operations would have been 
GBP40 million lower at GBP5,372 million and profit for the year would have reduced by GBP47 million to 
GBP4,075 million with a corresponding credit in other comprehensive income. 
 
SHARE BUY-BACK PROGRAMME 
In 2012, the Board approved the continuation of the on-market share buy-back programme with a value 
of  up  to  GBP1,250 million,  excluding  transaction  costs.  During  the  year  ended  31  December  2012, 
38.9 million shares were bought at a cost of GBP1,250 million, excluding transaction costs of GBP8 million. 
For  the  year  ended  31  December  2011, 28 million shares were bought at a cost of GBP750 million 
excluding transaction costs of GBP5 million.  
 
The  Board  has  approved an on-market share  buy-back programme for 2013 with a value of up to 
GBP1,500 million, excluding costs. 
                                  
CONTINGENT LIABILITIES AND FINANCIAL COMMITMENTS 

The Group has contingent liabilities in respect of litigation, taxes and guarantees in various countries. 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  judgment.  There  are,  however,  contingent  liabilities in respect of litigation, taxes  in 
some countries and guarantees for which no provisions have been made.  
 
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, amongst 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. In some cases disputes are proceeding 
to litigation.  
 
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.  
 
Product liability 
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 a particular period 
could be materially affected by this.  
 
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 which 
could  in  some cases  equal  or  exceed  the  amount  of  the  judgment.  In  any  event, with regard  to US 
litigation,  the Group  has  the  benefit  of  the  indemnity  from  R.J. Reynolds Tobacco Company, a wholly-
owned subsidiary of Reynolds American Inc. 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.  
 
Having regard to all these matters, with the exception of the Fox River matter included in the adjusting 
items section above (and further described in that section), the Group (i) does not consider it appropriate 
to make any provision in respect of any pending litigation, save insofar as stated above and (ii) does not 
believe that the ultimate outcome of this litigation will significantly impair the Group's financial condition. 
 
Full details of the litigation will be included in the Annual Report for the year ended 31 December 2012. 
There were no material developments during the year that would impact on the financial position of the 
Group. 
 

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 judgement 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  (ACT) 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  GBP1.2  billion for British 
American Tobacco. 
 
The case was heard by the Court of Appeal in October 2009 and the judgment handed down on 
23 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 British American Tobacco Group'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  ECJ  judgement  of  13  November  2012  confirms  that  the  UK  treatment  of  EU  dividends  was 
discriminatory  and  produces  the  same  outcome  for  third  country  dividends  from  1994  in  certain 
circumstances. The judgement also confirms that the claim can cover dividends from all indirect as well as 
direct EU subsidiaries and also ACT paid by a superior holding company. 
 
The case will now revert to the UK High Court to apply the ECJ judgement and the date of the trial 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. 
 
RELATED PARTIES 
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. In the year to 31 December 2012, there were no 
material changes in related parties or in related party transactions except for the increased level of shares 
bought back by Reynolds American resulting in an amount of GBP262 million (2011: GBP71 million) being 
received  by  the  Group, as well as the extension of a manufacturing  agreement  between  a  Group 
subsidiary and Reynolds American, which was due to expire on 31 December 2014. 
 
                                     

FOREIGN CURRENCIES 
The principal exchange rates used were as follows: 
                                                       Average                     Closing 
                                                  2012          2011         2012            2011
                                                                                    
US dollar                                        1.586         1.604        1.626           1.554
Canadian dollar                                  1.584         1.586        1.619           1.583
Euro                                             1.234         1.153        1.233           1.197
South African rand                              13.054        11.632       13.791          12.547
Brazilian real                                   3.109         2.683        3.328           2.899
Australian dollar                                1.532         1.554        1.566           1.516 
Russian rouble                                  49.277        47.116       49.656          49.922
Japanese yen                                   126.633       127.826      140.549         119.572
Indian rupee                                    84.838        74.802       89.061          82.531 

ANNUAL REPORT 
 
Statutory accounts 
The financial information set out above does not constitute the  Company's statutory accounts for the 
years  ended 31 December  2012 or 2011. Statutory accounts  for  2011  have  been  delivered to the 
Registrar of Companies and  those for 2012 will be delivered following the Company's  Annual General 
Meeting. The auditors' reports on both the 2011 and 2012 accounts were unqualified, did  not draw 
attention to any  matters by way of emphasis and did not contain statements under s498(2) or (3) of 
Companies Act 2006 or equivalent preceding legislation. 
 
Publication 
The Annual Report will be published on bat.com on 25 March 2013.  At that time, a printed copy will be 
mailed to shareholders  on  the  UK  main  register  who  have  elected  to  receive  it. Otherwise,  such 
shareholders will be notified that the Annual Report is available on the website and will, at the time of 
that notification,  receive  a  Performance  Summary (which  sets  out  an  overview  of  the  Group's 
performance, headline facts and figures and key dates in the Company's financial calendar) together with 
a Proxy Form and Notice of Annual General Meeting.  Specific local mailing and/or notification 
requirements will apply to shareholders on the South African branch register. 
 
DISCLAIMERS 
This announcement does not constitute an invitation to underwrite, subscribe for, orotherwise 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 PRELIMINARY STATEMENT 
This announcement is released to the London Stock Exchange and the JSE Limited.  It may be viewed and 
downloaded from our website 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;  and  (3)  British  American 
Tobacco Publications, as above. 

                                               Nicola Snook 
                                                 Secretary 
                                             27 February 2013 

SHAREHOLDER INFORMATION 
 
FINANCIAL CALENDAR 2013 
 
  25 April                                            Interim Management Statement 
   
  25 April                                            Annual General Meeting at 11.30am 
                                                      The Banqueting House, Whitehall, London SW1A 2ER
   
  31 July                                             Half-Yearly Report
   
  23 October                                          Interim Management Statement
 
CALENDAR FOR THE FINAL DIVIDEND 2012 
 
  2013                                                 
   
  Thursday 28 February                                Dividend announced: amount of dividend per share in both 
                                                      sterling and rand; applicable exchange rate and conversion date 
                                                      - Tuesday 26 February 2013; plus additional applicable 
                                                      information as required in respect of South Africa Dividend Tax(1). 
  
 Thursday 28 February to                              From the commencement of trading on Thursday 28 February 
 Friday 15 March                                      2013 to Friday 15 March 2013, no removal requests in either 
                                                      direction between the UK main register and the South Africa 
                                                      branch register will be permitted. 
                                                       
 Friday 8 March                                       Last Day to Trade or LDT (JSE)
  
 Monday 11 March to Friday 15 March                   No transfers between the UK main register and the South Africa 
                                                      branch register will be permitted; no shares may be 
                                                      dematerialised or rematerialised between these inclusive dates. 
  
 Monday 11 March                                      Ex-dividend date (JSE)
                                                       
 Wednesday 13 March                                   Ex-dividend date (LSE)
  
 Friday 15 March                                      Record date (LSE and JSE) 
  
 Wednesday 8 May                                      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 30. 
 
For holders of American Depositary Receipts (ADRs), the record date for ADRs is also Friday 15 March 
2013 with an ADR payment date of Monday 13 May 2013. 
 
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; +44 870 889 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 
 
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 
email enquiries: web.queries@computershare.co.za 
 
American Depositary Receipts (ADRs) 
NYSE MKT Equities (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 
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 
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 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 21 888 3722 

28 February 2013 
 
Sponsor: UBS South Africa (Pty) Ltd 
Date: 28/02/2013 09:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story