Wrap Text
Preliminary Announcement – Year Ended 31 December 2013
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")
27 February 2014
BRITISH AMERICAN TOBACCO p.l.c.
PRELIMINARY ANNOUNCEMENT – YEAR ENDED 31 DECEMBER 2013
ANOTHER STRONG PERFORMANCE
KEY FINANCIALS 2013 2012 Change
Current Constant Restated** Current Constant
rates rates rates rates
Revenue GBP15,260m GBP15,822m GBP15,190m 0% +4%
Adjusted profit from operations* GBP5,820m GBP6,041m GBP5,641m +3% +7%
Profit from operations GBP5,526m GBP5,747m GBP5,372m +3% +7%
Adjusted diluted earnings per share* 216.6p 224.7p 205.2p +6% +10%
Basic earnings per share 205.4p 195.8p +5%
Dividends per share 142.4p 134.9p +6%
*The non GAAP measures, including adjusting items and constant currencies, are set out on page 18.
**The 2012 comparatives have been restated to take account of the revised IAS 19 Employee Benefits (see page 17).
FULL YEAR HIGHLIGHTS
- Group revenue was up by 4% at constant rates of exchange, mainly as a result of continued good
pricing. Reported revenue was slightly higher due to exchange rate movements which adversely
impacted three of the Group's four regions.
- Adjusted Group profit from operations increased by 3% and by 7% at constant rates of exchange.
- Reported profit from operations was 3% higher at GBP5,526 million.
- Operating margin grew strongly by 100 basis points to 38.1%.
- Basic earnings per share were up by 5% at 205.4p.
- At constant rates of exchange, adjusted diluted earnings per share were up by 10%, principally as a
result of the growth in profit from operations. At current rates of exchange, it was 6% higher at
216.6p.
- The Board has recommended a final dividend of 97.4p, taking the 2013 total dividend to 142.4p per
share, an increase of 6%.
- Group cigarette volume was 676 billion, a decline of 2.7%. Total tobacco volume was 2.6% lower.
- International brands grew volume by 2.1%, of which Global Drive Brands grew by 1.9%. The Group's
cigarette market share continued to increase in its key markets.
- 44 million shares were bought back at a cost of GBP1.5 billion, excluding transaction costs. The Board
agreed a GBP1.5 billion share buy-back programme for 2014.
Richard Burrows, Chairman, commenting on the year ended 31 December 2013
"British American Tobacco continued to perform strongly in 2013, with another year of excellent earnings
growth and cash flow, partially offset by currency headwinds. The Group's Global Drive Brands also
achieved outstanding growth in market share and volume. Difficult trading conditions persist in some
parts of the world, notably southern Europe, but these results demonstrate that the Group's strategy
continues to deliver robust profit and dividend growth."
CHIEF EXECUTIVE'S REVIEW
We're delivering today and investing in tomorrow
British American Tobacco had another very good year in 2013, again meeting or exceeding our financial
metrics. Revenue and market share continued to grow. Together our Global Drive Brands (GDBs) – Dunhill,
Kent, Lucky Strike and Pall Mall – increased share and volume.
It was a challenging year for our people globally, but they responded with the enterprise and commitment I
have come to expect. We adapted to changes in our business environment, faced some tough trading
conditions and embraced a range of new opportunities, in both new product categories and new markets. We
invested further in our existing key high growth markets, too.
We've achieved another year of strong results
The Group's strong performance in 2013 was achieved against a backdrop of adverse exchange rate
movements, lower industry volume and instability in some parts of the world.
At constant rates of exchange, revenue was up by 4% and adjusted profit from operations was up by 7%.
Adjusted diluted earnings per share were up by 6% at current rates or 10% at constant rates of exchange.
Our adjusted operating margin improved significantly by 100 basis points, at the top end of our guidance of an
increase of 50 to 100 basis points each year. This was achieved thanks to efforts right across our global
organisation to address our cost base, to standardise our systems and deliver productivity savings year on year.
A strong price-mix of 7% has also contributed to this excellent result.
Our return on capital employed (ROCE) has also improved considerably over the past few years. We have seen
a steady increase in ROCE from 23% in 2009 to 31% in 2013, demonstrating that our investments are delivering
growth.
We're growing market share
In 2013 we successfully grew our market share in our key markets by 20 basis points, driven by the success of
our GDBs, which were up by 60 basis points. Our share of the premium segment also grew, up by 80 basis
points. However, cigarette volume from subsidiaries was lower by 2.7%, mainly as a result of industry declines.
Our international brands grew volume by 2.1%, of which our GDBs grew by 1.9%. Dunhill volume was up by
9.7% and Pall Mall grew by 4.4%. Kent's was 2.9% lower while Lucky Strike volume was down by 6.5%.
Collectively, our GDBs now account for 35% of our total volume. From 2014, we have added Rothmans to our
portfolio of GDBs, recognising the brand's strategic value to the Group.
Other tobacco products also performed very well, particularly Fine Cut tobacco, which was up 1.3% in Western
Europe, driven by the continued success of Pall Mall and Lucky Strike. We also launched Vype, our first
electronic cigarette, in the UK in 2013, making us the first international tobacco business to enter this new
market.
We look to the future with confidence
Challenges persist in 2014. Economic recovery is still fragile, particularly across southern Europe. However, we
have shown a consistent ability to improve our operating margin and grow market share. The pricing
environment also remains good.
We have a great brand portfolio, market-leading innovations and an outstanding range of high quality
products. We maintain our firm commitment to invest in key growth markets and new product categories. Our
scientific research into harm reduction, for instance, is helping us develop next-generation tobacco products,
such as heat-not-burn, and nicotine-based products, like e-cigarettes.
In short, we have the expertise, the talented people and the global reach to succeed. Consumers have always
been core to our success. We will continue to meet their needs by providing them with the superior and
innovative products they want. We have a compelling strategy and proven capabilities in place to make this
happen. I look forward to a gradually improving economic environment and BAT is well positioned to take
advantage of this when it comes.
Nicandro Durante
26 February 2014
REGIONAL REVIEW
Adjusted profit from operations and volume for the twelve months ended 31 December are:
Adjusted profit from operations Cigarette Volumes
2013 2012 2013 2012
Restated
Constant Current
rates rates
GBPm GBPm GBPm Bns Bns
Asia-Pacific 1,787 1,693 1,663 197 188
Americas 1,453 1,364 1,391 134 142
Western Europe 1,222 1,273 1,175 119 129
EEMEA 1,579 1,490 1,412 226 235
Total 6,041 5,820 5,641 676 694
Total tobacco volume 703 722
References to profit in the performance of markets are at current rates of exchange. Adjusted profit from operations is
derived after excluding adjusting items from profit from operations and are explained in the Group's non-GAAP measures on
page 18. The 2012 numbers are restated to take account of the change in accounting policy (see pages 17 and 30).
British American Tobacco performed well during the year with strong pricing and continued growth in
Global Drive Brands. We met or exceeded all our long-term financial strategic objectives, on a constant
currency basis. These excellent business results were, however, impacted by the weakness against sterling
of some key currencies, notably the Brazilian real, South African rand, Japanese yen and Australian dollar.
This was slightly offset by a stronger euro. The business performance was delivered against a backdrop of
excise-driven price increases, industry contraction in some parts of the world and the fragile economic
conditions in many countries.
Driven by a price-mix of 7%, revenue was up 4% at constant rates of exchange. At current rates, revenue
was slightly higher.
Reported profit from operations was 3% higher at GBP5,526 million with a 3% increase in adjusted profit
from operations, as explained on page 18. Adjusted profit from operations, at constant rates of exchange,
grew by 7%.
Group cigarette volume from subsidiaries was 676 billion, down 2.7% from 694 billion in the previous
year. Total tobacco volume was 2.6% lower. This was mainly the result of contracting industry volume in
Western Europe and some key Group markets, such as Brazil, Russia, Ukraine, Turkey and South Africa,
partially offset by strong performances in Bangladesh, Pakistan, Indonesia, Vietnam and the Middle East.
The Group's cigarette market share in its key markets was higher with growth of 20 basis points, while the
share in the premium segment grew by an excellent 80 basis points.
Other tobacco products continued to perform well. Fine Cut volume in Western Europe grew by 1.3% to
21 billion sticks equivalent as a result of good growth in Italy, Belgium, Germany and Poland, partially
offset by declines in the Netherlands and Greece.
Our international brands grew by 2.1%, of which the four Global Drive Brands achieved good volume
growth of 1.9%.
Dunhill increased volume by 9.7% with growth in Indonesia, South Korea and the GCC, partially offset by
declines in Malaysia, due to market contraction, and West Africa. Kent volume was down 2.9% on last
year as declines, driven by market contractions in Russia, Japan and Romania, were partially offset by
growth in the Middle East and Uzbekistan.
Lucky Strike volume was down by 6.5%, mainly driven by the market contraction in Spain, partially offset
by higher volume in Philippines and Russia. Pall Mall volume rose by 4.4% with strong growth in Chile,
Pakistan and Argentina, partially offset by lower volume in Russia, Serbia, Italy and Hungary.
Brands are reviewed from time to time to assess performance and increasing focus for investment. This
review resulted in the decision to include Rothmans from 2014 as one of the Global Drive Brands.
Rothmans performed well with strong growth in Russia, Ukraine, Algeria and Italy.
Asia-Pacific: adjusted profit at constant rates of exchange increased by GBP124 million or 7%
Adjusted profit was up GBP30 million to GBP1,693 million as a result of strong performances in Australia,
New Zealand, Pakistan, Bangladesh and Taiwan, partially offset by South Korea and Japan, as well as
continued investment in Indonesia and unfavourable exchange rate movements. At constant rates of
exchange, profit would have increased by GBP124 million or 7%. Volume at 197 billion was 5% higher than
last year, with increases in Pakistan, Bangladesh, Vietnam, Indonesia and Philippines, partially offset by
lower volumes in Japan and Malaysia.
Country Performance
Australia Profit was up strongly as a result of higher pricing and cost saving initiatives,
partially offset by lower volume. Illicit trade increased following the introduction of
plain packaging. Market share was lower.
New Zealand Market share was higher, however, volume was impacted by the industry
contraction. Profit grew strongly due to price increases and cost savings.
Japan Despite significant competitor activity, there was good market share momentum
exiting the year, driven by the introduction of innovations. Profit was adversely
affected by a decrease in volume as a result of industry contraction, as well as
exchange rate movements.
Malaysia Market share grew strongly, driven by the excellent performance of Dunhill,
strengthening the Group's leadership position. Profit was higher as the adverse
impact of lower volume due to market contraction was offset by higher pricing.
Vietnam The increase in volume and market share continued, driven by the strong
performance of State Express 555. Profit increased as a result of growth in the
premium segment, higher pricing and increased volume.
South Korea Volume grew despite intense competitor activities resulting in market share slightly
lower than last year. Dunhill held share and grew volume. Higher marketing
investment, partially offset by cost savings, resulted in a decrease in profit.
Taiwan Strong performances by Pall Mall and Lucky Strike contributed to a record high
market share. An increase in volume, coupled with higher pricing, led to a strong
increase in profit.
Pakistan Impressive performances by Pall Mall and John Player Gold Leaf drove market share
to a record high, strengthening the Group's leadership position. Profit increased
significantly as a result of the higher volume, cost savings and increased pricing.
Bangladesh An outstanding growth in profit was the result of a strong increase in market share
and higher volume.
Indonesia Significant increase in volume driven by Dunhill, the fastest growing brand in one of
the largest tobacco markets in the world. Profitability was impacted by higher
marketing investment, lower volume in low-priced brands and higher clove prices.
Philippines As a result of the recent market entry following the removal of the discriminatory
excise structure, Lucky Strike made good gains in volume and market share.
Americas: adjusted profit at constant rates of exchange increased by GBP62 million or 4%
Adjusted profit declined by GBP27 million to GBP1,364 million, mainly due to exchange rate movements
in Brazil and Venezuela. At constant rates of exchange, profit rose by GBP62 million or 4%. Good
performances from Brazil, Canada and Mexico were partially offset by adverse exchange rate movements
and lower contributions from Chile and Colombia. Volume was down 6% at 134 billion, mainly as a result
of market contractions in Brazil, Argentina and Chile, partially offset by increases in Mexico and
Venezuela.
Country Performance
Brazil Profit growth was driven by higher pricing and cost savings. This good result was
more than offset by adverse exchange rate movements. Market share rose strongly
but volume was down due to market contraction after significant excise increases
and a subsequent rise in illicit trade.
Canada Profit grew, benefiting from the stronger performance in the premium segment,
price increases and a lower cost base. Volume and market share were lower.
Mexico Impressive market share growth was led by the excellent performance of Pall Mall
and the capsules innovation. A significant increase in profit was the result of higher
volume and improved pricing, while illicit trade volume reduced.
Argentina The strong performance of Lucky Strike led to a higher market share and also to an
increased share of the premium segment. Profit was lower as a result of reduced
volume and inflation-driven cost pressures which were not fully recovered through
higher pricing.
Chile Although Dunhill and Pall Mall performed very well, profit was lower, impacted by a
decrease in volume, while market share was slightly down.
Venezuela Market share was higher, boosted by Viceroy and Lucky Strike, and overall volume
increased. Profit was significantly down, driven by the transactional impact of the
currency devaluation.
Colombia Volume grew, however, market share was slightly lower. Profit was adversely
impacted by one-off costs.
Western Europe: adjusted profit at constant rates of exchange increased strongly by GBP47 million or
4%
Adjusted profit was up by GBP98 million to GBP1,273 million but at constant rates of exchange, the
increase would have been GBP47 million or 4%. Industry volume declined sharply, affecting profit growth.
There were strong profit performances in Germany, Switzerland, Belgium, Denmark, Sweden, the United
Kingdom and Romania, partially offset by declines in Italy, the Netherlands and Spain. Cigarette volume
was 8% lower at 119 billion, following market contractions in Italy, Spain, Poland, the Netherlands,
Germany and France. Fine Cut volume at 21 billion sticks equivalent was up 1.3% as a result of increases in
Italy, Germany, Poland and Belgium, partly offset by decreases in the Netherlands and Greece.
Country Performance
Italy After its successful re-launch, Rothmans had good share growth and exited the year
with continued momentum. Despite this, difficult trading conditions persist, which
resulted in a profit decline. Share and volume in the Fine Cut segment grew.
Germany Profit was up strongly. Cigarette volume was lower, in line with industry decline.
Good share growth by Lucky Strike resulted in a stable overall market share. In the
Fine Cut segment, share and volume grew due to the performance of Pall Mall.
France Market share was stable with a good performance from Lucky Strike, although
volume was lower, in line with the industry volume decline. Profit was stable,
benefiting from exchange rate movements.
Switzerland Profit grew as a result of higher pricing and lower costs, partially offset by volume
and market share decline.
The Netherlands Significant market contraction and declining market share resulted in lower volume,
adversely impacting profit.
Belgium Profit grew due to price increases, lower costs and strong growth in Fine Cut as a
result of the good performance by Pall Mall. Cigarette volume and market share
declined despite a strong growth by Lucky Strike.
Spain Industry volume continued to fall sharply. Profit was adversely affected by volume
decline and lower market share, partially offset by a lower cost base.
Romania Excellent increase in market share was the result of the good performances of
Dunhill and Pall Mall, although volume was lower. Profit was up, benefiting from
price increases.
Poland Decline in industry volume continued, adversely impacting volume and profit. Our
market share was down, however, Lucky Strike performed well and Fine Cut volume
grew.
United Kingdom Good performances from Pall Mall and Rothmans led to increased market share
although volume was lower. Profit grew strongly due to price increases, cost
management and increased Fine Cut volume.
Denmark Significant profit and volume growth was due to higher sales in December in
anticipation of an excise duty increase in January 2014.
Eastern Europe, Middle East and Africa: adjusted profit at constant rates of exchange increased by
GBP167 million or 12%
Adjusted profit increased by GBP78 million to GBP1,490 million. This was principally due to strong
performances in Russia, the GCC and Ukraine and price increases, partially offset by a decrease in profit
from Nigeria and the adverse impact of exchange rate movements. At constant rates of exchange, profit
would have increased by GBP167 million or 12%. Volume at 226 billion was 4% lower than last year with
the declines in Russia, Ukraine, Turkey, Egypt and South Africa, partially offset by an increase in the GCC.
Country Performance
Russia Strong share growth was driven by the impressive performance of Rothmans and
the encouraging launch of Lucky Strike. Kent maintained its leadership position of
the premium segment, contributing to the good profit growth. Volume was down.
Ukraine A substantial profit increase was the result of pricing and an improved product mix,
while strong market share growth was driven by excellent performances from Kent
and Rothmans. Sharp industry volume decline and increased illicit trade led to
lower volume.
Turkey Continued volume decline adversely impacted profit and market share, despite
growth by Viceroy and Kent.
The GCC An impressive increase in profit was due to higher volume and price increases. The
growth in market share was mainly due to the performance of Dunhill.
Egypt Despite a good performance from Viceroy, market instability led to lower volume,
adversely impacting profit.
Nigeria Increased instability and competitor activities in the north and south-eastern parts
of the country resulted in lower volume, adversely affecting profits.
South Africa Profit grew as a result of price increases but this was more than offset by the
adverse exchange rate movement. Volume was lower and market share was slightly
down as a result of price competition.
The following includes a summary of the analysis of revenue, adjusted profit from operations, share of post-
tax results of associates and joint ventures and adjusted diluted earnings per share, as reconciled between
reported information and non-GAAP management information on pages 19 and 20.
REGIONAL INFORMATION
Western
For the year ended 31 December Asia-Pacific Americas Europe EEMEA Total
SUBSIDIARIES
Volume (cigarette billions)
2013 197 134 119 226 676
2012 188 142 129 235 694
Change +5% -6% -8% -4% -3%
Revenue (GBPm)
2013 (at constant) 4,448 3,579 3,493 4,302 15,822
2013 (at current) 4,203 3,317 3,635 4,105 15,260
2012 4,214 3,460 3,442 4,074 15,190
Change (at constant) +6% +3% +1% +6% +4%
Change (at current) 0% -4% +6% +1% 0%
Adjusted profit from operations (GBPm)
2013 (at constant) 1,787 1,453 1,222 1,579 6,041
2013 (at current) 1,693 1,364 1,273 1,490 5,820
2012 Restated 1,663 1,391 1,175 1,412 5,641
Change (at constant) +7% +4% +4% +12% +7%
Change (at current) +2% -2% +8% +6% +3%
Operating margin based on adjusted profit (%)
2013 (at current) 40.3% 41.1% 35.0% 36.3% 38.1%
2012 Restated 39.5% 40.2% 34.1% 34.7% 37.1%
*Volume change percentages, where shown, are based on absolute numbers.
REGIONAL INFORMATION
Western
For the year ended 31 December Asia-Pacific Americas Europe EEMEA Total
ASSOCIATES AND JOINT VENTURES
Share of post-tax results of associates
and joint ventures (GBPm)
2013 (at current) 294 439 - 6 739
2012 Restated 265 409 - 2 676
Change +11% +7% - +200% +9%
Share of adjusted post-tax results of
associates and joint ventures (GBPm)
2013 (at constant) 293 439 - 6 738
2013 (at current) 272 445 - 6 723
2012 Restated 245 434 - 2 681
Change (at constant) +20% +1% - +200% +8%
Change (at current) +11% +3% - +200% +6%
GROUP
For the year ended 31 December Total
Underlying tax rate of subsidiaries (%)
2013 30.7%
2012 Restated 30.6%
Adjusted diluted earnings per share (pence)
2013 (at constant) 224.7
2013 (at current) 216.6
2012 Restated 205.2
Change (at constant) +10%
Change (at current) +6%
Return on capital employed
2013 31%
2012 29%
FINANCIAL INFORMATION AND OTHER
NET FINANCE COSTS
Net finance costs at GBP466 million were GBP10 million higher than last year, reflecting the Group's
increased borrowings.
Net finance costs comprise:
2013 2012
GBPm GBPm
Finance costs (532) (505)
Finance income 66 49
(466) (456)
Comprising:
Interest payable (614) (580)
Interest and dividend income 64 84
Net impact of fair value and exchange 84 40
- fair value changes - derivatives 103 71
- exchange differences (19) (31)
(466) (456)
RESULTS OF ASSOCIATES
The Group's share of post-tax results of associates increased by GBP63 million, or 9%, to GBP739 million.
The Group's share of the adjusted post-tax results of associates increased by 6% to GBP723 million, with
a rise of 8% at constant rates of exchange.
The adjusted contribution from Reynolds American increased by 2% to GBP441 million. At constant rates
of exchange the increase was 1%. The Group's adjusted contribution from its associate in India, ITC, was
GBP265 million, up 12%. At constant rates of exchange, the contribution would have been 21% higher
than last year.
TAXATION
2013 2012
Restated
GBPm GBPm
UK
- current year tax - -
Overseas
- current year tax expense 1,581 1,556
- adjustment in respect of prior periods (14) (18)
Current tax 1,567 1,538
Deferred tax 33 (22)
1,600 1,516
The tax rates in the income statement of 27.6% in 2013 and 27.1% (restated) in 2012 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 30.7% in 2013
and 30.6% (restated) in 2012. The slight increase is mainly due to a change in the mix of profits. The
charge relates to taxes payable overseas.
Refer to page 33 for the Franked Investment Income Group Litigation Order update.
FREE CASH FLOW AND NET DEBT
Operating cash flow increased by GBP233 million, or 5%, to GBP5,320 million, reflecting the growth in
underlying operating performance and lower net capital expenditure, partially offset by working capital
movements. The higher cash outflows in respect of the net movement relating to pension funds, net
interest paid, dividends paid to non-controlling interests and restructuring costs, together with lower
dividends and other appropriations from associates (due to the Reynolds American share buy-back being
GBP73 million lower at GBP189 million) were partially offset by lower tax paid. These led to the Group's
free cash flow increasing by GBP112 million or 3% to GBP3,371 million.
The ratio of free cash flow per share to adjusted diluted earnings per share was 82% (2012 restated: 81%).
Closing net debt at GBP9,515 million was up GBP1,042 million from GBP8,473 million as at 31 December
2012.
The Group's alternative cash flow statement is shown on page 23 and explained on page 18 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 regarding illicit trade, excise and tax and financial risk.
However, in the course of the year, the Board decided to increase its focus, as a key risk, of failing to lead
the development of the non-tobacco nicotine market, in order to recognise the importance to the Group
of its Nicoventures business.
Regulatory risks facing the Group have been addressed in our risk register for a number of years, and
reported as key risks previously. In previous years, sub-categories of risk relating to product ingredients
regulation and advertising and packaging restrictions were presented separately to broader regulatory
risk. This year, we are treating regulation as a single risk, combining its various elements, and reflecting
the Group's renewed focus on an integrated approach to its regulatory risk management programme.
Full details of all key Group risks will be included in the Annual Report for the year ended 31 December
2013.
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 out in this announcement. Further information will be provided in the
Strategic Report and in the notes to the financial statements, all of which will be included in the 2013
Annual Report.
The Group has, at the date of this report, sufficient existing financing available for its estimated
requirements for at least the next 12 months. This, together with the proven ability to generate cash from
trading activities, the performance of the Group's 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, 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
Further to the announcement made on 31 July 2013, John Daly stood down as Chief Operating Officer on
31 December 2013. During the first quarter of 2014 he has focused on the transitioning of key projects
and initiatives. He will retire as an Executive Director on 6 April 2014.
Anthony Ruys (member of the Audit Committee) will be standing down as a Non-Executive Director of the
Company at the conclusion of the Annual General Meeting on 30 April 2014, having served eight years on
the Board. In the context of this forthcoming retirement, Christine Morin-Postel (Senior Independent
Director) was appointed a member of the Audit Committee with effect from 6 January 2014.
Savio Kwan, having been appointed a Non-Executive Director on 6 January 2014, became a member of the
Corporate Social Responsibility Committee in place of Christine Morin-Postel who stood down from that
role on that date.
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 2013. 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 and the Strategic Report include 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 26 February 2014 and is signed
on its behalf by:
Richard Burrows Ben Stevens
Chairman Finance Director and Chief Information Officer
26 February 2014
ENQUIRIES:
INVESTOR RELATIONS: PRESS OFFICE:
Mike Nightingale 020 7845 1180 Will Hill/Annie Brown 020 7845 2888
Rachael Brierley 020 7845 1519
Sabina Marshman 020 7845 1781
Webcast and Conference Call
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GROUP INCOME STATEMENT
For the year ended 31 December
2012
2013 Restated
Gross turnover (including duty, excise and other taxes of GBP30,925 million GBPm GBPm
(2012: GBP30,682 million)) 46,185 45,872
Revenue 15,260 15,190
Raw materials and consumables used (3,348) (3,445)
Changes in inventories of finished goods and work in progress 105 133
Employee benefit costs (2,384) (2,426)
Depreciation, amortisation and impairment costs (477) (475)
Other operating income 302 245
Other operating expenses (3,932) (3,850)
Profit from operations 5,526 5,372
Analysed as:
– adjusted profit from operations 5,820 5,641
– restructuring and integration costs (246) (206)
– amortisation of trademarks and similar intangibles (74) (63)
– gain on deemed partial disposal of a trademark 26 -
5,526 5,372
Net finance costs (466) (456)
Finance income 66 49
Finance costs (532) (505)
Share of post-tax results of associates and joint ventures 739 676
Analysed as:
– adjusted share of post-tax results of associates and joint ventures 723 681
– issue of shares and change in shareholding 22 20
– restructuring and integration costs (4) (24)
– other (2) (1)
739 676
Profit before taxation 5,799 5,592
Taxation on ordinary activities (1,600) (1,516)
Profit for the year 4,199 4,076
Owners of the parent 3,904 3,797
Non-controlling interests 295 279
4,199 4,076
Basic 205.4p 195.8p
Diluted 204.6p 194.8p
Adjusted diluted 216.6p 205.2p
All of the activities during both years are in respect of continuing operations.
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
Restatement: see page 17.
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December
2013 2012
Restated
GBPm GBPm
Profit for the year 4,199 4,076
Other comprehensive income
Items that may be reclassified subsequently to profit or loss: (1,025) (337)
Differences on exchange
– subsidiaries (972) (379)
– associates (141) (145)
Cash flow hedges
– net fair value gains/(losses) 94 (11)
– reclassified and reported in profit for the year (49) 71
– reclassified and reported in net assets (1) 12
Available-for-sale investments
– net fair value losses (7) (3)
– reclassified and reported in profit for the year - (1)
Net investment hedges
– net fair value gains 89 106
– differences on exchange on borrowings (25) 49
Tax on items that may be reclassified (13) (36)
Items that will not be reclassified subsequently to profit or loss: 355 (306)
Retirement benefit schemes
– net actuarial gains/(losses) in respect of subsidiaries 308 (381)
– surplus recognition and minimum funding obligations in respect of subsidiaries (5) 60
– actuarial gains/(losses) in respect of associates net of tax 90 (39)
Tax on items that will not be reclassified (38) 54
Total other comprehensive income for the year, net of tax (670) (643)
Total comprehensive income for the year, net of tax 3,529 3,433
Attributable to:
Owners of the parent 3,272 3,163
Non-controlling interests 257 270
3,529 3,433
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
Restatement: see page 17.
GROUP STATEMENT OF CHANGES IN EQUITY
At 31 December
2013 Attributable to owners of the parent
Share
premium,
capital Total
redemption attributable Non-
Share and merger Other Retained to owners controlling
capital reserves reserves earnings of parent interests Total equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January 2013 507 3,916 796 2,253 7,472 307 7,779
Total comprehensive income for the year - - (986) 4,258 3,272 257 3,529
Profit for the year - - - 3,904 3,904 295 4,199
Other comprehensive income for the year - - (986) 354 (632) (38) (670)
Employee share options
– value of employee services - - - 61 61 - 61
– proceeds from shares issued - 3 - 1 4 - 4
Dividends and other appropriations
– ordinary shares - - - (2,611) (2,611) - (2,611)
– to non-controlling interests - - - - - (271) (271)
Purchase of own shares
– held in employee share ownership
trusts - - - (74) (74) - (74)
– share buy-back programme - - - (1,509) (1,509) - (1,509)
Non-controlling interests - capital injection - - - - - 8 8
Other movements - - - 19 19 - 19
Balance at 31 December 2013 507 3,919 (190) 2,398 6,634 301 6,935
2012 Attributable to owners of the parent
Share
premium, Total
capital attributable Non-
redemption Retained to owners controlling
Share and merger Other earnings of parent interests Total equity
capital reserves reserves Restated Restated Restated Restated
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 - - - 3,797 3,797 279 4,076
Other comprehensive income for the year - - (316) (318) (634) (9) (643)
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
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
Restatement: see page 17.
GROUP BALANCE SHEET
At 31 December
2013 2012
GBPm GBPm
Assets
Non-current assets
Intangible assets 11,205 11,710
Property, plant and equipment 3,156 3,201
Investments in associates and joint ventures 2,299 2,330
Retirement benefit assets 135 105
Deferred tax assets 248 327
Trade and other receivables 171 224
Available-for-sale investments 36 37
Derivative financial instruments 113 207
Total non-current assets 17,363 18,141
Current assets
Inventories 4,042 4,026
Income tax receivable 95 83
Trade and other receivables 2,876 2,741
Available-for-sale investments 54 26
Derivative financial instruments 312 166
Cash and cash equivalents 2,106 2,081
9,485 9,123
Assets classified as held-for-sale 33 63
Total current assets 9,518 9,186
Total assets 26,881 27,327
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
GROUP BALANCE SHEET
At 31 December
2013 2012
GBPm GBPm
Equity
Capital and reserves
Share capital 507 507
Share premium, capital redemption and merger reserves 3,919 3,916
Other reserves (190) 796
Retained earnings 2,398 2,253
Owners of the parent 6,634 7,472
after deducting
– cost of treasury shares (4,325) (2,824)
Non-controlling interests 301 307
Total equity 6,935 7,779
Liabilities
Non-current liabilities
Borrowings 9,716 9,083
Retirement benefit liabilities 632 1,152
Deferred tax liabilities 514 500
Other provisions for liabilities and charges 387 419
Trade and other payables 131 166
Derivative financial instruments 130 86
Total non-current liabilities 11,510 11,406
Current liabilities
Borrowings 1,980 1,636
Income tax payable 487 404
Other provisions for liabilities and charges 194 210
Trade and other payables 5,741 5,827
Derivative financial instruments 34 65
Total current liabilities 8,436 8,142
Total equity and liabilities 26,881 27,327
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
GROUP CASH FLOW STATEMENT
For the year ended 31 December
2013 2012
GBPm GBPm
Cash flows from operating activities
Cash generated from operations 5,366 5,437
Dividends received from associates 510 486
Tax paid (1,440) (1,496)
Net cash generated from operating activities 4,436 4,427
Cash flows from investing activities
Interest received 70 72
Dividends received from investments 2 2
Purchases of property, plant and equipment (574) (664)
Proceeds on disposal of property, plant and equipment 173 56
Purchases of intangibles (147) (140)
Purchases and proceeds on disposals of investments (32) 24
Proceeds from associate's share buy-back 189 262
Purchase of subsidiaries (16) (12)
Net cash used in investing activities (335) (400)
Cash flows from financing activities
Interest paid (570) (564)
Interest element of finance lease rental payments (1) (1)
Capital element of finance lease rental payments (2) (5)
Proceeds from issue of shares to owners of the parent 3 4
Proceeds from the exercise of options over own shares
held in employee share ownership trusts 1 1
Proceeds from increases in and new borrowings 2,428 2,539
Movements relating to derivative financial instruments 54 93
Purchases of own shares (1,509) (1,258)
Purchases of own shares held in employee share ownership trusts (74) (121)
Purchases of non-controlling interests - (24)
Reductions in and repayments of borrowings (1,421) (1,821)
Dividends paid to owners of the parent (2,611) (2,538)
Dividends paid to non-controlling interests (265) (259)
Net cash used in financing activities (3,967) (3,954)
Net cash flows generated from operating, investing and financing activities 134 73
Differences on exchange (197) (176)
Decrease in net cash and cash equivalents in the year (63) (103)
Net cash and cash equivalents at 1 January 1,839 1,942
Net cash and cash equivalents at 31 December 1,776 1,839
The accompanying notes on pages 8 and 17 to 34 form an integral part of this condensed consolidated
financial information.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information has been extracted from the Annual Report, including
the audited financial statements for the year ended 31 December 2013. This condensed consolidated
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 2012, except where noted below.
With effect from 1 January, 2013 the Group has adopted the revised IAS 19 Employee Benefits. The
revised standard has not changed the values of retirement benefit assets and liabilities on the balance
sheet, but has changed the amounts recognised in the income statement and in other comprehensive
income. The expected return on plan assets and the interest cost on liabilities have been replaced by a
new component of the income statement charge - interest on the net retirement benefit asset / liability.
The revised standard has retrospective application and has reduced the profit for the year to
31 December 2012 by GBP46 million, with compensating credits in other comprehensive income. See
page 30 for the detail.
The Group has early adopted IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and
IFRS 12 Disclosure of Interests in Other Entities with effect from 1 January 2013 along with the revised
versions of IAS 27 Separate Financial Statements and IAS 28 Associates. While the requirements of IFRS 12
have lengthened certain disclosures in respect of Group entities, the requirements of these standards
have not materially affected the Group.
In addition, with effect from 1 January 2013, the Group has adopted a number of minor changes to IFRS,
including the amendment to IAS 1 Presentation of Financial Statements which changes the presentation
of certain items within other comprehensive income, and IFRS 13 Fair Value Measurement which provides
a single source of fair value measurement and disclosure requirements for use across IFRS. The
implementation of IFRS 13 does not require a restatement of historical transactions.
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 year 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 are reconciled to profit from operations and 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
non-GAAP measures of adjusted profit from operations, adjusted share of post-tax results of associates
and joint ventures and adjusted diluted earnings per share.
All adjustments to profit from operations and diluted earnings per share are explained in this
announcement. See pages 21, 22 and 27.
The Management Board, as the chief operating decision maker, reviews current and prior year adjusted
segmental income statement information of subsidiaries, joint operations 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 20.
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 would be made to current and prior year numbers,
based on the 2013 Group position but for the year to 31 December 2013 no adjustments are necessary.
See page 19.
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 23 and 24. 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 2/2013 ‘Headline Earnings’ issued by the South African Institute of Chartered
Accountants. These are shown on page 27.
ANALYSIS OF REVENUE, PROFIT FROM OPERATIONS AND DILUTED EARNINGS PER SHARE
REVENUE
2013
Impact Organic
Reported of Revenue Organic revenue
revenue exchange at CC(1) adjustments(2) at CC(1)
GBPm GBPm GBPm GBPm GBPm
Asia-Pacific 4,203 245 4,448 - 4,448
Americas 3,317 262 3,579 - 3,579
Western Europe 3,635 (142) 3,493 - 3,493
EEMEA 4,105 197 4,302 - 4,302
Total 15,260 562 15,822 - 15,822
2012
Reported Organic Organic
revenue adjustments(2) revenue
GBPm GBPm GBPm
Asia-Pacific 4,214 - 4,214
Americas 3,460 - 3,460
Western Europe 3,442 - 3,442
EEMEA 4,074 - 4,074
Total 15,190 - 15,190
PROFIT FROM OPERATIONS
2013
Adjusted Organic
Reported Adjusting Adjusted Impact of PFO(3) Organic PFO(3)
PFO(3) items PFO(3) exchange @ CC(1) adjustments(2) @ CC(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Asia-Pacific 1,672 21 1,693 94 1,787 - 1,787
Americas 1,303 61 1,364 89 1,453 - 1,453
Western Europe 1,133 140 1,273 (51) 1,222 - 1,222
EEMEA 1,418 72 1,490 89 1,579 - 1,579
Total 5,526 294 5,820 221 6,041 - 6,041
2012 Restated (4)
Reported Adjusting Adjusted Organic Organic
PFO(3) items PFO(3) Adjustments(2) PFO(3)
GBPm GBPm GBPm GBPm GBPm
Asia-Pacific 1,583 80 1,663 - 1,663
Americas 1,327 64 1,391 - 1,391
Western Europe 1,076 99 1,175 - 1,175
EEMEA 1,386 26 1,412 - 1,412
Total 5,372 269 5,641 - 5,641
DILUTED EARNINGS PER SHARE
2013
Adjusting Impact of Adjusted
Reported items Adjusted exchange @ CC(1)
GBPm GBPm GBPm GBPm GBPm
Profit from subsidiaries 5,526 294 5,820 221 6,041
Net Finance costs (466) - (466) 2 (464)
Associates and joint ventures 739 (16) 723 15 738
Profit before tax 5,799 278 6,077 238 6,315
Taxation (1,600) (46) (1,646) (71) (1,717)
Non-controlling interest (295) (3) (298) (13) (311)
Profit attributable to shareholders 3,904 229 4,133 154 4,287
Diluted number of shares 1,908 1,908 1,908
Diluted earnings per share (pence) 204.6 216.6 224.7
2012 Restated (4)
Adjusting
Reported items Adjusted
GBPm GBPm GBPm
Profit from subsidiaries 5,372 269 5,641
Net Finance costs (456) - (456)
Associates and joint ventures 676 5 681
Profit before tax 5,592 274 5,866
Taxation (1,516) (70) (1,586)
Non-controlling interest (279) (1) (280)
Profit attributable to shareholders 3,797 203 4,000
Diluted number of shares 1,949 1,949
Diluted earnings per share (pence) 194.8 205.2
Notes:
(1) CC: Constant currencies
(2) Organic adjustments: No organic adjustments were required for events in 2013.
(3) PFO: Profit from operations
(4) The 2012 results have been restated for the adoption of the revised IAS 19 Employee Benefits (see page 17).
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 also include a review of the Group’s
manufacturing operations, supply chain, overheads and indirect costs, organisational structure and
systems and software used. The costs of these initiatives together with the costs of integrating acquired
businesses into existing operations, including acquisition costs, are included in profit from operations
under the following headings:
2013 2012
GBPm GBPm
Employee benefit costs 140 96
Depreciation and impairment costs 11 26
Other operating expenses 161 100
Other operating income (66) (16)
Total 246 206
Restructuring and integration costs in 2013 principally relate to the restructuring initiatives directly
related to implementation of a new operating model, the continuation of factory closures in Australia and
Russia and restructurings in the Democratic Republic of the Congo, Switzerland and Germany. The costs
also cover separation packages in respect of permanent headcount reductions and permanent employee
benefit reductions in the Group.
Restructuring and integration costs in 2012 principally related to the implementation of the new
operating model, and factory restructurings in Australia and 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 included separation packages in respect of permanent headcount reductions and
permanent employee benefit reductions in the Group.
Other operating income in 2013 includes gains from the sale of land and buildings in Australia, Denmark
and Russia. In 2012, other operating income 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.
(b) Amortisation of trademarks and similar intangibles
The acquisitions of Protabaco, Bentoel, Tekel, ST and CN Creative Limited, as well as the creation of CTBAT
International Ltd, 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 GBP74 million
(2012: GBP63 million) is included in depreciation, amortisation and impairment costs in the profit from
operations.
(c) Gain on deemed partial disposal of a trademark
The contribution of the State Express 555 brand to CTBAT International Ltd is accounted for at fair value in
the arrangement. This resulted in a GBP26 million gain on deemed partial disposal of a trademark which is
included in other operating income but has been treated as an adjusting item. See page 30.
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 27.
In 2013, the Group’s interest in ITC decreased from 30.72% to 30.47% 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 GBP22 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$24 million in respect of its
overall activities. The Group’s share of these charges is GBP4 million (net of tax).
During 2013, Reynolds American has also recognised amounts which have been combined in the table of
adjusting items in the Group income statement and are shown as "other". These include costs of
US$18 million in respect of a number of Engle progeny lawsuits, the Group’s share of which is GBP3
million (net of tax); costs of US$34 million relating to other tobacco related litigation charges, the Group’s
share of which is GBP6 million (net of tax); trademark amortisation and impairment of US$27 million, the
Group’s share of which is GBP4 million (net of tax) and costs of US$124 million relating to losses on
extinguishment of debt, the Group’s share of which is GBP22 million (net of tax). In addition, during 2013
Reynolds American, various other tobacco manufacturers, 19 states, the District of Columbia and Puerto
Rico reached a final agreement related to Reynolds American’s 2003 Master Settlement Agreement (MSA)
activities. Under this agreement Reynolds American will receive credits, currently estimated to be more
than US$1 billion, in respect of its Non-Participating Manufacturer (NPM) Adjustment claims related to
the period from 2003 to 2012. These credits will be applied against the company’s MSA payments over
the next five years, subject to meeting the various ongoing performance obligations. During 2013,
Reynolds American has recognised income of US$219 million related to its 2012 liability, the Group’s
share of which is GBP33 million (net of tax). Credits claimable against 2013 and future years will be
accounted for in the applicable year and will not be treated as adjusting items.
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. This resulted in a gain of GBP20 million,
which was treated as a deemed partial disposal and included in the income statement.
During 2012, Reynolds American recognised restructuring charges of US$149 million and the Group’s
share of these charges amounted to GBP24 million (net of tax).
In the year ended 31 December 2012, Reynolds American 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 which amounted to
GBP6 million (net of tax); and trademark amortisation and impairment of US$86 million, the Group’s
share of which amounted to GBP16 million (net of tax). These charges were offset by a gain of US$157
million resulting from the amendment by Reynolds American of a post-employment medical plan, the
Group’s share of which amounted to GBP24 million (net of tax).
CASH FLOW AND NET DEBT MOVEMENTS
a) Alternative cash flow
The IFRS cash flow statement on page 16 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.
2013 2012
Restated*
GBPm GBPm
Adjusted profit from operations (page 11) 5,820 5,641
Depreciation, amortisation and impairment 392 385
Other non-cash items in operating profit 30 45
Profit from operations before depreciation and impairment 6,242 6,071
Increase in working capital (375) (242)
Net capital expenditure (547) (742)
Gross capital expenditure (720) (798)
Sale of fixed assets 173 56
Operating cash flow 5,320 5,087
Net of pension funds’ shortfall funding and one-off receipts (190) (164)
Net interest paid (443) (429)
Tax paid (1,440) (1,496)
Dividends paid to non-controlling interests (265) (259)
Cash generated from operations 2,982 2,739
Restructuring costs (310) (228)
Dividends and other appropriations from associates 699 748
Free cash flow 3,371 3,259
Dividends paid to shareholders (2,611) (2,538)
Share buy-back (including transaction costs) (1,509) (1,258)
Net investment activities (19) (43)
Net flow from share schemes and other (79) (57)
Net cash outflow (847) (637)
External movements on net debt
Exchange rate effects** (163) 89
Change in accrued interest and other (32) 3
Change in net debt (1,042) (545)
Opening net debt (8,473) (7,928)
Closing net debt (9,515) (8,473)
* Restatement: see page 17.
** Including movements in respect of debt related derivatives.
Operating cash flow increased by GBP233 million, or 5%, to GBP5,320 million, reflecting the growth in
underlying operating performance and lower net capital expenditure, partially offset by working capital
movements. The higher cash outflows in respect of the net movement relating to pension funds, net
interest paid, dividends paid to non-controlling interest and restructuring costs, together with lower
dividends and other appropriations from associates (due to the Reynolds American share buy-back being
GBP73 million lower at GBP189 million) were partially offset by lower tax paid. These led to the Group’s
free cash flow increasing by GBP112 million or 3% to GBP3,371 million.
The ratio of free cash flow per share to adjusted diluted earnings per share was 82% (2012 restated: 81%),
with free cash flow per share increasing by 6% (2012: decreasing by 0.4%).
Below free cash flow, the principal cash outflows for 2013 comprise the payment of the prior year final
dividend and the 2013 interim dividend, which was GBP73 million higher at GBP2,611 million, as well as a
GBP1,509 million outflow due to the continuation of the on-market share buy-back programme in 2013,
including transaction costs.
During 2013, the cash outflow from net investing activities of GBP19 million relates mainly to the further
payment for the acquisition of CN Creative. In 2012, the cash outflow of GBP43 million mainly relates 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.
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 GBP847 million (2012: GBP637 million outflow). After taking
account of other changes, especially exchange rate movements, total net debt was GBP1,042 million higher at
GBP9,515 million at 31 December 2013 (2012: GBP8,473 million).
b) Net debt
The Group defines net debt as borrowings including related derivatives, less cash and cash equivalents
and current available-for-sale investments. The maturity profile of net debt is as follows:
2013 2012
GBPm GBPm
Net debt due within one year:
Borrowings 1,980 1,636
Related derivatives (55) (41)
Cash and cash equivalents (2,106) (2,081)
Current available-for-sale investments (54) (26)
(235) (512)
Net debt due beyond one year:
Borrowings 9,716 9,083
Related derivatives 34 (98)
9,750 8,985
Total net debt 9,515 8,473
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 16 includes the following
items:
2012
2013
Restated*
GBPm GBPm
Profit from operations 5,526 5,372
Adjustments for:
Amortisation of trademarks and similar intangibles 74 63
Amortisation of other intangible assets 48 53
Gain on deemed partial disposal of a trademark (26) -
Depreciation and impairment of property,
plant and equipment 355 359
Increase in inventories (386) (755)
Increase in trade and other receivables (246) (329)
Increase in trade and other payables 311 840
Decrease in net retirement benefit liabilities (222) (160)
Decrease in provisions for liabilities and charges (19) (45)
Other non-cash items (49) 39
Cash generated from operations 5,366 5,437
*See page 17
d) IFRS net cash and cash equivalents
The net cash and cash equivalents in the IFRS Group cash flow statement on page 16 comprise:
2013 2012
GBPm GBPm
Cash and cash equivalents per balance sheet 2,106 2,081
Accrued interest (1) -
Overdrafts (329) (242)
Net cash and cash equivalents 1,776 1,839
e) Liquidity
The Central Treasury Department is responsible for managing, within an overall policy framework, the
Group’s exposure to funding and liquidity, interest rate, foreign exchange and counterparty risk arising
from the Group’s underlying operations.
The Group has a target average centrally managed debt maturity of at least 5 years with no more than
20% of centrally managed debt maturing in a single rolling year. As at 31 December 2013, the average
centrally managed debt maturity was 7.2 years (2012: 7.2 years) and the highest proportion of centrally
managed debt maturing in a single rolling year was 18.3% (2012: 19.3%).
The Group continues to have a GBP2 billion central banking facility with a final maturity date of December
2015. The facility is provided by 22 banks and was undrawn as at 31 December 2013 (31 December 2012:
undrawn).
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 2013, commercial paper of GBP521 million
was outstanding (2012: no commercial paper was outstanding).
In the year ended 31 December 2013, the Group continued with transactions in the capital markets. In
March 2013, the Group issued a US$300 million bond with a maturity of March 2016 and EUR650 million bond
with a maturity of March 2025. In July 2013, the Group repaid a EUR519 million bond from the Group’s cash
balances. In September 2013, the Group issued a new GBP650 million bond with a maturity of 2026. In
November 2013, a maturing US$300 million bond was repaid and in December 2013, a maturing
GBP152 million bonds was repaid. These repayments were financed from Group cash balances.
In June 2012, the Group issued new US$2 billion bonds; US$500 million with a maturity of 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 US$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.
EARNINGS PER SHARE
Adjusted diluted earnings per share rose by 6% to 216.6p (2012: 205.2p), principally as a result of the
growth in profit from operations, the higher share of post-tax results of associates and joint ventures and
the impact of the share buy-back programme. Basic earnings per share were up 5% to 205.4p
(2012: 195.8p).
2013 2012
Restated
pence pence
Earnings per share
- basic 205.4 195.8
- diluted 204.6 194.8
Adjusted earnings per share
- basic 217.4 206.3
- diluted 216.6 205.2
Headline earnings per share
- basic 201.1 195.2
- diluted 200.4 194.2
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 2/2013
‘Headline Earnings’, as issued by the South African Institute of Chartered Accountants. Circular 2/2013
superseded Circular 3/2012 for periods ending on or after 31 July 2013 and requires comparative figures
to be restated, where appropriate. The comparative headline earnings per share for 2012 have been
restated for the effects of the revised IAS 19 Employee Benefits as explained on page 17.
Adjusted diluted earnings per share are calculated by taking the following adjustments into account:
2013 2012
Restated
pence pence
Unadjusted diluted earnings per share 204.6 194.8
Effect of restructuring and integration costs 11.0 8.3
Gain on deemed partial disposal of a trademark (1.4) -
Effect of deferred tax credit - (0.6)
Effect of amortisation of trademarks and similar intangibles 3.2 2.4
Effect of associates’ adjusting items (0.8) 0.3
Adjusted diluted earnings per share 216.6 205.2
As well as the adjusting items explained on pages 21 to 22, the above adjustments for 2012 also take into
account a tax credit to the income statement, included in the taxation of ordinary activities. 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.
Diluted headline earnings per share are calculated by taking the following adjustments into account:
2013 2012
Restated
pence pence
Diluted unadjusted earnings per share 204.6 194.8
Effect of impairment of intangibles and property, plant and equipment 1.7 0.4
Effect of gains on disposal of property, plant and equipment and
held-for-sale assets (3.5) (0.8)
Effect of disposal of business and trademarks (1.4) -
Effect of gains reclassified from the available-for-sale reserve (0.1) -
Effect of share of associates’ trademark and other asset impairments 0.2 0.8
Effect of issue of shares and change in shareholding in associate (1.1) (1.0)
Diluted headline earnings per share 200.4 194.2
The earnings per share are based on:
2013 2012
Earnings Shares Earnings Shares
Restated
GBPm m GBPm m
Earnings per share
- basic 3,904 1,901 3,797 1,939
- diluted 3,904 1,908 3,797 1,949
Adjusted earnings per share
- basic 4,133 1,901 4,000 1,939
- diluted 4,133 1,908 4,000 1,949
Headline earnings per share
- basic 3,823 1,901 3,784 1,939
- diluted 3,823 1,908 3,784 1,949
DIVIDENDS
Recommendation
The Board recommends a final dividend of 97.4 pence per ordinary share of 25p for the year ended
31 December 2013. If approved by shareholders at the Annual General Meeting to be held on 30 April
2014, the final dividend will be payable on 8 May 2014 to shareholders registered on either the UK main
register or the South Africa branch register on 14 March 2014 (the record date).
General Dividend Information
The following is a summary of the dividends declared/recommended for the years ended 31 December
2013 and 2012.
2013 2012
Pence Pence
per GBPm per GBPm
share share
Ordinary shares
Interim
- 2013 paid 30 September 2013 45.0 846
- 2012 paid 26 September 2012 42.2 815
Final
- 2013 payable 8 May 2014 97.4 1,838
- 2012 paid 8 May 2013 92.7 1,765
142.4 2,684 134.9 2,580
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 2014
Last Day to Trade (LDT) cum dividend (JSE) Friday 7 March
Shares commence trading ex dividend (JSE) Monday 10 March
Shares commence trading ex dividend (LSE) Wednesday 12 March
Record date (JSE and LSE) Friday 14 March
Payment date Thursday 8 May
No removal requests permitted between the UK main Thursday 27 February to Friday
register and the South Africa branch register 14 March (inclusive)
No transfers permitted between the UK main register and Monday 10 March to Friday 14 March
the South Africa branch register (inclusive)
No shares may be dematerialised or rematerialised Monday 10 March to Friday 14 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 =
17.89670 as at 25 February 2014 (the closing rate on that date as quoted by Bloomberg), results in an
equivalent final dividend of 1743.13858 SA cents per ordinary share.
South Africa Branch Register: Dividends Tax Information
South Africa Dividends Tax will be withheld from the gross final dividend of 261.47079 SA cents per
ordinary share paid to shareholders on the South Africa branch register at the rate of 15 per cent unless a
shareholder qualifies for an exemption. After Dividends Tax has been withheld, the net dividend will be
1481.66779 SA cents per ordinary share.
At the close of business on 25 February 2014 (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
1,887,026,281 ordinary shares in issue (excluding treasury shares). The Company held 139,516,345
ordinary shares in treasury giving a total issued share capital of 2,026,542,626 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 Dividends Tax. No STC credits are available for
set-off against Dividends Tax liability on the final dividend which is regarded as a ‘foreign dividend’ for the
purposes of the South Africa Dividends 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, Dividends Tax and the information provided above is of only direct
application to shareholders on the South Africa branch register. Shareholders on the South Africa branch
register should direct any questions regarding the application of Dividends 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 total present value of funded scheme liabilities at 31 December 2013 was GBP5,921 million
(2012: GBP6,217 million), while unfunded scheme liabilities amounted to GBP337 million (2012: GBP378
million). The scheme assets increased from GBP5,563 million in 2012 to GBP5,780 million in 2013.
After excluding unrecognised scheme surpluses of GBP19 million (2012: GBP15 million), the overall net
liability for all pension schemes and healthcare schemes amounted to GBP497 million at the end of 2013,
compared to GBP1,047 million at the end of 2012.
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.
As explained on page 17, with effect from 1 January 2013 the Group adopted the revised IAS 19 Employee
Benefits with the following impact on the results for the twelve months to 31 December 2012:
2012
Previously Restated Change
reported
GBPm GBPm GBPm
Income statement
- Profit from operations 5,412 5,372 (40)
- Adjusted profit from operations 5,681 5,641 (40)
- Share of post-tax results of
associates and joint ventures 692 676 (16)
- Adjusted share of post-tax results
of associates 697 681 (16)
- Profit before taxation 5,648 5,592 (56)
- Taxation on ordinary activities (1,526) (1,516) 10
- Profit for the year 4,122 4,076 (46)
Other comprehensive income (689) (643) 46
CHANGES IN THE GROUP
(a) CTBAT International Limited
On 30 August 2013 the Group announced that CTBAT International Limited (CTBAT), a joint investment
incorporated in Hong Kong between subsidiaries of China National Tobacco Corporation (CNTC) and the
Group, had commenced official business operations. The joint venture was created in accordance with the
Joint Venture Agreement signed by both companies. It owns and manages the worldwide international
cigarette trademark State Express 555, and also owns the worldwide rights outside China to the leading
CNTC brand Shuang Xi.
CTBAT is treated as a joint operation as defined under IFRS 11 Joint Arrangements, as it operates as an
extension of the existing tobacco businesses of its investors and the Group therefore recognises its share
(50%) of the assets, liabilities, income and expenses of the arrangement on a line by line basis in the
consolidated financial statements. CTBAT is reported as part of the Asia Pacific Region with the majority of
its international sales (non China domestic sales) made through existing BAT end markets in that region.
All sales to mainland China are via CNTC.
In accordance with best practice, the contribution of brands and businesses into CTBAT have been
recognised by the new entity at fair value, resulting in a gain on the deemed partial disposal of the State
Express 555 brand which has been treated as an adjusting item and the recognition of the Group’s share
of the assets of the new business.
The impact of the arrangement on operating results for 2013 was not material.
(b) British American Tobacco Myanmar Limited
On 8 July 2013, the Group announced a joint venture in Myanmar with I.M.U. Enterprise Limited (IMU) to
manufacture, distribute and market the Group’s brands. Under the terms of the agreement, the Group
has contributed plant and machinery and cash to the venture in return for a controlling stake, and will
therefore account for the transaction as a business combination.
The goodwill of GBP1 million on the acquisition of the 51 per cent stake in the business reflects the
strategic premium to acquire the opportunity to re-enter the Myanmar market.
(c) 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 in 2012 and a further GBP16 million was paid in 2013. The
remaining balance of the consideration payable is contingent upon the achievements of certain post-
acquisition events. The only material asset acquired was the company’s intellectual property.
(d) British American Tobacco Bangladesh
On 27 June 2012, the Group acquired a further 7 per cent interest in British American Tobacco Bangladesh
Company Limited at a cost of GBP24 million. This increased the Group’s total shareholding to 73 per cent.
SHARE BUY-BACK PROGRAMME
In 2013, the Board approved the continuation of the on-market share buy-back programme with a value
of up to GBP1,500 million, excluding transaction costs. During the year ended 31 December 2013, 44
million shares were bought at a cost of GBP1,500 million, excluding transaction costs of GBP9 million. For
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.
The Board has approved an on-market share buy-back programme for 2014 with a value of up to
GBP1,500 million, excluding costs.
RELATED PARTIES
The Group’s related party transactions and relationships for 2012 were disclosed on page 174 of the
Annual Report for the year ended 31 December 2012. In the year to 31 December 2013, there were no
material changes in related parties or in related party transactions except for the decreased level of
shares bought back by Reynolds American resulting in an amount of GBP189 million (2012: GBP262
million) being received by the Group.
FOREIGN CURRENCIES
The principal exchange rates used were as follows:
Average Closing
2013 2012 2013 2012
US dollar 1.564 1.586 1.656 1.626
Canadian dollar 1.612 1.584 1.760 1.619
Euro 1.178 1.234 1.202 1.233
South African rand 15.099 13.054 17.347 13.791
Brazilian real 3.381 3.109 3.908 3.328
Australian dollar 1.623 1.532 1.851 1.566
Russian rouble 49.853 49.277 54.424 49.656
Japanese yen 152.715 126.633 174.080 140.549
Indian rupee 91.707 84.838 102.447 89.061
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.
While the amounts that may be payable or receivable could be material to the results or cash flows of the
Group in the period in which they are recognised, the Board does not expect these amounts to have a
material effect on the Group’s financial condition.
Taxes
The Group has exposures in respect of the payment or recovery of a number of taxes. The Group is and
has been subject to a number of tax audits covering, 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.
Group litigation
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. Group companies are also involved in proceedings that are not related to tobacco
products. These various proceedings could give rise to material liability.
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 product
liability 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, provided for in 2011, 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 and more information on tax disputes, will be included in the Annual Report
for the year ended 31 December 2013. 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 a full quantification hearing
is scheduled to commence in May 2014.
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.
ANNUAL REPORT
Statutory accounts
The financial information set out above does not constitute the Company’s statutory accounts for the
years ended 31 December 2013 or 2012. Statutory accounts for 2012 have been delivered to the
Registrar of Companies and those for 2013 will be delivered following the Company’s Annual General
Meeting. The auditors’ reports on both the 2012 and 2013 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 24 March 2014. 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, or otherwise acquire or
dispose of any British American Tobacco p.l.c. shares or other securities.
This announcement contains certain forward looking statements which are subject to risk factors
associated with, among other things, the economic and business circumstances occurring from time to
time in the countries and markets in which the Group operates. It is believed that the expectations
reflected in this announcement are reasonable but they may be affected by a wide range of variables
which could cause actual results to differ materially from those currently anticipated.
Past performance is no guide to future performance and persons needing advice should consult an
independent financial adviser.
DISTRIBUTION OF 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
26 February 2014
APPENDIX 1
OTHER TOBACCO PRODUCTS
The Group reports volumes as additional information. This is done with cigarette sticks as the basis, with
usage levels applied to other tobacco products to calculate the equivalent number of cigarette units.
The usage rates that are applied:
Equivalent to one cigarette
Roll-your-own (RYO) 0.8 grams
Make-your-own (MYO)
- Expanded tobacco 0.5 grams
- Optimised tobacco 0.7 grams
Cigars 1 cigar
Snus
- Pouches 1 pouch
- Loose snus 2.0 grams
Roll-your-own (RYO)
Loose tobacco designed for hand rolling, normally a finer cut with higher moisture, compared to cigarette
tobacco.
Make-your-own (MYO)
MYO Expanded tobacco; also known as volume tobacco
Loose cigarette tobacco with enhanced filling properties – to allow higher yields of cigarettes/kg –
designed for use with cigarette tubes and filled via a tobacco tubing machine.
MYO Non-expanded tobacco; also known as optimised tobacco
Loose cigarette tobacco designed for use with cigarette tubes and filled via a tobacco tubing machine.
GROUP VOLUME
The Group volume includes 100% of all volume sold by subsidiaries. In the case of the joint operation
described on page 30, the volume of CTBAT not already recognised by Group subsidiaries will be included
in Group volumes at 100% rather than as a proportion of volume sold, in line with the Group’s
measurement of market share, which is based on absolute volume sold, both in individual markets and
globally.
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR 2014
Wednesday 30 April Interim Management Statement
Wednesday 30 April Annual General Meeting at 11.30am
The Banqueting House, Whitehall, London SW1A 2ER
Wednesday 30 July Half-Yearly Report
Wednesday 22 October Interim Management Statement
CALENDAR FOR THE FINAL DIVIDEND 2013
2014
Thursday 27 February Dividend announced: amount of dividend per share in both
sterling and rand; applicable exchange rate and conversion date
– Tuesday 25 February 2014; plus additional applicable
information as required in respect of South Africa Dividends
Tax(1).
Thursday 27 February to From the commencement of trading on Thursday 27 February
Friday 14 March 2014 to Friday 14 March 2014 (inclusive), no removal requests in
either direction between the UK main register and the South
Africa branch register will be permitted.
Friday 7 March Last Day to Trade or LDT (JSE)
Monday 10 March to Friday 14 March From the commencement of trading on Monday 10 March 2014
to Friday 14 March 2014 (inclusive), no transfers between the UK
main register and the South Africa branch register will be
permitted; no shares may be dematerialised or rematerialised.
Monday 10 March Ex-dividend date (JSE)
Wednesday 12 March Ex-dividend date (LSE)
Friday 14 March Record date (LSE and JSE)
Thursday 8 May Payment date (sterling and rand)
Note:
(1) Details of the applicable exchange rate and the South Africa Dividends Tax information can be
found under the heading ‘Dividends’ on page 28.
For holders of American Depositary Receipts (ADRs), the record date for ADRs is also Friday 14 March
2014 with an ADR payment date of Tuesday 13 May 2014.
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 (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 3077
Sponsor: UBS South Africa (Pty) Ltd
Date: 27/02/2014 09:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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