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BRITISH AMERICAN TOBACCO PLC - Preliminary Announcement Year Ended 31 December 2019

Release Date: 27/02/2020 09:00
Code(s): BTI     PDF:  
 
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Preliminary Announcement – Year Ended 31 December 2019

 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 2020
                      BRITISH AMERICAN TOBACCO p.l.c.
         PRELIMINARY ANNOUNCEMENT – YEAR ENDED 31 DECEMBER 2019
                        JSE Short-Form Announcement

          STRONG OPERATIONAL PERFORMANCE DRIVES DELEVERAGING
KEY FINANCIALS                                                          2019               Change vs 2018
                                                                       Current                       Current
                                                                         rates                         rates
Revenue                                                            £25,877m                          +5.7%
Profit from operations                                              £9,016m                          -3.2%
Basic earnings per share (EPS)                                        249.7p                         -5.4%
Headline earnings per share (HEPS)                                    268.1p                         -0.7%
Dividend per share (see ‘Dividends’ section below)                    210.4p                         +3.6%

 Jack Bowles, Chief Executive said:
 “When I became CEO, my commitment was to maximise value growth from combustibles, deliver a step
 change in New Categories and develop a simpler, stronger, faster, more agile organisation to create a
 better tomorrow. I am delighted with the progress we have made in all areas. We have delivered value
 growth from our combustible business and grown our New Categories business, now providing potentially
 reduced risk products to close to 11 million consumers. In September, we announced a significant
 restructuring and simplification programme, which is largely complete. This will create the capabilities and
 resources to continue investing in New Categories and allow us to deliver on our financial commitments.
 Looking into 2020, we are confident of another year of high single figure adjusted constant currency
 earnings growth.”

 Key highlights, at current rates unless otherwise stated:
 • Reported diluted EPS of 249.0p down 5.4%, impacted by a number of adjusting items discussed below;
 • Adjusted diluted EPS of 323.8p up 9.1%, or 321.6p up 8.4% at constant rates;
 • Cigarette and THP volume share1 increased by 20 bps, with value share2 up 30bps in key markets;
 • New Categories revenue grew 36.9% or 32.4% to £1,214m at constant rates with strong growth in all
    categories, despite the slowdown in US vapour. Excluding US vapour, New Categories revenue grew
    39% at constant rates;
 • Reported revenue of £25,877m (up 5.7%);
 • Adjusted revenue of £25,827m (up 6.2%), or £25,683m on a constant currency basis (up 5.6%);
 • Reported profit from operations of £9,016m down 3.2% driven by adjusting items of £2,114m (2018:
    £1,034m) partly due to the charges incurred in respect of Canada (Quebec), Quantum (simplification
    programme), other smoking and health litigation including Engle in the US, Russia (excise dispute) and
    Indonesia (goodwill impairment), the majority of which are non-cash items;
 • Adjusted profit from operations of £11,130m (up 7.6%), an increase of 6.6% on a constant currency
    basis;
 • Reported operating margin declined 320 bps to 34.8%, largely due to the adjusting items;
 • Adjusted operating margin up 50 bps with significantly increased investment in New Categories;
 • At constant rates of exchange, the US delivered a strong year with adjusted revenue up 4.4%, value
    share up 30 bps and adjusted profit from operations up 6.4%;
• Operating cash flow conversion was 97%, with adjusted cash generated from operations down 16.3%
  (on a constant currency basis). Normalising for the timing of the 2018 MSA payment, ACGFO increased
  1.2%;
• Free cash flow after dividends of £1,921m drove deleveraging of 0.5x to 3.5x (0.4x at constant rates);
  and
• Dividend up 3.6% to 210.4p, in line with our commitment to a 65% pay-out ratio of adjusted diluted
  EPS.
1. Key Market offtake volume share, as independently measured by retail audit agencies (including Nielsen), shipment share estimates, and share of retail for
the US business, based upon latest available validated data. The Group’s Key Markets represent over 80% of the Group’s cigarette volume.
2. Value share represents the retail sales value of the product sold as a proportion of total retail sales value in that category.


BOARD SUCCESSION
The Board considers the length of service of the Directors of the Board as a whole and the need for
membership to be refreshed progressively is kept under regular review.

During 2018 and 2019, the Nominations Committee prioritised effective succession planning for the Chief
Executive and the Finance Director. Having overseen the orderly transition for both those roles, the
Nominations Committee has focused on succession planning for the role of Chairman, mindful of the
provisions of the UK Corporate Governance Code 2018 and that Richard Burrows has served as a Director
for just over ten years.

To facilitate the ongoing succession process and to best serve the interests of the Company’s
shareholders, it is intended that Mr Burrows will retire from the Board at or prior to the Annual General
Meeting in 2021 and will continue to lead the Board in the interim. Accordingly, the Board will be
proposing Mr Burrows for re-election as Chairman at the forthcoming 2020 Annual General Meeting.

Kieran Poynter will retire from the Board with effect from the conclusion of the Annual General Meeting
on 30 April 2020. Mr Poynter has served as a Non-Executive Director since July 2010, as Senior
Independent Director since October 2016, and is currently a member of the Audit and Nominations
Committees.

Dimitri Panayotopoulos will succeed Mr Poynter as the Company’s Senior Independent Director with
effect from the conclusion of the 2020 Annual General Meeting. Mr Panayotopoulos has also taken over
responsibility for leading the process for succession planning for the role of Chairman. Mr Panayotopoulos
has served as a Non-Executive Director since February 2015, is the Chairman of the Remuneration
Committee and is a member of the Nominations Committee.

OTHER INFORMATION

DIVIDENDS

Declaration
The Board has declared an interim dividend of 210.4p per ordinary share of 25p, for the year ended 31
December 2019, payable in four equal quarterly instalments of 52.60p per ordinary share in May 2020,
August 2020, November 2020 and February 2021. This represents an increase of 3.6% on 2018 (2018:
203.0p per share), and a payout ratio, on 2019 adjusted diluted earnings per share, of 65.0%.

The quarterly dividends will be paid to shareholders registered on either the UK main register or the
South Africa branch register and to holders of American Depositary Shares (ADSs), each on the applicable
record dates set out under the heading ‘Key Dates’ below.

South Africa Branch Register
In accordance with the JSE Limited (JSE) Listing Requirements, the finalisation information relating to
shareholders registered on the South Africa branch register (comprising the amount of the dividend in
South African rand, the exchange rate and the associated conversion date) will be published on the dates
stated below, together with South Africa dividends tax information.
 The quarterly dividends are regarded as ‘foreign dividends’ for the purposes of the South Africa Dividends
 Tax. For the purposes of South Africa Dividends Tax reporting, the source of income for the payment of
 the quarterly dividends is the United Kingdom.

 Holders of ADSs
 For holders of ADSs listed on the New York Stock Exchange (NYSE), the record dates and payment dates
 are set out below. The equivalent quarterly dividends receivable by holders of ADSs in US dollars will be
 calculated based on the exchange rate on the applicable payment date. A fee of US$0.005 per ADS will be
 charged by Citibank, N.A. in its capacity as depositary bank for the BAT American Depositary Receipt
 (“ADR”) programme in respect of each quarterly dividend payment.

 General dividend information
 Under IFRS, the dividend is recognised in the year that it is approved by shareholders or, if declared as an
 interim dividend by directors, in the period that it is paid.

 During the year, as an outcome of the Financial Reporting Council’s (FRC’s) review of the Group’s 2018
 Annual Report and Accounts, the Group received correspondence related to a number of areas, including
 the accounting treatment for interim dividends. It was agreed that the recognition of an accrual at the
 year-end in respect of the dividend paid in February 2018 and February 2019 was incorrect. Accordingly,
 from 1 January 2019, the Group has revised the treatment to recognise the interim dividends in the
 period in which they are paid. The review conducted by the FRC was based solely on the Group’s
 published report and accounts and does not provide any assurance that the report and accounts are
 correct in all material respects.

 The cash flow, prepared in accordance with IFRS, reflects the total cash paid in the period, amounting to
 £4,598 million (2018: £4,347 million) and was unaffected by the change.
                                                                       2019                             2018
                                                  Pence per         USD per        Pence per         USD per
 Dividends declared:                                 share             ADS            share             ADS
 Quarterly payment 1 (paid May 2019)                  50.75        0.6596990           48.8         0.661142
 Quarterly payment 2 (paid August 2019)               50.75        0.6155970           48.8         0.628153
 Quarterly payment 3 (paid November 2019)             50.75        0.6521370           48.8         0.621712
 Quarterly payment 4 (paid February 2020)             50.75        0.6571610           48.8         0.632496
                                                      203.0        2.5845940          195.2         2.543503

 Key dates
 In compliance with the requirements of the London Stock Exchange (LSE), the NYSE and Strate, the
 electronic settlement and custody system used by the JSE, the following salient dates for the quarterly
 dividends payments are applicable. All dates are 2020, unless otherwise stated.

Event                             Payment No. 1      Payment No. 2       Payment No. 3         Payment No. 4
Preliminary announcement
(includes declaration data                                           27 February
required for JSE purposes)
Publication of finalisation       17 March           30 June             21 September          7 December
information (JSE)
No removal requests permitted     17 March to        30 June to          21 September to       7 December to 18
between the UK main register      27 March           10 July             2 October             December
and the South Africa branch       (inclusive)        (inclusive)         (inclusive)           (inclusive)
register
Last Day to Trade (LDT) cum       24 March           7 July              29 September          14 December
dividend (JSE)
Shares commence trading ex-       25 March           8 July              30 September          15 December
dividend (JSE)
No transfers permitted            25 March to       8 July to             30 September to        15 December to
between the UK main register      27 March          10 July               2 October              18 December
and the South Africa branch       (inclusive)       (inclusive)           (inclusive)            (inclusive)
register
No shares may be                  25 March to       8 July to             30 September to        15 December to
dematerialised or                 27 March          10 July               2 October              18 December
rematerialised on the South       (inclusive)       (inclusive)           (inclusive)            (inclusive)
Africa branch register
Shares commence trading ex-       26 March          9 July                1 October              17 December
dividend (LSE and NYSE)
Record date                       27 March          10 July               2 October              18 December
(JSE, LSE and NYSE)
Last date for receipt of Dividend   21 April          29 July               22 October             13 January 2021
Reinvestment Plan (DRIP)
elections (LSE)
Payment date (LSE and JSE)          13 May            19 August             12 November            3 February 2021
ADS payment date (NYSE)             18 May            24 August             17 November            8 February 2021
 Note:
 (1) The dates set out above may be subject to any changes to public holidays arising and changes or revisions to the LSE, JSE
     and NYSE timetables. Any confirmed changes to the dates will be announced.

 SHORT-FORM ANNOUNCEMENT
 This short-form announcement is the responsibility of the Directors of the Company. It is only a summary
 of the information contained in the full Preliminary Announcement – Year Ended 31 December 2019 (the
 “Results Announcement”) and does not contain full or complete details. Any investment decisions should
 be based on consideration of the full Results Announcement available via the JSE at
 https://senspdf.jse.co.za/documents/2020/JSE/ISSE/BTI/BATFY19.pdf and on the Company’s website at
 www.bat.com. Copies of the full Results Announcement may also be obtained during normal business
 hours from the Company’s registered office and the Company’s representative office in South Africa.
 Contact details are set out below.

 SHAREHOLDER INFORMATION

 FINANCIAL CALENDAR 2020*

   Wednesday 18 March                                      Capital Markets Day

   Thursday 30 April                                       Annual General Meeting at 11.30am
                                                           Hilton London Bankside, 2-8 Great Suffolk Street,
                                                           London SE1 0UG

   Friday 31 July                                          Half-Year Report

 * Indicated dates are subject to change


 CORPORATE INFORMATION
 Premium listing
 London Stock Exchange (Share Code: BATS; ISIN: GB0002875804)
 Computershare Investor Services PLC
 The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, UK
 tel: 0800 408 0094; +44 370 889 3159
 Share dealing tel: 0370 703 0084 (UK only)
 Your account: www.computershare.com/uk/investor/bri
 Share dealing: www.computershare.com/dealing/uk
 Web-based enquiries: www.investorcentre.co.uk/contactus
 Secondary listing
 JSE (Share Code: BTI)
 Shares are traded in electronic form only and transactions settled electronically through Strate.
 Computershare Investor Services Proprietary Limited
 Private Bag X9000, Saxonwold 2132, South Africa
 tel: 0861 100 634; +27 11 870 8216
 email enquiries: web.queries@computershare.co.za
 Sponsor for the purpose of the JSE
 UBS South Africa (Pty) Ltd
 American Depositary Receipts (ADRs)
 NYSE (Symbol: BTI; CUSIP Number: 110448107)
 BAT’s shares are listed on the NYSE in the form of American Depositary Shares (ADSs) and these are evidenced
 by American Depositary Receipts (ADRs), each one of which represents one ordinary share of British American
 Tobacco p.l.c. Citibank, N.A. is the depositary bank for the sponsored ADR programme.
 Citibank Shareholder Services
 PO Box 43077, Providence, Rhode Island 02940-3077, USA
 tel: +1 888 985 2055 (toll-free) or +1 781 575 4555
 email enquiries: citibank@shareholders-online.com
 website: www.citi.com/dr
 Publications
 British American Tobacco Publications
 Unit 80, London Industrial Park, Roding Road, London E6 6LS, UK
 tel: +44 20 7511 7797; facsimile: +44 20 7540 4326
 e-mail enquiries: bat@team365.co.uk or the Company’s Representative office in South Africa using the contact
 details shown below.
 British American Tobacco p.l.c.
 Registered office
 Globe House, 4 Temple Place, London, WC2R 2PG, UK
 tel: +44 20 7845 1000; facsimile: +44 20 7240 0555
 British American Tobacco p.l.c. is a public limited company which is listed on the London Stock Exchange, New
 York Stock Exchange and the JSE Limited in South Africa. British American Tobacco p.l.c. is incorporated in
 England and Wales (No. 3407696) and domiciled in the UK.
 British American Tobacco p.l.c.
 Representative office in South Africa
 Waterway House South
 No 3 Dock Road, V&A Waterfront, Cape Town 8000
 South Africa
 PO Box 631, Cape Town 8000, South Africa
 tel: +27 21 003 6712

ENQUIRIES

INVESTOR RELATIONS:                                       PRESS OFFICE:

Mike Nightingale               +44 (0)20 7845 1180         Press Office             +44 (0)20 7845 2888
Rachael Brierley               +44 (0)20 7845 1519
Victoria Buxton                +44 (0)20 7845 2012
William Houston                +44 (0)20 7845 1138
John Harney                    +44 (0)20 7845 1263

 FORWARD-LOOKING STATEMENTS
 This announcement contains certain forward-looking statements, including “forward-looking” statements made within the
 meaning of Section 21E of the United States Securities Exchange Act of 1934. These statements are often, but not always,
 made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,”
 “plan,” “potential,” “predict,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy,” “outlook”, “target” and
 similar expressions. These include statements regarding our intentions, beliefs or current expectations concerning, amongst
other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the economic and
business circumstances occurring from time to time in the countries and markets in which the Group operates.

All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other
factors that could cause actual future financial condition, performance and results to differ materially from the plans, goals,
expectations and results expressed in the forward-looking statements and other financial and/or statistical data within this
announcement. Among the key factors that could cause actual results to differ materially from those projected in the
forward-looking statements are uncertainties related to the following: the impact of competition from illicit trade; the
impact of adverse domestic or international legislation and regulation; changes in domestic or international tax laws and
rates and the impact of an unfavourable ruling by a tax authority in a disputed area; adverse litigation and dispute
outcomes and the effect of such outcomes on the Group’s financial condition; changes or differences in domestic or
international economic or political conditions; adverse decisions by domestic or international regulatory bodies; the impact
of market size reduction and consumer down-trading; translational and transactional foreign exchange rate exposure; the
impact of serious injury, illness or death in the workplace; the ability to maintain credit ratings and to fund the business
under the current capital structure; the inability to develop, commercialise and deliver New Category products; and
changes in the market position, businesses, financial condition, results of operations or prospects of the Group.

It is believed that the expectations reflected in this announcement are reasonable but they may be affected by a wide range
of variables that could cause actual results to differ materially from those currently anticipated. Past performance is no
guide to future performance and persons needing advice should consult an independent financial adviser. The forward-
looking statements reflect knowledge and information available at the date of preparation of this announcement and the
Group undertakes no obligation to update or revise these forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place undue reliance on such forward-looking
statements.

No statement in this communication is intended to be a profit forecast and no statement in this communication should be
interpreted to mean that earnings per share of BAT for the current or future financial years would necessarily match or
exceed the historical published earnings per share of BAT.

Additional information concerning these and other factors can be found in the Company’s filings with the US Securities and
Exchange Commission (“SEC”), including the Annual Report on Form 20-F filed on 15 March 2019 and Current Reports on
Form 6-K, which may be obtained free of charge at the SEC’s website, http://www.sec.gov, and the Company’s Annual
Reports, which may be obtained free of charge from the British American Tobacco website www.bat.com.


Sponsor: UBS South Africa (Pty) Ltd

Date: 27-02-2020 09:00:00
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