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BTI
BTI
BTI - British American Tobacco p.l.c - Half-yearly report to 30 June 2011
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")
HALF-YEARLY REPORT TO 30 JUNE 2011
SUMMARY
Six Months Results - unaudited 2011 2010 Change
Revenue GBP7,438m GBP7,298m +2%
Profit from operations GBP2,691m GBP2,271m +18%
Adjusted profit from operations GBP2,760m GBP2,460m +12%
Basic earnings per share 94.5p 76.9p +23%
Adjusted diluted earnings per share 96.1p 87.1p +10%
Interim dividend per share 38.1p 33.2p +15%
The Group`s organic revenue at constant rates of exchange grew by 7
per cent with continued good pricing momentum. Reported Group revenue
was up 2 per cent.
Adjusted Group profit from operations increased by 12 per cent. All
the regions contributed to this good profit result. The reported
profit from operations was 18 per cent higher at GBP2,691 million.
The adjusting items are explained on pages 23 to 24.
Group volumes were 344 billion, down 1 per cent as the overall market
share of the Group increased and industry volume decline moderated.
The four Global Drive Brands achieved good overall volume growth of 11
per cent. Dunhill was up 1 per cent, Kent 16 per cent, Lucky Strike 8
per cent and Pall Mall grew by 14 per cent.
Adjusted diluted earnings per share rose by 10 per cent, principally
as a result of the growth in profit from operations, reduced by a
higher tax charge. Basic earnings per share were up 23 per cent at
94.5p (2010: 76.9p).
The Board has declared an interim dividend of 38.1p, a 15 per cent
increase on last year, to be paid on 28 September 2011.
13 million shares were bought back at a cost of GBP335 million.
The Chairman, Richard Burrows, commented "With continued pricing
momentum, an increase in market share and the rate of volume decline
moderating, we are on track for another very good year."
ENQUIRIES:
INVESTOR RELATIONS: PRESS OFFICE:
Ralph 020 7845 Kate Matrunola/ 02020020 7845 2888
Edmondson/ 1180 Catherine Armstrong
Maya Farhat/ 020 7845
Rachael 1977
Brierley 020 7845
1519
BRITISH AMERICAN TOBACCO p.l.c.
HALF-YEARLY REPORT TO 30 JUNE 2011
INDEX
PAGE
BUSINESS REVIEW:
Chairman`s statement 2
Regional review 3
Dividends 8
Risk and uncertainties 8
Going concern 9
Directors` responsibility statement 9
Independent review report to British American Tobacco 10
p.l.c.
FINANCIAL STATEMENTS:
Group income statement 11
Group statement of comprehensive income 12
Group statement of changes in equity 13
Group balance sheet 15
Group cash flow statement 17
Accounting policies and basis of preparation 18
Non-GAAP measures* 19
Foreign currencies 19
Segmental analyses of revenue and profit 20
Adjusting items included in profit from operations 23
Other changes in the Group 24
Net finance costs 25
Associates and joint ventures 25
Taxation 27
Earnings per share 27
Cash flow and net debt movements 29
Contingent liabilities 33
Related party disclosures 33
Share buy-back programme 33
Proposed acquisition of cigarette company in Colombia 33
SHAREHOLDER INFORMATION:
Financial calendar 34
Calendar for the interim dividend 2011 34
Corporate information 34
Disclaimers 36
Distribution of report 36
APPENDIX
Appendix 1 - Analysis of revenue and profit from 37
operations
*Non-GAAP measures referred to and used in these
condensed consolidated financial statements, such as
adjusted profit from operations, organic growth and
adjusted diluted earnings per share, are explained on
page 19.
CHAIRMAN`S STATEMENT
British American Tobacco has had a very good half-year as a result of
continued pricing momentum and an exceptionally strong performance from our
Global Drive Brands, driven by the successful roll-out of innovations.
Organic revenue at constant rates of exchange grew by 7 per cent to GBP7,421
million and organic adjusted profit from operations at constant rates
increased by 11 per cent to GBP2,724 million.
The very strong growth in profit from operations led to a 10 per cent
improvement in adjusted diluted earnings per share to 96.1p. Profit from
operations benefited from additional shipments to Japan.
The Board has declared an Interim Dividend of 38.1p per share, an increase of
15 per cent. As usual, the Interim Dividend has been set at one third of
last year`s total dividend and it will be paid on 28 September to
shareholders on the Register at 19 August 2011.
In addition, following the resumption of the share buy-back programme, some
13 million shares have been repurchased in the first half of the year at a
cost of GBP335 million and at an average price of GBP25.76 per share.
The Group is announcing the appointment of Ann Godbehere as a Non-Executive
Director with effect from 3 October 2011. She currently serves on the Boards
of Rio Tinto plc, UBS AG and Prudential plc.
With continued pricing momentum, an increase in market share and the rate of
volume decline moderating, we are on track for another very good year.
Richard Burrows
26 July 2011
REGIONAL REVIEW
The Group`s reported revenue increased by 2 per cent to GBP7,438 million.
However, organic revenue at constant rates of exchange grew by 7 per cent to
GBP7,421 million, as a result of continued good pricing momentum. See page
37 for the detail.
The reported Group profit from operations was 18 per cent higher at GBP2,691
million while the adjusted profit from operations, used as the basis for the
discussion of the regional results below, was up 12 per cent at GBP2,760
million. All the regions contributed to this good profit result. The
adjusting items are explained on pages 23 to 24.
As a measure of the Group`s underlying performance, the organic adjusted
profit from operations at constant rates of exchange, as set out on page 37,
increased by 11 per cent to GBP2,724 million.
Group volumes from subsidiaries were 344 billion, down 1 per cent on last
year, as the overall market share of the Group increased and industry volume
decline moderated. Organic volumes were also down by 1 per cent.
The four Global Drive Brands achieved very good overall volume growth of 11
per cent following the successful launches of innovations, resulting in the
continued improvement in market share. Dunhill increased volumes by 1 per
cent as strong growth in Brazil, Taiwan, Russia, Romania and the GCC was
partially offset by South Korea, Australia and Malaysia. Kent was 16 per cent
higher with strong performances in Japan, South Korea, Russia, Romania and
Ukraine.
Lucky Strike volumes increased by 8 per cent with growth in many markets,
partially offset by a decline in Spain. Volumes were higher in Japan,
Germany, France, Italy, Chile and Argentina. Pall Mall volumes rose by 14 per
cent with growth in Pakistan, Turkey, Russia, Ukraine, Germany, Romania, the
UK and Canada, partially offset by lower volumes in Mexico, Italy and Spain.
30.6.11 30.6.10
Adjusted
Adjusted profit from profit from
operations* operations*
Constant Current
rates rates
GBPm GBPm GBPm
Asia-Pacific 740 766 651
Americas 751 768 694
Western Europe 568 572 564
EEMEA 665 654 551
2,724 2,760 2,460
*Adjusted profit from operations (page 11) is derived after excluding
adjusting items from profit from operations. Adjusting items include
restructuring and integration costs and amortisation of trademarks as
explained on pages 23 and 24.
In Asia-Pacific, profit was up GBP115 million to GBP766 million as a result
of strong performances in Japan and Indonesia and favourable exchange rates.
At constant rates of exchange, profit would have increased by GBP89 million
or 14 per cent. Volumes at 95 billion were up 1 per cent with increases in
Japan, Vietnam and Pakistan, offset by lower volumes in Australia, Malaysia,
South Korea, and New Zealand.
In Australia, the steep excise increase during last year adversely impacted
industry volumes. Profit was higher as a result of exchange rate movements,
cost saving initiatives and higher pricing. Market share grew through strong
performances by Vogue and Pall Mall. In New Zealand, volumes were lower
despite the strong growth in volume and share by Pall Mall, impacted by an ad-
hoc excise increase last year and an excise equalisation of Roll Your Own
(RYO) products. Profit was down as a result of lower volumes and down-
trading.
Regional review cont...
Total industry volumes declined in Malaysia, following the excise-led price
increases. Down-trading to illicit brands selling below the mandatory
minimum price impacted both volumes and market share, which was flat.
In Japan, industry volumes were down sharply following a historically high
excise increase in October 2010. However, as a result of the disruption to
domestic production following the tragic events in March, the Group delivered
an exceptionally strong growth in volumes and share. With increased pricing,
underlying share growth and higher volumes, profit grew strongly.
Market share grew in Vietnam but profit was impacted by high inflation and
exchange rate devaluation, partially offset by higher pricing, cost saving
initiatives and the benefit of higher volumes.
In South Korea, the Group`s business increased prices at the end of April
2011, for the first time in over six years, to address eroding industry
profitability, resulting in an improved profit outlook for the year. Price-
based competition led to lower volumes and a reduction in market share while
profit was down as a result of reduced volumes and increased marketing spend
in the short term.
Market share grew strongly in Pakistan, led by volume growth as a result of a
good performance by Pall Mall more than doubling its volumes. Profit was
down, impacted by higher excise duties, high inflation and the growth in
illicit trade. In Bangladesh, market share grew with consistent strong
performance of Benson & Hedges. However, volumes were lower than last year,
following the excise-led price increase and inflationary pressures. Profit
was down as exchange rate movements more than offset price rises and tight
control of costs.
Profit grew strongly in Indonesia due to price increases and synergy savings
resulting from the merger of the business units during 2010. Market share
declined despite the growth in the mild kretek and the hand-made kretek
brands and volumes were lower than last year as a result of the delisting of
certain low-price brands.
In Americas, profit rose by GBP74 million to GBP768 million, mainly
attributable to a strong performance from Brazil and Mexico, an improved
product mix and exchange rate benefits. At constant rates of exchange,
profit would have risen by GBP57 million or 8 per cent. Volumes were down 5
per cent at 70 billion, with decreases experienced by Brazil, Mexico, Chile
and Venezuela as a result of industry declines.
In Brazil, profit growth was driven by higher pricing and an improved product
mix. Overall market share was slightly down with the growth of local duty
evaded product but share in the premium segment continued to grow due to the
solid performance of Lucky Strike and Dunhill.
Profit in Canada improved as a result of further progress in significantly
reducing the cost base. Industry volumes were lower after sales tax
increases were implemented during July last year. This resulted in increased
illicit trade, particularly in Ontario, where the Group has a particularly
high market share.
In Mexico, industry volumes declined sharply as a result of excise-led price
increases at the beginning of 2011. Market share was flat on last year,
while profit was higher, driven by pricing and lower operating expenses.
In Argentina, the growth of Lucky Strike and the successful launch of
Dunhill, resulted in a growth in volumes and in market share. Profit was
down as a result of the higher marketing investment. Lucky Strike and Pall
Mall grew in Chile, but total volumes and profit were lower following the
excise driven price increases.
In Venezuela, the profit increase was driven by higher pricing, partially
offset by higher costs and lower industry volumes. The Group announced the
proposed acquisition of Protabaco, the second largest cigarette company in
Colombia, which is still subject to regulatory approval.
Regional review cont...
Profit in Western Europe increased by GBP8 million to GBP572 million, mainly
as a result of strong performances in Germany, Switzerland and Romania,
partially offset by declines in Denmark, Italy and Spain. At constant rates
of exchange, profit would have increased by GBP4 million or 1 per cent.
Regional volumes were 2 per cent lower at 65 billion as a result of declines
in Italy and Spain and the termination of the Gauloises licence agreement in
Germany.
In Italy, profit decreased as industry volume declined, partially offset by
improved product mix, coupled with a price increase and lower cost. Market
share has stabilised in line with last year with the Global Drive Brands
performing well.
Profit in Germany increased as a result of higher prices and lower costs and
despite the termination of the Gauloises license agreement at the end of
March 2010. Volumes decreased but market share was higher, driven by an
excellent performance by Pall Mall and growth by Lucky Strike.
Volumes in France rose and together with improved pricing and lower costs,
led to increased profit. The higher market share was the result of good
performances by Lucky Strike and Vogue. In Spain, market share was up
strongly, driven by Pall Mall and Lucky Strike. Volumes were lower, adversely
impacted by excise driven price increases at the end of last year while
profit deteriorated following the price war.
Profit in Switzerland grew with increased pricing and good cost control.
Volumes were lower but market share rose with good performances from Kent and
Pall Mall.
In Romania, industry volumes increased following a significant reduction in
the level of illicit trade due to the strong action taken by the government.
Market share was higher, led by Dunhill, Kent and Vogue. Profit was up
strongly, driven by price increases, higher volumes and an improved premium
product mix.
In Poland, volumes, market share and profit were higher after strong growth
of Viceroy, Lucky Strike and Vogue. Volumes in Greece were higher than last
year but profit was impacted by the absorption of some of the excise tax
increases. Market share was up as Peter Stuyvesant achieved leadership in
the low-price segment. In the United Kingdom, volumes and market share were
higher mainly as a result of the good performance of Pall Mall which, coupled
with price increases and cost management, led to improved profit.
The strong market position in Denmark was maintained but volumes and profit
were adversely affected by the impact of two significant excise driven price
increases on the premium segment.
Profit in the Eastern Europe, Middle East and Africa (EEMEA) region increased
by GBP103 million to GBP654 million. This was mainly due to stable volumes
and price increases and the absence of the adverse currency restatement in
Uzbekistan last year. At constant rates of exchange, profit would have
increased by GBP114 million or 21 per cent. Volumes at 114 billion, were
slightly higher than last year with the decline in volumes in Turkey offset
by increases in Nigeria, Egypt and Iran.
In Russia, volumes and market share continued to grow on the back of good
performances by Kent, supported by the whole portfolio. Profit was higher,
driven by price increases, an improved product mix and lower costs.
Market share in Ukraine was up although profits and volumes were lower due to
the industry decline. Volumes and market share increased in Kazakhstan, due
to strong performances by Dunhill and Pall Mall. Profit grew strongly with
higher margins.
In South Africa, market share strengthened and volumes were higher which,
combined with exchange rate benefits, resulted in good profit growth.
Regional review cont...
Despite the political upheaval and turbulence in the Middle East area, the
Group`s overall performance was strong. In the GCC markets, profit and
market share increased due to Dunhill`s performance in all the markets,
especially in Saudi-Arabia. In the rest of the Middle East, volumes were
significantly higher due to a strong performance of Kent, resulting in a rise
in profit. In Egypt, volumes and market share continued to grow strongly,
although profit was adversely impacted by the absorption by the industry of
some of the excise increase of July 2010. Rothmans strengthened its
leadership position amongst International Brands.
In Turkey, the 2010 excise-driven contraction of the legal market continued
with an increase in illicit trade. Volumes were further affected by market
share decline as a result of competitor pricing activities. Pall Mall grew
strongly and Lucky Strike was launched, partially offsetting the volume
losses of tail brands. Profit reduced as the improved product mix and
savings initiatives were not sufficient to cover the impact of lower volumes
and the price reductions.
Volume growth in Nigeria, coupled with an improved product mix, led to an
increase in profit. Market share was higher with a good performance from
Dunhill and Rothmans.
Results of Associates
Associates principally comprise Reynolds American and ITC.
The Group`s share of the post-tax results of associates increased by GBP90
million, or 38 per cent, to GBP329 million. Excluding the adjusting items in
2010 and in 2011, explained on pages 25 and 26, the Group`s share of the post-
tax results of associates increased by 3 per cent to GBP315 million, with a
rise of 8 per cent at constant rates of exchange.
The segmental analyses of the Group`s share of the adjusted* post-tax results
of associates and joint ventures are as follows:
30.6.11 30.6.10
Adjusted
Adjusted share of post- share of post-
tax results* tax results*
Constant Current
rates rates
GBPm GBPm GBPm
Asia-Pacific 117 112 103
Americas 213 201 202
Western Europe 1 1 -
EEMEA 1 1 1
332 315 306
*Adjusted share of post-tax results of associates and joint ventures is after
the adjusting item, as shown on page 11 and explained on pages 25 and 26,
have been eliminated from the share of post-tax results of associates and
joint ventures.
The contribution from Reynolds American increased by 36 per cent to GBP181
million. Excluding the amortisation of brands, restructuring costs, the
financing of a smoking cessation programme in Louisiana, tax credits and the
gain on disposal of Lane, as well as the Canadian settlement in 2010, the
contribution was in line with last year at GBP200 million. At constant rates
of exchange the increase would have been 6 per cent.
The Group`s associate in India, ITC, contributed GBP143 million to the Group,
up 39 per cent. Excluding the impact of the issue of shares and change in
the shareholding, the contribution was 6 per cent higher at GBP109 million.
At constant rates of exchange, the contribution would have been 10 per cent
higher than last year.
Regional review cont...
CIGARETTE VOLUMES
The segmental analysis of the volumes of subsidiaries is as follows:
3 months to 6 months to Year to
30.6.11 30.6.10 30.6.11 30.6.10 31.12.10
bns bns bns bns bns
51 50 Asia- 95 95 188
Pacific
34 35 Americas 70 73 149
35 35 Western 65 66 136
Europe
60 60 EEMEA 114 114 235
180 180 344 348 708
DIVIDENDS
The Board has declared an Interim Dividend of 38.1 pence per ordinary share
of 25p for the six months ended 30 June 2011 The Interim Dividend will be
payable on 28 September 2011 to shareholders registered on either the UK main
register or the South African branch register on 19 August 2011 (the record
date).
In compliance with the requirements of Strate, the electronic settlement and
custody system used by the JSE Limited (JSE), the following salient dates for
the payment of the Interim Dividend are applicable:
Last Day to Trade (LDT) cum dividend (JSE): 12 August 2011
Shares commence trading ex dividend (JSE): 15 August 2011
Shares commence trading ex dividend (LSE): 17 August 2011
Record date (JSE and LSE): 19 August 2011
Payment date: 28 September 2011
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 = 11.01700 as at
25 July 2011 (the closing rate on that date as quoted by Bloomberg), results
in an equivalent Interim Dividend of 419.74770 SA cents per ordinary share.
From the commencement of trading on 27 July 2011 until the close of business
on 19 August 2011, no removal requests between the UK main register and the
South African branch register will be permitted and no shares may be
dematerialised or rematerialised between 15 August 2011 and 19 August 2011,
both days inclusive.
The Interim Dividend amounts to GBP753 million. The comparative dividend for
the six months to 30 June 2010 of 33.2 pence per ordinary share amounted to
GBP662 million.
In accordance with IFRS, the Interim Dividend will be charged in the Group
results for the third quarter. The condensed consolidated financial
information for the six months to 30 June 2011 includes the final dividend
paid in respect of the year ended 31 December 2010 of 81.0 pence per share
amounting to GBP1,620 million (30 June 2010: 71.6p amounting to GBP1,431
million).
RISKS AND UNCERTAINTIES
The principal risks and uncertainties affecting the business activities of
the Group were identified under the heading `Key Group risk factors`, set out
on pages 42 to 48 of the Annual Report for the year ended 31 December 2010, a
copy of which is available on the Group`s website www.bat.com. The key Group
risks are summarised under the headings of:
- Illicit trade;
- Excise and tax;
- Financial;
- Marketplace;
- Legal and compliance;
- Regulation; and
- Data risks
In the view of the Board the key risks and uncertainties for the remaining
six months of the financial year continue to be those set out in the above
section of the 2010 Annual Report. These should be read in the context of
the cautionary statement regarding forward looking statements on page 36.
GOING CONCERN
A full description of the Group`s business activities, its financial
position, cash flows, liquidity position, facilities and borrowings position
together with the factors likely to affect its future development,
performance and position, is set out in the Regional Review and Financial
Review and in the notes to the accounts, all of which are included in the
2010 Annual Report that is available on the Group`s website, www.bat.com.
This Half-Yearly Report provides updated information regarding the business
activities for the six months to 30 June 2011 and of the financial position,
cash flow and liquidity position at 30 June 2011.
The Group has, at the date of this report, sufficient financing available for
its estimated existing requirements for at least the next twelve months.
This, together with the proven ability to generate cash from trading
activities, the performance of the Group`s Global Drive Brands, its leading
market positions in a number of markets and its 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 despite the current financial conditions and uncertain outlook
in the general global economy.
After reviewing the Group`s annual budgets, plans, current forecasts and
financing arrangements, as well as the current trading activities of the
Group, the Directors consider that the Group has adequate resources to
continue operating for the foreseeable future. The Annual Report and this
Half-Yearly Report have been prepared on a going concern basis.
DIRECTORS` RESPONSIBILITY STATEMENT
The Directors confirm that this condensed consolidated financial information
has been prepared in accordance with IAS 34 `Interim Financial Reporting` as
adopted by the European Union, and that this Half-Yearly Report includes a
fair review of the information required by the Disclosure and Transparency
Rules of the Financial Services Authority, paragraphs DTR 4.2.7 and DTR
4.2.8.
The Directors of British American Tobacco p.l.c. are as listed on pages 50
and 51 in the British American Tobacco Annual Report for the year ended 31
December 2010, with the following Directors who retired in the six months to
30 June 2011:
Date of retirement
Paul Adams 28 February 2011
Dr Ana Maria Llopis 28 April 2011
Details of all the current Directors of British American Tobacco p.l.c. are
maintained on www.bat.com.
For and on behalf of the Board of Directors:
Richard Burrows Ben Stevens
Chairman Finance Director and Chief Information Officer
26 July 2011
INDEPENDENT REVIEW REPORT TO BRITISH AMERICAN TOBACCO p.l.c.
Introduction
We have been engaged by the Company to review the condensed consolidated
financial information in the Half-Yearly Report for the six months ended 30
June 2011, which comprises the Group income statement, the Group statement of
comprehensive income, the Group statement of changes in equity, the Group
balance sheet, the Group cash flow statement, the accounting policies and
basis of preparation and the related notes. We have read the other
information contained in the Half-Yearly Report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed consolidated financial information.
Directors` responsibilities
The Half-Yearly Report is the responsibility of, and has been approved by,
the Directors. The Directors are responsible for preparing the Half-Yearly
Report in accordance with the Disclosure and Transparency Rules of the United
Kingdom`s Financial Services Authority.
As disclosed on page 18, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed consolidated financial information in the Half- Yearly Report has
been prepared in accordance with International Accounting Standard 34,
`Interim Financial Reporting`, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
consolidated financial information in the Half-Yearly Report based on our
review. This report, including the conclusion, has been prepared for and
only for the Company for the purpose of the Disclosure and Transparency Rules
of the Financial Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, `Review of Interim Financial Information
Performed by the Independent Auditor of the Entity` issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK and
Ireland) and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated financial information in the Half-
Yearly Report for the six months ended 30 June 2011 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of
the United Kingdom`s Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
1 Embankment Place
London
26 July 2011
GROUP INCOME STATEMENT - unaudited
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Gross turnover (including duty, excise 22,276 21,177 43,855
and other taxes of
GBP14,838 million (30.6.10: GBP13,879
million; 31.12.10:
GBP28,972 million))
Revenue 7,438 7,298 14,883
Raw materials and consumables used (1,716) (1,964) (3,695)
Changes in inventories of finished 50 86 (12)
goods and work in progress
Employee benefit costs (1,177) (1,213) (2,550)
Depreciation, amortisation and (262) (323) (897)
impairment costs
Other operating income 129 103 207
Other operating expenses (1,771) (1,716) (3,618)
Profit from operations 2,691 2,271 4,318
Analysed as:
- adjusted profit from operations 2,760 2,460 4,984
- restructuring and integration costs (40) (158) (311)
- amortisation of trademarks (29) (31) (62)
- impairment of trademarks - - (44)
- goodwill impairment - - (249)
2,691 2,271 4,318
Net finance costs (233) (231) (480)
Finance income 57 9 27
Finance costs (290) (240) (507)
Share of post-tax results of 329 239 550
associates and joint ventures
Analysed as:
- adjusted share of post-tax results 315 306 622
of associates and
joint ventures
- issue of shares and change in 34 - (9)
shareholding
- smoking cessation programme (23) - -
- Canadian settlements - (60) (59)
- other (see page 25) 3 (7) (4)
329 239 550
Profit before taxation 2,787 2,279 4,388
Taxation on ordinary activities (781) (624) (1,248)
Profit for the period 2,006 1,655 3,140
Attributable to:
Owners of the parent 1,870 1,525 2,879
Non-controlling interests 136 130 261
2,006 1,655 3,140
Earnings per share
Basic 94.5p 76.9p 145.2p
Diluted 94.0p 76.5p 144.4p
The accompanying notes on pages 18 to 33 form an integral part of these
condensed consolidated financial statements.
GROUP STATEMENT OF COMPREHENSIVE INCOME - unaudited
6 months to Year
to
30.6.11 30.6.10 31.12.
10
GBPm GBPm GBPm
Profit for the period (page 11) 2,006 1,655 3,140
Other comprehensive income
Differences on exchange
- subsidiaries (5) 327 502
- associates (59) 194 105
Differences on exchange reclassified and - (1) (3)
reported in profit for the period
Cash flow hedges
- net fair value gains/(losses) 13 (36) (106)
- reclassified and reported in profit for (5) 55 55
the period
- reclassified and reported in net assets (8) (3) 3
Available-for-sale investments
- net fair value gains - - 4
Net investment hedges
- net fair value losses (43) (6) (31)
- differences on exchange on borrowings (48) 79 74
Retirement benefit schemes
- net actuarial (losses)/gains in respect (118) 69 193
of subsidiaries
- surplus recognition and minimum funding
obligations in respect
of subsidiaries (11) 54 58
- actuarial gains/(losses) in respect of 23 (89) (54)
associates net of tax
Tax on items recognised directly in other (23) 17 1
comprehensive income
Total other comprehensive income for the (284) 660 801
period, net of tax
Total comprehensive income for the period, 1,722 2,315 3,941
net of tax
Attributable to:
Owners of the parent 1,588 2,169 3,664
Non-controlling interests 134 146 277
1,722 2,315 3,941
The accompanying notes on pages 18 to 33 form an integral part of these
condensed consolidated financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY - unaudited
At 30 June
2011
Attributable to owners of the parent
Share Share Other Retaine Total Non- Total
capital premium, reserve d attribut contr equity
GBPm capital s earning able ollin GBPm
redempti GBPm s to g
on and GBPm owners inter
merger of ests
reserves parent GBPm
GBPm GBPm
Balance at 1 506 3,910 1,600 3,190 9,206 342 9,548
January 2011
Total - - (172) 1,760 1,588 134 1,722
comprehensive
income for
the period
(page 12)
Employee
share options
- value of - - - 38 38 - 38
employee
services
- proceeds - 2 - 3 5 - 5
from shares
issued
Dividends and
other
appropriation
s
- ordinary - - - (1,620) (1,620) - (1,620
shares )
- to non- - - - - - (139) (139)
controlling
interests
Purchase of
own shares
- held in
employee
share
ownership - - - (122) (122) - (122)
trusts
- share buy- - - - (410) (410) - (410)
back
programme
Other - - - 20 20 - 20
movements
Balance at 30 506 3,912 1,428 2,859 8,705 337 9,042
June 2011
At 30 June
2010
Attributable to owners of the parent
Share Share Other Retaine Total Non- Total
capital premium, reserve d attribut contr equity
GBPm capital s earning able ollin GBPm
redempti GBPm s to g
on and GBPm owners inter
merger of ests
reserves parent GBPm
GBPm GBPm
Balance at 1 506 3,907 1,032 2,168 7,613 299 7,912
January 2010
Total - - 599 1,570 2,169 146 2,315
comprehensive
income for
the period
(page 12)
Employee
share options
- value of - - - 34 34 - 34
employee
services
- proceeds - 3 - 3 6 - 6
from shares
issued
Dividends and
other
appropriation
s
- ordinary - - - (1,431) (1,431) -
shares (1,431
)
- to non- - - - - - (107)
controlling (107)
interests
Purchase of
own shares
- held in
employee
share
ownership - - - (62) (62) - (62)
trusts
Non- - - - (3) (3) - (3)
controlling
interests -
acquisitions
Other - - - 40 40 - 40
movements
Balance at 30 506 3,910 1,631 2,319 8,366 338 8,704
June 2010
The accompanying notes on pages 18 to 33 form an integral part of these
condensed consolidated financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY - unaudited cont...
At 31
December 2010
Attributable to owners of the parent
Share Share Other Retaine Total Non- Total
capita premium, reserve d attribut control equity
l capital s earning able ling GBPm
GBPm redempti GBPm s to interes
on and GBPm owners ts
merger of GBPm
reserves parent
GBPm GBPm
Balance at 1 506 3,907 1,032 2,168 7,613 299 7,912
January 2010
Total - - 568 3,096 3,664 277 3,941
comprehensive
income for
the period
(page 12)
Employee
share options
- value of - - - 67 67 - 67
employee
services
- proceeds - 3 - 4 7 - 7
from shares
issued
Dividends and
other
appropriation
s
- ordinary - - - (2,093) (2,093) - (2,093
shares )
- to non- - - - - - (234) (234)
controlling
interests
Purchase of
own shares
- held in
employee
share
ownership - - - (66) (66) - (66)
trusts
Non- - - - (12) (12) - (12)
controlling
interests -
acquisitions
Other - - - 26 26 - 26
movements
Balance at 31 506 3,910 1,600 3,190 9,206 342 9,548
December 2010
The accompanying notes on pages 18 to 33 form an integral part of these
condensed consolidated financial statements.
GROUP BALANCE SHEET - unaudited
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Assets
Non-current assets
Intangible assets 12,673 12,209 12,458
Property, plant and equipment 3,064 2,939 3,117
Investments in associates and joint 2,809 2,742 2,666
ventures
Retirement benefit assets 113 105 122
Deferred tax assets 366 358 411
Trade and other receivables 311 193 272
Available-for-sale investments 30 23 29
Derivative financial instruments 110 149 128
Total non-current assets 19,476 18,718 19,203
Current assets
Inventories 3,824 3,522 3,608
Income tax receivable 71 89 73
Trade and other receivables 2,517 2,465 2,409
Available-for-sale investments 46 58 58
Derivative financial instruments 136 312 145
Cash and cash equivalents 1,717 1,497 2,329
8,311 7,943 8,622
Assets classified as held-for-sale 22 16 35
Total current assets 8,333 7,959 8,657
Total assets 27,809 26,677 27,860
The accompanying notes on pages 18 to 33 form an integral part of
these condensed consolidated financial statements.
GROUP BALANCE SHEET - unaudited
cont...
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Equity
Capital and reserves
Share capital 506 506 506
Share premium, capital redemption 3,912 3,910 3,910
and merger reserves
Other reserves 1,428 1,631 1,600
Retained earnings 2,859 2,319 3,190
Owners of the parent 8,705 8,366 9,206
after deducting
- cost of treasury shares (1,207) (760) (750)
Non-controlling interests 337 338 342
Total equity 9,042 8,704 9,548
Liabilities
Non-current liabilities
Borrowings 8,713 8,656 8,916
Retirement benefit liabilities 786 886 770
Deferred tax liabilities 527 494 509
Other provisions for liabilities 181 146 187
and charges
Trade and other payables 194 184 193
Derivative financial instruments 97 48 92
Total non-current liabilities 10,498 10,414 10,667
Current liabilities
Borrowings 2,303 2,138 1,334
Income tax payable 465 434 467
Other provisions for liabilities 314 282 282
and charges
Trade and other payables 4,937 4,572 5,335
Derivative financial instruments 250 133 227
Total current liabilities 8,269 7,559 7,645
Total equity and liabilities 27,809 26,677 27,860
The accompanying notes on pages 18 to 33 form an integral part of
these condensed consolidated financial statements.
GROUP CASH FLOW STATEMENT - unaudited
6 months to Year to
30.6.11 30.6.10 31.12.1
0
GBPm GBPm GBPm
Cash flows from operating activities
Cash generated from operations (page 31) 2,099 1,956 5,207
Dividends received from associates 159 150 461
Tax paid (744) (546) (1,178)
Net cash from operating activities 1,514 1,560 4,490
Cash flows from investing activities
Interest received 34 30 59
Dividends received from investments 2 2 2
Purchases of property, plant and (106) (140) (497)
equipment
Proceeds on disposal of property, plant 38 9 61
and equipment
Purchases of intangibles (42) (32) (87)
Purchases and proceeds on disposals of 13 1 (1)
investments
Proceeds on disposal of subsidiaries - 12 12
Net cash from investing activities (61) (118) (451)
Cash flows from financing activities
Interest paid (326) (334) (578)
Interest element of finance lease rental (1) (1) (2)
payments
Capital element of finance lease rental (7) (10) (17)
payments
Proceeds from issue of shares to owners 2 3 3
of the parent
Proceeds from the exercise of options 3 3 4
over own shares
held in employee share ownership trusts
Proceeds from increases in and new 1,265 820 892
borrowings
Movements relating to derivative (64) (200) (179)
financial instruments
Purchases of own shares (317) - -
Purchases of own shares held in employee (122) (62) (66)
share ownership trusts
Purchases of non-controlling interests - (3) (12)
Reductions in and repayments of (820) (704) (1,582)
borrowings
Dividends paid to owners of the parent (1,620) (1,431) (2,093)
Dividends paid to non-controlling (139) (107) (234)
interests
Net cash from financing activities (2,146) (2,026) (3,864)
Net cash flows from operating, investing (693) (584) 175
and financing activities
Differences on exchange 7 (23) 29
(Decrease)/Increase in net cash and cash (686) (607) 204
equivalents
in the period
Net cash and cash equivalents at 1 2,183 1,979 1,979
January
Net cash and cash equivalents at period 1,497 1,372 2,183
end
The accompanying notes on pages 18 to 33 form an integral part of these
condensed consolidated
financial statements.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
These condensed consolidated financial statements are comprised of the
unaudited interim financial information for the six months to 30 June 2011
and 30 June 2010, together with the audited results for the year ended 31
December 2010. These condensed consolidated financial statements have been
prepared in accordance with IAS 34 `Interim Financial Reporting` as adopted
by the European Union and the Disclosure and Transparency Rules issued by the
Financial Services Authority. These condensed consolidated financial
statements are unaudited but have been reviewed by the auditors and their
review report is set out on page 10.
These condensed consolidated financial statements do not constitute statutory
accounts within the meaning of Section 434 of the UK Companies Act 2006 and
should be read in conjunction with the annual consolidated financial
statements for the year ended 31 December 2010, which were prepared in
accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union (EU) and implemented in the UK. The annual
consolidated financial statements for 2010 represent the statutory accounts
for that year and have been filed with the Registrar of Companies. The
auditors` report on those statements was unqualified and did not contain an
emphasis of matter paragraph and did not contain any statement under Section
498 of the Companies Act 2006.
These condensed consolidated financial statements have been prepared under
the historical cost convention, except in respect of certain financial
instruments, and on a basis consistent with the IFRS accounting policies as
set out in the Annual Report for the year ended 31 December 2010, with the
following amendment, due to certain changes in IFRS, affecting the Group.
The Annual Improvements to IFRS (issued in May 2010) have varying application
dates commencing with annual periods ending on or after 1 July 2010. The main
effect of these amendments is to amend certain disclosures regarding credit
and other risks in respect of financial instruments. There is no effect on
these condensed consolidated financial statements.
The preparation of these condensed consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities and the disclosure of
contingent liabilities at the date of these condensed consolidated financial
statements. Such estimates and assumptions are based on historical experience
and various other factors that are believed to be reasonable in the
circumstances and constitute management`s best judgement at the date of the
condensed consolidated financial statements. The key estimates and
assumptions were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2010, apart from updating the
assumptions used to determine the carrying value of liabilities for
retirement benefit schemes. In the future, actual experience may deviate
from these estimates and assumptions, which could affect these condensed
consolidated financial statements as the original estimates and assumptions
are modified, as appropriate, in the period in which the circumstances
change.
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 by the Group, are useful
to users of the financial information in helping them understand the
underlying business performance.
The principal non-GAAP measure which the Group uses is adjusted diluted
earnings per share, which is reconciled to diluted earnings per share. The
adjusting items that mainly drive the reconciling items are separately
disclosed, as memorandum information, on the face of the income statement and
are used to calculate the additional non-GAAP measures of adjusted profit
from operations and adjusted share of post-tax results of associates and
joint ventures. All adjustments to profit from operations and diluted
earnings per share are explained in this announcement.
The Management Board, as the chief operating decision maker, reviews current
and prior year segmental income statement information of subsidiaries and
associates 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 rate movements.
In the presentation of financial information, the Group also uses another
measure, organic growth, to analyse underlying business performance. Organic
growth is the growth after adjusting for mergers and acquisitions and
discontinued activities. Adjustments are made to current and prior year
numbers, based on the current period Group position.
The Group also prepares an alternative cash flow, which includes a measure of
`free cash flow`, to illustrate the cash flows before transactions relating
to borrowings. The Group also provides gross turnover as an additional
disclosure to indicate the impact of duty, excise and other taxes.
Due to the secondary listing of the ordinary shares of British American
Tobacco p.l.c. on the main board of the JSE Limited (JSE) in South Africa,
the Group is required to present headline earnings per share and diluted
headline earnings per share, as alternative measures of earnings per share,
calculated in accordance with Circular 3/2009 `Headline Earnings` issued by
the South African Institute of Chartered Accountants. These are shown on
pages 27 and 28.
FOREIGN CURRENCIES
The income and cash flow statements of overseas subsidiaries and associates
have been translated at the average rates for the respective periods. Assets
and liabilities have been translated at the relevant period end rates. For
hyper inflationary countries, the financial statements in local currency are
adjusted to reflect the impact of local inflation prior to translation to
sterling.
The principal exchange rates used were as follows:
Average Closing
30.6.11 30.6.10 31.12.10 30.6.11 30.6.10 31.12.10
US dollar 1.617 1.525 1.546 1.605 1.496 1.566
Canadian 1.579 1.578 1.592 1.549 1.590 1.556
dollar
Euro 1.152 1.150 1.166 1.107 1.221 1.167
South 11.146 11.481 11.300 10.883 11.469 10.358
African
rand
Brazilian 2.636 2.741 2.719 2.508 2.697 2.599
real
Australian 1.564 1.708 1.682 1.500 1.771 1.527
dollar
Russian 46.239 45.876 46.945 44.817 46.729 47.795
rouble
SEGMENTAL ANALYSES OF REVENUE AND PROFIT - unaudited
As part of the plans to reduce complexity and drive efficiency in management
structures and achieve a better balance in the scale of our regions, it was
decided to reduce the management structure from five regions to four regions
from 1 January 2011. Markets which comprised the Eastern Europe region were
merged into the Africa and Middle East region and the Western Europe region.
Russia, Ukraine, Moldova, Belarus, Caucasus and Central Asia form part of the
new Eastern Europe, Middle East and Africa region (EEMEA) while Romania,
Bulgaria, Serbia, Montenegro, Albania and Kosovo have become part of the
Western Europe region. The prior year comparatives have been restated
according to the new management structure.
The four geographic regions are the reportable segments for the Group as they
form the focus of the Group`s internal reporting systems and are the basis
used by the chief operating decision maker, identified as the Management
Board, for assessing performance and allocating resources.
The Management Board reviews current and prior year segmental revenue,
adjusted profit from operations of subsidiaries and adjusted post-tax results
of associates and joint ventures at constant rates of exchange. As a result,
the 2011 segmental results are translated using the average rates of exchange
for the six months to 30 June 2010. The 2010 comparative figures are also
stated at the 2010 actual average rates of exchange for the relevant period.
The analyses of revenue for the six months to 30 June 2011, 30 June 2010 and
the year to 31 December 2010, based on location of sales, are as follows:
30.6.11 30.6.10 31.12.10
Revenue Translatio Revenue
Constant n Current Revenue Revenue
exchange
GBPm GBPm GBPm GBPm GBPm
Asia-Pacific 1,990 35 2,025 1,811 3,759
Americas 1,709 35 1,744 1,646 3,498
Western Europe 1,702 17 1,719 1,949 3,695
EEMEA 2,020 (70) 1,950 1,892 3,931
Total 7,421 17 7,438 7,298 14,883
Western Europe includes revenue in respect of Lyfra NV and the Gauloises
licence agreement in Germany (see page 24) of GBP215 million and GBP37
million respectively, for the six months ended 30 June 2010.
Americas includes revenue in respect of the discontinued phone card business
(see page 24) of GBP78 million for the six months ended 30 June 2010.
Segmental analysis of revenue and profit - unaudited cont...
The analyses of profit from operations and the Group`s share of the post-tax
results of associates and joint ventures for the six months to 30 June 2011,
reconciled to profit before tax, are as follows:
30.6.11
Adjuste Adjusted* Segment
d* segment result
segment Translation result Adjusti Current
result exchange Current ng rates
Constan rates items
t
rates
GBPm GBPm GBPm GBPm GBPm
Asia-Pacific 740 26 766 (22) 744
Americas 751 17 768 12 780
Western Europe 568 4 572 (49) 523
EEMEA 665 (11) 654 (10) 644
Profit from 2,724 36 2,760 (69) 2,691
operations
Net finance (233)
costs
Asia-Pacific 117 (5) 112 34 146
Americas 213 (12) 201 (20) 181
Western Europe 1 - 1 - 1
EEMEA 1 - 1 - 1
Share of post- 332 (17) 315 329
tax 14
results of
associates
and joint
ventures
Profit before 2,787
taxation
*The adjustments to profit from operations and the Group`s share of the post-
tax results of associates and joint ventures are explained on pages 23 to 26.
Segmental analysis of revenue and profit - unaudited cont...
The analyses of profit from operations and the Group`s share of the post-tax
results of associates and joint ventures for the six months to 30 June 2010
and the year to 31 December 2010 are as follows:
30.6.10 31.12.10
Adjusted* Adjust Adjusted* Segment
Segment ing Segmen Segment Adjusting result
result items t result items Current
Current result Current rates
rates Curren rates
t
rates
GBPm GBPm GBPm GBPm GBPm GBPm
Asia- 651 (39) 612 1,332 (56) 1,276
Pacific
Americas 694 (16) 678 1,382 (36) 1,346
Western 564 (90) 474 1,103 (236) 867
Europe
EEMEA 551 (44) 507 1,167 (338) 829
Profit
from 2,460 (189) 2,271 4,984 (666) 4,318
operations
Net (231) (480)
finance
costs
Asia- 103 - 103 208 (9) 199
Pacific
Americas 202 (67) 135 412 (63) 349
EEMEA 1 - 1 2 - 2
Share of 239 (72)
post-tax
results of 306 (67) 622 550
associates
and joint
ventures
Profit 2,279 4,388
before
taxation
*The adjustments to profit from operations and the Group`s share of the post-
tax results of associates and joint ventures are explained on pages 23 to 26.
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. These items
are separately disclosed either as memorandum information on the face of the
income statement and in the segmental analyses. The Group believes that
these items are useful to the users of the Group condensed financial
statements in helping them understand the underlying business performance and
are used to derive the Group`s principal non-GAAP measure which is adjusted
diluted earnings per share.
(a) Restructuring and integration costs
Restructuring costs reflect the costs incurred as a result of initiatives to
improve the effectiveness and the efficiency of the Group as a globally
integrated enterprise. These initiatives include a review of the Group`s
manufacturing operations, overheads and indirect costs, organisational
structure and systems and software used. The costs of these initiatives
together with the costs of integrating acquired businesses into existing
operations are included in profit from operations under the following
headings:
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Employee benefit costs 23 67 163
Impairment of tangible and
intangible 10 75 100
assets
Other operating expenses 24 16 68
Other operating income (17) - (20)
Total 40 158 311
Restructuring and integration costs in 2011 principally relate to the
continuation of: factory closure and downsizing activities in Denmark and
Australia respectively; the closure of the Jawornik factory in Poland, the
Lecce factory in Italy and Tire factory in Turkey; a voluntary separation
scheme and closure of the printing unit in Argentina and the continued
integration of Tekel into existing operations. In addition, they also
includes separation packages in respect of permanent headcount reductions in
the Group.
Other operating income in 2011 includes gains on sale of surplus land and
buildings in Argentina.
The GBP158 million charge for restructuring and integration costs in the six
months to 30 June 2010 arose principally in respect of the continuation of
factory closure and downsizing activities in Denmark and Australia
respectively, the closure of the Jawornik factory in Poland, the Tire factory
in Turkey; a voluntary separation scheme and closure of the printing unit in
Argentina and the continued integration of Skandinavisk Tobakskompagni (ST),
Tekel and Bentoel into existing operations, as well as other restructuring
initiatives directly related to improving the efficiency and effectiveness of
the Group as a globally integrated enterprise.
For the year ended 31 December 2010, the charge of GBP311 million for
restructuring and integration costs include the activities referred to in
respect of the six months to 30 June 2010, but in addition, the closure of
the Lecce factory in Italy, the combining of the Group`s businesses in
Belgium, Luxembourg and the Netherlands and charges for the repositioning of
reward packages in the Group`s subsidiary in Canada to bring them in line
with the Group`s global practices. The Group has also recognised impairment
charges as a result of the continued review of its software assets in light
of the development of global software solutions.
Restructuring and integration costs in 2010 also include a payment of US$21
million to Reynolds American relating to the early termination and settlement
of all disputes at issue in respect of the Contract Manufacturing Agreement
dated 30 July 2004.
Other operating income in 2010 includes gains from sale of surplus land and
buildings in Turkey and Croatia as well as the release of deferred income
from a disposal in 2007.
Adjusting items included in profit from operations cont...
(b) Amortisation of trademarks
The acquisitions of Bentoel, Tekel and ST resulted in the capitalisation of
trademarks which are amortised over their expected useful lives, which do not
exceed 20 years. The amortisation charge of GBP29 million is included in
depreciation, amortisation and impairment costs in the profit from operations
for the six months to 30 June 2011 (30 June 2010: GBP31 million). For the
year to 31 December 2010, the amortisation charge was GBP62 million.
(c) Impairment of goodwill and trademarks
Goodwill and trademarks recognised as a result of the Tekel acquisition in
2008 were impaired by GBP249 million and GBP44 million respectively in the
year to 31 December 2010. Turkey remains an important strategic market for
the Group. Although cost saving initiatives in the acquisition plan have
been delivered successfully, the impairment charge arose from intense pricing
competition in 2010 following unforeseen and significant excise increases in
Turkey in 2009 and further increases effective from January 2010, which
resulted in the growth of illicit trade and a loss of volumes and market
share.
OTHER CHANGES IN THE GROUP
(a) Lyfra NV
On 7 April 2010, the Group announced that it had agreed to sell its Belgium
distribution business, Lyfra NV, to Landewyck Group S.a.r.l. The transaction
was completed on 25 June 2010 for a consideration of Euro16 million and
resulted in a gain of GBP5 million. Lyfra contributed GBP215 million to
revenue and GBP1 million to profit from operations to 25 June 2010 in the
Western Europe region.
(b) Gauloises licence agreement termination
With effect from the end of the first quarter in 2010, the Gauloises licence
agreement applicable in Germany, was terminated. The agreement resulted in a
revenue contribution of GBP37 million and a profit contribution of GBP5
million to the 2010 results in the Western Europe region.
(c) Phone Card distribution business in Brazil
During 2010, the Group made the decision to withdraw from distributing phone
cards in Brazil. For the six months to 30 June 2010, the phone card
distribution business contributed GBP78 million to revenue and GBP3 million
to profit from operations in the Americas region.
NET FINANCE COSTS
Net finance costs comprise:
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Finance costs (290) (240) (507)
Finance income 57 9 27
(233) (231) (480)
Comprising:
Interest payable (287) (286) (583)
Interest and dividend income 42 31 60
Net impact of fair value and exchange 12 24 43
- fair value changes - derivatives (88) (53) (209)
- exchange differences 100 77 252
(233) (231) (480)
Net finance costs at GBP233 million were GBP2 million higher than last year,
principally reflecting the net impact of interest related changes in the fair
value of derivatives largely offset by increased income on cash and cash
equivalents.
The net GBP12 million gain (2010: GBP24 million) of fair value changes and
exchange differences reflects a GBP2 million loss (2010: gain of GBP4
million) from the net impact of exchange rate movements and a gain of GBP14
million (2010: gain of GBP20 million) principally due to interest related
changes in the fair value of derivatives.
ASSOCIATES AND JOINT VENTURES
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Share of post-tax results of 329 239 550
associates and joint ventures
Analysed as:
- adjusted share of post-tax results 315 306 622
of associates and
joint ventures
- restructuring costs (2) (7) (3)
- issue of shares and change in 34 - (9)
shareholding
- trademark, amortisation and (1) - (1)
impairments
- smoking cessation programme (23) - -
- tax credits 5 - -
- gain on disposal of businesses 1 - -
- Canadian settlements - (60) (59)
329 239 550
The Group`s share of the post-tax results of associates and joint ventures
was GBP329 million (2010: GBP239 million) after net adjusting income of GBP14
million (2010: GBP67 million charge) and after tax of GBP157 million (2010:
GBP144 million). For the year to 31 December 2010, the share of post-tax
results was GBP550 million after net adjusting charges of GBP72 million and
after tax of GBP322 million. In 2011, excluding the adjusting items, the
Group`s share of the post-tax results increased by 3 per cent to GBP315
million (2010: GBP306 million). The Group`s share is after the adjusting
items explained below, are excluded from the calculation of adjusted diluted
earnings per share (page 27).
In the six months to 30 June 2011:
Reynolds American recognised restructuring charges of US$15 million in
respect of a factory closure. The Group`s share of the restructuring charges
amounted to GBP2 million (net of tax).
The Group`s interest in ITC decreased from 31.43 per cent to 31.18 per cent
as a result of ITC issuing ordinary shares under the Company`s Employee Stock
Option Scheme. This issue of shares and
Associates and joint ventures cont.....
change in the Group`s share of ITC resulted in a gain of GBP34 million, which
under IAS 28 Revised (Investment in Associates) is treated as a partial
deemed disposal and included in the Income Statement.
Reynolds American recognised a trademark amortisation of US$2 million. The
Group`s share of these charges amounted to GBP1 million (net of tax).
Reynolds American, with other tobacco companies, was refused by the US
Supreme Court a request to revoke a 2009 order requiring them to finance a
US$278 million smoking cessation programme in Louisiana (Scott case). The
Group`s share of this charge amounts to GBP23 million (net of tax).
Reynolds American reported US$16 million of tax credits. The Group`s share
of these tax credits amounts to GBP5 million (net of tax).
Reynolds American sold Lane Limited for US$200 million in cash. The Group`s
share of the gain on disposal of businesses amounts to GBP1 million (net of
tax).
In the six months to 30 June 2010:
A subsidiary of Reynolds American, R.J. Reynolds Tobacco Company Inc.
(RJRTC), entered into a comprehensive settlement agreement with the Canadian
federal, provincial and territorial governments to resolve all the
governments` civil claims related to smuggling in Canada during the 1980s and
1990s. As part of the civil settlement, RJRTC agreed to pay the governments
CA$325 million. In a separate matter, a subsidiary of R.J. Reynolds Tobacco
Holdings Inc. Northern Brands International Inc., entered into a plea
agreement with the Ministry of the Attorney General of Ontario. As a result
of its plea to one count of conspiracy to aid others in the sale and
possession of contraband cigarettes in the early 1990s, Northern Brands paid
a fine of CA$75 million. The Group`s share of these charges amounted to GBP60
million (net of tax).
Reynolds American also recognised restructuring charges in respect of the
planned closure of two cigarette factories in order to maximise cigarette
manufacturing efficiency in light of the declining U.S. cigarette industry
and to facilitate cost-effective compliance with new federal regulation of
the tobacco industry. The Group`s share of these charges amounted to GBP10
million (net of tax) and is presented as part of the post-tax results of
associates and joint ventures in the Group income statement.
RJRTC received a payment of US$21 million as a result of the agreement to
terminate early the Contract Manufacturing Agreement dated 30 July 2004
between RJRTC and BATUS Japan Inc., a wholly owned Group subsidiary, and
settle all disputes at issue between the parties. The Group`s share of this
receipt amounted to GBP3 million (net of tax) and is treated as an adjusting
item. The receipt (net of tax) is presented as part of restructuring costs in
the post-tax results of associates and joint ventures in the Group income
statement.
For the year ended 31 December 2010:
In addition to the RJRTC comprehensive settlement agreement and the
termination of the Contract Manufacturing Agreement referred to above, the
following were the adjusting items for the year ended 31 December 2010:
Reynolds American recognised a trademark impairment charge of US$6 million,
as well as trademark amortisation of US$4 million. The Group`s share of
these charges amounted to GBP1 million (net of tax).
Reynolds American also recognised restructuring charges from the closure of
one factory in August 2010 and the planned closure of another in the mid
2011. As a result of these actions, Reynolds American has recorded costs
mostly relating to asset impairment and, to a lesser extent, severance costs.
The Group`s share of these charges amounted to GBP6 million (net of tax).
The Group`s interest in ITC decreased from 31.92 per cent to 31.43 per cent
as a result of ITC issuing ordinary shares under the Company`s Employee Stock
Option Scheme. This issue of shares and the change in the Group`s share of
ITC resulted in a charge of GBP9 million, which under IAS 28 Revised
(Investments in Associates) is treated as a partial deemed disposal and
included in the income statement.
TAXATION
The tax rate in the income statement of 28.0 per cent for the six months to
30 June 2011 (30 June 2010: 27.4 per cent; 31 December 2010: 28.4 per cent)
is affected by the inclusion of the share of associates` post-tax profit in
the Group`s pre-tax results and by adjusting items. The underlying tax rate
for subsidiaries reflected in the adjusted earnings per share below was 31.4
per cent in 2011 and 30.0 per cent for the six months to 30 June 2010. For
the year to 31 December 2010 it was 30.2 per cent. The increase is the result
of an increase in the effective tax rate in Brazil and a change in the mix of
profits. The charge relates to taxes payable overseas.
EARNINGS PER SHARE
6 months to Year to
30.6.11 30.6.10 31.12.10
pence pence pence
Earnings per share
- basic 94.5 76.9 145.2
- diluted 94.0 76.5 144.4
Adjusted earnings per share
- basic 96.6 87.6 176.7
- diluted 96.1 87.1 175.7
Headline earnings per share
- basic 93.0 80.2 160.9
- diluted 92.5 79.7 160.0
Basic earnings per share are based on the profit for the year attributable to
ordinary shareholders and the weighted average number of ordinary shares in
issue during the period (excluding treasury shares).
For the calculation of the diluted earnings per share, the weighted average
number of shares reflects the potential dilutive effect of employee share
schemes.
The presentation of headline earnings per share, as an alternative measure of
earnings per share, is mandated under the JSE Listing Requirements. It is
calculated in accordance with Circular 3/2009 `Headline Earnings`, as issued
by the South African Institute of Chartered Accountants.
Earnings have been affected by a number of adjusting items which impact
profit from operations (see pages 23 and 24) and share of post-tax results of
associates and joint ventures (see pages 25 and 26). For the year to 31
December 2010 earnings were also affected by the write-off of deferred tax
assets of GBP35 million in respect of unutilised losses in Turkey, which has
also been treated as an adjusting item. In order to illustrate the impact of
these items, the adjusted diluted earnings per share are shown below:
Earnings per share cont...
Adjusted diluted earnings per share
6 months to Year to
30.6.11 30.6.10 31.12.10
pence pence pence
Unadjusted earnings per share 94.0 76.5 144.4
Effect of restructuring and 1.7 6.0 11.8
integration costs
Effect of impairment of goodwill - - 11.8
and trademarks
Effect of deferred tax asset - - 1.8
written off
Effect of amortisation of 1.1 1.2 2.3
trademarks
Effect of associates` adjusting (0.7) 3.4 3.6
items
Adjusted diluted earnings per share 96.1 87.1 175.7
Similar types of adjustments would apply to basic earnings per share.
The earnings per share are based on:
30.6.11 30.6.10 31.12.10
Earnings Shares Earnings Shares Earnings Shares
GBPm m GBPm m GBPm m
Earnings
per share
- basic 1,870 1,979 1,525 1,982 2,879 1,983
- diluted 1,870 1,990 1,525 1,993 2,879 1,994
Adjusted
earnings
per share
- basic 1,912 1,979 1,736 1,982 3,504 1,983
- diluted 1,912 1,990 1,736 1,993 3,504 1,994
Headline
earnings
per share
- basic 1,841 1,979 1,589 1,982 3,191 1,983
- diluted 1,841 1,990 1,589 1,993 3,191 1,994
Headline earnings per share are calculated by taking the following
adjustments into account:
Diluted headline earnings per share
6 months to Year to
30.6.11 30.6.10 31.12.10
pence pence pence
Unadjusted earnings per share 94.0 76.5 144.4
Effect of impairment of intangibles
and property, plant and equipment 0.9 3.0 15.6
Effect of gains on disposal of non-
current assets held-for-sale (0.6) - (0.7)
Effect of gains on disposal of - (0.3) (0.2)
businesses and trademarks
Effect of share of associates` -
trademark and other asset - 0.5 0.4
impairments and termination of
joint venture
Effect of share of associates` gains
on disposal of assets held-for-sale (0.1) - -
Effect of dilution in shareholding in (1.7) - 0.5
associate
Headline earnings per share 92.5 79.7 160.0
CASH FLOW AND NET DEBT MOVEMENTS
a) Alternative cash flow
The IFRS cash flow statement on page 17 includes all transactions affecting
cash and cash equivalents, including financing. The alternative cash flow
statement below is presented to illustrate the cash flows before transactions
relating to borrowings.
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Adjusted profit from operations (page 2,760 2,460 4,984
11)
Depreciation, amortisation and 223 217 442
impairment
Other non-cash items in operating 33 23 59
profit
Profit from operations before 3,016 2,700 5,485
depreciation and impairment
Increase in working capital (802) (635) (61)
Net capital expenditure (110) (163) (523)
Gross capital expenditure (148) (172) (584)
Sale of fixed assets 38 9 61
Operating cash flow 2,104 1,902 4,901
Net interest paid (309) (297) (491)
Tax paid (744) (546) (1,178)
Dividends paid to non-controlling (139) (107) (234)
interests
Restructuring costs (115) (109) (219)
Dividends from associates 159 150 461
Free cash flow 956 993 3,240
Dividends paid to shareholders (1,620) (1,431) (2,093)
Share buy-back (317) - -
Net investment activities - 9 -
Purchases of subsidiaries and non- - (3) (12)
controlling interests
Disposal of subsidiaries and - 12 12
trademarks
Net flow from share schemes and other (107) (80) (77)
Net cash flow (1,088) (509) 1,070
External movements on net debt
Exchange rate effects* (372) 311 (41)
Net debt disposed - 11 11
Change in accrued interest and other 40 58 (39)
Change in net debt (1,420) (129) 1,001
Opening net debt (7,841) (8,842) (8,842)
Closing net debt (9,261) (8,971) (7,841)
* Including movements in respect of debt related derivatives.
Free cash flow is the Group`s cash flow before dividends, share buy-back and
investing activities. Operating cash flow increased by GBP202 million or 11
per cent to GBP2,104 million, reflecting growth in underlying operating
performance partially offset by working capital movements. Taking into
account outflows relating to taxation, which were GBP198 million higher than
last year due to higher taxable profits, as well as an increase in dividends
to non-controlling interests, the Group`s free cash flow was GBP37 million or
4 per cent lower at GBP956 million.
Cash flow cont...
The ratio of free cash flow per share to adjusted diluted earnings per share
was 50 per cent (2010: 57 per cent), with free cash flow per share decreasing
by 4 per cent.
Below free cash flow, the principal cash outflows for 2011 comprise the
payment of the prior year final dividend which was GBP189 million higher at
GBP1,620 million, as well as a GBP317 million outflow due to the resumption
of the on-market share buy-back programme in 2011. Also reflected below free
cash flow are cash flows in respect of investing activities. The six months
to 30 June 2010 included proceeds on disposal of subsidiaries of GBP12
million which arose from the sale of the Group`s Belgian distribution
business, Lyfra NV as explained on page 24.
The other net flows principally relate to the impact of the level of shares
purchased by the employee share ownership trusts and cash flows in respect of
certain derivative financial instruments.
The above flows resulted in net cash outflows of GBP1,088 million (2010:
GBP509 million). After taking account of exchange rate movements and the
charge in accrued interest and other, total net debt was GBP9,261 million at
30 June 2011 (31 December 2010: GBP7,841 million).
b) Net debt/financing
The Group defines net debt as borrowings including related derivatives, less
cash and cash equivalents and current available-for-sale investments. The
maturity profile of net debt is as follows:
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Net debt due within one year:
Borrowings (2,303) (2,138) (1,334)
Related derivatives (34) 179 (29)
Cash and cash equivalents 1,717 1,497 2,329
Current available-for-sale 46 58 58
investments
(574) (404) 1,024
Net debt due beyond one year:
Borrowings (8,713) (8,656) (8,916)
Related derivatives 26 89 51
(8,687) (8,567) (8,865)
Total net debt (9,261) (8,971) (7,841)
The Group remains confident about its ability to access successfully the debt
capital markets and reviews its options on a continuing basis.
Cash flow cont...
c) IFRS cash generated from operations
The cash generated from operating activities in the IFRS cash flows on page
17 include the following items:
6 months to Year to
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Profit from operations 2,691 2,271 4,318
Adjustments for:
Amortisation and impairment of 29 31 106
trademarks
Amortisation and impairment of
other 35 39 322
intangible assets
Gains on disposal of businesses - (5) (5)
Depreciation and impairment of
property, 198 253 469
plant and equipment
Increase in inventories (171) (269) (280)
Increase in trade and other (85) (205) (127)
receivables
(Decrease)/increase in trade (459) (14) 497
and other payables
Decrease in net retirement (104) (148) (153)
benefit liabilities
(Decrease)/increase in (64) (20) 17
provisions for liabilities and
charges
Other non-cash items 29 23 43
Cash generated from operations 2,099 1,956 5,207
d) IFRS Investing and financing activities
The investing and financing activities in the IFRS cash flows on page 17
include the following items:
The purchases and proceeds on disposals of investments (which comprise
available-for-sale investments and loans and receivables) comprises a net
cash inflow in respect of current investments of GBP13 million for the six
months ended 30 June 2011 (30 June 2010: GBP1 million inflow and 31 December
2010: GBP1 million outflow).
The proceeds on disposal of subsidiaries in 2010 reflects the consideration
received, less cash and cash equivalents disposed of, from the sale of the
Group`s Belgian distribution business, Lyfra NV, as explained on page 24.
In the six months ended 30 June 2010, a cash outflow of GBP3 million arose in
respect from the acquisition of the non-controlling interests of shareholders
who did not wish to participate in the merger of Bentoel and BAT Indonesia.
A cash outflow of GBP9 million in the financing activities in 2010 related to
the acquisition of non-controlling interests in the EEMEA region.
Cash flow cont...
The movement relating to derivative financial instruments is in respect of
derivatives taken out to hedge cash and cash equivalents and external
borrowings, derivatives taken out to hedge inter company loans and
derivatives treated as net investment hedges. Derivatives taken out as cash
flow hedges in respect of financing activities are also included in the
movement relating to derivative financial instruments, while other such
derivatives in respect of operating and investing activities are reflected
along with the underlying transactions.
e) IFRS net cash and cash equivalents
The net cash and cash equivalents in the Group cash flow statement comprise:
30.6.11 30.6.10 31.12.10
GBPm GBPm GBPm
Cash and cash equivalents per 1,717 1,497 2,329
balance sheet
Accrued interest - - (1)
Overdrafts (220) (125) (145)
Net cash and cash equivalents 1,497 1,372 2,183
f) Liquidity
The Central Treasury Department is responsible for managing, within an
overall policy framework, the Group`s exposure to funding and liquidity,
interest rate, foreign exchange and counterparty risk arising from the
Group`s underlying operations.
The Group has a target average centrally managed debt maturity of at least 5
years with no more than 20 per cent of centrally managed debt maturing in a
single rolling year. The average centrally managed debt maturity was 7.2
years at 30 June 2011 (30 June 2010: 6.5 years; 31 December 2010: 7.4 years)
and the highest proportion of centrally managed debt maturing in a single
rolling year was 19.3 per cent (30 June 2010: 17.2 per cent; 31 December
2010: 12.5 per cent).
In June 2011, the Group repaid a Euro530 million bond. The repayment was
financed from Group cash balances.
It is Group policy that short-term sources of funds (including drawings under
the GBP1 billion euro commercial paper (ECP) programme) are backed by undrawn
committed lines of credit and cash. At 30 June 2011, GBP729 million of ECP
was outstanding (30 June 2010: GBP380 million), while at 31 December 2010 the
ECP programme was undrawn.
During the period, the Group`s subsidiary in Brazil received proceeds of
GBP342 million (30 June 2010: GBP280 million and 31 December 2010: GBP410
million) from short-term borrowings in respect of advance payments on leaf
export contracts and repaid GBP311 million (30 June 2010: GBP150 million and
31 December 2010: GBP297 million).
In May 2010, the Group repaid a Euro525 million bond. The repayment was
financed from debt issued in November 2009. On 25 June 2010, the terms of
Euro470 million of the Euro1 billion bond maturing in 2011 were modified by
extending the maturity to 2020; at the same time, the Group issued an
additional Euro130 million bond with a maturity of 2020. In addition, Euro413
million of the Group`s Euro750 million bond maturing in 2012 was purchased
and cancelled. At the same time, the Group issued a new GBP275 million bond
with a maturity of 2040.
In December 2010, the Group negotiated a new central banking facility of GBP2
billion with a final maturity date of December 2015. The existing central
banking facility of GBP1.75 billion, with a final maturity date of March 2012
was cancelled at the same time. The facility was undrawn as at 30 June 2011,
30 June 2010 and 31 December 2010.
CONTINGENT LIABILITIES
As noted in the 2010 Annual Report for the year ended 31 December 2010, there
are contingent liabilities in respect of litigation, overseas taxes and
guarantees in various countries.
Group companies, as well as other leading cigarette manufacturers, are
defendants in a number of product liability and other cases. In a number of
these cases, the amounts of compensatory and/or punitive damages sought are
significant. At least in the aggregate and despite the quality of the
defences available to the Group, it is not impossible that the results of
operations or cash flows of the Group in particular quarterly or annual
periods could be materially affected by this.
Having regard to these matters, the Directors (i) do not consider it
appropriate to make any provision in respect of any pending litigation and
(ii) do not believe that the ultimate outcome of this litigation will
significantly impair the financial condition of the Group.
RELATED PARTY DISCLOSURES
In the six months to 30 June 2011, there were no material changes in related
parties or related party transactions. The Group`s related party transactions
and relationships for 2010 were disclosed in the British American Tobacco
Annual Report for the year ended 31 December 2010.
SHARE BUY-BACK PROGRAMME
The Board has approved the resumption of the on-market share buy-back
programme in 2011 with a value of up to GBP750 million, excluding costs.
During the six months to 30 June 2011, 13 million shares were bought at a
cost of GBP335 million (2010: GBPnil).
`Purchase of own shares` in the Group statement of changes in total equity,
includes an amount of GBP75 million provided for the potential buy-back of
shares during July 2011 under an irrevocable non-discretionary contract.
PROPOSED ACQUISITION OF CIGARETTE COMPANY IN COLOMBIA
On 26 May 2011, the Group agreed to acquire 100 per cent of privately owned
Productora Tabacalera de Colombia, S.A.S. (Protabaco), the second largest
cigarette company in Colombia, for an enterprise value of US$452 million.
The transaction is subject to competition authority approval which is
expected later this year.
FINANCIAL CALENDAR
26 October 2011 Interim Management Statement
23 February 2012 Preliminary Statement
CALENDAR FOR THE INTERIM DIVIDEND 2011
2011
27 July Dividend announced (including amount of dividend
per share in both sterling and rand; applicable
exchange rate(1) and conversion date - 25 July 2011)
27 July to 19 August From the commencement of trading on 27 July 2011
to 19 August 2011, no removal requests between the
UK main register and the South African branch
register will be permitted(2)
12 August Last Day to Trade (JSE)
15 August to 19 August No transfers between the UK main register and
the South African branch register will be permitted;
no shares may be dematerialised or rematerialised
between these inclusive dates
15 August Ex-dividend date (JSE)
17 August Ex-dividend date (LSE)
19 August Record date (LSE and JSE)
28 September Payment date (sterling and rand)
Notes:
(1) Details of the applicable exchange rate can be found under the heading
`Dividends` on page 8.
(2) Dates amended from those published in the Interim Management Statement
dated 28 April 2011.
For holders of American Depositary Receipts (ADRs), the record date for ADRs
is also
19 August 2011 with an ADR payment date of 3 October 2011.
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
Corporate information cont...
Secondary listing
JSE (Share Code: BTI)
Shares are traded in electronic form only and transactions settled
electronically through Strate.
Computershare Investor Services (Pty) Ltd
PO Box 61051, Marshalltown 2107, South Africa
tel: 0861 100 925; +27 11 870 8222
e-mail enquiries: web.queries@computershare.co.za
American Depositary Receipts (ADRs)
NYSE Amex Equities (Symbol: BTI; CUSIP Number: 110448107)
Sponsored ADR programme; each ADR represents two ordinary shares of British
American Tobacco p.l.c.
Citibank Shareholder Services
PO Box 43077
Providence, Rhode Island 02940-3077, USA
tel: 1-888-985-2055 (toll-free) or +1 781 575 4555
e-mail enquiries: citibank@shareholders-online.com
website: www.citi.com/dr
Publications
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS, UK
tel: +44 20 7511 7797; facsimile: +44 20 7540 4326
e-mail enquiries: bat@team365.co.uk or
Computershare Investor Services (Pty) Ltd in South Africa using the contact
details shown above.
British American Tobacco p.l.c.
Registered office
Globe House
4 Temple Place
London
WC2R 2PG
tel: +44 20 7845 1000
British American Tobacco p.l.c. is a public limited company which is listed
on the London Stock Exchange and the JSE Limited in South Africa. British
American Tobacco p.l.c. is incorporated in England and Wales (No. 3407696)
and domiciled in the UK.
British American Tobacco p.l.c.
Representative office in South Africa
34 Alexander Street
Stellenbosch
7600
South Africa
(PO Box 631, Cape Town 8000, South Africa)
tel: +27 21 888 3722
DISCLAIMERS
This announcement does not constitute an invitation to underwrite, subscribe
for, or otherwise acquire or dispose of any British American Tobacco p.l.c.
shares or other securities.
This announcement contains certain forward looking statements which are
subject to risk factors associated with, among other things, the economic and
business circumstances occurring from time to time in the countries and
markets in which the Group operates. It is believed that the expectations
reflected in this announcement are reasonable but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated.
Past performance is no guide to future performance and persons needing advice
should consult an independent financial adviser.
DISTRIBUTION OF REPORT
This Half-Yearly Report is released to the London Stock Exchange and the JSE
Limited. It may be viewed and downloaded from our website www.bat.com.
Copies of the Half-Yearly Report may also be obtained during normal business
hours from: (1) the Company`s registered office; (2) the Company`s
representative office in South Africa; and (3) British American Tobacco
Publications, as above.
Nicola Snook
Secretary
26 July 2011
APPENDIX 1
ANALYSIS OF REVENUE AND PROFIT FROM OPERATIONS
REVENUE
30.6.11 30.6.10
Impac Orga Orga Organi
t nic nic c
Repor of Reven adju reve Repor adjust- Organi
ted ue st- nue ted c
reven excha at ment at reven ments( revenu
ue nge CC(1) s(3) CC(1 ue 3) e
)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Asia- 2,025 35 1,990 - 1,99 1,811 - 1,811
Pacifi 0
c
Americ 1,744 35 1,709 - 1,70 1,646 (78) 1,568
as 9
Wester 1,719 17 1,702 - 1,70 1,949 (252) 1,697
n 2
Europe
EEMEA 1,950 (70) 2,020 - 2,02 1,892 - 1,892
0
Total 7,438 17 7,421 - 7,42 7,298 (330) 6,968
1
PROFIT FROM OPERATIONS
30.6.11 30.6.10
Orga
nic
Adjus Orga Adju Organi Organi
ted nic sted c c
Repor Adjus Adjus Impac Profi adju Prof Adjus adjust- Adjust
ted ting ted t of t(2) st- it(2 ted ed
)
Profi items Profi excha at ment at Profi ments( Profit
t(2) t(2) nge CC(1) s(3) CC(1 t(2) 3) (2)
)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Asia- 744 (22) 766 26 740 - 740 651 - 651
Pacifi
c
Americ 780 12 768 17 751 - 751 694 (3) 691
as
Wester 523 (49) 572 4 568 - 568 564 (6) 558
n
Europe
EEMEA 644 (10) 654 (11) 665 - 665 551 - 551
Total 2,691 (69) 2,760 36 2,724 - 2,72 2,460 (9) 2,451
4
Notes:
(1) CC: Constant currencies
(2) Profit: Profit from operations
(3) Organic adjustments: Discontinued activities - adjustments are made to
the 2010 numbers, based on the 2011 Group position
Nicola Snook
Secretary
26 July 2011
27 July 2011
Sponsor: UBS South Africa (Pty) Ltd
Date: 27/07/2011 08:00:15 Produced by the JSE SENS Department.
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