| Thu 26 Apr 2012, 13:33 | | BTI - British American Tobacco p.l.c - Speech by Richard Burrows Chairman at |
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BTI
BTI
BTI - British American Tobacco p.l.c - Speech by Richard Burrows, Chairman, at
the British American Tobacco P.l.c. Annual General Meeting on 26 April 2012
British American Tobacco p.l.c.
Incorporated in England and Wales
(Registration number: 03407696)
Short name: BATS
Share code: BTI
ISIN number: GB0002875804
("British American Tobacco p.l.c." or "the Company")
SPEECH BY RICHARD BURROWS, CHAIRMAN, AT THE BRITISH AMERICAN TOBACCO p.l.c.
ANNUAL GENERAL MEETING ON 26 APRIL 2012
Good morning ladies and gentlemen and welcome to your Annual General Meeting.
And welcome to our new venue. This fine and historic building is, I hope you
agree, very acceptable. The ceiling by Rubens from 1636 is magnificent.
Interestingly that century also witnessed soaring tobacco taxes and rampant
smuggling. Some things never change, it seems.
Business performance
Moving firmly back to the present, I`m pleased to report that 2011 was another
very good year for your company as our proven strategy continued to deliver
growth, despite the continued economic stagnation in many markets.
Overall industry volume declined again last year, but our global volumes were
virtually unchanged, down just 0.4 per cent, and importantly we again grew
market share.
That growth is spear-headed by innovation and by speed of execution as we roll
out product innovations and formats that really appeal to our consumers.
Innovations - including our re-sealable packs and menthol capsules - already
account for more than 35 per cent of Global Drive Brand volumes. And be assured
that we have many more innovations in the pipeline.
Last year we further addressed our cost base, helping to achieve a substantial
increase in operating margin from 33.5 to 35.8 per cent.
Overall our revenue rose by 7 per cent, profit from operations grew by 11 per
cent and earnings per share improved by 11 per cent to 194.6 pence.
And you will be voting on a final dividend of 88.4 pence, taking the total for
the year to 126.5 pence, an increase of 11 per cent and maintaining our target
of paying out 65 per cent of underlying earnings in dividends.
And finally the increase in our share buy-back, which the Board believes is
strongly in shareholders` interests - to a value of GBP1.25 billion this year -
has been agreed.
Further impressions
This is my third AGM. Taking stock, I can tell you your company is in good
shape.
Wherever I go I see great energy - there is a real sense of drive and confidence
coupled with quality in execution.
Quality comes in many forms and I want to focus just now on our determination to
reduce the harm caused by smoking.
Science is important to us and last year we created a new Management Board
position of Group Scientific Director.We also spent GBP166 million on research
and development in 2011, making us one of Britain`s top investors in R&D. I
visited our Cambridge biotechnology laboratories and saw some of that investment
in action.
So where is this leading? We expect continued growth in our current cigarette
business.
But we also want to be able to offer a choice of reduced toxicant cigarettes and
build our business in new categories such as low-toxicant smokeless tobacco and
approved nicotine products.
Remember it`s the smoking that creates the serious risk to health, not nicotine.
Nicoventures, a stand-alone company in our Group, is exploring the development
of nicotine products that, subject to regulatory approval, will provide smokers
with a safer alternative to cigarettes that they actually want to use.
If it is successful this will also meet the objectives of some leading public
health professionals and make commercial sense for us and to you, our
shareholders.
Regulation
I think it still surprises some people that we are not automatically against
regulation. Why would we be when smoking is bad for you?
We support, for example, raising to 18 the legal age for the sale of cigarettes
in countries where it is lower or even non-existent, we want tougher laws
against smugglers and agree all packs should carry appropriate health warnings.
But bigger and bigger health warnings don`t tell consumers anything they didn`t
know - it`s just the equivalent of shouting at them even louder and louder. Not
surprisingly, real life evidence suggests they are not effective.
A 2010 report for the Department of Health concluded that the introduction of
graphic health warnings in England had no impact on smoking rates or the number
of cigarettes smoked.
The display ban which started in larger stores here this month is an ineffective
game of `tobacco hide and seek` at the counter that isn`t going to stop people
smoking either - but it is frustrating for consumers and retailers alike.
That`s why we, retail groups and other like-minded organisations stood together
against the measure.
Campaigners push for regulations that have no scientific basis and frankly make
no difference to adult or under-age smoking.
I think you then have to question whether plain or generic packaging will ever
achieve government health objectives to reduce smoking.
In this country, plain packaging is now a live issue. The Government says it
has an open mind and has started to consult widely. We hope it will.
We hope it doesn`t follow Australia - the only country in the world to insist on
what amounts to the theft of our intellectual property. It`s a move that we and
others are challenging in court.
At the heart of the pro-plain packaging campaign is the belief that removing
logos and colours from packs will give children "one less reason to start
smoking."
But we believe plain packaging - because it`s a gift to the black market - will
actually make cigarettes easier for children to buy.
How? Generic packaging would make packs even easier to counterfeit, further
fuelling the illegal market where there are no age controls.
A recent Canadian study showed that, while contraband tobacco accounted for
about 14 per cent of all cigarettes smoked by adults, they accounted for 43 per
cent of those smoked by school-age children. That`s shocking. Contraband
tobacco really is a trap for young people.
Add to this that decades of research shows young people start smoking because of
friends and family influence, and you begin to see plain packaging is plainly
misconceived.
So, what`s the real answer? Smoking prevention and quitting initiatives alone
are not going to resolve the public health question. We need a broader approach
- one that accepts many adults are going to continue using tobacco and nicotine
products. That means developing reduced risk products as I described earlier.
That means co-operation between industry and regulators for the public good.
I strongly encourage stakeholders to learn more about our approach to harm
reduction in our Sustainability Report and on our website bat.com.
People
Turning now to people, let me mention Ann Godbehere, a Canadian, who joined your
Board as a Non-Executive director in October last year. Ann, who has many
years` experience in senior roles in financial services, is a member of our
Nominations and Remuneration Committees and is becoming a member of our Audit
Committee today.
It was Nicandro Durante`s first year as Chief Executive and I want to thank him
and his management board for outstanding leadership.
And it is to the great credit of all our 56,000 people worldwide that your
company continues to grow and I warmly thank everyone for their energy, drive
and enthusiasm.
Once again, thank you, shareholders with us today, for your continued loyalty.
Today`s trading update
Before we move on to the Resolutions, a quick update on how the Group has
performed in the first three months of this year.
In our interim management statement this morning we reported good revenue growth
of 6 per cent at constant rates of exchange, revenue growth of 4 per cent at
current rates of exchange and a 6 per cent rise in Global Drive Brand volumes.
Overall organic volumes from subsidiaries increased by 0.7 per cent. It`s a
strong start to another year of anticipated good earnings growth.
Enquiries:
Investor Relations
Mike Nightingale/Rachael Brierley/Maya Farhat +44 20 7845 1180/1519/1977
British American Tobacco Press Office
Kate Matrunola/Cat Armstrong +44 20 7845 2888
26 April 2012
Sponsor: UBS South Africa (Pty) Ltd
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