REG - British Amer.Tobacco - Annual Financial Report
09/02/2024 16:30
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240209:nRSI7019Ca&default-theme=true
RNS Number : 7019C British American Tobacco PLC 09 February 2024
BRITISH AMERICAN TOBACCO p.l.c. (the "Company")
Annual Report for the Year Ended 31 December 2023
In compliance with Listing Rule 9.6.1 and Disclosure Guidance and Transparency
Rule ("DTR") 4.1, the Company announces that the following documents have been
published on its website: www.bat.com/annualreport
(http://www.bat.com/annualreport) :
· Annual Report and Form 20-F 2023 (the "Annual Report 2023"); and
· Combined Performance and ESG Summary 2023.
These documents have been submitted to the National Storage Mechanism and will
shortly be available for inspection via the following link:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
In addition, in accordance with Section 203.01 of the New York Stock Exchange
Listed Company Manual, the Company announces that it filed its Annual Report
on Form 20-F 2023 (the "Form 20-F 2023") with the Securities and Exchange
Commission on 9 February 2024. The Form 20-F 2023 included audited financial
statements for the year ended 31 December 2023. The Form 20-F 2023 will
shortly be available on the Company's website at www.bat.com/annualreport and
also online at www.sec.gov.
The Annual Report 2023 and other ancillary shareholder documents will be
mailed and made available to shareholders on 14 March 2024. Investors have
the option to receive a hard copy of the Company's complete audited financial
statements, free of charge, upon request, by contacting the below:
United Kingdom
British American Tobacco Publications Telephone: +44 20 7511 7797
Email: bat@team365.co.uk
South Africa
The Company's Representative Office Telephone: +27 21 003 6712
United States
Citibank Shareholder Services Telephone: +1 888 985 2055 (toll-free)
Email: citibank@shareholders-online.com
This announcement should be read in conjunction with the Company's Final
Results announcement which was released to the market on 8 February 2024.
Together these constitute the material required by DTR 6.3.5R to be
communicated to the media in unedited full text through a Regulatory
Information Service. This material is not a substitute for reading the full
Annual Report 2023. Page numbers and cross-references in the extracted
information below refer to page numbers in the Annual Report 2023. The
following disclosures are set out in the appendices to this announcement:
· Appendix A: Group Principal Risks (pages 121 to 128 of the Annual
Report 2023);
· Appendix B: Related Party Disclosures (pages 284 and 285 of the
Annual Report 2023); and
· Appendix C: Directors' Responsibility Statement (page 193 of the
Annual Report 2023).
C Dhokia
Deputy Secretary
9 February 2024
Enquiries:
British American Tobacco Media Centre
+44 (0)20 7845 2888 (24 hours) │@BATPlc
Investor Relations
Victoria Buxton: +44 (0)20 7845 2012
Amy Chamberlain +44 (0)20 7845 1124
John Harney: +44 (0)20 7845 1263
Jane Henderson +44 (0)207845 1117
APPENDIX A
"GROUP PRINCIPAL RISKS
Overview
The Principal Risks that may affect the Group are set out on the following
pages.
Each risk is considered in the context of the Group's strategy and business
model, as set out in this Strategic Report beginning on page 2 and page 18. On
the following pages is a summary of each Principal Risk, its potential impact
and management by the Group. The Group defines the Principal Risks as those
assessed with a high impact and probable likelihood. Additionally, "Supply
Chain Disruption", "Cyber Security", "Litigation" and "Solvency and liquidity"
risks are also recognised as Principal Risks; they are not assessed as having
high impact and probable likelihood but are material to the delivery of the
Group's strategic objectives.
The Group has identified risks and is actively monitoring and mitigating these
risks, including those related to climate change and other sustainability
matters. This section focuses on those risks that the Directors believe to be
the Principal Risks to the Group. Not all of these risks are within the
control of the Group and other risks besides those listed may affect the
Group's performance. Some risks may be unknown at present. Other risks,
currently regarded as less material, could become material in the future.
Clear accountability is attached to each risk through the risk owner.
The risks listed in this section and the activities being undertaken to manage
them should be considered in the context of the Group's internal control
framework. This process is described in the section on risk management and
internal control in the corporate governance statement from page #. This
section should also be read in the context of the cautionary statement on
page 386. A summary of all the risk factors (including the Principal Risks)
which are monitored by the Board through the Group's risk register is set out
in the Additional Disclosures section from page 353.
Assessment of Group Principal Risks
During the year, the Directors carried out a robust assessment of the
Principal Risks, uncertainties and emerging risks facing the Group, including
those that could impact delivery of its strategic objectives, business model,
future performance, solvency or liquidity.
Leading in Sustainability is a core component/key building block of our
corporate strategy and sustainability risk factors are embedded across the
Group's risks in accordance with how risks are managed within the Group.
Continued progress was made to further embed both climate-related and other
sustainability risks into the Group Risk Management Framework.
Key risk initiatives include the introduction of the Group's inaugural
Sustainability risk register and the development of a Climate Diagnostic Tool.
Sustainability risks are assessed on a residual risk basis and are reviewed
biannually and evaluated in terms of their relevance and materiality to the
business, in accordance with the Group's risk management methodology. The
Climate Diagnostic Tool will enable better understanding of the climate change
impact to the Group's physical property locations and subsequent business
interruption. These emphasise the Group's commitment to understand, mitigate,
and manage risks that could impact the organisation as a whole, BAT's
stakeholders and the wider environment.
The viability statement on 129 provides a broader assessment of long-term
solvency and liquidity. The Directors considered a number of factors that may
affect the resilience of the Group. Except for the risk "Injury, illness or
death in the workplace" which is not considered to be sufficiently material to
impact the Group's overall viability assessment, the Directors also assessed
the potential impact of the Principal Risks that may impact the Group's
viability.
Risks
Competition from illicit trade
Increased competition from illicit trade and illegal products - either local
duty evaded, smuggled, counterfeits, or non-regulatory compliant, including
products diverted from one country to another.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable Future
Key Stakeholders
Consumers, Society, Shareholders & Investors
Considered in viability statement
Yes
Impact
Erosion of goodwill, with lower volumes and/or increased operational costs
(e.g. track and trace costs) and reduced profits.
Reduced ability to take price increases.
Investment in trade marketing and distribution is undermined and the product
is commoditised.
Counterfeit products (especially in New Categories) and other illicit products
could harm consumers, damaging goodwill, and/or the category (with lower
volumes and reduced profits), potentially leading to misplaced claims against
BAT, further regulation and a failure to deliver the corporate harm reduction
objective.
Breach of legislation, criminal offences, contract breaches under the EU
Cooperation Agreement, allegations of facilitating smuggling and reputational
damage, including negative perceptions of our governance.
Existence of illicit trade reduces our ability to reduce the health impact
of our business, it undermines policies of state governments with respect to
underage tobacco users and creates basis for inappropriate regulation.
Mitigation activities across all categories
Dedicated Anti-Illicit Trade (AIT) teams operating at regional and country
levels; internal cross-functional levels; compliance procedures, toolkit and
best practice shared.
Active engagement with key external stakeholders.
Cross-industry and multi-sector cooperation on a range of AIT issues.
Regional AIT strategy supported by a research programme to further the
understanding of the size and scope of the problem.
AIT Engagement Teams (including a dedicated analytical laboratory and a
forensic and compliance team) work with enforcement agencies as appropriate.
Geopolitical tensions
Geopolitical tensions, civil unrest, economic policy changes, global health
crises, terrorism and organised crime have the potential to disrupt the
Group's business in multiple markets.
Time frame
Short-/medium-term
Strategic impact
Quality Growth/Sustainable Future
Key Stakeholders
Society, Our people, Shareholders & Investors
Considered in viability statement
Yes
Impact
Potential injury or loss of life, loss of assets and disruption to
supply chains and normal business processes.
Increased costs due to more complex supply chain and security arrangements
and/or the cost of building new facilities or maintaining inefficient
facilities.
Lower volumes as a result of not being able to trade in a country.
Higher taxes or other costs of doing business as a foreign company or the
loss of assets as a result of nationalisation.
Reputational damage, including negative perceptions of our governance and
protection of our people and our ESG credentials. Disruption to the supply
chain impacts our ability to reduce the health impact of our business.
Mitigation activities across all categories
Physical and procedural security controls are in place, and regularly reviewed
in accordance with our Security Risk Management process, for all field force
and supply chain operations, with an emphasis on the protection of Group
employees.
Globally integrated sourcing strategy and contingency sourcing arrangements
are in place.
Security risk modelling, including external risk assessments and the
monitoring of geopolitical and economic policy developments worldwide.
Insurance coverage and business continuity planning, including scenario
planning and testing, and risk awareness training.
Geopolitical assessment and monitoring by the Group Security Centre of
Excellence and regions inform the Business Continuity Management organisation
plans and responses to geopolitical
risks, including readiness of Crisis Management Teams at all levels.
Tobacco, New Categories and other regulation interrupts growth strategy
The enactment of, proposals for, or rumours of, regulation that significantly
impairs the Group's ability to communicate, differentiate, market or launch
its products, and/or the lack of appropriate regulation for New Categories.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable Future
Key Stakeholders
Consumers, Society, Shareholders & Investors
Considered in viability statement
Yes
Impact
A lack of acceptance or rejection of Tobacco Harm Reduction as a tobacco
control policy could prevent a balanced regulatory framework for New
Categories. Restricted ability to sell and communicate New Categories could
lead to failure of the harm reduction objective and loss of confidence in the
Group's ESG performance. Lack of appropriate regulation and its enforcement
may impact our opportunity for quality growth and affect our ability to
develop an outstanding pipeline of new products. Disproportionate regulations
for New Categories, such as questionable regulatory classifications or total
bans, that may not be science-based and/or risk-proportionate and that neither
recognise unintended consequences nor respect legal rights (e.g. wrong
regulatory classifications or total bans). Reduced ability to make scientific
claims and compete in future product categories and make new market entries.
Erosion of brand value through commoditisation and the inability to launch
innovations may negatively affect our ability to generate value growth.
Regulation with respect to bans or severe restrictions on menthol flavours,
product design & features and nicotine levels may adversely impact
individual brand portfolios. Reduced consumer acceptability of new product
specifications, leading to consumers seeking alternatives in illegal markets
or irresponsible operators exploiting regulatory loopholes. Shocks to share
price on rumours of, or the announcement or enactment of, restrictive
regulation (e.g. sales ban to future generations). Failure to deliver
appropriate and proportionately costed Extended Producer Responsibility (EPR)
schemes.
Mitigation activities across all categories
Establishment of Regulation and Science Committee, the objectives of which are
to review the execution of the Group's regulatory, corporate, and science
strategies, monitor the regulatory and science landscape, prioritize key
regulatory and science initiatives and resource allocation.
Engagement and alignment across the Group to drive a balanced global policy
framework for combustibles and New Categories.
Stakeholder mapping and prioritisation, developing robust compelling advocacy
materials (with supporting evidence and data) and regulatory engagement
programmes.
Regulatory risk assessment of marketing plans to ensure decisions are informed
by an understanding of the potential regulatory environments.
Advocating the application of integrated regulatory proposals to governments
and public health regulators and practitioners based on the harm reduction
potential of New Categories.
Development of an integrated regulatory strategy that spans conventional
combustibles and New Categories.
Training and capability programmes for End Markets to upskill Corporate and
Regulatory Affairs managers on combustible and New Categories regulatory
engagement, including product knowledge.
Direct access to online portal providing latest position and advocacy material
for End Market engagement on combustibles and New Categories.
Working to define a sustainable EPR model and markets negotiating to implement
effective EPR schemes.
Please refer to the to the description of the tobacco and nicotine regulatory
regimes under which the Group's businesses operate set out from page 375
Supply Chain disruption
Disruption to the global supply chain that may impact our ability to
manufacture products or supply our consumers.
Time frame
Short-
Strategic impact
Quality Growth/Sustainable Future/Dynamic Business
Key Stakeholders
Consumers, Our people, Shareholders & Investors
Considered in viability statement
Yes
Impact
Disruption to the global supply chain may impact all aspects of our business
and impede our ability to manufacture products and supply our consumers.
Disruption to supply chain can lead to volume shortfalls and inability to
supply markets, increased replacement or/and rebuild costs consequently
leading to reduced profit and reputational damage. This may affect our ability
to reinvest into New Categories and deliver our Tobacco Harm Reduction
commitment.
Loss of one or more key facilities or suppliers may cause loss of life and
injuries. It may also lead to societal dislocation resulting in population
migration and loss of key skills.
Our supply chain could be negatively impacted by events arising from, but not
limited to natural disasters, man-made accidents, cyber incidents.
Mitigation activities across all categories
Group-wide business continuity plans (BCP) and contingency sourcing plans
(CSP) in compliance with the new Business Continuity Management standard, are
in place.
All factory CSPs are regularly updated, reviewed and desktop simulations
conducted to ensure compliance with the Group's policy.
BCPs and disaster recovery plans for logistics providers are in place.
Unrest and Evacuation plans are in place.
Existence of insurance cover for Property Damage and Business Interruption.
Appropriate technical and organisational cyber security measures are in place.
Litigation
Product liability, regulatory or other significant cases (including
investigations) may be lost or settled resulting in a material loss or other
consequence.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable future
Key Stakeholders
Shareholders & Investors
Considered in viability statement
Yes
Impact
Damages and fines, negative impact on reputation (including ESG credentials),
disruption and loss of focus on the business.
Consolidated results of operations, cash flows and financial position could be
materially affected by an unfavourable outcome or settlement of pending or
future litigation, criminal prosecution or other contentious action, or by the
costs associated with bringing proceedings or defending claims.
Inability to sell products as a result of an injunction arising out of a
patent infringement action against the Group may restrict growth plans and
competitiveness.
Potential share price impact.
Sustainability-related litigation could also result in a reduction in the
investor base due to sustainability and sustainability-related concerns.
Mitigation activities across all categories
Consistent litigation and patent management strategy across the Group.
Expertise and legal talent maintained both within the Group and external
partners, including for New Categories and sustainability-related matters.
Ongoing monitoring of key legislative and case law developments related to our
business.
Delivery with Integrity compliance programme.
Driving the litigation strategy in relation to key regulatory issues.
Central management of strategic litigation impacting key regulatory processes.
Developing expert analysis on efficacy of various regulatory proposals.
Please refer to note 31 on page 286 in the Notes on the Accounts for details
of contingent liabilities applicable to the Group.
Significant increases or structural changes in tobacco, nicotine and New
Categories related taxes
The Group is exposed to unexpected and/or significant increases or structural
changes in tobacco, nicotine and New Categories related taxes in key markets.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable Future
Key Stakeholders
Consumers, Society, Shareholders & Investors
Considered in viability statement
Yes
Impact
Consumers reject the Group's legitimate tax-paid products for products from
illicit sources or cheaper alternatives.
Reduced legal industry volumes.
Reduced sales volume and/or portfolio erosion leading to inability to invest
in, develop, commercialise and deliver New Category products.
Partial absorption of excise increases leading to lower profitability.
Mitigation activities across all categories
Formal pricing and excise strategies, including Revenue Growth Management
using a data science-led approach, with annual risk assessments and
contingency plans across all products.
Pricing, excise and trade margin committees in markets, with global support.
Engagement with relevant local and international authorities where
appropriate, in particular in relation to the increased risk to excise
revenues from higher illicit trade.
Portfolio reviews to ensure appropriate balance and coverage across price
segments.
Monitoring of economic indicators, government revenues and the political
situation.
Inability to develop, commercialise and deliver the New Categories strategy
Risk of not capitalising on the opportunities in developing and
commercialising successful, safe and consumer-appealing innovations.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable Future/Dynamic
Business
Key Stakeholders
Consumers, Society, Shareholders & Investors
Considered in viability statement
Yes
Impact
Failure to deliver Group strategic imperative, 2025 growth ambition and 2030
consumer targets.
Potentially missed opportunities, unrecoverable costs and/or erosion of
brand, with lower volumes and reduced profits.
Reputational damage and recall costs may arise in the event of defective
product design or manufacture.
Loss of market share due to non-compliance of product portfolio
with regulatory requirements or inability to engage on our science, leading
to a negative shift in sentiment and confidence in Group products.
Loss of investor confidence in ESG performance.
Failure to deliver our corporate purpose of harm reduction.
Mitigation activities across all categories
Focus on product stewardship to ensure high-quality standards across the
portfolio.
Brand Expression, which sets out how our brand expresses itself (including
through its logo, name, product, packaging, etc.) deployed to lead End Markets
via activation workshops and best practices shared.
Generating sufficient IP to develop competitive and sustainable products.
Accelerating digital and consumer analytics along with data management
platforms for enhanced methodologies, insight generation and line of sight
across the Group.
R&D is accredited to ISO9001 standard and laboratories are accredited to
ISO17025 for key methods.
Internal and external communications about BAT's science through publications
and engagement. Quality assurance reviews undertaken with key science
suppliers to ensure appropriate standards in place.
Disputed taxes, interest and penalties
The Group may face significant financial penalties, including the payment of
interest, in the event of an unfavourable ruling by a tax authority in a
disputed area.
Time frame
Short-/medium term
Strategic impact
Quality Growth/Sustainable
Future
Key Stakeholders
Shareholders &
Investors
Considered in viability statement
Yes
Impact
Significant fines and potential legal penalties.
Disruption and loss of focus on the business due to diversion of management
time.
Impact on profit and dividend.
Mitigation activities across all categories
End Market tax committees.
Internal tax function provides dedicated advice and guidance, and external
advice sought where needed.
Engagement with tax authorities at Group, regional and individual market
level.
Injury, illness or death in the workplace
The risk of injury, death or ill health to employees and those who work with
the business is a fundamental concern of the Group
and can have a significant effect on our operations.
Time frame
Short-term
Strategic impact
Quality Growth/Sustainable Future/Dynamic
Business
Key Stakeholders
Our people
Considered in viability statement
No
Impact
Serious injuries, ill health, disability or loss of life suffered by employees
and the people who work with the Group.
Exposure to civil and criminal liability and the risk of prosecution from
enforcement bodies and the cost of associated legal costs, fines and/or
penalties.
Interruption of Group operations if issues are not addressed promptly.
High staff turnover or difficulty recruiting employees if perceived to have
a poor Environment, Health and Safety (EHS) record.
Reputational damage to the Group and negative impact on our ESG
credentials.
Mitigation activities across all categories
Risk control systems in place to ensure equipment and infrastructure are
provided and maintained.
EHS strategy aims to ensure that employees at all levels receive appropriate
EHS training and information.
Behavioural-based safety programme to drive operations' safety performance,
culture and closer to zero accidents.
Analysis of incidents undertaken regionally and globally by a dedicated team
to identify increasing incident trends or high potential risks that require
coordinated action.
Global monthly Health & Safety (H&S) Committee established, formed by
senior members from the H&S and Operations Sustainability leadership
team.
Solvency and liquidity
Liquidity (access to cash and sources of finance) is essential to maintaining
the Group as a going concern in the short-term (liquidity) and medium-term
(solvency).
Time frame
Short-/medium-term
Strategic impact
Quality Growth/Sustainable Future/Dynamic Business
Key Stakeholders
Shareholders & Investors
Considered in viability statement
Yes
Impact
Inability to access the Group's cash resources and to fund the business under
the current capital structure resulting in missed strategic opportunities or
inability to respond to threats.
Decline in our creditworthiness and increased funding costs for the Group.
Requirement to issue equity or seek new sources of capital.
Reputational risk of failure to manage the financial risk profile
of the business, resulting in an erosion of shareholder value
reflected in an underperforming share price.
Inability to mitigate accounting and economic exposures.
Economic loss as a result of devaluation/revaluation of assets (including
cash) valued or held in local currency, and additional costs as a result of
paying premiums to obtain hard currency.
Failure to appropriately engage with investors' and lenders' sustainability
criteria and concerns may impact BAT's counterparty availability, credit
ratings, access to funding, or may result in an increase in the cost of
funding.
Exposure to the cannabis sector may lead to regulatory and legal risk,
reputation and compliance issues restricting bank and/or investor access.
Mitigation activities across all categories
Group policies include a set of financing principles and key performance
indicators, including the monitoring of credit ratings, interest cover,
solvency and liquidity with regular reporting to the Corporate Finance
Committee and the Board.
Controls in place to ensure full compliance with Sanctions regimes.
Plans implemented to manage the risk in key geographies.
The Group targets an average centrally managed debt maturity of at least five
years with no more than 20% of centrally managed debt maturing in a single
rolling year.
At 31 December 2023, the Group had access to a £5.38 billion revolving credit
facility. In March 2023, the Group refinanced the £2.7 billion 364-day
tranche of the revolving credit facility at the reduced amount of £2.5
billion, maturing in March 2024 with two one-year extension options, and a
one-year term out option. Additionally, £3.0 billion of the five-year tranche
remains available until March 2025, with £2.85 billion extended to March 2026
and £2.5 billion extended to March 2027.
Liquidity pooling structures are in place to ensure that there is maximum
mobilisation of cash liquidity within the Group.
Going concern and viability support papers are presented to the Board on a
regular basis.
Continued review of UK money laundering legislation and cannabis policy with
financial partners.
Foreign exchange rates exposures
The Group faces translational and transactional foreign exchange (FX) rate
exposure for earnings/cash flows from its global businesses.
Time frame
Short-/medium-term
Strategic impact
Short-/medium-term
Key Stakeholders
Shareholders &
Investors
Considered in viability statement
Yes
Impact
Fluctuations in FX rates of key currencies against sterling introduce
volatility in reported earnings per share (EPS), cash flow and the balance
sheet driven by translation into sterling of our financial results and these
exposures are not normally hedged.
The dividend may be impacted if the payout ratio is not adjusted.
Differences in translation between earnings and net debt may affect key ratios
used by credit rating agencies.
Volatility and/or increased costs in our business, due to transactional FX,
may adversely impact financial performance.
Mitigation activities across all categories
While translational FX exposure is not hedged, its impact is identified in
results presentations and financial disclosures; earnings are restated at
constant rates for comparability.
Debt and interest are matched to assets and cash flows to mitigate volatility
where possible and economic to do so.
Hedging strategy for transactional FX is defined in the treasury policy, a
global policy approved by the Board.
Illiquid currencies of many markets where hedging is either not possible or
uneconomic are reviewed on a regular
basis.
Climate Change and Circular Economy
Direct and indirect adverse impacts associated with climate change and the
move towards a circular economy.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable
Future
Key Stakeholders
Consumers, Society, Shareholders &
Investors
Considered in viability statement
Yes
Impact
Direct physical risks to BAT agricultural, manufacturing, operational and
logistic processes may lead to reduced production capability, delays, volume
shortfalls, disruption of energy supply (and other utilities) and business
interruption.
Extreme temperatures and pollution could be harmful for employees, creating
health and safety risks.
Failure to adequately manage supply chain risks associated with transitional
and operational impacts (of climate change particularly) may cause increased
volatility in supply volume, quality or cost of raw materials and services
necessary for the effective and efficient operation of BAT's business across
its value chain.
GHG emissions can indirectly increase costs of supply and delivery.
Punitive actions against the Group or ability to sell products in key markets,
due to failure to comply in an effective, competitive or economic manner with
evolving regulations and requirements relevant to business operations,
products and supply chain, and reporting.
Technology risk increase due to write-offs and early retirement of existing
assets. Additional cost required to deploy new practices and processes.
Poor ESG ratings by investors or platforms/indices used by them may lead to
reduced access to capital, increased cost of capital or impact the share
price.
Loss or damage to reputation may reduce market share and revenue, due to
customers and/or consumers having a reduced or negative perception of BAT and
its products in comparison to its competitors, or of specific
products/product categories overall.
Negative impact upon the attraction, retention and motivation of skilled
employees and contractors.
Inadequate waste management can increase negative public opinion on BAT and
cause potential damage to brand value from loss of consumer trust, increased
costs in jurisdictions where waste management is costly and/or insufficient.
Failure to adequately manage Group sustainability priorities like climate
change, protection of natural resources and forest, human rights in leaf
supply chain may restrict suppliers willing to do business with
BAT.
Mitigation activities across all categories
The Group has a well-established Environmental Sustainability Committee and
Operations Sustainability Forum. Sustainability matters overall, and climate
change and circular economy specifically, are under the governance remit of
the Audit Committee.
Life Cycle Assessment is used in the development and approval processes for
new products to understand and improve their climate change and circular
economy impacts.
Monitoring of climate change- and circular economy-related governmental policy
and regulations, and taking proactive actions to meet and/or surpass it.
Working to mitigate climate change impacts and optimise circular economy
alignment across the value chain by designing for the reuse and recycling of
end-of-life products and increasing the use of recycled and environmentally
preferable materials. Compliance assessment tool covering all significant
touch points related to employee health and safety and environmental impact.
Circular economy strategy, Business Continuity and Contingency Sourcing plans.
Supplier Code of Conduct which defines the minimum standards expected for
suppliers, including the requirement of adoption of BAT environmental
procedures.
2023 review of future ESG reporting requirements and frameworks, globally, and
increasing alignment with them, ahead of required timescales.
Ongoing increase in the reporting of sustainability information in the Group's
Combined Annual and Sustainability Report and accompanying ESG Performance
Data Book, including public provision to financial actors of information
required by investors for their own sustainability reporting.
Internal and external goals and targets related to the risks and opportunities
posed by climate change and circular economy to the Group's business and wider
society, along with comprehensive programmes for review of progress against
these goals.
Climate change- and circular economy-related objectives, targets and metrics
publicly reported and externally assured and integrated into personal
performance objectives of those functionally responsible for their delivery.
Driving innovation and collaboration through Btomorrow Ventures.
Cross-functional and cross-industry engagement on sustainability
topics.
Cyber Security
Inability of the organisation to defend against an intentional or
unintentional action that results in loss of confidentiality, availability or
integrity of systems and data.
Time frame
Short-/medium-/long-term
Strategic impact
Quality Growth/Sustainable Future/Dynamic
Business
Key Stakeholders
Consumers, Society, Our People, Shareholders &
Investors
Considered in viability statement
Yes
Impact
Loss or theft of confidential business information, when used alone or in
conjunction with any other available information reduces the impact of BAT
business strategy, investments and commercial operations.
Personal data breach incidents that result in the disclosure of personally
identifiable data resulting in legal, reputational, and regulatory compliance
impacts.
Disruption to BAT's business operations that impacts R&D facilities,
manufacturing, distribution or technology services resulting in business
interruption and/or impacts to health & safety.
Inappropriate use of technology systems to enable fraud, or theft of product,
technology, or monetary resources.
Loss of digital trust resulting in brand damage and a loss of consumer trust.
A cyber incident experienced by a third party partner or supplier resulting in
business interruption, supply chain disruption, loss of company data or
provides access or transmission of malicious activity from the supplier to
BAT.
Mitigation activities across all categories
The group implements physical, technical and administrative safeguards to
mitigate risks of a cyber security incident, including security measures, such
as defensive technologies, encryption, authentication, backup and recovery
systems, to protect the confidentiality, integrity and availability of IDT
systems and networks.
The Group's cyber security processes are regularly reviewed and updated to
ensure these remain effective and aligned with our business objectives,
regulatory obligations and industry standards.
Regular training and awareness programmes provided to Group employees and
contractors on cyber security best practices and procedures and adherence to
our SoBC.
Vendor management processes in place, including due diligence and contractual
obligations, to ensure that third-party service providers adhere to BAT's
cyber security requirements and standards.
Development of business continuity plans to ensure that the Group can promptly
respond to any potential or actual cyber security incident and minimise their
impact on the business.
Engagement with external assessors, consultants, auditors and other third
parties to provide independent assurance and recommendations on cyber security
matters.
Engagement with relevant stakeholders on cyber security matters and being
prepared to disclose any material cyber security risks or incidents in a
timely and transparent
manner.
Viability Statement
The Board has assessed the viability of the Group taking into account the
current position and principal risks, in accordance with provision 31 of the
UK Corporate Governance Code 2018. Whilst the Board believes the Group will be
viable over a longer period, owing to the inherent uncertainty arising due to
ongoing litigation and regulation, the period over which the Board considers
it possible to form a reasonable expectation as to the Group's longer-term
viability (that it will continue in operation and meet its liabilities as they
fall due) is three years.
In making this assessment, the Board considered the Group's:
- strong cash generation from operating activities;
- access to, and ability to raise, external sources of financing,
including the removal, in prior years, of any financial covenants in such
credit facilities; and
- the current macro-economic environment, including the impact of
inflation and higher interest rates.
This assessment included a robust review of the Group's operational and
financial processes, (which cover both short-term financial forecasts and
capacity plans) and the Principal Risks (as indicated on pages 117 to 121)
that may impact the Group's viability. These are considered, with the
mitigating actions, at least once a year. The assessment included a reverse
stress test of the principal risks and did not identify any individual risk,
based upon a prudent annual forecast, that would, if arising in isolation and
without mitigation, impact the Group's viability within the three-year
confirmation period. Furthermore, the Board recognised that even if all the
principal risks arose simultaneously, given the underlying strong free cash
flow generation before the payment of dividends (2022: £8.0 billion), the
Group would be able to undertake mitigating actions to meet the liabilities as
they fall due. The assessment also reviewed the potential impact of inflation
on the Group's delivery and the impact of climate-related risks and concluded
that these, including the potential cost implications and noting the
mitigating actions, would not impact the Group's viability (see discussion
commencing on page 70 with respect to TCFD).
The Board noted that the Group has access to a £5.7 billion credit facility
(2022: undrawn), US (US$4 billion) and Euro (£3 billion) commercial paper
programmes (2022: £27 million drawn) and £3.0 billion of bilateral
agreements which may be utilised to support the Group's ability to operate.
However, the Group is subject to inherent uncertainties with regards to
regulatory change and litigation, the outcome of which may have a bearing on
the Group's viability. The Group maintains, as referred to in note 31 in the
Notes on the Accounts 'Contingent Liabilities and Financial Commitments,'
that, whilst it is impossible to be certain of the outcome of any particular
case, the defences of the Group's companies to all the various claims are
meritorious on both law and the facts. If an adverse judgment is entered
against any of the Group's companies in any case, an appeal may be made, the
duration of which can be reasonably expected to last for a number of years.
APPENDIX B
"RELATED PARTY DISCLOSURES
The Group has a number of transactions and relationships with related parties,
as defined in IAS 24 Related Party Disclosures, all of which are undertaken
in the normal course of business. Transactions with CTBAT International
Limited (a joint operation) are not included in these disclosures as the
results are immaterial to the Group.
Intercompany transactions and balances are eliminated on consolidation and
therefore are not disclosed.
Transactions and balances with associates relate mainly to the sale and
purchase of cigarettes and tobacco leaf. The Group's share of dividends from
associates, included in other income in the table below, was £559 million
(2022: £438 million; 2021: £392 million).
2023 2022 2021
£m £m £m
Transactions
- revenue 523 494 524
- purchases (178) (190) (123)
- other income 560 441 393
- other expenses (6) (1) (6)
Amounts receivable at 31 December 48 51 48
Amounts payable at 31 December (4) (4) (3)
In November 2023, the Group announced the signing of an agreement for a
further investment in Organigram. At 31 December 2023, the proposed
investment of CAD$125 million (approximately £74 million) was subject to
customary conditions, including necessary approvals by the shareholders of
Organigram, which was given on 18 January 2024. On 24 January 2024, BAT made
the first tranche investment of CAD$42 million (£24 million), acquiring a
further 12,893,175 common shares of Organigram at a price of CAD$3.22 per
share. Subject to certain conditions, the remaining 25,786,350 shares
subscribed for shall be issued at the same price in two further equal tranches
by the end of August 2024 and February 2025 respectively. Based on
Organigram's outstanding share capital at the end of 2023, this investment
will increase the Group's equity position from c.19% to c.45% (restricted to
30% voting rights) once all three tranches have been completed.
In addition, as mentioned in note 27, in 2023, the Group also acquired 20% of
DeFloria for £8 million and increased its ownership in Steady State LLC from
5.76% to 10.8% for £4 million. In October 2023, a further investment of
£8 million was made in Steady State LLC by way of a convertible loan note.
During 2023, the Group acquired a further 1.31% in Hrvatski Duhani d.d., at a
cost of less than £1 million, following the acquisitions in 2022 (3.3% at a
cost of £1 million) and 2021 (2.7% at a cost of £1 million).
In 2022, as mentioned in note 27, the Group made a £32 million investment in
exchange for 16% of Sanity Group GmbH and made
a non-controlling
investment in Steady State LLC for £4 million.
During 2022, the Group increased its ownership of a wholesale producer and
distributor operating in the agriculture sector based in Uzbekistan,
FE 'Samfruit' JSC to 45.40% for £1 million. In 2021, the Group increased
its ownership to 42.61%, for £1 million.
In November 2022, the Group invested in Charlotte's Web via a convertible
debenture of £48 million which is currently convertible into a
non-controlling equity stake of approximately 19.9%.
In 2021, the Group made a capital contribution in Brascuba Cigarrillos S.A. at
a cost of £6 million. There was a capital reduction in CTBAT International
Limited of approximately US$171 million with funds remitted prorata to
investors in 2021.
On 5 October 2021, PT Bentoel Internasional Investama Tbk (Bentoel) announced
its intention to delist from the Indonesia Stock Exchange and go private by
conducting a Voluntary Tender Offer (VTO). As part of this, in two phases in
November and December 2021, the Group acquired an additional 0.2% of shares in
Bentoel from independent shareholders at a cost of £4 million and terminated
the total return swap (as explained in note 32).
As explained in note 15, in 2022 the Group provided a temporary liquidity
facility to the main UK pension fund. As at 31 December 2023 this facility was
undrawn.
The Group and Organigram also entered into a Product Development Collaboration
Agreement following which a Centre of Excellence has been established to focus
on developing the next generation of cannabis products with an initial focus
on cannabidiol (CBD).
As a result of the implementation of the EU Single-Use Plastic Directive in
certain EU countries, the Group, along with other tobacco manufacturers,
established Producer Responsibility Organisations for the management of the
Extended Producer Responsibility obligations relating to tobacco product butt
filter waste collection. The costs incurred by the Group in relation to this
waste disposal is included in note 6(l).
The key management personnel of British American Tobacco consist of the
members of the Board of Directors of British American Tobacco p.l.c. and the
members of the Management Board. No such person had any material interest
during the year in a contract of significance (other than a service contract)
with the Company or any subsidiary company. The term key management personnel
in this context includes their close family members.
2023 2022 2021
£m £m £m
The total compensation for key management personnel, including Directors, was:
- salaries and other short-term employee benefits
17 19 18
- post-employment benefits 1 1 1
- share-based payments 13 17 16
31 37 35
The following table, which is not part of IAS 24 disclosures, shows the
aggregate emoluments of the Directors of the Company.
Executive Directors Chairman Non-Executive Directors Total
2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Salary; fees; benefits; incentives
- salary 1,644 2,129 2,119 1,644 2,129 2,119
- fees 688 670 727 1,059 1,027 1,045 1,747 1,697 1,772
- taxable benefits 395 449 420 17 59 55 31 78 2 443 586 477
- short-term incentives 1,650 3,761 4,128 1,650 3,761 4,128
- long-term incentives 1,371 7,888 3,399 1,371 7,888 3,399
Sub-total 5,060 14,227 10,066 705 729 782 1,090 1,105 1,047 6,855 16,061 11,895
Pension; other emoluments
- pension 248 320 318 248 320 318
- other emoluments 2 6 6 2 6 6
Sub-total 250 326 324 250 326 324
Total emoluments 5,310 14,553 10,390 705 729 782 1,090 1,105 1,047 7,105 16,387 12,219
"
APPENDIX C
"RESPONSIBILITY OF DIRECTORS
Statement of Directors' Responsibilities in Respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the Group
and Parent Company financial statements in accordance with applicable law and
regulations. Under company law, directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Parent Company and the Group for that period.
Under applicable law, directors are required to prepare the financial
statements in accordance with UK-adopted international accounting standards
and applicable law. The Directors have elected to prepare the Parent Company
financial statements in accordance with UK Accounting Standards and applicable
law, including FRS 101 'Reduced Disclosure Framework'. In preparing these
Group financial statements, the Directors have also elected to comply with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
In preparing each of the Group and Parent Company financial statements, the
Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable, relevant,
reliable and prudent;
- state whether Group financial statements have been prepared in
accordance with UK-adopted international accounting standards;
- state whether, for the Parent Company financial statements,
applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the those statements;
- assess the Group and Parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern;
and
- use the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that comply with applicable law and
regulations.
The Directors are responsible for the maintenance and integrity of the Annual
Report included on the Company's website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
n accordance with Disclosure Guidance and Transparency Rule (DTR) 4.1.16R, the
financial statements will form part of the annual financial report prepared
using the single electronic reporting format under DTRs 4.1.17R and 4.1.18R.
The auditor's report on these financial statements provides no assurance over
whether the annual financial report has been prepared in accordance with those
requirements.
Directors' Declaration in Relation to Relevant Audit Information
Having made appropriate enquiries, each of the Directors who held office at
the date of approval of this Annual Report confirms that:
- so far as he or she is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
- he or she has taken all steps that a Director ought to have taken
in order to make himself or herself aware of relevant audit information and to
establish that the Company's auditors are aware of that information.
Responsibility Statement of the Directors in Respect of the Annual Financial
Report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole; and
- the Strategic Report and the Directors' Report include a fair review
of the development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties that they
face.
Forward looking statements
This document contains certain forward-looking statements, including
"forward-looking" statements made within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements are often, but not
always, made through the use of words or phrases such as "believe,"
"anticipate," "could," "may," "would," "should," "intend," "plan,"
"potential," "predict," "will," "expect," "estimate," "project," "positioned,"
"strategy," "outlook", "target" and similar expressions. These include
statements regarding our intentions, beliefs or current expectations
concerning, amongst other things, our results of operations, financial
condition, liquidity, prospects, growth, strategies and the economic and
business circumstances occurring from time to time in the countries and
markets in which the Group operates.
In particular, these forward-looking statements include, among other
statements, statements regarding the Group's future financial performance,
planned product launches and future regulatory developments, as well as: (i)
certain statements in the Overview section (pages 2 to 13), including the Our
Global Business section, the Chair's Introduction, Chief Executive's Review
and Interim Finance Director's Overview; (ii) certain statements in the Our
Strategy section (pages 14 to 27), including the Our Strategic Navigator
section, the Strategic Summary section and the Investment Case section; (iii)
certain statements in the Quality Growth section (pages 28 to 39), including
the Strategic Pillar overview; (iv) certain statements in the Dynamic Business
section (pages 40 to 29), including certain statements in the Strategic Pillar
Overview section, the Financial Performance Summary section, the Treasury and
Cash Flow section and the going concern discussions; (v) certain statements in
the Sustainable Future section (pages 60 to 129), including the Leading in
Sustainability & Integrity section, Sustainability highlights section, our
material topics, TCFD reporting and Our approach to Taskforce on
Nature-related Financial Disclosures (TNFD) section; (vi) certain statements
in the Notes on Accounts (pages 215 to 311), including note 12(b)(iv); and
(vii) certain statements in the Other Information section (pages 330 to 406),
including the Additional Disclosures and Shareholder Information sections.
All such forward-looking statements involve estimates and assumptions that are
subject to risks, uncertainties and other factors. It is believed that the
expectations reflected in this announcement are reasonable, but they may be
affected by a wide range of variables that could cause actual results and
performance to differ materially from those currently anticipated.
Among the key factors that could cause actual results to differ materially
from those projected in the forward-looking statements are uncertainties
related to the following: the impact of competition from illicit trade; the
impact of adverse domestic or international legislation and regulation; the
inability to develop, commercialise and deliver the Group's New Categories
strategy; the impact of Supply chain disruptions; adverse litigation and
dispute outcomes and the effect of such outcomes on the Group's financial
condition; the impact of significant increases or structural changes in
tobacco, nicotine and New Categories related taxes; translational and
transactional foreign exchange rate exposure; changes or differences in
domestic or international economic or political conditions; the ability to
maintain credit ratings and to fund the business under the current capital
structure; the impact of serious injury, illness or death in the workplace;
adverse decisions by domestic or international regulatory bodies; changes in
the market position, businesses, financial condition, results of operations
or prospects of the Group; direct and indirect adverse impacts associated with
Climate Change and the move towards a Circular Economy; and Cyber Security
caused by the heightened cyber-threat landscape, the increased digital
interactions with consumers and changes to regulation. Further details on the
principal risks that may affect the Group can be found in the 'Group Principal
Risks' section of the Strategic Report on pages 121 to 128 of this document. A
summary of all the risk factors (including the principal risks) which are
monitored by the Board through the Group's risk register is set out in the
Additional Disclosures section under the heading 'Group Risk Factors' on pages
353 to 374.
Past performance is no guide to future performance and persons needing advice
should consult an independent financial adviser. The forward-looking
statements reflect knowledge and information available at the date of
preparation of this document and the Group undertakes no obligation to update
or revise these forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on such forward-looking statements.
No statement in this document is intended to be a profit forecast and no
statement in this document should be interpreted to mean that earnings per
share of BAT for the current or future financial years would necessarily match
or exceed the historical published earnings per share of BAT.
A review of the reasons why actual results and developments may differ
materially from the expectations disclosed or implied within forward-looking
statements can be found by referring to the information contained under the
headings "Cautionary statement", "Group Principal Risks" and "Group Risk
Factors" in the Annual Report 20232 and Form 20-F of British American Tobacco
p.l.c. (BAT). Additional information concerning these and other factors can be
found in the Company's filings with the U.S. Securities and Exchange
Commission ("SEC"), including the Annual Report on Form 20-F filed on 2 March
9 February 20234 and Current Reports on Form 6-K, which may be obtained free
of charge at the SEC's website, www.sec.gov (http://www.sec.gov) , and the
Company's Annual Reports, which may be obtained free of charge from the
Company's website www.bat.com (http://www.bat.com) .
Although financial materiality has been considered in the development of our
Double Materiality Assessment (DMA), our DMA and any conclusions in this
document as to the materiality or significance of sustainability or ESG
matters do not imply that all topics discussed therein are financially
material to our business taken as a whole, and such topics may not
significantly alter the total mix of information available about our
securities.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACSFLFESFRIAIISRecent news on British American Tobacco
See all newsREG - British Amer.Tobacco - Director/PDMR Shareholding
AnnouncementREG - British Amer.Tobacco - Director/PDMR Shareholding
AnnouncementREG - British Amer.Tobacco - Transaction in Own Shares
AnnouncementREG - British Amer.Tobacco - Total Voting Rights
AnnouncementREG - British Amer.Tobacco - Cancellation of Treasury Shares
Announcement