REG - British Amer.Tobacco - Final Results
08/02/2024 07:15
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RNS Number : 4042C British American Tobacco PLC 08 February 2024
8 February 2024 - Press Release/Preliminary Results
British American Tobacco p.l.c.
Preliminary results for the year ended 31 December 2023
Building a Smokeless World
Summary
- Revenue down 1.3%, up 3.1% on an organic basis (at constant rates), driven
by New Categories organic revenue up 21.0% (at constant rates) and resilient
pricing
- Strong volume led New Category revenue growth - driven by Vuse and Velo,
with revenue from Non-Combustibles now 16.5% of Group revenue, up 170 bps vs
FY22
- New Categories achieved profitability in 2023 (at a category contribution
level), two years ahead of original target and contributing a £398 million
increase to Group profit, at constant rates of exchange
- Global settlement with Philip Morris International Inc. (PMI) that resolves
all ongoing patent infringement litigation between the parties related to our
Heated Products (HP) and Vapour products
- Total Combustibles organic revenue up 0.6% (at constant rates), with organic
price/mix of +6.1% offset by lower volume and geographic mix mainly due to
macro-economic pressures in the U.S. impacting the premium segment
- Strong performances from AME and APMEA, demonstrating the benefit our global
footprint and multi-category strategy
- Reported loss from operations of £15,751m (with reported operating margin
down 95.8 ppts to -57.7%) - impacted by a £27.6 billion non-cash impairment
charge mainly related to our U.S. business (£27.3 billion)
- Adjusted organic profit from operations up 3.9% at constant rates, adjusted
organic operating margin up 40 bps to 45.6%
- Reported diluted EPS at -646.6p; adjusted organic diluted EPS up 5.2% at
constant rates
- Operating cash flow conversion 100% - organic adjusted net debt / adjusted
EBITDA down to 2.6x
- Dividend growth of 2.0% to 235.52p, in line with our progressive dividend
increase approach
- Continued ESG progress - 2023 MSCI rating upgraded to A (2022: BBB),
achieved targets for water withdrawn and waste generated two years early
Tadeu Marroco, Chief Executive
"2023 was another year of resilient financial performance and delivery in line
with our guidance, underpinned by our global footprint and multi-category
strategy, despite a challenging macro-environment.
New Categories delivered continued volume-led revenue growth and increased
profitability, driven by Vuse and Velo. As a result, our New Categories
portfolio has turned profitable two years ahead of our original target.
In combustibles, our commercial plans in the U.S. are enabling early signs of
portfolio recovery. AME and APMEA performed well, with a strong revenue and
profit performance, led by our well-balanced portfolio.
Our refined strategy commits us to 'Building a Smokeless World', a
predominantly smokeless business, with 50% of our revenue from
Non-Combustibles by 2035. Consistent with this vision, and taking into account
the current macro-economic pressures impacting the U.S. combustibles industry,
the growth of illicit single-use vapour products and uncertainty around a
potential menthol ban in the U.S., we have taken a non-cash impairment charge
of £27.3 billion, mainly relating to our acquired U.S. combustibles brands.
We are investing to strengthen our U.S. business, accelerate innovation
momentum, and enhance capabilities that support our strategic delivery. We
expect these investments, together with the U.S. macro-economic pressures,
will impact 2024. Thereafter, we will progressively build to deliver 3-5%
organic revenue, and mid-single digit adjusted organic profit from operations
growth by 2026 on a constant currency basis. We are committed to continuing to
reward shareholders with strong cash returns throughout this period.
I am confident that the choices we have made will drive our long-term success
and create sustainable value for all our stakeholders."
Performance highlights Reported Adjusted(1) Adjusted(1) Organic(2)
For year ended 31 December 2023 Current vs 2022 Current vs 2022 vs 2022
rates (current) rates (constant) (constant)
Cigarette and HP volume share -10 bps
Cigarette and HP value share -50 bps
Non-Combustibles consumers(3) 23.9m +3.2m
Revenue (£m) £27,283m -1.3% £27,283m +1.6% +3.1%
Revenue from New Categories (£m) £3,347m +15.6% £3,347m +17.8% +21.0%
(Loss)/profit from operations (£m) £(15,751)m -250% £12,465m +3.1% +3.9%
Category contribution - New Categories (£m)(4) £17m n/m n/m
Operating margin (%) (57.7)% -95.8 ppts +45.7% +60 bps +40 bps
Diluted (loss)/earnings per share (pence) (646.6)p -322% 375.6p +4.0% +5.2%
Net cash generated from operating activities (£m) £10,714m +3.1%
Adjusted cash generated from operations (£m) £7,824m +2.9%
Cash conversion (%) (68.0)% -167 ppts +100% -40 bps
Borrowings(5) (£m) £39,730m -7.9%
Adjusted Net Debt (£m) £33,940m -7.4%
Dividend per share (pence) 235.52 +2.0%
The use of non-GAAP measures, including adjusting items and constant
currencies, are further discussed from page 51, with reconciliation from the
most comparable IFRS measure provided.
Notes: 1. See page 31 for discussion on adjusting items. 2. Organic measures
exclude the performance of businesses sold (including the Group's Russian and
Belarusian businesses) or acquired, or that have an enduring structural change
impacting performance that may significantly affect the users' understanding
of the Group's performance in the current and comparator periods to ensure
like-for-like assessment across all periods. 3. Internal estimate, excluding
Russia and Belarus, see page 45. 4. New Categories contribution is positive in
2023 at £17 million (at current rates of exchange), turning from a loss of
£366 million in 2022. Accordingly, the movement is deemed not meaningful (or
n/m) in % terms. 5. Includes lease liabilities.
Sharpening our Vision and Strategic Execution
Tadeu Marroco, Chief Executive
When appointed as Chief Executive, I was clear that the fundamentals of our
strategy remain correct. However, we need to clarify our vision and strengthen
our execution.
We are therefore refining our A Better Tomorrow(TM) purpose, with a vision to
'Build A Smokeless World'.
Our vision is clear and focused on migrating cigarette consumers to
reduced-risk(*)(†) alternatives.
At the same time, we will manage our cigarette business responsibly, enabling
the returns to continue to invest in growing smokeless alternatives.
Leading in adult consumer choice is the cornerstone of our vision. Consumers
are not choosing a single alternative to smoking, and BAT is very well
positioned in all three of the main alternatives to smoking:
- Vuse is the global market leader in Vapour, a category that is the fastest
growing alternative to smoking;
- glo, our HP brand, is the global #2 brand in a category that is a strong
substitutional offer; and
- Velo is a leading Modern Oral brand in a rapidly growing category with the
lowest toxicant profile of all New Categories.
We have refined our strategy, enabling sharper execution with a clear
organisational line of sight across three strategic pillars:
- Quality Growth: Focused on more balanced top-line and bottom-line delivery,
built on the strength of our global brands and innovation;
- Sustainable Future: Our first-class science, more active external engagement
and regulatory focus driving our future sustainability; and
- Dynamic Business: A modern and progressive organisation, that is both
efficient and effective in its operations, is data driven and creates the
greatest financial flexibility possible to invest and generate cash returns.
I am pleased with the progress made across each of our key focus areas in
2023, each aligning with our strategic pillars:
- Drive profitability in New Categories: Reaching profitability (on a category
contribution basis) two years ahead of our original target;
- U.S. combustibles value growth: Delivering sequential volume and value share
growth since January 2023;
- Significantly strengthening Heated Products: Launching our first-to-market
tobacco-free offer, veo, and the launch of glo Hyper pro in Italy and Poland,
combined with the recently announced global settlement with PMI that resolves
all ongoing patent infringement litigation between the parties related to our
HP and Vapour products.
- Lead responsible New Category stewardship: Taking a pro-active,
science-driven approach to external affairs, as demonstrated by our campaign
in support of the ambition for a smoke-free Britain, through appropriate and
responsible Vapour regulation; and
- Enhance financial flexibility: Delivering our fourth consecutive year of
100% operating cash conversion, enabling us to return a total of £26.2
billion to shareholders since 2019.
A key part of our Dynamic Business pillar is financial flexibility,
disciplined capital allocation and strong shareholder distributions. We remain
committed to our 25-year track record of consistent dividend growth, rewarding
our shareholders through all economic cycles.
Over the next five years, we expect to generate around £40 billion of free
cash flow before dividends.
In addition, we continue to pursue all opportunities to enhance balance sheet
flexibility and, as part of this, we regularly review our stake in ITC. We
recognise that we have a significant shareholding which offers us the
opportunity to release and reallocate some capital.
Our shareholding in ITC has existed in one way or another since the early
1900s and is subject to numerous share capital changes and regulatory
restrictions. We have been actively working for some time on completing the
regulatory process required to give us the flexibility to monetise some of our
shareholding and will update you at the earliest opportunity.
It is an exciting time to be part of BAT and I look forward to working with my
colleagues around the globe to Build a Smokeless World and drive A Better
Tomorrow™.
* Based on the weight of evidence and assuming a complete switch from
cigarette smoking. These products are not risk free and are addictive.
†Our Vapour product Vuse (including Alto, Solo, Ciro and Vibe), and certain
products including Velo, Grizzly, Kodiak, and Camel Snus, which are sold in
the U.S., are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
2024 Outlook
- Global tobacco industry volume expected to be down c.3% mainly due to the
U.S. and Indonesia.
- Low-single figure organic revenue* growth and continued progress towards our
2025 £5 billion New Category revenue ambition.
- Low-single figure organic adjusted profit from operations growth*, including
an expected c.2% transactional FX headwind.
- Performance expected to be second half weighted given planned investment
phasing and expected slow recovery in U.S. macros.
- Expected translational foreign exchange headwind of 3% on full year adjusted
profit from operations growth.
- Operating cash flow conversion in excess of 90%.
- Progress towards the middle of our 2-3x adjusted net debt/adjusted EBITDA
corridor*.
- Commitment to dividend growth in sterling terms*.
* at constant rates of exchange.
Group Operating Review
Total Group volume and revenue
Prior year data is provided in the tables on pages 49 and 52
For year ended 31 December 2023 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Constant
Unit vs 2022 vs 2022 £m vs 2022 £m £m vs 2022 £m vs 2022
New Categories 3,347 +15.6% 63 3,410 +17.8% 3,312 +21.0%
Vapour (10ml units/pods mn) 654 +7.0% +7.0% 1,812 +26.2% 11 1,823 +26.9% 1,821 +26.8%
Heated Products (sticks bn) 23.7 -1.3% +11.6% 996 -6.0% 37 1,033 -2.5% 944 +4.1%
Modern Oral (pouches mn) 5,360 +33.6% +34.4% 539 +35.3% 15 554 +39.0% 547 +38.9%
Traditional Oral (stick eq bn) 6.6 -10.3% -10.3% 1,163 -3.8% 9 1,172 -3.1% 1,172 -3.1%
Total Non-Combustibles 4,510 +9.9% 72 4,582 +11.7% 4,484 +13.6%
Cigarettes (sticks bn) 555 -8.2% -5.3%
OTP incl RYO/MYO (stick eq bn) 15 -11.0% -11.0%
Total Combustibles 570 -8.3% -5.5% 22,108 -4.0% 738 22,846 -0.8% 22,396 +0.6%
Other 665 +27.6% 3 668 +28.4% 666 +29.6%
Total 27,283 -1.3% 813 28,096 +1.6% 27,546 +3.1%
Cigarettes and HP (sticks bn) 579 -8.0% -4.8%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Movement in Revenue
Reported revenue decreased by 1.3% to £27,283 million, largely due to the
sale of our businesses in Russia and Belarus partway through the year, as well
as the impact of lower cigarette volume (mainly in the U.S.) and a
translational foreign exchange headwind of 2.9% (due to the relative strength
of sterling, particularly against the US dollar, Pakistani rupee, Bangladeshi
taka and Japanese yen). These more than offset:
- New Categories revenue growth, up 17.8% (at constant rates of exchange), up
21.0% organically, with volume growth in all three categories; and
- Robust delivery in AME (despite the negative impact of the sale of the
businesses in Russia and Belarus midway through the year) and APMEA.
Cigarette volume declined c.8.2%, a decline of 5.3% on an organic basis. This
was mainly driven by the U.S. cigarette volume decline of 11.4%. The U.S.
cigarette industry was down 7.5%, driven by continued macro-economic pressures
and proliferation of illicit single-use vapour products impacting industry
volumes into the second half of 2023, with the premium segment remaining under
pressure. Despite this, our commercial plans are delivering early signs of
portfolio stabilisation with our volume share up 40 bps since January 2023.
This was driven by Newport and the continued strength of Natural American
Spirit and Lucky Strike. However, there is still more to do to mitigate the
impact from challenging macro-economic cycles, the rise of illicit single-use
vapour products and regulatory uncertainty.
Global duty paid industry cigarette volume was estimated to be down by c.3.5%.
Group cigarette volume share was flat, with value share 40 bps lower vs. 2022.
The following analysis is on a constant currency basis, which we believe
reflects the operational performance of the Group:
- In the U.S., revenue was down 4.5% as combustibles pricing and the growth of
New Categories (up 12.0%, underpinned by pricing, which more than offset a
decrease in volume of 11.4%) were more than offset by lower cigarette volume.
Vuse extended leadership in value share (of total Vapour in tracked channels)
by 470 bps to 45.6%. While we welcome the recent step-up in enforcement
actions from the FDA and other federal and state government agencies, those
regulatory bodies have an obligation to do far more to prevent the
proliferation of illicit flavoured single-use vapour products in the U.S.
- In AME, revenue grew 7.6%, driven by combustibles (up 2.9%, underpinned by a
robust pricing delivery) and New Categories (up 29.6%) where the Group
continued to grow revenue in all three categories. On an organic basis,
excluding the results of Russia and Belarus, revenue increased by 13.0% to
£9,439 million, with New Categories up 39% to £1,585 million.
- In APMEA, revenue was up 5.5%, driven by higher combustibles volume in
Bangladesh and combustibles pricing in Pakistan. New Categories revenue grew
2.6%, as higher volume in all categories was partly offset by lower revenue in
Heated Products (down 7.3%) driven by the price repositioning in the highly
competitive Japanese market, including the impact of the final step in the
five-year excise harmonisation programme.
Please refer to pages 8 to 10 for a further discussion on the performance by
category and pages 11 to 13 for discussion on regional performance.
Group Operating Review
Continued
Profit from operations, operating margin and category contribution
Reconciliation of Profit from Operations and Operating Margin, to adjusted
profit from operations at constant rates of exchange
Further details and prior year data are provided in the table on page 54
For year ended 31 December 2023 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2022 £m £m £m vs 2022 £m vs 2022
(Loss)/profit from Operations (PfO) (15,751) -250% 28,216 324 12,789 +3.1% 12,566 +3.9%
Operating Margin -57.7% -95.8 ppts 45.5% +60 bps 45.6% +40 bps
PfO delivered by
New Categories contribution^ 32 n/m 16 n/m
Rest of the Business 12,757 -0.1% 12,550 +0.9%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
^ New Categories contribution is positive in 2023 at £17 million (at
current rates of exchange), turning from a loss of £366 million in 2022.
Accordingly, the movement is deemed not meaningful (or n/m) in % terms.
Movement in Profit/(loss) from Operations
Profit from operations and operating margin
Profit from operations on a reported basis was a loss of £15.8 billion
compared to a profit in 2022 of £10.5 billion, driven by:
- The recognition of non-cash impairment charges of £22,992 million in
respect of certain of the acquired U.S. brands, £4,299 million in respect of
U.S. goodwill, £291 million related to South African goodwill and £24
million in respect of goodwill related to Peru;
- A translational foreign exchange headwind of 2.6% due to the relative
strength of sterling against the Group's operating currencies, particularly in
APMEA; and
- While absorbing a 2.5% (or £293 million) transactional foreign exchange
headwind.
These more than offset:
- A significant reduction in other one-off charges (£610 million in 2023
compared to £1,885 million in 2022). The movement was largely due to charges
relating to the agreement with the U.S. Department of Justice (DOJ) and the
U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) to
resolve investigations into historical breaches of sanctions (£75 million in
2023, compared to £450 million in 2022) and the Group's restructuring
programme Quantum, which did not repeat; and
- The recognition in 2023 of a further charge of £353 million (2022: £612
million) relating to the completed sale of the Group's Russian and Belarusian
businesses (see page 21).
Our Group operating margin was -57.7% in 2023, compared to 38.1% in 2022, due
to the impairment charges referred to above.
For a full discussion on the performance by region, please see pages 11 to 13.
However, excluding the impact of adjusting items and the impact of
translational foreign exchange (as we believe this provides an understanding
of the operational performance on a comparable basis):
- In the U.S., adjusted profit from operations was marginally higher than 2022
(up 0.4% to £6,863 million), as the continued improved performance in Vapour
(where pricing more than offset lower volume) offset the lower volume in
combustibles (described earlier) and associated decline in revenue (despite an
increase in pricing);
- In AME, adjusted profit from operations increased 5.9%, driven by improved
New Category profitability (on a category contribution basis) and pricing in
combustibles (with price/mix of 8.6%) enabling further New Categories
expansion. This more than offset the headwind from the sale of the Group's
businesses in Russia and Belarus midway through the year. On an organic basis,
adjusted profit from operations increased 9.7% at constant rates of exchange;
and
- In APMEA, adjusted profit from operations increased 6.9%, driven by the
performance of Pakistan, Sri Lanka and Uzbekistan and asset sales in West
Africa related to various market exits, which more than offset the decline in
Japan.
In aggregate, adjusted profit from operations at constant rates of exchange
was up 3.1%, or 3.9% on an organic basis, with adjusted operating margin up 80
bps at current rates and 60 bps at constant rates of exchange.
Group Operating Review
Continued
Earnings per share
(Note: NFC and Hybrid referred to above relates to Net Finance Costs (NFC) and
Hybrid bonds. Please refer to page) (14)(.)
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
are therefore excluded from the calculation of diluted earnings per share,
calculated in accordance with IFRS, for that year. For remuneration purposes,
and reflective of the Group's positive earnings on an adjusted basis,
management have included the dilutive effect of share options in calculating
adjusted diluted earnings per share.
Basic earnings per share were down 320% to -646.6p (2022: 293.3p) due to the
non-cash impairment charges in respect of goodwill and trademarks discussed
earlier, partly offset by lower other one-off charges compared to 2022 (mainly
related to the sale of the Group's businesses in Russia and Belarus, the
resolutions of the DOJ and OFAC investigations into historical sanctions
breaches and the Quantum restructuring).
Before adjusting items and including the dilutive effect of employee share
schemes, adjusted diluted earnings per share increased 1.1% to 375.6p (2022:
371.4p). On a constant translational foreign exchange basis, adjusted diluted
earnings per share were 4.0% higher at 386.4p, being an increase of 5.2% on an
adjusted, organic basis. For a full reconciliation of diluted earnings per
share to adjusted diluted earnings per share, at constant rates, and adjusted
diluted organic earnings per share, at constant rates, please see page 57.
Cash/Capital allocation
The Group continues to be highly cash generative, delivering another year of
operating cash conversion at c.100%, in excess of our 90% guidance. We
continued to make good progress towards reaching the middle of our 2-3x
adjusted net debt to adjusted EBITDA range reaching 2.6x in 2023.
Liquidity remains strong with average debt maturity close to 10 years, and a
fixed debt profile of c.95% and close currency matching. Our medium-term
rating target remains Baa1/BBB+/BBB+, with a current rating of Baa2 (positive
outlook), BBB+ (negative outlook), BBB (positive outlook), from Moody's,
S&P and Fitch, respectively. The Group expects gross capital expenditure
in 2024 of approximately £550 million, mainly related to the ongoing
investments in the Group's operational infrastructure, including the expansion
of our New Categories portfolio.
Our active capital allocation framework considers the continued investment in
our transformation, the macro environment, and potential future litigation and
regulatory outcomes. In April 2023, we reached agreements with the DOJ and
OFAC to resolve previously disclosed investigations into suspicions of
sanctions breaches. The total amount payable to the U.S. authorities is US$635
million plus interest.
In Canada, the confidential CCAA mediation process is still ongoing and the
outcome remains uncertain. At 31 December 2023, Canada had a balance of
£1,904 million related to restricted cash and cash equivalents and £446
million related to restricted investments held at fair value.
Given the above issues, and a more challenging and dynamic macro environment,
in 2023 the Board took a pragmatic approach to prioritise strengthening our
balance sheet.
Moving forward, capital effectiveness will continue to play a pivotal role in
our transformation strategy. We will continue to pursue all opportunities to
enhance balance sheet flexibility, including disposals and non-strategic
market exits. In line with our tobacco sector and broader FMCG peer group, and
taking into consideration the global interest rate environment, we aim to
further deleverage towards the middle of our 2-3x adjusted net debt to
adjusted EBITDA corridor over the medium term.
We continue to expect to deliver c.£40 billion of cumulative free cash flow
over the next five years, and remain committed to a progressive dividend. Once
our leverage target is reached, we will evaluate further opportunities to
return excess cash to our shareholders.
ESG Performance update
Ambitions and targets Metrics Performance tracking
Material Topic* 2023 2022 2021 Status
Harm reduction £5bn by 2025 New Category revenues (£bn) 3.3 2.9 2.1 n
in revenue from New Categories
50m by 2030 No. of consumers (millions) 23.9 20.7 17.1 n
consumers of our Non-Combustible products excluding Russia and Belarus
Net Zero GHG emissions by 2050 Scope 1 and 2 (market-based) CO(2)e emissions (thousand tonnes) 362 420 495 n
Climate change
50% reduction in Scope 1 and 2 GHG emissions by 2030 (vs 2020 baseline)(1)
Scope 1 and 2 CO(2)e emissions intensity (tonnes per £m revenue) 13.3 15.2 19.3 n
% Scope 1 and 2 CO(2)e emissions reduction vs 2020 baseline 33.1 22.3 8.4 n
50% reduction in Scope 3 GHG emissions by 2030 (vs 2020 baseline)(1) Scope 3 CO(2)e emissions (thousand tonnes) including biogenic emissions and - (2) 6,045 6,496 n
removals
Circular economy 25% reduction in waste generated in own operations by 2025 (vs 2017 baseline) % reduction in waste generated 28.2 21.5 14.1 ü
100% packaging % packaging reusable, recyclable or compostable 94 92 92 n
to be reusable, recyclable or compostable by 2025
% markets selling Vuse and glo with Take-Back schemes 100 100 100 ü
Biodiversity and ecosystems Deforestation and Conversion Free tobacco supply chain by 2025 % sources of wood used by our contracted farmers for curing fuels that are 99.99 99.99 99.89 n
from sustainable sources
Deforestation Free pulp and paper supply chain by 2025
Forest Positive in our tobacco supply chain by 2025 (vs 2021 baseline)
% of pulp and paper materials sourced with low risk of deforestation 69.3 N/A N/A n
Hectares of forests planted for conservation and Forest Positive 68.8 27.6 N/A n
Water 35% less water use by 2025 % reduction in water withdrawn vs 2017 baseline 39.2 32.6 27.6 ü
100% operations sites Alliance for Water Stewardship certified by 2025 % operations sites Alliance for Water Stewardship (AWS) certified 68.8 36.4 15.0 n
Employees, diversity and culture Increase to 45% by 2025 % female representation in Management roles 42 41 39 n
proportion of women in Management roles
Increase to 40% by 2025 proportion of women on Senior Leadership teams % female representation on Senior Leadership teams 33 30 27 n
Zero accidents Lost Time Incident Rate (LTIR) 0.17 0.19 0.20 n
aiming for zero accidents Group-wide each year
Number of serious injuries and fatalities 25 36 31 n
to employees and contractors
Human rights(3) Zero child labour % farms with incidents of child labour identified 0.15 0.38 0.70 n
aiming for zero incidents in our tobacco supply chain by 2025
% incidents of child labour identified and reported as resolved by the end of 100 100 100 ü
the growing season
Farmer livelihoods and communities(3) Prosperous livelihoods we are committed to working to enable prosperous % farmers in our Thrive Supply Chain(3) reported to grow other crops for food 93.3 92.8 95.6 n
livelihoods for all farmers in our tobacco supply chain or as additional sources of income
Marketing and communications Full compliance Incidents of non-compliance with marketing regulations resulting in a fine or 3 2 N/A n
penalty(4)
aiming for full compliance with marketing regulations
Ethics and integrity 100% SoBC compliance Number of established SoBC breaches(5) 123 84 99 n
aiming for full adherence to our Standards of Business Conduct (SoBC)
Number of disciplinary actions taken as a result of established SoBC breaches 79 58 46 n
that resulted in people leaving BAT
Supplier engagement 100% of product material and high-risk indirect suppliers having at least one % product material and higher-risk indirect service suppliers having an 58.8 36.6 22.0 n
independent labour audit within a three-year cycle independent labour audit within a three-year cycle
Notes: Environmental and Health & Safety data is reported for the period
1 December 2022 to 30 November 2023. * See 'Key Terms' on page 49. For more
definitions, see 'Reporting Criteria' on www.bat.com/sustainabilityreport. 1.
Compared to a 2020 baseline. Our near-term 2030 science-based targets comprise
50% reduction in Scope 1 and 2 and 50% reduction in Scope 3 GHG emissions.
Scope 3 emissions target includes purchased goods and services, upstream
transportation and distribution, use of sold products and end-of-life
treatment of sold products, which collectively comprised >90% of Scope 3
emissions in 2020. 2. Due to the complexity of consolidating and assuring
Scope 3 data from our suppliers and value chain, this is reported one year
later. In 2022 we further enhanced our Scope 3 calculation methodology leading
to the reporting periods 2020 and 2021 being restated accordingly. 3. Our
ambitions cover all tobacco we purchase for our products ('tobacco supply
chain'), which is used in our combustibles, Traditional Oral and Tobacco
Heated Products. Our metrics, however, derive data from our annual Thrive
assessment, which includes our directly contracted farmers and those of our
third-party suppliers, which represented over 94% of the tobacco we purchased
by volume in 2023 ('Thrive Supply Chain'). 4. In line with a reclassification
of 'ongoing incidents' (which, from 2023 reporting will be included as an
'incident' when the final decision is issued), the 2022 number has been
restated (three previously reported for 2022). 5. Consistent with previous
years' reporting, cases are not included if investigations were not resolved
at year-end.
ESG Performance update
As we transition from cigarettes to smokeless products, our transformation
must address not only our products' public health impact, but all our
material(1) sustainability topics. In 2023, we continued on our journey to
embed sustainability in our business and across our value chain guided by this
clear focus on materiality.
In 2023, we established a cross-functional programme to comply with the EU
Corporate Sustainability Reporting Directive (CSRD) for 2025. We also
refreshed our Double Materiality Assessment, building on last year's findings
and working towards alignment with the available guidance. One outcome was the
addition of 'Supplier engagement' as a distinct material topic, reflecting the
importance of engaging with our suppliers to drive progress on climate,
circularity, human rights and beyond.
Tobacco Harm Reduction: Science and regulation key to Building a Smokeless
World
- Non-Combustible product consumer acquisition of 3.2 million to 23.9 million
(excluding Russia and Belarus) and now representing 16.5% of Group revenue
- Published two cross-sectional studies which demonstrated a significant
reduction in biomarkers associated with negative health impacts for those who
switch from cigarettes to Velo or Vuse, as compared to continuing to smoke
- New Management Board role created - Director, Corporate and Regulatory
Affairs (CORA) with accountabilities for shaping regulatory strategy and
leading regulatory engagement
In response to the UK government's Tobacco and Vapes Bill announced in
November 2023, our UK business ran a proactive campaign to demonstrate its
support for the UK government's '2030 smoke-free' ambition. The campaign
called for a number of critical steps, including more effective vaping
regulation enforcement, a ban on flavours that appeal to those underage,
harsher penalties for illegal imports, restricting where and how vaping
products are sold in the UK and making devices more environmentally
responsible.
Environment: Further environmental progress across our operations; step-change
in biodiversity disclosure and actions
- Continued emissions reduction across own operations with Scope 1 and 2 GHG
emissions, now down 33.1% vs our 2020 baseline
(down 13.9% vs 2022), partly driven by continued capital expenditure (2023:
£24 million) in emissions and energy reduction activities
- Water withdrawn and waste generated reduction targets achieved two years
ahead of 2025 goals
- Science-Based Targets set by 15% of suppliers of purchased goods and
services by spend; more than halfway to 2025 goal of 20% of suppliers
We recognise the importance of protecting biodiversity - our approach starts
within our own operations and extends across our supply chain. Our approach to
identifying biodiversity risks and opportunities includes on-the-ground farmer
monitoring, geospatial risk assessment and third-party assessments. In 2023,
we launched a new Biodiversity Operating Standard outlining our requirements
to protect forest and biodiversity in agriculture, trained more than 1,300
employees and suppliers, set out our approach to Taskforce on Nature-related
Financial Disclosures (TNFD) and initiated work towards setting nature targets
aligned to the Science-Based Targets Network (SBTN).
Social: Holistic approach to human rights in our supply chain
- 0.15% of farms(2) with child labour incidents reported, down from 0.38% in
2022; with 100% reported as resolved by end of the growing season
- Over 415,000 farmers and community members reported as engaged in human
rights training and awareness programmes while building community resilience,
including by increasing coverage of our Women's Empowerment Programme
- Joined the Responsible Business Alliance, a global industry initiative for
sustainable supply chains related to manufacturing and sourcing of minerals,
metal and plastics, with a particular focus on the electronics industry
Our Supplier Code of Conduct outlines our expectation that all suppliers
conduct their operations in a way that respects the fundamental human rights
of others. Our non-leaf suppliers undergo independent due diligence audits,
which cover assessments of workplace conditions, and we continue to educate
our supply partners on sustainability issues. In 2023, we hosted supplier
engagement events in Bangladesh and Pakistan to develop local suppliers'
understanding of sustainability topics, such as human rights and climate
change.
Governance: Continuously strengthening our SoBC and Business Integrity and
Compliance (BIC) programmes
- Further strengthened our Group compliance programme with ongoing focus on
automation, centralisation, and deployment consistency; included improved
sanctions screening, automation and training initiatives in 2023
- Seventh continuous year of 100% Group-wide completion of Standards of
Business Conduct (SoBC) employee training and certification
- The 2023 annual SoBC e-learning programme included modules on Underage
Access Prevention and International Marketing Principles for the first time,
to deepen employee awareness and understanding of these key areas for the
Group
We continue to drive a culture of integrity, aligned with our values, and with
clear commitment that our business standards should never be compromised for
the sake of results.The Group continues to embrace the 'Delivery with
Integrity' programme, and we actively benchmark to keep up with global
regulations and expectations.
1. See Key Terms on page 49. 2. We derive data from our annual Thrive
assessment, which represented over 94% of tobacco sourced in 2023 ('Thrive
Supply Chain').
Enquiries
For more information, please contact Press Office:
Investor Relations: +44 (0)20 7845 2888 | @BATplc
Victoria Buxton +44 (0)20 7845 2012
Amy Chamberlain +44 (0)20 7845 1124
Yetunde Ibe +44 (0)20 7845 1095
John Harney+44 (0)20 7845 1263
Jane Henderson +44 (0)20 7845 1117
BAT IR Team
BAT Media Team
Webcast and Q&A session:
BAT will hold a live webcast for investors and analysts at 9.30am (GMT) on
8 February 2024, hosted by Tadeu Marroco, Chief Executive, and Javed Iqbal,
Interim Finance Director and Director, Digital & Transformation. The
presentation will be followed by a Q&A session. The webcast and
presentation slides will be available to view on our website at
www.bat.com/latestresults.
If you prefer to listen via conference call, please use the following dial-in
details (participant passcode: 550353).
Standard International: +44 20 3936 2999 SA (toll free): +27 80 017 2952
UK (toll free): 0800 358 1035 U.S. (toll free): + 1 855 979 6654
Category Performance Review
Please see page 52 for a full reconciliation to constant currency and organic
metrics, including prior year data.
All references to volume share or value share movement in the following
discussion are compared to 2022. See page 44 for a discussion on the use of
these measures.
Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
For year ended 31 December 2023 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Constant
Unit vs 2022 vs 2022 £m vs 2022 £m £m vs 2022 £m vs 2022
New Categories 3,347 +15.6% 63 3,410 +17.8% 3,312 +21.0%
Vapour (10ml units/pods mn) 654 +7.0% +7.0% 1,812 +26.2% 11 1,823 +26.9% 1,821 +26.8%
HP (sticks bn) 23.7 -1.3% +11.6% 996 -6.0% 37 1,033 -2.5% 944 +4.1%
Modern Oral (pouches mn) 5,360 +33.6% +34.4% 539 +35.3% 15 554 +39.0% 547 +38.9%
New Categories contribution* 32 n/m 16 n/m
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
*New Categories contribution is presented above on adjusted and adjusted
organic bases, in each case at constant rates of exchange. New Categories
contribution is positive in 2023 at £17 million (at current rates of
exchange), turning from a loss of £366 million in 2022. Accordingly, the
movement is deemed not meaningful (or n/m) in % terms.
Vuse - Vapour
Driving strongest consumer conversion to New Categories
- Vapour is the largest contributor to New Category usage, reaching 11.5
million consumers(1), adding 1.5 million in 2023, driven by continued closed
system growth and single-use vapour products.
- Vuse value share* up 30 bps, reaching 36.1% in key Vapour markets**, with
the single-use Vapour products continuing to accelerate total category growth.
Vuse Go now in 59 markets.
- Vuse extended leadership in value share (of total Vapour in tracked
channels) by 470 bps to 45.6% in the U.S.
- Vapour revenue up 26.9% (at constant rates), delivered by volume growth of
7.0% and pricing.
- Accelerating positive contribution with four of the five key Vapour markets
profitable(2), driven by pricing, increased scale and marketing spend
effectiveness.
Vuse volume grew 7.0% vs 2022, with revenue up 26.2% to £1,812 million, or
26.9% at constant rates of exchange. Vuse increased value share by 30 bps,
reaching 36.1%, with continued strong performance across all three regions.
Single-use products continue to accelerate category growth with their
convenient format, driving consumer trial and conversion. Vuse Go is now in 59
countries, with positive regulatory developments enabling our entrance into a
number of emerging markets (Colombia, Paraguay, Peru). We continue to approach
the growing single-use product category in a responsible way (including
through Underage Access Prevention programmes and flavours targeted to adult
consumers).
In the U.S., the world's largest Vapour market, Vuse extended leadership in
value share (of total Vapour in tracked channels) by 470 bps to 45.6%, with
revenue up 13.1%, or 13.8% on a constant currency basis. This was despite a
decrease in consumables volume (down 6.6%), due to the growth of illicit
single-use products which we estimate to be more than 60% of the total Vapour
market. We believe that public health officials, legislators, and regulators
-especially the FDA- should be concerned about the continued influx of illegal
single-use vapour products into the U.S. market. It is unacceptable that these
products, marketed in youth-appealing flavours such as Bubble Gum and Cotton
Candy, continue to be sold. We call on the FDA, in conjunction with state and
local authorities, to enforce against these products.
We are disappointed by the FDA's Marketing Denial Orders (MDOs) for Vuse
Alto's Menthol and Mixed Berry products. We are challenging these denials and
have obtained a permanent stay of enforcement allowing Vuse Alto Menthol to
remain on the market until a final decision is made. Furthermore, we remain
confident in our Premarket Tobacco Product Authorisation (PMTA) submission for
Vuse Alto tobacco variants, which further builds on the foundational science
of our successful applications for Solo, Ciro and Vibe tobacco flavour.
In AME, our Vapour business continued to grow volume (up 19.4%) and revenue
(up 47.6%, or 46.9% on a constant currency basis) with broad based growth
across key European markets.
In APMEA, total Vapour consumables volume grew 43.1%, with revenue up 60.5%,
or 74.6% on a constant currency basis, driven by South Africa, New Zealand,
Malaysia and Indonesia.
*Based on Vuse estimated value share from RRP in measured retail for Vapour
(i.e., total Vapour category value in retail sales) in the U.S., Canada,
France, the UK and Germany.
**Key Vapour markets are defined as the Top 5 markets by industry revenue in
tracked channels, being the U.S., the UK, France, Germany
and Canada. The Top 5 account for c.75% (2022: 88%) of global industry vapour
revenue (rechargeable closed systems and single-use products).
1. Excluding Russia and Belarus.
2. On a market contribution basis.
Category Performance Review
Continued
glo - Heated Products (HP), including Tobacco Heated Products (THP)
Global category growth slowing driven by increasing use of single-use Vapour
products and heightened competitive activity
- glo volume declined 1.3%, with revenue down 6.0% negatively impacted by the
disposal of the Russian and Belarusian businesses and translational foreign
exchange. On an organic basis, volume grew 11.6% with revenue up 4.1% at
constant rates of exchange.
- Global industry HP category volume growth of 13%, slowed from 20% in 2022,
due to the growth of single-use vapour despite elevated competitive activity.
- glo volume share of total HP and combustibles up 20 bps to reach 4.0%; glo
HP category volume share in key HP markets declined 110 bps to 18.2%.
- Continued HP category volume share gains in key AME markets (Poland and the
Czech Republic) offset by heightened competitive activity in Japan, South
Korea, and Italy.
- Enhancing our innovation pipeline, glo Hyper Air now launched in 23 markets;
veo™, our first brand to launch in the tobacco-free segment, now in 11
markets. Hyper pro launched in Italy and Poland with further geographic
rollouts planned for 2024.
- Global settlement with Philip Morris International (PMI) resolving all
ongoing patent infringement litigation related to HP and Vapour products.
glo volume declined by 1.3% (up 11.6% on an organic basis). Reported revenue
declined by 6.0%, or 2.5% at constant rates of exchange, due to the sale of
the Russian and Belarusian businesses during the year. On an organic, constant
rate basis, revenue grew 4.1%. Continued category volume share momentum in key
HP markets, including Poland and the Czech Republic, was offset by the highly
competitive markets in Japan, South Korea and Italy, leading to glo's HP
category volume share in key HP markets being down 110 bps to 18.2%. glo's
volume share of total HP and combustibles was up 20 bps to reach 4.0%.
In AME, volume was down 7.5%, as growth in Poland, Italy, Lithuania, Bulgaria
and Romania was more than offset by the sale of the Group's businesses in
Russia and Belarus. Reported revenue was up 2.3%, or 3.0% at constant
currency. On an organic basis, continued strong volume growth of 23.4% drove
revenue up 23.1% at constant rates of exchange, due to our successful
portfolio laddering strategy and volume share gains in key markets.
In APMEA, volume grew 4.9%, with revenue down 13.2%, or 7.3% at constant
currency, driven by the price repositioning in the highly competitive Japanese
market, including the impact of the final step in the five-year excise
harmonisation programme. glo's volume share in Japan started to stabilise in
the second half of 2023, driven by the activation of our commercial plans.
Our recently announced global IP settlement agreement with PMI is an important
step forward for glo, allowing us to further develop enhanced product
iterations and innovations in the Heated Products category over the medium
term.
veo™ is our latest innovation, offering an alternative to adult smokers in
11 markets and is the first brand to launch in the tobacco-free segment. glo
Hyper Air (our lightest device to date) is now in 23 markets, delivering
positive results. We continue to expand our geographic footprint with glo now
available in 31 markets.
*Key HP markets are defined as the Top 12 markets (excl Russia) by industry
volume. They were adjusted in 2023, with more established HP markets
Kazakhstan, Romania, Switzerland and Malaysia introduced and Russia removed.
Accordingly, glo's category volume share for 2022 was rebased on the new
definition from 19.4% to 19.2%. Top 12 markets are Japan, South Korea, Italy,
Greece, Hungary, Kazakhstan, Ukraine, Poland, Switzerland, Romania, Malaysia
and the Czech Republic. The Top 12 account for c. 85% of global industry HP
volume in 2023.
Velo - Modern Oral
Continued strong volume and revenue growth driving accelerating returns
- Continued strong volume growth of 33.6% driving revenue up 39.0% (at
constant rates).
- Growth driven by consumer acquisition, up 26.1%, reaching 3.3m users(1) and
increasing average daily consumption in both established and expansion
markets.
- Continued volume share leadership in 14 European markets, with aggregate
volume share at 67.0% in our four key AME markets*.
- Strong volume growth in Pakistan and Kenya, supporting future Emerging
Market ambitions.
Modern Oral volume was up 33.6% and revenue up 35.3%, or 39.0% at constant
rates, driving volume share of the total oral category up 120 bps to 8.6%.
While our category volume share of Modern Oral in key markets was 28.0%, down
240 bps, this was mainly driven by the reduction in volume share in the large
U.S. market (down 200 bps) where we continue to await the outcome of our PMTA
submission for our successful European product, Velo 2.0.
We are encouraged by the strong results from our recent Velo pilot in New
York, with a national roll-out to commence in 2024.
In our key markets outside the U.S., we maintained clear Modern Oral category
volume share leadership, despite a decline of 170 bps to 67.0%. We have
maintained our momentum by driving further geographic expansion and through
continued innovation, including the launch of our fusion and sensations
ranges, tailored to meet the needs of local consumer tastes and preferences.
In AME, we maintained volume share leadership in 14 markets, with volume
growth of 36.5% and revenue growth of 41.5% (or 44.6% at constant rates),
mainly driven by continued consumer acquisition.
We have been engaging with governments and other regulatory agencies and are
encouraged by the recently announced government regulatory proposals in
Hungary, Finland, Lithuania, Iceland and Serbia joining a growing group of
countries issuing bespoke regulation for the Modern Oral category that is
aligned to our Tobacco Harm Reduction strategy.
In APMEA, our volume grew 36.2% and our revenue grew 50.3% (or 70.8% at
constant rates), mainly driven by strong volume performances in Pakistan and
Kenya. In Pakistan, through stronger consumer acquisition, we have achieved
our highest active consumer base (as a % of population) in Modern Oral
globally. In Kenya, our accelerated national roll-out in January 2023 has
driven a near fourfold increase in adult consumer numbers. Together, our
learnings from these two markets give us confidence in our ability to unlock
the Emerging Market opportunity for Modern Oral going forward.
* Key Oral and Modern Oral markets are defined as the Top 5 markets by
industry revenue, being the U.S., Sweden, Norway, Denmark and Switzerland and
accounting for c.85% (2022: c.80%) of total industry Modern Oral revenue.
** Source: Kantar New Category Tracker.
1. Excluding Russia and Belarus
Category Performance Review
Continued
Combustibles
- Group value share down 40 bps, with AME flat, while APMEA was down 60 bps
and the U.S. was down 60 bps.
- Group volume share flat, with an increase in AME (up 10 bps) offset by APMEA
(down 20 bps) and the U.S. (down 10 bps).
- U.S. commercial plans delivered sequential volume share growth in 2023.
- Sharpening execution with reinvigorated portfolios and refreshed brands are
driving strong performance outside the U.S., demonstrating benefit of our
well-balanced portfolio and global footprint.
Group cigarette volume was down 8.2% to 555 billion sticks (2022: 605 billion
sticks), as volume growth in Bangladesh, Brazil and Türkiye was more than
offset by lower volume in the U.S., the impact of significant excise increases
in Pakistan and the sale, partway through the year, of the Group's businesses
in Russia and Belarus. On an organic basis, volume was down 5.3%.
In the U.S., industry volume declined 7.5%, largely driven by macro-economic
pressures impacting consumer behaviour. As a result of our premium-skewed
portfolio, combustibles volume was down 11.3%, with downtrading driving a
greater proportional effect on the Group. In addition, cigarette volume was
negatively impacted by the flavour ban in California and the increase of
solus-usage of alternative nicotine products, driven by the growth of illicit
single-use Vapour products. Our commercial plans have driven sequential volume
share growth during 2023. Our value share of the premium segment has grown 60
bps since January 2023, while the total premium sector remains under pressure,
down 30 bps (compared to H2 2022).
Total Group revenue from combustibles declined 4.0% to £22,108 million (2022:
£23,030 million), due to the decline in volume and a translational foreign
exchange headwind of 3.2%. Revenue at constant rates of exchange was down 0.8%
to £22,846 million, impacted by a lower comparable performance from Russia
and the timing of the sale of the Group's businesses in Russia and Belarus. On
an organic, constant currency basis, revenue grew 0.6%. Strong pricing most
notably in Pakistan, Türkiye, Canada and Germany, more than offset negative
geographic mix (driven by the U.S.), delivering an overall price/mix of 7.5%
on a constant currency basis.
Following a review of the U.S. market reflecting continuing macro-economic
headwinds, growth of illicit single-use Vapour products and uncertainty
regarding menthol regulation, from 1 January 2024 the Group will commence
amortising certain U.S. brands (Newport, Camel, Natural American Spirit and
Pall Mall) over a period not exceeding 30 years. The non-cash charge is
estimated to be £1.4 billion per year and will be treated as an adjusting
item.
Traditional Oral
Group volume declined 10.3% to 6.6 billion stick equivalents. Total revenue
was £1,163 million (2022: £1,209 million), down 3.8% or 3.1% at constant
rates. Continued strong pricing in the U.S. drove Group price/mix of +7.2% at
constant rates of exchange. This was more than offset by the reduction in
volume in both the U.S. (down 10.9%) and AME (down 5.2%) in 2023.
In the U.S. (which accounts for 97% of Group revenue from the category),
revenue declined 3.4% (at constant rates of exchange) as pricing was
insufficient to offset the volume decline (down 10.9%), negatively impacted by
the normalisation of inventory levels (being a drag of 1.7%). 2023 was also
negatively impacted by the continued strong macro-economic headwinds leading
to downtrading, accelerated cross-category switching and reduced consumption.
Value share in Traditional Oral increased 40 bps, with volume share down 20
bps.
Beyond Nicotine
Btomorrow Ventures (BTV), the Group's corporate venture capital arm, has
completed 25 investments (with three successful exits) since its launch in
2020, and continues to invest in innovative, consumer-led new sciences and
technologies and sustainability to support the Group's transformational
strategy for A Better Tomorrow(TM).
Throughout 2023, BTV has continued to support its portfolio of companies with
a number of follow-on investment rounds and commercial partnerships with BAT,
including investments in a UK-based bioplastics company, FlexSea, a U.S.-based
organ-on-a-chip technology company, Hesperos Inc., and a Brazilian supplements
company, Mais Mu.
In addition to the BTV investments mentioned above, in April 2023, a BAT
subsidiary entered into a joint venture agreement with Charlotte's Web. This
investment reinforces BAT's commitment to Charlotte's Web and represents
another step for the Group in its exploration beyond nicotine.
In November, BDI, a BAT subsidiary company, announced it will strengthen its
strategic partnership with Organigram Holdings Inc. (Organigram), a leading
Canadian licensed producer of cannabis. The investment of approximately £74
million is subject to customary conditions and is expected to be completed in
three equal tranches between January 2024 and February 2025. Based on
Organigram's current outstanding share capital, this investment will increase
the Group's equity position from c.19% to c.45% (restricted to 30% voting
rights) once all tranches have been completed. This investment enhances the
Product Development Collaboration between Organigram and BAT, which was
established in March 2021 and is further focused on R&D and product
innovation in the cannabis space. As described on page 21, the Group made the
first tranche of this additional investment of CAD$41.5 million (£24.1
million) on 24 January 2024.
The Group has continued its exploration of Beyond Nicotine via its subsidiary,
The Water Street Collective Ltd, with a series of pilot launches of our own
functional shot brand, Ryde, offering a scientifically formulated range of
Energy, Focus and Relax products in two markets - Australia and Canada.
Please see page 21 for more information on our investments.
Regional Review
The performances of the regions are discussed below. The following discussion
is based upon the Group's internal reporting structure.
All references to volume share or value share movement in the following
discussion are compared to FY 2022. See page 44 for a discussion on the use of
this measure. Our products as sold in the US, including Vuse, Velo, Grizzly,
Kodiak, and Camel Snus, are subject to FDA regulation and no reduced-risk
claims will be made as to these products without agency clearance.
United States (U.S.):
- Vuse revenue growth of 13.1%, or 13.8% at constant rates of exchange, and
extended value share leadership, in tracked channels
- Combustibles volume down, driven by macro-economic pressures
- £27 billion impairment, largely against the carrying value of the acquired
U.S. brands
- Sequential growth in our U.S. volume share in 2023, with sharper portfolio
management driving stabilisation
Volume/Revenue
Please see page 53 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2022 vs 2022 £m vs 2022 £m £m vs 2022 £m vs 2022
New Categories 1,058 +11.3% 6 1,064 +12.0% 1,064 +12.0%
Vapour (10ml units/pods mn) 298 -6.6% -6.6% 1,033 +13.1% 6 1,039 +13.8% 1,039 +13.8%
HP (sticks bn) - -% -% - -100% - - -100% - -100%
Modern Oral (pouches mn) 297 -1.3% -1.3% 25 -32.2% - 25 -31.8% 25 -31.8%
Traditional Oral (stick eq bn) 5.8 -10.9% -10.9% 1,127 -4.0% 7 1,134 -3.4% 1,134 -3.4%
Total Non-Combustibles 2,185 +2.9% 13 2,198 +3.5% 2,198 +3.5%
Total Combustibles 52 -11.3% -11.3% 9,744 -6.9% 58 9,802 -6.4% 9,802 -6.4%
Other 65 +44% - 65 +45% 65 +45%
Total 11,994 -5.1% 71 12,065 -4.5% 12,065 -4.5%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported revenue decreased 5.1%, partly due to a foreign exchange headwind of
0.6%. On a constant currency basis, revenue declined 4.5%. Continued growth in
New Categories was driven by Vuse with revenue up 13.1%, or 13.8% at constant
rates of exchange, but this was more than offset by combustibles volumes,
which were down 11.3% (see below).
Non-Combustibles now represent 18.2% of total revenue.
On a constant currency basis (excluding translational foreign exchange), which
we believe reflects the operational performance:
- In Vapour, where the U.S. is the world's largest Vapour market, Vuse
extended leadership in value share (of total Vapour in tracked channels) by
470 bps to 45.6%, with revenue up 13.8%. This was despite a decrease in
consumables volume (down 6.6%) due to the growth of illicit single-use
products which we estimate to be more than 60% of the total Vapour market. We
believe that public health officials, legislators, and regulators -especially
the FDA- should be concerned about the continued influx of illegal single-use
vapour products into the U.S. market. It is unacceptable that these products,
marketed in youth-appealing flavours such as Bubble Gum and Cotton Candy,
continue to be sold. We call on the FDA, in conjunction with state and local
authorities, to enforce against these products;
- Modern Oral revenue declined 31.8%, driven by lower volume (down 1.3%) while
we continue to await the outcome of our PMTA submission for our successful
European product, Velo 2.0;
- Traditional Oral revenue declined 3.4% as pricing was insufficient to offset
the volume decline (down 10.9%), negatively impacted by the normalisation of
inventory levels (being a drag of 1.7%). 2023 was also negatively impacted by
the continued strong macro-economic headwinds leading to downtrading,
accelerated cross-category switching and reduced consumption. Value share in
Traditional Oral increased 40 bps, with volume share down 20 bps; and
- In combustibles, industry volume declined 7.5%, largely driven by
macro-economic pressures impacting consumer behaviour. As a result of our
premium-skewed portfolio, combustibles volume was down 11.3%, with downtrading
driving a greater proportional effect on the Group. In addition, cigarette
volume was negatively impacted by the flavour ban in California and the
increase of solus-usage of alternative nicotine products, driven by the growth
of illicit single-use Vapour products. Our combustibles volume share fell 10
bps with value share down 60 bps, although during 2023 volume share has
returned to sequential growth.
Profit from operations and operating margin
Please see page 50 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2022 £m £m £m vs 2022 £m vs 2022
(Loss)/profit from Operations -20,781 -435% 27,602 42 6,863 +0.4% 6,863 +0.4%
Operating Margin -173% -222 ppts 56.9% +280 bps 56.9% +280 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported profit from operations declined by 435%, due to the £4.3 billion
impairment of goodwill and £23.0 billion impairment of the carrying value of
some of the Group's U.S. acquired brands, with the combustible brands to be
reclassified as definite-lived intangible assets from 1 January 2024.
Translational foreign exchange was a headwind of 1.6%. Accordingly, reported
operating margin was down 222 ppts to -173%.
On a constant currency basis, and excluding adjusting items, adjusted profit
from operations was marginally higher, up 0.4% to £6,863 million as the
continued improved financial performance in Vapour performance was partly
offset by the impact of lower combustibles volume (described above).
Following a review of the U.S. market reflecting continuing macro-economic
headwinds, growth of illicit single-use Vapour products and uncertainty
regarding menthol regulation, from 1 January 2024 the Group will commence
amortising certain U.S. brands (Newport, Camel, Natural American Spirit and
Pall Mall) over a period not exceeding 30 years. The non-cash charge is
estimated to be £1.4 billion per year and will be treated as an adjusting
item.
Regional Review
Continued
Americas and Europe (AME):
- Multi-category region with Non-Combustibles now representing 17.5% of
revenue
- New Category revenue growth of 28.8%, or 29.6% at constant rates of exchange
- Resilient combustibles performance led by pricing, despite headwind due to
sale of the Russian and Belarusian businesses partway through the year
- Combustibles volume share up 10 bps and value share flat
Volume/Revenue
Please see page 53 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2022 vs 2022 £m vs 2022 £m £m vs 2022 £m vs 2022
New Categories 1,673 +28.8% 10 1,683 +29.6% 1,585 +39.0%
Vapour (10ml units/pods mn) 312 +19.4% +19.4% 686 +47.6% (4) 682 +46.9% 680 +46.5%
HP (sticks bn) 11 -7.5% +23.4% 505 +2.3% 3 508 +3.0% 419 +23.1%
Modern Oral (pouches mn) 4,210 +36.5% +37.5% 482 +41.5% 11 493 +44.6% 486 +44.6%
Traditional Oral (stick eq bn) 0.8 -5.2% -5.2% 36 +1.7% 2 38 +7.9% 38 +7.9%
Total Non-Combustibles 1,709 +28.1% 12 1,721 +29.0% 1,623 +38.0%
Total Combustibles 278 -5.7% +1.2% 7,614 +0.3% 196 7,810 +2.9% 7,360 +8.0%
Other 468 +28.2% (10) 458 +25.2% 456 +26.9%
Total 9,791 +5.4% 198 9,989 +7.6% 9,439 +13.0%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported revenue was up 5.4% at current rates, driven by New Category revenue
growth of 28.8% and a robust performance in combustibles (despite a £456
million negative drag on the regional performance which comprises the combined
impact of a lower performance from Russia compared to 2022 and the timing of
the sale of the Group's businesses in Russia and Belarus partway through the
year), which was partly offset by a 2.2% translational foreign exchange
headwind.
Non-Combustibles now represent 17.5% of total revenue. On a constant currency
basis (excluding translational foreign exchange), which we believe reflects
the operational performance, revenue increased by 7.6%, driven by:
- Higher revenue from combustibles (up 2.9%), driven by a favourable pricing
environment across the region coupled with volume performance in Brazil,
Türkiye, Germany, Mexico and France, which more than offset the impact of
lower volume (in Chile, Canada and Romania) and the sale partway through the
year of the Group's businesses in Russia and Belarus;
- Continued growth in Vapour revenue (up 46.9%), largely due to the
performance of Vuse in the Germany, Italy, Poland, France, Romania, the UK,
Greece and the Czech Republic. Single-use vapour products continued to grow
across all key markets;
- A good performance in HP (up 3.0%), although this was negatively impacted by
the timing of the sale of the Group's businesses in Russia and Belarus. On an
organic basis, HP revenue was up 23.1% (with volume up 23.4%) driven by
Poland, the Czech Republic, Greece and Romania; and
- Modern Oral revenue growth of 44.6%, driven by Sweden, Norway, the UK and
the Czech Republic, as we maintained volume share leadership in 14 markets.
On a constant currency, organic basis (excluding the results of Russia and
Belarus), revenue increased by 13.0% to £9,439 million.
Profit from operations and operating margin
Please see page 50 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2022 £m £m £m vs 2022 £m vs 2022
Profit from Operations 3,194 +9.2% 266 87 3,547 +5.9% 3,324 +9.7%
Operating Margin 32.6% +110 bps 35.5% -50 bps 35.2% -110 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported profit from operations increased by 9.2%, despite a translational
foreign exchange headwind of 2.5%. The growth was partly due to a number of
charges that impacted the prior year, including charges related to the sale of
the Group's businesses in Russia and Belarus and Quantum-related
restructurings, which were in aggregate £449 million lower in 2023. The
comparative regional performance was also affected by the settlement of
historical VAT and excise tax claims in Brazil accounting for income of £167
million in 2023, compared to £460 million in 2022.
Excluding the impact of foreign exchange and adjusting items, the increase was
driven by an improved operational performance in
- Germany and Türkiye (where the combustibles portfolio performed well with
higher volume and pricing);
- Poland, Sweden and the Czech Republic, which all improved their New
Categories financial performance; and
- Ukraine, where the Group had temporarily suspended operations in the first
six months of 2022.
These were partly offset by a combination of the timing of the sale of the
Group's businesses in Russia and Belarus and a lower operational delivery from
Russia. Adjusted profit from operations was up 5.9%, or 9.7% on an adjusted
organic constant currency basis.
In June 2023, the Group's new Innovation Hub in Trieste, Italy, was opened,
manufacturing Velo, to support our global supply chain. It also houses an
Innovation Lab (our first in Europe) and a Digital Boutique (to accelerate
BAT's digital transformation). The facility uses 100% renewable electricity.
Regional Review
Continued
Asia-Pacific, Middle East and Africa (APMEA):
- New Category revenue declined 4.5%, but was up 2.6% at constant rates of
exchange, driven by the growth of Vapour in South Africa
- Combustibles performance impacted by a translational foreign exchange
headwind with constant rate growth led by robust pricing
- Combustibles value share down 60 bps with volume share down 20 bps
Volume/Revenue
Please see page 53 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Volume Revenue
Reported Organic Reported Or
ga
ni
c
Current Exchange Constant Co
ns
ta
nt
Unit vs 2022 vs 2022 £m vs 2022 £m £m vs 2022 £m vs 2022
New Categories 616 -4.5% 47 663 +2.6% 663 +2.6%
Vapour (10ml units/pods mn) 44 +43.1% +43.1% 93 +60.5% 9 102 +74.6% 102 +74.6%
HP (sticks bn) 13 +4.9% +4.9% 491 -13.2% 34 525 -7.3% 525 -7.3%
Modern Oral (pouches mn) 853 +36.2% +36.2% 32 +50.3% 4 36 +70.8% 36 +70.8%
Traditional Oral (stick eq bn) - -% -% - -% - - -% - -%
Total Non-Combustibles 616 -4.5% 47 663 +2.6% 663 +2.6%
Total Combustibles 240 -10.6% -10.6% 4,750 -4.5% 484 5,234 +5.2% 5,234 +5.2%
Other 132 +18.9% 13 145 +32.0% 145 +32.0%
Total 5,498 -4.0% 544 6,042 +5.5% 6,042 +5.5%
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Reported revenue declined 4.0% due to a translational foreign exchange
headwind of 9.5% largely related to the relative movement of sterling against
the Pakistani rupee, Bangladeshi taka and Japanese yen. Constant currency
revenue was 5.5% higher, due to combustibles pricing (notably in Pakistan)
more than offsetting lower total combustibles volume (down 10.6%) as a decline
in Pakistan more than outweighed higher volume in Bangladesh.
Non-Combustibles now represent 11.2% of total revenue.
On a constant currency basis (excluding translational foreign exchange), which
we believe reflects the operational performance, New Categories increased by
2.6%, driven by growth in revenue from:
- Vapour, driven by increases in South Africa, New Zealand, Malaysia and
Indonesia; and
- Modern Oral, mainly driven by strong volume performances in Pakistan and
Kenya. In Pakistan, through stronger consumer acquisition, we have achieved
our highest active consumer base (as a % of population) in Modern Oral
globally. In Kenya, our accelerated national roll-out in January 2023 has
driven a near fourfold increase in adult consumer numbers.
These were offset by lower revenue from HP as, despite an increase in volume
of 4.9%, revenue was negatively impacted by the price repositioning in the
highly competitive Japanese market, including the impact of the final step in
the five-year excise harmonisation programme.
Profit from operations and operating margin
Please see page 50 for a full reconciliation to constant currency and organic
metrics, including prior year data.
For year ended 31 December 2023 Reported Adj. Exchange Adjusted Adjusted Organic
Current Constant Co
ns
ta
nt
£m vs 2022 £m £m £m vs 2022 £m vs 2022
Profit from Operations 1,836 +32% 348 195 2,379 +6.9% 2,379 +6.9%
Operating Margin 33.4% +910 bps 39.4% +60 bps 39.4% +60 bps
Constant currency measures are calculated based upon a re-translation, at the
prior year's exchange rates, of the current year's results of the Group and,
where applicable, its segments.
Profit from operations was 32% higher, as the prior year was adversely
affected by charges related to the DOJ and OFAC resolutions of investigations
into suspicions of sanctions breaches described on page 20 (2023: £75
million; 2022: £450 million) and other charges (in respect of Quantum and the
exit from Egypt) that did not repeat in 2023. 2023 was also negatively
impacted by a translational foreign exchange headwind as described above, and
an impairment of goodwill in respect of South Africa of £291 million due to
the continued negative impact of illicit trade.
Excluding adjusting items and translational foreign exchange, the performance
was driven by:
- Pakistan, where pricing more than offset a reduction in combustibles volume;
- Sri Lanka, largely due to pricing in combustibles as macro-economic
stability returned;
- Uzbekistan, driven by combustibles pricing; and
- Asset sales in West Africa related to various market exits.
These more than offset a decline in Japan, largely due to the highly
competitive pricing environment in combustibles and HP (including the final
step in the five-year excise harmonisation programme).
Adjusted profit from operations at constant rates of exchange (which excludes
the impact of adjusting items and translational foreign exchange) increased by
6.9%.
Other Financial Information
Analysis of profit from operations (by segment) and diluted earnings per share
Prior year data is provided in the table on page 49.
For year ended 31 December 2023 Reported vs Adj Items(1) Adjusted vs Exch. Adjusted at CC(2) vs Adjusted Organic at CC(2) vs
2022 2022 2022 2022
£m % £m £m % £m £m % £m %
Profit from Operations
U.S. (20,781) -435% 27,602 6,821 -0.2% 42 6,863 0.4% 6,863 0.4%
AME 3,194 9.2% 266 3,460 3.4% 87 3,547 5.9% 3,324 9.7%
APMEA 1,836 31.9% 348 2,184 -1.8% 195 2,379 6.9% 2,379 6.9%
Total Region (15,751) -250% 28,216 12,465 0.5% 324 12,789 3.1% 12,566 3.9%
Net finance costs (1,895) 15.5% 96 (1,799) 11.9% 5 (1,794) 11.6% (1,819) 12.8%
Associates and joint ventures 585 32.4% (8) 577 8.1% 34 611 14.5% 611 14.4%
(Loss)/profit before tax (17,061) -283% 28,304 11,243 -0.8% 363 11,606 2.4% 11,358 3.2%
Taxation 2,872 -216% (5,488) (2,616) -2.4% (109) (2,725) 1.6% (2,662) 1.1%
Non-controlling interests (178) -1.1% (1) (179) -3.2% (13) (192) 3.8% (192) 3.8%
Coupons relating to hybrid bonds net of tax (45) -8.2% - (45) -8.2% - (45) -8.2% (45) -8.2%
(Loss)/profit attributable to shareholders (14,412) -318% 22,815 8,403 -0.2% 241 8,644 2.7% 8,459 3.9%
Diluted number of shares (m) 2,229 -1.7% 2,237 -1.3% 2,237 -1.3% 2,237 -1.3%
Diluted (loss)/earnings per share (pence)(3) (646.6) -322% 375.6 1.1% 386.4 4.0% 378.1 5.2%
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
3. In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
are therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS, for 2023.
Net finance costs
Net finance costs were £1,895 million, compared to £1,641 million in 2022.
This was an increase of 15.5%, largely due to:
- Higher interest expense, as the Group's average cost of debt has increased
to 5.2% compared to 4.0% in 2022 in line with higher interest rates in the
market; and
- Charges incurred as the Group completed a tender offer to repurchase
sterling-equivalent £3,133 million of bonds, including £43 million of
accrued interest.
Translational foreign exchange was a marginal headwind due to the relative
movement of sterling.
These were partly offset by higher interest income (2023: £186 million; 2022:
£92 million), of which £97 million (2022: £42 million) relates to income on
cash and cash equivalents on restricted cash balances (in Canada due to the
cash build up in that market) with the remainder driven by higher interest
rates on local deposits.
The Group has debt maturities of around £3.2 billion annually in the next
two years. Due to higher interest rates, net finance costs are expected to
increase as debts are refinanced.
Also in 2023, in line with IAS 33 Earnings Per Share, £45 million (2022: £49
million) has been recognised as a deduction to EPS related to the perpetual
hybrid bonds issued in 2021, as the coupons paid on such instruments are
recognised in equity rather than as a charge to the income statement in net
finance costs.
On a constant currency basis, and after adjusting for items including the
costs incurred in respect of the early repurchase of bonds and finance costs
related to the Franked Investment Income Group Litigation Order (FII GLO, as
described on page 42), adjusted net finance costs were £1,799 million, an
increase of 11.9% (2022: £1,607 million). Please refer to page 35 for
discussion of the adjusting items within net finance costs. For a full
reconciliation of net finance costs to adjusted net finance costs at constant
rates, see page 55.
Results of associates and joint ventures
The Group's share of post-tax results of associates and joint ventures
increased from £442 million to £585 million which largely relates to the
performance of the Group's main associate, ITC Limited (ITC) in India. The
Group's share of ITC's post-tax results was 19.8% higher at £616 million
(2022: £514 million). The movements are largely due to the economic recovery
in India in 2023 from COVID-19 which led to difficult trading conditions in
2022, more than offsetting a translational foreign exchange headwind.
On 24 July 2023, ITC announced a proposed demerger of its 'Hotels Business'
under a scheme of arrangement by which 60% of the newly incorporated entity
would be held directly by ITC's shareholders proportionate to their
shareholding in ITC. On 14 August 2023, ITC's Board of Directors approved the
scheme of arrangement subject to necessary regulatory approvals. The demerger
is expected to be completed by the end of 2024.
The Group recognised an impairment charge of £34 million (net of tax) in
respect of the Group's investment in Organigram, after having recognised an
impairment charge of £59 million (net of tax) in 2022. The charge was treated
as an adjusting item in both periods.
Included in the results of associates and joint ventures above is other
adjusting income of £42 million (2022: adjusting costs of £3 million). It is
mainly related to a deemed income of £40 million (2022: £3 million loss) on
dilution of the Group's holding in ITC.
Excluding these adjusting items and the impact of translational foreign
exchange, on an adjusted constant currency basis, the Group's share of
post-tax results from associates and joint ventures was higher than 2022, up
14.5% to £611 million. Please refer to page 35 for discussion of the
adjusting items within the Group's share of post-tax results from associates
and joint ventures.
Other Financial Information
Continued
Taxation
The tax rate in the income statement was 16.8% for 2023 (2022: 26.6%). The
Group's tax rate is affected by the impact of the adjusting items referred to
on pages 31 to 35 and by the inclusion of the share of associates and joint
ventures post-tax profit in the Group's pre-tax results.
Excluding these, the Group's underlying tax rate for subsidiaries reflected in
the adjusted earnings per share on page 39 was 24.5% for 2023 (2022: 24.8%).
The effective and underlying rate in 2023 reflects the mix of profits.
A full reconciliation from taxation on ordinary activities to the underlying
tax rate is provided on page 56.
On 15 December 2023, a further judgment was issued regarding the Netherlands
Tax disputes for the 2003 - 2016 period. The disputes have a potential
aggregate net liability of £1,148 million. Having considered the judgment and
the Dutch judicial and international proceedings available to it, the Group
has recognised a further adjusting charge of £70 million in 2023, with a
total provision of £145 million recognised by 31 December 2023. The findings
of the December judgement have been appealed.
In December 2021, the Organisation for Economic Co-operation and Development
(OECD) released model rules for a new global minimum corporate tax framework
applicable to multinational enterprise groups with global revenues over €750
million (so called Pillar Two rules). The UK substantively enacted legislation
implementing these rules on 20 June 2023 and the rules apply to the Group
as of 1 January 2024. The Group is reviewing this legislation together with
developing guidance. The Group is also monitoring the status of implementation
of the model rules outside of the UK to assess the potential impact. Based on
the information currently available, the impact of these rules on the Group
tax position is not expected to be material. The Group has applied the
mandatory exception to recognising and disclosing information about deferred
tax assets and liabilities related to Pillar Two income taxes in accordance
with IAS12 Income Taxes.
Cash flow
For years ended 31 December
2023 2022 Change
£m £m %
Net cash generated from operating activities 10,714 10,394 3.1%
Operating cash flow conversion 100% 100%
Free cash flow - before payment of dividends 8,360 8,049 3.9%
Free cash flow - after payment of dividends 3,305 3,134 5.5%
As at 31 December
2023 2022 Change
£m £m %
Borrowings (including lease liabilities) 39,730 43,139 -7.9%
Adjusted net debt 33,940 38,131 -11.0%
In the Group's cash flow, prepared in accordance with IFRS and presented on
page 30, net cash generated from operating activities increased by 3.1% to
£10,714 million (2022: £10,394 million). This was driven by:
- the realisation of tax credits in Brazil (related to the previously
disclosed VAT and excise on social contributions); and
- higher dividends received from the Group's associates of £506 million
(2022: £394 million), mainly related to ITC.
These were partially offset by:
- payments in respect of the settlement agreements with the DOJ and OFAC
(2023: £262 million; 2022: £nil million);
- increases in tax paid of £2,622 million, compared to £2,537million in
2022; and
- a payment of £59 million to settle the investigation by the Nigerian
Federal Competition and Consumer Protection Commission (FCCPC).
In 2023, other litigation payments (mainly related to Engle) were lower at
£73 million (2022: £181 million).
The Group made interim repayments to HMRC of £50 million in both 2023 and
2022, and intends to make further interim repayments in future periods in
respect of the Franked Investment Income Group Litigation Order (FII GLO), as
described on page 42.
Operating cash conversion and free cash flow (before and after dividends paid
to shareholders)
The Group's operating cash conversion rate (based upon adjusted profit from
operations and defined on page 57) was 100% (2022: 100%).
This exceeded our target of at least 90%, demonstrating the ongoing strength
of the Group in turning operating performance into cash.
Free cash flow (before the payment of dividends), as defined on page 58, was
£8,360 million for 2023 (2022: £8,049 million), an increase of 3.9%. This
was driven by the improvement in net cash generated from operating activities
and lower net capital expenditure (2023: £487 million; 2022: £599 million),
partly offset by higher net interest paid (2023: £1,682 million; 2022:
£1,578 million) due to the increase in interest rates.
After paying dividends of £5,055 million (2022: £4,915 million), free cash
flow (after dividends paid to shareholders), as defined on page 58, was
£3,305 million for 2023 (2022: £3,134 million).
For a full reconciliation of net cash generated from operating activities to
free cash flow before and after dividends, see page 58.
( )
Other Financial Information
Continued
Borrowings and net debt
Borrowings (which includes lease liabilities) were £39,730 million at 31
December 2023, a decrease of 7.9% compared to £43,139 million at 31 December
2022. This was partly due to the foreign exchange movements, mainly related to
the US dollar and sterling.
The Group remains confident of its ability to access the debt capital markets
successfully and reviews its options on a continuing basis.
The Group's average centrally managed debt maturity was 10.5 years at 31
December 2023 (31 December 2022: 9.9 years), and the highest proportion of
centrally managed debt maturing in a single rolling 12-month period was 15.7%
(31 December 2022: 18.6%).
The Group defines net debt as borrowings (including related derivatives and
lease liabilities), less cash and cash equivalents (including restricted cash)
and current investments held at fair value. Closing net debt was £34,640
million at 31 December 2023 (31 December 2022: £39,281 million). A
reconciliation of borrowings to net debt is provided below.
As at 31 December
2023 2022 Change
£m £m %
Borrowings (including lease liabilities) (39,730) (43,139) -7.9%
Derivatives in respect of net debt (170) (167) +1.8%
Cash and cash equivalents 4,659 3,446 +35.2%
Current investments held at fair value 601 579 +3.8%
Net debt (34,640) (39,281) -11.8%
Maturity profile of net debt:
Net debt due within one year 852 (181) -570.7%
Net debt due beyond one year (35,492) (39,100) -9.2%
Net debt (34,640) (39,281) -11.8%
The movement in net debt includes the free cash outflow, after payment of
dividends to shareholders, of £3,305 million (2022: £3,134 million outflow),
as described on page 58. Also impacting the carrying value of net debt at the
balance sheet date are:
- Cash payments related to share schemes and investing activities of £303
million (2022: £635 million), which, in 2023, was lower mainly due to the
movement in foreign exchange dividend hedges due to the movement in sterling,
predominantly against the US dollar;
- Other non-cash movements of £226 million (2022: £84 million);
- The reclassification of certain balances previously held-for-sale related to
the proposed sale of the Group's operations in Russia and Belarus of £368
million inflow (2022: £352 million outflow); and
- Foreign exchange impacts related to the revaluation of foreign currency
denominated net debt balances being a net tailwind of £1,338 million (2022:
£3,030 million headwind).
In 2022, the Group purchased £2 billion of own shares under the Group's share
buy-back programme, which ended in December 2022.
These movements can be summarised as follows:
As at 31 December
2023 2022 Change
£m £m %
Opening net debt (including IFRS 16) (39,281) (36,302) 8.2%
Free cash inflow (after dividends) 3,305 3,134 5.5%
Other cash payments (303) (635)
Purchase of own shares - (2,012)
Receipt from disposal of subsidiaries (net of cash disposed of) 159 -
Transferred from/(to) held-for-sale 368 (352)
Other non-cash movements (226) (84)
Foreign exchange 1,338 (3,030)
Closing net debt (34,640) (39,281) -11.8%
Investments held at fair value through profit and loss above include
restricted amounts of £446 million (31 December 2022: £396 million) due to
investments held by subsidiaries in CCAA protection, as well as £89 million
(31 December 2022: £78 million) subject to potential exchange control
restrictions.
Cash and cash equivalents include restricted amounts of £1,904 million (31
December 2022: £1,411 million) due to subsidiaries in CCAA protection and
£392 million (31 December 2022: £324 million) principally due to exchange
control restrictions.
Other Financial Information
Continued
Borrowings and net debt (continued)
Adjusted net debt and adjusted net debt to adjusted EBITDA
For the purposes of assessing the Group's ability to service and repay
borrowings, the Group uses the ratio of adjusted net debt to adjusted EBITDA.
Adjusted EBITDA is defined as profit for the year (earnings) before net
finance costs, taxation on ordinary activities, share of post-tax results of
associates and joint ventures, depreciation, amortisation, impairment costs
and adjusting items. Please refer to page 59 for a reconciliation of adjusted
EBITDA to profit for the year.
The Group also adjusts net debt for items held-for-sale and for the purchase
price allocation adjustment to the debt, included within borrowings, acquired
as part of the acquisition of Reynolds American Inc. This is an accounting
adjustment and does not reflect the enduring repayment of the instrument. The
Group Management Board believes that this additional measure, which is used
internally to assess the Group's financial capacity, is useful to the users of
the financial statements in helping them to see how the Group's financial
capacity has changed over the year. The adjusted net debt position is provided
below:
As at 31 December
2023 2022 Change
£m £m %
Net debt (34,640) (39,281) -11.8%
Net debt items included within assets held-for-sale - 352 -100%
Purchase price allocation (PPA) adjustment to acquired debt 700 798 -12.3%
Adjusted net debt (33,940) (38,131) -11.0%
Exchange (1,358)
Adjusted net debt translated at 2022 exchange rates (35,298) -7.4%
The Group's ratio of adjusted net debt to adjusted EBITDA as at 31 December
2023 was 2.6x (2022: 2.9x).
The calculation of adjusted net debt to adjusted EBITDA is provided on page
59.
Global patent settlement
As previously announced, BAT has reached a global settlement with Philip
Morris International Inc. (PMI) that resolves all ongoing patent infringement
litigation between the parties related to our HP and Vapour products.
The settlement includes non-monetary provisions between BAT and PMI that
resolve all ongoing global patent infringement litigation, encompassing all
related injunctions and exclusion orders, and prevents future claims against
current heated tobacco and vapour products. The settlement also allows each
party to innovate and introduce product iterations. BAT is committed to
continued innovation in reduced-risk products to further advance Tobacco Harm
Reduction.
Dividends summary
The Board has declared an interim dividend of 235.5p per ordinary share of 25p
for the year ended 31 December 2023, payable in four equal quarterly
instalments of 58.8795p per ordinary share in May 2024, August 2024, November
2024 and February 2025. This represents an increase of 2.0% on 2022 (2022:
230.9p per share), and a pay-out ratio, on 2023 adjusted diluted earnings per
share, of 62.7%.
The quarterly dividends will be paid to shareholders registered on either the
UK main register or the South Africa branch register and to holders of
American Depositary Shares (ADSs), each on the applicable record dates below:
Event (2024 unless stated otherwise) Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Record date (JSE, LSE and NYSE) 22 March 28 June 27 September 20 December
Payment date (LSE and JSE) 2 May 2 August 1 November 3 February 2025
ADS payment date (NYSE) 7 May 7 August 6 November 6 February 2025
Other Financial Information
Continued
Foreign currencies
The principal exchange rates used to convert the results of the Group's
foreign operations to pounds sterling for the purposes of inclusion and
consolidation within the Group's financial statements are indicated in the
table below. Where the Group has provided results "at constant rates of
exchange" this refers to the translation of the results from the foreign
operations at rates of exchange prevailing in the prior period - thereby
eliminating the potentially distorting impact of the movement in foreign
exchange on the reported results.
The principal exchange rates used were as follows:
Average for the period ended As at
31 December 31
De
ce
mb
er
2023 2022 2023 2022
Australian dollar 1.873 1.779 1.868 1.774
Bangladeshi taka 134.747 115.040 139.909 123.502
Brazilian real 6.208 6.384 6.192 6.351
Canadian dollar 1.678 1.607 1.681 1.630
Chilean peso 1,044.498 1,076.291 1,113.264 1,024.811
Euro 1.150 1.173 1.154 1.127
Indian rupee 102.707 97.030 106.081 99.516
Japanese yen 174.883 161.842 179.721 158.717
Romanian leu 5.688 5.783 5.741 5.577
Russian ruble(1) 102.662 87.184 120.111 87.812
South African rand 22.962 20.176 23.313 20.467
Swiss franc 1.117 1.179 1.073 1.113
US dollar 1.244 1.236 1.275 1.203
1. As a result of the disposal of the Russian businesses, the 2023 rates
reflect the average for the period ended and as at 13 September 2023,
respectively.
Other Information
Risks and uncertainties
The Board carried out a robust assessment of the Principal Risks and
uncertainties facing the Group for the period, including those that would
threaten its business model, future performance, solvency, liquidity and
viability. The Board also maintained close oversight of the Group's response
to critical external uncertainties, recognising current macro-economic and
geopolitical challenges.
All Group risks are reviewed biannually by the Audit Committee and annually by
the Board. Sustainability is core to the Group's long-term business strategy
and ESG risk factors are embedded across the Group's risks in accordance with
the Group's Risk Management Framework.
In 2023, the Board identified two additional risks to the Group: "Cyber
security", to reflect the evolving complexity of the cyber-threat environment
and increased digital interaction with consumers and "Supply chain
disruption", in view of the macro-economic and geopolitical environment and
the complexity of the New Categories supply chain.
The Principal Risks facing the Group are summarised under the headings of:
- Competition from illicit trade;
- Geopolitical tensions;
- Tobacco, New Categories and other regulation interrupts the growth strategy;
- Supply chain disruption;
- Litigation;
- Significant increases or structural changes in tobacco, nicotine and New
Categories related taxes;
- Inability to develop, commercialise and deliver the New Categories strategy;
- Disputed taxes, interest and penalties;
- Injury, illness or death in the workplace;
- Solvency and liquidity;
- Foreign exchange rate exposures;
- Climate change and circular economy; and
- Cyber security.
A summary of all the risk factors (including the Principal Risks) which are
monitored by the Board through the Group's risk register will be included in
the Annual Report and Accounts and Form 20-F for the year ended 31 December
2023.
Update on investigations into misconduct allegations
From time to time, the Group investigates, and becomes aware of governmental
authorities' investigations into allegations of misconduct, including alleged
breaches of sanctions and allegations of corruption at Group companies. Some
of these allegations are currently being investigated. The Group cooperates
with the authorities, where appropriate.
On 25 April 2023, the Group announced that it had reached settlement
agreements with the DOJ and OFAC in the U.S. related to breaches of sanctions
related to North Korea, which resulted in the imposition of fines against the
Group totalling US$635 million. British American Tobacco p.l.c. (the
"Company") entered into a three-year deferred prosecution agreement (DPA) with
the DOJ and a civil settlement agreement with OFAC. The DOJ's charges against
the Company - one count of conspiring to commit bank fraud and one count of
conspiring to violate sanctions laws - were filed and will later be dismissed
if the Company abides by the terms of the DPA. In addition, a BAT subsidiary
in Singapore, British-American Tobacco Marketing (Singapore) Private Limited,
pleaded guilty to the same charges. The total amount payable to the U.S.
authorities is US$635 million (£499 million) plus interest, which will be
paid by the Company.
Having recognised an initial provision of £450 million (US$540 million), in
line with the requirements of IAS 37 (Provisions, Contingent Liabilities and
Contingent Assets), in the 2022 interim and full year results, the Group has
recognised an additional charge of £75 million in 2023. Having made payments
of £4 million (US$5 million) in April 2023 and £258 million (US$321 million)
in September 2023, the remainder will be paid in the first half of 2024.
Update on Quebec class action and CCAA
There have been no substantial developments in respect of the Quebec Class
Action and subsequent grant of protection of the Group's subsidiary, Imperial
Tobacco Canada Ltd (ITCAN), under the Companies' Creditors Arrangement Act
(CCAA). The stays are currently in place until 29 March 2024. While the stays
are in place, no steps are to be taken in connection with the Canadian tobacco
litigation with respect to ITCAN, certain of its subsidiaries or any other
Group company.
In accordance with the CCAA process, the parties continue to work towards a
plan of arrangement or compromise in a court-ordered confidential mediation.
The length and ultimate outcome of the CCAA process, including the resolution
of the underlying legal proceedings, remains uncertain.
In line with IFRS 10 (Consolidated Financial Statements), ITCAN is
consolidated in the Group's results. For ease of reference and to assist the
users of this Preliminary Announcement, in 2023, ITCAN's contribution to the
financial performance of the Group was:
- Revenue: £1,003 million;
- Profit from operations: £600 million;
- Adjusted profit from operations: £604 million; and
- Adjusted EBITDA: £613 million.
At 31 December 2023, restricted cash in ITCAN was £1,904 million and
restricted investments held at fair value were £446 million, with ITCAN
goodwill recognised on the balance sheet of the Group at £2,386 million.
For a summary of the case, please see the Contingent Liabilities section on
page 40. Full details of the case and the assessment of goodwill will be
included in the Group's Annual Report and Accounts and Form 20-F for the year
ended 31 December 2023 (note 12 Intangible Assets and note 31 Contingent
Liabilities and Financial Commitments).
Other Information
Continued
Changes in the Group
Russia and Belarus
On 11 March 2022, as discussed on page 33, the Group announced the intention
to transfer its Russian business in compliance with international and local
laws. At that time, the Group had two subsidiaries in Russia (BAT Russia),
being JSC British American Tobacco-SPb and JSC International Tobacco Marketing
Services.
In September 2023, we formally entered into an agreement to sell the Group's
Russian and Belarusian businesses to a consortium led by then members of BAT
Russia's management team, in compliance with local and international laws. As
previously announced, due to operational dependencies between BAT Russia and
the Group's subsidiary in Belarus (International Tobacco Marketing Services
BY) (BAT Belarus), the Belarusian business was included in the sale. The
transaction was completed on 13 September 2023 and, since completion, the
buyer consortium has wholly owned both businesses. These businesses are now
known as the ITMS Group.
Throughout the transfer process one of our key priorities was the interests of
our colleagues in Russia and Belarus. As part of the agreement, their
employment terms will remain comparable to their prior BAT terms for at least
two years post-completion.
In accordance with IFRS, the assets and liabilities of the subsidiaries
comprising BAT Russia and BAT Belarus were classified as held-for-sale at 31
December 2022 and presented as such on the balance sheet at an estimated
recoverable value. Impairment charges (and associated costs) of £612 million
were recognised in 2022 (and treated as a non-cash adjusting item).
Upon completion, the businesses were deconsolidated from the Group's balance
sheet. This included assets primarily composed of £177 million of property,
plant and equipment and other non-current assets, £342 million of trade and
other receivables, £266 million of cash and cash equivalents and £211
million of other current assets principally relating to inventories. This was
offset by liabilities primarily composed of £7 million of borrowings and
£219 million of trade creditors and other current liabilities, resulting in a
net asset position of £770 million.
As shown in the cash flow statement on page 30, proceeds of £425 million were
received in 2023 (net of cash disposed of £266 million). This resulted in an
impairment charge of £345 million. However, the impairment charge of £554
million in 2022 (net of £14 million utilised) was reversed, leading to a net
partial reversal of the previously recognised impairment charge of £195
million.
In addition to this, £554 million of foreign exchange previously recognised
in the statement of other comprehensive income has been reclassified to the
income statement upon completion of the transaction, which has been treated as
a non-cash adjusting item. Other disposal-related costs of £3 million and £9
million of foreign exchange gains on proceeds received were also recognised in
2023.
Combined with the aforementioned partial reversal of impairment charges, this
resulted in a net charge to the income statement of £353 million. Refer to
page 33 for a detailed analysis of the charge.
As part of the disposal agreements, the Group holds call options to reacquire
the ITMS Group entities. No value has been ascribed to these options as they
cannot be sold or transferred outside the BAT Group, they expire within two
years of the completion of the transaction and current sanctions and
countersanctions would restrict the ability of the Group to exercise these
options. Assuming the higher returns that any market participant would require
given the perceived risk of investing in Russia going forwards, and a
consequent high discount rate, any value associated with exercising the
options would be immaterial.
The transfer of the Russian and Belarusian businesses does not have a material
impact on the remainder of the Group's supply chain.
To supplement the Group's results presented in accordance with IFRS, the
Group's Management Board, as the chief operating decision-maker, reviews the
Group's results, including volume, revenue, profit from operations and
operating margin excluding businesses sold, held-for-sale or acquired that
have a significant impact on the users' understanding of the Group's
performance between periods. Although the Group does not believe that these
measures are a substitute for IFRS measures, the Group does believe that such
presentation of the results (excluding the impact of businesses sold or to be
held-for-sale, and referred to as "on an organic basis") provides additional
useful information to investors regarding the underlying performance of the
business on a comparable basis and in the case of the sale of the Group's
businesses in Russia and Belarus, the impact these businesses had on revenue
and profit from operations. Accordingly, the organic financial measures
appearing in this document should be read in conjunction with the Group's
results as reported under IFRS.
Please see the reconciliations of volume to organic volume, revenue to organic
revenue, profit operations to adjusted organic profit from operations and
operating margin to adjusted organic operating margin on page 49.
Other changes
In April 2023, the Group announced a strategic joint venture agreement with
Charlotte's Web. Under the terms of the transaction, a Group subsidiary
acquired a 20% stake in the new JV entity (DeFloria LLC) at a cost of c.£7.9
million (US$10 million).
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$41.5 million (£24.1 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 current outstanding share capital, 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.
External Audit Tender Process
As previously announced, during 2023 the Audit Committee undertook a formal
competitive audit tender process in respect of the audit for the 2025
financial year. That process was concluded in 2023 and the Board approved the
re-appointment of KPMG LLP.
A resolution proposing the appointment of KPMG LLP as external auditors for
the 2025 financial year will be put forward to shareholders for approval at
the 2025 Annual General Meeting. Details of the external audit tender process
and evaluation criteria will be reported in the Group's Annual Report and Form
20-F 2023.
Other Information
Continued
Changes to the Main Board
As previously announced, the following Board changes have taken place:
- Savio Kwan stepped down from the Board as a Non-Executive Director with
effect from 19 April 2023.
- Jack Bowles stepped down from the Board as Chief Executive with effect from
15 May 2023.
- Tadeu Marroco was appointed as Chief Executive with effect from 15 May 2023.
- Murray S. Kessler joined the Board as an independent Non-Executive Director
and member of the Nominations and Remuneration Committees with effect from 6
November 2023.
- Serpil Timuray joined the Board as an independent Non-Executive Director and
member of the Nominations and Remuneration Committees with effect from 4
December 2023.
Sue Farr and Dimitri Panayotopoulos will step down from the Board with effect
from the conclusion of the Company's 2024 AGM to be held on 24 April 2024 and
will not stand for re-election.
As previously announced, Soraya Benchikh has been appointed to the role of
Chief Financial Officer and Executive Director and will join the Main Board
and Management Board with effect from 1 May 2024.
Changes to the Management Board
With effect from 15 May 2023, Tadeu Marroco was appointed Chief Executive and
Javed Iqbal was appointed Interim Finance Director. Javed retained his role as
Director, Digital & Information.
With effect from 1 July 2023, Johan Vandermeulen was appointed to the new role
of Chief Operating Officer, reporting to the Chief Executive. Reporting to
Johan are:
- David Waterfield, appointed to the Management Board as President & CEO,
Reynolds American Inc.
- Fred Monteiro (Director, Americas & Europe) and Michael Dijanosic
(Director, Asia Pacific, Middle East & Africa).
- Zafar Khan (Director, Operations) and Javed Iqbal (Director, Digital &
Information). Javed also continues to serve as Interim Finance Director.
With effect from 1 September 2023, Kingsley Wheaton, previously Chief Growth
Officer, was appointed to the new role of Chief Strategy & Growth Officer,
reporting to the Chief Executive. Reporting to Kingsley are:
- Luciano Comin, appointed to the new role of Marketing Director, Combustibles
& New Categories, with effect from 1 July 2023.
- Paul McCrory, appointed to the new role of Director, Corporate &
Regulatory Affairs, with effect from 1 September 2023.
- James Barrett, appointed to the new role of Director, Business Development,
with effect from 1 September 2023.
James Murphy, Director, Research & Science and Jerome Abelman, Director,
Legal & General Counsel, continue in their roles reporting directly to the
Chief Executive.
With effect from 1 November 2023, Cora Koppe-Stahrenberg was appointed to the
new role of Chief People Officer, reporting directly to the Chief Executive.
Other Information
Continued
Going concern
A description of the Group's business activities, its financial position, cash
flows, liquidity position, facilities and borrowings position, together with
the factors likely to affect its future development, performance and position,
are set out in this announcement. Further information will be provided in the
Strategic Report and in the Notes on the Accounts, all of which will be
included in the Group's 2023 Annual Report and Accounts and Form 20-F.
The Group has, at the date of this Preliminary Announcement, sufficient
existing financing available for its estimated requirements for at least 12
months from the date of approval of this condensed consolidated financial
information. This, together with the ability to generate cash from trading
activities, the performance of the Group's Strategic Portfolio, its leading
market positions in a number of countries and its broad geographical spread,
as well as numerous contracts with established customers and suppliers across
different geographical areas and industries, provides the Directors with the
confidence that the Group is well placed to manage its business risks
successfully through the ongoing uncertainty, the current macro-economic
financial conditions and the general outlook in the global economy.
After reviewing the Group's forecast financial performance and financing
arrangements, the Directors consider that the Group has adequate resources to
continue operating for at least 12 months from the date of approval of this
preliminary announcement and that it is therefore appropriate to continue to
adopt the going concern basis in preparing the Group's 2023 Annual Report and
Accounts and Form 20-F.
Additional information
In addition to this Preliminary Announcement, the Group wishes to inform the
reader that additional information will be available in documents filed with
the LSE and SEC on 9 February 2024 and which should be referred to in
addition to this Preliminary Announcement. Additional information includes:
- The Group's audited Financial Statements;
- Exchange rates;
- Reconciliations of all non-GAAP measures from the most relevant IFRS
equivalent;
- Information regarding contingent liabilities and financial commitments;
- Information for shareholders on dividends;
- Information with regards to the Group's Principal Risks;
- Key dates in respect of the year ending 31 December 2024; and
- Glossary and definition of key terms.
This information will be an extract of information that will be included in
the Group's 2023 Annual Report and Accounts and Form 20-F for the 12 months
ended 31 December 2023 which is expected to be published on 9 February 2024.
Financial Statements
Contents
Page
Financial Statements:
Group Income Statement 25
Group Statement of Comprehensive Income 26
Group Statement of Changes in Equity 27
Group Balance Sheet 29
Group Cash Flow Statement 30
Notes to the Financial Statements 31
Other Information 43
Data Lake and Reconciliations 49
Financial Statements
Group Income Statement
For years ended 31 December
2023 2022
£m £m
Revenue(1) 27,283 27,655
Raw materials and consumables used (4,545) (4,781)
Changes in inventories of finished goods and work in progress (96) 227
Employee benefit costs (2,664) (2,972)
Depreciation, amortisation and impairment costs (28,614) (1,305)
Other operating income 432 722
Loss on reclassification from amortised cost to fair value (9) (5)
Other operating expenses (7,538) (9,018)
(Loss)/profit from operations (15,751) 10,523
Net finance costs (1,895) (1,641)
Share of post-tax results of associates and joint ventures 585 442
(Loss)/profit before taxation (17,061) 9,324
Taxation on ordinary activities 2,872 (2,478)
(Loss)/profit for the year (14,189) 6,846
Attributable to:
Owners of the parent (14,367) 6,666
Non-controlling interests 178 180
(14,189) 6,846
(Loss)/earnings per share
Basic (646.6)p 293.3p
Diluted (646.6)p 291.9p
All of the activities during both years are in respect of continuing
operations.
The accompanying notes on pages 31 to 42 form an integral part of this
condensed consolidated financial information.
1. Revenue is net of duty, excise and other taxes of £36,917 million and
£38,527 million for the years ended 31 December 2023 and 31 December 2022,
respectively.
2. In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS, for that year. For remuneration
purposes, and reflective of the Group's positive earnings on an adjusted
basis, management have included the dilutive effect of share options in
calculating adjusted diluted earnings per share.
Financial Statements
Continued
Group Statement of Comprehensive Income
For years ended 31 December
2023 2022
£m £m
(Loss)/profit for the year (page 25) (14,189) 6,846
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss: (3,317) 8,506
Foreign currency translation and hedges of net investments in foreign
operations
- differences on exchange from translation of foreign operations (4,049) 8,923
- reclassified and reported in profit for the year 552 5
- net investment hedges - net fair value gains/(losses) on derivatives 236 (578)
- net investment hedges - differences on exchange on borrowings 9 (21)
Cash flow hedges
- net fair value gains 59 81
- reclassified and reported in profit for the year 12 101
- tax on net fair value (gains) in respect of cash flow hedges (23) (17)
Investments held at fair value
- net fair value (losses)/gains (6) 6
Associates - share of OCI, net of tax (107) 6
Items that will not be reclassified subsequently to profit or loss: (57) 201
Retirement benefit schemes
- net actuarial (losses)/gains (106) 316
- surplus recognition 24 (39)
- tax on actuarial losses/(gains) in respect of subsidiaries 30 (95)
Associates - share of OCI, net of tax (5) 19
Total other comprehensive (expense)/income for the year, net of tax (3,374) 8,707
Total comprehensive (expense)/income for the year, net of tax (17,563) 15,553
Attributable to:
Owners of the parent (17,699) 15,370
Non-controlling interests 136 183
(17,563) 15,553
The accompanying notes on pages 31 to 42 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Statement of Changes in Equity
At 31 December 2023 Attributable to owners of the parent
Share Share premium, capital redemption and merger reserves Other Retained In respect of assets held-for-sale Total attributable Perpetual hybrid bonds Non-controlling interests
capital reserves earnings to owners Total equity
of parent
£m £m £m £m £m £m £m £m £m
Balance at 1 January 2023 614 26,628 2,655 44,081 (295) 73,683 1,685 342 75,710
Total comprehensive (expense)/income for the year comprising: - - (3,281) (14,418) - (17,699) - 136 (17,563)
(page 26)
(Loss)/profit for the year - - - (14,367) - (14,367) - 178 (14,189)
(page 25)
Other comprehensive expense for the year (page 26) - - (3,281) (51) - (3,332) - (42) (3,374)
Other changes in equity
Cash flow hedges reclassified and reported in total assets - - 27 - - 27 - - 27
Employee share options
- value of employee services - - - 71 - 71 - - 71
- proceeds from new shares issued - 2 - - - 2 - - 2
Dividends and other appropriations
- ordinary shares - - - (5,071) - (5,071) - - (5,071)
- to non-controlling interests - - - - - - - (110) (110)
Purchase of own shares
- held in employee share ownership trusts - - - (110) - (110) - - (110)
Perpetual hybrid bonds
- coupons paid - - - (58) - (58) - - (58)
- tax on coupons paid - - - 14 - 14 - - 14
Reclassification of equity relating to assets held-for-sale - - (295) - 295 - - - -
Other movements - - - 22 - 22 - - 22
Balance at 31 December 2023 614 26,630 (894) 24,531 0 50,881 1,685 368 52,934
Financial Statements
Continued
Group Statement of Changes in Equity (continued)
At 31 December 2022 Attributable to owners of the parent
Share Share premium, capital redemption and merger reserves Other Retained In respect of assets held-for-sale Total attributable Perpetual hybrid bonds Non-controlling interests Total equity
capital reserves earnings to owners
of parent
£m £m £m £m £m £m £m £m £m
Balance at 1 January 2022 614 26,622 (6,032) 44,212 - 65,416 1,685 300 67,401
Total comprehensive income for the year comprising: (page 26) - - 8,521 6,849 - 15,370 - 183 15,553
Profit for the year (page 25) - - - 6,666 - 6,666 - 180 6,846
Other comprehensive income for the year (page 26) - - 8,521 183 - 8,704 - 3 8,707
Other changes in equity
Cash flow hedges reclassified and reported in total assets - - (129) - - (129) - - (129)
Employee share options -
- value of employee services - - - 81 - 81 - - 81
- proceeds from new shares issued - 5 - - - 5 - - 5
- treasury shares used for share option schemes - 1 - (1) - - - - -
Dividends and other appropriations
- ordinary shares - - - (4,915) - (4,915) - - (4,915)
- to non-controlling interests - - - - - - - (141) (141)
Purchase of own shares -
- held in employee share ownership trusts - - - (80) - (80) - - (80)
- share buy-back programme - - - (2,012) - (2,012) - - (2,012)
Perpetual hybrid bonds
- proceeds, net of issuance fees - - - - - - - - -
- tax on issuance fees - - - - - - - -
- coupons paid - - - (59) - (59) - - (59)
- tax on coupons paid - - - 11 - 11 - - 11
Non-controlling interests - acquisitions - - - (1) - (1) - - (1)
Other movements non-controlling interests - - - - - - - -
Reclassification of equity in respect of assets classified as held-for-sale - - 295 - (295) - - - -
Other movements - - - (4) - (4) - - (4)
Balance at 31 December 2022 614 26,628 2,655 44,081 (295) 73,683 1,685 342 75,710
The accompanying notes on pages 31 to 42 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Balance Sheet
As at 31 December
2023 2022
£m £m
Assets
Intangible assets 95,562 129,075
Property, plant and equipment 4,583 4,867
Investments in associates and joint ventures 1,970 2,020
Retirement benefit assets 956 1,000
Deferred tax assets 911 682
Trade and other receivables 321 241
Investments held at fair value 118 121
Derivative financial instruments 109 131
Total non-current assets 104,530 138,137
Inventories 4,938 5,671
Income tax receivable 172 149
Trade and other receivables 3,621 4,367
Investments held at fair value 601 579
Derivative financial instruments 181 430
Cash and cash equivalents 4,659 3,446
14,172 14,642
Assets classified as held-for-sale 14 767
Total current assets 14,186 15,409
Total assets 118,716 153,546
Equity - capital and reserves
Share capital 614 614
Share premium, capital redemption and merger reserves 26,630 26,628
Other reserves (894) 2,655
Retained earnings 24,531 44,081
In respect of assets held-for-sale - (295)
Owners of the parent 50,881 73,683
Perpetual hybrid bonds 1,685 1,685
Non-controlling interests 368 342
Total equity 52,934 75,710
Liabilities
Borrowings 35,406 38,726
Retirement benefit liabilities 881 949
Deferred tax liabilities 12,192 18,428
Other provisions for liabilities 531 434
Trade and other payables 893 944
Derivative financial instruments 206 502
Total non-current liabilities 50,109 59,983
Borrowings 4,324 4,413
Income tax payable 992 1,049
Other provisions for liabilities 468 1,087
Trade and other payables 9,700 10,449
Derivative financial instruments 189 427
15,673 17,425
Liabilities associated with assets classified as held-for-sale - 428
Total current liabilities 15,673 17,853
Total equity and liabilities 118,716 153,546
The accompanying notes on pages 31 to 42 form an integral part of this
condensed consolidated financial information.
Financial Statements
Continued
Group Cash Flow Statement
For years ended 31 December
2023 2022
£m £m
Cash flows from operating activities
Cash generated from operating activities (page 37) 12,830 12,537
Dividends received from associates 506 394
Tax paid (2,622) (2,537)
Net cash generated from operating activities 10,714 10,394
Cash flows from investing activities
Interest received 145 85
Purchases of property, plant and equipment (460) (523)
Proceeds on disposal of property, plant and equipment 54 31
Purchases of intangibles (141) (133)
Proceeds on disposal of intangibles 27 3
Purchases of investments (448) (257)
Proceeds on disposals of investments 405 128
Investment in associates and acquisitions of other subsidiaries net of cash (37) (39)
acquired
Disposal of subsidiary, net of cash disposed of 159 -
Net cash used in investing activities (296) (705)
Cash flows from financing activities
Interest paid on borrowings and financing related activities (1,682) (1,578)
Interest element of lease liabilities (30) (25)
Capital element on lease liabilities (162) (161)
Proceeds from increases in and new borrowings 5,134 3,267
Reductions in and repayments of borrowings (6,769) (3,044)
Outflows relating to derivative financial instruments (480) (117)
Purchases of own shares - share buy-back programme - (2,012)
Purchases of own shares held in employee share ownership trusts (110) (80)
Coupon paid on perpetual hybrid bonds (59) (60)
Dividends paid to owners of the parent (5,055) (4,915)
Capital injection from and purchases of non-controlling interests - (1)
Dividends paid to non-controlling interests (105) (158)
Other 4 6
Net cash used in financing activities (9,314) (8,878)
Net cash flows generated from operating, investing and financing activities 1,104 811
Transferred from/(to) held-for-sale(*) 368 (368)
Differences on exchange (292) 431
Increase in net cash and cash equivalents in the year 1,180 874
Net cash and cash equivalents at 1 January 3,337 2,463
Net cash and cash equivalents at 31 December 4,517 3,337
Cash and cash equivalents per balance sheet 4,659 3,446
Overdrafts and accrued interest (142) (109)
Net cash and cash equivalents at 31 December 4,517 3,337
(*Included in Transferred from held-for-sale in 2023 is £102 million of
foreign exchange loss due to the devaluation of the Russian ruble.)
The accompanying notes on pages 31 to 42 form an integral part of this
condensed consolidated financial information. The net cash flows relating to
the adjusting items within profit from operations on pages 31 to 35, included
in the above, are an outflow of £156 million (31 December 2022: £466 million
outflow).
( )
Notes to the Financial Statements
Accounting policies and basis of preparation
The condensed consolidated financial information has been extracted from the
Group's 2023 Annual Report and Accounts and Form 20-F, including the financial
statements for the year ended 31 December 2023, which is expected to be
published on 9 February 2024. This condensed consolidated financial
information does not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006.
The Group prepares its annual consolidated financial statements in accordance
with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and UK-adopted international
accounting standards, and in accordance with the provisions of the UK
Companies Act 2006 applicable to companies under IFRS. UK-adopted
international accounting standards differ in certain respects from IFRS as
issued by the IASB. The differences have no impact on the Group's consolidated
financial statements for the periods presented.
These condensed financial statements have been prepared under the historical
cost convention, except in respect of certain financial instruments. They are
prepared on a basis consistent with the IFRS accounting policies as set out in
the Group's Annual Report and Accounts and Form 20-F for the year ended 31
December 2022.
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 judgment at the date of the condensed
consolidated financial statements. Other than in respect of the Group's
Russian and Belarusian businesses and certain assumptions related to the
assessment of the carrying value of goodwill and intangible assets, the key
estimates and assumptions were the same as those that applied to the
consolidated financial information for the year ended 31 December 2022, apart
from updating the assumptions used to determine the carrying value of
liabilities for retirement benefit schemes. As described on page 34, the Group
has assessed whether there are any impairment triggers related to the carrying
value of the significant investments of goodwill and intangibles. Other than
as described on pages 34 and 35 in relation to the U.S., South Africa and Peru
and the investment in Organigram, no other impairment is required. 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.
As discussed on page 23, after reviewing the Group's forecast financial
performance and financing arrangements, the Directors consider that the Group
has adequate resources to continue operating for at least 12 months from the
date of approval of this condensed consolidated financial information and that
it is therefore appropriate to continue to adopt the going concern basis in
preparing the 2023 Annual Report and Accounts and Form 20-F.
Analysis of revenue and profit from operations by segment
Years ended 31 December 2023 2022
Reported Exchange Reported at CC(2) Reported
Revenue £m £m £m £m
U.S. 11,994 71 12,065 12,639
AME 9,791 198 9,989 9,287
APMEA 5,498 544 6,042 5,729
Total Region 27,283 813 28,096 27,655
Years ended 31 December 2023 2022
Reported Adj Items(1) Adjusted Exchange Adjusted at CC(2) Reported Adj Items(1) Adjusted
(Loss)/profit from operations £m £m £m £m £m £m £m £m
U.S. (20,781) 27,602 6,821 42 6,863 6,205 630 6,835
AME 3,194 266 3,460 87 3,547 2,926 422 3,348
APMEA 1,836 348 2,184 195 2,379 1,392 833 2,225
Total Region (15,751) 28,216 12,465 324 12,789 10,523 1,885 12,408
Notes to the analysis of revenue and profit from operations above:
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
As part of 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 four regions to three regions,
with the new organisational structures in place from April 2023. The new
regional structure is:
- the U.S.;
- Americas and Europe (AME), comprising largely the old Europe region with the
inclusion of markets in Latin America and Canada; and
- Asia-Pacific, Middle East and Africa (APMEA) comprising the old APME region
with the inclusion of markets in Sub-Saharan Africa and parts of the former
Europe region.
The regional results, for the year ended 31 December 2022, presented as
comparators within this Preliminary Announcement have been represented on the
new regional structure.
Notes to the Financial Statements
Continued
Adjusting Items
Adjusting items are significant items of income or expense in profit from
operations, net finance costs, taxation and the Group's share of the post-tax
results of associates and joint ventures which individually or, if of a
similar type, in aggregate, are relevant to an understanding of the Group's
underlying financial performance because of their size, nature or incidence.
In identifying and quantifying adjusting items, the Group consistently applies
a policy that defines criteria that are required to be met for an item to be
classified as adjusting. These items are separately disclosed in the segmental
analyses or in the notes to the accounts as appropriate.
The Group believes that these items are useful to users of the Group financial
statements in helping them to understand the underlying business performance
and are used to derive the Group's principal non-GAAP measures of organic
revenue, adjusted profit from operations, adjusted organic profit from
operations, New Categories contribution, organic New Categories contribution,
adjusted diluted earnings per share, adjusted organic diluted earnings per
share, adjusted net finance costs, adjusted taxation and operating cash flow
conversion ratio, adjusted cash generated from operations, free cash flow
(before dividends paid to shareholders) and free cash flow (after dividends
paid to shareholders) all of which are before the impact of adjusting items
and which are reconciled from revenue, profit from operations, diluted
earnings per share, net finance costs, taxation, cash conversion ratio and net
cash generated from operating activities.
Adjusting items included in profit from operations
Adjusting items are significant items in the profit from operations that
individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group's underlying financial performance.
In summary, in 2023, the Group incurred £28,216 million (2022: £1,885
million) of adjusting items within profit from operations:
Years ended 31 December
2023 2022
£m £m
(a) Restructuring and integration costs (2) 771
(b) Amortisation and impairment of trademarks and similar intangibles 23,202 285
(c) Charges in connection with planned disposal of subsidiaries - 612
(c) Charges/(credit) in connection with disposal of subsidiaries 351 (6)
(d) Credit in respect of partial buy-out of the pension fund in the U.S. - (16)
(d) Credit in respect of calculation of excise on social contributions in (148) -
Brazil
(d) Credit in respect of calculation of VAT on social contributions in Brazil (19) (460)
(d) Charges in respect of DOJ and OFAC investigations 75 450
(d) Charges in respect of Nigeria Federal Competition and Consumer Protection - 79
Commission (FCCPC) case
(d) Charges in respect of contributions on investment grants in Brazil 47 -
(d) Other adjusting items (including Engle) 96 170
(e) Impairment of goodwill 4,614 -
Total adjusting items included in profit from operations 28,216 1,885
(a) Restructuring and integration costs
Restructuring costs have reflected the costs associated with the
implementation of revisions to the Group's operating model, mainly in relation
to Quantum. No further Quantum restructuring charges were recognised as
adjusting in 2023, following the completion of the Quantum programme.
During 2023, the Group reversed unutilised provisions of £48 million
primarily relating to Quantum. This has been partially offset by an impairment
charge of £46 million for machinery due to the adverse impact from
macro-economic headwinds and industry volume declines in the U.S.
The costs of the Group's initiatives are included in profit from operations
under the following headings:
Years ended 31 December
2023 2022
£m £m
Employee benefit costs (26) 315
Depreciation, amortisation and impairment costs 39 220
Other operating expenses (15) 237
Other operating income - (1)
Total (2) 771
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(b) Amortisation and impairment of trademarks and similar intangibles
Acquisitions in previous years have resulted in the capitalisation of
trademarks and similar intangibles including those which are amortised over
their expected useful lives. The amortisation and impairment charge of
£23,202 million (2022: £285 million) is included in depreciation,
amortisation and impairment costs in the income statement.
Management note that the U.S. combustibles market has experienced substantial
volatility since 2020. In the period immediately prior to the COVID-19
pandemic, U.S. combustibles industry volumes declined by c.5.0-5.5% per annum
(2017-2019). During COVID-19, due to changes in consumer behaviour, industry
volume was largely flat in 2020 (0.1% decline) with 2021 also declining by
only 3.0%. However, in 2022, as the U.S. exited the pandemic combined with
adverse impacts from the macro-economic headwinds, industry volume declined by
10.6%. Due to the continued trading conditions in the U.S., a detailed
external study was commissioned to assist management with an independent view
of the potential forecast performance for the market based upon factors such
as macro-economic trends, pricing and elasticity and secular assumptions which
themselves include category-specific consumption patterns in comparison to
other categories.
Management recognise that the date at which the redesignation to
definite-lived is made is judgemental and have determined that amortisation
will commence from 1 January 2024. As a result, with effect from 1 January
2024, Newport, Camel, Natural American Spirit and Pall Mall will be amortised
on a straight-lined basis. Pall Mall will be amortised over a 20-year period
and Newport, Camel and Natural American Spirit will be amortised over a
30-year period. From 2024, the increase in annual amortisation expense is
expected to be £1.4 billion per annum for the next 20 years, after which it
is expected to decline to £1.3 billion.
In addition, the Group have recognised a non-cash adjusting impairment charge
of £23.0 billion against certain of our acquired U.S. brands which have been
previously recognised as indefinite-lived and an impairment to the Reynolds
goodwill of £4.3 billion which is further explained in section (e) below.
(c) Loss on disposal of business
As explained on page 21, on 13 September 2023, the Group disposed of its
Russian and Belarusian businesses in compliance with international and local
laws. The Group had two subsidiaries in Russia (BAT Russia), being JSC British
American Tobacco-SPb and JSC International Tobacco Marketing Services (ITMS),
and one subsidiary in Belarus, International Tobacco Marketing Services BY.
The net assets held-for-sale of £770 million were disposed of for proceeds of
£425 million, resulting in an impairment charge of £345 million.
In accordance with IFRS 5, the assets and liabilities of these subsidiaries
were classified as held-for-sale at 31 December 2022 and presented as such on
the balance sheet at an estimated fair value less costs to sell. An impairment
charge of £554 million (and associated costs of £58 million) were recognised
in other operating expenses as adjusting items in 2022. On reversal of the
2022 impairment charge (less £14 million utilised in the period), offset by
the recognition in 2023 of the £345 million referred to above, the net impact
was a net partial reversal of £195 million.
Included within other operating expenses and recognised as an adjusting item
in 2023, is a charge of £548 million and includes £554 million of foreign
exchange reclassified from other comprehensive income and associated costs of
£3 million, partially offset by a realised foreign exchange gain on the
proceeds received of £9 million. When partially offset by the impairment
reversal of £195 million, the disposal of the Russian and Belarusian
businesses resulted in a charge of £353 million to the income statement.
(d) Other
In 2023, the Group incurred a net charge of £51 million (2022: net charge of
£223 million) of other adjusting items. These included:
- A charge of £75 million (2022: £450 million) recognised in respect of the
DOJ and OFAC settlement agreements to resolve historical breaches of sanctions
(see page 20);
- A net credit of £120 million (2022: £460 million) in Brazil, as credits of
£167 million (2022: £460 million) related to the calculation of VAT and
excise on social contributions in Brazil were partly offset by charges of £47
million recognised following a supreme court ruling stating that the
application of a 10% levy on investment grants was constitutional and
applicable to all tax payers in Rio de Janeiro state; and
- Other costs of £96 million (2022: £170 million). In 2023, this mainly
related to litigation costs including Engle progeny cases
(2022: £104 million, partly offset in the first half of 2022 by a credit of
£24 million related to a favourable resolution in respect of MSA litigation
in the state of Illinois).
In 2022, the Group recognised a credit of £16 million in respect of a
settlement gain related to the partial buy-out of the U.S. pension fund and a
charge of £79 million in respect of the investigation by the FCCPC in
Nigeria.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(e) Ongoing impairment review of assets
The Group reviews and monitors the performance of its non-financial assets
(including goodwill) in line with the requirements of IAS 36 Impairment of
Assets.
The Group's impairment testing uses the value-in-use method, with calculations
prepared on a ten-year cash flow forecast (five-year cash flow forecast for
Reynolds, South Africa and Peru) which assumes long-term volume decline of
cigarettes, generally offset by pricing. After this forecast, a growth rate
into perpetuity has been applied, other than for Newport, Camel, Natural
American Spirit and Pall Mall which have been prepared on a discrete basis,
reflecting the revised useful economic lives as mentioned in note (b) above.
Pre-tax discount rates were used in the impairment testing, based upon the
Group's weighted average cost of capital, taking into account the cost of
capital and borrowings, to which specific market-related premium adjustments
were made. These adjustments are derived from external sources and are based
on the spread between bonds (or credit default swaps, or similar indicators)
issued by the relevant local (or comparable) government, adjusted for the
Group's own credit market risk. This applies to all cash generating units with
the exception of Reynolds, which had its discount rate independently
determined based on its own weighted average cost of capital and U.S.
market-related premiums. The long-term growth rates and discount rates have
been applied to forecast cash flows, determined by local management based upon
experience, specific market and brand trends as well as pricing and cost
expectations. Further adjustments to reflect risk not otherwise reflected in
the forecast cash flows are also applied as required.
Based on the impairment assessment undertaken by management, the Group has
recognised an impairment of £291 million for the South African cash
generating unit (CGU) and £24 million for the Peruvian CGU. This reflects
continuing difficult trading conditions and market deterioration primarily due
to the growth in illicit trade in both markets.
Subsequent to the FDA announcement on 28 April 2022 of a proposed product
standard to prohibit menthol as a characterising flavour in cigarettes, the
FDA formally submitted the final product standard to the Office of Management
and Budget on 18 October 2023. Management notes that the proposal of a product
standard does not itself constitute a ban on menthol in cigarettes given the
proposed standard is still required to go through the established U.S.
comprehensive rule-making process, the timetable and outcome for which was,
and remains, uncertain. Further to this, on 21 June 2022, the FDA announced
plans to develop a proposed product standard that would establish a maximum
nicotine level in cigarettes and certain other combustible tobacco products to
reduce addictiveness. Management notes that the FDA announcement does not
itself constitute restrictions on nicotine levels in cigarettes, and any
proposed regulation of nicotine in cigarettes would need to be introduced
through the established U.S. comprehensive rule-making process, the timetable
and outcome for which was, and remains, uncertain. Management does not deem
this to be a new development but rather a continuation of the rulemaking
process that the FDA initiated in 2017 that was later put on hold.
In December 2022, the sale of most tobacco products with characterising
flavours (including menthol) other than tobacco were banned in the state of
California. The estimated impact of the ban in California has been reflected
in the cash flow forecasts used in the impairment model.
The Group has a long-standing track record of managing regulatory shifts and,
in the event of regulatory change, the Group remains confident in its ability
to navigate that environment successfully.
In line with the approach used in 2022, the value-in-use calculations for the
U.S. have been determined based on probability weighted scenarios to derive a
risk-adjusted cash flow forecast applied within the valuations. These
scenarios incorporate varying assumptions on potential timing for a final
product standard to prohibit menthol as a characterising flavour in cigarettes
becoming effective. However, the impact of any potential menthol ban was not
deemed to be a key assumption. As explained in note (b) above, in 2023, due to
the continued trading conditions in the U.S., a detailed external study was
commissioned to assist management with an independent view of the potential
forecast performance for the market. As a result, management concluded that it
was appropriate to redesignate Newport, Camel, Natural American Spirit and
Pall Mall as definite-lived with an estimated useful economic life (UeL) not
exceeding 30 years from
1 January 2024.
In relation to Reynolds, the table below illustrates the carrying value,
impairment charged during the year and key assumptions used in the assessment:
Carrying Value As at 31 December 2023 Pre-tax discount rate (%) 5 Year Volume CAGR (Trademarks) Terminal value % Impairment charged for the period 2023** Amortisation expected for year 2024***
£ million £ million £ million
Reynolds American Goodwill 30,938 9.6% 1.0% (4,299)
Newport* 20,753 8.7% (11.3)% (11,144) 692
Camel* 7,822 8.9% (12.3)% (5,719) 261
Pall Mall* 2,608 9.4% (18.8)% (3,457) 130
Natural American Spirit* 10,439 7.9% (7.6)% (1,938) 348
Camel Snus 1,099 7.8% (5.4)% 1.0% (189) -
Grizzly 9,209 7.8% (3.9)% 1.0% (545) -
82,868 (27,291) 1,431
Further to the redesignation to definite-lived brands, Pall Mall will be
amortised over 20 years and Newport, Camel and Natural Spirit amortised over
30 years, commencing 1 January 2024.
* These have been prepared on a discrete basis, reflecting the revised
useful economic lives in determining the terminal value applied.
** Converted using the spot rate prevailing on the date of the impairment
assessment of £1:US$1.213.
*** Converted using the 31 December 2023 exchange rate of £1:US$ 1.275.
Notes to the Financial Statements
Continued
Adjusting items included in profit from operations (continued)
(e) Ongoing impairment review of assets (continued)
Management note that the following changes to key assumptions, within the
value-in-use model, could result in a change to the Reynolds goodwill
impairment charge as follows:
Reynolds American goodwill impairment charge for 2023 (£m) Assumptions Reasonable possible change Possible additional impairment
(£m)
4,299 Pre-tax discount rate Increase of 0.67% (6,169)
Long-term growth rates Decrease of 0.50% (4,962)
The below table indicates the additional amount of impairment that would be
required in respect of the indefinite-lived trademarks if the following
individual changes were made to the key assumptions used in the impairment
model:
Newport Camel Pall Mall Natural American Spirit Grizzly Camel Snus
£m £m £m £m £m £m
Assumptions
Volume decline by additional 1% year-on-year(*) (1,135) (427) (142) (572) (559) (68)
Decrease in long-term growth rate by 50bps (560) (163) (32) (467) (593) (70)
Increase in pre-tax discount rate by 75bps (1,105) (354) (86) (804) (945) (112)
Note:
*Volume sensitivity results in a proportional reduction in both net revenue
and direct costs with no impact to operating margin %. Fixed overhead cost
allocations remain flat. This demonstrates a year-on-year decrease in
operating cash flow for the discrete forecast years.
The sensitivities on the tables above relating to the Reynolds American
goodwill and the trademarks have been translated using the exchange rate
prevailing on the date of the impairment assessment of £1:US$1.213 as the
underlying cash flows and net assets are US$ denominated.
Adjusting items included in net finance costs
In 2023, the Group incurred adjusting items within net finance costs of £96
million (2022: £34 million). This included:
- the early repurchase of bonds as the Group incurred a fair value loss of
£151 million on debt-related derivatives, realised a net gain of £129
million arising on the difference between the redemption value and the
amortised cost of the bonds, and incurred other transaction costs of £7
million;
- interest of £60 million (2022: £33 million) in relation to the FII GLO, as
described on page 42; and
- interest of £16 million in relation to a tax provision in the Netherlands.
The remainder in 2023 related to credits from the reversal of provisions
previously recognised in respect of Russia (£2 million), Switzerland (£3
million) and the disposal of the Group's Iranian business in a prior period
(£4 million).
All of the adjustments noted above have been included in the adjusted earnings
per share calculation on page 39.
Adjusting items included in results of associates and joint ventures
Adjusting items included in results of associates and joint ventures was a
credit of £8 million in 2023 (2022: £92 million charge), mainly related to:
- A deemed gain of £40 million (2022: £3 million loss) as the Group's
interest in ITC decreased from 29.19% in 2022 to 29.02% in 2023 as a result of
ITC issuing ordinary shares under the company's Employees Share Option Scheme.
The issue of these shares and change in the Group's share of ITC resulted in a
deemed partial disposal; and
- An impairment charge with respect to the investment in Organigram.
Management assessed the carrying value of the Group's investment in Organigram
Holdings Inc., due to the continued deterioration in the investment's market
capitalisation which Management identified as an impairment trigger. As part
of this exercise, Management took into consideration:
- Organigram's share price as at 31 December 2023;
- internal value-in-use calculations;
- external trading multiples; and
- broker forecasts.
As a result of this analysis, it was concluded that a further impairment
charge of £36 million (or £34 million net of tax) was required against the
carrying value of the investment in associate, with the recoverable amount as
at 31 December 2023 being £30 million. In 2022, the Group recorded an
impairment charge of £65 million (or £59 million net of tax) against the
carrying value of Organigram Holdings Inc.
In 2022, the Group ceased business activities in Yemen, and recognised a
charge of £18 million related to the impairment of the investment in
the Group's remaining associate in Yemen, United Industries Company Limited.
The share of post-tax results of associates and joint ventures is after the
adjusting items noted above, which are excluded from the calculation of
adjusted earnings per share as set out on page 39.
Notes to the Financial Statements
Continued
Adjusting items included in taxation
The Group's tax rate is affected by the adjusting items referred to below and
by the inclusion of the share of associates and joint ventures post-tax profit
in the Group's pre-tax results.
Adjusting items in 2023 included a net credit of £73 million mainly relating
to the revaluation of deferred tax liabilities arising on trademarks
recognised in the Reynolds American acquisition in 2017 due to changes in U.S.
state tax rates, the reversal of provisions related to tax risks in Russia
and a potential clawback of tax reliefs arising from the closure of the
Group's factory in Switzerland, partially offset by a provision for potential
tax exposures in the Netherlands and the tax impact in Brazil arising from the
legal case regarding Rio de Janeiro VAT incentives described above.
In 2022, it included a net credit of £27 million mainly related to the
revaluation of deferred tax liabilities arising on trademarks recognised in
the Reynolds American acquisition in 2017 due to changes in U.S. state tax
rates and a potential clawback of tax reliefs arising from the closure of the
Group's factory in Switzerland.
The adjusting tax item also includes £5,415 million (2022: £176 million) in
respect of the taxation on other adjusting items, which are described on pages
31 to 35.
Refer to page 42 for the Franked Investment Income Group Litigation Order
update.
As the above items are not reflective of the ongoing business, they have been
recognised as adjusting items within taxation. All of the adjustments noted
above have been included in the adjusted earnings per share calculation on
page 39.
Liquidity
The Treasury function is responsible for raising finance for the Group,
managing the Group's cash resources and the financial risks arising from
underlying operations. All these activities are carried out under defined
policies, procedures and limits, reviewed and approved by the Board,
delegating oversight to the Finance Director and Treasury function. The Group
has targeted an average centrally managed bond maturity of at least five years
with no more than 20% of centrally managed debt maturing in a single rolling
12-month period. As at 31 December 2023, the average centrally managed debt
maturity of bonds was 10.5 years (31 December 2022: 9.9 years) and the highest
proportion of centrally managed debt maturing in a single rolling 12-month
period was 15.7% (31 December 2022: 18.6%).
The Group continues to maintain investment-grade credit ratings, with ratings
from Moody's, S&P and Fitch of Baa2 (positive outlook), BBB+ (negative
outlook), BBB (positive outlook), respectively, with a medium-term target of
Baa1, BBB+ and BBB+. The strength of the ratings has underpinned debt issuance
and the Group is confident of its ability to continue to successfully access
the debt capital markets. A credit rating is not a recommendation to buy, sell
or hold securities. A credit rating may be subject to withdrawal or revision
at any time. Each rating should be evaluated separately of any other rating.
In order to manage its interest rate risk, the Group maintains both floating
rate and fixed rate debt. The Group sets targets (within overall guidelines)
for the desired ratio of floating to fixed rate debt on a net basis (at least
50% fixed on a net basis in the short to medium term). At 31 December 2023,
the relevant ratio of floating to fixed rate borrowings after the impact of
derivatives was 10:90 (31 December 2022: 12:88). On a net basis, after
offsetting liquid assets but excluding cash and other liquid assets in Canada,
which are subject to certain restrictions under CCAA protection, the relevant
ratio of floating to fixed rate borrowings was 2:98 (31 December 2022: 7:93).
The Group is party to the ISDA fallback protocol and, in January 2022, it
automatically replaced GBP LIBOR with an economically equivalent interest rate
referencing SONIA for derivatives on their reset date.
Available facilities
It is Group policy that short-term sources of funds (including drawings under
both the US$4 billion U.S. commercial paper programme and £3 billion euro
commercial paper programme) are backed by undrawn committed lines of credit
and cash. As at 31 December 2023, no commercial paper was outstanding (31
December 2022: £27 million). Cash flows relating to commercial paper
issuances with maturity periods of three months or less are presented on a net
basis in the Group's cash flow statement.
At 31 December 2023, the Group had access to a £5.4 billion revolving credit
facility. This facility was undrawn at 31 December 2023. 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,
£2.85 billion of the five-year tranche remains available until March 2025,
with £2.7 billion extended to March 2026 and £2.5 billion extended to
March 2027. During 2023, the Group extended short-term bilateral facilities
totalling £2.65 billion. As at 31 December 2023, £100 million was drawn on
a short-term basis with £2.55 billion undrawn and still available under such
bilateral facilities. Cash flows relating to bilateral facilities that have
maturity periods of three months or less are presented on a net basis in the
Group's cash flow statement.
Issuance, drawdowns and repayments in the period
- In January 2023, the Group repaid a €750 million bond at maturity;
- In February 2023, the Group accessed the Euro market under its EMTN
Programme, raising a total of €800 million;
- In May 2023, the Group repaid a total of US$48 million of bonds at
maturity;
- Given the refinancing levels in the medium term and to reduce near term
refinancing risks, in August 2023, the Group accessed the US dollar market
under its SEC Shelf Programme, raising a total of US$5 billion across five
tranches whilst also announcing a concurrent capped debt tender offer,
targeting a series of GBP-, EUR- and USD-denominated bonds maturing between
2024 and 2027. Pursuant to this tender offer, BAT repurchased bonds prior to
their maturity in a principal amount of £3.1 billion; and
- In September, October and November 2023, the Group repaid US$550 million,
€800 million and €750 million of bonds at maturity, respectively.
The Group has debt maturities of around £3.2 billion annually in the next
two years. Due to higher interest rates, net finance costs are expected to
increase as debts are refinanced.
Notes to the Financial Statements
Continued
Cash Flow
Net cash generated from operating activities
Net cash generated from operating activities in the IFRS cash flows on page 30
includes the following items:
Years ended 31 December
2023 2022
£m £m
(Loss)/profit for the year (14,189) 6,846
Taxation on ordinary activities (2,872) 2,478
Share of post-tax results of associates and joint ventures (585) (442)
Net finance costs 1,895 1,641
(Loss)/profit from operations (15,751) 10,523
Adjustments for:
- depreciation, amortisation and impairment costs 28,614 1,305
- decrease/(increase) in inventories 265 (246)
- increase in trade and other receivables (487) (42)
- decrease in Master Settlement Agreement payable (287) (145)
- increase in trade and other payables 640 3
- decrease in net retirement benefit liabilities (111) (110)
- (decrease)/increase in other provisions for liabilities (489) 643
- other non-cash items 436 606
Cash generated from operating activities 12,830 12,537
Dividends received from associates 506 394
Tax paid (2,622) (2,537)
Net cash generated from operating activities 10,714 10,394
Net cash generated from operating activities increased by 3.1% to £10,714
million (2022: £10,394 million). This was driven by:
- the realisation of tax credits in Brazil (related to the previously
disclosed VAT and excise on social contributions); and
- higher dividends received from the Group's associates of £506 million
(2022: £394 million), mainly related to ITC.
These were partially offset by:
- payments in respect of the settlement agreements with the DOJ and OFAC
(2023: £262 million; 2022: £nil million);
- increases in tax paid of £2,622 million, compared to £2,537 million in
2022; and
- a payment of £59 million to settle the investigation by the FCCPC.
In 2023, other litigation payments (mainly related to Engle) were lower at
£73 million (2022: £181 million).
The Group made interim repayments to HMRC of £50 million in both 2023 and
2022, and intends to make further interim repayments in future periods in
respect of the Franked Investment Income Group Litigation Order (FII GLO), as
described on page 42.
Expenditure on research and development was approximately £408 million in
2023 (2022: £323 million) with a focus on products that could potentially
reduce the risk associated with smoking conventional cigarettes.
Net cash from investing activities
Net cash from investing activities was an outflow £296 million, a reduction
of £409 million from the same period last year when it was an outflow of
£705 million. The improvement was largely due to the sale of the Group's
businesses in Russia and Belarus, as proceeds of £425 million were received
in 2023, net of cash disposed of £266 million, being a net cash inflow from
the disposal of £159 million. The lower outflow from investing activities was
also due to a lower net outflow of £43 million (2022: £129 million net
outflow) from short-term investment products, including treasury bills.
Purchases of property, plant and equipment were also lower than 2022, at £460
million (2022: £523 million).
Included within investing activities is gross capital expenditure. This
includes the investment in the Group's global operational infrastructure
(including, but not limited to, the manufacturing network, trade marketing and
IT systems). In 2023, the Group invested £541 million, a decrease of 14.2% on
the prior year (2022: £630 million). The Group now expects gross capital
expenditure in 2024 of approximately £550 million mainly related to the
ongoing investment in the Group's operational infrastructure, including the
expansion of our New Categories portfolio.
Net cash used in financing activities
Net cash used in financing activities was an outflow of £9,314 million in
2023 (2022: £8,878 million outflow). The total outflow includes:
- The payment of the dividend of £5,055 million (2022: £4,915 million);
- Higher interest paid in the period of £1,682 million (2022: £1,578
million), driven by higher interest charges as new debt issued replaced
cheaper debt on maturity;
- The net repayment of borrowings in 2023 of £1,635 million compared to a
net issuance of borrowings in 2022 of £223 million;
- An outflow of £480 million related to derivatives (2022: inflow of £117
million); and
- In 2022, an outflow of £2,012 million in respect of the 2022 share buy-back
programme.
Notes to the Financial Statements
Continued
Related party disclosures
The Group's related party transactions and relationships for 2022 were
disclosed on pages 271 and 272 of the Group's Annual Report and Accounts and
Form 20-F for the year ended 31 December 2022.
In the year ended 31 December 2023, apart from the collaboration with
Organigram, there were no material changes in related parties or related party
transactions to be reported.
Full details of the Group's related party transactions as at 31 December 2023
will be included in the Group's 2023 Annual Report and Accounts and Form 20-F.
Earnings per share
Basic earnings per share were down 320.5% to -646.6p (2022: 293.3p) due to the
non-cash impairment charges in respect of goodwill and trademarks discussed
earlier, partly offset by lower other one-off charges compared to 2022 (mainly
related to the sale of the Group's businesses in Russia and Belarus, the
resolutions of the DOJ and OFAC investigations into historical sanctions
breaches and the Quantum restructuring).
Before adjusting items and including the dilutive effect of employee share
schemes, adjusted diluted earnings per share increased 1.1% to 375.6p (2022:
371.4p). On a constant translational foreign exchange basis, adjusted diluted
earnings per share were 4.0% higher at 386.4p, being an increase of 5.2% on an
adjusted, organic basis. For a full reconciliation of diluted earnings per
share to adjusted diluted earnings per share, at constant rates, and adjusted
diluted organic earnings per share, at constant rates, please see page 57.
Earnings used in the basic, diluted and headline earnings per share
calculation represent the profit attributable to the ordinary equity
shareholders after deducting amounts representing the coupon on perpetual
hybrid bonds on a pro-rata basis regardless of whether or not coupons have
been declared and paid in the period. In 2023, this was £45 million (2022:
£49 million).
Years ended 31 December
2023 2022
£m £m
(Loss)/Earnings attributable to owners of the parent (14,367) 6,666
Coupon on perpetual hybrid bonds (59) (60)
Tax on coupon on perpetual hybrid bonds 14 11
(Loss)/Earnings (14,412) 6,617
On 11 February 2022, the Company announced its intention to start a share
buy-back programme of up to £2 billion. The programme ended in December
2022. The total number of shares repurchased during 2022 as part of the share
buy-back programme was 59,541,862 ordinary shares. Total consideration for the
repurchase of shares was £2 billion, and was recorded within retained
earnings.
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.
In 2023, the Group reported a loss for the year. Following the requirements of
IAS 33 Earnings per Share, the impact of share options would be antidilutive
on a reported basis and is excluded, for 2023, from the table below. Earnings
per share calculations are based upon the following:
Reported Adjusted Headline
Basic Diluted Basic Diluted Basic Diluted
Year ended 31 December 2023
- (Loss)/earnings £m (14,412) (14,412) 8,403 8,403 8,169 8,169
- Shares m 2,229 2,229 2,229 2,237 2,229 2,229
- Per share p (646.6) (646.6) 377.0 375.6 366.5 366.5
Year ended 31 December 2022
- Earnings £m 6,617 6,617 8,420 8,420 7,499 7,499
- Shares m 2,256 2,267 2,256 2,267 2,256 2,267
- Per share p 293.3 291.9 373.2 371.4 332.4 330.8
In 2023, the Group reported a loss for the year. Following the requirements of
IAS 33, the impact of share options would be antidilutive and is therefore
excluded, for 2023, from the calculation of diluted earnings per share,
calculated in accordance with IFRS, for that year. For remuneration purposes,
and reflective of the Group's positive earnings on an adjusted basis,
management have included the dilutive effect of share options in calculating
adjusted diluted earnings per share.
British American Tobacco p.l.c. is a public limited company which is listed on
the London Stock Exchange, New York Stock Exchange
and the JSE Limited in South Africa. British American Tobacco p.l.c. is
incorporated in England and Wales (No. 3407696) and domiciled
in the UK.
Notes to the Financial Statements
Continued
Earnings per share (continued)
Adjusted diluted earnings per share are calculated by taking the following
adjustments into account (see pages 31 to 35):
Years ended 31 December
2023 2022
pence pence
Diluted (loss)/earnings per share (646.6) 291.9
Effect of amortisation and impairment of goodwill, trademarks and similar 1,006.1 9.6
intangibles
Net effect of excise and VAT cases (5.7) (17.1)
Effect of disposal of subsidiaries 24.5 (0.3)
Effect of Brazil other taxes 1.4 -
Effect of charges in respect of DOJ and OFAC investigations 3.4 19.9
Effect of charges in respect of Nigerian FCCPC case - 3.5
Effect of planned disposal of subsidiaries (8.7) 26.4
Effect of restructuring and integration costs (0.2) 28.9
Effect of other adjusting items 3.3 5.2
Effect of adjusting items in net finance costs 3.1 1.2
Effect of associates' adjusting items (0.4) 4.1
Effect of adjusting items in respect of deferred taxation (4.4) (1.9)
Adjusting items in tax 1.2 -
Impact of dilution* (1.4)
Adjusted diluted earnings per share 375.6 371.4
Impact of translational foreign exchange 10.8 -
Adjusted diluted earnings per share translated at 2022 exchange rates 386.4 371.4
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS, for that year. For remuneration
purposes, and reflective of the Group's positive earnings on an adjusted
basis, management have included the dilutive effect of share options in
calculating adjusted diluted earnings per share.
In 2022, the planned disposal mentioned above relates to the disposal of the
Russian and Belarusian businesses which completed during 2023, as mentioned on
page 20 (#RUSSIAANDBELARUS) .
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 1/2023 'Headline Earnings' as issued by
the South African Institute of Chartered Accountants.
Diluted headline earnings per share are calculated by taking the following
adjustments into account:
Years ended 31 December
2023 2022
pence pence
Diluted (loss)/earnings per share (646.6) 291.9
Effect of impairment of intangibles, property, plant and equipment, associates 1,003.6 15.5
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (4.4) (0.7)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and (9.1) 23.7
associated costs (net of tax)
Effect of foreign exchange reclassification from reserves to the income 24.8 0.3
statement
Issue of shares and change in shareholding of an associate (1.8) 0.1
Diluted headline earnings per share 366.5 330.8
The following is a reconciliation of earnings to headline earnings, in
accordance with the JSE Listing Requirements:
Years ended 31 December
2023 2022
£m £m
(Loss)/earnings (14,412) 6,617
Effect of impairment of intangibles, property, plant and equipment, associates 22,370 352
and held-for-sale assets (net of tax)
Effect of gains on disposal of property, plant and equipment, trademarks, (98) (16)
held-for-sale assets, partial/full termination of IFRS 16 leases, and sale and
leaseback (net of tax)
Effect of impairment of subsidiaries transferred to held-for-sale and (203) 538
associated costs (net of tax)
Effect of foreign exchange reclassification from reserves to the income 552 5
statement
Issue of shares and change in shareholding of an associate (40) 3
Headline earnings 8,169 7,499
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments
The Group has contingent liabilities in respect of litigation, taxes and
guarantees in various countries. These are described below, are further
described in Note 31 to the 2022 Annual Report and Accounts and Form 20-F and
will be included in the Group's 2023 Annual Report and Accounts and Form 20-F.
The Group is subject to contingencies pursuant to requirements that it
complies with relevant laws, regulations and standards. Failure to comply
could result in restrictions in operations, damages, fines, increased tax,
increased cost of compliance, interest charges, reputational damage or other
sanctions. These matters are inherently difficult to quantify.
In cases where the Group has an obligation as a result of a past event
existing at the balance sheet date, it is probable that an outflow of economic
resources will be required to settle the obligation and the amount of the
obligation can be reliably estimated, a provision will be recognised based on
best estimates and management judgment. There are, however, contingent
liabilities in respect of litigation, taxes in some countries and guarantees
for which no provisions have been made. While the amounts that may be payable
or receivable could be material to the results or cash flows of the Group in
the period in which they are recognised, the Board does not expect these
amounts to have a material effect on the Group's financial condition.
Taxes
The Group has exposures in respect of the payment or recovery of a number of
taxes. The Group is and has been subject to a number of tax audits covering,
among others, excise tax, value-added taxes, sales taxes, corporate taxes,
overseas withholding taxes and payroll taxes. The estimated costs of known tax
obligations have been provided in these accounts in accordance with the
Group's accounting policies. In some countries, tax law requires that full or
part payment of disputed tax assessments be made pending resolution of the
dispute. To the extent that such payments exceed the estimated obligation,
they would not be recognised as an expense.
There are disputes that are in or may proceed to litigation in a number of
countries, including Brazil and the Netherlands.
The Dutch tax authority has issued a number of assessments on various issues
across the years 2003-2016 in relation to various intra-group transactions.
The assessments amount to an aggregate net potential liability across these
periods of £1,148 million covering tax, interest and penalties. The Group
appealed against the assessments in full.
On 15 December 2023, a further judgment was issued regarding the Dutch Tax
disputes, covering the period 2014 - 2016. These periods have an aggregate
potential net liability of £959 million. Having considered the judgment and
the Dutch judicial and international proceedings available to it, the Group
has recognised a further adjusting charge of £70 million in 2023, with a
total provision of £145 million recognised at 31 December 2023. The findings
of the December judgment have been appealed.
As part of the 15 December 2023 judgment, the assessed fine of £108 million
for the filing of an intentionally incorrect tax return was upheld but reduced
to £92 million. The Group has appealed in full to the High Court and
considers no provision is appropriate.
The Group is also appealing the ruling in respect of sales taxes and penalties
in South Korea.
Group litigation
Group companies, as well as other leading cigarette manufacturers, are
defendants in a number of product liability cases. In a number of the cases,
the amounts of compensatory and punitive damages sought are significant. While
it is impossible to be certain of the outcome of any particular case or of the
amount of any possible adverse verdict, the Group believes that the defences
of the Group's companies to all these various claims are meritorious on both
the law and the facts, and a vigorous defence is being made everywhere. If an
adverse judgment is entered against any of the Group's companies in any case,
avenues of appeal will be pursued as necessary. Such appeals could require the
appellants to post appeal bonds or substitute security in amounts that could
in some cases equal or exceed the amount of the judgment. At least in the
aggregate, and despite the quality of defences available to the Group, it is
not impossible that the Group's results of operations or cash flows in a
particular period could be materially affected by this and by the final
outcome of any particular litigation.
Canada
In Canada, following the implementation of legislation enabling provincial
governments to recover healthcare costs directly from tobacco manufacturers,
ten actions for recovery of healthcare costs arising from the treatment of
smoking and health-related diseases were commenced in ten provinces. Damages
sought have not yet been quantified by all ten provinces; however, in respect
of five provinces, the damages quantified in each of the provinces range
between CAD$10 billion (approximately £5.9 billion) and CAD$118 billion
(approximately £70 billion), and the province of Ontario delivered an expert
report quantifying its damages in the range of CAD$280 billion (approximately
£167 billion) and CAD$630 billion (approximately £375 billion) in
2016/2017 dollars. Ontario has amended its Statement of Claim to claim damages
of CAD$330 billion (approximately £196 billion). On 31 January 2019, the
Province delivered a further expert report claiming an additional
CAD$9.4 billion (approximately £5.6 billion) and CAD$10.9 billion in
damages (approximately £6.5 billion) in respect of environmental tobacco
smoke. No trial date has been set. In respect of New Brunswick, on 7 March
2019, the New Brunswick Court of Queen's Bench released a decision requiring
the Province to produce a substantial amount of additional documentation and
data to the defendants. As a result, the original trial date of 4 November
2019 has been delayed. No new trial date has been set.
In addition to the actions commenced by the provincial governments, there are
numerous class actions outstanding against Group companies. As set out below,
all of these actions are currently subject to stays of proceedings. On 1 March
2019, the Quebec Court of Appeal handed down a judgment which largely upheld
and endorsed the lower court's previous decision in the Quebec class actions.
ITCAN's share of the judgment is approximately CAD$9.2 billion (approximately
£5.5 billion). As a result of this judgment, the attempts by the Quebec
plaintiffs to obtain payment out of the CAD$758 million (approximately £451
million) on deposit with the court, the fact that JTI-MacDonald Corp (a
co-defendant in the cases) filed for protection under the CCAA on 8 March 2019
and obtained a court ordered stay of all tobacco litigation in Canada as
against all defendants (including the RJR Group Companies) until 4 April 2019,
and the need for a process to resolve all of the outstanding litigation across
the country, on 12 March 2019, ITCAN filed for protection under the CCAA. In
its application, ITCAN asked the Ontario Superior Court to stay all pending or
contemplated litigation against ITCAN, certain of its subsidiaries and all
other Group companies that were defendants in the Canadian tobacco litigation
(the "stays"). The stays are currently in place until 29 March 2024. While
the stays are in place, no steps are to be taken in connection with the
Canadian tobacco litigation with respect to ITCAN, certain of its subsidiaries
or any other Group company. The parties continue to work towards a plan of
arrangement or compromise in a confidential mediation (by order of the Court)
as part of the CCAA process. The length and ultimate outcome of the CCAA
process, including the resolution of the underlying legal proceedings, remains
uncertain.
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments (continued)
U.S. - Engle
As at 31 December 2023, the Group's subsidiaries, R. J. Reynolds Tobacco
Company (RJRT), Lorillard Tobacco Company (Lorillard Tobacco) and Brown &
Williamson Holdings, Inc., had collectively been served in 305 pending Engle
progeny cases filed on behalf of approximately 380 individual plaintiffs. Many
of these are in active discovery or nearing trial. In 2023, RJRT or Lorillard
Tobacco paid judgments in eight Engle progeny cases. Those payments totalled
approximately US$38.5 million (approximately £30.2 million) in compensatory
or punitive damages. Additional costs were paid in respect of attorneys' fees
and statutory interest. In addition, from
1 January 2021 to 31 December 2023, outstanding jury verdicts in favour of the
Engle progeny plaintiffs had been entered against RJRT or Lorillard Tobacco
for US$58.4 million (approximately £46 million) in compensatory damages (as
adjusted) and US$23.1 million (approximately £18 million) in punitive
damages. A majority of these verdicts are in various stages in the appellate
process and have been bonded as required by Florida law under the
US$200 million (approximately £156.9 million) bond cap passed by the
Florida legislature in 2009. Although the Group cannot currently predict when
or how much it may be required to bond and pay, the Group's subsidiaries will
likely be required to bond and pay additional judgments as the litigation
proceeds.
Fox River
In January 2017, NCR Corporation (NCR) and Appvion entered into a Consent
Decree with the U.S. Government to resolve how the remaining clean-up will be
funded and to resolve further outstanding claims between them. The Consent
Decree was approved by the District Court of Wisconsin in August 2017. The
U.S. Government enforcement action against NCR was terminated as a result of
that order and contribution claims from the Potentially Responsible Parties
(PRPs) against NCR were dismissed. On 3 January 2019, the U.S. Government, P.
H. Glatfelter and Georgia-Pacific (the remaining Fox River PRPs) sought
approval for a separate Consent Decree settling the allocation of costs on the
Fox River. This Consent Decree was approved by the District Court in the
Eastern District of Wisconsin on 14 March 2019, and concludes all existing
litigation on the Fox River clean-up. Considering these developments, the
provision has been reviewed. No adjustment has been proposed, other than as
related to the payments in the period of £10 million, with the provision
standing at £44 million at 31 December 2023 (31 December 2022:
£54 million) after disbursements.
In July 2016, the High Court ruled in favour of BAT Industries p.l.c.
(Industries), stating that a dividend of €135 million (approximately
£117 million) paid by Windward Prospects Limited (Windward) to Sequana S.A.
(Sequana) in May 2009 was a transaction made with the intention of putting
assets beyond the reach of Industries and of negatively impacting its
interests. On 10 February 2017, following a hearing in January 2017 to
determine the relief due, the Court found in favour of Industries, ordering
that Sequana must pay an amount up to the full value of the dividend plus
interest which equates to around US$185 million (approximately
£145.1 million), related to past and future clean-up costs. The Court
granted all parties leave to appeal and Sequana a stay in respect of the above
payments. The appeal was heard in June 2018. Judgment was given on 6 February
2019 and the Court of Appeal upheld the High Court's findings against Sequana.
The Court of Appeal refused applications made by both parties for a further
appeal to the UK Supreme Court. Both parties applied directly to the UK
Supreme Court for permission to appeal in March 2019. On 31 July 2019, BTI
2014 LLC (BTI), a Group subsidiary, was granted permission to appeal to the
Supreme Court in respect of its claims against the former Windward directors
(who authorised the dividend payments to Sequana). On the same day, the
Supreme Court refused Sequana permission to appeal. On 5 October 2022, the
Supreme Court handed down its judgment, dismissing BTI's appeal. In February
2017, Sequana entered into a process in France seeking court protection (the
"Sauvegarde"), exiting the Sauvegarde in June 2017. In May 2019, Sequana was
placed into formal liquidation proceedings. No payments have been received
from Sequana.
Kalamazoo
Georgia-Pacific, a designated PRP in respect of the Kalamazoo River in
Michigan, also pursued NCR in relation to remediation costs caused by PCBs
released into that river. On 26 September 2013, the United States District
Court, Michigan held that NCR was liable as a PRP on the basis that it had
arranged for the disposal of hazardous material for the purposes of the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).
Following further litigation, on 11 December 2019, NCR announced that it had
entered into a Consent Decree with the U.S. Government and the State of
Michigan (subsequently approved by the Michigan Court on 2 December 2020),
pursuant to which it assumed liability for certain remediation work at the
Kalamazoo River. The payments to be made on the face of the Consent Decree in
respect of such work total approximately US$245 million (approximately
£192 million). The Consent Decree also provides for the payment by NCR of an
outstanding judgment against it of approximately US$20 million (approximately
£15.7 million) to Georgia-Pacific.
The quantum of the clean-up costs for the Kalamazoo River is presently
unclear. It seems likely to well exceed the amounts payable on the face of the
Consent Decree.
On 10 February 2023, NCR filed a complaint in the United States District Court
for the Southern District of New York against Industries, seeking a
declaration that Industries must compensate NCR for 60% of costs NCR incurred
and incurs relating to the Kalamazoo River site on the asserted basis that the
Kalamazoo River constitutes a 'Future Site' for the purposes of a 1998
Settlement Agreement between it, Appvion and Industries. On 23 June 2023,
Industries filed its defence and counterclaims in the proceedings. On 2
October 2023, NCR filed a motion for declaratory judgment on its complaint and
to strike out Industries' affirmative defences and counterclaims. Industries
has filed its reply to this motion. The motion is expected to be heard in
February 2024.
Investigations
There are instances where Group companies are cooperating with relevant
national competition authorities in relation to ongoing competition law
investigations and/or engaged in legal proceedings at the appellate level,
including (amongst others) in the Netherlands.
From time to time, the Group investigates, and becomes aware of governmental
authorities' investigations into allegations of misconduct, including alleged
breaches of sanctions and allegations of corruption at Group companies. Some
of these allegations are currently being investigated. The Group cooperates
with the authorities, where appropriate.
Notes to the Financial Statements
Continued
Contingent liabilities and financial commitments (continued)
Investigations (continued)
On 25 April 2023, the Group announced that it had reached an agreement with
the DOJ and OFAC to resolve previously disclosed investigations into
suspicions of sanctions breaches. These concerned business activities relating
to the Democratic People's Republic of Korea between 2007 and 2017. British
American Tobacco p.l.c. entered into a three-year deferred prosecution
agreement ("DPA") with the DOJ and a civil settlement agreement with OFAC. The
DOJ's charges against the Company - one count of conspiring to commit bank
fraud and one count of conspiring to violate sanctions laws - were filed and
will later be dismissed if the Company abides by the terms of the DPA. In
addition, a BAT subsidiary in Singapore, British-American Tobacco Marketing
(Singapore) Private Limited, pleaded guilty to the same charges. The total
amount payable to the U.S. authorities is approximately US$635 million plus
interest, which is being paid by British American Tobacco p.l.c. During 2023,
payments totalling £262 million were paid, with the balance due during 2024.
Summary
Having regard to all these matters, with the exception of Fox River, Canada
(Quebec) and the DOJ and OFAC investigations, the Group does not consider it
appropriate to make any provision or accrual in respect of any pending
litigation. The Group does not believe that the ultimate outcome of this
litigation will significantly impair the Group's financial condition. If the
facts and circumstances change, then there could be a material impact on the
financial statements of the Group. In addition, the Group accrues for damages,
attorneys' fees and/or statutory interest, including in respect of certain
Engle progeny cases, certain U.S. individual smoking and health cases, and the
DOJ medical reimbursement/corrective statement case.
Full details of the litigation against Group companies and tax disputes as at
31 December 2023 will be included in the Group's 2023 Annual Report and
Accounts and Form 20-F. Whilst there has been some movement on new and
existing cases against Group companies, there have been, except as otherwise
stated, no material developments in 2023 or to date in 2024 that would impact
the financial position of the Group.
Franked Investments Income Group Litigation Order
The Group is the principal test claimant in an action in the United Kingdom
against HM Revenue and Customs (HMRC) in the FII GLO. There were 17 corporate
groups in the FII GLO as at 31 December 2023. The case concerns the treatment
for UK corporate tax purposes of profits earned overseas and distributed to
the UK. The Supreme Court heard appeals in two separate trials during 2020.
The judgment in the first hearing was handed down in November 2020 and
concerned the time limit for bringing claims. The Supreme Court remitted that
matter to the High Court to determine whether the claim is within time on the
facts. The judgment from the second hearing was handed down in July 2021 and
concerned issues relating to the type of claims BAT is entitled to bring.
Applying that judgment reduces the value of the FII GLO claim to approximately
£0.3 billion, mainly as the result of the application of simple interest and
the limitation to claims for advance corporation tax offset against lawful
corporation tax charges, which is subject to the determination of the timing
issue by the High Court and any subsequent appeal. The High Court hearing on
time limits was held in late November 2023 with judgment handed down in
February 2024. The High Court determined that claims should have been filed
within 6 years of June 2000 meaning that BAT's claims are in time. It is
uncertain whether HMRC will appeal the judgment.
During 2015, HMRC paid to the Group a gross amount of £1.2 billion in two
separate payments, less a deduction (withheld by HMRC) of £0.3 billion. The
payments made by HMRC have been made without any admission of liability and
are subject to refund were HMRC to succeed on appeal. Due to the uncertainty
of the amounts and eventual outcome the Group has not recognised any impact in
the income statement in the current or prior period in respect of the receipt
(being net £0.9 billion) which is held within trade and other payables. Any
future recognition as income will be treated as an adjusting item, due to the
size of the order, with interest of £60 million in respect for 2023 (2022:
£33 million) accruing on the balance, which was also treated as an adjusting
item.
The final resolution of all issues in the litigation is likely to take a
number of years. The Group made interim repayments to HMRC of £50 million in
2023 and 2022, and intends to make further interim repayments in future
periods.
Full details of the case and the assessment of goodwill will be included in
the Group's Annual Report and Accounts and Form 20-F for the year ended 31
December 2023 (note 10 Taxation on ordinary activities).
Other Information
Dividends
The Board has declared an interim dividend of 235.5p per ordinary share of 25p
for the year ended 31 December 2023, payable in four equal quarterly
instalments of 58.8795p per ordinary share in May 2024, August 2024, November
2024 and February 2025. This represents an increase of 2.0% on 2022 (2022:
230.9p per share), and a pay-out ratio, on 2023 adjusted diluted earnings per
share, of 62.7%.
The quarterly dividends will be paid to shareholders registered on either the
UK main register or the South Africa branch register and to holders of
American Depositary Shares (ADSs), each on the applicable record dates set out
under the heading 'Key dividend dates' below.
General dividend information
Under IFRS, the dividend is recognised in the year that it is approved by
shareholders or, if declared as an interim dividend by directors, in the
period that it is paid.
The cash flow, prepared in accordance with IFRS, reflects the total cash paid
in the period, amounting to £5,055 million (2022: £4,915 million).
Dividends declared 2023 2022
Pence per share US$ per ADS Pence per share US$ per ADS
Quarterly Payment 1 (paid May 2023) 57.72 0.723866 54.45 0.680434
Quarterly Payment 2 (paid August 2023) 57.72 0.734400 54.45 0.655523
Quarterly Payment 3 (paid November 2023) 57.72 0.713880 54.45 0.635540
Quarterly Payment 4 (paid February 2024) 57.72 0.731803 54.45 0.669190
230.88 2.903949 217.80 2.640687
Holders of ADSs
For holders of ADSs listed on the New York Stock Exchange (NYSE), the record
dates and payment dates are set out below. The equivalent quarterly dividends
receivable by holders of ADSs in US dollars will be calculated based on the
exchange rate on the applicable payment date. A fee of US$0.005 per ADS will
be charged by Citibank, N.A. in its capacity as depositary bank for the BAT
American Depositary Receipt (ADR) programme in respect of each quarterly
dividend payment. With effect from 1 May 2024, such dividends are subject to a
fee of up to US$0.04 per ADR per year (a fee of US$0.01 per dividend based on
the distribution of four quarterly cash dividends per year).
South Africa Branch register
In accordance with the JSE Limited (JSE) Listing Requirements, the
finalisation information relating to shareholders registered on the South
Africa branch register (comprising the amount of the dividend in South African
rand, the exchange rate and the associated conversion date) will be published
on the dates stated below, together with South Africa dividends tax
information. The quarterly dividends are regarded as 'foreign dividends' for
the purposes of the South Africa Dividends Tax. For the purposes of South
Africa Dividends Tax reporting, the source of income for the payment of the
quarterly dividends is the United Kingdom.
Key dividend dates
In compliance with the requirements of the London Stock Exchange (LSE), the
NYSE and Strate, the electronic settlement and custody system used by the JSE,
the following salient dates for the quarterly dividends payments are
applicable.
Event Payment No. 1 Payment No. 2 Payment No. 3 Payment No. 4
Preliminary announcement (includes declaration data required for JSE purposes) 08 February
Publication of finalisation information (JSE) 11 March 18 June 16 September 9 December
No removal requests permitted (in either direction) between the UK main 11 March - 25 March 18 June - 1 July 17 September - 30 September 10 December - 23 December
register and the South Africa branch register
Last Day to Trade (LDT) cum-dividend (JSE) 18 March 25 June 23 September 17 December
Shares commence trading ex-dividend (JSE) 19 March 26 June 25 September 18 December
No transfers permitted between the UK main register and the South Africa 19 March - 25 March 26 June - 1 July 25 September - 30 September 18 December - 23 December
branch register
No shares may be dematerialised or rematerialised on the South Africa branch 19 March - 25 March 26 June - 1 July 25 September - 30 September 18 December - 23 December
register
Shares commence trading ex-dividend (LSE) 21 March 27 June 26 September 19 December
Shares commence trading ex-dividend (NYSE) 21 March 27 June 26 September 19 December
Record date 22 March 28 June 27 September 20 December
(JSE, LSE and NYSE)
Last date for receipt of Dividend Reinvestment Plan (DRIP) elections (LSE) 11 April 12 July 11 October 13 January 2025
Payment date (LSE and JSE) 2 May 2 August 1 November 3 February 2025
ADS payment date (NYSE) 7 May 7 August 6 November 6 February 2025
Notes:
1. All dates are 2024, unless otherwise stated.
2. The dates set out above may be subject to any changes to public
holidays arising and changes or revisions to the LSE, JSE and NYSE timetables.
Any confirmed changes to the dates will be announced.
Other Information
Continued
Non-financial Key Performance Indicators (KPIs)
Volume
Volume is defined as the number of units sold. Units may vary between
categories. This can be summarised for the principal metrics as follows:
- Factory-made cigarettes (FMC) - sticks, regardless of weight or dimensions;
- Roll-Your-Own/Make-Your-Own - kilos, converted to a stick equivalent based
upon 0.8 grams (per stick equivalent) for Roll-Your-Own and between 0.5 and
0.7 grams (per stick equivalent) for Make-Your-Own;
- Traditional Oral - pouches (being 1:1 conversion to stick equivalent) and
kilos, converted to a stick equivalent based upon 2.8 grams
(per stick equivalent) for Moist Snuff, 2.0 grams (per stick equivalent) for
Dry Snuff and 7.1 grams (per stick equivalent) for other oral;
- Modern Oral - pouches, being 1:1 conversion to stick equivalent;
- Heat/Heated sticks - sticks, being 1:1 conversion to stick equivalent; and
- Vapour - pods and 10 millilitre bottles. There is no conversion to a stick
equivalent.
Volume is recognised in line with IFRS 15 Revenue from Contracts with
Customers, based upon transfer of control. It is assumed that there is no
material difference, in line with the Group's recognition of revenue, between
the transfer of control and shipment date.
Volume is used by management and investors to assess the relative performance
of the Group and its brands within categories, given volume is a principal
determinant of revenue.
Volume Share
Volume share is the number of units bought by consumers of a specific brand or
combination of brands, as a proportion of the total units bought by consumers
in the industry, category or other sub-categorisation. Sub-categories include,
but are not limited to, the HP category, Modern Oral, Vapour, Traditional
Oral, Total Oral or Cigarette. Except when referencing particular markets,
volume share is based on our key markets (representing around 60% of the
Group's cigarette and HP volume).
Where possible, the Group utilises data provided by third-party organisations,
including NielsenIQ, based upon retail audit of sales to consumers. In certain
markets, where such data is not available, other measures are employed which
assess volume share based upon other movements within the supply chain, such
as sales to retailers. This may depend on the provision of data to the
industry by the customers including distributors/wholesalers.
Volume share is used by management to assess the relative performance to the
Group and its brands against the performance of its competitors in the
categories and geographies in which the Group operates. This measure is also
useful to understand the Group's performance when seeking to grow scale within
a market or category from which future financial returns can be realised. The
Group's management believes that this measure is useful to investors to
understand the relative performance of the Group and its brands against the
performance of its competitors in the categories and geographies in which the
Group operates.
Volume share in each year compares the average volume share in the year with
the average volume share in the prior year. This is a more robust measure of
performance, removing short-term volatility that may arise at a point in time.
However, in certain circumstances, in order to illustrate the latest
performance, data may be provided as at the end of the period rather than the
average in that period. In these instances, the Group indicates that these are
at a specific date (for instance, December 2023).
Value Share
Value share is the retail value of units bought by consumers of a particular
brand or combination of brands, as a proportion of the total retail value of
units bought by consumers in the industry, category or other
sub-categorisation in discussion. Except when referencing particular markets,
value share is based on our key markets (representing around 85% of the
Group's cigarette and HP value).
Where possible, the Group utilises data provided by third-party organisations,
including NielsenIQ, based upon retail audit of sales to consumers. In certain
markets, where such data is not available, other measures are employed which
assess value share based upon other movements within the supply chain, such as
sales to retailers. This may depend on the provision of data to the industry
by the customers (including distributors and wholesalers).
Value share is used by management to assess the relative performance of the
Group and its brands against the performance of its competitors in the
categories and geographies in which the Group operates, specifically
indicating the Group's ability to realise value relative to the market. The
Group's management believes that this measure is useful to investors to
apprehend the relative performance of the Group and its brands against the
performance of its competitors in the categories and geographies in which the
Group operates, specifically indicating the Group's ability to realise value
relative to the market.
Value share in each year compares the average value share in the year with the
average value share in the prior period. This is a more robust measure of
performance, removing short-term volatility that may arise at a point of time.
However, in certain circumstances, in order to illustrate the latest
performance, data may be provided that is as at the end of the period rather
than the average in that period. In these instances the Group indicates that
these are at a specific date (for instance, December 2023).
Price Mix
Price mix is a term used by management and investors to explain the movement
in revenue between periods. Revenue is affected by the volume (how many units
are sold) and the value (how much is each unit sold for). Price mix is used to
explain the value component of the sales as the Group sells each unit for a
value (price) but may also achieve a movement in revenue due to the relative
proportions of higher value volume sold compared to lower value volume sold
(mix).
This term is used to explain the Group's relative performance between periods
only. It is calculated as the difference between the movement in revenue
(between periods) and volume (between periods). For instance, the decline in
combustibles revenue (excluding translational foreign exchange movements) of
0.8% in 2023, with a decline in combustibles volume of 8.3% in 2023, leads to
a price mix
of 7.5% in 2023. No assumptions underlie this metric as it utilises the
Group's own data.
Other Information
Continued
Non-financial Key Performance Indicators (KPIs) (continued)
Consumers of Non-Combustible Products
The number of consumers of Non-Combustible products is defined as the
estimated number of Legal Age (minimum 18 years) consumers of the Group's
Non-Combustible products. In markets where regular consumer tracking is in
place, this estimate is obtained from adult consumer tracking studies
conducted by third parties (including Kantar). In markets where regular
consumer tracking is not in place, the number of consumers of Non-Combustible
products is derived from volume sales of consumables and devices in such
markets, using consumption patterns obtained from other similar markets with
consumer tracking (utilising studies conducted by third parties, including
Kantar).
The number of Non-Combustible products consumers is used by management to
assess the number of consumers regularly using the Group's New Categories
products as the increase in Non-Combustible products is a key pillar of the
Group's sustainability ambition and is integral to the sustainability of our
business.
The Group's management believes that this measure is useful to investors given
the Group's sustainability ambition and alignment to the sustainability of the
business with respect to the Non-Combustibles portfolio.
Our products
The Group reports volumes as additional information. This is done, where
appropriate, with cigarette sticks as the basis, with usage levels applied to
other products to calculate the equivalent number of cigarette units. There is
no conversion to a stick equivalent for vapour products.
The conversion rates that are applied:
Equivalent to one cigarette
Heat sticks 1 heat stick
Cigars 1 cigar (regardless of size)
Oral
- Pouch 1 pouch
- Moist Snuff 2.8 grams
- Dry Snuff 2.0 grams
- Loose leaf, plug, twist 7.1 grams
Pipe tobacco 0.8 grams
Roll-your-own 0.8 grams
Make-your-own
- Expanded tobacco 0.5 grams
- Optimised tobacco 0.7 grams
Roll-your-own (RYO)
Loose tobacco designed for hand rolling, normally a finer cut with higher
moisture, compared to cigarette tobacco.
Make-your-own (MYO)
MYO expanded tobacco; also known as volume tobacco.
Loose cigarette tobacco with enhanced filling properties - to allow higher
yields of cigarettes/kg - designed for use with cigarette tubes and filled via
a tobacco tubing machine.
MYO non-expanded tobacco; also known as optimised tobacco
Loose cigarette tobacco designed for use with cigarette tubes and filled via a
tobacco tubing machine.
Other Information
Continued
Additional information
British American Tobacco is one of the world's leading consumer products
businesses, with brands sold across the world. We have strategic combustible
and HP brands - including Dunhill, Kent, Lucky Strike, Pall Mall, Rothmans,
glo, veo, Newport (in the U.S.), Camel (in the U.S.) and Natural American
Spirit (in the U.S.) - and over 200 brands in our portfolio, including a
growing portfolio of reduced-risk products*†.
References in this document to information on websites, including the web
address of BAT, have been included as inactive textual references only. These
websites and the information contained therein or connected thereto are not
intended to be incorporated into or to form part of this report.
*Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
†Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
Annual Report and Accounts and Form 20-F
Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2023 or 2022. Statutory
accounts for 2022 have been delivered to the Registrar of Companies and those
for 2023 will be delivered following the Company's Annual General Meeting. The
auditors' reports on the 2022 and 2023 accounts were unqualified, did not draw
attention to any matters by way of emphasis and did not contain statements
under s498(2) or (3) of Companies Act 2006 or equivalent preceding
legislation.
Publication
The Group's 2023 Annual Report and Accounts and Form 20-F will be published on
www.bat.com on or around 9 February 2024. A printed copy will later be mailed
to shareholders on the UK main register who have elected to receive it. At the
same time, shareholders will be notified of the availability of the Annual
Report and Form 20-F on the website and of the Performance Summary together
with other ancillary documents in accordance with their elections. Specific
local mailing and/or notification requirements will apply to shareholders on
the South Africa branch register. In addition, the Company files its Annual
Report on Form 20-F and other documents with the United States Securities and
Exchange Commission (SEC). BAT's filings are available to the public, together
with the public filings of other issuers, at the SEC's website, www.sec.gov
(file:///C%3A/Users/50003440/Downloads/www.sec.gov) .
Distribution of Preliminary Statement
This announcement is released or otherwise made available or notified to the
London Stock Exchange, the JSE Limited and the New York Stock Exchange and
filed in accordance with applicable regulations. It may be viewed and
downloaded from our website www.bat.com.
Copies of the announcement may also be obtained during normal business hours
from: (1) the Company's registered office; (2) the Company's representative
office in South Africa; (3) British American Tobacco Publications; and (4)
Citibank Shareholder Services. Contact details are set out below.
This announcement was approved by the Board of Directors on 7 February 2024.
Shareholder Information
Financial calendar 2024
Event Date(1)
Annual General Meeting 2024(2) 24 April 2024
(at 11.30am)
Half-Year Report 2024 25 July 2024
1. Indicated dates are subject to change.
2. Details of the venue and business to be proposed at the meeting will be set
out in the Notice of Annual General Meeting, which will be made available to
all shareholders and published on www.bat.com.
Other Information
Continued
Forward-looking statements and other matters
This announcement contains certain forward-looking statements, including
"forward-looking" statements made within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995.
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 and business
objectives (including with respect to sustainability and other environmental,
social and governance matters), as well as: (i) certain statements in the
Summary and the Chief Executive statement and the 2024 Outlook (both on pages
1 to 2); (ii) certain statements in the Group Operating Review (pages 3 to 7);
(iii) certain statements in the Category Performance Review (pages 8 to 10);
(iv) certain statements in the Regional Review section (pages 11 to 13); (v)
certain statements in the Other Financial Information section (pages 14 to
19); (vi) certain statements in the Other Information section (pages 20 to
23); (vii) certain statements in the Notes to the Financial Statements section
(pages 31 to 42), including the Liquidity and Contingent liabilities and
financial commitments sections; and (viii) certain statements in the Other
Information (including Dividends) section (pages 43 to 46).
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 British American Tobacco Group (the
"Group") operates.
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.
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 2022 Annual Report and Accounts and Form 20-F of British
American Tobacco p.l.c. (BAT). Additional information concerning these and
other factors can be found in BAT's filings with the U.S. Securities and
Exchange Commission (SEC), including the Group's Annual Report on Form 20-F
and Current Reports on Form 6-K, which may be obtained free of charge at the
SEC's website, www.sec.gov and BAT's Annual Reports, which may be obtained
free of charge from the BAT website www.bat.com.
No statement in this announcement is intended to be a profit forecast and no
statement in this communication should be interpreted to mean that earnings
per share of BAT for the current or future financial years would necessarily
match or exceed the historical published earnings per share of BAT. Past
performance is no guide to future performance and persons needing advice
should consult an independent financial adviser. The forward-looking
statements reflect knowledge and information available at the date of
preparation of this announcement and BAT 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.
All financial statements and financial information provided by or with respect
to the U.S. or Reynolds American are initially prepared on the basis of U.S.
GAAP and constitute the primary financial statements or financial records of
the U.S./Reynolds American. This financial information is then converted to
International Financial Reporting Standards as issued by the IASB and as
adopted for use in the UK (IFRS) for the purpose of consolidation within the
results of the Group. To the extent any such financial information provided in
this announcement relates to the U.S. or Reynolds American it is provided as
an explanation of, or supplement to, Reynolds American's primary U.S. GAAP
based financial statements and information.
Our Vapour product Vuse (including Alto, Solo, Ciro and Vibe), and certain
products including Velo, Grizzly, Kodiak, Camel Snus and Granit, which are
sold in the U.S., are subject to FDA regulation and no reduced-risk claims
will be made as to these products without Agency clearance.
Caroline Ferland
Company Secretary
7 February 2024
Other Information
Continued
Corporate information
British American Tobacco p.l.c. is a public limited company which is listed on
the London Stock Exchange, New York Stock Exchange and the JSE Limited in
South Africa. British American Tobacco p.l.c. is incorporated in England and
Wales (No. 3407696) and domiciled in the UK.
Registered office
Globe House, 4 Temple Place, London, WC2R 2PG, UK
tel: +44 20 7845 1000
Premium listing
London Stock Exchange (Share Code: BATS; ISIN: GB0002875804)
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, UK
tel: 0800 408 0094; +44 370 889 3159
Share dealing tel: 0370 703 0084 (UK only)
Your account: www.computershare.com/uk/investor/bri
Share dealing: www.computershare.com/dealing/uk
Web-based enquiries: www.investorcentre.co.uk/contactus
Secondary listing
JSE Limited (Share Code: BTI)
Shares are traded in electronic form only and transactions settled
electronically through Strate.
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, 2132, South Africa
tel: 0861 100 634; +27 11 870 8216
email enquiries: web.queries@computershare.co.za
Sponsor for the purpose of the JSE listing
Merrill Lynch South Africa (Pty) Ltd t/a BofA Securities
Representative office in South Africa
Waterway House South
No 3 Dock Road, V&A Waterfront, Cape Town 8000, South Africa
PO Box 631, Cape Town 8000, South Africa
tel: +27 21 003 6500
American Depositary Receipts (ADRs)
NYSE (Symbol: BTI; CUSIP Number: 110448107)
BAT's shares are listed on the NYSE in the form of American Depositary Shares
(ADSs) and these are evidenced by American Depositary Receipts (ADRs), each
one of which represents one ordinary share of British American Tobacco p.l.c.
Citibank, N.A. is the depositary bank for the sponsored ADR programme.
Citibank Shareholder Services
PO Box 43077, Providence, Rhode Island 02940-3077, USA
tel: +1 888 985 2055 (toll-free) or +1 781 575 4555
email enquiries: citibank@shareholders-online.com
website: www.citi.com/dr
Publications
British American Tobacco Publications
Unit 80, London Industrial Park, Roding Road, London E6 6LS, UK
tel: +44 20 7511 7797
e-mail enquiries: bat@team365.co.uk
If you require publications and are located in South Africa, please contact
the Company's Representative office in South Africa using the contact details
shown above.
Glossary and Definitions
The following is a summary of the key terms used within this report:
Term Definition
AME Americas (excluding U.S.) and Europe. The key markets are: Belgium, Brazil,
Canada, Chile, Colombia, the Czech Republic, Denmark, France, Germany, Greece,
Hungary, Italy, Mexico, Netherlands, Poland, Romania, Spain, Switzerland,
Ukraine, the UK.
APMEA Asia Pacific, Middle East and Africa. The key markets are: Australia,
Bangladesh, Japan, Kazakhstan, Malaysia, New Zealand, Pakistan, Saudi Arabia,
South Africa, South Korea, Taiwan, Vietnam.
British American Tobacco, BAT, Group, we, us and our When the reference denotes an opinion, this refers to British American Tobacco
p.l.c. and when the reference denotes business activity, this refers to
British American Tobacco Group operating companies, either collectively or
individually, as the case may be.
Carbon Dioxide equivalent emissions Carbon Dioxide equivalent (CO(2)e) emissions include CO(2), CH4 and N2O and
are reported where we have operational control. We do not include data on
other GHG emissions (HFCs, PFCs, SF6 and NF3) as they are estimated to be
insignificant.
Cigarette Factory-made cigarettes (FMC) and products that have similar characteristics
and are manufactured in the same manner, but due to specific features may not
be recognised as cigarettes for regulatory, duty or similar reasons.
Circular Economy The circular economy is a model of production and consumption, which involves
sharing, leasing, reusing, repairing, refurbishing and recycling existing
materials and products as long as possible.
Combustibles Cigarettes and OTP.
Constant Currency/Constant rates Presentation of results in the prior year's exchange rate, removing the
potentially distorting effect of translational foreign exchange on the Group's
results. The Group does not adjust for normal transactional gains or losses in
profit from operations which are generated by exchange rate movements.
Developed Markets As defined by the World Economic Outlook as Advanced Economies and those
within the European Union.
Double Materiality Assessment/Material topic Although financial materiality has been considered in the development of our
Double Materiality Assessment ("DMA"), our DMA/Material topic and any related
conclusions as to the materiality 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.
Emerging Markets Those markets not defined as Developed Markets.
GTR Global Travel Retail.
HP Heated Products, comprising the devices, which include glo and our hybrid
products, which are used to heat our consumables being the Tobacco Heated
Products or Herbal Products for Heating.
Key markets The key markets are: Australia, Bangladesh, Belgium, Brazil, Canada, Chile,
Colombia, the Czech Republic, Denmark, France, Germany, Greece, Hungary,
Italy, Japan, Kazakhstan, Malaysia, Mexico, Netherlands, New Zealand,
Pakistan, Poland, Romania, Saudi Arabia, South Africa, South Korea, Spain,
Switzerland, Taiwan, Ukraine, the United Kingdom, the United States, Vietnam.
Modern Oral Includes Velo.
New Categories Includes Vapour, HP and Modern Oral.
Non-Combustibles New Categories plus Traditional Oral.
Organic Performance presented excluding businesses sold or acquired that may
significantly affect the users understanding of the Group's performance when
compared across periods. Organic measures exclude the performance of such
businesses in the current and comparator periods to ensure like-for-like
assessment across all periods. In 2023, organic measures exclude the
performance of Russia and Belarus as those businesses (in aggregate) were
deemed to be significant to the users' understanding of the financial
performance. In 2021, the Group sold its Iranian business. However, as the
Iranian business was not significant to the users' understanding of that year
or subsequent years financial performance, management did not treat the sale
of Iranian business as an organic adjustment.
OTP Other Tobacco Products, including make-your-own, roll-your-own, Pipe and
Cigarillos.
Project Quantum Review of the Group's operating model to drive increased agility and
efficiency.
Reduced risk(†) Based on the weight of evidence and assuming a complete switch from cigarette
smoking. These products are not risk free and are addictive.
Strategic combustible and HP brands Includes Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans, Newport (U.S.),
Natural American Spirit (U.S.), Camel (U.S.), glo and veo.
Strategic Portfolio Comprises strategic combustibles (Kent, Dunhill, Lucky Strike, Pall Mall,
Rothmans, Newport (U.S.), Natural American Spirit (U.S.), Camel (U.S.)),
strategic traditional oral (Grizzly) and New Categories (including Vuse, glo,
veo, Velo).
Thrive Supply Chain Our goals cover all tobacco we purchase for our products ('tobacco supply
chain'), which includes those in our combustibles, traditional oral and
tobacco heating products. Our metrics, however, derive data from our annual
Thrive assessment, which includes our directly contracted farmers and those of
our third-party suppliers, which represented over 94% of the tobacco we
purchased by volume in 2023 ('Thrive Supply Chain').
Top 5/T5 Vapour markets Being the top 5 markets for industry Vapour sales by revenue - the U.S., the
UK, France, Germany
and Canada. These markets represent an estimated c.75% (2022: 88%) of global
closed system revenue (being rechargeable closed systems and single-use
products) in tracked channels.
Top 5/T5 Modern Being the top 5 markets for industry Modern Oral sales by revenue -the U.S.,
Oral markets Sweden, Norway, Denmark and Switzerland. These markets represent c.85% (2022:
c.80%) of global industry Modern Oral revenue.
Top 12/T12 HP markets Being the top 12 markets (excluding Russia) for industry HP volume - Japan,
South Korea, Italy, Greece, Hungary, Kazakhstan, Ukraine, Poland, Switzerland,
Romania, Malaysia and the Czech Republic. These markets account for c. 85% of
global industry HP volume in 2023.
THP Tobacco Heated Products (i.e., the consumables that contain tobacco used by
Heated Product devices).
Traditional Oral Moist Snuff (Granit, Mocca, Grizzly, Kodiak) and other traditional snus
products (including Camel Snus and Lundgrens).
U.S. United States of America (a key market).
Value share Value share is the retail value of units bought by consumers of a particular
brand or combination of brands, as a proportion of the total retail value of
units bought by consumers in the industry, category or other
sub-categorisation in discussion. Except when referencing particular markets,
value share is based on our key markets (representing around 80% of the
Group's cigarette and HP value).
Volume share Offtake volume share, as independently measured by retail audit agencies
(including Nielsen and Marlin) and scanner sales to consumers, where possible
or based on movements within the supply chain (such as sales to retailers) to
generate an estimate of shipment share, based upon latest available data.
Except when referencing particular markets, volume share is based on our key
markets. The Group's key markets represent around 70% of the Group's cigarette
and HP volume.
Vapour Rechargeable, battery-powered devices that heat liquid formulations -
e-liquids - to create a vapour which is inhaled. Vapour products include Vuse.
† Our products as sold in the US, including Vuse, Velo, Grizzly, Kodiak, and
Camel Snus, are subject to FDA regulation and no reduced-risk claims will be
made as to these products without agency clearance.
Data Lake and Reconciliations
Reconciling volume to organic volume
Group Volume
Years ended 31 December 2023 2022
Reported Inorganic adjust's Organic Organic Reported Inorganic adjust's Organic
growth %
New Categories:
Vapour (mn 10ml/pods) 654 - 654 +7.0% 612 - 612
HP (bn sticks) 23.7 (2.7) 21.0 +11.6% 24.0 (5.2) 18.8
Modern Oral (mn pouches) 5,360 (36) 5,324 +34.4% 4,010 (49) 3,961
Traditional Oral (bn sticks eq) 6.6 - 6.6 -10.3% 7.4 - 7.4
Cigarettes (bn sticks) 555 (23) 532 -5.3% 605 -43 562
OTP (bn sticks) 15 - 15 -11.0% 16 - 16
Total Combustibles (bn sticks) 570 (23) 547 -5.5% 621 -43 578
Memo: Cigarettes + HP (bn sticks) 579 (26) 553 -4.8% 629 -48 581
Inorganic adjustments relate to businesses bought or sold, including those
held-for-sale (being the Group's businesses in Russia and Belarus, until their
sale partway through 2023). In 2021, the Group sold its Iranian business.
However, as the Iranian business was not significant to the users
understanding of that year or subsequent years financial performance,
Management did not treat the sale of Iranian business as an organic
adjustment.
Analysis of profit from operations (by segment) and diluted earnings per share
Year ended 31 December 2023
Reported Adj Items(1) Adjusted Exchange Adjusted at CC(2) Inorganic Adjs at CC(2) Adjusted Organic at CC(2)
£m £m £m £m £m £m £m
(Loss)/profit from Operations
U.S. (20,781) 27,602 6,821 42 6,863 - 6,863
AME 3,194 266 3,460 87 3,547 (223) 3,324
APMEA 1,836 348 2,184 195 2,379 - 2,379
Total Region (15,751) 28,216 12,465 324 12,789 (223) 12,566
Net finance costs (1,895) 96 (1,799) 5 (1,794) (25) (1,819)
Associates and joint ventures 585 (8) 577 34 611 - 611
(Loss)/profit before tax (17,061) 28,304 11,243 363 11,606 (248) 11,358
Taxation 2,872 (5,488) (2,616) (109) (2,725) 63 (2,662)
Non-controlling interests (178) (1) (179) (13) (192) - (192)
Coupons relating to hybrid bonds net of tax (45) - (45) - (45) - (45)
(Loss)/profit attributable to shareholders (14,412) 22,815 8,403 241 8,644 (185) 8,459
Diluted number of shares (m)* 2,229 2,237 2,237 2,237
Diluted (loss)/earnings per share (pence) (646.6) 375.6 386.4 378.1
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS, for that year. For remuneration
purposes, and reflective of the Group's positive earnings on an adjusted
basis, management have included the dilutive effect of share options in
calculating adjusted diluted earnings per share.
Year ended 31 December 2022
Reported Adj Items(1) Adjusted Inorganic Adjs Adjusted Organic
£m £m £m £m £m
Profit from Operations
U.S. 6,205 630 6,835 - 6,835
AME 2,926 422 3,348 (319) 3,029
APMEA 1,392 833 2,225 - 2,225
Total Region 10,523 1,885 12,408 (319) 12,089
Net finance costs (1,641) 34 (1,607) (5) (1,612)
Associates and joint ventures 442 92 534 - 534
Profit before tax 9,324 2,011 11,335 (324) 11,011
Taxation (2,478) (203) (2,681) 49 (2,632)
Non-controlling interests (180) (5) (185) - (185)
Coupons relating to hybrid bonds net of tax (49) - (49) - (49)
Profit attributable to shareholders 6,617 1,803 8,420 (275) 8,145
Diluted number of shares (m) 2,267 2,267 2,267
Diluted earnings per share (pence) 291.9 371.4 359.3
Notes to the analysis of profit from operations above:
1. Adjusting items represent certain items which the Group considers
distinctive based upon their size, nature or incidence.
2. CC: constant currency - measures are calculated based on a
re-translation, at the prior year's exchange rates, of the current year's
results of the Group and, where applicable, its segments.
Data Lake and Reconciliations
Continued
Non-GAAP measures
To supplement the presentation of the Group's results of operations and
financial condition in accordance with IFRS, the Group also presents several
non-GAAP measures used by management to monitor the Group's performance. The
Group's management regularly reviews the measures used to assess and present
the financial performance of the Group and, as relevant, its geographic
segments.
Although the Group does not believe that these measures are a substitute for
IFRS measures, the Group does believe such results excluding the impact of
adjusting items provide additional useful information to investors regarding
the underlying performance of the business on a comparable basis.
The principal non-GAAP measures which the Group uses are organic revenue,
adjusted profit from operations, adjusted organic profit from operations,
adjusted diluted earnings per share, adjusted organic diluted earnings per
share, adjusted net finance costs, adjusted taxation, operating cash flow
conversion ratio, adjusted cash generated from operations, free cash flow
(before dividends paid to shareholders) and free cash flow (after dividends
paid to shareholders) which are before the impact of adjusting items and, in
certain instances, inorganic adjustments and are reconciled from revenue,
profit from operations, net finance costs, taxation, diluted earnings per
share, cash conversion ratio and net cash generated from operating activities.
The Group also uses adjusted share of post-tax results of associates and joint
ventures, and underlying tax rate. Adjusting items, as identified in
accordance with the Group's accounting policies, represent certain items of
income and expense which the Group considers distinctive based on their size,
nature or incidence. Inorganic adjustments refer to the results of businesses
that have been acquired or sold, are due to be sold, or where there is an
enduring structural change in performance which would have a significant
impact on the users' understanding of the Group's performance between periods.
These include significant items in revenue, profit from operations, net
finance costs, taxation and the Group's share of the post-tax results of
associates and joint ventures which individually or, if of a similar type, in
aggregate, are relevant to an understanding of the Group's underlying
financial performance. The adjusting items are used to calculate the non-GAAP
measures of adjusted profit from operations, adjusted organic profit from
operations, adjusted operating margin, adjusted organic operating margin,
adjusted net finance costs, adjusted taxation, adjusted share of post-tax
results of associates and joint ventures, underlying tax rate, adjusted
diluted earnings per share and adjusted organic diluted earnings per share.
Additionally, the Group uses the non-GAAP measures of non controlling
interest, coupons relating to hybrid bonds net of tax and profit attributable
to shareholders.
The Group also supplements its presentation of revenue in accordance with IFRS
by presenting the non-GAAP component breakdowns of revenues by product
category (including revenue generated from Vapour, Heated Products, Modern
Oral, New Categories as a whole, Combustibles and Traditional Oral), including
by geographic segment (including revenue generated in the United States,
Americas and Europe and Asia-Pacific, Middle East and Africa) and including on
an organic basis. The Group further supplements the presentation of profit
from operations in accordance with IFRS by presenting the non-GAAP measure
referred to as New Categories contribution (including on an organic basis),
which reflects the marginal contribution of the New Categories products to the
Group's financial performance. This measure includes all directly attributable
revenue and costs. The Group's Management Board believes these measures, which
are used internally, are useful to the users of the financial statements in
helping them understand the underlying business performance of individual
Group product categories, including by geographic segments. They are not
presentations made in accordance with IFRS and should not be considered as an
alternative to breakdowns of revenues or profit from operations determined in
accordance with IFRS. Breakdowns of revenues by product category and
contributions to profit from operations by product category are not
necessarily comparable to similarly titled measures used by other companies.
As a result, readers should not consider these measures in isolation from, or
as a substitute analysis for, the Group's breakdowns of revenues as determined
in accordance with IFRS or profit from operations as determined in accordance
with IFRS.
The Management Board, as the chief operating decision maker, reviews a number
of our IFRS and non-GAAP measures for the Group and its product categories and
geographic segments (including on an organic basis) at constant rates of
exchange. This allows comparison of the Group's results, had they been
translated at the previous year's average rates of exchange. The Group does
not adjust for the normal transactional gains and losses in profit from
operations that are generated by exchange movements. Although the Group does
not believe that these measures are a substitute for IFRS measures, the Group
does believe that such results excluding the impact of currency fluctuations
year-on-year provide additional useful information to investors regarding the
operating performance on a local currency basis (see page 19).
The Group also supplements its presentation of cash flows in accordance with
IFRS by presenting the non-GAAP measures of free cash flow (before dividends
paid to shareholders), free cash flow (after dividends paid to shareholders)
and operating cash flow conversion ratio. The Group's Management Board
believes these measures, which are used internally, are useful to the users of
the financial statements in helping them understand the underlying business
performance and can provide insights into the cash flow available to, among
other things, reduce debt and pay dividends. Free cash flow (before dividends
paid to shareholders), free cash flow (after dividends paid to shareholders)
and operating cash flow conversion ratio have limitations as analytical tools.
They are not presentations made in accordance with IFRS and should not be
considered as an alternative to net cash generated from operating activities
determined in accordance with IFRS. Free cash flow (before dividends paid to
shareholders), free cash flow (after dividends paid to shareholders) and
operating cash flow conversion ratio are not necessarily comparable to
similarly titled measures used by other companies. As a result, readers should
not consider these measures in isolation from, or as a substitute analysis
for, the Group's results of operations or cash flows as determined in
accordance with IFRS.
The Group also presents net debt and adjusted net debt, non-GAAP measures, on
page 1 and pages 17 to 18 and page 58. The Group uses net debt and adjusted
net debt to assess its financial capacity. The Management Board believes that
these additional measures, which are used internally, are useful to the users
of the financial statements in helping them to see how business financing has
changed over the year. Net debt and adjusted net debt have limitations as
analytical tools. They are not presentations made in accordance with IFRS and
should not be considered as alternatives to borrowings or total liabilities
determined in accordance with IFRS. Net debt and adjusted net debt are not
necessarily comparable to similarly titled measures used by other companies.
As a result, readers should not consider these measures in isolation from, or
as a substitute analysis for the Group's measures of financial position as
determined in accordance with IFRS.
Due to the secondary listing of the ordinary shares of British American
Tobacco p.l.c. on the main board of the 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 1/2021 'Headline Earnings' issued by the South
African Institute of Chartered Accountants. Please see page 39.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
The Group also presents the underlying tax rate, a non-GAAP measure, on page
16. The Group uses the underlying tax rate to assess the tax rate applicable
to the Group's underlying operations, excluding the Group's share of post-tax
results of associates and joint ventures in the Group's pre-tax results and
adjusting items. The Management Board believes that this additional measure,
which is used internally, is useful to the users of the financial statements
because it excludes the contribution from the Group's associates, recognised
after tax but within the Group's pre-tax profits, and adjusting items, thereby
enhancing users' understanding of underlying business performance.
Underlying tax rate has limitations as an analytical tool. It is not a
presentation made in accordance with IFRS and should not be considered as an
alternative to the Group's headline effective tax rate as determined in
accordance with IFRS. Underlying tax rate is not necessarily comparable to
similarly titled measures used by other companies. As a result, this measure
should not be considered in isolation from, or as a substitute analysis for,
the Group's underlying tax rate as determined in accordance with IFRS.
Revenue and organic revenue, at constant rates of exchange
Definition: revenue before the impact of foreign exchange and inorganic
adjustments.
Years ended 31 December 2023 2022
£m £m
Revenue 27,283 27,655
Impact of translational foreign exchange 813
Revenue translated at 2022 exchange rates 28,096 27,655
Inorganic adjustments translated at 2022 exchange rates (550) (935)
Organic revenue translated at 2022 exchange rates 27,546 26,720
Revenue (and organic revenue) by Product Category, including New Categories,
at constant rates of exchange
Definition: revenue derived from each of the main product categories,
including New Categories, before the impact of foreign exchange and inorganic
adjustments. These measures enable users of the financial statements to
compare the Group's business performance across and with reference to the
Group's investment activity.
Years ended 31 December 2023 2022
Group Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 3,347 63 3,410 (98) 3,312 2,894 (158) 2,736
Vapour 1,812 11 1,823 (2) 1,821 1,436 - 1,436
HP 996 37 1,033 (89) 944 1,060 (154) 906
Modern Oral 539 15 554 (7) 547 398 (4) 394
Traditional Oral 1,163 9 1,172 - 1,172 1,209 - 1,209
Non-Combustibles 4,510 72 4,582 (98) 4,484 4,103 (158) 3,945
Combustibles 22,108 738 22,846 (450) 22,396 23,030 (769) 22,261
Other 665 3 668 (2) 666 522 (8) 514
Total Revenue 27,283 813 28,096 (550) 27,546 27,655 (935) 26,720
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Revenue (and organic revenue) by Product Category, including New Categories,
at constant rates of exchange (continued)
Years ended 31 December 2023 2022
U.S. Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 1,058 6 1,064 - 1,064 949 - 949
Vapour 1,033 6 1,039 - 1,039 913 - 913
HP - - - - - - - -
Modern Oral 25 - 25 - 25 36 - 36
Traditional Oral 1,127 7 1,134 - 1,134 1,174 - 1,174
Non-Combustibles 2,185 13 2,198 - 2,198 2,123 - 2,123
Combustibles 9,744 58 9,802 - 9,802 10,470 - 10,470
Other 65 - 65 - 65 46 - 46
Total Revenue 11,994 71 12,065 - 12,065 12,639 - 12,639
Years ended 31 December 2023 2022
AME Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 1,673 10 1,683 (98) 1,585 1,300 (158) 1,142
Vapour 686 (4) 682 (2) 680 465 - 465
HP 505 3 508 (89) 419 494 (154) 340
Modern Oral 482 11 493 (7) 486 341 (4) 337
Traditional Oral 36 2 38 - 38 35 - 35
Non-Combustibles 1,709 12 1,721 (98) 1,623 1,335 (158) 1,177
Combustibles 7,614 196 7,810 (450) 7,360 7,588 (769) 6,819
Other 468 (10) 458 (2) 456 364 (8) 356
Total Revenue 9,791 198 9,989 (550) 9,439 9,287 (935) 8,352
Years ended 31 December 2023 2022
APMEA Revenue Reported Impact of exchange Revenue Inorganic Adjs at CC Organic revenue at CC Reported Inorganic Adjs Organic revenue
at CC
£m £m £m £m £m £m £m
New Categories 616 47 663 - 663 645 - 645
Vapour 93 9 102 - 102 58 - 58
HP 491 34 525 - 525 566 - 566
Modern Oral 32 4 36 - 36 21 - 21
Traditional Oral - - - - - - - -
Non-Combustibles 616 47 663 - 663 645 - 645
Combustibles 4,750 484 5,234 - 5,234 4,972 - 4,972
Other 132 13 145 - 145 112 - 112
Total Revenue 5,498 544 6,042 - 6,042 5,729 - 5,729
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted profit from operations, adjusted profit from operations at constant
rates of exchange, adjusted organic profit from operations at constant rates
of exchange; adjusted operating margin and adjusted organic operating margin
Definition: profit from operations before the impact of adjusting items
(described on pages 32 to 35), inorganic adjustments and translational foreign
exchange; and adjusted profit from operations as a percentage of revenue and
adjusted organic profit from operations as a percentage of organic revenue, at
constant rates of exchange.
Years ended 31 December 2023 2022
£m £m
(Loss)/profit from operations (15,751) 10,523
Add:
Restructuring and integration costs (2) 771
Amortisation and impairment of trademarks and similar intangibles 23,202 285
Impairment of Goodwill 4,614 -
Credit in respect of calculation of excise on social contributions in Brazil (148) -
Credit in respect of partial buy-out of the pension fund in the U.S. - (16)
Charges in connection with planned disposal of subsidiaries - 612
Charges/(credit) in connection with disposal of subsidiaries 351 (6)
Charges in respect of contributions on investment grants in Brazil 47 -
Credit in respect of recovery of VAT on social contributions in Brazil (19) (460)
Charges in respect of DOJ and OFAC investigation 75 450
Charges in respect of Nigeria Federal Competition and Consumer Protection - 79
Commission (FCCPC) case
Other adjusting items (including Engle) 96 170
Adjusted profit from operations 12,465 12,408
Impact of translational foreign exchange on adjusted profit from operations 324
Adjusted profit from operations translated at 2022 exchange rates 12,789 12,408
Inorganic adjustments translated at 2022 exchange rates (223) (319)
Adjusted organic profit from operations translated at 2022 exchange rates 12,566 12,089
Operating Margin (Profit from operations as % of revenue) -57.7% 38.1%
Adjusted Operating Margin (Adjusted profit from operations as % of revenue) 45.7% 44.9%
Adjusted Organic Operating Margin (Adjusted organic PFO as % of organic 45.8% 45.2%
revenue)
Category contribution, at constant rates of exchange and Organic Category
contribution, at constant rates of exchange
Definition: profit from operations before the impact of adjusting items
(described on pages 32 to 34), inorganic adjustments and translational foreign
exchange, and after directly attributable, category specific costs.
Year ended 31 December 2023
Reported Adj Items Adjusted Exchange Adjusted Inorganic Adjs at CC Adjusted Organic at CC
at CC
£m £m £m £m £m £m £m
(Loss)/profit from Operations (15,751) 28,216 12,465 324 12,789 (223) 12,566
As delivered through:
New Categories contribution 32 (16) 16
Rest of Business 12,757 (207) 12,550
Year ended 31 December 2022
Reported Adj Items Adjusted Inorganic Adjs Adjusted Organic
£m £m £m £m £m
Profit from Operations 10,523 1,885 12,408 (319) 12,089
As delivered through:
New Categories contribution (366) 19 (347)
Rest of Business 12,774 (338) 12,436
Category contribution reflects the marginal contribution of the New Categories
products to the Group's financial performance. This measure includes all
directly attributable revenue and costs. This measure is provided in aggregate
as certain costs are incurred across all New Categories and are not product
specific. However, other overhead costs that are shared between New Categories
and Rest of Business are borne by the Rest of Business as they are deemed to
be incurred regardless of the performance of New Categories.
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted net finance costs and adjusted net finance costs, at constant rates
of exchange
Definition: net finance costs before the impact of adjusting items (described
on page 35) and translational foreign exchange.
Years ended 31 December 2023 2022
£m £m
Finance costs (2,081) (1,733)
Finance income 186 92
Net finance costs (1,895) (1,641)
Less: Adjusting items in net finance costs 96 34
Adjusted net finance costs (1,799) (1,607)
Comprising:
Interest payable (1,835) (1,648)
Interest and dividend income 186 92
Fair value changes - derivatives (599) 473
Exchange differences 449 (524)
Adjusted net finance costs (1,799) (1,607)
Impact of translational foreign exchange 5
Adjusted net finance costs translated at 2022 exchange rates (1,794) (1,607)
Adjusted share of post-tax results of associates and joint ventures and
adjusted share of post-tax results of associates and joint ventures, at
constant rates of exchange
Definition: share of post-tax results of associates and joint ventures before
the impact of adjusting items (described on page 35) and translational foreign
exchange.
Years ended 31 December 2023 2022
£m £m
Group's share of post-tax results of associates and joint ventures 585 442
Issue of shares and changes in shareholding (40) 3
Other exceptional items in ITC (2) -
Impairment of the Group's associate in Yemen - 18
Impairment in relation to Organigram (net of tax) 34 59
Other - 12
Adjusted Group's share of post-tax results of associates and joint ventures 577 534
Impact of translational foreign exchange 34
Adjusted Group's share of post-tax results of associates and joint ventures 611 534
translated at 2022 exchange rates
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted taxation and adjusted taxation at constant rates of exchange
Definition: Taxation before the impact of adjusting items (described on page
35) and translational foreign exchange.
Years ended 31 December 2023 2022
£m £m
UK
- current year tax 20 2
- adjustment in respect of prior periods 12 (5)
Overseas
- current year tax 2,804 2,675
- adjustment in respect of prior periods (25) 46
Total current tax 2,811 2,718
Deferred tax (5,683) (240)
Taxation on ordinary activities (2,872) 2,478
Adjusting items in taxation 73 27
Taxation on adjusting items 5,415 176
Adjusted taxation 2,616 2,681
Impact of translational foreign exchange 109 (131)
Adjusted taxation translated at 2022 exchange rates 2,725 2,550
Underlying tax rate and underlying tax rate, at constant rates of exchange
Definition: tax rate incurred before the impact of adjusting items (described
on pages 32 to 35) and translational foreign exchange and to adjust for the
inclusion of the Group's share of post-tax results of associates and joint
ventures within the Group's pre-tax results.
Years ended 31 December 2023 2022
£m £m
(Loss)/profit before taxation (PBT) (17,061) 9,324
Less:
Share of post-tax results of associates and joint ventures (585) (442)
Adjusting items within profit from operations 28,216 1,885
Adjusting items within finance costs 96 34
Adjusted PBT, excluding associates and joint ventures 10,666 10,801
Impact of translational foreign exchange 329
Adjusted PBT, excluding associates and joint ventures translated at 2022 10,995
exchange rates
Taxation on ordinary activities 2,872 (2,478)
Adjusting items within taxation and taxation on adjusting items (5,488) (203)
Adjusted taxation (2,616) (2,681)
Impact of translational foreign exchange (109)
Adjusted taxation translated at 2022 exchange rates (2,725)
Effective tax rate 16.8% 26.6%
Underlying tax rate 24.5% 24.8%
Underlying tax rate (at 2022 exchange rates) 24.8%
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted diluted earnings per share, at current and constant rates of exchange
and adjusted organic diluted earnings per share, at constant rates of exchange
Definition: diluted earnings per share before the impact of adjusting items
and inorganic adjustments, after adjustments to the number of shares
outstanding for the impact of share option schemes whether they would be
dilutive or not under statutory measures, presented at the prior year's rate
of exchange.
Years ended 31 December 2023 2022
pence pence
Diluted (loss)/earnings per share (646.6) 291.9
Effect of amortisation and impairment of goodwill, trademarks and similar 1,006.1 9.6
intangibles
Net effect of excise and VAT cases (5.7) (17.1)
Effect of disposal of subsidiaries 24.5 (0.3)
Effect of Brazil other taxes 1.4 -
Effect of charges in respect of DOJ and OFAC investigations 3.4 19.9
Effect of charges in respect of Nigerian FCCPC case - 3.5
Effect of planned disposal of subsidiaries (8.7) 26.4
Effect of restructuring and integration costs (0.2) 28.9
Effect of other adjusting items 3.3 5.2
Effect of adjusting items in net finance costs 3.1 1.2
Effect of associates' adjusting items (0.4) 4.1
Effect of adjusting items in respect of deferred taxation (4.4) (1.9)
Adjusting items in tax 1.2 -
Impact of dilution (*) (1.4)
Adjusted diluted earnings per share 375.6 371.4
Impact of translational foreign exchange 10.8
Adjusted diluted earnings per share, at 2022 exchange rates 386.4 371.4
Inorganic adjustments (8.3) (12.1)
Adjusted organic diluted earnings per share, at 2022 exchange rates 378.1 359.3
* In 2023, the Group reported a loss for the year. Following the
requirements of IAS 33, the impact of share options would be antidilutive and
is therefore excluded, for 2023, from the calculation of diluted earnings per
share, calculated in accordance with IFRS, for that year. For remuneration
purposes, and reflective of the Group's positive earnings on an adjusted
basis, management have included the dilutive effect of share options in
calculating adjusted diluted earnings per share.
Operating cash flow conversion ratio
Definition: net cash generated from operating activities before the impact of
adjusting items and dividends from associates and excluding pension short fall
funding, taxes paid and after net capital expenditure, as a proportion of
adjusted profit from operations.
Years ended 31 December 2023 2022
£m £m
Net cash generated from operating activities 10,714 10,394
Cash related to adjusting items 156 466
Non-tobacco litigation costs (509) 60
Tobacco litigation 460 171
Other adjusting cash items 205 235
Dividends from associates (506) (394)
Tax paid 2,622 2,537
Net capital expenditure (487) (599)
Other - (1)
Operating cash flow 12,499 12,403
Adjusted profit from operations 12,465 12,408
Cash conversion ratio -68% 99%
Operating cash flow conversion ratio 100% 100%
Cash conversion is net cash generated from operating activities as a
proportion of profit from operations
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted cash generated from operations
Definition: net cash generated from operating activities before the impact of
adjusting items (litigation), excluding dividends received from associates,
and after dividends paid to non-controlling interests, net interest paid and
net capital expenditure.
Years ended 31 December 2023 2022
£m £m
Net cash generated from operating activities 10,714 10,394
Dividends paid to non-controlling interests (105) (158)
Net interest paid (1,763) (1,588)
Net capital expenditure (487) (599)
Other 1 -
Cash related to adjusting items within adjusted cash generated from operations (49) 231
- Non tobacco litigation (509) 60
- Tobacco litigation 460 171
Other costs excluding litigation and restructuring costs 19 3
Dividends from associates (506) (394)
Adjusted cash generated from operations 7,824 7,889
Free cash flow (before and after dividends paid to shareholders), at constant
rates of exchange
Definition: net cash generated from operating activities after dividends paid
to non-controlling interests, net interest paid and net capital expenditure,
and translational foreign exchange. This measure is presented before and after
dividends paid to shareholders.
Years ended 31 December 2023 2022
£m £m
Net cash generated from operating activities 10,714 10,394
Dividends paid to non-controlling interests (105) (158)
Net interest paid (1,763) (1,588)
Net capital expenditure (487) (599)
Other 1 -
Free cash flow (before dividends paid to shareholders) 8,360 8,049
Dividends paid to shareholders (5,055) (4,915)
Free cash flow (after dividends paid to shareholders) 3,305 3,134
Impact of translational foreign exchange 46
Free cash flow (after dividends paid to shareholders), at 2022 exchange rates 3,351
Net debt
Definition: total borrowings, including related derivatives, less cash and
cash equivalents and current investments held at fair value.
Years ended 31 December 2023 2022
£m £m
Opening net debt (39,281) (36,302)
Free cash flow (after dividends paid to shareholders) 3,305 3,134
Other cash payments (303) (635)
Purchase of own shares - (2,012)
Other non-cash movements (226) (84)
Receipt from disposal of subsidiaries 159 -
Disposal of net debt -
Transferred from/(to) held-for-sale 368 (352)
Impact of foreign exchange 1,338 (3,030)
Closing net debt (34,640) (39,281)
Data Lake and Reconciliations
Continued
Non-GAAP measures (continued)
Adjusted net debt and ratio of adjusted net debt to adjusted EBITDA, at
constant rates of exchange and ratio of adjusted net debt to adjusted, organic
EBITDA
Definition: net debt, excluding the impact of the revaluation of Reynolds
American Inc. acquired debt arising as part of the purchase price allocation
process and translational foreign exchange, as a proportion of profit for the
year (earnings) before net finance costs (interest), tax, depreciation,
amortisation, impairment, associates, adjusting items and translational
foreign exchange, and, where appropriate, excluding inorganic adjustments for
businesses sold in the period.
Years ended 31 December 2023 2022
£m £m
Borrowings (excluding lease liabilities) 39,232 42,622
Lease liabilities 498 517
Derivatives in respect of net debt 170 167
Cash and cash equivalents (4,659) (3,446)
Current assets held at fair value (601) (579)
Net debt items included within asset held-for-sale - (352)
Purchase price adjustment (PPA) to Reynolds American Inc. debt (700) (798)
Adjusted net debt 33,940 38,131
Translational foreign exchange impact to adjusted net debt 1,358
Adjusted net debt, at 2022 exchange rates 35,298
(Loss)/profit for the year (14,189) 6,846
Taxation on ordinary activities (2,872) 2,478
Net finance costs 1,895 1,641
Depreciation, amortisation and impairment costs 28,614 1,305
Share of post-tax results of associates and joint ventures (585) (442)
Other adjusting items 360 1,380
Adjusted EBITDA 13,223 13,208
Translational foreign exchange impact to adjusted EBITDA 335
Adjusted EBITDA, at 2022 exchange rates 13,558
Adjustment for Russia and Belarus adjusted EBITDA in 2023 (207)
Adjusted, organic EBITDA 13,016
Ratio of adjusted net debt to adjusted EBITDA 2.57x 2.89x
Ratio of adjusted net debt to adjusted, organic EBITDA 2.61x
Ratio of adjusted net debt to adjusted EBITDA, at 2022 exchange rates 2.60x
Data Lake and Reconciliations
Continued
Summary of volume and revenue by category by region
Volume (unit)
Year ended 31 December U.S. AME APMEA Group
2023 % change 2023 % change 2023 % change 2023 % change
New Categories
Vapour 298 -6.6% 312 +19.4% 44 +43.1% 654 +7.0%
HP - 0.0% 11 -7.5% 13 +4.9% 24 -1.3%
Modern Oral 297 -1.3% 4,210 +36.5% 853 +36.2% 5,360 +33.6%
Traditional Oral 5.8 -10.9% 0.8 -5.2% - -% 6.6 -10.3%
Total Non-Combustibles
Cigarettes 52 -11.4% 265 -5.3% 238 -10.6% 555 -8.2%
OTP - -5.6% 13 -12.0% 2 -3.1% 15 -11.0%
Total Combustibles 52 -11.3% 278 -5.7% 240 -10.6% 570 -8.3%
Memo: Cigarettes and HP 52 -11.4% 276 -5.7% 251 -9.9% 579 -8.1%
Revenue - reported at current rates (£m)
Year ended 31 December U.S. AME APMEA Group
2023 % change 2023 % change 2023 % change 2023 % change
New Categories 1,058 +11.3% 1,673 +28.8% 616 -4.5% 3,347 +15.6%
Vapour 1,033 +13.1% 686 +47.6% 93 +60.5% 1,812 +26.2%
HP - -52.4% 505 +2.3% 491 -13.2% 996 -6.0%
Modern Oral 25 -32.2% 482 +41.5% 32 +50.3% 539 +35.3%
Traditional Oral 1,127 -4.0% 36 +1.7% - -% 1,163 -3.8%
Total Non-Combustibles 2,185 +2.9% 1,709 +28.1% 616 -4.5% 4,510 +9.9%
Total Combustibles 9,744 -6.9% 7,614 +0.3% 4,750 -4.5% 22,108 -4.0%
Other 65 +44% 468 +28.2% 132 +18.9% 665 +27.6%
Total 11,994 -5.1% 9,791 +5.4% 5,498 -4.0% 27,283 -1.3%
Of which:
Strategic 11,317 -5.5% 7,170 +5.9% 2,923 -5.7% 21,410 -2.0%
Non-strategic 677 +2.7% 2,621 +4.1% 2,575 -2.1% 5,873 +1.1%
11,994 -5.1% 9,791 +5.4% 5,498 -4.0% 27,283 -1.3%
Organic revenue - adjusted at constant rates (£m)
Year ended 31 December U.S. AME APMEA Group
2023 % change 2023 % change 2023 % change 2023 % change
New Categories 1,064 +12.0% 1,585 +39.0% 663 +2.6% 3,312 +21.0%
Vapour 1,039 +13.8% 680 +46.5% 102 +74.6% 1,821 +26.8%
HP - -52.1% 419 +23.1% 525 -7.3% 944 +4.1%
Modern Oral 25 -31.8% 486 +44.6% 36 +70.8% 547 +38.9%
Traditional Oral 1,134 -3.4% 38 +7.9% - -% 1,172 -3.1%
Total Non-Combustibles 2,198 +3.5% 1,623 +38.0% 663 +2.6% 4,484 +13.6%
Total Combustibles 9,802 -6.4% 7,360 +8.0% 5,234 +5.2% 22,396 +0.6%
Other 65 +45% 456 +26.9% 145 +32.0% 666 +29.6%
Total 12,065 -4.5% 9,439 +13.0% 6,042 +5.5% 27,546 +3.1%
Of which:
Strategic 11,384 -5.0% 7,304 +14.9% 3,211 +3.6% 21,899 -0.8%
Non-strategic 681 +3.3% 2,135 +8.2% 2,831 +7.7% 5,647 +22.9%
12,065 -4.5% 9,439 +13.0% 6,042 +5.5% 27,546 +3.1%
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