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achieved targets for water withdrawn and waste generated two years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
|
|
Adjusted1
|
|
Adjusted1
Organic2
|
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
consumers3
|
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
|
|
|
Borrowings5
(£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 TomorrowTM 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
|
|
Organic
|
|
|
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
|
|
Constant
|
£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
in revenue from New
Categories
|
New Category revenues
(£bn)
|
3.3
|
2.9
|
2.1
|
n
|
|
50m by 2030
consumers of our Non-Combustible
products
|
No. of consumers
(millions)
excluding Russia and
Belarus
|
23.9
|
20.7
|
17.1
|
n
|
|
|
Climate change
|
Net Zero GHG emissions by
2050
50% reduction in Scope 1 and 2 GHG emissions by 2030 (vs 2020
baseline)1
|
Scope 1 and 2 (market-based)
CO2e emissions (thousand tonnes)
|
362
|
420
|
495
|
n
|
|
Scope 1 and 2 CO2e
emissions intensity (tonnes per
£m revenue)
|
13.3
|
15.2
|
19.3
|
n
|
|
% Scope 1 and 2 CO2e
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 CO2e emissions
(thousand tonnes) including biogenic emissions and
removals
|
-
2
|
6,045
|
6,496
|
n
|
|
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
to be reusable, recyclable or
compostable by 2025
|
% packaging reusable, recyclable
or compostable
|
94
|
92
|
92
|
n
|
|
|
% 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
Deforestation Free
pulp and paper supply chain by 2025
Forest Positive
in our tobacco supply chain by 2025 (vs 2021
baseline)
|
% sources of wood used by our
contracted farmers for curing fuels that are from sustainable
sources
|
99.99
|
99.99
|
99.89
|
n
|
|
|
% 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
proportion of women in Management
roles
|
% female representation in
Management roles
|
42
|
41
|
39
|
n
|
|
|
Increase to 40% by 2025
proportion of women on Senior Leadership
teams
|
% female representation on Senior
Leadership teams
|
33
|
30
|
27
|
n
|
|
|
Zero accidents
aiming for zero accidents
Group-wide each year
|
Lost Time Incident Rate
(LTIR)
|
0.17
|
0.19
|
0.20
|
n
|
|
|
Number of serious injuries and
fatalities
to employees and contractors
|
25
|
36
|
31
|
n
|
|
|
Human
rights3
|
Zero child labour
aiming for zero incidents in our
tobacco supply chain by 2025
|
% farms with incidents of child
labour identified
|
0.15
|
0.38
|
0.70
|
n
|
|
|
% incidents of child labour
identified and reported as resolved by the end of the growing
season
|
100
|
100
|
100
|
ü
|
|
|
Farmer livelihoods and
communities3
|
Prosperous livelihoods
we are committed to working to enable prosperous
livelihoods for all farmers in our tobacco supply chain
|
% farmers in our Thrive Supply
Chain3 reported to grow other crops for food or as additional sources of income
|
93.3
|
92.8
|
95.6
|
n
|
|
|
Marketing and
communications
|
Full compliance
aiming for full compliance with
marketing regulations
|
Incidents of non-compliance with
marketing regulations resulting in a fine or
penalty4
|
3
|
2
|
N/A
|
n
|
|
|
Ethics and integrity
|
100% SoBC compliance
aiming for full adherence to our
Standards of Business Conduct (SoBC)
|
Number of established SoBC
breaches5
|
123
|
84
|
99
|
n
|
|
|
Number of disciplinary actions
taken as a result of established SoBC breaches that resulted in
people leaving BAT
|
79
|
58
|
46
|
n
|
|
|
Supplier engagement
|
100% of
product material and high-risk indirect suppliers having at least
one independent labour audit within a three-year cycle
|
% product material and higher-risk
indirect service suppliers having an independent labour audit
within a three-year cycle
|
58.8
|
36.6
|
22.0
|
n
|
|
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
material1 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 farms2
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
Investor Relations:
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
|
Press Office:
+44 (0)20 7845 2888 |
@BATplc
|
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
|
|
Organic
|
|
|
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
consumers1, 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
profitable2, 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 users1 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
TomorrowTM.
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
|
|
Organic
|
|
|
|
|
Current
|
Exchange
|
Constant
|
|
Constant
|
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
|
|
Constant
|
£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
|
|
Organic
|
|
|
|
|
Current
|
Exchange
|
Constant
|
|
Constant
|
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
|
|
Constant
|
£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
|
|
Organic
|
|
|
|
|
Current
|
Exchange
|
Constant
|
|
Constant
|
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
|
|
Constant
|
£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
2022
|
Adj
Items1
|
Adjusted
|
vs
2022
|
Exch.
|
Adjusted at
CC2
|
vs
2022
|
|
Adjusted Organic at
CC2
|
vs
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
December
|
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
ruble1
|
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
|
Revenue1
|
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
capital
|
Share premium, capital
redemption and merger reserves
|
Other
reserves
|
Retained
earnings
|
In respect of assets
held-for-sale
|
Total
attributable
to owners
of parent
|
Perpetual hybrid
bonds
|
Non-controlling
interests
|
Total
equity
|
£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:
(page 26)
|
-
|
-
|
(3,281)
|
(14,418)
|
-
|
(17,699)
|
-
|
136
|
(17,563)
|
(Loss)/profit for the
year
(page 25)
|
-
|
-
|
-
|
(14,367)
|
-
|
(14,367)
|
-
|
178
|
(14,189)
|
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
capital
|
Share
premium, capital redemption and merger reserves
|
Other
reserves
|
Retained
earnings
|
In
respect of assets held-for-sale
|
Total
attributable
to
owners
of
parent
|
Perpetual hybrid bonds
|
Non-controlling interests
|
Total
equity
|
£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 acquired
|
(37)
|
(39)
|
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
CC2
|
|
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
Items1
|
Adjusted
|
Exchange
|
Adjusted at
CC2
|
|
Reported
|
Adj
Items1
|
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 Brazil
|
(148)
|
-
|
(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 Commission (FCCPC)
case
|
-
|
79
|
(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
£ million
|
Pre-tax discount rate
(%)
|
5 Year Volume CAGR
(Trademarks)
|
Terminal value
%
|
Impairment charged for the
period 2023**
£ million
|
Amortisation expected for
year 2024***
£ 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
£m
|
Camel
£m
|
Pall Mall
£m
|
Natural American
Spirit
£m
|
Grizzly
£m
|
Camel Snus
£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
intangibles
|
1,006.1
|
9.6
|
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.
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 and
held-for-sale assets (net of tax)
|
1,003.6
|
15.5
|
Effect of gains on disposal of
property, plant and equipment, trademarks, held-for-sale assets,
partial/full termination of IFRS 16 leases, and sale and leaseback
(net of tax)
|
(4.4)
|
(0.7)
|
Effect of impairment of
subsidiaries transferred to held-for-sale and associated costs (net
of tax)
|
(9.1)
|
23.7
|
Effect of foreign exchange
reclassification from reserves to the income statement
|
24.8
|
0.3
|
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 and
held-for-sale assets (net of tax)
|
22,370
|
352
|
Effect of gains on disposal of
property, plant and equipment, trademarks, held-for-sale assets,
partial/full termination of IFRS 16 leases, and sale and leaseback
(net of tax)
|
(98)
|
(16)
|
Effect of impairment of
subsidiaries transferred to held-for-sale and associated costs (net
of tax)
|
(203)
|
538
|
Effect of foreign exchange
reclassification from reserves to the income statement
|
552
|
5
|
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 register and the South Africa
branch register
|
11 March
- 25 March
|
18 June
- 1 July
|
17
September - 30 September
|
10
December - 23 December
|
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 branch register
|
19 March
- 25 March
|
26 June
- 1 July
|
25
September - 30 September
|
18
December - 23 December
|
No shares may be dematerialised or
rematerialised on the South Africa branch register
|
19 March
- 25 March
|
26 June
- 1 July
|
25
September - 30 September
|
18
December - 23 December
|
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
(JSE, LSE and NYSE)
|
22
March
|
28
June
|
27
September
|
20
December
|
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.
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
|
Date1
|
Annual General Meeting
20242
|
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
(CO2e) emissions include CO2, 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
Oral
markets
|
Being the top 5 markets for
industry Modern Oral sales by revenue -the U.S., 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
growth %
|
|
Reported
|
Inorganic adjust's
|
Organic
|
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
Items1
|
Adjusted
|
Exchange
|
Adjusted at
CC2
|
Inorganic Adjs at
CC2
|
Adjusted Organic at
CC2
|
£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
Items1
|
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
at CC
|
Inorganic Adjs at
CC
|
Organic revenue at
CC
|
|
Reported
|
Inorganic Adjs
|
Organic
revenue
|
£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
at CC
|
Inorganic Adjs at
CC
|
Organic revenue at
CC
|
|
Reported
|
Inorganic Adjs
|
Organic
revenue
|
£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
at CC
|
Inorganic Adjs at
CC
|
Organic revenue at
CC
|
|
Reported
|
Inorganic Adjs
|
Organic
revenue
|
£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
at CC
|
Inorganic Adjs at
CC
|
Organic revenue at
CC
|
|
Reported
|
Inorganic Adjs
|
Organic
revenue
|
£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 Commission (FCCPC)
case
|
-
|
79
|
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 revenue)
|
45.8%
|
45.2%
|
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
at CC
|
Inorganic Adjs at
CC
|
Adjusted Organic 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 translated at 2022 exchange rates
|
611
|
534
|
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 exchange rates
|
10,995
|
|
|
|
|
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
intangibles
|
1,006.1
|
9.6
|
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%
|