TIDMBATS
RNS Number : 3788P
British American Tobacco PLC
09 February 2023
9 February 2023 - PRESS RELEASE / PRELIMINARY RESULTS
BRITISH AMERICAN TOBACCO p.l.c.
YEARED 31 DECEMBER 2022
New Category Acceleration Drives Profitability Forward
To 2024
Jack Bowles, Chief Executive :
"We continue to accelerate our A Better Tomorrow(TM)
transformation at speed.
"Driven by our strong New Category momentum, (with revenue
approaching GBP3bn), we are confident in our GBP5bn revenue target
by 2025, and now expect New Category profitability in 2024, one
year ahead of plan.
"Our New Category business delivered strong volume, revenue and
market share growth and has become a significant contributor to the
Group's financial delivery. In 2022, we invested more than GBP2bn
in New Categories to drive long-term sustainable growth, while
making excellent progress in reducing operating losses by 62%.
"While reported results were impacted by a number of one-off
charges, we achieved a 150 bps improvement in adjusted operating
margin at current rates and another year of 100% operating cash
conversion demonstrating our ability to successfully navigate an
increasingly challenging macro-economic environment. This enabled
us to return GBP6.9bn to shareholders in 2022. I am proud of our
people and their focus on delivery of our three strategic
priorities, demonstrating once again the strength and resilience of
our business.
"Looking forward, while we expect the macro-economic environment
to remain challenging, we will continue to deliver and further
accelerate our transformation. We will leverage our
well-established multi-category brand portfolio, our new regional
structure to enable even greater collaboration and accelerated
decision-making and our new market archetype model to guide our
strategic choices and resource allocation to further enhance
returns.
"I am confident in BAT's ability to deliver long-term
sustainable value for shareholders."
PERFORMANCE HIGHLIGHTS REPORTED ADJUSTED
--------------------- ---------------------------------
Current Vs 2021 Current Vs 2021
rates (current) Rates (current) (constant)
---------- --------- ---------- --------- ----------
Cigarette and THP volume share -10 bps
Cigarette and THP value share flat
Non-Combustibles consumers(1) 22.5m +4.2m
Revenue (GBPm) GBP27,655m +7.7% GBP27,655m +7.7% +2.3%
Revenue from New Categories
(GBPm) GBP2,894m +40.9% GBP2,894m +40.9% +37.0%
Profit from operations (GBPm) GBP10,523m +2.8% GBP12,408m +11.3% +4.3%
Category contribution - New
Categories (GBPm) ^ -GBP366m -61.6% -60.7%
Operating margin (%) 38.1% -170 bps +44.9% +150 bps +90 bps
Diluted EPS (pence) 291.9p -1.3% 371.4p +12.9% +5.8%
Net cash generated from operating
activities (GBPm) GBP10,394m +7.0%
Adjusted cash generated from
operations (GBPm) GBP7,889m +7.4% +3.9%
Cash conversion (%) 98.8% +390 bps +100.0% -360 bps
Borrowings(2) (GBPm) GBP43,139m +8.8%
Adjusted Net Debt (GBPm) GBP38,131m +7.3% +0.5%
Dividend per share (pence) 230.9p +6.0%
---------------------------------- ---------- --------- ---------- --------- ----------
The use of non-GAAP measures, including adjusting items and
constant currencies, are further discussed from page 48 , with
reconciliation from the most comparable IFRS measure provided.
Note - 1. Internal estimate. 2. Includes lease liabilities.
^This is an improvement in New Categories contribution as losses
reduced by 61.6% (or 60.7% at constant rates of exchange).
Faster Transformation Strong FY Results
* New Category profitability expected in 2024, one year * Revenue up 2.3%** driven by New Category growth and
ahead of target pricing
* Non-Combustible product* consumers up 4.2m to 22.5m * Combustible revenue underpinned by price/mix of +4.6%
* Non-Combustibles now 14.8% of revenue up 2.4 ppts * Global Cigarette value share flat, US value sh are up
from 2021 10 bps
* New Categories revenue up 37.0% to GBP2,813m** with * D elivered GBP1.9bn annualised Quantum savings, well
growth in: ahead of original GBP1bn target, with GBP629m in 2022
* Vapour (+43.8%**), THP (+26.7%**), Modern Oral * Adjusted profit from operations up 4.3%** absorbing a
(+45.6%**) negative transactional FX impact of 1.5%
* New Category contribution losses reduced by GBP578m** * Adjusted operating margin up 90 bps**
,
an improvement of 60.7%**
* Adjusted diluted EPS up 5.8%**
* Double Materiality Assessment completed
* Operating cash flow conversion of 100%
* Scope 1 & 2 Greenhouse Gas emissions down 15% vs.
2021 * Adjusted net debt/Adjusted EBITDA 2.89x
* Achieved target of 30% renewable energy use 3 years * 6.0% dividend growth
early
* CDP "A" for Climate Change; DJSI World Sustainability
Index
* Based on the weight of evidence and assuming a complete switch
from cigarette smoking. These products are not risk free and are
addictive. ** at constant rates of exchange.
2023 OUTLOOK:
-- Global tobacco industry volume expected to be down c.2%.
-- 3-5% organic constant currency revenue growth, reported
growth impacted by timing of the transfer of the Russian and
Belarusian businesses expected to close in 2023.
-- Strong New Category revenue growth with further improvement
in category contribution alongside incremental investment.
-- Mid-single figure constant currency adjusted EPS growth,
including a c.2% transactional FX headwind, with growth H2
weighted.
-- Translational foreign exchange is expected to be broadly
neutral on full year adjusted EPS growth.
-- Operating cash flow conversion in excess of 90%.
Jack Bowles, Chief Executive Statement
Transforming at speed
"In 2022, the business demonstrated once again that we are
transforming BAT while delivering strong results.
"At the core of our strategy is our corporate purpose to build A
Better Tomorrow(TM) . This means offering a greater choice of
enjoyable and less risky products(*) for our consumers.
"Our results show that our strategy is working. We have strong,
global New Category brands, targeted geographic expansion plans and
an unwavering commitment to innovation that ensures we are
delivering for the consumer. We now have 22.5 million consumers of
non-combustible products and revenue from these products account
for c.15% of Group revenue.
"Our people have always been one of our greatest strengths and
this year that has never been more evident. Their focus and resolve
in the face of global economic upheaval has ensured excellent
progress against our three strategic priorities to deliver:
-- a step change in New Categories performance;
-- value from combustibles; and
-- business simplification.
"Following a comprehensive strategic review, we have taken the
decision to further simplify the Group, reducing the number of
regions and business units(1) . At the same time, our new operating
model, centred around market archetypes, will enable us to
prioritise our investments smartly and focus our activities and
resource allocation to maximise returns. In addition, we expect to
sell at least 20bn fewer cigarettes after completion of our phased
exits of around 30 markets, further advancing our A Better
TomorrowTM purpose.
"I am also pleased to confirm that we are in advanced
discussions with a joint management-distributor consortium with a
view to completing the transfer of our Russian and Belarusian
businesses in 2023.
"In the Wellbeing and Stimulation space, we have made good
progress in 2022, through our venturing unit, Btomorrow Ventures.
In addition, in the cannabis space, we complemented our investment
in Organigram with a non-controlling minority stake in Sanity Group
and an investment in Charlotte's Web. Together, these investments
represent further steps in our exploration beyond tobacco and
nicotine.
"With ESG being central to our strategy, further embedding our
commitment to sustainability, we appointed our first Chief
Sustainability Officer. In 2022, we were one of the first companies
globally to implement a comprehensive Double Materiality
Assessment, well ahead of regulatory requirements, providing
insights to guide the business through 2023 and beyond.
"With the external environment becoming ever more complex, I am
confident that BAT's proven resilience and performance will ensure
we will capitalise on emerging opportunities as we continue to
deliver value for stakeholders now and in the future."
Tadeu Marroco, Finance & Transformation Director's
Statement
Continued delivery in a challenging macro-environment:
"Our 2022 full-year performance demonstrates that we are
delivering and transforming at speed, driven by our multi-category
portfolio of global brands. Having invested significantly, New
Categories are now a meaningful contributor to Group results,
delivering a strong GBP578 million improvement in profitability as
New Category losses reduced by 61% at constant rates.
"Our consumer-centric, multi-category approach is driving
continued momentum in our New Categories, underpinned by our
exciting pipeline of innovations and further geographic expansion,
with our products now available in 60 countries globally, and
around 90 category-market combinations. Our increasing scale is
driving operating leverage, while further automation is reducing
the cost of goods sold. In addition, our growing brand equity has
enabled us to increase pricing on both devices and consumables in
key markets. This strong momentum has enabled us to bring forward
our New Category profitability target by one year to 2024.
"In combustibles, our targeted portfolio of brands across price
tiers delivered a robust performance across APME, AmSSA and Europe
driven by resilient volumes and strong pricing, partly offset by
mainly geographic mix and the disposal of our Iranian business in
August 2021. In the U.S., industry volumes were impacted by
normalisation of consumption patterns post COVID-19 and growing
macro-economic pressures in the second half of 2022. In addition,
our volumes reflect the partial unwind of prior year inventory
movements. Our combustibles value share in the U.S. grew by 10 bps,
together with an excellent Vuse performance and a translational FX
tailwind driving profit from operations up 11.5%. Adjusted profit
from operations was up 3.5%, excluding higher adjusting items and
translational FX.
"Group reported profit from operations was up 2.8%, with
reported operating margin down 170 bps and reported diluted EPS
down 1.3%. Our reported results were affected by a number of
adjusting items including charges (GBP612 million) in respect of
Russia and Belarus (described on page 33 ), a charge (GBP450
million) related to the investigation in respect of alleged
historical breaches of sanctions (described on page 21 ) and other
restructuring charges (GBP771 million) largely related to Project
Quantum. These were more than offset by a translational foreign
exchange tailwind and a net credit in Brazil (GBP460 million) in
relation of historical VAT on social contributions.
"We are successfully navigating the challenging external
environment, delivering 150 bps adjusted operating margin growth,
while absorbing a 1.5% impact from transactional foreign exchange.
This was driven by our increased agility and resilience, in
addition to GBP1.9 billion annualised savings from Project Quantum,
delivering well ahead of our original target of GBP1bn annualised
savings by the end of 2022. Adjusted profit from operations
increased 11.3% (or 4.3% at constant currency) with adjusted
diluted EPS up 12.9%, or 5.8% at constant currency, delivering at
the top end of our mid-single digit guidance.
"Our business is highly cash generative; we achieved another
year of excellent operating cash conversion, delivering 100%, well
ahead of our 90% guidance and we expect as a Group to generate
c.GBP40 billion of free cash flow before dividends over the next
five years.
"The Board reviews our capital allocation priorities taking into
account the macro-economic environment and potential regulatory and
litigation outcomes. At this time, the Board has decided to take a
pragmatic approach. Given our incremental investment plans in 2023
to further accelerate our transformation, and in light of the
uncertain macro environment, higher interest rates, outstanding
litigation and regulatory matters, the Board has decided to
prioritise strengthening the balance sheet. This will provide
greater business resilience while continuing to support future
financial agility, as we aim to reduce leverage more quickly
towards the middle of our target 2-3x corridor. In line with our
progressive dividend policy, the dividend will increase by 6.0% to
230.9p.
" We strongly believe that share buy-backs have an important
role to play within our capital allocation framework, and we will
continue to keep it under review as we progress through the
year.
"Liquidity remains strong with average debt maturity close to 10
years, and a fixed debt-profile of over 95%. Our medium-term rating
target remains Baa1/BBB+, with a current rating of Baa2 (stable
outlook)/BBB+ (negative outlook)**.
"We are in our "Faster Transformation" phase, driven by our
well-established consumer-centric, multi-category strategy, strong
portfolio of global brands and our resilient, highly cash
generative business. This will enable us to further invest in and
accelerate the transformation of our business, as we continue to
build A Better Tomorrow(TM) ."
* Based on the weight of evidence and assuming a complete switch
from cigarette smoking. These products are not risk free and are
addictive.
** 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.
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. 1. Subject to applicable information and
consultation requirements in some jurisdictions.
GROUP OPERATING REVIEW
TOTAL GROUP VOLUME AND REVENUE
For years ended
31 December Volume (unit) Revenue (GBPm)
--------------- -------------------------------------------------------
Reported At constant rates
---------------------- -------------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
New Categories 2,894 2,054 +40.9% (81) 2,813 2,054 +37.0%
------ ------- ------ ------ ------ ------- ------ ------ ------
Vapour (10ml units
/ pods mn) 612 +14.3% 1,436 927 +54.9% (103) 1,333 927 +43.8%
THP (sticks bn) 24.0 +25.6% 1,060 853 +24.3% 21 1,081 853 +26.7%
Modern Oral (pouches
mn) 4,010 +21.7% 398 274 +45.3% 1 399 274 +45.6%
------ ------- ------ ------ ------ ------- ------ ------ ------
Traditional Oral
(stick eq bn) 7.4 -8.3% 1,209 1,118 +8.2% (117) 1,092 1,118 -2.3%
------ ------ ------ ------- ------ ------ ------
Total Non-Combustibles 4,103 3,172 +29.4% (198) 3,905 3,172 +23.1%
------ ------ ------ ------- ------ ------ ------
Cigarettes (sticks
bn) 605 -5.1%
------ ------ ------ ------- ------ ------ ------
OTP incl RYO/MYO
(stick eq bn) 16 -10.3%
------ ------- ------ ------ ------ ------- ------ ------ ------
Total Combustibles 621 -5.2% 23,030 22,029 +4.5% (1,142) 21,888 22,029 -0.6%
------ ------ ------ ------- ------ ------ ------
Other 522 483 +7.6% (42) 480 483 -0.8%
------ ------ ------ ------- ------ ------ ------
Total 27,655 25,684 +7.7% (1,382) 26,273 25,684 +2.3%
====== ====== ====== ======= ====== ====== ======
Cigarettes and
THP (sticks bn) 629 -4.2%
======================= ====== ======= ====== ------ ------ ------- ------ ------ ------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance.
New Category consumables volume continues to grow and was up in
all three categories. Cigarette volume declined 5.1% with cigarette
volume share down 20 bps. While emerging markets began to recover
from the impact of COVID-19 last year, including Cuba, Bangladesh,
Brazil, and our GTR business, these effects were more than offset
by volume decline in the U.S., Turkey and the sale of our Iranian
business partway through 2021. Duty paid industry cigarette volume
was down by circa 2%.
On a reported basis, revenue increased 7.7% to GBP27,655
million. Strong revenue growth in New Categories, up 40.9%, was
supported by good cigarette pric ing (partially offset by negative
geographic mix), while value share was flat (compared to 2021).
2022 was negatively impacted by the full year impact of the sale of
the Group's Iranian business, which completed midway through 2021,
and t he partial unwind of the inventory movements in the U.S.
(mainly linked to the timing of price increases and uncertainty
about a potential excise increase). Excluding the foreign exchange
tailwind, revenue was up 2.3% on a constant currency basis.
Revenue from Non-Combustibles now represents 14.8% of Group
revenue, up from 12.4% in 2021 (and 4.2% in 2017), reflecting
strong New Category revenue growth of 40.9% (or 37.0% at constant
rates of exchange).
PROFIT FROM OPERATIONS AND OPERATING MARGIN
Reported PfO (GBPm) Adjusted PfO (GBPm)
Operating Margin Adjusted Operating Margin
For years ended 31 December (%) (%)
----------------------- ------------------------------------
2022
2022 2021 Change Adj FX cc 2021 Change
Profit from Operations (PfO) 10,523 10,234 +2.8% 1,885 (782) 11,626 11,150 +4.3%
-170 +90
Operating Margin 38.1% 39.8% bps 44.3% 43.4% bps
------- ------ ------ ----- ----- ------ ------ ------
PfO delivered by
New Categories contribution (375) (953) -60.7%
Rest of the Business 12,001 12,103 -0.8%
------------------------------ ------- ------ ------ ----- ----- ------ ------ ------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the 2021
adjusted performance.
Profit from operations on a reported basis was up 2.8% at
GBP10,523 million, with reported operating margin down 170 bps to
38.1%. A foreign exchange tailwind of 7.6%, due to the relative
weakness of sterling against the Group's operating currencies,
notably the US dollar, and lower losses from New Categories more
than offset the impact of a number of one-off items. These were
mainly charges of GBP612 million recognised in respect of the
Group's decision to transfer its Russian (and Belarusian)
operations (as explained on pages 20 and 33 ), charges of GBP771
million largely related to the Group's restructuring programme,
Quantum (including the exit from Egypt and the factory closures in
the U.S., Singapore and Switzerland), a charge of GBP79 million
(related to the conclusion of the investigation into alleged
violations of the Nigerian Competition and Consumer Protection Act
and National Tobacco Control Act) and a potential liability of
GBP450 million recognised in connection with the United States
Department of Justice (DOJ) and the United States Department of the
Treasury's Office of Foreign Assets Control (OFAC) investigations
into alleged historical breaches of sanctions. These were partly
offset by the recognition (in the second half of 2022) of GBP460
million in Brazil in relation to the calculation of VAT on social
contributions in prior periods, as the litigation was successfully
concluded in the year.
Adjusted profit from operations and adjusted operating
margin
Adjusted profit from operations at constant rates was up 4.3%,
driven by revenue growth, an improvement in the financial
performance of New Categories (as losses reduced by 60.7% at
constant rates of exchange) and GBP629 million of productivity
savings driven by Quantum. These more than offset the negative
impact of a soft U.S. combustible industry performance driven by
stretched consumer affordability, the partial unwinding of the 2021
trade inventory movements in the U.S., the impact of the sale of
the Group's Iranian business partway through 2021 and the
absorption of a 1.5% transactional foreign exchange headwind in the
period. Accordingly, adjusted operating margin was up 150 bps at
current rates and 90 bps at constant rates of exchange.
GROUP OPERATING REVIEW
ESG PERFORMANCE
Our ESG Roadmap contains key goals and targets, metrics, current
performance and prior-year comparatives.
Improvement/target Ongoing Significant improvement
l met l focus area l required
Performance
tracking
Topic Goals and targets Metrics
2022 2021 2020 Trend
GBP5bn by 2025 -
in revenue from New New Category revenues
Categories (GBPbn) 2.9 2.1 1.4 l
------------------------- ------------------------------------------------ --------- -------- ---------
50m by 2030 - consumers
of our No. of consumers
Harm reduction Non-Combustible products (millions) 22.5 18.3 13.5 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
Net Zero by 2050
across our value chain
- comprising Scope
1, 2 & 3 Greenhouse
Gas (GHG) emissions
50% CO(2) e emissions
reduction by 2030
-
across our value
chain - comprising
Scope 1, 2 & 3 GHG
emissions(1)
Carbon neutral
operations
by 2030 comprising Scope 1 & 2 (market
Scope 1 & 2 GHG based) CO(2) e emissions
emissions (thousand tonnes) 420 495 541 l
------------------------- ------------------------------------------------ --------- -------- ---------
Scope 1 & 2 CO(2) e
emissions intensity
(tonnes per GBPm revenue) 15.2 19.3 20.0 l
-------------------------------------------------------------------------- --------- -------- ---------
% Scope 1 & 2 CO(2)
e emissions reduction
vs 2020 baseline 22.3 8.4 - l
-------------------------------------------------------------------------- --------- -------- ---------
Scope 3 CO(2) e
emissions
(thousand tonnes)
including
biogenic emissions and -
Climate change removals (2) 5,243 5,614 l
------------------------------------------------- ------------------------ --------- -------- ---------
<1% waste to landfill
by 2025
100% packaging reusable,
recyclable or
Circular compostable % waste sent to landfill
economy by 2025 from direct operations 4.90 8.70 8.90 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
% packaging reusable,
recyclable or compostable 92 92 80 l
-------------------------------------------------------------------------- --------- -------- ---------
% markets selling Vuse
and glo with Take-Back
schemes 100 100 - l
-------------------------------------------------------------------------- --------- -------- ---------
No gross Deforestation
of primary native
forests in our tobacco,
paper and pulp supply
chains
% sources of wood used
Net Zero Deforestation by our contracted
by 2025 of managed farmers
natural forests in for curing fuels that
Biodiversity our tobacco, paper are from sustainable
& ecosystems and pulp supply chains sources 99.99 99.89 99.70 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
% paper and pulp volumes
that is certified
as sourced sustainably 94 89 - l
-------------------------------------------------------------------------- --------- -------- ---------
35% less water use
by 2025
100% of operations
sites Alliance for % reduction in water
Water Stewardship withdrawn vs 2017
Water certified by 2025 baseline 33 28 23 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
% operations sites Alliance
for Water Stewardship
(AWS) certified 36 15 - l
-------------------------------------------------------------------------- --------- -------- ---------
Zero child labour
- aiming for zero % farms with incidents
incidents in our Tobacco of child
Supply Chain by 2025 labour identified 0.38 0.70 0.50 l
------------------------- ------------------------------------------------ --------- -------- ---------
% incidents of child
labour reported as resolved
by the end of the growing
season 100 100 98.5 l
-------------------------------------------------------------------------- --------- -------- ---------
% farms monitored for
Monitoring of supply child labour in our
chains Tobacco Supply Chain 99.99 99.91 99.70 l
------------------------- ------------------------------------------------ --------- -------- ---------
% product material and
higher-risk indirect
service suppliers
having
an independent labour
audit within a
three-year
Human rights(3) cycle 36.6 22.0 - l
------------------------------------------------- ------------------------ --------- -------- ---------
% farmers in our Tobacco
Supply Chain reported
to grow other crops
Crop diversification for food or as
supporting prosperous additional
Farmer livelihoods(3) livelihoods sources of income 92.8 95.6 93.4 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
Increase to 45% by
2025 proportion of
People, Diversity women in management % female representation
& Culture roles in management roles 41 39 38 l
---------------------- ------------------------- ------------------------- --------- -------- ---------
Number of work-related
Zero accidents - accidents (including
aiming for zero assaults) resulting
accidents in injury, causing absence
Group-wide each year of one shift or more 83 95 114 l
------------------------- ------------------------------------------------ --------- -------- ---------
Lost Time Incident Rate
(LTIR) 0.19 0.20 0.22 l
-------------------------------------------------------------------------- --------- -------- ---------
Number of serious injuries
and fatalities
to employees and contractors 36 31 39 l
-------------------------------------------------------------------------- --------- -------- ---------
100% SoBC compliance
- aiming for full
adherence to our
Standards
of Business Conduct Number of established
(SoBC) SoBC breaches(4) 84 99 116 l
------------------------- --------- -------- ---------
Number of disciplinary
actions taken as a
result
of established SoBC
Ethics & breaches that resulted
Integrity in people leaving BAT 58 46 54 l
------------------------------------------------- ------------------------ --------- -------- ---------
Responsible Full compliance - Incidents of 3 - - _
marketing aiming for full non-compliance
compliance with marketing
with marketing regulations
regulations resulting in a fine
or penalty(5)
---------------------- ------------------------- ------------------------- --------- -------- ---------
Notes: For key terms see page 59 . See 'Reporting Criteria' on
www.bat.com/sustainabilityreport for more definitions.
Environmental and Health & Safety data is reported for the
period 1 December 2021 to 30 November 2022.
In 2022, BAT changed its CO2e emissions reduction baseline from
2017 to 2020, following SBTi approval of its near-term,
1.5degC-aligned, 2030 reduction target. 1. Compared to 2020
baseline. Comprises 50% reduction in Scope 1, 2 and 50% reduction
in Scope 3 GHG (CO2e) 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, Scope 3
data is reported one year later. 3. Our goals cover all tobacco
used in our combustibles and THP products. Our metrics derive data
from our annual Thrive assessment, which includes our directly
contracted farmers and those of our strategic third party
suppliers, representing over 80% of the tobacco purchased by volume
in 2022 and defined in this preliminary announcement as 'Tobacco
Supply Chain'. 4. Consistent with previous years' reporting, cases
are not included in the above if they were not resolved at
year-end. 5) This is a new GRI-aligned metric for FY2022, with a
new reporting system. Although similar data exists for FY2021 &
2020, because the reporting methodology has changed, prior data is
not directly comparable.
GROUP OPERATING REVIEW
ESG PERFORMANCE REVIEW
At the centre of our strategy is our corporate purpose to build
A Better Tomorrow(TM) and reduce the health impact of our
business.
2022 shows that our strategy is working. We have strong, global
New Category brands, targeted geographic expansion plans and an
unwavering commitment to innovation that means we are delivering
for the consumer. As we deliver A Better Tomorrow(TM) and reduce
the health impact of our business, we must also drive progress
across all our other material ESG areas. In 2022, we appointed our
first Chief Sustainability Officer (CSO) and implemented a new
Double Materiality(1) led approach to inform our Sustainability
Agenda and drive continued embedding of sustainability in our
strategy and in every business function.
BAT has continuously updated its reporting over the years, and
this year marks another step forward, with a Combined Annual and
ESG Report in 2022. We will report on the Principal Adverse Impact
indicators of the EU SFDR and we are starting to align to draft
standards for the CSRD, and looking towards US SEC plans on
climate-related reporting and ISSB Sustainability Disclosure
Standards(2) .
Harm Reduction: Multi-category strategy driving further
progress
-- Non-Combustible Product(3) consumer acquisition of 4.2 million to 22.5 million; with Non-Combustibles now 14.8% of revenue
-- New Categories revenue up 40.9% (or 37.0% at constant rates
of exchange) with growth in all three categories
-- Over 150 peer-reviewed papers published to date on our
cutting-edge research into New Category products
Having launched our first Vapour product in 2013, 2023 marks 10
years of building our multi-category portfolio. We have developed a
portfolio of less risky products(3, 4) , tailored to meet the
evolving preferences of adult consumers. This portfolio is
underpinned by over 150 peer-reviewed papers on our New Category
product research, as well as R&D spend, which increased to
GBP323 million in 2022, focused on New Category products. Across
our three global New Category brands, we are seeing the benefits of
our investments, driving sustainable growth while reducing
operating losses.
Environment: Reduction in direct carbon emissions with renewable
energy target achieved early
-- Scope 1 & 2 GHG emissions reduced by 15.1% in 2022;
achieved 2025 target of 30% renewable energy use three years
early
-- 36% of operations sites now Alliance for Water Stewardship
(AWS) certified, up 21 ppts; supporting our target of 100% by
2025
-- Achieved CDP "A" for Climate Change; "A-" for Water and Forests
We drove a further reduction in Scope 1 & 2 emissions of
15.1% in 2022, supported by a decrease in direct energy consumption
and an increase in renewable energy consumption - primarily through
additional renewable electricity purchases and on-site generation
from solar. We achieved our 30% target for renewable energy use
three years ahead of the 2025 corporate target, and now target 50%
by 2030. We report Scope 3 emissions one year in arrears due to the
timing of data availability from our value chain. In 2021, we
decreased our Scope 3 emissions by 7% and, in 2022, to help drive
further progress, we invited over 200 priority suppliers to make
climate change disclosures via CDP, with a completion rate of over
90%. We have also requested those suppliers to commit to a series
of environmental pledges, including setting science-based targets
via SBTi and initiatives to support removal and/or reduction of
single-use plastics.
Social: Continuing our long-standing commitment to Human
Rights
-- 0.38% o f farms with incidents of child labour reported, down
46%; with 100% reported as resolved by the end of the growing
season
-- Over 345,000 farmers and community members reported to have
engaged in human rights training and awareness programmes
-- Increase in female representation in management roles to 41%,
supporting our target of 45% in 2025
With 63% of our leaf sourced from directly contracted farmers
and long-term partnerships with strategic third party suppliers, we
believe our relationships can enable us to have a real and lasting
impact. Our Field Technicians visit our directly contracted farmers
approximately once a month during the growing season. As well as
providing agronomy support, this is an important way of training
and monitoring the farms on human rights. In 2022, a total of 942
incidents of child labour were reported on 0.38% of farms in our
Tobacco Supply Chain, down from 0.70% in 2021. The reduction was
supported by our work with farmers, industry engagement and
collaboration, and improved data granularity with our third party
suppliers. 100% of cases were reported as resolved during the
growing season. We monitor the recurrence of child labour
instances, and remediation plans often involve local community
support. In 2022, for more than 90% of the farmers reported with
child labour, it was their first reported incident. As part of our
continued focus on this complex area, we completed 10 Human Rights
Impact Assessments in tobacco sourcing countries by the end of
2022.
Governance: Further strengthening of our responsible marketing
governance in 2022
-- First Chief Sustainability Officer appointed in 2022 to further drive integration of sustainability in the business
-- Continued iCommit training on responsible marketing in digital channels
-- 100 % of our employees completed training and compliance
sign-off on our Standards of Business Conduct (SoBC)
Our global principles and policies set out how we work to ensure
consistent and robust corporate governance in our markets. For
example, alongside our International Marketing Principles (IMP)
that govern our approach to marketing, we continue to invest in
iCommit, a training programme on responsible marketing, seeking to
drive Youth Access Prevention (YAP) compliance across our digital
channels. In 2022, we achieved 100% completion of iCommit training
for BAT employees and rolled out training to key agency employees
and retailers across over 90 markets. In addition, our Digital
Confidence Unit, a dedicated social media monitoring unit, utilises
cutting-edge technology to monitor social media 24/7 for IMP and
YAP compliance and for any content related to our brands and
products.
1. See Key Terms on page 59 . 2. SFDR is the Sustainable Finance
Disclosure Regulation; CSRD is the Corporate Sustainability
Reporting Directive; ISSB is the International Sustainability
Standards Board. 3. Based on the weight of evidence and assuming a
complete switch from cigarette smoking. These products are not risk
free and are addictive. 4. 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.
CATEGORY PERFORMANCE REVIEW
NEW CATEGORIES DRIVING FASTER TRANSFORMATION
For years ended
31 December Volume (unit) Revenue (GBPm)
--------------- -------------------- ---------------------------
Reported At constant rates
-------------------- ---------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
Revenue
------ ------- ----- ----- ------ ----- ----- ----- ------
Vapour (10ml units
/ pods mn) 612 +14.3% 1,436 927 +54.9% (103) 1,333 927 +43.8%
THP (sticks bn) 24.0 +25.6% 1,060 853 +24.3% 21 1,081 853 +26.7%
Modern Oral (pouches
mn) 4,010 +21.7% 398 274 +45.3% 1 399 274 +45.6%
------ ------- ----- ----- ------ ----- ----- ----- ------
Total New Categories
revenue 2,894 2,054 +40.9% (81) 2,813 2,054 +37.0%
New Categories
contribution (375) (953) -60.7%
------------------------- ------ ------- ----- ----- ------ ----- ----- ----- ------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance.
VUSE - VAPOUR: Extending global value share* leadership
-- Vuse value share up 250 bps compared to 2021, to reach 35.9%
in key vapour markets(**) , with the modern disposable segment
accelerating total category growth
-- Vuse achieves national value share leadership position in the
U.S., increasing 840 bps vs 2021 to 40.9%, and leading in 35
states
-- Continuous strong momentum in consumer acquisition, up 1.6
million reaching 10.0 million by the end of the year
-- Vapour revenue up 55% or 44% (at constant rates), ahead of
volume growth of 14.3%, with 3 of the key Vapour markets
profitable(1)
-- Launched Vuse Go in 24 countries with early launch markets,
the UK and France, achieving No.2 in the disposables segment, with
premium price positioning and volumes which are accretive to our
ePod platform
We continued to strengthen our leadership position globally with
value share at 36.8% (up 200 bps vs 2021) led by the continued
strong performance of Vuse. The category accelerated, led by the
modern disposable segment with its convenient and flexible format.
Group volume grew 14.3% against 2021, with revenue up 55% to
GBP1,436 million, or 44% at constant rates of exchange. We
consolidated our volume share leadership of devices in all key
Vapour markets* with consumer acquisition up 1.6 million to 10.0
million consumers.
In the U.S., the largest global Vapour market, Vuse, driven by
continued success of Vuse Alto, became the market leader(2) in both
value share and volume share. During 2022, the FDA issued marketing
authorisation for tobacco flavoured Vuse Vibe and Ciro, and our
application related to Alto is still pending. We have received and
are challenging the FDA's Market Denial Order dated January 2023
related to Vibe and Ciro (menthol variants) and are seeking a
permanent stay***. Total Vapour value share was up 840 bps to
40.9%, with leadership in 35 states. Total Vuse consumables volume
grew 10.0% (maintaining leadership of closed system devices, with
growth of 700 bps to 64.4%) with revenue up 62.9% or 46.4% on a
constant currency basis. While the Group does not sell synthetic
nicotine disposables in the U.S., the category continues to grow,
driven by the availability of flavours. Since March 2022, these
products are now under FDA regulatory control, and are required to
receive PMTA authorization to remain on the market. We continue to
innovate across our Vuse portfolio to drive increased satisfaction
for consumers.
In Canada, supported by the launch of the Group's first
connected Vapour device (Vuse ePod2+), we extended our value share
leadership position, growing 890 bps to 89.5% in 2022. Vuse ePod2+
now represents 72% of all sales in tracked channels.
In Europe, Vuse continued to grow both revenue (up 37.9%) and
volume (up 13.9%), and our value share of closed system Vapour
continued to rise, up 830 bps to 64.3% for the full year. However,
the growth of the disposable segment in 2022 has impacted our value
share of total Vapour across a number of markets declining 16.7
ppts as:
-- In France, we maintained value share leadership despite a decline of 6.3 ppts to 38.8%;
-- In Germany, we also maintained value share leadership despite
a decline of 37.9 ppts to 21.4%; and
-- In the UK, value share stabilised in the final quarter post
Vuse Go launch (May 2022) despite a decline of 14.7 ppts to
14.8%.
We rapidly rolled out our new modern disposable product, Vuse
Go, over the second half of the year, through our broad
distribution footprint and consumer reach in multiple markets
including the UK, France, Germany, Spain, Canada, South Africa,
Greece and Ireland. Despite the impact of regulatory changes in the
U.S., the number of consumers utilising our subscription programmes
globally increased to c.26k, up 34% vs 2021.
* Based on Vype/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, being the U.S., the UK, France, Germany and Canada and
accounting for 88% of total industry Vapour revenue (rechargeables
and disposables). *** Menthol variants accounted for approximately
75% of total Vuse consumables in 2022 1. On a market contribution
basis. 2. Source: Marlin.
CATEGORY PERFORMANCE REVIEW
glo - TOBACCO HEATING PRODUCTS (THP) - Continues to make
category share gains
-- glo THP category volume share reached 19.4%, up 140 bps vs 2021 in our key THP markets*
-- glo consumer acquisition up 2.0m reaching 8.8m
-- glo consumable volume up 25.6%, ahead of industry growth of 15%
-- glo revenue growth up 24.3% or 26.7% at constant currency
with sequential growth in H2 2022
-- Successful national launch of Hyper X2 in Japan in October
2022 with total launches in 21 markets in 2022
Driven by the continued success of glo Hyper in Japan and across
key markets in Europe, glo maintained its momentum with total
category revenue growth at 24.3% or 26.7% at constant rates of
exchange and consumable volume growth of 25.6% in 2022. glo
achieved THP category volume share in key THP markets of 19.4%, up
140 bps in 2022 compared to 2021. Excluding Russia, our share of
Top 8 markets (representing over 82% of total THP volumes) reached
18.7%, up 1.1 ppts.
In APME, volume grew 17.0%, with device volume up 19% as we
continued to invest in consumer acquisition. Revenue was up 2.3%,
or 9.1% at constant currency, driven by higher volume and
consumable pricing, partly offset by a partial absorption of excise
increases. In Japan, glo's volume share of the tobacco market (FMC
and THP combined) reached 7.4%, up 60 bps on 2021 as consumers
continue to switch from cigarettes to THP**. In a highly
competitive market, our THP category volume share closed the year
at 20.1%, down 120 bps vs FY 2021. This was ahead of the nationwide
roll-out of Hyper X2 in October with 1 million device sales by the
end of the year. glo Hyper X2 is a further step towards delivering
enhanced product experience with a smaller, lighter device and a
dedicated boost button for maximum taste satisfaction and is
delivering positive early results.
In Europe, glo volume grew 33.8%, driving continued strong
revenue growth of 57.3% or 53.3% at constant currency. The region
now represents over 54% of our global THP volume (or 43% excluding
Russia) and 51% of our global THP revenue (or 41% excluding
Russia). glo continued to grow category volume share across all key
European markets, with aggregate category volume share in key
European THP markets*** reaching 20.2%, up 380 bps on 2021.
Excluding Russia, our aggregate share of the category reached
18.7%, up 470 bps. Driven by Hyper, glo performed well across the
key European THP markets:
-- In Italy, glo category volume share reached 14.5%, up 170 bps;
-- In Poland, glo category volume share reached 31.2%, up 14.4 ppts;
-- In Greece, glo category volume share reached 13.2%, up 470 bps; and
-- In Hungary, glo category volume share reached 14.4%, up 740 bps.
Since the launch of Hyper in the first half of 2020, glo's
performance on key metrics such as brand power and consumer
conversion have continued to improve, supporting our ambition for
glo to be the fastest growing global THP brand (by volume). Driven
by our increased speed and agility, Hyper X2 was launched in 21
markets in 2022 with encouraging early results.
* The key THP markets are defined as the Top 9 markets by
industry revenue. They were adjusted in 2022, with Greece and
Hungary introduced, replacing Germany and Romania. Accordingly,
glo's category volume share for 2021 was rebased on the new
definition from 18.1% to 17.9%. Top 9 markets by revenue are Japan,
South Korea, Russia, Italy, Greece, Hungary, Ukraine, Poland and
the Czech Republic. Russia will remain in the Top 9 markets until
the sale of the Russian business is completed. The Top 9 account
for 80% (2021: 82%) of total industry THP revenue.
** Based on the weight of evidence and assuming a complete
switch from cigarette smoking. These products are not risk free and
are addictive.
*** The key European THP markets are defined as the Top 7 (T7)
markets by revenue - being Russia, Italy, Greece, Hungary, Ukraine,
Poland and the Czech Republic. Russia will remain in the T7 markets
until the sale of the Russian business is completed.
CATEGORY PERFORMANCE REVIEW
VELO - MODERN ORAL - European leadership continues, unlocking
emerging markets
-- Revenue up 45.3%, or 45.6% at constant currency ahead of
volume growth of 21.7% with consumer numbers up 0.6m to 2.7m.
-- Volume share leadership in Modern Oral in Europe at 68.8%
-- Category volume share in key Modern Oral markets* was 30.4%,
down 440 bps, driven by a decline in the highly competitive U.S.
market
-- Velo remains volume share leader in 15 Modern Oral markets in Europe
-- In Pakistan, now our third largest Modern Oral market (by
volume), Velo is demonstrating the potential of Modern Oral in
emerging markets
Our Modern Oral portfolio, driven by Velo expansion, continued
to grow in 2022, with volume up 21.7% and revenue up 45.3%, or
45.6% at constant currency. Volume share of the Modern Oral
category in our key Modern Oral markets(*) was 30.4%, down 440 bps
vs. 2021, driven by a highly competitive pricing environment in the
U.S. Excluding the U.S., the Group maintained leadership of the
Modern Oral category. We continue to innovate in the category, with
Mini pouches and Max ranges driving strong growth.
In the U.S., volume was down 50.1%, with volume share down 580
bps. Revenue was up, as we pivoted to drive value, reducing
promotional support for the brand, and prioritising investment
behind Vuse in the much larger Vapour category. The market remains
highly competitive, with current low moisture product formulations
continuing to result in low levels of average daily consumption and
high poly-usage. As a result, we have submitted a PMTA for a new
Velo product, leveraging our international insights.
In Europe, we remain the volume share leader in 15 Modern Oral
markets, with revenue and volume growth at 30.8% and 29.9%,
respectively. From a high base, volume share was marginally lower
at 68.8%, down 60 bps. As the Modern Oral category continues to
grow and become more established in Europe, we continue to see
strong growth in average daily consumption, including in Sweden
which reached 11 pouches in November 2022**.
-- In Sweden, where Modern Oral has grown to represent 19.0% of
the total oral category, our volume share of the Modern Oral
category was 58.1%, a decrease of 170 bps on 2021, impacted by
heavy competitor discounting, with volume share stabilising in the
final quarter;
-- In Norway, where Modern Oral now represents 33.5% of the
total oral category, we maintained our leadership position with
volume share of the Modern Oral reaching 64.1%, up 20 bps vs
2021;
-- In Denmark (with volume share marginally lower than 2021,
down 40 bps to 92.2%) and in Switzerland (where volume share was up
160 bps to 93.2%), we maintained our volume share leadership
position in the Modern Oral category from a high base; and
-- In the UK, we gained market leadership with volume share of
the Modern Oral category reaching 51.6%, an increase of 2,220 bps
from 29.4% in 2021.
We believe that Modern Oral is an exciting longer-term
opportunity to unlock reduced risk products(***) in emerging
markets. We are particularly proud of Velo's performance in
Pakistan, now our third largest Modern Oral market (by volume),
where we have rapidly achieved national coverage. Enabled by
powerful, consumer-centric digital activations, Velo has reached a
monthly volume in Pakistan of over 40 million pouches.
This progress demonstrates our ability to unlock the significant
opportunity for Modern Oral in emerging markets, including:
-- In South Africa, where we have expanded our pilot in
Johannesburg with guided trial and expansion into key accounts,
delivering encouraging early results; and
-- In Kenya, where, after the category was reinstated as
regulated under the Tobacco Control Act, we reintroduced Velo to a
limited retail universe with positive early momentum, as we focus
on driving guided trial.
In December 2022, results from our innovative cross-sectional
clinical study on Velo were published in the science publication
'Biomarkers'. The results show that consumers exclusively using
Velo for over six months had significant favourable differences in
several biomarkers of exposure and biomarkers of potential harm
relevant to smoking-related diseases compared to the adults who
smoked.
* Key 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 80% of total industry revenue.
** Source: Kantar New Category Tracker. *** 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.
CATEGORY PERFORMANCE REVIEW
BEYOND NICOTINE
As consumers increasingly seek products offering wellbeing and
stimulation characteristics, our venturing unit, Btomorrow Ventures
(BTV), and selected third parties are helping us to strengthen our
positioning for this market. Our well-established market research
has given us a detailed understanding of consumer need states
allowing us to invest in, acquire and develop natural ingredients
and new delivery formats that satisfy these needs. We believe our
supply chain strengths and trade market capabilities mean that,
when ready, we can deliver associated products to consumers at
speed and scale.
BTV has c ompleted 22 investments since launch in 2020. In 2022,
this included five new investments and two exits, which delivered
on their strategic objectives for BAT whilst also achieving a
positive financial return. We continue to invest in innovative
consumer, new sciences and technology businesses aligned with our
strategic priorities. While we have impaired the investment in
Organigram by GBP59 million (net of tax), partly due to the
volatility in global cannabis stock prices, we remain pleased with
our strategic collaboration. This includes our joint Product
Development Collaboration Agreement focusing on research and
product development activities of next generation adult cannabis
products, with an initial focus on cannabidiol (CBD). Organigram is
performing well and we continue to explore opportunities to expand
our science-focused cannabis ecosystem, including new investments
in Sanity Group (Germany) and Charlotte's Web (U.S.) in the second
half of the year, as we monitor changes in the regulatory
environment.
In January 2022, we announced the launch of KBio Holdings
Limited (KBio) to accelerate the research, development and
production of novel treatments for rare and infectious diseases.
KBio will leverage the existing plant-based technology capabilities
of BAT and Kentucky BioProcessing Inc. (KBP), the existing
BAT-owned U.S. plant biologics organisation.
We continue to invest in companies that are carefully selected
for original ideas across a range of criteria, as well as a
cultural fit. This allows us to continue leveraging the strength of
the BAT Group in helping entrepreneurial candidates accelerate and
sustain growth. This approach provides us with evolving
capabilities for the future across both our New Categories and
Beyond Nicotine.
TRADITIONAL ORAL
Group volume declined 8.3% to 7.4 billion stick equivalents.
Total revenue was GBP1,209 million (2021: GBP1,118 million), up
8.2% benefiting from the translational foreign exchange tailwind.
At constant currency, revenue declined 2.3%, as continued strong
pricing in the U.S., driving Group price/mix of 6.0%, was more than
offset by the reduction in volume in both Europe (down 9.8%) and
the U.S. (down 8.1%) in 2022.
In the U.S. (which accounts for 97% of revenue from the
category), value share in Traditional Oral declined 60 bps with
volume share down 70 bps. The decline in 2022 was driven by strong
macro-economic headwinds.
In the second half of 2022, the decision was taken to withdraw
the Modified Risk Tobacco Product (MRTP) applications for Camel
Snus, as we adjust our near-term priorities to continue to focus on
providing a diverse portfolio of New Category nicotine products in
line with our global harm reduction strategy.
VALUE THROUGH COMBUSTIBLES
-- Group value share was flat, with gains in the U.S. (up 10
bps) and APME (up 10 bps) offset by Europe and AmSSA.
-- Group volume share down 20 bps, driven by a flat share in
APME and a lower performance in AmSSA, Europe and the U.S.
-- Revenue up 4.5% due to foreign exchange, but down 0.6% at
constant rates, with combustibles price/mix of 4.6%.
-- Continued strong pricing, partially offset by geographic mix.
Group cigarette value share is flat vs 2021, driven by the
continued performance of the strategic cigarette brands in the U.S.
(up 10 bps) and higher cigarette value share gains in APME, which
fully offset lower value share in Europe and AmSSA. Group cigarette
volume was down 5.1% at 605 billion sticks (2021: 637 billion
sticks). This was driven by:
-- The U.S., where combustible volume was down 15.5% to 59
billion sticks (2021: 69.7billion sticks) reflecting post COVID-19
normalisation of consumption patterns, and the continued pressure
of growing macro-economic headwinds leading to some accelerated
downtrading in the industry in key channels and states. In
addition, we have partially unwound the prior year inventory (which
benefited revenue in 2021 by around GBP200 million), mainly linked
to the timing of price increases and uncertainty around a potential
Federal excise increase; and
-- The impact of the sale of our Iranian business in August of 2021.
This was partly offset by volume growth driven by post COVID-19
normalisation in Bangladesh and a reduction in illicit trade in
Brazil.
Revenue from combustibles grew 4.5% to GBP23,030 million (2021:
GBP22,029 million), benefiting from a translational foreign
exchange tailwind of 5.1%. Revenue at constant rates of exchange
was down 0.6% at GBP21,888 million (2021: GBP22,029 million). Our
targeted portfolio of brands across price tiers enabled the
delivery of a robust financial performance across APME, AmSSA and
Europe. Pricing continued to be strong notably in the U.S., Turkey,
Canada, Germany, Bangladesh and Brazil, with combustibles price/mix
of 4.6%, partly offset by geographic mix.
Our GTR business is continuing to recover following the COVID-19
travel restrictions, especially outside Asia where restrictions
have reduced significantly.
CATEGORY PERFORMANCE REVIEW
SIMPLIFYING THE BUSINESS - Delivering the Enterprise of the
Future
-- Quantum, the first pillar of our transformation programme
QUEST, delivered GBP1.9 billion annualised savings ahead of our
original GBP1 billion target.
-- Comprehensive market review and optimal regional and business
unit realignment to further simplify our business, driving speed,
focus and agility.
-- New operating model developed with six market archetypes to
guide strategic choices and resource allocation.
-- Other QUEST pillars focus on our people, innovation, digital
and sustainability as we accelerate our transformation journey.
Through QUEST, we are building a sustainable Enterprise of the
Future, delivering the organisational flexibility to implement and
operationalise our growth strategy - from simplifying the business
to faster decision-making. QUEST is one way that we are becoming
more responsive and resilient in the face of change, and is built
around five pillars:
-- Quantum, our programme designed to simplify our business;
-- Unleashing innovation through data-driven insights and
foresights, leveraging state-of-the-art technologies to ensure we
are building the brands of the future;
-- Empowering our organisation and attracting and retaining an
increasingly diverse workforce;
-- Shaping the sustainability agenda through our focus on
reducing the health impact of our business and demonstrating
excellence across our other ESG measures; and
-- Technology and data analytics, which will drive our
transformation and unlock commercial value across the entire value
chain.
In a fast evolving world, these pillars operationalise how we
ensure we continue to be fit for growth and build the Enterprise of
the Future.
We have delivered another GBP629 million of annualised cost
savings in 2022 enabling us to exceed our original GBP1 billion
target of annualised cost savings over the last three years. This
has been achieved through many Group-wide initiatives, including:
large-scale organisational change, operational efficiency through
route-to-market optimisation and supply chain productivity.
Further simplification, productivity improvements and savings
will be a key focus as we continue to sharpen our core
capabilities. These are critical to addressing inflationary
pressures while continuing to fund New Category investment and
improve New Category profitability as we accelerate our
transformation towards A Better Tomorrow(TM). Moving forward, we
will leverage the foundations created by Quantum with a new
regional and business unit realignment.
In 2023, our regions will reduce from four to three, and our
business units from sixteen to twelve. This will drive increased
speed, focus and agility. Our new operating model, centred around
six market archetypes, will further enable us to guide strategic
decision-making and resource allocation. We will continue to
deliver efficiencies through our established continuous improvement
mindset and, as a result, we do not expect any further significant
impact (to profit from operations) from adjusting items related to
restructuring programmes in the medium term.
REGIONAL REVIEW
The performances of the regions are discussed below. The
following discussion is based upon the Group's internal reporting
structure. For further information on regional performance by
category, see "Additional Information on Revenue by Category by
Region".
UNITED STATES (U.S.):
For years ended 31
December Volume (unit) Revenue (GBPm)
--------------- ------------------------ ------------------------------------
Reported At constant rates
------------------------ -------------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
New Categories 949 564 +68.7% (95) 854 564 +51.6%
------ ------- ------ ------ -------- --- ------- ------ ------ ------
Vapour (10ml units/pods
mn) 320 +10.0% 913 561 +62.9% (92) 821 561 +46.4%
THP (sticks bn) - -% - 1 -69.1% 0 - 1 -72.3%
Modern Oral (pouches
mn) 301 -50.1% 36 2 n/m (3) 33 2 n/m
------ ------- ------ ------ -------- --- ------- ------ ------ ------
Traditional Oral
(stick eq bn) 6.6 -8.1% 1,174 1,077 +8.9% (119) 1,055 1,077 -2.1%
------ ------ -------- --- ------- ------ ------ ------
Total Non-Combustibles 2,123 1,641 +29.5% (214) 1,909 1,641 +16.3%
Total Combustibles
(sticks bn) 59 -15.5% 10,470 10,015 +4.5% (1,061) 9,409 10,015 -6.1%
Other 46 35 +27.9% (6) 40 35 +14.9%
------ ------ -------- --- ------- ------ ------ ------
Total 12,639 11,691 +8.1% (1,281) 11,358 11,691 -2.8%
====== ====== ======== === ======= ====== ====== ======
Reported PfO (GBPm) Adjusted PfO (GBPm)
Margin (%) Adjusted operating margin
(%)
------------------------ ------------------------------------
2022 2021 Change Adj FX 2022 2021 Change
cc
Profit from Operations
(PfO) 6,205 5,566 +11.5% 630 (740) 6,095 5,887 +3.5%
+330
Operating Margin 49.1% 47.6% +150 bps 53.7% 50.4% bps
---------------------------- ------ ------- ------ ------ -------- --- ------- ------ ------ ------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance.
-- Strong New Category revenue, growth up 69% or 52% at constant
rates driven by Vuse performance
-- Vuse achieved national value share leadership, reaching
40.9%, up 840 bps versus FY 2021, with leadership in 35 states
-- U.S. combustibles volume impacted by industry decline due to
macro-economic pressures and partial inventory unwind from prior
year
-- Continued strong combustibles pricing supported by Revenue
Growth Management (RGM) capabilities
-- Combustibles value share up 10 bps and volume share down 30 bps
Regional Revenue and Profit from Operations
Reported revenue increased 8.1%, driven by the translational
foreign exchange tailwind. On a constant currency basis, revenue
declined 2.8%. Excellent growth in New Categories was driven by
Vuse with revenue up 63% or 46% at constant rates of exchange and
achieving value share leadership in the U.S.
In combustibles, strong pricing, supported by our revenue growth
management techniques, was more than offset by lower volume,
impacted by industry decline due to macro-economic headwinds and
post COVID-19 normalisation of consumption patterns. To offset
early signs of accelerated downtrading, we have activated
commercial plans in specific brands, channels, and states. Revenue
growth was further offset by the partial unwind of inventory
movements linked to the timing of price increases and uncertainty
about a potential excise increase in the prior year, which had
benefited 2021 by GBP200 million.
Reported profit from operations rose by 11.5%, with reported
margin up 150 bps to 49.1%. This was driven by a continued
improvement in the financial performance of Vuse and a
translational foreign exchange tailwind of 12.9%. Adjusting items
were higher in 2022, largely in respect of the factory
rationalisation as part of our restructuring programme, Quantum.
Furthermore, while 2021 benefited from credits related to the
partial buy-out of the pension fund (GBP35 million), this was a
credit of GBP16 million in 2022, as discussed on page 21 .
At constant rates of exchange, adjusted profit from operations
was up 3.5% and adjusted operating margin was up 330 bps to 53.7%,
driven by further cost saving efficiencies and an improvement in
New Category contribution from Vuse and Velo.
REGIONAL REVIEW
AMERICAS AND SUB-SAHARAN AFRICA (AmSSA):
For years ended 31
December Volume (unit) Revenue (GBPm)
--------------- ----------------------- -----------------------------------
Reported At constant rates
----------------------- ----------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
New Categories 219 141 +55.6% (11) 208 141 +47.5%
------ ------- ------ ------ ------- ----- ----- ----- ----- -------
Vapour (10ml units/pods
mn) 83 +33.3% 218 141 +55.1% (11) 207 141 +47.0%
THP (sticks bn) - n/m - - -% 0 - - -%
Modern Oral (pouches
mn) 10 n/m 1 - n/m 0 1 - -100.0%
------ ------- ------ ------ ------- ----- ----- ----- ----- -------
Traditional Oral
(stick eq bn) - -% - - 0.0% 0 - - -%
------ ------ ------- ----- ----- ----- ----- -------
Total Non-Combustibles 219 141 +55.6% (11) 208 141 +47.5%
Total Combustibles
(sticks bn) 149 +0.7% 3,751 3,435 +9.2% (186) 3,565 3,435 +3.8%
Other 233 225 +3.2% (27) 206 225 -8.7%
------ ------ ------- ----- ----- ----- ----- -------
Total 4,203 3,801 +10.6% (224) 3,979 3,801 +4.7%
====== ====== ======= ===== ===== ===== ===== =======
Reported PfO (GBPm) Adjusted PfO (GBPm)
Margin (%) Adjusted operating margin
(%)
----------------------- -----------------------------------
2022
2022 2021 Change Adj FX cc 2021 Change
Profit from Operations
(PfO) 2,022 1,496 +35.2% (280) (83) 1,659 1,590 +4.3%
+880
Operating Margin 48.1% 39.3% bps 41.7% 41.8% -10 bps
---------------------------- ------ ------- ------ ------ ------- ----- ----- ----- ----- -------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance.
-- Strong New Category revenue growth up 56% or 48% at constant
rates of exchange, driven by Vuse
-- Vuse extended value share leadership in Canada, reaching
89.5%, up 890 bps versus 2021
-- Combustibles revenue up 9.2% or 3.8% at constant rates of
exchange, driven by resilient volume and strong pricing, partially
offset by geographic mix
-- Combustibles value sh are down by 60 bps and volume share down by 90 bps
Regional Revenue and Profit from Operations
Reported revenue was up 10.6%, as 4.7% constant currency growth
was enhanced by a translational foreign exchange tailwind due to
the relative weakness of sterling against a number of currencies,
particularly the Brazilian real and Canadian dollar. Constant
currency revenue growth was driven by resilient combustibles
volume, particularly in Brazil and Mexico, strong combustibles
pricing and the growth in New Categories, notably from Vuse in
Canada.
Reported profit from operations increased 35.2% to GBP2,022
million, partly due to the recognition (in the second half of 2022)
of GBP460 million in Brazil in relation to the calculation of VAT
on social contribution in prior periods, as the litigation was
successfully concluded in the year. This was partly offset by a
charge of GBP79 million related to the conclusion of the
investigation into alleged violations of the Nigerian Competition
and Consumer Protection Act and National Tobacco Control Act.
Excluding adjusting items in both periods (which mainly related to
Quantum, VAT recovery in Brazil, Nigerian investigations and, in
2021, the impairment of goodwill related to Peru), adjusted profit
from operations increased 4.3% on a constant currency basis, driven
by the growth in revenue.
REGIONAL REVIEW
EUROPE:
For years ended 31
December Volume (unit) Revenue (GBPm)
--------------- ----------------------- ----------------------------------
Reported At constant rates
----------------------- ----------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
New Categories 1,171 814 +43.7% (9) 1,162 814 +42.7%
------ ------- ------ ------ ------- ---- ----- ----- ----- -------
Vapour (10ml units/pods
mn) 197 +13.9% 286 207 +37.9% 1 287 207 +38.5%
THP (sticks bn) 13.0 +33.8% 537 341 +57.3% (14) 523 341 +53.3%
Modern Oral (pouches
mn) 3,169 +29.9% 348 266 +30.8% 4 352 266 +32.3%
------ ------- ------ ------ ------- ---- ----- ----- ----- -------
Traditional Oral
(stick eq bn) 0.8 -9.8% 35 41 -12.3% 2 37 41 -7.7%
------ ------ ------- ---- ----- ----- ----- -------
Total Non-Combustibles 1,206 855 +41.1% (7) 1,199 855 +40.3%
Total Combustibles
(sticks bn) 206 -10.0% 4,996 5,024 -0.6% 87 5,083 5,024 +1.2%
Other 144 122 +16.9% (3) 141 122 +15.1%
------ ------ ------- ---- ----- ----- ----- -------
Total 6,346 6,001 +5.7% 77 6,423 6,001 +7.0%
====== ====== ======= ==== ===== ===== ===== =======
Reported PfO (GBPm) Adjusted PfO (GBPm)
Margin (%) Adjusted operating margin
(%)
----------------------- ----------------------------------
2022
2022 2021 Change Adj FX cc 2021 Change
Profit from Operations
(PfO) 1,270 1,885 -32.6% 812 21 2,103 1,956 +7.5%
-1,140
Operating Margin 20.0% 31.4% bps 32.7% 32.6% +10 bps
---------------------------- ------ ------- ------ ------ ------- ---- ----- ----- ----- -------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance .
Effective 1 January 2022, the North African markets of Algeria,
Egypt, Libya, Morocco, Sudan and Tunisia, which formed part of the
Europe and North Africa (ENA) region were moved to the Asia-Pacific
and Middle East (APME) region. From 2022, the ENA region has been
renamed Europe. The impact of this is not considered material to
the understanding of the regional results of the Europe and APME
regions and, therefore, the prior year comparative information has
not been restated.
-- Truly multi-category region with non-combustibles now representing 19% of revenue
-- New Category revenue growth up 44% or 43% at constant rates
of exchange, with over 30% revenue growth across all three New
Categories
-- Resilient combustibles performance led by pricing with volume
impacted by regional re-allocation of North Africa to APME
-- Combustibles volume sh are down 20 bps, and value share declined by 10 bps
Regional Revenue and Profit from Operations
Reported revenue was up 5.7% at current rates, driven by New
Category revenue growth of 43.7% and combustibles pricing. This
more than offset volume decline (impacted by the regional
re-allocation of North Africa to APME and lower volume in Turkey,
Germany, Denmark and France), and translational foreign exchange
headwinds. On a constant currency basis, revenue was up by 7.0%
with key drivers of performance including Romania, Poland, Italy
and the Czech Republic.
Reported profit from operations decreased by 32.6%, mainly
reflecting the charges recognised in respect of the proposed
transfer of the Group's operations in Russia and Belarus (which
have been classified as held for sale at 31 December 2022
necessitating a charge of GBP612 million in the period) and Quantum
restructuring (including the closure of the factory in
Switzerland). Adjusted profit from operations was up 7.5% at
constant rates of exchange driven by the performance of New
Categories, together with tight control of overheads and Quantum
cost savings.
REGIONAL REVIEW
ASIA-PACIFIC AND MIDDLE EAST (APME):
For years ended 31
December Volume (unit) Revenue (GBPm)
--------------- ----------------------- ----------------------------------
Reported At constant rates
----------------------- ----------------------------
2022
2022 Change 2022 2021 Change FX cc 2021 Change
Unit % GBPm GBPm% GBPm GBPm GBPm %
New Categories 555 535 +3.7% 34 589 535 +10.1%
----- -------- ------ ------ ------- ---- ---- ----- ----- --------
Vapour (10ml units/pods
mn) 12 +31.1% 19 18 +4.3% (1) 18 18 +1.7%
THP (sticks bn) 11.0 +17.0% 523 511 +2.3% 35 558 511 +9.1%
Modern Oral (pouches
mn) 530 +108.4% 13 6 +117.0% 0 13 6 +121.2%
----- -------- ------ ------ ------- ---- ---- ----- ----- --------
Traditional Oral
(stick eq bn) - -% - - -% - - - -%
------ ------ ------- ---- ---- ----- ----- --------
Total Non-Combustibles 555 535 +3.7% 34 589 535 +10.1%
Total Combustibles
(sticks bn) 207 -0.8% 3,813 3,555 +7.3% 18 3,831 3,555 +7.8%
Other 99 101 -0.9% (6) 93 101 -7.8%
------ ------ ------- ---- ---- ----- ----- --------
Total 4,467 4,191 +6.6% 46 4,513 4,191 +7.7%
====== ====== ======= ==== ==== ===== ===== ========
Reported PfO (GBPm) Adjusted PfO (GBPm)
Margin (%) Adjusted operating margin
(%)
----------------------- ----------------------------------
2022
2022 2021 Change Adj FX cc 2021 Change
Profit from Operations
(PfO) 1,026 1,287 -20.3% 723 20 1,769 1,717 +3.0%
-770
Operating Margin 23.0% 30.7% bps 39.2% 41.0% -180 bps
---------------------------- ----- -------- ------ ------ ------- ---- ---- ----- ----- --------
Use of the term "cc" refers to the variance between the 2022
adjusted performance, at 2021 exchange rates, against the adjusted
2021 performance. Effective 1 January 2022, the North African
Markets of Algeria, Egypt, Libya, Morocco, Sudan and Tunisia, which
formed part of the Europe and North Africa (ENA) region were moved
to the Asia-Pacific and Middle East (APME) region. From 2022, the
ENA region has been renamed Europe. The impact of this is not
considered material to the understanding of the regional results of
the Europe and APME region and therefore the prior year comparative
information has not been restated.
-- New Category revenue growth up 3.7% or 10.1% at constant
rates of exchange driven by glo in Japan
-- glo Hyper X2 launched nationally in Japan in October with positive early results
-- Robust combustibles performance led by resilient volume and pricing
-- Combustibles value share up by 10 bps with volume share flat
Regional Revenue and Profit from Operations
Reported revenue increased 6.6%. Constant currency revenue was
7.7% higher, driven by robust combustibles pricing and growth of
New Categories. Combustibles volume was resilient (down 0.8%),
benefiting from emerging market recovery from COVID-19 and the
regional re-allocation of North Africa, which was partly offset by
the sale of the Group's Iranian business midway through 2021.
Reported profit from operations declined 20.3% largely due to
the increased one-off charges related to the DOJ and OFAC
investigations regarding allegations of historical breaches of
sanctions (GBP450 million), charges related to the closure of the
Singapore factory and the Group's exit from Egypt (GBP118 million).
These charges were higher than in the prior period which included a
charge of GBP358 million in respect of the sale of the Group's
Iranian business.
Adjusted profit from operations increased 3.0% at constant rates
of exchange driven by a robust combustibles revenue performance,
while reflecting the negative geographic mix impact of growth in
higher volume, lower margin markets, including Bangladesh,
Pakistan, and Vietnam. In addition, results reflect continued
savings from Project Quantum whilst also including a transactional
foreign exchange headwind of 4.5% and the impact of the 2021 sale
of the Group's Iranian business.
OTHER FINANCIAL INFORMATION
ANALYSIS OF PROFIT FROM OPERATIONS AND DILUTED EARNINGS PER
SHARE BY SEGMENT
2022 2021
=================================================
Reported Adjusted Exchange Adjusted Reported Adjusted
For years ended Adj at CC
31 December Items(1) (2) Adj Items(1)
-------- --------- -------- -------- -------- -------- ------------ --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Profit from Operations
U.S. 6,205 630 6,835 (740) 6,095 5,566 321 5,887
AmSSA 2,022 (280) 1,742 (83) 1,659 1,496 94 1,590
Europe 1,270 812 2,082 21 2,103 1,885 71 1,956
APME 1,026 723 1,749 20 1,769 1,287 430 1,717
-------- --------- -------- -------- -------- -------- ------------
Total Region 10,523 1,885 12,408 (782) 11,626 10,234 916 11,150
Net finance costs (1,641) 34 (1,607) 140 (1,467) (1,486) 55 (1,431)
Associates and
joint ventures 442 92 534 (24) 510 415 12 427
-------- --------- -------- -------- -------- -------- ------------
Profit before
tax 9,324 2,011 11,335 (666) 10,669 9,163 983 10,146
Taxation (2,478) (203) (2,681) 131 (2,550) (2,189) (210) (2,399)
Non-controlling
interests (180) (5) (185) 7 (178) (173) (6) (179)
Coupons relating
to hybrid bonds
net of tax (49) - (49) - (49) (12) - (12)
-------- --------- -------- -------- -------- -------- ------------
Profit attributable
to shareholders 6,617 1,803 8,420 (528) 7,892 6,789 767 7,556
Diluted number
of shares (m) 2,267 2,267 2,267 2,297 2,297
-------- --------- -------- -------- -------- -------- ------------
Diluted earnings
per share (pence) 291.9 371.4 348.1 295.6 329.0
-------- -------- -------- --------
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.
NET FINANCE COSTS
Net finance costs were GBP1,641 million, compared to GBP1,486
million in 2021. This was an increase of 10.5%, largely due to:
-- a translational foreign exchange headwind due to the relative weakness of sterling;
-- higher interest expense, as debt issuances in the year were
at a higher interest rate than those maturing; and
-- partly offset by higher interest income, driven by higher
interest rates on local deposits and an increase in interest income
in Canada due to the cash build up in that market.
The Group has debt maturities of around GBP4 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 2022, in line with IAS 33 Earnings Per Share, GBP49
million (2021: GBP12 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 finance costs related to the Franked Investment Income
Group Litigation Order (FII GLO, as described on page 42 ),
adjusted net finance costs were GBP1,467 million, an increase of
2.5% (2021: GBP1,431 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. For a full
reconciliation of net finance costs to adjusted net finance costs
at constant rates, see page 51 .
RESULTS OF ASSOCIATES AND JOINT VENTURES
The Group's share of post-tax results of associates and joint
ventures increased from GBP415 million to GBP442 million which
largely relates to the performance of the Group's main associate,
ITC Ltd (ITC) in India. The Group's share of ITC's post-tax results
was 22.7% higher at GBP514 million (2021: GBP419 million). The
movements are largely due to the economic recovery in India in 2022
from COVID-19 which led to difficult trading conditions in 2021,
with the results also benefiting from a translational foreign
exchange tailwind.
Included above are adjusting costs of GBP92 million (2021: GBP12
million). These mainly related to:
-- a deemed loss of GBP3 million (2021: GBP6 million gain) on
dilution of the Group's holding in ITC;
-- the impairment of the Group's investment in Organigram (GBP59 million (net of tax)); and
-- an impairment of GBP18 million recognised in 2022 (2021:
GBP18 million) in respect of one of the Group's associates in
Yemen, given the ongoing operational challenges in that
country.
Excluding these and the impact of translational foreign
exchange, on an adjusted constant rate basis, the Group's share of
post-tax results from associates and joint ventures was higher than
2021, up 19.6% to GBP510 million. Please refer to page 36 for dis
cussion of the adjusting items within the Group's share of post-tax
results from associates and joint ventures.
OTHER FINANCIAL INFORMATION
TAXATION
The tax rate in the income statement was a charge of 26.6%
(2021: 23.9%). The Group's tax rate is affected by the impact of
the adjusting items referred to on pages 31 to 36 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
40 was 24.8% in 2022 (2021: 24.7%). A full reconciliation from
taxation on ordinary activities to the underlying tax rate is
provided on page 52 .
EARNINGS PER SHARE
Basic earnings per share were down 1.2% at 293.3p (2021: 296.9p)
as the improvement in operational performance and translational
foreign exchange tailwinds were more than offset by the increase in
one-off charges (partly related to Russia and Belarus, the
investigations into alleged historical breaches of sanctions, the
Nigerian investigation and Quantum), a higher effective tax rate
and higher net finance costs.
Before adjusting items and including the dilutive effect of
employee share schemes, adjusted diluted earnings per share
increased 12.9% to 371.4p (2021: 329.0p). On a constant
translational foreign exchange basis, adjusted diluted earnings per
share were 5.8% higher at 348.1p. For a full reconciliation of
diluted earnings per share to adjusted diluted earnings per share,
at constant rates, see page 52 .
CASH FLOW
For years ended 31 December
-------------------------------
2022 2021 Change
--------- --------- ---------
GBPm GBPm %
Net cash generated from operating activities 10,394 9,717 7.0%
Operating cash flow conversion 100% 104%
Free cash flow - before payment of dividends 8,049 7,447 8.1%
Free cash flow - after payment of dividends 3,134 2,543 23.2%
As at 31 December
-------------------------------
2022 2021 Change
--------- --------- ---------
GBPm GBPm %
Borrowings (including lease liabilities) 43,139 39,658 8.8%
Adjusted net debt 38,131 35,548 7.3%
--------------------------------------------- --------- --------- ---------
In the Group's cash flow, prepared in accordance with IFRS and
presented on page 30 , net cash generated from operating activities
increased by 7.0% to GBP10,394 million (2021: GBP9,717 million),
primarily driven by the growth in profit from operations (including
the translational foreign exchange tailwind) combined with higher
provisions (partly in respect of the DOJ and OFAC investigations)
and other non-cash items, including depreciation, amortisation and
impairment. In 2022, the Group paid GBP231 million related to
litigation payments (2021: GBP248 million) which included, in both
2022 and 2021, payments in respect of Engle.
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 53 ) was 100% (2021:
104%), as the increase in net cash generated from operating
activities was partly offset by higher tax paid, leading to a
growth of operating cash flow that was largely in line with
adjusted profit from operations. Our operating cash conversion was
again ahead of 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 53 , was GBP8,049 million (2021: GBP7,447 million), an
increase of 8.1%. This was driven by higher net cash generated from
operating activities, while an increase in net interest paid was
partly offset by a reduction in net capital expenditure (2022:
GBP599 million; 2021: GBP632 million). After paying dividends of
GBP4,915 million (2021: GBP4,904 million), free cash flow (after
dividends paid to shareholders), as defined on page 53 , was an
inflow of GBP3,134 million (2021: GBP2,543 million). For a full
reconciliation of net cash generated from operating activities to
free cash flow before and after dividends, see page 53 .
OTHER FINANCIAL INFORMATION
BORROWINGS AND NET DEBT
Borrowings (which includes lease liabilities) were GBP43,139
million at 31 December 2022, an increase of 8.8% (31 December 2021:
GBP39,658 million) largely due to the foreign exchange movements,
mainly related to the US dollar and sterling. This more than offset
the net repayment of borrowings in the year of GBP223 million.
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 9.9
years at 31 December 2022 (31 December 2021: 10.1 years), and the
highest proportion of centrally managed debt maturing in a single
rolling 12-month period was 18.6% (2021: 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 GBP39,281 million (31 December 2021:
GBP36,302 million). A reconciliation of borrowings to net debt is
provided below.
As at 31 December
---------------------------
2022 2021 Change
-------- -------- -------
GBPm GBPm %
Borrowings (including lease liabilities) (43,139) (39,658) +8.8%
Derivatives in respect of net debt (167) 91 -283.5%
Cash and cash equivalents 3,446 2,809 +22.7%
Current investments held at fair value 579 456 +27.0%
-------- -------- -------
Net debt (39,281) (36,302) +8.2%
Maturity profile of net debt:
Net debt due within one year (181) (792) -77.1%
Net debt due beyond one year (39,100) (35,510) +10.1%
-------- -------- -------
Net debt (39,281) (36,302) +8.2%
----------------------------------------- -------- -------- -------
The movement in net debt includes the free cash flow, after
payment of dividends to shareholders, of GBP3,134 million (31
December 2021: GBP2,543 million) as described on page 54 . Also
impacting the carrying value of net debt at the balance sheet date
are:
-- cash payments related to share schemes and investing
activities of GBP635 million (31 December 2021: GBP150 million),
which, in 2022, was mainly due to the movement in foreign exchange
hedges due to the devaluation of sterling, predominantly against
the US dollar;
-- purchase of own shares (GBP2,012 million) related to the
Group's announced GBP2 billion share buy-back programme for 2022,
which ended in December 2022;
-- other non-cash movements of GBP84 million;
-- the classification of certain balances as held-for-sale
related to the proposed sale of the Group's operations in Russia
and Belarus (in 2022) of GBP352 million; and
-- foreign exchange impacts related to the revaluation of
foreign currency denominated net debt balances being a net headwind
of GBP3,030 million (31 December 2021: GBP124 million
headwind).
These movements can be summarised as follows:
As at 31 December
--------------------------
2022 2021 Change
-------- -------- ------
GBPm GBPm %
Opening net debt (including IFRS 16) (36,302) (40,241) -9.8%
Free cash inflow (after dividends) 3,134 2,543 23.2%
Other cash payments (635) (150)
Net proceeds from the issue of perpetual
hybrid bonds - 1,681
Purchase of own shares (2,012) -
Transferred to held-for-sale (352) 0
Other non-cash movements (84) (11)
Foreign exchange (3,030) (124)
-------- -------- ------
Closing net debt (39,281) (36,302) 8.2%
----------------------------------------- -------- -------- ------
OTHER FINANCIAL INFORMATION
BORROWINGS AND NET DEBT cont...
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 54 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
--------------------------
2022 2021 Change
-------- -------- ------
GBPm GBPm %
Net debt (39,281) (36,302) +8.2%
Net debt items included within asset held
for sale 352 - 0.0%
Purchase price allocation (PPA) adjustment
to acquired debt 798 754 +5.8%
-------- -------- ------
Adjusted net debt (38,131) (35,548) +7.3%
Exchange 2,406
-------- ======== ======
Adjusted net debt at constant rates (35,725) +0.5%
------------------------------------------- -------- -------- ------
The Group's ratio of adjusted net debt to adjusted EBITDA as at
31 December 2022 was 2.89x (2021: 2.99x) or 2.88x on a constant
currency basis, as the Group is exposed to translational foreign
exchange. In 2022, there was a foreign exchange tailwind of GBP811
million on adjusted EBITDA and a headwind on net debt primarily as
a result of sterling weakening against the US dollar, as shown on
page 19 . The calculation of adjusted net debt to adjusted EBITDA
is provided on page 54 .
2022 SHARE BUY-BACK PROGRAMME
On 11 February 2022, the Company announced a programme to
buy-back up to GBP2 billion of BAT ordinary shares.
As at 31 December 2022, the Group had repurchased 59,541,862
ordinary shares. Total consideration for the repurchase of shares
was GBP2 billion which is recorded within retained earnings.
DIVIDS
The Board has declared an interim dividend of 230.9p per
ordinary share of 25p for the year ended 31 December 2022, payable
in four equal quarterly instalments of 57.72p per ordinary share in
May 2023, August 2023, November 2023 and February 2024. This
represents an increase of 6.0% on 2021 (2021: 217.8p per share),
and a pay-out ratio, on 2022 adjusted diluted earnings per share,
of 62.2%.
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 (2022 unless stated) Payment No. Payment No. Payment No. Payment No.
1 2 3 4
Record date 24 March 14 July 29 September 22 December
(JSE, LSE and NYSE)
Payment date (LSE and 03 May 18 August 03 November 01 February
JSE) 2024
ADS payment date (NYSE) 08 May 23 August 08 November 06 February
2024
-------------------------- ----------- ----------- ------------ -----------
OTHER INFORMATION
FOREIGN CURRENCIES
The principal exchange rates used to convert the results of the
Group's foreign operations to pound 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 Closing
==================== ====================
2022 2021 2022 2021
Australian dollar 1.779 1.832 1.774 1.863
Bangladeshi taka 115.040 117.023 123.502 116.212
Brazilian real 6.384 7.421 6.351 7.544
Canadian dollar 1.607 1.724 1.630 1.711
Chilean peso 1,076.291 1,045.816 1,024.811 1,153.991
Euro 1.173 1.164 1.127 1.191
Indian rupee 97.030 101.702 99.516 100.684
Japanese yen 161.842 151.124 158.717 155.972
Romanian leu 5.783 5.727 5.577 5.894
Russian rouble 87.184 101.388 87.812 101.592
South African rand 20.176 20.335 20.467 21.617
Swiss franc 1.179 1.258 1.113 1.234
U.S. dollar 1.236 1.376 1.203 1.354
--------- --------- --------- ---------
RISKS AND UNCERTAINTIES
During the year, the Board carried out a robust assessment of
the principal risks and uncertainties facing the Group, 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 that arose during the year, including significant
cost increases due to inflation and higher interest rates which may
translate into higher net finance costs as debts are refinanced in
the coming years. The ongoing conflict in Ukraine continues to
represent a very complex, fast-moving and volatile situation, and
the primary focus of the Group remains the safety and wellbeing of
Group company employees.
All Group risks are reviewed biannually by the Audit Committee
and annually by the Board. ESG 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 Risk Management Framework
within the Group. In 2022, the Board identified "Climate and
circularity" as a Principal Risk to the Group, recognising the
Group's existing commitments to mitigating and adapting to climate
change and circular economy related matters.
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;
-- Litigation;
-- Significant increases or structural changes in tobacco,
nicotine and New Categories related taxes;
-- Inability to develop, commercialise and deliver the New Categories strategy;
-- Injury, illness or death in the workplace.
-- Disputed taxes, interest and penalties;
-- Foreign exchange rate exposures;
-- Solvency and liquidity; and
-- Climate and circularity.
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 2022.
OTHER INFORMATION
CHANGES IN THE GROUP
1. 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. The Group has two subsidiaries in
Russia (BAT Russia), being JSC British American Tobacco-SPb and JSC
International Tobacco Marketing Services. Due to operational
dependencies between Russia and the Group's subsidiary in Belarus
(International Tobacco Marketing Services BY) (BAT Belarus), it has
been decided that the Belarusian business will be included in the
transfer. Upon completion, the Group will no longer have a presence
in Russia or Belarus. The Group is working as quickly as possible
to transfer the businesses.
At the date of writing, no agreement to transfer the shares in
these subsidiaries has been entered into. Further, any transaction
that is agreed will be subject to regulatory approvals. In
accordance with IFRS, the assets and liabilities of the
subsidiaries comprising BAT Russia and BAT Belarus have been
classified as held-for-sale at 31 December 2022 and presented as
such on the balance sheet at an estimated recoverable value.
Impairment charges (GBP554 million) and associated costs of GBP58
million (in aggregate GBP612 million) have been recognised in the
Income Statement as adjusting items. The assessment of recoverable
value has taken into account a range of internal assumptions,
including those regarding the impact, extent and duration of
sanctions, likely transaction terms, the likelihood of any
consideration being significantly deferred, including the ability
to remit funds, and ongoing macroeconomic developments, including
the impact of inflation and interest rates. All assumptions are
based on current expectations and are subject to a high degree of
volatility and uncertainty. On completion of the proposed transfer,
certain other items, including foreign exchange previously
recognised in the Statement of Other Comprehensive Income (which
was GBP295 million at 31 December 2022), will be reclassified to
the Income Statement in the period in which completion occurs. The
financial impact of these items will also be treated as non-cash,
adjusting items. Refer to page 33 for a detailed analysis of the
charge.
The transfer of the business will not have a material impact on
the remainder of the Group's supply chain. The Group is in the
process of transferring any manufacturing undertaken by Russia and
Belarus for other markets to other Group facilities within the
region or where operationally efficient.
The Group continues to monitor sanction developments to ensure
that it is compliant with international and local laws, and that it
has the necessary business controls in place to operate
effectively. The Group has taken steps to remain compliant with all
new measures and continues to assess their implications.
In 2022, on a constant currency basis, Russia and Belarus
accounted for approximately 3.1% of Group revenue, and
approximately 2.4% of Group adjusted profit from operations.
To supplement the Group's results presented in accordance with
IFRS, the Group's Management Board, as the chief operating
decision-maker, reviews certain of its results, including volume,
revenue, profit from operations and operating margin prior to the
impact of businesses sold or to be held-for-sale. 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 businesses sold or to be held-for-sale provide
additional useful information to investors regarding the underlying
performance of the business on a comparable basis and in the case
of the expected sale of the Group's businesses in Russia and
Belarus, the impact these businesses have 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 organic adjusted
profit from operations and operating margin to organic adjusted
operating margin on page 60 . 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.
2. OTHER CHANGES
In September 2022, the Group acquired a non-controlling (16%)
minority stake in one of Germany's leading cannabis companies,
Sanity Group GmbH (Sanity Group) for GBP32 million. Sanity Group is
based in Berlin and has a well-established product portfolio of
cannabidiol (CBD) consumer brands and medical cannabis brands. It
also has a track record in the research, development and marketing
of cannabis products. This investment is complementary to our other
recent investments, most notably the strategic R&D
collaboration established with Canada's Organigram Holdings Inc.
announced in March 2021. The Sanity Group investment will be
accounted for as an associate.
In November 2022, we invested in Charlotte's Web Holdings, Inc.
(Charlotte's Web), via a convertible debenture of GBP48 million.
Charlotte's Web is based in Colorado, USA, listed on the Toronto
Stock Exchange, and holds a prominent position in innovative hemp
extract wellness products across major retail channels, including
food/drug/mass retail, and natural grocery and vitamin retailers(1)
. Their product formats include tinctures, capsules, chews and
topicals. The debenture is currently convertible into a
non-controlling equity stake in Charlotte's Web of approximately
19.9% and is convertible at BAT's discretion. Given that the nature
of the investment as a convertible loan note does not give the
Group any current right to a share of the earnings or net assets of
the investee, despite the ability to appoint directors, the
investment will be recognised at fair value through profit and loss
with fair value changes in the investment recognised in net finance
costs. On conversion of the loan note, the Group will equity
account for its investment.
1. Based on market share data from leading third-party analysts
such as The Nielsen Company (total xAOC), SPINS (SPINS Total US),
and Brightfield Group, respectively.
OTHER INFORMATION
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, against Group companies. The Group cooperates with
the authorities' investigations, where appropriate.
For instance, as previously disclosed, the Group has been
cooperating with investigations by the DOJ and the OFAC into
suspicions of breaches of sanctions. The Group is currently engaged
in discussions with both agencies to find a resolution through
settlement. Consequently, the Group has recognised a provision of
GBP450 million in 2022, in line with the requirements of IAS 37
Provisions, Contingent Liabilities and Contingent Assets. However,
it cannot be excluded that the amount of any potential settlement
with the DOJ and OFAC may vary from this amount. Although the Group
is working to resolve the government investigations through
settlement, there can be no assurance that these efforts will be
successful or, if they are, what the timing or terms of any such
settlements would be.
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 31 March 2023. 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.
Please refer to "Contingent Liabilities and Financial
Commitments" below (page 41 ) an d the Group's Annual Report and
Accounts and Form 20-F for the year ended 31 December 2021, note 31
Contingent Liabilities and Financial Commitments for a full
discussion of the case.
RETIREMENT BENEFIT SCHEMES - U.S. Partial Buy-Out / UK third and
final Buy-In
Following a partial buy-out in October 2021, a further partial
buy-out was concluded in the U.S. on 7 June 2022, with
approximately US$1.6 billion (GBP1.3 billion) of plan liabilities
removed from the balance sheet, resulting in a settlement gain of
GBP16 million. This has been reported as a settlement in the Income
Statement, and recognised as an adjusting item. In total,
approximately US$3.5 billion (GBP2.7 billion) of plan liabilities
have been removed from the balance sheet in the U.S. under these
partial buy-outs, as the Group seeks to de-risk the balance
sheet.
Following buy-ins entered into in previous periods, on 26
October 2022 the Trustee's of the British American Tobacco UK
Pension Fund (UKPF) entered into an agreement with Pension
Insurance Corporation plc (PIC) to acquire third and final
insurance policy with the intent of matching a specific part of
UKPF's future cash flows arising from the accrued pension
liabilities of retired and deferred members and improving the
security to the UKPF and its members. On an IAS 19 basis, the
subsequent fair value of the insurance policy matches the present
value of the liabilities being insured. GBP198 million of assets
were transferred immediately with GBP35 million of the premium
deferred until 2023 and 2024. As a result of these transactions,
approximately 94.0% of the assets held by UKPF (2021: 84%) are
represented by the buy-in contracts, covering 100% of UKPF's
retirement liabilities (2021: 91%). On an IAS 19 basis, the
subsequent fair value of the insurance policies matches the present
value of the liabilities being insured.
EXTERNAL AUDIT TER PROCESS
The Audit Committee has commenced planning for an audit tender
process to be conducted in 2023 in respect of the audit for the
2025 financial year, in compliance with applicable regulations.
The timetable for the external audit tender process is designed
to permit time to plan for the transition of any non-audit services
if there is a change of auditor and to enable any new auditor to
fully prepare to assume responsibility for a complex and
international audit across the Group. The audit tender process will
be overseen by the Audit Committee and is expected to conclude
later in 2023. It is intended that a resolution proposing the
appointment of the selected auditor would be put to shareholders at
the 2025 Annual General Meeting.
CHANGES TO THE MAIN BOARD
As previously announced, Krishnan (Kandy) Anand was appointed to
the Board of British American Tobacco p.l.c. as a Non-Executive
Director on 14 February 2022 and Marion Helmes resigned from the
Board as a Non-Executive Director on 28 April 2022.
Also in 2022, Véronique Laury-Deroubaix was appointed to the
Board of British American Tobacco p.l.c. as an independent
Non-Executive Director and member of the Audit Committee and
Nominations Committee with effect from 19 September 2022. In
addition, Sue Farr succeeded Dimitri Panayotopoulos as Senior
Independent Director, with effect from 1 August 2022.
Savio Kwan will step down as a Non-Executive Director with
effect from the conclusion of the 2023 AGM and will not stand for
re-election at the 2023 AGM.
OTHER INFORMATION
CHANGES TO THE MANAGEMENT BOARD
On 31 January 2023, the Group announced a number of changes to
the Management Board to accelerate its transformation. These
changes are:
-- With effect from 1 April 2023:
-- The creation of two new Management Board roles:
-- Johan Vandermeulen, currently Regional Director, Europe, will
be appointed to the new role of Chief Transformation Officer.
-- Luciano Comin, currently Regional Director, Americas and
Sub-Saharan Africa, will be appointed to the new role of Director,
Combustibles.
-- Frederico (Fred) Monteiro will be promoted to the Management
Board as Regional Director, Americas & Europe Region (AME).
-- Michael Dijanosic will take on an expanded role as Regional
Director, Asia Pacific, Middle East & Africa (APMEA).
-- Guy Meldrum will continue to lead BAT's largest business in
the USA as President, Reynolds American Inc.
-- Javed Iqbal will continue in his role as Director, Digital and Information.
-- The President, Reynolds American Inc., the Regional Directors
for AME and APMEA and the Director, Digital & Information will
report to the Chief Transformation Officer. The Director,
Combustibles will report to the Chief Growth Officer.
-- Tadeu Marroco's role will be redesignated as Finance Director.
Further:
-- Dr James Murphy joined the Management Board as the Director,
Research and Science Designate, on 1 February 2023; he will assume
the role of Director, Research and Science on 1 March 2023.
-- Dr David O'Reilly, Director, Research and Science, will step
down from the Management Board on 28 February 2023 and leave BAT
with effect from 31 May 2023.
OTHER INFORMATION
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 2022 Annual Report and Accounts and Form 20-F.
The Group has, at the date of this 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 Annual Report and Accounts and Form
20-F.
EXTERNAL RECOGNITION IN RESPECT OF SUSTAINABILITY
The Group continues to be recognised for its ESG performance,
building on the numerous ESG-related awards BAT has won in the
past:
Year Award/rating Environmental Social Governance
2022 2023 Bloomberg Gender Equality Index Member ü
---- ------------------------------------------------ ------------- ------
Gartner Supply Chain 2022 Award: Top 25 ü ü ü
ranking
---- ------------------------------------------------ ------------- ------
CDP: Climate A, Forests A- and Water A- ü
------------------------------------------------ ------------- ------
BAT scored 88 (out of 100) in the 2022 ü ü ü
S&P Global Corporate Sustainability Assessment
(Score date: 8th December)
------------------------------------------------ ------------- ------
Dow Jones Sustainability Indices (DJSI): ü ü ü
World Index & Industry leader
------------------------------------------------ ------------- ------
MSCI: BBB rating ü ü ü
------------------------------------------------ ------------- ------
Sustainalytics Risk Rating: 33.4 score ü ü ü
------------------------------------------------ ------------- ------
In 2022, our U.S. and Mexico businesses ü
scored 100% on the Human Rights Campaign
Foundation's Corporate Equality Index for
LGBT+ workplace equality
------------------------------------------------ ------------- ------
S&P Global's Sustainability Yearbook 2022: ü ü ü
highest "Gold Class" distinction
------------------------------------------------ ------------- ------
BAT's 2022 Workforce Disclosure Initiative ü
submission received a score which placed
it in the top 10% of participating companies
------------------------------------------------ ------------- ------
Global Top Employer 2022 ü
------------------------------------------------ ------------- ------
Institutional Shareholder Services' (ISS) ü ü
Environment and Governance Disclosures
Quality Score: highest rating for best-in-class
sustainability disclosure practices
------------------------------------------------ ------------- ------
Financial Times Europe Climate Leader Ranking ü
2022
---- ------------------------------------------------ ------------- ------
2021 DJSI: World Index & Industry leader ü ü ü
---- ------------------------------------------------ ------------- ------
Workforce Disclosure Initiative (WDI): ü ü
ranked in the top 10% of responding companies
---- ------------------------------------------------ ------------- ------
WDI Workforce Transparency Awards: special ü ü
mentions in the 'COVID-19 transparency'
and 'Workforce action' categories
------------------------------------------------ ------------- ------
CRRA 2020: Winner in the 'Openness and ü ü ü
Honesty' category for our 2018 ESG Report
------------------------------------------------ ------------- ------
Disability Confident Committed employer ü
under the UK Government's accreditation
scheme
------------------------------------------------ ------------- ------
MSCI: BBB rating ü ü ü
------------------------------------------------ ------------- ------
Vigeo Eiris: 47% score ü ü ü
------------------------------------------------ ------------- ------
Sustainalytics Risk Rating: 27.8 score ü ü ü
------------------------------------------------ ------------- ------
CDP: Climate A and Water A- ü
------------------------------------------------ ------------- ------
S&P Global Sustainability Yearbook Award: ü ü ü
highest "Gold Class" distinction
------------------------------------------------ ------------- ------
Sustainability, Environmental Achievement ü ü ü
and Leadership (SEAL) Awards: top 50 companies
------------------------------------------------ ------------- ------
Global Top Employer ü
------------------------------------------------ ------------- ------
Financial Times Diversity Leader Ranking ü
2020
------------------------------------------------ ------------- ------
Gartner Supply Chain Award: top 25 ranking ü
------------------------------------------------ ------------- ------
Corporate Equality Index 2021: our businesses ü
in the U.S. and Mexico were ranked among
the best places to work for LGBTQ equality
------------------------------------------------ ------------- ------
Undergraduate Employability Awards: top ü
Medium-sized Undergraduate Scheme (UK)
------------------------------------------------ ------------- ------
Product of the Year: Vype ePod best e-cigarette ü
------------------------------------------------ ------------- ------
dotCOMM Awards: Platinum award for our ü
Women in Science video
---- ------------------------------------------------ ------------- ------
2020 DJSI: World Index & Industry leader ü ü ü
---- ------------------------------------------------ ------------- ------
RobecoSAM Sustainability Award: Gold Class ü ü ü
---- ------------------------------------------------ ------------- ------
MSCI: BBB rating ü ü ü
------------------------------------------------ ------------- ------
Vigeo Eiris: 42% score ü ü ü
------------------------------------------------ ------------- ------
CDP: Climate A and Water B ü
------------------------------------------------ ------------- ------
Global Child Forum benchmark: leader status ü
------------------------------------------------ ------------- ------
Global Top Employer ü
------------------------------------------------ ------------- ------
Workforce Disclosure Initiative (WDI): ü
industry leader
------------------------------------------------ ------------- ------
International Women's Day: best practice ü
winner
------------------------------------------------ ------------- ------
Product of the Year: Vype ePod best e-cigarette ü
---- ------------------------------------------------ ------------- ------
A rating and award may be subject to withdrawal or revision at
any time. Each rating and award should be evaluated separately from
any other rating or award. The methodologies of any rating or award
presented here may not be the same as those of other ratings,
awards or methodologies that may be used by our stakeholders, and
may emphasize different aspects of ESG practices and performance,
and, thus, may not be representative of our ESG performance in all
respects.
OTHER INFORMATION
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 2023 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 2023; and
-- Glossary and definition of key terms.
This information will be an extract of information that will be
included in the Group's Annual Report and Accounts (and Form 20-F)
for the 12 months ended 31 December 2022 which is expected to be
published on 2 March 2023.
ENQUIRIES
INVESTOR RELATIONS : MEDIA:
+44 (0)20 7845 +44 (0)20 7845
Victoria Buxton 2012 BAT Media Centre 2888
+44 (0)20 7845
Yetunde Ibe 1095
+44 (0)20 7845
John Harney 1263
Live webcast of FY22 Results Presentation at 09.30am GMT on 9
February 2023
Jack Bowles, Chief Executive, and Tadeu Marroco, Finance and
Transformation Director, will host a presentation of the results
followed by a Q&A session. We appreciate it is a busy reporting
day, so we will be hosting our full-year results presentation as a
virtual event. The presentation will be webcast live from 9.30am
GMT, in listen-only mode on http://www.bat.com.
If you wish to ask a question, please join the call using the
telephone numbers below, quoting 'BAT' when prompted by the
operator.
United Kingdom (toll): +44 (0) 33 0551 SA (toll free): 0 800 980
0200 512
United Kingdom (toll free): 0808 109 0700 U.S. (toll free): 866 580
3963
A video playback of the presentation will be available online
and via our BAT IR app, alongside the slides and script for the
results presentation.
A full transcript will be available 24 hours after the event
.
FINANCIAL STATEMENTS (AUDITED)
GROUP INCOME STATEMENT
For the years ended 31 December 2022 2021
------- -------
GBPm GBPm
Revenue(1) 27,655 25,684
Raw materials and consumables used (4,781) (4,542)
Changes in inventories of finished goods and
work in progress 227 160
Employee benefit costs (2,972) (2,717)
Depreciation, amortisation and impairment costs (1,305) (1,076)
Other operating income 722 196
Loss on reclassification from amortised cost
to fair value (5) (3)
Other operating expenses (9,018) (7,468)
------- -------
Profit from operations 10,523 10,234
Net finance costs (1,641) (1,486)
Share of post-tax results of associates and joint
ventures 442 415
------- -------
Profit before taxation 9,324 9,163
Taxation on ordinary activities (2,478) (2,189)
======= =======
Profit for the year 6,846 6,974
======= =======
Attributable to:
Owners of the parent 6,666 6,801
Non-controlling interests 180 173
======= =======
6,846 6,974
======= =======
Earnings per share
======= =======
Basic 293.3p 296.9p
======= =======
Diluted 291.9p 295.6p
======= =======
All of the activities during both years are in respect of
continuing operations.
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information.
(1) Revenue is net of duty, excise and other taxes of GBP38,527
million and GBP38,595 million for the years ended 31 December 2022
and 31 December 2021, respectively.
FINANCIAL STATEMENTS (AUDITED)
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the years ended 31 December 2022 2021
------ -----
GBPm GBPm
Profit for the year (page 25 ) 6,846 6,974
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss: 8,506 509
------ -----
Foreign currency translation and hedges of net
investments in foreign operations
- differences on exchange from translation of
foreign operations 8,923 32
- reclassified and reported in profit for the
year 5 291
- net investment hedges - net fair value (losses)/gains
on derivatives (578) 75
- net investment hedges - differences on exchange
on borrowings (21) 24
Cash flow hedges
- net fair value gains 81 95
- reclassified and reported in profit for the
year 101 32
- tax on net fair value gains in respect of
cash flow hedges (17) (32)
Investments held at fair value
- net fair value gains 6 9
Associates - share of OCI, net of tax 6 (17)
------
Items that will not be reclassified subsequently
to profit or loss: 201 313
------ -----
Retirement benefit schemes
- net actuarial gains 316 382
- surplus recognition (39) (1)
- tax on actuarial gains in respect of subsidiaries (95) (82)
Associates - share of OCI, net of tax 19 14
------
Total other comprehensive income for the year,
net of tax 8,707 822
------ -----
Total comprehensive income for the year, net
of tax 15,553 7,796
====== =====
Attributable to:
Owners of the parent 15,370 7,622
Non-controlling interests 183 174
------ -----
15,553 7,796
====== =====
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information.
FINANCIAL STATEMENTS (AUDITED)
GROUP STATEMENT OF CHANGES IN EQUITY
2022 Attributable to owners of the parent
--------------------------------------------------------------------
Share
premium,
capital Total
redemption In respect attributable Perpetual
Share and merger Other Retained of assets to owners hybrid Non-controlling Total
capital reserves reserves earnings held-for-sale of parent bonds interests equity
------- ---------- -------- -------- ------------- ------------ --------- --------------- -------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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 0 6,666 - 180 6,846
Other
comprehensive
income for the
year
(page 26 ) - - 8,521 183 0 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 - 5 - - - -
new
shares issued - 5 5
- treasury shares - 1 - (1) - -
used for share
option
schemes - - -
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
- coupons paid - - - (59) - (59) - - (59)
- tax on coupons
paid - - - 11 - 11 - - 11
Non-controlling
interests -
acquisitions - - - (1) - (1) - - (1)
Reclassification
of equity
relating
to assets
held-for-sale - - 295 - (295) - - - -
Other movements - - - (4) 0 (4) - - (4)
----------------- ------- ---------- -------- -------- ------------- ------------ --------- --------------- -------
Balance at 31
December
2022 614 26,628 2,655 44,081 (295) 73,683 1,685 342 75,710
2021 Attributable to owners of the parent
--------------------------------------------------------------------
Share
premium,
capital Total
redemption In respect attributable Perpetual
Share and merger Other Retained of assets to owners hybrid Non-controlling Total
capital reserves reserves earnings held-for-sale of parent bonds interests equity
------- ---------- -------- -------- ------------- ------------ --------- --------------- -------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1
January
2021 614 26,618 (6,600) 42,041 0 62,673 - 282 62,955
Total
comprehensive
(expense)/income
for the year
comprising:
(page 26 ) - - 523 7,099 0 7,622 - 174 7,796
----------------- ------- ---------- -------- -------- ------------- ------------ --------- --------------- -------
Profit for the
year
(page 25 ) - - - 6,801 0 6,801 - 173 6,974
Other
comprehensive
(expense)/income
for the year
(page
26 ) - - 523 298 0 821 - 1 822
----------------- ------- ---------- -------- -------- ------------- ------------ --------- --------------- -------
Other changes in
equity
Cash flow hedges
reclassified and
reported in
total
assets - - 45 - 0 45 - - 45
Employee share
options
- value of
employee
services - - - 76 0 76 - - 76
- treasury shares
used for share
option
schemes - 4 - (4) 0 - - - -
Dividends and
other
appropriations
- ordinary shares - - - (4,904) 0 (4,904) - - (4,904)
- to
non-controlling
interests - - - - 0 - - (162) (162)
Purchase of own
shares
- held in
employee
share ownership
trusts - - - (82) 0 (82) - - (82)
Perpetual hybrid
bonds
- proceeds, net
of
issuance fees - - - - 0 - 1,681 - 1,681
- tax on issuance
fees - - - - 0 - 4 - 4
- coupons paid - - - (6) 0 (6) - - (6)
- tax on coupons
paid - - - 1 0 1 - - 1
Non-controlling
interests
- acquisitions - - - (5) 0 (5) - - (5)
Other movements
non-controlling
interests - - - 0 - - 6 6
Other movements - - - (4) 0 (4) - - (4)
================= ======= ========== ======== ======== ============= ============ ========= =============== =======
Balance at 31
December
2021 614 26,622 (6,032) 44,212 0 65,416 1,685 300 67,401
================= ======= ========== ======== ======== ============= ============ ========= =============== =======
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information.
FINANCIAL STATEMENTS (AUDITED)
GROUP BALANCE SHEET
As at 31 December 2022 2021
------- -------
GBPm GBPm
Assets
Non-current assets
Intangible assets 129,075 115,625
Property, plant and equipment 4,867 4,953
Investments in associates and joint ventures 2,020 1,948
Retirement benefit assets 1,000 918
Deferred tax assets 682 611
Trade and other receivables 241 210
Investments held at fair value 121 50
Derivative financial instruments 131 243
------- -------
Total non-current assets 138,137 124,558
------- -------
Current assets
Inventories 5,671 5,279
Income tax receivable 149 117
Trade and other receivables 4,367 3,951
Investments held at fair value 579 456
Derivative financial instruments 430 182
Cash and cash equivalents 3,446 2,809
------- -------
14,642 12,794
Assets classified as held-for-sale 767 13
------- -------
Total current assets 15,409 12,807
======= =======
Total assets 153,546 137,365
======= =======
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information.
FINANCIAL STATEMENTS (AUDITED)
GROUP BALANCE SHEET - cont...
As at 31 December 2022 2021
------- -------
GBPm GBPm
Equity - capital and reserves
Share capital 614 614
Share premium, capital redemption and merger
reserves 26,628 26,622
Other reserves 2,655 (6,032)
Retained earnings 44,081 44,212
In respect of assets held-for-sale (295) -
------- -------
Owners of the parent 73,683 65,416
Perpetual hybrid bonds 1,685 1,685
Non-controlling interests 342 300
------- -------
Total equity 75,710 67,401
------- -------
Liabilities
Non-current liabilities
Borrowings 38,726 35,666
Retirement benefit liabilities 949 1,239
Deferred tax liabilities 18,428 16,462
Other provisions for liabilities 434 392
Trade and other payables 944 982
Derivative financial instruments 502 79
------- -------
Total non-current liabilities 59,983 54,820
------- -------
Current liabilities
Borrowings 4,413 3,992
Income tax payable 1,049 879
Other provisions for liabilities 1,087 461
Trade and other payables 10,449 9,577
Derivative financial instruments 427 235
------- -------
17,425 15,144
Liabilities associated with assets classified
as held-for-sale 428 -
------- -------
Total current liabilities 17,853 15,144
------- -------
Total equity and liabilities 153,546 137,365
======= =======
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information.
FINANCIAL STATEMENTS (AUDITED)
GROUP CASH FLOW STATEMENT
For the years ended 31 December 2022 2021
------- -------
GBPm GBPm
Cash flows from operating activities
Cash generated from operating activities (page
36 ) 12,537 11,678
Dividends received from associates 394 353
Tax paid (2,537) (2,314)
------- -------
Net cash generated from operating activities 10,394 9,717
------- -------
Cash flows from investing activities
Interest received 85 33
Purchases of property, plant and equipment (523) (527)
Proceeds on disposal of property, plant and equipment 31 31
Purchases of intangibles (133) (218)
Proceeds on disposal of intangibles 3 -
Purchases of investments (257) (369)
Proceeds on disposals of investments 128 141
Investment in associates and acquisitions of
other subsidiaries net of cash acquired (39) (133)
Disposal of subsidiary, net of cash disposed
of - (98)
------- -------
Net cash used in investing activities (705) (1,140)
------- -------
Cash flows from financing activities
Interest paid on borrowings and financing related
activities (1,578) (1,479)
Interest element of lease liabilities (25) (23)
Capital element on lease liabilities (161) (154)
Proceeds from increases in and new borrowings 3,267 978
Reductions in and repayments of borrowings (3,044) (4,843)
(Outflows)/inflows relating to derivative financial
instruments (117) 229
Purchases of own shares - share buy-back programme (2,012) -
Purchases of own shares held in employee share
ownership trusts (80) (82)
Proceeds from the issue of perpetual hybrid bonds,
net of issuance costs - 1,681
Coupon paid on perpetual hybrid bonds (60) (6)
Dividends paid to owners of the parent (4,915) (4,904)
Capital injection from and purchases of non-controlling
interests (1) 1
Dividends paid to non-controlling interests (158) (150)
Other 6 3
------- -------
Net cash used in financing activities (8,878) (8,749)
------- -------
Net cash flows generated from/(used in) operating,
investing and financing activities 811 (172)
Transferred to held-for-sale (368) -
Differences on exchange 431 (253)
------- -------
Increase/(decrease) in net cash and cash equivalents
in the year 874 (425)
Net cash and cash equivalents at 1 January 2,463 2,888
------- -------
Net cash and cash equivalents at 31 December 3,337 2,463
======= =======
Cash and cash equivalents per balance sheet 3,446 2,809
Overdrafts and accrued interest (109) (346)
------- -------
Net cash and cash equivalents at 31 December 3,337 2,463
======= =======
The accompanying notes on pages 31 to 43 form an integ ral part
of this condensed consolidated financial information. The net cash
outflows relating to the adjusting items within profit from
operations on pages 31 to 35 , included in the above, are GBP466
million (31 December 2021: GBP501 million).
Notes to the Financial Statements
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The condensed consolidated financial information has been
extracted from the Annual Report and Accounts and Form 20-F,
including the audited financial statements for the year ended 31
December 2022. 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
2021.
The preparation of these condensed consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
date of these condensed consolidated financial statements. Such
estimates and assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances and constitute management's best judgement at the
date of the condensed consolidated financial statements. Other than
in respect of the Group's Russian and Belarusian businesses (which
have been classified as held-for-sale) 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 2021, apart from updating the
assumptions used to determine the carrying value of liabilities for
retirement benefit schemes. As described on page 33 , the Group has
reviewed the carrying value of
the significant investments of goodwill and intangibles (due in
part to the announcements in the U.S. regarding potential menthol
regulation and ongoing challenging trading conditions in certain
markets). Other than as described on page 33 , being mainly in
respect of Peru (in 2021), 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 and that it is therefore appropriate to continue
to adopt the going concern basis in preparing the Annual Report and
Accounts and Form 20-F.
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 adjusted profit from operations,
adjusted diluted earnings per share, adjusted net finance costs,
adjusted taxation and operating cash flow conversion ratio, all of
which are before the impact of adjusting items and which are
reconciled from profit from operations, diluted earnings per share,
cash conversion ratio and net cash generated from operating
activities.
Notes to the Financial Statements
ANALYSIS OF REVENUE AND PROFIT FROM OPERATIONS BY SEGMENT
Years ended 2022 2021
31 December
-------------------------------------------------- --------------------------------
Reported Exchange At CC Reported
(2)
Revenue GBPm GBPm GBPm GBPm
------------- -------- --------- -------- -------- --------- -------- ------------ --------
U.S. 12,639 (1,281) 11,358 11,691
AmSSA 4,203 (224) 3,979 3,801
Europe 6,346 77 6,423 6,001
APME 4,467 46 4,513 4,191
------------- -------- --------- -------- -------- --------- -------- ------------ --------
Total Region 27,655 (1,382) 26,273 25,684
------------- -------- --------- -------- -------- --------- -------- ------------ --------
Years ended
31 December 2022 2021
-------------------------------------------------- --------------------------------
Reported Adj Adjusted Exchange Adjusted Reported Adj Items(1) Adjusted
Items(1) at CC(2)
Profit from GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Operations
------------- -------- --------- -------- -------- --------- -------- ------------ --------
U.S. 6,205 630 6,835 (740) 6,095 5,566 321 5,887
AmSSA 2,022 (280) 1,742 (83) 1,659 1,496 94 1,590
Europe 1,270 812 2,082 21 2,103 1,885 71 1,956
APME 1,026 723 1,749 20 1,769 1,287 430 1,717
------------- -------- --------- -------- -------- --------- -------- ------------ --------
Total Region 10,523 1,885 12,408 (782) 11,626 10,234 916 11,150
------------- -------- --------- -------- -------- --------- -------- ------------ --------
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.
(3) Effective 1 January 2022, the North African markets of
Algeria, Egypt, Libya, Morocco, Sudan and Tunisia, which formed
part of the Europe and North Africa (ENA) region were moved to the
Asia-Pacific and Middle East (APME) region. From 2022, the ENA
region has been renamed Europe. The impact of this is not
considered material to the understanding of the regional results of
the Europe and APME region and therefore the prior year comparative
information has not been restated.
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. Additional details of the Group's
adjusting items will be included in the Annual Report and Accounts
and Form 20-F for the year ended 31 December 2022.
In summary, in 2022, the Group incurred GBP1,885 million (2021:
GBP916 million) of adjusting items within profit from
operations:
Years ended 31 December 2022 2021
----- ----
GBPm GBPm
(a) Restructuring and integration costs 771 150
(b) Amortisation and impairment of trademarks
and similar intangibles 285 306
(c) Charges in connection with planned disposal
of subsidiaries 612 -
(c) Charges in connection with disposal of subsidiaries (6) 358
(d) Credit in respect of partial buy-out of the
pension fund in the U.S. (16) (35)
(d) Credit in respect of calculation of VAT on
social contributions in Brazil (460) -
(d) Charges in respect of DOJ and OFAC investigations 450 -
(d) Charges in respect of Nigeria Federal Competition
and Consumer Protection Commission (FCCPC) case 79 -
(d) Other adjusting items (including Engle) 170 80
(e) Impairment of goodwill (mainly Peru in 2021) - 57
===== ====
Total adjusting items included in profit from
operations 1,885 916
===== ====
(a) Restructuring and integration costs
Restructuring costs reflect the costs incurred as a result of
initiatives to improve the effectiveness and the efficiency of the
Group as a globally integrated enterprise. These costs represent
additional expenses incurred that are not related to the normal
business and day-to-day activities. These initiatives include a
review of the Group's manufacturing operations, and the costs
associated with Quantum, being the review of the Group's
organisational structure to simplify the business and create a more
efficient, agile and focused company. The costs of the Group's
initiatives are included in profit from operations under the
following headings:
Years ended 31 December 2022 2021
---- ----
GBPm GBPm
Employee benefit costs 315 160
Depreciation, amortisation and impairment costs 220 (11)
Other operating expenses 237 1
Other operating income (1) 0
==== ====
Total 771 150
==== ====
Notes to the Financial Statements
ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS cont...
The adjusting charge in 2022 and 2021 relates to the ongoing
restructuring costs associated with the implementation of revisions
to the Group's operating model, mainly in relation to Quantum. This
programme has delivered GBP1.9 billion of annualised savings over a
three-year period (to 2022) and the charges include the cost of
packages in respect of permanent headcount reductions and permanent
employee benefit reductions in the Group. Included above in respect
of 2022 is a charge of GBP118 million, including GBP4 million for
foreign exchange reclassified from equity, related to the Group's
withdrawal from Egypt. The costs also cover the downsizing and
factory rationalisation activities in 2022 and 2021, including as
related to the factory closure programmes in the U.S., Singapore
and Switzerland. 2021 also included a charge of GBP27 million,
including GBP4 million for foreign exchange reclassified from
equity, related to the Group's withdrawal from Myanmar, and a
credit of GBP59 million as an accrual was released on finalisation
of Reynolds American dissenting shareholders litigation.
(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, which
do not exceed 20 years. The amortisation and impairment charge of
GBP285 million (2021: GBP306 million) is included in depreciation,
amortisation and impairment costs in the income statement.
(c) Assets classified as held-for-sale
On 11 March 2022, the Group announced its intention to transfer
BAT Russia in compliance with international and local laws. As
described on page 20 . Due to operational dependencies between BAT
Russia and BAT Belarus, it has been decided that the Belarusian
business will be included in any transaction. Upon completion, the
Group will no longer have a presence in Russia or Belarus. The
Group is working as quickly as possible to transfer the
businesses.
At the date of writing, no agreement to transfer the shares in
these subsidiaries has been entered into. Further, any transaction
that is agreed will be subject to regulatory approvals. In
accordance with IFRS, the assets of these subsidiaries comprising
GBP281 million of property, plant and equipment and other
non-current assets, GBP474 million of trade and other receivables,
GBP368 million of cash and cash equivalents and GBP181 million of
other current assets principally relating to inventories, have been
classified as held-for-sale at 31 December 2022 and presented as
such on the balance sheet at an estimated recoverable value (fair
value less costs to sell). In addition, GBP16 million of borrowings
and GBP412 million of trade creditors and other current liabilities
have been classified as held-for-sale at 31 December 2022.
Impairment charges of GBP554 million and associated costs of GBP58
million have been recognised in the Income Statement as adjusting
items. The assessment of recoverable value has taken into account a
range of internal assumptions, including those regarding the
impact, extent and duration of sanctions, likely transaction terms,
the likelihood of any consideration being significantly deferred,
potentially impacting the ability to remit funds, and ongoing
macro-economic developments, such as the impact of inflation and
interest rates. All assumptions are based on current expectations
and are subject to a very high degree of volatility and uncertainty
and therefore may change up until the final value can be
determined, based on an actual transaction.
On completion of the transaction, certain other items, including
foreign exchange previously recognised in the Statement of Other
Comprehensive Income (which was GBP295 million at 31 December
2022), will be reclassified to the Income Statement in the period
in which completion occurs. The financial impact of these items
will also be treated as non-cash, adjusting items.
The following is a reconciliation between the total assets
available for sale and their estimated recoverable amount (fair
value less costs to sell):
At 31 December 2022 GBPm
Total assets held-for-sale* 1,321
Impairment of non-current assets held-for-sale
- Russia and Belarus (281)
-----
1,040
Excess impairment beyond non-current assets held-for-sale
- Russia and Belarus (273)
-----
Assets held-for-sale* 767
-----
*Includes GBP15 million of assets held-for-sale in territories
other than Russia and Belarus
Also included in 2022 is a net credit of GBP6 million related to
the sale of the Group's Iranian business, which was completed in
2021 and for which a charge of GBP358 million was recognised in
that year.
(d) Other
In 2022, the Group incurred GBP223 million (2021: GBP45 million)
of other adjusting items. These included:
-- A charge of GBP450 million recognised in respect of the DOJ
and OFAC investigations into alleged historical breaches of
sanctions (see page 21 );
-- A charge of GBP79 million related to the conclusion of the
investigation into alleged violations of the Nigerian Competition
and Consumer Protection Act and National Tobacco Control Act;
-- A net credit (GBP460 million) related to the calculation of
VAT on social contributions in Brazil;
-- A credit of GBP16 million (2021: GBP35 million) in respect of
a settlement gain related to the partial buy-out of the U.S.
pension fund. Across 2022 and 2021 a total of approximately US$3.5
billion (GBP2.7 billion) of plan liabilities have been removed from
the balance sheet; and
-- Other costs of GBP170 million (2021: GBP80 million). In 2022,
this mainly related to litigation costs including Engle progeny
cases (2021: GBP54 million). Also included in 2021 were settlement
costs in Turkey and South Korea (GBP26 million).
Notes to the Financial Statements
ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS cont...
(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) which assumes long-term
volume decline of cigarettes, generally offset by pricing. After
this forecast, a growth rate into perpetuity has been applied.
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. In general, an overall
increase in post-tax discount rates in 2022 has been observed,
primarily driven by higher interest rates and bond yields. In
relation to Reynolds, this has been partially offset by a reduction
in the risk-adjustment incorporated into the 2021 discount rates
which has now been incorporated directly into the cash flows. 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.
On 28 April 2022, the FDA announced a proposed product standard
to prohibit menthol as a characterising flavour in cigarettes,
consistent with their previously stated timeline. 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. 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 and 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
impact of such ban does not present an indicator of a potential
impairment for Reynolds American goodwill or any of the
indefinite-lived intangibles. The Group has a long-standing track
record of managing regulatory shifts and, in the event of a
regulatory change, the Group remains confident in its ability to
navigate that environment successfully.
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.
Management incorporated the following scenarios into the
valuation:
-- Management's internal forecast (risk of the proposed product
standard to prohibit menthol as a characterising flavour in
cigarettes incorporated into the terminal value).
-- Assuming a final product standard to prohibit menthol as a
characterising flavour in cigarettes becomes effective in the final
year of the discrete forecast period (management's best estimate of
the ban's effective date, if a final rule is published).
-- No product standard to prohibit menthol as a characterising
flavour in cigarettes ultimately ends up being introduced.
This is a change in valuation methodology from 2021 where
management prepared one cash flow forecast for the U.S. with the
potential impact/risk of a proposed product standard to prohibit
menthol as a characterising flavour in cigarettes incorporated into
the terminal value and discount rate. This change was a result of
the timing of a proposed product standard narrowing given we have
moved one year further forward.
Notes to the Financial Statements
ADJUSTING ITEMS INCLUDED IN PROFIT FROM OPERATIONS cont...
(e) Ongoing impairment review of assets cont...
The below table illustrates the carrying values, the key
assumptions used in the assessment and the variance in that
assumption required before an impairment is required for Reynolds
goodwill and specific indefinite-lived intangibles:
Carrying Pre-tax discount Long-term growth
Value rate rate (probability
weighted)
-------------- -------------------------- ---------------------------
At 31 December Applied Required increase Applied Required reduction
2022 (GBPm) to reach nil to reach nil
headroom headroom
------------------ -------------- ------- ------- ------------------
Reynolds American
Goodwill 37,181 8.8% 0.8% 1.1% 0.8%
Newport 33,236 9.2% 3.4% 0.9% 4.0%
Camel 14,058 8.9% 5.5% 0.9% 7.0%
Camel Snus 1,355 8.6% 0.4% 1.0% 0.5%
Pall Mall 6,252 8.6% 2.2% 1.0% 2.4%
Grizzly 10,308 8.6% 0.8% 1.0% 1.0%
In addition to the above, management also considered a number of
reasonably possible scenarios which could result in a potential
impairment. The following scenarios were deemed to be possible:
Reynolds American Goodwill Camel Snus
(Current headroom: GBP11,826 (Current headroom: GBP95
million) million)
Assumptions Reasonable Impact Possible Reasonable Impact Possible
possible change (GBPm) Impairment possible change (GBPm) Impairment
(GBPm) (GBPm)
----------------- ----------------- -------- ---------------- -------
Pre-tax discount Increase of Increase of
rate 0.93% (13,355) (1,529) 0.94% (165) (70)
Long-term growth Decrease of Decrease of
rates 0.85% (13,036) (1,210) 1.00% (175) (80)
================= ================= ======== =========== ================ ======= ===========
Apart from Camel Snus, management concluded that no reasonably
possible scenarios were identified that resulted in any of the
indefinite-lived intangibles requiring an impairment charge.
However, it is noted that if adverse movement occurred in a
combination of key assumptions for the Pall Mall brand intangible
this may result in an impairment charge.
Aside from the considerations noted above, no impairments were
identified in any cash generating units as part of our review.
In 2021, the Group also recognised an impairment charge of GBP57
million in respect of goodwill related to the Group's operations in
Peru and Myanmar .
ADJUSTING ITEMS INCLUDED IN NET FINANCE COSTS
In 2022, the Group incurred adjusting items within net finance
costs of GBP34 million (2021: GBP55 million). This included:
-- interest of GBP33 million (2021: GBP20 million) in relation
to the FII GLO, as described on page 42 ;
-- foreign exchange on cash balances in Russia (GBP15 million);
-- interest on other adjusting payables in respect of Switzerland (GBP3 million); and
-- partially offset by the reversal of a provision raised in
2021 (GBP24 million) in respect of the disposal of the Group's
Iranian business, being a credit in 2022 of GBP17 million.
Also in 2021, a charge of GBP11 million was recognised in
relation to the amnesty tax payment in Turkey.
All of the adjustments noted above have been included in the
adjusted earnings per share calculation on page 40 .
Notes to the Financial Statements
ADJUSTING ITEMS INCLUDED IN RESULTS OF ASSOCIATES AND JOINT
VENTURES
The Group's interest in ITC decreased from 29.38% in 2021 to
29.19% in 2022 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 loss of GBP3
million (2021: GBP6 million gain), which is treated as a deemed
partial disposal and included in the income statement.
In 2022, the Group:
-- impaired the investment in Organigram by GBP59 million (net
of tax), driven by the decrease in that company's share price;
and
-- impaired the remaining investment in the Group's associates
in Yemen (GBP18 million net of tax), having recognised a charge of
GBP18 million in 2021.
Also, in 2022 and 2021, the Group incurred a GBP2 million charge
in relation to the amortisation of acquired intangibles associated
with the acquisition of the equity stake in Organigram in March
2021. Following the liquidation of Tisak d.d., the Group
reclassified the foreign exchange previously recognised in other
comprehensive income to the income statement. This resulted in a
credit of GBP2 million to the income statement in 2021.
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
40 .
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 2022 included a net credit of GBP27 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. In 2021, this included a net credit
of GBP91 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 adjusting tax item also includes GBP176 million (2021:
GBP119 million) in respect of the taxation on other adjusting
items, which are described on pages 31 to 36 .
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 40 .
CASH FLOW
Net cash generated from operating activities
Net cash generated from operating activities in the IFRS cash
flows on page 30 in cludes the following items:
Years ended 31 December 2022 2021
------- -------
GBPm GBPm
Profit for the year 6,846 6,974
Taxation on ordinary activities 2,478 2,189
Share of post-tax results of associates and joint
ventures (442) (415)
Net finance costs 1,641 1,486
------- -------
Profit from operations 10,523 10,234
Adjustments for:
- depreciation, amortisation and impairment
costs 1,305 1,076
- (increase)/decrease in inventories (246) 433
- increase in trade and other receivables (42) (393)
- decrease in Master Settlement Agreement payable (145) (36)
- increase in trade and other payables 3 183
- decrease in net retirement benefit liabilities (110) (104)
- increase/(decrease) in other provisions for
liabilities 643 (145)
- other non-cash items 606 430
------- -------
Cash generated from operating activities 12,537 11,678
------- -------
Dividends received from associates 394 353
Tax paid (2,537) (2,314)
======= =======
Net cash generated from operating activities 10,394 9,717
======= =======
Notes to the Financial Statements
Net cash generated from operating activities cont...
Net cash generated from operating activities increased by GBP677
million, primarily driven by the growth in profit from operations
(including the translational foreign exchange tailwind) combined
with higher provisions (partly in respect of the DOJ and OFAC
investigations) and other non-cash items, including depreciation,
amortisation and impairment. Included within net cash generated
from operating activities were litigation payments of GBP231
million (2021: GBP248 million) which included, in both 2022 and
2021, payments in respect of Engle. 2021 also included payment
obligations under the state settlement agreements with Florida,
Texas, Mississippi and Minnesota for brands previously sold to a
third party.
Expenditure on research and development was approximately GBP323
million in 2022 (2021: GBP304 million) with a focus on products
that could potentially reduce the risk associated with smoking
conventional cigarettes.
Net cash used in investing activities
Net cash used in investing activities decreased by GBP435
million to GBP705 million (2021: GBP1,140 million) partly due to a
lower net outflow of GBP129 million (2021: GBP228 million net
outflow) from short-term investment products, including treasury
bills, while 2021 included the disposal of the Group's Iranian
business (GBP98 million) and the purchase of the equity stake in
Organigram. Purchases of property, plant and equipment were largely
in line with 2021, at GBP523 million (2021: GBP527 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 2022,
the Group invested GBP630 million, a decrease of 5.0% on the prior
year (2021: GBP664 million). The Group expects gross capital
expenditure in 2023 of approximately GBP600 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 GBP8,878
million in 2022 (2021: GBP8,749 million outflow). The total outflow
includes:
-- the payment of the dividend of GBP4,915 million (2021:
GBP4,904 million), which was a marginal increase on 2021 due to the
higher dividend per share, offset by the reduction in the number of
shares due to the share buy-back programme undertaken in the
year;
-- the acquisition of 59.5 million shares for GBP2,012 million
by the Group under the share buy-back programme;
-- higher interest paid in the year of GBP1,578 million (2021:
GBP1,479 million), driven by higher interest charges as new debt
issued replaced cheaper debt on maturity; and
-- the net issuance of borrowings in 2022 of GBP223 million
compared to a net repayment of borrowings in 2021 of GBP3,865
million. The movement was impacted by the issuance of perpetual
hybrid bonds (GBP1,681 million inflow) in 2021.
Notes to the Financial Statements
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 and
Transformation 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 2022, the
average centrally managed debt maturity of bonds was 9.9 years (31
December 2021: 10.1 years) and the highest proportion of centrally
managed debt maturing in a single rolling 12-month period was 18.6%
(31 December 2021: 18.6%).
The Group continues to maintain investment-grade credit ratings,
with ratings from Moody's/S&P at Baa2 (stable outlook)/BBB+
(negative outlook), respectively, with a medium-term target of
Baa1/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 2022, the relevant ratios of floating
to fixed rate borrowings were 3:97 (31 December 2021: 10:90) on a
net basis. Excluding cash and other liquid assets in Canada, which
are subject to certain restrictions under Companies' Creditors
Arrangement Act (CCAA) protection, the ratios of floating to fixed
rate borrowings were 7:93 (2021: 13:87).
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 GBP3 billion euro commercial paper programme) are
backed by undrawn committed lines of credit and cash. As at 31
December 2022, commercial paper of GBP27 million was outstanding
(31 December 2021: GBP269 million drawn). 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 2022, the Group had access to a GBP5.69 billion
revolving credit facility. This facility was undrawn at 31 December
2022. In February 2022, the Group exercised the second of the
one-year extension options. The GBP2.85 billion 364-day tranche was
extended to March 2023 at the reduced amount of GBP2.7 billion and
GBP2.5 billion of the five-year tranche was extended from March
2026 to March 2027 (with GBP3.0 billion of this tranche remaining
available until March 2025 and GBP2.85 billion remaining available
from March 2025 to March 2026). During 2022, the Group extended
short-term bilateral facilities totalling GBP3.0 billion. As at 31
December 2022, GBP875 million was drawn on a short-term basis with
GBP2.1 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 March 2022, the Group accessed the US dollar market under
its SEC Shelf Programme, raising a total of US$2.5 billion across
two tranches ;
-- In May 2022, the Group repaid EUR600 million bond at maturity;
-- In June 2022, the Group repaid US$419 million and GBP180 million bonds at maturity;
-- In August 2022, the Group repaid US$750 million and US$601 million bonds at maturity; and
-- In October 2022, the Group raised US$600 million in the US
dollar market under its SEC Shelf Programme .
The Group has debt maturities of around GBP4 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
RELATED PARTY DISCLOSURES
The Group's related party transactions and relationships for
2021 were disclosed on pages 249 and 250 of the Annual Report and
Accounts and Form 20-F for the year ended 31 December 2021.
In the year ended 31 December 2022, other than in respect of
Organigram and Bentoel (as described on page 20 ) there were no
material changes in related parties or related party transactions.
Full details of the Group's related party transactions as at 31
December 2022 will be included in the Annual Report and Accounts
and Form 20-F for the year ended 31 December 2022.
EARNINGS PER SHARE
Basic earnings per share were down 1.2% at 293.3p (2021: 296.9p)
as the improvement in operational performance and translational
foreign exchange tailwinds were more than offset by the increase in
one-off charges (partly related to Russia and Belarus, the
investigations into alleged historical breaches of sanctions, the
Nigerian investigation and Quantum), a higher effective tax rate
and higher net finance costs.
Before adjusting items and including the dilutive effect of
employee share schemes, adjusted diluted earnings per share
increased 12.9% to 371.4p (2021: 329.0p). On a constant
translational foreign exchange basis, adjusted diluted earnings per
share were 5.8% higher at 348.1p. For a full reconciliation of
diluted earnings per share to adjusted diluted earnings per share,
at constant rates, see page 52 . 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 2022 this was GBP49 million
(2021: GBP12 million).
Years ended 31 December 2022 2021
----- -----
GBPm GBPm
Earnings attributable to owners of the parent 6,666 6,801
Coupon on perpetual hybrid bonds (60) (15)
Tax on coupon on perpetual hybrid bonds 11 3
----- -----
Earnings 6,617 6,789
===== =====
On 11 February 2022, the Company announced a share buy-back
programme of up to GBP2 billion. As at 31 December 2022, the
Company had repurchased 59,541,862 ordinary shares. Total
consideration for the repurchase of shares was GBP2.0 billion which
is 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.
Earnings per share calculations are based upon the following
:
Reported Adjusted Headline
----- -------- ----- -------- ----- --------
Basic Diluted Basic Diluted Basic Diluted
-------- --------
Year ended 31 December
2022
- Earnings GBPm 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 GBp 293.3 291.9 373.2 371.4 332.4 330.8
Year ended 31 December
2021
- Earnings GBPm 6,789 6,789 7,556 7,556 7,243 7,243
- Shares m 2,287 2,297 2,287 2,297 2,287 2,297
- Per share GBp 296.9 295.6 330.4 329.0 316.7 315.3
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
Earnings per share cont...
Adjusted diluted earnings per share are calculated by taking the
following adjustments into account (see pages 31 to 36 ):
Years ended 31 December 2022 2021
------ -----
pence pence
Diluted earnings per share 291.9 295.6
Effect of amortisation and impairment of goodwill,
trademarks and similar intangibles 9.6 12.7
Effect of Brazil VAT case (17.1) -
Effect of disposal of subsidiaries (0.3) 15.6
Effect of excise and VAT dispute - 1.0
Effect of charges in respect of DOJ and OFAC
investigations 19.9 -
Effect of charges in respect of Nigerian FCCPC
case 3.5 -
Effect of impairment on held-for-sale assets
and associated costs 26.4 -
Effect of restructuring and integration costs 28.9 4.9
Effect of other adjusting items 5.2 0.6
Effect of adjusting items in net finance costs 1.2 2.4
Effect of associates' adjusting items 4.1 0.5
Effect of adjusting items in respect of deferred
taxation (1.9) (4.3)
====== =====
Adjusted diluted earnings per share 371.4 329.0
====== =====
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 1/2021 '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 2022 2021
----- -----
pence pence
Diluted earnings per share 291.9 295.6
Effect of impairment of intangibles, property,
plant and equipment, associates and held-for-sale
assets (net of tax) 15.5 4.2
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) (0.7) (0.3)
Effect of impairment of subsidiaries transferred
to held-for-sale (net of tax) 23.7 3.6
Effect of foreign exchange reclassification from
reserves to the income statement 0.3 12.5
Issue of shares and change in shareholding of
an associate 0.1 (0.3)
===== =====
Diluted headline earnings per share 330.8 315.3
===== =====
The following is a reconciliation of earnings to headline
earnings, in accordance with the JSE Listing Requirements:
Years ended 31 December 2022 2021
----- -----
GBPm GBPm
Earnings 6,617 6,789
Effect of impairment of intangibles, property,
plant and equipment, associates and held-for-sale
assets (net of tax) 352 96
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) (16) (8)
Effect of impairment of subsidiaries transferred
to held-for-sale (net of tax) 538 83
Effect of foreign exchange reclassification from
reserves to the income statement 5 289
Issue of shares and change in shareholding of
an associate 3 (6)
===== =====
Headline earnings 7,499 7,243
===== =====
Notes to the Financial Statements
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 2021 Annual Report
and Accounts and Form 20-F and will be included in the 2022 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.
In Brazil, the Federal Tax authority has challenged the
treatment of Rio de Janeiro VAT incentives. In October 2021, in
respect of the 2016-2021 calendar years, the authority's position
was upheld at the lower Judicial Court. The company has appealed in
full against the judgment. The maximum exposure from 2016 is BRL
833 million (GBP131 million) including potential interest and
penalties.
In the Netherlands, the Dutch tax authority previously issued a
number of assessments on various issues across the years 2003-2016
in relation to several intra-group transactions. The case is being
dealt with in two separate trials. The first trial deals with
assessments for the periods from 2008-2013 (with an aggregate net
potential liability of GBP285 million). A separate trial will cover
the periods from 2014-2016 (with an aggregate net potential
liability of GBP936 million). In relation to the periods from 2008
- 2013, at an initial trial, the District Court of North Holland
issued judgments on 17 October 2022, resulting in findings against
the Group on a number of issues. All these judgments have been
appealed to the High Court.
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 GBP6.1 billion) and CAD$118
billion (approximately GBP72 billion), and the province of Ontario
delivered an expert report quantifying its damages in the range of
CAD$280 billion (approximately GBP172 billion) and CAD$630 billion
(approximately GBP387 billion) in 2016/2017 dollars. Ontario has
amended its Statement of Claim to claim damages of CAD$330 billion
(approximately GBP203 billion). On 31 January 2019, the Province
delivered a further expert report claiming an additional CAD$9.4
billion (approximately GBP5.8 billion) and CAD$10.9 billion in
damages (approximately GBP6.7 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. As a result of this judgment, the attempts by the
Quebec plaintiffs to obtain payment out of the CAD$758 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
Notes to the Financial Statements
Contingent liabilities and financial commitments cont...
Canada cont...
defendants in the Canadian tobacco litigation (the "stays"). The
stays are currently in place until 31 March 2023. While the stays
are in place, no steps are to be taken in connection with the
Canadian tobacco litigation with respect to any of the
defendants.
U.S. - Engle
As at 31 December 2022, 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 665 pending Engle progeny cases filed
on behalf of approximately 838 individual plaintiffs. Many of these
are in active discovery or nearing trial. In 2022, RJRT or
Lorillard Tobacco paid judgments in eleven Engle progeny cases.
Those payments totalled US$13.2 million (approximately GBP11.0
million) in compensatory or punitive damages. Additional costs were
paid in respect of attorneys' fees and statutory interest. In
addition, from 1 January 2020 to 31 December 2022, outstanding jury
verdicts in favour of the Engle progeny plaintiffs had been entered
against RJRT or Lorillard Tobacco for US$58 million (approximately
GBP48 million) in compensatory damages (as adjusted) and US$35
million (approximately GBP29 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 GBP166 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 4 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 GBP8 million, with the provision standing at GBP54 million at 31
December 2022 (2021: GBP62 million) after disbursements.
In July 2016, the High Court ruled in favour of a Group
subsidiary, BTI 2014 LLC (BTI), stating that a dividend of EUR135
million (approximately GBP120 million) paid by Windward to Sequana
in May 2009 was a transaction made with the intention of putting
assets beyond the reach of BTI 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 BTI's favour,
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 GBP154 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 was granted permission to appeal to the Supreme
Court. On the same day, the Supreme Court refused Sequana
permission to appeal. The hearing of BTI's appeal took place before
the Supreme Court on 4 and 5 May 2021. 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. No payments have been received.
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, against Group companies. The Group cooperates with
the authorities' investigations, where appropriate.
For instance, as discussed on page 21 , the Group has been
cooperating with investigations by the DOJ and OFAC into
allegations of breaches of sanctions. The Group is engaged in
discussions with both agencies to find a resolution through
settlement. A provision of GBP450 million has been recognised in
2022. However, it cannot be excluded that the amount of any
potential settlement with the DOJ and OFAC may vary from this
amount.
Summary
Having regard to all these matters, with the exception of Fox
River, Egypt, Quebec, and the DOJ and OFAC investigations, the
Group does not consider it appropriate to make any provision 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, the DOJ medical reimbursement/corrective
statement case and the Nigeria competition investigation.
Full details of the litigation against Group companies and tax
disputes as at 31 December 2022 will be included in the Annual
Report and Accounts and Form 20-F for the year ended 31 December
2022. 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 2022 or to date in 2023 that
would impact the financial position of the Group.
Notes to the Financial Statements
FRANKED INVESTMENT 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 (at 31 December 2022) 17 corporate groups in the
FII GLO. 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 the appropriate
methodology to compute the claim. Applying that judgment reduces
the value of the FII GLO claim to approximately GBP0.3 billion,
mainly as the result of the application of simple interest and the
limitation to claims for advanced 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.
During 2015, HMRC paid to the Group a gross amount of GBP1.2
billion in two separate payments, less a deduction (withheld by
HMRC) of GBP0.3 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 GBP0.9 billion) and 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
GBP33 million in respect of 2022 (2021: GBP20 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 an interim repayment to
HMRC of GBP50 million in 2022 and intends to make further interim
repayments in future periods.
RETIREMENT BENEFIT SCHEMES
The Group's subsidiary undertakings operate various funded and
unfunded defined benefit schemes, including pension and
post-retirement healthcare schemes, and defined contribution
schemes in various jurisdictions, with its most significant
arrangements being in the U.S., the UK, Canada, Germany,
Switzerland and the Netherlands. Together, schemes in these
territories account for over 90% of the total underlying
obligations of the Group's defined benefit arrangements and over
70% of the current service cost.
Benefits provided through defined contribution schemes are
charged as an expense as payments fall due. The liabilities arising
in respect of defined benefit schemes are determined in accordance
with the advice of independent, professionally qualified actuaries,
using the projected unit credit method. It is Group policy that all
schemes are formally valued at least every three years.
The present value of total funded scheme liabilities as at 31
December 2022 was GBP6,515 million (2021: GBP10,084 million), while
unfunded scheme liabilities amounted to GBP797 million (2021:
GBP1,037 million). The fair value of scheme assets decreased from
GBP10,816 million in 2021 to GBP7,424 million in 2022. The overall
net asset for all pension and healthcare schemes in Group
subsidiaries amounted to GBP51 million at the end of 2022, compared
to a net liability of GBP321 million at the end of 2021.
The reduction in net liability may be largely attributed to the
impact of higher discount rates applied in the U.S. (2022: 5.5%;
2021: 3.0%) and elsewhere, offset by inflation-related experience
adjustments and increases in the assumptions for the impact of
future inflation on pensions across the Group.
In addition, during 2022, the risk profiles and values of
amounts relating to retirement benefit arrangements were impacted
by the following transactions:
-- In the U.S., following a partial buy-out in October 2021, a
further partial buy-out affecting portions of the membership of the
Reynolds American Retirement Plan plan was concluded on 7 June
2022, with approximately US$1.6 billion (GBP1.3 billion) of plan
liabilities removed from the balance sheet, resulting in a
settlement gain of GBP16 million. This has been reported as a
settlement in the Income Statement, and recognised as an adjusting
item. In total, approximately US$3.5 billion (GBP2.7 billion) of
plan liabilities have been removed from the balance sheet in the
U.S. under these partial buy-outs, as the Group seeks to de-risk
the balance sheet; and
-- In the UK, on 26 October 2022, a third and final buy-in
policy was acquired with PIC. GBP198 million of assets were
transferred immediately with GBP35 million of the premium deferred
until 2023 and 2024. As a result of this and previous buy-in
transactions, approximately 94% of the assets held by UKPF (2021:
84%) are represented by the buy-in contracts, covering 100% of
UKPF's retirement liabilities (2021: 91%). On an IAS 19 basis, the
subsequent fair value of the insurance policies matches the present
value of the liabilities being insured. In accordance with IAS 19,
any initial gains or losses on entering into these buy-in contracts
has been recognised in other comprehensive income with no impact to
the income statement. Subsequently, the fair value of the buy-in
insurance policies noted above will match the present value of the
liabilities being insured and gains or losses on these assets will
match similar amounts on insured liabilities through the statement
of other comprehensive income.
Other Information
DIVIDS
The Board has declared an interim dividend of 230.9p per
ordinary share of 25p, for the year ended 31 December 2022, payable
in four equal quarterly instalments of 57.72p per ordinary share in
May 2023, August 2023, November 2023 and February 2024. This
represents an increase of 6.0% on 2021 (2021: 217.8p per share),
and a payout ratio, on 2022 adjusted diluted earnings per share, of
62.2%.
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 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 GBP4,915 million (2021:
GBP4,904 million).
2022 2021
--------------------- ---------------------
Dividends declared: Pence USD per Pence USD per
per share ADS per share ADS
Quarterly Payment 1 (paid May 2022) 54.45 0.6804340 53.90 0.7576180
Quarterly Payment 2 (paid August
2022) 54.45 0.6555230 53.90 0.7345300
Quarterly Payment 3 (paid November
2022) 54.45 0.6355400 53.90 0.7217210
Quarterly Payment 4 (paid February
2023) 54.45 0.6691900 53.90 0.7298860
---------- --------- ---------- ---------
217.80 2.6406870 215.60 2.9437550
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
U.S. 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.
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.
Other Information
Dividends cont...
Key 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. All dates are 2023,
unless otherwise stated.
Event Payment No. Payment No. Payment No. Payment No.
1 2 3 4
Preliminary announcement 09 February
(includes declaration
data required for
JSE purposes)
Publication of finalisation 13 March 04 July 18 September 12 December
information (JSE)
No removal requests 13 March- 04 July - 18 September- 12 December-
permitted (in either 27 March 17 July 02 October 27 December
direction) between
the UK main register
and the South Africa
branch register
Last Day to Trade 20 March 11 July 26 September 19 December
(LDT) cum-dividend
(JSE)
Shares commence trading 22 March 12 July 27 September 20 December
ex-dividend (JSE)
No transfers permitted 22 March- 12 July- 27 September- 20 December-
between the UK main 27 March 17 July 02 October 27 December
register and the
South Africa branch
register
No shares may be 22 March- 12 July- 27 September- 20 December-
dematerialised or 27 March 17 July 02 October 27 December
rematerialised on
the South Africa
branch register
Shares commence trading 23 March 13 July 28 September 21 December
ex-dividend (LSE)
Shares commence trading 23 March 13 July 28 September 21 December
ex-dividend (NYSE)
Record date 24 March 14 July 29 September 22 December
(JSE, LSE and NYSE)
Last date for receipt 11 April 28 July 13 October 11 January
of Dividend Reinvestment 2024
Plan (DRIP) elections
(LSE)
Payment date (LSE 03 May 18 August 03 November 01 February
and JSE) 2024
ADS payment date 08 May 23 August 08 November 06 February
(NYSE) 2024
--------------------------- ----------- ----------- ------------- ------------
Note:
(1) 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
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;
-- Tobacco Heat 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 total nicotine 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 70% of the Group's cigarette and THP volume).
Where possible, the Group utilises data provided by third-party
organisations, including AC Nielsen, 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. 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. 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. Volume share provides an
indicator of the Group's relative performance in unit terms versus
competitors.
Volume share in each period compares the average volume share in
the period 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, related to periods of
introduction to a market, 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 states these at a specific date (for instance, December
2022).
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 THP
value).
Where possible, the Group utilises data provided by third-party
organisations, including AC Nielsen, 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 measure is particularly
useful when the Group's products and/or the relevant category in
the market in which they are sold has developed or achieved scale
from which value can be realised. The Group's management believes
that this measure is useful to investors to comprehend 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.
Other Information
Non-Financial KPIs cont....
Value share in each period compares the average value share in
the period with the average value share in the prior year. This is
a more robust measure of performance, removing short-term
volatility that may arise at a point of time.
However, in certain circumstances, related to periods of
introduction to a market, 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 states these at a specific date (for instance, December
2022).
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 0.6% in
2022, with a decline in combustibles volume of 5.2% in 2022, leads
to a price mix of 4.6% in 2022. No assumptions underlie this metric
as it utilises the Group's own data.
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 adult consumer tracking (utilising studies conducted
by third parties, including Kantar). The number of consumers is
adjusted for those identified (as part of the consumer tracking
studies undertaken) as using more than one BAT Brand - referred to
as "poly users".
The number of Non-Combustible products consumers is used by
management to assess the number of consumers using the Group's New
Categories products as the increase in Non-Combustible products is
a key pillar of the Group's ESG 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 ESG ambition and alignment to the
sustainability of the business with respect to the Non-Combustibles
portfolio.
Other Information
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
adjusted profit from operations, adjusted 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 are reconciled from profit
from operations, diluted earnings per share, cash conversion ratio
and net cash generated from operating activities. 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.
These include significant items 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. The adjusting
items are used to calculate the non-GAAP measures of adjusted
profit from operations, adjusted operating margin, adjusted net
finance costs, adjusted taxation, adjusted share of post-tax
results of associates and joint ventures, underlying tax rate and
adjusted diluted earnings per share. In addition to the operating
cash flow conversion ratio, free cash flow (before dividends paid
to shareholders) and free cash flow (after dividends paid to
shareholders), the Group also provides other non-GAAP measures of
net debt, adjusted net debt and adjusted net debt to adjusted
earnings before interest, tax, depreciation, amortisation and
post-tax income from associates and joint-ventures (adjusted
EBITDA), which the Group uses to monitor its financial
position.
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, Tobacco Heating Products, Modern Oral, New
Categories as a whole, Combustibles and Traditional Oral),
including by geographic segment (including revenue generated in the
United States, Europe and North Africa, Americas and Sub-Saharan
Africa and Asia-Pacific and Middle East). 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, 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 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.
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 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.
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.
Other Information
Non-GAAP measures cont...
The Group also presents net debt and adjusted net debt, non-GAAP
measures, on page 1 and pages 17 to 18 and page 54 . 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. These are shown on page 40
.
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 at constant rates of exchange
Definition: Revenue before the impact of foreign exchange.
For the year ended 31 December 2022 2021
------- ------
GBPm GBPm
Revenue 27,655 25,684
Impact of translational foreign exchange (1,382)
=======
Revenue at constant exchange rates 26,273
=======
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. This measure enables users of the financial statements to
better compare the Group's business performance across and with
reference to the Group's investment activity.
For the years ended 31 December 2022 Impact 2022 2021
of exchange at
2021
CC
GBPm GBPm GBPm GBPm
New Categories 2,894 (81) 2,813 2,054
------ ------------ ------ ------
Vapour 1,436 (103) 1,333 927
THP 1,060 21 1,081 853
Modern Oral 398 1 399 274
------ ------------ ------
Traditional Oral 1,209 (117) 1,092 1,118
------ ------------ ------ ------
Non-Combustibles 4,103 (198) 3,905 3,172
Combustibles 23,030 (1,142) 21,888 22,029
Other 522 (42) 480 483
====== ============ ====== ======
Total Revenue 27,655 (1,382) 26,273 25,684
====== ============ ====== ======
Other Information
Non-GAAP measures cont...
Adjusted profit from operations, at constant rates of exchange
and adjusted operating margin
Definition: Profit from operations before the impact of
adjusting items (described on pages 32 to 33 ) and before the
impact of foreign exchange and adjusted profit from operations as a
percentage of revenue.
For the years ended 31 December 2022 2021
------ ------
GBPm GBPm
Profit from operations 10,523 10,234
Add:
Restructuring and integration costs 771 150
Amortisation and impairment of trademarks and
similar intangibles 285 306
Impairment of Goodwill - 57
Credit in respect of partial buy-out of the pension
fund in the U.S. (16) (35)
Charges in connection with impairment on held-for-sale
assets and associated costs 612 -
Charges in connection with disposal of subsidiaries (6) 358
Credit in respect of calculation of VAT on social
contributions in Brazil (460) -
Charges in respect of DOJ and OFAC investigations 450 -
Charges in respect of Nigerian FCCPC case 79 -
Other adjusting items (including Engle) 170 80
------ ------
Adjusted profit from operations 12,408 11,150
Impact of translational foreign exchange on adjusted
profit from operations (782)
------
Adjusted profit from operations at constant
exchange rates 11,626
======
Operating Margin (Profit from operations as
% of revenue) 38.1% 39.8%
Adjusted operating Margin (Adjusted profit from
operations as % of revenue) 44.9% 43.4%
Category Contribution, at constant rates of exchange
Definition: Profit from operations before the impact of
adjusting items (described on pages 32 to 33 ) and translational
foreign exchange, and after directly attributable, category
specific costs.
For the years ended 2022 2021
31 December
-------- --------- -------- -------- --------- -------- --------- --------
Reported Adj Adjusted Exchange Reported Reported Adj Adjusted
Items(1) at CC(2) Items(1)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Profit from Operations 10,523 1,885 12,408 (782) 11,626 10,234 916 11,150
As delivered through:
New Categories contribution (375) (953)
Rest of Business 12,001 12,103
-------- --------- -------- -------- --------- -------- ---------
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.
Other Information
Non-GAAP measures cont...
Adjusted net finance costs, at constant rates of exchange
Definition: Net finance costs before the impact of adjusting
items (described on page 35 ) a nd before the impact of foreign
exchange.
For the years ended 31 December 2022 2021
------- -------
GBPm GBPm
Finance costs (1,733) (1,521)
Finance income 92 35
------- -------
Net finance costs (1,641) (1,486)
Less: Adjusting items in net finance costs 34 55
======= =======
Net adjusted finance costs (1,607) (1,431)
======= =======
Comprising:
Interest payable (1,648) (1,493)
Interest and dividend income 92 35
Fair value changes - derivatives 473 (252)
Exchange differences (524) 279
------- =======
Net adjusted finance costs (1,607) (1,431)
=======
Impact of translational foreign exchange 140
=======
Net adjusted finance costs (at constant rates
of exchange) (1,467)
=======
Adjusted Share of Post-Tax Results of Associates and Joint
Ventures
Definition - share of post-tax results of associates and joint
ventures before the impact of adjusting items (described on page 36
).
For the years ended 31 December 2022 2021
---- ----
GBPm GBPm
Group's share of post-tax results of associates
and joint ventures 442 415
Issue of shares and changes in shareholding 3 (6)
Impairment of the Group's associate in Yemen 18 18
Impairment in relation to Organigram (net of
tax) 59 -
Other 12 -
---- ----
Adjusted Group's share of post-tax results of
associates and joint ventures 534 427
==== ====
Adjusted taxation
Definition: Taxation before the impact of adjusting items
(described on page 36 ).
For the years ended 31 December 2022 2021
----- -----
GBPm GBPm
UK
- current year tax 2 1
- adjustment in respect of prior periods (5) (26)
Overseas
- current year tax 2,675 2,418
- adjustment in respect of prior periods 46 (17)
----- -----
Current tax 2,718 2,376
Deferred tax (240) (187)
----- -----
Taxation on ordinary activities 2,478 2,189
Adjusting items in taxation 27 91
Taxation on adjusting items 176 119
----- -----
Net adjusted tax charge 2,681 2,399
===== =====
Other Information
Non-GAAP measures cont...
Underlying tax rate
Definition: Tax rate incurred before the impact of adjusting
items (described on page 32 to 36 ) 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.
For the year ended 31 December 2022 2021
------- -------
GBPm GBPm
Profit before taxation (PBT) 9,324 9,163
Less:
Share of post-tax results of associates and joint
ventures (442) (415)
Adjusting items within profit from operations 1,885 916
Adjusting items within finance costs 34 55
------- -------
Adjusted PBT, excluding associates and joint
ventures 10,801 9,719
=======
Impact of translational foreign exchange (642)
-------
Adjusted PBT, excluding associates and joint
ventures (at constant rates) 10,159
=======
Taxation on ordinary activities (2,478) (2,189)
Adjusting items within taxation and taxation
on adjusting items (203) (210)
------- =======
Adjusted taxation (2,681) (2,399)
=======
Impact of translational foreign exchange on adjusted
taxation 131
=======
Adjusted taxation (at constant rates) (2,550)
Effective tax rate 26.6% 23.9%
Underlying tax rate 24.8% 24.7%
Underlying tax rate (constant rates) 25.1%
Adjusted diluted earnings per share, at constant rates of
exchange
Definition: diluted earnings per share before the impact of
adjusting items, presented in the prior year's rate of
exchange.
For the year ended 31 December 2022 2021
------ -----
pence pence
Diluted earnings per share 291.9 295.6
Effect of amortisation and impairment of goodwill,
trademarks and similar intangibles 9.6 12.7
Effect of Brazil VAT case (17.1) 0.0
Effect of disposal of subsidiaries (0.3) 15.6
Effect of excise and VAT dispute - 1.0
Effect of charges in respect of DOJ and OFAC
investigations 19.9 0.0
Effect of charges in respect of Nigerian FCCPC
case 3.5 0.0
Effect of impairment on held-for-sale assets
and associated costs 26.4 0.0
Effect of restructuring and integration costs 28.9 4.9
Effect of other adjusting items 5.2 0.6
Effect of adjusting items in net finance costs 1.2 2.4
Effect of associates' adjusting items 4.1 0.5
Effect of adjusting items in respect of deferred
taxation (1.9) (4.3)
====== =====
Adjusted diluted earnings per share 371.4 329.0
====== =====
Impact of translational foreign exchange (23.3)
======
Adjusted diluted earnings per share, at constant
exchange rates 348.1
======
Other Information
Non-GAAP measures cont...
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.
For the year ended 31 December 2022 2021
------- ------
GBPm GBPm
Net cash generated from operating activities 10,394 9,717
Cash related to adjusting items 466 501
======= ======
Non-tobacco litigation costs 60 -
Tobacco litigation 171 248
Other adjusting cash items 235 253
=======
Dividends from associates (394) (353)
Tax paid 2,537 2,314
Net capital expenditure (599) (632)
Other (1) -
------- ------
Operating cash flow 12,403 11,547
Adjusted profit from operations 12,408 11,150
Cash conversion ratio 99% 95%
Operating cash flow conversion ratio 100% 104%
Cash conversion is net cash generated from operating activities
as a proportion of profit from operations
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.
For the year ended 31 December 2022 2021
------- -------
GBPm GBPm
Net cash generated from operating activities 10,394 9,717
Dividends paid to non-controlling interests (158) (150)
Net interest paid (1,588) (1,488)
Net capital expenditure (599) (632)
Cash related to adjusting items within adjusted
cash generated from operations 231 248
======= =======
- Tobacco litigation 60 -
- Other adjusting cash items 171 248
=======
Other costs excluding litigation and restructuring
costs 3 0
Dividends from associates (394) (353)
======= =======
Adjusted cash generated from operations 7,889 7,342
======= =======
Free cash flow (before and after dividends paid to
shareholders)
Definition: net cash generated from operating activities after
dividends paid to non-controlling interests, net interest paid and
net capital expenditure. This measure is presented before and after
dividends paid to shareholders.
For the year ended 31 December 2022 2021
------- -------
GBPm GBPm
Net cash generated from operating activities 10,394 9,717
Dividends paid to non-controlling interests (158) (150)
Net interest paid (1,588) (1,488)
Net capital expenditure (599) (632)
Free cash flow (before dividends paid to shareholders) 8,049 7,447
Dividends paid to shareholders (4,915) (4,904)
------- -------
Free cash flow (after dividends paid to shareholders) 3,134 2,543
------- -------
Impact of translational foreign exchange (474)
=======
Free cash flow (after dividends paid to shareholders),
at constant exchange rates 2,660
=======
Other Information
Non-GAAP measures cont...
Net debt
Definition: Total borrowings, including related derivatives,
less cash and cash equivalents and current investments held at fair
value, excluding the impact of the revaluation of RAI acquired debt
arising as part of the PPA process.
For the year ended 31 December 2022 2021
-------- --------
GBPm GBPm
Opening net debt (36,302) (40,241)
Free cash flow (after dividends paid to shareholders) 3,134 2,543
Other cash payments (635) (150)
Net proceeds from the issue of perpetual hybrid
bonds - 1,681
Purchase of own shares (2,012) -
Other non-cash movements (84) (11)
Transferred to held-for-sale (352) -
Impact of foreign exchange (3,030) (124)
======== ========
Closing net debt (39,281) (36,302)
======== ========
Ratio of adjusted net debt to adjusted 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, as a proportion of profit for
the year (earnings) before net finance costs (interest), tax,
depreciation, amortisation, impairment, associates and adjusting
items.
For the year ended 31 December 2022 2021
------- -------
GBPm GBPm
Borrowings (excluding lease liabilities) 42,622 39,212
Lease liabilities 517 446
Derivatives in respect of net debt 167 (91)
Cash and cash equivalents (3,446) (2,809)
Current assets held at fair value (579) (456)
Net debt items included within asset held for
sale (352) 0
Purchase price adjustment (PPA) to Reynolds American
Inc. debt (798) (754)
------- -------
Adjusted net debt 38,131 35,548
Profit for the year 6,846 6,974
Taxation on ordinary activities 2,478 2,189
Net finance costs 1,641 1,486
Depreciation, amortisation and impairment costs 1,305 1,076
Share of post-tax results of associates and joint
ventures (442) (415)
Other adjusting items (excluding depreciation,
amortisation and impairment) 1,380 564
------- -------
Adjusted EBITDA 13,208 11,874
======= =======
Adjusted net debt to adjusted EBITDA 2.89x 2.99x
======= =======
Translational foreign exchange impact to adjusted
net debt (2,406)
Adjusted net debt at constant rates 35,725
Translational foreign exchange impact to adjusted
EBITDA (811)
Adjusted EBITDA at constant rates 12,397
=======
Adjusted net debt to adjusted EBITDA (at constant
exchange rates) 2.88x
=======
Other Information
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 THP brands - including Dunhill, Kent,
Lucky Strike, Pall Mall, Rothmans, glo, 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
potentially reduced-risk products. We hold robust market positions
in each of our regions and have leadership positions in more than
50 markets.
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.
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 2022
or 2021. Statutory accounts for 2021 have been delivered to the
Registrar of Companies and those for 2022 will be delivered
following the Company's Annual General Meeting. The auditors'
report on the 2021 accounts was 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 Annual Report and Accounts and Form 20-F will be published
on bat.com on or around 2 March 2023. 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.
The Group financial statements (including the notes to the
financial statements and the report of the independent registered
public accounting firm (for U.S. purposes) for the year ended 31
December 2022), the consent of KPMG LLP and management's report on
internal control over financial reporting will be filed on a Form
6-K with the SEC on or around 9 February 2023 and will be available
on the SEC's website at www.sec.gov. That Form 6-K will be
submitted to the U.K. National Storage Mechanism thereafter and
will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
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 8
February 2023.
Other Information
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.
The conversion rates that are applied:
Equivalent to one cigarette
Tobacco 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.
SHAREHOLDER INFORMATION
FINANCIAL CALAR 2023*
Wednesday 19 April Annual General Meeting at 11.30
am
Details of the venue and business
to be proposed at
the meeting will be set out in
the Notice of AGM, which
will be made available to all shareholders
and published
on www.bat.com.
The format for the 2023 AGM will
be contingent on applicable UK
Government health and safety restrictions
in place at that time.
Thursday 27 July Half-Year Report
* Indicated dates are subject to change
Other Information
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 New Categories
Acceleration Drives Profitability Forward To 2024 section and in
the Chief Executive Statement (pages 1 to 2 ); (ii) certain
statements in the Finance and Transformation Director's Statement
(page 2 ); (iii) certain statements in the Group Operating Review
(page 4 ); (iv) certain statements in the Category Performance
Review (pages 6 to 9 ); (v) certain statements in the Regional
Review section (pages 11 to 14 ); (vi) certain statements in the
Other Financial Information section (pages 15 to 18 ); (vii)
certain statements in the Other Information section (pages 19 to 24
); (viii) certain statements in the Notes to the Financial
Statements section (pages 31 to 43 ), including the Liquidity and
Contingent Liabilities and Financial Commitments sections; and (ix)
certain statements in the Other Information section (pages 44 to 56
), including the Non-GAAP Measures sections and under the heading
"Dividends".
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, including the
projected future financial and operating impacts of the COVID-19
pandemic.
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; 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; and direct and indirect adverse impacts associated with
Climate Change and the move towards a Circular Economy.
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 2021 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 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, http://www.sec.gov and BAT's Annual
Reports, which may be obtained free of charge from the British
American Tobacco 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.
CORPORATE INFORMATION
Premium listing
London Stock Exchange (Share Code: BATS; ISIN: GB0002875804)
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ, UK
tel: 0800 408 0094; +44 370 889 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 (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
UBS South Africa (Pty) Ltd
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 or the Company's
Representative office in South Africa using the contact details
shown below.
British American Tobacco p.l.c.
Registered office
Globe House, 4 Temple Place, London, WC2R 2PG, UK
tel: +44 20 7845 1000;
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.
British American Tobacco p.l.c.
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 6712
GLOSSARY and DEFINITIONS
The following is a summary of the key terms used within this
report:
Term Definition
AmSSA Americas (excluding U.S.) and Sub-Saharan Africa. The key
markets are:
Argentina, Brazil, Canada, Chile, Colombia, Mexico, Nigeria,
South Africa.
------------------
APME Asia Pacific and Middle East. The key markets are:
Algeria, Australia, Bangladesh, Egypt, Gulf Cooperation
Council (including Saudi Arabia), Japan, Malaysia, Morocco,
New Zealand, Pakistan, South Korea, Taiwan, Vietnam.
From 1 January 2022, Algeria, Sudan, Morocco, Libya, Tunisia
and Egypt moved to APME. No restatement of prior year figures
has been made as the impact was not material to either Europe
or APME.
------------------
British American When the reference denotes an opinion, this refers to British
Tobacco, American Tobacco p.l.c. and when the reference denotes business
BAT, Group, activity, this refers to British American Tobacco Group
we, us and operating companies, either collectively or individually,
our as the case may be.
------------------
Carbon Dioxide Carbon Dioxide equivalent (CO2e) emissions include CO2,
equivalent CH4 and N2O and are reported where we have operational control.
emissions 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 The circular economy is a model of production and consumption,
Economy which involves sharing, leasing, reusing, repairing, refurbishing
and recycling existing materials and products as long as
possible.
------------------
Combustibles Cigarettes and OTP.
Constant Presentation of results in the prior year's exchange rate,
Currency removing the potentially distorting effect of translational
/ Constant foreign exchange on the Group's results. The Group does
rates not adjust for normal transactional gains or losses in profit
from operations which are generated by exchange rate movements.
------------------
Developed As defined by the World Economic Outlook as Advanced Economies
Markets and those within the European Union.
Double Materiality Although financial materiality has been considered in the
Assessment development of our Double Materiality Assessment ("DMA"),
our DMA 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 Those markets not defined as Developed Markets.
Markets
Europe Europe. The key markets are:
Belgium, Bulgaria, the Czech Republic, Denmark, France,
Germany, Greece, Hungary, Italy, Kazakhstan, Netherlands,
Poland, Romania, Russia, Spain, Switzerland, Turkey, Ukraine,
the United Kingdom.
From 1 January 2022, Algeria, Sudan, Morocco, Libya, Tunisia
and Egypt moved to APME and ENA has been renamed Europe.
No restatement of prior year figures has been made as the
impact was not material to either Europe or APME.
------------------
GTR Global Travel Retail.
Key markets The key markets are:
Algeria, Argentina, Australia, Bangladesh, Belgium, Bulgaria,
Brazil, Canada, Chile, Colombia, the Czech Republic, Denmark,
Egypt, France, Germany, Greece, Gulf Cooperation Council
(including Saudi Arabia), Hungary, Italy, Japan, Kazakhstan,
Malaysia, Mexico, Morocco, Netherlands, New Zealand, Nigeria,
Pakistan, Poland, Romania, Russia, South Africa, South Korea,
Spain, Switzerland, Turkey, Taiwan, Ukraine, the United
Kingdom, the United States, Vietnam.
------------------
Modern Oral Includes EPOK, Lyft, Velo and other modern white snus.
New Categories Includes Vapour, THP 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 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 available science, products within "New Categories"
and "Traditional Oral" have been shown to be reduced-risk;
are likely to be reduced-risk or may have the potential
to be reduced-risk, in each case if switched to exclusively
as compared to continuing to smoke cigarettes.
------------------
Strategic Includes Kent, Dunhill, Lucky Strike, Pall Mall, Rothmans,
combustible Newport (U.S.), Natural American Spirit (U.S.), Camel (U.S.),
and THP brands glo and Neo.
------------------
Strategic Comprises strategic combustibles, strategic traditional
Portfolio oral and New Categories - and includes Kent, Dunhill, Lucky
Strike, Pall Mall, Rothmans, Newport (U.S.), Natural American
Spirit (U.S.), Camel (U.S.), Vype, Vuse, glo, Neo, Ten Motives,
Velo, EPOK, Lyft, Granit, Mocca, Grizzly, Camel Snus, Kodiak.
------------------
Tobacco Supply Our goals cover all tobacco used in our combustibles and
Chain THP products. Our metrics, however, derive data from our
annual Thrive assessment, which includes our directly contracted
farmers and those of our strategic third-party suppliers,
representing over 80% of the tobacco purchased by volume
in 2022 and defined in this document as 'Tobacco Supply
Chain'.
------------------
Top 5 / T5 Being the top 5 markets for industry Vapour sales by revenue
Vapour markets - U.S., Canada, UK, France and Germany. These markets represent
an estimated 88% of Global industry vapour revenue (rechargeables
and disposables).
------------------
Top 5 / T5 Being the top 5 markets for industry Modern Oral sales by
Modern Oral revenue - U.S., Sweden, Norway, Denmark and Switzerland.
markets These markets represent an estimated 80% of Global industry
Modern Oral revenue.
------------------
Top 9 / T9 Being the top 9 markets for industry THP sales by revenue
THP markets - Japan, South Korea, Russia, Italy, Hungary, Greece, Ukraine,
Poland and the Czech Republic. These markets represent an
estimated 80% of Global industry THP revenue.
------------------
THP Tobacco Heating Products (i.e., the devices, which include
glo and our hybrid products) or Tobacco Heated Products
(i.e., the consumables used by Tobacco heating product devices).
------------------
Traditional Moist Snuff (Granit, Mocca, Grizzly, Kodiak) and other traditional
Oral 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 THP 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
THP volume.
Vapour Rechargeable, battery-powered devices that heat liquid formulations
- e-liquids - to create a vapour which is inhaled. Vapour
products include Vype, Vuse, ViP and Ten Motives.
------------------
*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.
In August 2021, the Group disposed of its Iranian business.
Additional information reconciling Volume, Revenue, Profit from
Operations and Operating Margin to Organic volume, Organic revenue,
Organic adjusted profit from operations and Organic adjusted
operating margin
Group Volume 2022 2021
For the years ended Organic
31 December Inorganic growth Inorganic
Reported adjust's Organic % Reported adjust's Organic
New categories :
Vapour (mn 10ml/pods) 612 - 612 +14.3% 535 - 535
THP (bn sticks) 24.0 (5.2) 18.8 +26.8% 19.1 (4.3) 14.8
Modern Oral (mn pouches) 4,010 (49) 3,961 +21.7% 3,296 (40) 3,256
Traditional Oral (bn sticks
eq) 7 - 7 -8.3% 8 - 8
Cigarettes (bn sticks) 605 (43) 562 -5.3% 637 (44) 593
OTP (bn sticks) 16 - 16 -10.3% 18 - 18
Total Combustibles (bn sticks) 621 (43) 578 -5.4% 655 (44) 611
Memo: Cigarettes + THP (bn
sticks) 629 (48) 581 -4.5% 656 (48) 608
Revenue by Region
For the
years ended
31 December 2022 2021
Inorganic Inorganic
adjust's Organic
Impact Reported at constant Organic growth
Reported of exchange at constant rate at constant vs 2021 Reported Adjust's Organic
GBPm GBPm GBPm GBPm GBPm % GBPm GBPm GBPm
U.S. 12,639 (1,281) 11,358 - 11,358 -2.8% 11,691 - 11,691
AmSSA 4,203 (224) 3,979 - 3,979 +4.7% 3,801 - 3,801
Europe 6,346 77 6,423 (813) 5,610 +5.3% 6,001 (673) 5,328
APME 4,467 46 4,513 - 4,513 +7.7% 4,191 - 4,191
Total Group 27,655 (1,382) 26,273 (813) 25,460 +1.8% 25,684 (673) 25,011
Revenue by Product
Category
For the years
ended
31 December 2022 2021
Inorganic Inorganic
adjust's Organic
Impact Reported at constant Organic growth
Reported of exchange at constant rate at constant vs 2021 Reported Adjust's Organic
Group GBPm GBPm GBPm GBPm GBPm % GBPm GBPm GBPm
New
categories:
Vapour 1,436 (103) 1,333 - 1,333 +43.8% 927 - 927
THP 1,060 21 1,081 (133) 948 +24.7% 853 (93) 760
Modern Oral 398 1 399 (5) 394 +45.9% 274 (4) 270
Total New
Categories 2,894 (81) 2,813 (138) 2,675 +36.7% 2,054 (97) 1,957
Traditional
Oral 1,209 (117) 1,092 - 1,092 -2.3% 1,118 - 1,118
Combustibles 23,030 (1,142) 21,888 (669) 21,219 -1.1% 22,029 (573) 21,456
Other 522 (42) 480 (6) 474 -1.3% 483 (3) 480
Revenue 27,655 (1,382) 26,273 (813) 25,460 +1.8% 25,684 (673) 25,011
Profit from Operations
For the
years
ended
31
December 2022 2021
Impact
Adjusting of Inorganic Adjusting Inorganic
Adjusted
adjust's Adjusted organic
Adjusted at constant organic growth Adjusted
Reported items exchange at constant rate at constant vs 2021 Reported items Adjust's organic
GBPm GBPm GBPm GBPm GBPm GBPm % GBPm GBPm GBPm GBPm
U.S. 6,205 630 (740) 6,095 - 6,095 +3.5% 5,566 321 - 5,887
AmSSA 2,022 (280) (83) 1,659 - 1,659 +4.3% 1,496 94 - 1,590
Europe 1,270 812 21 2,103 (276) 1,827 +0.6% 1,885 71 (139) 1,817
APME 1,026 723 20 1,769 - 1,769 +3.0% 1,287 430 - 1,717
Total
Group 10,523 1,885 (782) 11,626 (276) 11,350 +3.1% 10,234 916 (139) 11,011
Additional Information on Revenue by Category by Region
Volume (unit)
For year ended U.S. AmSSA EUROPE APME Group
31 December
2022 % change 2022 % change 2022 % change 2022 % change 2022 % change
New Categories
Vapour 320 +10.0% 83 +33.3% 197 +13.9% 12 +31.1% 612 +14.3%
THP - 0.0% - n/m 13 +33.8% 11 +17.0% 24 +25.6%
Modern Oral 301 -50.1% 10 n/m 3,169 +29.9% 530 +108.4% 4,010 +21.7%
Traditional
Oral 6.6 -8.1% - 0.0% 0.8 -9.8% - 0.0% 7.4 -8.3%
Total Non-Combustibles
Cigarettes 59 -15.4% 148 +0.7% 193 -9.9% 205 -0.8% 605 -5.1%
OTP - -17.8% 1 -5.1% 13 -11.1% 2 -6.8% 16 -10.3%
Total Combustibles 59 -15.5% 149 +0.7% 206 -10.0% 207 -0.8% 621 -5.2%
Memo: Cigarettes
and THP 59 -15.4% 148 +0.7% 206 -8.0% 216 0.0% 629 -4.2%
Revenue - reported at current rates (GBPm)
For year ended U.S. AmSSA EUROPE APME Group
31 December
2022 % change 2022 % change 2022 % change 2022 % change 2022 % change
New Categories 949 +68.7% 219 +55.6% 1,171 +43.7% 555 +3.7% 2,894 +40.9%
Vapour 913 +62.9% 218 +55.1% 286 +37.9% 19 +4.3% 1,436 +54.9%
THP 0 -69.1% 0 -% 537 +57.3% 523 +2.3% 1,060 +24.3%
Modern Oral 36 n/m 1 n/m 348 +30.8% 13 +117.0% 398 +45.3%
Traditional
Oral 1,174 +8.9% 0 0.0% 35 -12.3% 0 0.0% 1,209 +8.2%
Total Non-Combustibles 2,123 +29.5% 219 +55.6% 1,206 +41.1% 555 +3.7% 4,103 +29.4%
Total Combustibles 10,470 +4.5% 3,751 +9.2% 4,996 -0.6% 3,813 +7.3% 23,030 +4.5%
Other 46 +27.9% 233 +3.2% 144 +16.9% 99 -0.9% 522 +7.6%
Total 12,639 +8.1% 4,203 +10.6% 6,346 +5.7% 4,467 +6.6% 27,655 +7.7%
Of which:
Strategic 12,018 +8.5% 2,622 +18.6% 4,969 +11.0% 2,276 +3.8% 21,885 +9.6%
Non-strategic 621 +1.4% 1,581 -0.6% 1,377 -9.7% 2,191 +9.7% 5,770 +0.8%
12,639 +8.1% 4,203 +10.6% 6,346 +5.7% 4,467 +6.6% 27,655 +7.7%
Revenue - reported at constant rates (GBPm)
For year ended U.S. AmSSA EUROPE APME Group
31 December
2022 % change 2022 % change 2022 % change 2022 % change 2022 % change
New Categories 854 +51.6% 208 +47.5% 1,162 +42.7% 589 +10.1% 2,813 +37.0%
Vapour 821 +46.4% 207 +47.0% 287 +38.5% 18 +1.7% 1,333 +43.8%
THP 0 -72.3% 0 -211.1% 523 +53.3% 558 +9.1% 1,081 +26.7%
Modern Oral 33 n/m 1 -100.0% 352 +32.3% 13 +121.2% 399 +45.6%
Traditional
Oral 1,055 -2.1% 0 0.0% 37 -7.7% 0 0.0% 1,092 -2.3%
Total Non-Combustibles 1,909 +16.3% 208 +47.5% 1,199 +40.3% 589 +10.1% 3,905 +23.1%
Total Combustibles 9,409 -6.1% 3,565 +3.8% 5,083 +1.2% 3,831 +7.8% 21,888 -0.6%
Other 40 +14.9% 206 -8.7% 141 +15.1% 93 -7.8% 480 -0.8%
Total 11,358 -2.8% 3,979 +4.7% 6,423 +7.0% 4,513 +7.7% 26,273 +2.3%
Of which:
Strategic 10,799 -2.5% 2,485 +12.4% 5,019 +12.1% 2,322 +5.9% 20,625 +3.3%
Non-strategic 559 -8.9% 1,494 -6.1% 1,404 -7.8% 2,191 +9.7% 5,648 -1.3%
11,358 -2.8% 3,979 +4.7% 6,423 +7.0% 4,513 +7.7% 26,273 +2.3%
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR SSWEEAEDSELE
(END) Dow Jones Newswires
February 09, 2023 02:03 ET (07:03 GMT)
British American Tobacco (LSE:0A76)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
British American Tobacco (LSE:0A76)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024
