GROUP 10 YEAR VIEW 1981
INTRODUCTION
1. The purpose of this paper is:-
To present a 10 Year View of the probable development of B.A.T
Industries, assuming that the policies and strategies outlined in
the Guidelines and Operating Group Plans remain unchanged.
(b) To assess these developments in relation to B.A.T Industries'
Objectives.
(e) To Identify options for improvement through additional investments
and through changed policies and strategies.
2. The paper is based largely on information contained in the Operating
Groups' own 10 Year Views but it should be emphasized that the object
is to provide a considered B.A.T Industries View rather than just a
consolidation of Operating Group Views.
3. The Group 10 Year View (with the Group Financial Forecast and the
Future Business Environment paper), constitutes an information base for
the Investment Strategy paper, which will be presented to the Board in
September.
4. It is therefore necessary to have Board comments now, particularly
regarding the need to reinforce, modify or reverse existing strategies.
These views can then be taken into account when the Investment Strategy
paper Le being prepared.
S. Key Issues which the Board nay wish to consider are:-
Whether there is a need for additional investment to Increase the
prospective level of profits in the UX. If so, what are the
Implications for the disposition of resources?
(b) Desired directions of thrust in the allocation of resources, both
geographically and between the Group's various industrial
activities, particularly bearing in mind potential additional
investments identified in Paper and PacksginS/Printlag.
(c) Whether existing activities provide sufficient long tarn growth
potential or whether there is a need to seek opportunities to
invest in new Industrial activities.
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2
SURRENT B.A.T INDUSTRIES OBJECTIVES AS AGREED IN SEPTEMBER 1980)
1. Financial Objectives 2h% P. a. real growth in Dividends.
Profits growth sufficient to maintain
cover at least 2 times profits after
inflation.
Returns on net assets of at least 25Z in
historical accounting term.
2. Quality of the Business - Market leadership.
- Good long term growth prospects.
3. Controlled Risk - No undue dependence on a single product
or market.
- No undue vulnerability to losses through
political risks, restrictions an
remittances, exchange rate changes
etc.
- A Debt/Equity ratio below 502 overall
and below 60% in transferrable
currencies. Normally, no mismatch-of
assets and borrowings.
SUHKARISED ASSESSM ENT
Principal features of the assessment of the Group 10 Year View, in relation
to the B.A.T Industries Objectives are as follows:-
1. Based on the Operating Groups' 10 Year Views of the prospects for their
existing businesses and for planned extensions of these, the financial
projections for the Group as a whole show rates of growth for Profits
Attributable to B.A.T Industries more than adequate to seat the Objectives for
Dividend growth and cover.
2. However, the achievement of these results depends critically on a
substantial improvement In profit margins. This is in contrast to the
experience over the past 10 years when margins have fallen.
3. The proportion of the Group's Profit Before Tax contributed by Associates is
forecast to rise from l2hZ in 1980 to 202 in 1990. Part of this increase is
due to contributions from coupsales which were Subsidiaries La 1980 but which
are expected to be Associates in 1990.
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3
4. Non-Tobacco activities are forecast to $raw faster than Tobacco
activities and by 1990 the proportion of the Group's profits derived
from Tobacco is projected to fall to under 50%. However. despite the
forecast reduction in the proportion of profits contributed by Tobacco
in 1990. the Group is still very dependent on this activity, not only
for profits but, more importantly, for cash generation.
S. Packaging/Printing and Home Improvements show high rates of growth.
Emphasis on these activities has increased compared with last year,
in line with the Group's agreed Investment Strategy. 'Others',
including Catering and Food, has also increased significantly. mainly
due to the inclusion of Hardees in the figures for Imasco.
6. Profits of UK based companies are forecast to increase from L15m in
1980 to L144m in 1990. Me of the L129m increase is accounted for by
UK & E (00m) and BAT Stores Holdings' Stores and Superstores divisions
(L25m), note of which was profitable In 1980. Since UK taxable profits
of L128a will be required if full recoveries of ACT are to be obtained
an 1990 dividends, some further reinforcement of UK activities may need
to be considered.
7. Elsewhere, the balance between profits from the developed and
developing countries is expected to remain roughly the as=. However,
within the developing countries, Latin America shows an increase while
Asia and Africa decrease.
S. Considering options for change, it appears that an important not
source of funds will be the developing countries, with a significant
part of these being derived from the expected sale of part of the
Group's existing shareholdings in various companies, the largest of
which are in Nalayxia, Nigeria, South Africa and Venezuela. Subject to
restrictions on reMiLtability, this will provide an opportunity either
to invest La new activities In these countries or to repatriate the
funds to the UK, for investment either in the UK or elsewhere.
9. The main options for additional investment which have been identified
are in Paper and in Packaging/Priating. The scale of the resources
required for the potential Investments in Paper is large (over 9500a in
Wiggins Taape alone). Hance, if it were decided to allocate resources
preferentially to Paper, this industrial activity could become inch
sore Important as a contributor to Group profits.
10. In view of the degree to which the forecast growth in profit& to 1990
depends an Improved profit margins rather than on underlying growth.
further options nay need to be sought for investment in new industrial
activities If acceptable rates of lorg term growth are to be
Maintained
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PROSPECTS ?OR TIM EXISTING BUSINESS
TABLE I
Prospects for Turnover and Profits Group Totals (La at 1980 values)
Rate of Increase
1980-1990
1980 .1990 (z P.&.)
Turnover 5057 6548 2.6
Trading Profit 467 724 4.
Shares of Associates 60 191 12.3
Interest (not) (48) 11
PDT 479 926 6.8
Taxation (217) (417) 6.7
PAT Yu- -5-0 F 3-.9
Minorities (28) (33) 1.7
Profit Attributable BAT Inds. 234 476 T-4
Notes on Table I
1. The figures shown for 1990 are a direct consolidation of the Operating
Group 10 Year Views.
2. Some adjustments were made to the operating Group figures for 1980
profits, to bring then into line with the actual results for the -year
and to ensure that there war* no duplications or omissions within the
Group totals. These adjustments are referred to in the notes to the
table In the Appendix, where the contributions from the individual
Operating Groups are set out.
3. Although the profit figures for 1980 reconcile with the reported
results, there is a significant difference on Turnover since some
operating Group 10 Year View figures omit certain "lea and excise
taxes which are Included in the published figures.
Assessment of Group Totals
4. Comparing 1990 and 1980, the figures show moderate Turnover growth, a
nor* rapid growth In Trading Profits and a very rapid growth In the
Shares of Associates.
S. The reversal In the figure for Net Interest reflects an improvement in
the cash position resulting from the forecast improvement In profit
margins.
6. Since the effective rate of tax has been assumed to remain
approximately constant and Minorities are forecast to rise very little
between 1990 and 1"O. the net off act is a very healthy 7.42 p.a.
average rate of increase In Profits Attributable to B.A.T Industries.
This would comfortably met the Group's objectives. provided, of rQ
course, that all the forecasts are achieved. C)
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7. Some of the difference between the rate of growth of Trading Profits
and that for Shares of Associates is due to the expected change in
status of some companies which are expected to change from Subsidiaries
to Associates (*.a. Malaysia, Nigeria and South Africa). It is also
expected that some small Subsidiaries will be divested or closed
during the 10 year period.
If the profits of companies which are no longer Subsidiaries in 1990
were eliminated from the Trading Profits for 1990, the rate of growth
would be 5.4% p.a. rather than the 4. 5Z shown.
9. Similarly, the elimination from the 1990 Shares of Associates of
profits from companies which were not Associates in 1980 would reduce
the rate of growth from 12.3% to 10-8Z. However, this is still
significantly higher than the corresponding rate of growth for Trading
Profits of Subsidiaries.
9. The relatively small figure for Minorities in 1990 reflects the fact
that some of the companies that are assumed to convert from
Subsidiaries to Associates have significant minority holdings which
show up in 1980 but which are not included in the figures for 1990.
The low growth rate for Minorities is due to this factor, and is not
significant beyond this.
10. Much depends an the degree of confidence that the growth rates shown
can be achieved in practice and this will be considered later in the
paper. However, It is perhaps worth remarking at this stage tha the
projected increase in trading profits and margins is very different
from the results that have been achieved over the past 10 years. This
is Illustrated In the comparisons below, showing growth rates in Z
p.a., after eliminating inflation.
Growth Rates (Z p-a-) 1970 - 1980 1980 - 1990
Turnover +2.4 +2.6
Trading Profits -1.5 +4.5
It should also be noted that the sales increase from 1970 to 1980
includes the effect of acquisitions. In addition, the Debt:Equity i
ratio rose from 27.7Z to 45.92 during this period, reflecting a
significant amount of not investment over and above that generated
within the business.
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Industrial and Geographical Analyses
11. Industrial and Geographical analyses of total Group profits are shown
in Tables 11 and III which follow. An analysis of the contributions
from individual Operating Groups is shown in the Appendix.
Industrial Shape of the Group 1980 & 1990
12. The relative growth rates for the Group's various Industrial activities
are illustrated in Table II.
TABLE II
'Attributable' Trading Profits & Share of Associates
1980 1990 (all at 1980 values)
1980 1990 Increase 1980/90 As Z of Group Total
La La cm X P-a- 1980 1990
Tobacco 336 429 93 2.5 68.9 49.6
Retail 50 124 74 9.5 10.2 14.3
Paper 58 159 101 10.6 11.9 18.4
Packaging (a) 20 70 50 13.3 4.1 .8. i
Cosmetics 11 16 5 3.5 2.3 1.9
nous Imp 6 21 15 13.3 1.2 2.4
Others (b) 7 46 39 20.7 1.4 5.3
TOTAL 488 865 377 r 5.9 100.0 100.0
(a) Including Printing; (b) Mainly Catering and Food.
13. In this table, B.A.T Industries' 'Attributable' Trading Profits from
each industrial activity are arrived at by multiplying the appropriate
Trading Profits in each subsidiary by the proportion of the equity
hold by B.A.T Industries. The appropriate Shares of Associates LZI
are then added to Siva the totals for each industrial activity.
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14. The industrial analysis in Table II shows a reduced dependence on
Tobacco by 1990 consequent au the relatively low growth rates for this
industrial activity. The volume increases forecast for the 10 years
are still substantial and the overall growth rate forecast for
cigarette sales is 3.7% P.&.. well In advance of the 1.6% P.&. growth
rate for the market as a whole. This leads to a forecast increase from
20.4Z in 1980 to 25.1% in 1990 for the total market share of BAT Group
Subsidiaries and Associates. However, this increase is partially
offset by expected reductions La: selling prices expressed in real
terms. In addition, the rate of profits increase shown in the table is
also affected by expected reductions in the shareholdings of
Subsidiaries, resulting in lower proportions of their profits being
attributable to B.A.T Industries.
The composition of the profits from Tobacco shows significant changes
between 1980 and 1990. The Shares of Associates Increase from 07m to
MU and become more important as a proportion of the whole. Profits
from Latin American companies also show a large increase from L60m. In
1980 to E91a in 1990, despite the reduced shareholding, from 100% to
7OZ, which is expected to occur in the Venezuelan company. The other
significant increase between 1980 and 1990 is the 00m contribution
from UK & E.
15. Profits from the non-Tobacco activities are forecast to grow more
rapidly than those from Tobacco and the proportion of profits from
Tobacco activities is forecast to fall below 50% of the Group total by
1990. A significant part of the non-Tobacco growth is based an
forecast improvements in margins and/or market shares.
16. The largest increase In money terms is forecast to come from Paper.
Of the L101m total, Essm is accounted for by Wiggins Tempe, Mm by
RATUS and LUM by Aracruz. Carbonless still accounts for most of the
growth in BATUS, despite Increased efforts in Commercial papers.
Wiggins Teape is more widely spread in its activities and, by 1990,
only 382 of profits are expected to come from Carbonless, compared with
502 in 1980. Overall. the increase In Wiggins Tempe is less dramatic
than might appear at first might, since the results for 1980 were
depressed. Had the 1960 results been at the same levels as for 1979,
the rate of Increase to 1990 would have been ouch less than is shown
here.
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17. Retail shown a Mu increase In profits from 1980 to 1990, made up as
f ollows:-
(La at 1980 values) 1980 1990 Increase
BAT Stores 4 39 35
BATUS, 38 67 29
Horton, Imasco 8 is 10
56 124 74
WS of the increase in BAT Stores depends on converting the
loss-making Stores and Superstores operations to profits and LION comes
from a threefold increase in the profits from Argos over the period.
Within BATUS, the achievement of the profits increase shown Ls very
critically dependent on Improved margins for the retail operations as a
whole. Of the Z29* increase shown, approximately half cows from Saks,
a quarter from recoveries In Gimbals and Kohl Food and the remaining
quarter from Kohl Department Stores and Thimbles.
18. Packaging/Printing increases from L20m to L70m between 1980 and 1990.
Over half the improvement comes from the existing activities of MPI in
the-UK, Europe and North America and LION of this represents a recovery
to previous levels of profitability from the depressed levels of 1980.
The remainder of the improvement shown for Packaging/Printing
activities depends largely on the success of a number of relatively new
ventures in Latin America and Asia by Subsidiaries and Associates of
BAT Co. Packaging/Printing activities in A"til have also been- -
forecast to show a significant advance during the 10 Years. Including
BAT Co. Associates, the contribution from Shares of Associates rise&
from L2m to 117m between 1980 and 1990.
19. Ham Improvements shows a good rate of increase over the period with
volume growth and improved margins accounting for roughly equal
proportion* of the gain. However, it still remains small in overall
Group torms at the end of the 10 years.
20. Cosmetics accounts for an even smaller proportion of the Group's total
profits in 1990 but is widely spread geographically. The 10 Year View
for this activity has been constrained by the B.A.T Industries
Guideline limiting expansion to a rate of growth that can be funded
Internally. However, the existing business might form a bass for
future expansion if funds were made available to it.
21. Other activities are largely Catering and Food. Of the 09m
improvement from 1980 to 1990, M. La accounted for by Weinkruger and
complementary activities in Germany. A further L22m is accounted for
by the contribution from Hardees and the remainder comes from other
acitivites. mainly In Anatil.
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9
Geographical Shape of the Group 1980 & 1990
22. Table III shows a similar analysis to that in Table 11, except that the
analysis is on a Geographical rather than an Industrial basis.
TABLE III
'Attributable' Trading Profits & Share of Associates
1980 & 1990 (All at 1980 values)
1980 1990 Increase 1980/90 As %a 'Of Group Total
La La In I I P-a- 19 0 1 1990
UK 15 144 129 25.4 3.1 16.6
Europe Bs 125 37 3.6 18.0 14.5
N. America 234 352 118 4.2 48.0 40.7
L. America 69 131 62 6.6 14.1 15.1
Africa 30 27 (3) (1-0) 6.1 -3.1
Asia 36 50 12 2.8 7.8 5.8
Australasia 14 36 22 9.9 2.9 4.2
TOTAL 488 865 377 5.9 100.0 100.0
23. The most striking feature of the Geographical analysis is the very
large increase In profits from UK based companies between 1980 and
1990. An analysis of the sake-up of this Increase is shown below.
UK Trading Profits and Shares of Associates
1980 1990 Increase
its to in
Tobacco (4) 30 34
Retail 4 39 35
Paper (3) 40 43
FackAging./Printing 11 31 20
others 7 4 (3)
15 144 129
Note others covers Cosmetics, Molina and Group HQ, and Includes
special credits of Un in 1980. f 1%)
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10
24. Included In the figures in paragraph 23 are Mm for UK & 9 and L25a
for Stores and Suporstores. In addition, although the 1980 results 'for
Wiggins To-ape and HPI were depressed and the increases shown in the
table are correspondingly higher than if 1980 had been a acre normal
year, the forecasts for 1990 still represent a substantial advance an
the performance in 1979. Hance, the levels of performance forecast for
1990 are significantly better than anything that has been achieved in
the past.
25. The L144a forecast for UX profits must also be seen in relation to the
likely level of B.A.T Industries Dividends in 1990 since, assuming that
the taxation of dividends stays as It is at present, full recoveries
of iCT depend an having suf f1cient taxable profits in the UX. Based
on a 1"O Dividend of Von increased by 2k% p-a-, the Dividend In 1990
would be just under MU. ACT would add a further Oba so that UK
taxable profits of L128m would used to be earned to allov a complete
recovery of ACT (see note below). Further profit would need to be
earned to recover any ACT unrelieved from previous years.
26. Outside the M the Geographical analysis of profits -shows a decreased
proportional contribution from Europe and North America but an
increased contribution from Australia. reflective the high rate of
growth forecast for Anatil.
27. Considering the contributions from the developing countries. profits
from Africa and Asia become less important as a proportion of the total
but there is a significant increase from lAtin America. The
comparisons la all three are" are affected by partial or complete
divestments of companies and, in. general, do not reflect low growth
rates for the companies In any of the three regions.
.............. ...........................................................
Note to RIEME"b .25
The actual asiount of Income subject to UK corporation tax will be
affected by a number of factors. For example, it win be increased by
income from overseas which is tax" at low rates locally sod which
therefore has a residual UK tax liability. It WM also be Increased
by von@-tradlng Imoms. In the UK. On the other hand, it will be
decreased by Interest payments and by tax credits such as capital and
stock allowances Thus, the figures for UK profit -a shown In the 10 PQ
Year View are not the saw as UX taxable profits. However, the figures C)
quoted here do give a reasonable Indication of the order of trading
profits that will need to be earned to achieve a full recovery of ACT. CO
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POTEN'rM ADDITIONAL INVESTMENT
1. Wiggins Teape and M have provided quantif Led information an potential
now Investments which they have under consideration. BAT Co. BATUS,
SAC and RAT Stores Holdings have also Included Information In their 10
Year Views on their thinking regarding potential now investment* but
this ban not been quantified. The 10 Year Views for Inter-versa, Imasco
and Anatil do not include information an any potential investments not
already Included in their plans.
2. in the case of Wiggins Tespe, a number of potential additions were
listed Including an Investment in a third Carbouless site In Europe
(cost 960a or 9120a depending on whether It is an acquisition or &
tgrionfields' project), the possible acquisition of a Scandinavian
integrated pulp and paper mill (Li 50m) and the purchase, in stages, of
the Champion company in Brazil (C35m) La order to establish a strong
position In the Brazilian Printing and writings market.
The scale of additional investment involved and the profits forecast in
1990 by Wiggins Teape are sumarised below.
Investment Trading Profits
La 1990 (La)
UK: Merchants and New Business 55 12
Europe integrated Pulp/Paper,
Tino Paper Expansion
Merchants end Now Business 250 49
Carbouless 3rd Site' 60/120 16
Americs: 'Brazil/Chanpion, Witced
(and Others) mad other Investments,
=July In L. America. 160 43
TOTAL.- 525/535 120
3. For X?I. the potential now invest mon to listed represent a continuation
of the stratea -outlined In their plan. This involves acquiring
-.businesses complementary to misting activities in the developed
countries and Especially In Sortb America while, at the same time,
opportunities to -met up -in developing countries overseas.
often In co-operation vith BAT Co. companies.
The @was of additional investment end the level of trading profits
envisaged by NPI In 1990 are summarised below.
UVOStUlAnt Trading Profits 1990
Europe 10 2
M. America 53 14
others 33 9
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TOTAL 115 30
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4. BAT Co expect to develop non-Tobacco activities in a nun bar of their
Subsidiaries and Associates but these developments are included within
their existing business forecasts and are not listed separately.
S. BkTUS are developing strategy proposals in Paper and in Retail and
these are scheduled for discussion by their Board in 1981. However, no
figures for potential additional Investments were included In their 10
Year View.
6. BAT Stores Holdings see possibilities for building on the existing
strength of Argot and a number of possibilities are under consideration
such as an extension into Mail Order or into new types of speciality
stores. However, no estimate has yet been made either of the scale of
Investment that night be required or of the profits that pursuing this
line of development might be expected to produce.
.7. In the case of BAC, the main emphasis to still on consolidating the
core business and, although further expansion from this base is seen an
a potential opportunity, no firm proposals have been developed.
However, it is expected that opportunities could arise which might be
.worth pursuing. These could involve proposals for acquisitions. Out
particular example, that is quoted as a possibility would involve an
investment of about f5m.
RESOURCE AvAnAITLITI
1. The Operating Group 10 Year Views do not contain sufficient iuforzat,ioa
for a clew picture to be established of the availability of Group
resources aver the longer term.
2. The main source of data an resources stast therefore be the operating
Group Plow and, at Group level, the Group Financial Forecast.
3. The Indications from these sources, supplenented by such Information as
Is available from the Operating Group 10 Year Views, are as follows:-
(a) Although Wiggins Tempe and NPI ay* expecting to improve their cash
flows to an extent such that the deficits expected in 1981 are
eliminated In succeeding years, their existing businesses WM got
produce cash surpluses sufficient to fund additional investments
of the scale of those listed in param 2 and 3 on page 11.
(b) BAT Stores Holdings and SAC mvisage the generation of a more
positive cash flow an a necessary precursor to additional
investment. They do not expect to be net users of resources
unless there should be major expansion& of their activities.
(e) The situation for UTUS to c6viplicated by the fact that the Paper
activities require not investment but this is funded by surpluses
from the Tobacco activities. Overall, they expect to produce a
net cash surplus In the longer term and most new investments night
be able to be funded from retentions plus borrowings up to the
agreed Debt:Equity limits.
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(d) UT Co identif Los substantial surpluses in Latin America and
further cash is expected to be generated from the sale of part of
the equity of the Malaysian, Nigerian. South African and
Venezuelan subsidiaries. Subject to any restrictions an
remittances which may be Imposed, any such additional funds might
be transferred to the UK or elsewhere. However, part of the
requirement for additional funds may occur within BAT Co itself
since borrowings in UK & E are show* to be increased considerably
In 1990.
(a) There are no figures for the availability of resources in Imasco
and Amatil but the figures for Interversa show surplus funds from
Tobacco activities vore than sufficient to fund their forecast
growth in non-Tobacto activities.
MAIN ARMS OF RISK
I. The purpose of this section is to consider the implications of possible
variations f raw the assumptions which have been made about the business
en*iroumut and to Identify sam of the min areas of risk inherent in
the 10 Year View taken as a whole.
Environsoutal Factors
Z. In the financial schedule*. constant exchange rates (as at 31.12.80)
have been used in converting to sterling the figures for overseas
businesses. If , as seem likely, sterling become less strong in
purchasing power parity term, the overseas profits will be worth more
in sterling term. As an indication of the importance of this affect,
each cent reduction in the DollartSterling exchange rate would result
In the sterling equivalent of the 1990 pretax profits from worth
Amrica Increasing 'by L1.5m. There would also be similar effects for
any other currencies which strengthen against sterling. On balance, it
seem likely that the effects of exchange rate changes will be
favourable but there Is nor* likelihood of this being so for the dollar
tlwm for otbor currencies, since several appeared overvalued at the and
of 198b. - This was aspwAany true in Latin America.
3. The converse effect would occur on currency converelom If sterling
were to strengthen in relation to over"" currencies. In addition,
there would be an adverse of fact an the coMmt1tiveness of UL based
Companies that would af fact both their exports, and also their UK *also
where the** are in competition with importer This 'business' effect La
sore dif ficult to q"ntify than the 'conversion' affect but could also
be vory significant.
4. While the implications of relatively low rates of econoule growth have
certainly been taken into account in the projections, account also
needs to be taken of risks due to political actions. These could
result In further restrictions on remittability and a reduced
capab"Ity of the Contra to influence dividend ad investment policies
in averse" Companies.
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Business Performance
5. Much of the forecast profits growth In the Operating group 10 Year
Views depends on improving margins and/or market shares. This
has implications for the longer term growth prospects for the Croup
since long term growth will need to be based an turnover growth and
profits growth swing together, once the potential for medium term
profits growth through improvements Li performance Is exhausted.
6. Thar are also implications for the medium term in the degree of
re are on currently unprofitable businesses being turned round into
profits, (e.g. UK & E. Stores and Superstores, some Wiggins Tampa
businesses). In addition. profits growth also depends critically on
substantial improvements in performance in a number of businesses,
including Gimbals and several In Wiggins Teape and MPI, where profits
margins are low at present. This Is particularly true in the UK.
-7. The degree of confidence that these forecasts will be achieved must
depend an the view taken of the improvements that can be achieved in
operating performance. However, more importantly, it must also depend
on the view taken of the strength of the Group businesses relative to
-competition, especially In term of product quality, marketing strength
and innovative ability.
S. The Operating Group 10 Year Views show returns on assets generally
rising above the Group target of 25%. If these levels of performance
were not achieved, there would be obvious implications for profits.
However, there would also be implications for cash since mom
businesses which are forecast to be net cash generators would become
not cash consumers. The implications of this are covered more fully in
the Group 71umoncial Forecast.
9. Finally. It needs to be emphasised that the reduced dependence an
Tobacco shown -in the figures disguises a continuing real dependence
which leaves the Group very vulnerable to adverse Influences an this
industrial activity. Because of the continuing dependence an the cash
flow, as wall-as the profits, from Tobacco, increased pressure an
Tobacco profit margins could have very serious implications for the
Group " a whole. This puts particular weight an the need for the
achievement of the forecast Improvements In performance by the Group's
son-Tobsigi activities.
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APPENDIX I
SUMALT OF OPERATING GROUP CONTRIBUTIONS
An analysis of the contributions from the Individual Operating Groups (all
expressed In 1980 values with overseas currencies converted at 31.12.80
exchange rates) is shown in the Table below.
Turnover, Trading Profits and Profits from Associates
Operating Group Contributions to Group Total& % 1980 & 1990
Turnover Trading Profits Shares of Associates
1980 19" Inc. 1980 1990 Inc. 1980 1990 Inc.
(La) (W (Zp -A.) (Ea) (its) (%P.&.) (La)
BAT Co.
Tobacco 952 1021 0.7 146 184 2.3 15 59 14.5
Pthers 21 34 5.0 2 9 27.1 4 34 23.6
WF T05-5 -I-4F =92 =6 -1 F TY 17.0
Intorversa
Yo-b-'4ji-to 234 230 (0.2) 41 31 (2.7) -
Retail - - - - 5 a 5.9
Others 2;2 4;0 8.3 7 36 18.3 -
I W -4.7
M6 U& -5 -8 5.8
BATUS
Tobacco 695 779 1.1 147 166 1.2 - - -
Retail 978 Soo (0.9) 38 67 5.9
Paper 14B 418 10.9 24 51 7.7
T
1M -1 9" 5 BF TS-4 371
IVA=0
Tobacco 17 23. 3.1
Others 5 31 20.3
Austil
To =OCC07.-. 5 7 3.4
Otb=*-:-. 4 22 18.6
H W. -1
Paper, 358 745 2.9 28 84 11.6 5 6 1.6
WI
F&Mckaging/ 3" 573 3.8 20 47 6.9 1 1 -
UT Stores
Retail $42 1353 4.9 4 39 24.3 - - -
BAC
Cosmetics L27 139 0.9 11 16 3.5 - - -
GP NQ 1 1 -
(5) (5)
AdjImatment 4 00
TOTA14 5057 65U 2.6 467 724 4.5 60 191 12.3
Q4
Ote NA Not Ava.Llable C>
BAT Industries document for Province of British Columbia 22 April 1999

16 APP.
Notes to the Table
1. (a)
(b)
comparison with the forecasts for 1990.
those for Imasco by Group RQ Vinanc*Oepartment.
2.
(a)
profits from Moorgate and Leaf "lea).
(16)
real terms.'
W
SiBmipkiiittly -more slowly tWM inflation.
(d) The
activities Le also high.
24th Jam, l"l