D R A F T
Guidelines for B.A.T Stores I July 1959
General
I. B.A.T Stores I primary responsibility is to manage and develop the
Group's retail activities in the UX.
2. The central objective should be the continued development of Argot to
achieve sustained rapid rates of growth. long term, in both sales and
profits.
3. Subject to the performance and development of Argos not being
endangered, consideration should also be given to extending the
Group's retailing activities by launching or acquiring businesses or
concepts offering prospects for sustained, profitable growth in either
the UK or Continental Europe. 'Where suitable prospects are
identified, appropriate proposals for investment should be prepared.
Financial Guidelines
4. Returns : Argos should aim to achieve a minima 30% return on
average not trading assets on an 'historic cost basis of accounting
(equivalent to a 15% return an a CC& basis).
5. Dividends: The minimum dividends expected from Argos are:-
1989 1990 1991 1992 1993 1994
La 32 39 49 60 72 86
6. Debt/ZquLty : Argos should seek to maxiaLse its year-end cash
deposits with RATTP- Peak borrowings during the year should not
exceed 5OZ of equity.
Specific Priorities
7. The first priority should be to continue to improve the positioning
and competitiveness of Argos to enable the Company to achieve a rapid
and sustained expansion La sales turnover and profits, through
stora-for-store growth, further geographic expansion in the UK and
accelerated development of the Superstares and Best Sellers
showrooms.
S. Plans should also be formulated for a rapid introduction of the
now-style conventional showrooms, subject to the concept &&Loving
satisfactory levels of performance.
9. Argos should continue to seek improvements La the performance and
profitability of Superstarse and Bost Sellers outlets. In addition,
the Viability of out-of-town locations for Superstores in smaller
catchwat araas shou3A be =Uttered vUh a vim to naliaiaLng
opportunities for expansion.
10. Plans should also be developed for accelerating the expansion of Argos rQ
through a mare active participation Lu the property market, L=Iudlug
the possible acquisition of properties by takeover. In particular
the attractiveness and feasibility of acquiring either of the too
retail businesses previously identified should be reviewed with the
CPC.
BAT Industries document for Province of British Columbia 23 April 1999

11. Argos should complete its review of opportunities to Improve
productivity and seek to Implement improvements in the areas of
distribution, HIS, Read Office costs, stock control and the possible
use of Incentive schemes. Efforts to affect Improvements in the use
of system and Information technology should be continued, aimed at
both securing improvements La performance and at establishing
positions of competitive advantage.
12. A high priority should be given to ensuring that sufficient senior
management capacity will be available both to manage the proposed
expansion of the existing business and to identify, evaluate and
develop new business opportunities. In particular, the planned
recruitment of two Deputy Managing Directors for Argos should be
completed before proceeding to the testing of pilot stores for the
CALA project; an independent management team should be established for
the ?re=ier Incentives initiative; and a B.A.T Stores 'holding'
structure should be implamenced over time to develop the Group's U-K
retailing incerests.
13. Argos should continue to develop plans, to be agreed with the CPC, for
testing the attractiveness and viability of the furniture/furnisbings
recall concept (GALA), with a view to launching two pilot stores in
late 1990.
14. With regard to Premier Incentives, the plans for the expansion of
Argos Achievement Awards should be implemented and specific proposals
developed for the introduction of the Premier Points coucdpt.
15. The feasibility of establishing a second, freestanding lawollary
brand should be critically reviewed and discussed with the CPC.
16. The potential impact of the European Single Harket on Argos'
business should also be reviewed, taking into account both investment
in the UK by overseas retailers and also opportunities for investment
by B.A.T Stores, particularly through a geographic expansion of the
Argos concept.
MWWA
14th July 1989 C)
BAT Industries document for Province of British Columbia 23 April 1999