D I A F T
Guidelines for UTUS. - July, 1987
General
1. BATUS is responsible for managing the Group's Tobacco, Retail and
Paper subsidiaries in the USA aa for optimising the growth of these
activities.
2. UTUS is also charged with identifying and assessing opportunities for
investing in Financial Services in the USA and for assisting in the
implementation, and subsequent management of any investment which is
agreed.
Financial Guidelines
3. Returns : BATUS should achieve a ROXk of 25Z, calculated before taking
Into account the sale of receivables. In addition, no individual
business should'achi4vot a return below 202, calculated on a similar
basis.
4. Dividends : Divideals expected from BMS (gross of Withholding Tax)
Ara:-
1987 19" 1989 1990 1991 1992
USSR 220 250 280 3L5 345 380
S. Debt/tcmity : for the time being, UTUS should work to a debt/equity
target of 5OZ. Zwever, this will need to be revised In the light of
any major acquisition and/or change La financing arrangements.
Specific Priorities
6. For Tobacco, the first priority must be to achieve sustained real
growth in profits and cash flow, year by year.
7. There should be particular emphasis an Improving market shares In the
full-price, higher margin segments of the market, giving priority to
halting the slide in the market share for K*ol. to building on the
initial success achieved by Capri and to pursuing other developments
such as 131 Cutter and Improved versions of Barclay.
S. In addition, the pi&= for Richland and Generics should indicate the
action being taken to Improve their profitability to a stage where
they are able to make a net contribution to the profits of R=S as a
whole, after -kg-* appropriate allowances for comma ct"us" and
overboads -
9. There should be a specific plan to maintain a capability (charged to
3roWtL & WillLauson) which == be deployod qutcUr to mast anT adverse
developments La product liability actions.
10. For the International Division, the plans should ohm what action Is
beinS taken to build an the success that has been achieved in 1987.
maintaining and, if possible, further improving the volumes and
profitability for this activity.
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11. For Retailing. the first requirement for Sake is to concentrate on
scare for store growth. Gtographical expansion should also be pursued
but subject to the umitation that the Saks image should not be
diluted.
12. For Marshall Fields and Ivey's the first priority should be to achieve
satisfactory levels of performance* throughout each store chain. At
the same time, chore should be an attempt to define more clearly the
respect-ive concepts and the war In which the star" seek to gain a
competitive advantage In their markets - These should then be used - as
a basis for upgraded expansion plane for the two chains.
13. For Braun4rs Retail; tremors Rental and Thimbles. the priority &La
should be to improve the performance and to establish the vlabilfty of
the respective store chains by and 1987, la order to provide a basis
for future PU-4-0.
14. Particular emphasis should be given to establishing a cash flow plan
for Retailing, demonstrating bow the operations can be as"
sal-f-funding at real growth rates of 6Z p-a- and outlining the key C
requirements for tbls to be achieved.
.13. Tor Paper, Appleton should continue with the strategy of
maintaining their at-rang position In the Carboulass market.
16. There should be particular emphasis as the plans to meet the capacity
requirements and to obtain a satisfactory return on the facilities at
West Carrolton.
17. Looking longer tern, UTUS should Siva further consideration to
establishing by early L988 tba options for the time when the growth
rate and profitability of the carboulass operation is expected to
begin to fall of f -
1.8- Plasacia.1 Services : Working with B.A.T Industries, BATUS should
continue to assass possible opportunities for a major entry to
74"ancial Services In the USA. Assuming that a suitable opportunity
La Identified, the Operating Group should then be prepared to assist
in the implementation and subsequent management of the investment.
RS/DJA
20ch July 1987
BAT Industries document for Province of British Columbia 23 April 1999