D I A P T
Guidelines for Amatil : July 1987
General
1. The central objective for Amatil should be the achievement of returns
and sustained rates of growth In dividend and earnings per share which
compete favourably with ocher leading businesses in Australia.
2. There should be an aim to position Anatil in Tobacco and in a limited
number of other activities of substantial size in leadership posrt-ro-ns
in growth markets or market sevients capable of providing sustained
organic growth in sales and profits. In selecting such growth
opportunities, Amatil should have regard to B.A.T Industries'
preference for developments in Tobacco, Retail, Financial Services and
Pulp/Paper.
3. In evaluating Amatills strategies and plans, B.A.T Industries will
apply Cho same criteria as are applied to the other businesses within
the Group. In particular, it will be iaportant to ensure that each of
the businesses within Anatil is operating efficiently and is producing
DN a44,4,6:. a cash flow which, after covering central av*rheads, dividends and
Ft,f paymants, is sufficient to either fund sales growth at real
rates of at least 6 per cant per a"".*= or to produce an *quivalent
cash surplus--rQ-r--TU-V-4sCm&= in other activities.
Pinaucial Guidelines
4. Used an the current B.A.T 'Industries Group shareholding. the
dividends expected from Amatil (gross of Withholding Tax) are as
follows:-
Years to 31st October
1987 1988 1989 1990 1991 1992
Asa 12.2 14.0 16.2 18.6 21.4 24.6
The pidoallue dividends recommended are based an real growth of 8 per
cant per snauz with inflation of 6.5 per cant per annum.
S. It is recommended that Amatil seek an overall historic cost return an
not asmuts (on a B.A.T Industrios' basis) of 30 per cant, with no
individual division achieving less than 20 per cent. In addition,
individual operating division should give priority consideration to
the issues of improving sales margins and ensuring positive cash
generation (after attributable dividends, interest and taxation
costs).
Specific Priorities
6. Amatil's first priority should be to seek improved performance in all
WLAIA ;VL. the existing businesses. When individual businesses do noc mast the
requirement of being in leadership positions In growth markets and
achieving returns sufficient to give cash golf-sufficiency at teal
rates of growth of at least 6 per cent per action pians should
hr,. -r be developed either for improving the performance aid position of the
businesses or for their divestment. Phi
7. There should be at &Is to reposition AiLa in fewer but %are
substantial operacions and an a first stage in this, consideration
might be given to divesting the Snack Food and Poultry divisions in
order to support further investment in the Beverages division.
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BAT Industries document for Province of British Columbia 23 April 1999

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S. Looking longer term, other opportunities for repositioul=g Amatil.
should be considered, giving particular emphasis to opportunities In
activities in which B.A.T Industries is already involved and where it
aight be possible to take advantage of synergistic bene!ics.
9. Priority should also be given to formulating plans for !uading these
investments, making the maximum use of internal resources, including
the proceeds from divestments.
10. For Tobacco, the first priority-should be to rebuild market share,
particularly in the fu.U-price asSmant; by ensuring that full use is
sad* of the competitive strength* derived from the new Manufacturing
facilities and by developing and marketing innovative new products.
Progress an achieving market share Laprovemurs should, however, be
monitored closely to ensure that any short-term adverse impact on
profitability does not endanger Aaatil I overall financial position
and capacity to pay dividends.
11. Priority should be given to consolidating the performance of the
domestic tobacco operation before seeking ratioazLisation in the other
Australasian and Pacific Island markets.
12. Efforts should continue to improve efficiencies so that the position
of lowest-cost producer of quality cigarettes is maintained.
13. Anatil should make full use of innovative product and process
developments available from elsewhere within the B.A.T Industries
Group.
14. Anatil should continua to support industry representations to both
Federal and State Governments on taxation and smoking issues and
should play an active role In opposing the anti-smaking lobby.
15. For the leverage division, the primary emphasis should be on
seeking opportunities for market share improvement In order to
strengthen and take full advantage of Amacil's leadership position in
the Australian non-alcoholic beverage market. In addition to pursuing
organic growth. the potential acquisitions identified in Amatil's
Strategy review should also be kept under consideration. Plane to
expand in overseas markets should, initially at least, be restricted
to Austria and New Zealand.
16. For Poultry, Amatil should consider bow the division's perform=&
can be improved and whether the involves*= In this activity should be
rationallsed. Consideration should also be given to the possible
divestment of these businesses.
17. Consideration should also be given to divestment of the Snack Ira"
activities. Rowever, the immediate priority for the division should
be to achleTe improved levels of performance through successful
implementation of the planned rationalisatian and through improvements
in production efficiencies.
18. Within the Communications and Packaging division Amatil should
continue to seek investment opportunities in potential high-ratura and
fast-growing markets, particularly in the Communications and System
area. Such investments should be resourced out of the division's own C)
cash flow, if necessary through divestment of other businesses such an
the Flex.ibles and related packaging operations. The future of the 11.4
Cartons operation should similarly be kept under review. -.0
Its /WA
20th July 1987
BAT Industries document for Province of British Columbia 23 April 1999