D R A F T
Guidelines for Anatil : July 1957
General
L. The central objective for Amatil should be the achievement of returns
and sustained rates of growth In dividend and earnings per share which
compare favourably with other leading businesses La Australia.
2. There should be an aim to position Amacil in Tobacco and in a limited
number of other activities of substantial size in leadership positions
in growth markets or market seScients capable of providing sustained
organic growth in sales and prof In selecting such growth
opportunities, Amacil should have regard to B.A.T Industries'
preference for developments in Tobacco, Retail, Financial Services and
Pulp/?aper.
3. In evaluating Amatil's strategies and plans, B.L.T Industries will
apply the same criteria an are applied to the other businesses within
the Group. In particular, it will be tzpaccant to ensure that each of
the businesses within Anatil is operating efficiently and is producing
a cash flow which, after covering central ovarhaads, dividends and
Interest payments, is sufficient to either fund sales growth at real
rates of at least 6 per cant per annum or to produce an equivalent
cash surplus for investment in other activities.
Financial Guidelines
'%@W r $...a
4. %5i;2iVA" current B.A.T Industries Group shareholding, the
diviAa-d- expected from Amtil @Swess ed 81's"al-d-Ing --) are as
follows:-
Years to 31st October
1987 1988 1989 1990 1991 1992
A$m 12.2 14.0 16.2 18.6 21.4 24.6
- @ " 0.164 *'@
The guideline dividends racomenpdl;@q/Sarreo-biarso*#d@"o%u@oreaI growth of 8 per
cent per annum with Inflation of 6.5 per cent per annua.
5. Lr- 2.1 ad that Amatil seek an overall historic cost return on
net "Sacs (on a B.A.T Industries' basis) of 30 per cant, with no
Individual division achieving lose than 20 per cent. In addition,
individual operating division should Siva priority consideration to
the issues of improving sales margins and ensuring positive cash
temeratiom (after attributable dividends, interest and taxation
costs).
Specific Priorities
6. Azatil's first priority should be to seek improved performance La all
the existing businesses. When iad,iv-idual businesses do not "at the
requirement of being In leadership positions La growth markets and
achieving returns sufficient to Siva cash Self-sufficiency at real
races of growth of at least 6 per cant per action plans should
be developed either for improving the performance and position of the
businesses or for their divestment.
MI'
7. Thera should be an aim to reposition Anatil in fewer but more C)
substantial operations and as a first stage in this, consideration
might be given to divesting the Snack Food and Poultry divisions in
order to support further itvestz*nr in the Beverages division.
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9. Look-'ng longer term, other opportunities f or repositioning Anatil
should be considered, giving particular emphasis to opportunities in
activities in which B.A.T Industries is aLready involved and where it
night be possible to take advantage of synergistic bamef its.
9. Priority should also be given to formulating plans for funding these
investments, making the use of internal resources, including
the proceeds from divestments.
LO. For Tobacco, the first priaritz- shoald be to rebuild market share,
particularly In the full-price segment; by ensuring that full use Is
made of the competitive strengths derived from the new manufacturing
facilities and by developing and markating innovative new products.
Progress an achieving market share improvemenrs should, however, be
monitored closely to ensure that any shortie= adverse impact an
profitability does not endanger Amatil's overall financial position
and capacity to pay dividends.
11. Priority should be given to consolidating the performance of the
domestic tobacco operation before seeking rationalization In the other
Australasian and Pacific Island markets.
12. Worts should continua to improve efficiencies to that the position
of lowest-cosc producer of quality cigarettes is maintained.
13. Amatil should sake full use of innovative product and process
developments available from elsewhere within the B.A.T Industries
Group.
14. Amatil should continue to support industry representations to both
Federal and State Governments au ta=tl= and smoking issues mg
should play an active role in opposing the antismoking lobby.
15. For the Beverage division, the primary emphasis should be an
seeking opportunities for market share improvement in order to
strengthen and take full advantage of Amatil's leadership position In
the Australian non-alcobalic beverage market. In addition to pursuing
organic growth, the potential acquisitions identified in Azacil' 5
Strategy Review should also be kept under consideration. Plane to
expand In overseas markets should, initially at least, be restricted
to Austria and Now Zealand.
16. Par Poultry, Anatil should consider bow the division's performanc&
h" bw) cm be improved and whether the involvement in this activity should be
racionalisod. Consideration should also be given to the possible
divestment of these businesses.
17. Consideration should also be given to divestment of the Smack Food
activities. Row-aver, the immediate priority for the division should
be to achieve improved levels of performance through successful
implementation of the planned razionallsaclon and through inprovesants
in production efficiencies.
18. Within the Commudcatious and Packaging division Amatil should'
continue to seek investment opportunities in potential bigh-return and
fast-groving markets, particularly in the Communications and Systems
area. Such Investments should be resourced out of the division's own
cash flow, if necessary through divestment of other businesses such as
the Flaxibles and related packaging operations. The future of the
Car:ons operation should similarly be kept under review.
RS/DJA
20 th July 1987
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BAT Industries document for Province of British Columbia 23 April 1999