D R A F T
Guidelines f or Imasco : July 1987
General
I. Imasca's central objective should be the achievement of returns and
sustained rates of growth in dividends and earnings per share which
compars favourably with other leading businesses in Canada.
2. To support this growth, it is iuSSest*d that, in addition to Tobacco.
Imasco should develop a portf alio of businesses in leadership
positions in growth markets or warkec sagmants capable of providing
sustained organic growth in sales and profits. B.A.T Imdustries would
prefer the main emphasis to be an developments in Canada rather than
the USA and centrad on the Group's main activities of Tobacco,
retailing, Financial Services and PuLp/Paper.
3. In evaluating Imasca's strategies and plans, B.A.T Industries will
apply the an= criteria as are applied to the other businesses within
the Group. In particular, it will be Important to ensure that each of
the businesses within Imsco is operating efficiently and Ls producing
a cash flow which, after covering central overheads, dividends and
interest payments, in sufficient either to fund sales growth at real
rates of at least 6 per cenc par annuis or to produce an equivalent
cash surplus for investment in other activities.
Financial Guidelines
VW; 0@ % -.
4. NEM-Ur-C22% current B.A.T Industries Group shareholding, the
/dividends expected from Imasco (gross of In Withholding Tax) are as
!Ollows:-
Years to 31st December
1987 1988 1989 1990 1991 1992
Om 46 56 63 73 83 94
For 1988 onwards, the proposed dividends are based on a payout ratio
of 40 per cant which is considered an appropriate long-term payout
ratio for a company such as Imasco.
5 ad that leasco seek to achieve an historic cost Tatum
$-on not assets (on a B.A.T Industries" basis) of 26 per cant for its
commercial activities, with a priority being to produce a satisfactory
return for People's Drug. The target for Canada TrustCo. should be
to achieve a suscainad Increase in after-tax profits of 15Z per
anum.
Specific Priorities
6. The first priority for leasco should to the developunc of plans for
re-buildiag the strength of the balance abeet and for ensuring that
each of the individual businesses mak& an appropriate contribution to
Inaeco's profits, cash flow and dividends.
7. For Tobacco, the priority should be to re-build and consolidate PQ
profitability both through price increases and through further
improvements La efficiency whirb will ensure that the posicion of
lowest-cosc producer of quality cigarettes Ls maintained.
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1, In addition, 12asco should continue to pursue improvements in market
share, p @Wv , pi . - - .. . . - - both In axisting
brands and by developing and marketing inniovative now products, making
full "a of developments available from elsewhere within the B.A.T
Industries Group.
9. Imasco should continue to support industry representations to both
Federal and State Governments an taxation and smoking issues and to
play an active role in opposing- the anti-smokimg lobby.
10. For Financial Services, the priority should be to develop p.
for the expansion of Canada T=stCo. In particular, consideration
should be given to ensuring that the projected short-tarn levels of
performance are set and to identifying how growth La after-tax
*arofags of at least 15 per cent a year will be achieved over the
longer tem.
11. Imasco should also develop plans for the addition of complementary
activities to extend the Group's operations In financial services in
Canada.
12. Imasco should continue to play an active part In influencing the
proposed regulations covering financial services' activities La
Canada.
13. Plans should be established concerning the possible reduction of
Imscals shareholding in Canada TrustCo. to 65 per cant.
14. For the Retailing businesses, the first priority must be to
Improve the performance in People's Drug, after which It will be
necassary to review all the retail operations to ensure that they seat
the Group's criteria for being self-supporting in terms of cash at
appropriate real rates of growth.
15. In addition to resolving the problems La those businesses which ar&
not performing satisfactorily at present, Imasco should identify
opportunities for profitable growth once satisfactory bases have been
established.
16. For Rardsieolq, the primary emphasis should be an Improving profit
growth Ind ensuring that the business makes a suitable contribution to
Loascols shareholders before pursuing opportunities to extend and
consolidate Ilardee's &**graphic coverage and product range.
17. For Pee2WA-Drug, the imedlate priority should be to concentrate on
imp tW p4tformance of the care business.
M Inasco should continue to seek opportunities for the development of
Shoppers Drug, both through organic growth and, where appropriate,
atqurjiLtion'. The business should, however, sia to fund Its own
growth, after --king an appropriate contribution to Zmasco for
overheads, etc.
19. It Ls suggested that Imsco should consider the divestzent of the UCS
Group.
CD
RS/DJA
20th July 1997
CD
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BAT Industries document for Province of British Columbia 23 April 1999