GuIA@14--s for Imsea i October 1989
"novel
1. The central objective for Isaac* Is to achieve returns and sustained rates of
growth in earnings and dividends which compare favourably with other leading
businesses in Canada.
2. In evaluating Imasco's strategies and plans, B.A.T Industries will apply
criteria similar to those applied to the other businesses within the Group.
In particular, each of the businesses within Iassco should be operating
efficiently and profitably, producing a cash flow which, after covering
central overheads, interest payments and dividends, is either sufficient to
fund growth at the desired rate or to give an equivalent cash surplus for
investment elsewhere.
Financial Guidelines
3. Dividends : Bused on the present B.A.T Industries Croup shareholding, the
mint-us dividends expected from Imasco (gross of withholding tax) are:-
Year to 31st December
1989 1990 1991 1992 1993 1994
C$n 57 62 76 93 ill 128
These Guidelines are based an 1"sco achieving a minimum dividend payout of
45% of prior year earnings. It in noted that the actual dividend declared by
Imasco for 1989 (C$1.12 per share - SAT's share CE54 million) In below the
target level.
4. Returns and Profits : Imanco will seek to achieve an historic cost return
on net assets (an a B.A.T Industries' basis) for its commercial activities in
accordance with existing plan, rising from the current level of 26% to 35Z
by 1994. The target for C.T. Financial will be to achieve a sustained
increase in after-tax profits of 15% p.a., with Imascols equity in the net
earnings of Imseco Enterprises growing at 20% p.a. These targets will be
reviewed In the event that Imasco is required to reduce its balding in C.T.
Financial. I
5. Balance Sheet : Imasco will continue to give a high priority to
implementing measures to further strengthen its balance sheet.
Strategic Priorities
6. For Tobacco, B.A.T Industries will be looking to Imperial Tobacco to
&chi*" at least the earnings and cash flow projected In the 1989/93 Imseco
Plan, eliminating the 'earnings' gap through further improvements in
productivity and market share and by seeking additional selective price
Increases.
7. Thar* will be particular Interest In the plans to increase market share, to rQ
maintain Im SC a' a position as the lowest cost producer of quality cigarettes CD
in Canada and to maintain competitiveness against potential compatitiou-from, -
the USA.
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2
8. Thera will also be interest in the plans for maintaining close links with
Government and others both in order to influence Federal and Provincial
policy with regard to the taxation of cigarettes and to ensure that the
Tobacco Products Control Act is not amended in a way which would have an
adverse impact on the performance of Imperial Tobacco.
9. For Shoppers Drug Hart. it in expected that the plans for 1990/4 will
show trends similar to those in the previous plan with a 15% p.m.
improvement In earnings based an a continuing development of the business.
10. For Peoples Drug State, it Is expected that the plans will show either
a ratiouallsetion programme leading to a continuing business which is
capable of making an adequate return to the cash flow and development of
Imasco or, failing this, firm plans for divestment.
11. For the UCS Group, it is rdcognised that the business has a role in the
development of the tobacco activities, but the plane for this operation
will also be evaluated on the basis that it should also meet the criteria
for a profitable self-sufficient business.
12. For Imasco USA, it Is expected that the priority will be to secure
significant and continued Improvements through higher productivity. less
waste and better margins through storL-for-store growth. It is also
expected that the strategy will be to build on the position an a strong
regional network with increasing market shares rather than seeking national
coverage.
13. It is also expected that further consideration will be given to the optimum
future for the Past Food Merchandisers operation.
14. With regard to Financial Services, it is expected that laseco will have
plans to improve its participation in astabLishing the strategic direction
and development of C. T. Financial.
15. In particular, it is expected that Imasco will work with C.T. Financial to
ensure that plans are developed for improving the rate of organic growth of
the business through strengthening the marketing effort, making innovative
and efficient use of technology and by maintaining a competitive product
range. It is also expected that there will be plans to achieve
improvements in the control and containment of costs in C.T. Financial.
16. It is expected that Imasca will continue to monitor programs relating to
the Financial Services regulatory framework in Canada with a view to
maximising the opportunities for extending the Group's involvement in
profitable, fast-growing sectors of the market. PQ
17. It In expected that Imasco will continue to develop both Genstar C)
Development Company and the Venture Capital business, but that
opportunities for early divestment will also be sought. 00
N)
RS/CC
lOtb October 1989 NJ
BAT Industries document for Province of British Columbia 13 April 1999