Guidelines for Isasco : October 1989
Ceneral
1. The central objective for Imasco 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 Tmasco I strategies and plans, B.A.T Industries will apply
criteria similar to those applied to the other businesses within the Croup.
In particular, each of the businesses within Imasco should be operating
efficiently and profitably, producing a cash flow which. after covering
central overheads, interest pa7mauts 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 : Based on the present B.A.T Industries Group shareholding, the
minimum dividends expected from Imasco (gross of withholding tax) are:-
Year to 31st December
1989 1990 1991 1992 1993 1994
C$M 57 62 76 93 ill 128
These Guidelines are based ou Imasco achieving a minimum dividend payout of
45Z of prior year earnings. It in noted that the actual dividend declared by
Imasco for 1989 (C$1.12 per share - BAT's share CL54 million) is below the
target level.
4. Iteturns. and Profits , Imasco will seek to achieve an historic cost return
on net assets (on a B.A.T Industries' basis) for its commercial activities in
accordance with existing plans, rising from the current level of 26Z to 35%
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
revieved in the event that Izaaco is required to reduce its holding in C.T.
Financial.
S. Balance Sheet : Jaasco 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,
achieve at least the earnings and cash flow projected In the 1989/93 Imasco
Plan, eliminating the earnings' gap through further improvements in
productivity and market share and by seeking additional selective price
increases.
7. There will be particular interest in the plans to increase market share, to
maintain Imascols position as the lowest cost producer of quality cigarettes
in Canada and to maintain competitiveness against potential competition from N)
the USA.
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B. There will also be interest in the plans for maintaining close links with
Cover--t 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 &-ended in a way which would have an
adverse Impact on the performance of Imperial Tobacco.
9. For Shoppers Drug Mart, it is expected that the plans for 1990/4 Vill
show trends similar to those in the previous plan with a 15% R.&.
improvement in earnings based on a continuing development of the business.
10. For Peoples Drug Store, it is expected that the plans will show either
a rationaUsation programe leading to a continuing business which is
capable of making an adequate return to the cash flow and development of
Izasco or, failing this, firm plans for divestment.
U. For the UCS Croup, it in recognised that the business has a role in the
development of the tobacco activities, but the plans 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 stom-for-store growth. It is also
expected that the strategy, will be to build on the position as 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 Fast Food Merchandisers operation.
14. With regard to Financial Services, it is expected that Imasco will have
plans to improve its participation in establishing 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 in 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 Inasco will continue to monitor progress relating to
the Financial Services regulatory framework in Canada with a view to
saximising the opportunities for extending the Group's involvement in
profitable, fast-growing sectors of the market.
17. It is expected that Imasco will continue to develop both Genstar
Devel"went Company and the Venture Capital business, but that rQ
opportunities for early divestment will also be sought. C:)
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10tb October 1989
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BAT Industries document for Province Of British Columbia 23 April 1999