Note for the
PROJECT SJEM@ PROGRESS REPORT
As agm-ed at the last TSG meeting, the project Stem team will prepare progress reports and
this one follows the recent meeting of the team.
P&T Formats
Attached as Appendix A is the suggested format for the report on cigarette operations which
will be used at a TSG and Group level; it reflects the outline presented to the last TSG
meeting. The Appendix also contains notes explaining certain of the items but, in addition.
the following key points should be noted:-
(a) The "TSG" (cigarette) data is allocated by market and brand.
(b) The components of this data are split by production. brand owner and end market
manager to separate out the relevant responsibilities. However Group profit for a
market or brand will involve more than one of these columns e.g. the Group profit for a
brand included in the TSG column would pick up the relevant brand profit from each of
the three columns.
(c) The legal entity column reflects the total profit of the relevant operation, whether
company, Op. Group or Group. It includes the cigarette profit in the TSG. column plus:-
- other tobacco operations to give total tobacco profit; this includes leaf operations
- non tobacco operations
- central costs not allocated to cigarette. leaf or non tobacco operations.
ne lines in this column need to be developed to reflect these non cigarette operations.
(d) The definitions included in the Appendix are summansed and wiU need to cover more
detail. This will be considered further at the next project team meeting', in particular,
the split of conversion costs and the splittsubsequent allocation of overheads will be
addressed.
(e) As noted in the last TSG report this exercise [ends itself to a "nctwoW solution with
access to the same "data base" by companies. Op. Groups, brand owners, end market
managers etc.. xho could access and aggregate information as required. To achieve this
will require a major development and implementation of system and data changes,
involving significant internal (and some "ternal) resource.
199';/99 Plan
The Op. Groups will complete their plans as normal and provide information to enable the
usual Group numbers to be consolidated. Also while it is not possible to implement any I%J
longer term reporting system for end market profitability within the time scale, the project C:@
team's initial suggestion is that Op. Groups do the follov-ing in their plan documents supplied --J
to Windsor House:-
co
BAT Industries document for Province of British Columbia 23 April 1999

(a) The P&L statements will, as far as possible, follow the formats intended for use in the
longer term project: the intention is to cover the main headings but not all the detail e.g.
no split of conversion costs would be made.
(b) VVhile the plan document will be based on the Op. Group profit, it will also include a
section showing Group figures for key end markets and key brands for which the
Op. Group has responsibility. A suggested list is attached as Appendix B. Thus, the
intention is to replace the overall 'rough cut' of the budget year undertaken last time by
a more detailed and rigorous analysis covering to key markets and brands for the plan
years; this would cover the key lines in the suggested formats in Appendix A.
Op. Groups are exchanog information to enable the new management responsibilities to
operate and so the 1995 QPR!s will start to include supplementary information on end market
profitability. However. for the next project team meeting, the members are following up the
detailed implications of the points noted above on the plam so that the detailed approach can
be finalised; ongoing reporting for 1995 should be reviewed in the light of these subsequent
discussions.
Market tartivalue share
The project team regard both market share and value share as useful components of regular
management and financial reporting. However. it is considered that they may be better dealt
with as part of a marketing data base (CIGMAR) rather than the proposed STEM financial
data base. The feasibility of making CIGMAR part of an overall Group data base would need
to be carefully investinted and wouK in particular. have the following implications for
CIGMAR.-
(a) Extension of data collected. including formal projections.
(b) Formalisation of input, both method and definitions; consistency with STEM financial
data.
(c) Access to data base to be equivalent to that decided for the STEM financial data base.
In the short term, Op. Groups may deal with value shares. as well as markets shares, in their
1995/99 Plans where this is considered relevant.
TRANSFER ERIC NG
This is obviously a much broader issue than the STEM financial reporting project involving
taxation departments. the work on production capacity etc. and is not therefore part of this
project team's intended work. However, the STEM project should at least provide the
consistency of cost definitions to provide a firmer basis for discussions.
N)
CD
N3
LA
co
--J
rs..)
BAT Industries document for Province of British Columbia 23 April 1999

3
ASSOCIATED COMPANIES
While these must be in the Group data base to provide complete results, there are practical
difficulties in includina associates as part of the data base which My analyses results in
detail between end markets and between brands: we certainly do not currently have the
required information.
rNTFRNATIONAL DUTY FREE
'Me separate analysis of this market as required by the TSC relates to "genuine' duty free.
This highlights the issue of other duty free trade; the basis for defining and reporting end
markets will need to be aereed.
NEXT PRQJ'FCT TFAM MEETING
Ms will concentrate on the following:-
(a) Feedback from the TSG on this note and from the marketing conference.
(b) Review aims for 1995/99 Plan and 1995 QPR's.
(c) Review list of end markets - potential problems
(d) Further detailed development of definitions in Appendix A.
(e) Review logic of Appendix A in detail.
(O Feedback from contact with other multinationals.
(g) Implications of move to longer term system.
I I April 1994
DMJCSq3CWrLDOC
r11-j
-4
U4
00
--4
Q^4
BAT Industries document for Province of British Columbia 23 April 1999