Tot Sir Patrick Sheehy
Mr- B.P. carralm,
Mr. X.?. Brought**
Mr. M.A. Batt
r
b.c.c. Mr. P. Crawford
Mr. D.?. Allvey
Mr. E. Et
lsa"o P11121 1991-1"5
The CPC Is due to discuss the Izalco plan at a meeting arranged for 10.00 a.m.
au Tuesday. 22ad January.
A copy of the Guidelines sent to Imasco at the end of July is attached.
Planning Department comments on the Plan are as follows:-
1. Objectives : The financial objectives for Imasca (Section I of the Plan)
are in a d1f ferent form from those of I-A.T Industries and it eight be .
questioned whether it would be helpful for Imasca to place more emphasis ans-
(a) The definition of shareholder value and an objective to produce returns
to the shareholders measured in terms of dividends and capital growth
superior to that of other leading Canadian companies (Guideline 9c).
(b) The need for individual businesses to achieve results au ficlout to
i
sake a full contribution to the overall results for Ima 0, especially
in tarma of net cash flaw (Guideline covering letter, paragraph 4a).
Note : Although the leasc* Plan shows the act cash flaw for each
business, this Ls before financing costs and dividends. The not cash
flow after financing costs for Rardaes/M and UCS is likely to be
negative throughout the Plan and even the cash contribution from
Shoppers Drug way be very limited. J.
(c) Being composed of businesses in leadership positions in markets wh
there are good prospects for sustained long term prof itxble growth
(Guideline covering letter, paragraph 4b) -
2. There must also be doubts about the achievability of the objectives for
earnings growth set out in Section 1, page 2. Although the earnings trowth
for 1990-1995 Ls above the 2OZ target, this depends an the depressed fivwes
for 1990. .-The historical record shown on page 3 of Section 4 and the vote
representative growth rates from 1989 to 1995 are a Lpif Icant17 lower than
the Imasco objectives.
Urnings C30 Growth antics X P.&.
1989 1990 1925 1990-1995 1989-1995
Tobacco 334*0 .367.0 578.5 9.5 9.6
Rardoes 118.6 72.2 187.0 21.0 7.9
Shoppers 70.6 $1.3 156.8 14*0 14.2
8.3 9.1 15.9 11.3 11*4
152.5 114.9 328.6 23.4 13*6
TOTAL 684*0 644.6 1266.8 14.5 10.8
Admin. (31.6) (31.0) -(40.8) 5.6 4.4
'Interest (195.5) (212.0) (173.0) (4.0) (2.0)
M 456.9 401.6 1053.0 21.3 14.9
TAX (95.4) (89.0) (253.7) 23.3 17.7
NIT ZARKMS 361.5 3 12. 6 799.4 20.7 - 7 14.1
3. It would be interesting to see a copy of the annual report indicating the
contribution of thc lassco Contra to shareholder value (Section 1. page 3).
C)
N;
co
BAT Industries document for Province of British Columbia 12 April 1999

4. The Balance Sheet is shown as strongtboulag signifleantly In the period to
1993 (Section 4, page 13). la-ver, it eight be questioned wbother the
figures for the early years reflect the priority suggested in the
Guidelines (8).
5 . Two subjects not discussed In the Plan but which might be raised at the
seating are the Implications of Quebec SeparaUsis (Guideline 4) and the
Financial Services L"aslatim (Guideline 16).
6. 1uperial Tobacco : The plans do not address the potential threat pan"
by the growth of M brands (Guideline 11) or the question of productivity
relative to US manufactfirers (Guideline 12).
7. The strategy with respect to stick @also Is not clear (Plan, 'PA* 4).
S. Rardoes/M : The Plan shows relatively poor results for Hard*** and
PIM throughout the period. The Guidelines (21) suggested that priority
should be given to deciding whether Imasco wishes to remain In the Fast
flood factor and it eight be suggested that, following the review scheduled
for the first quarter of 1991 (Plan, page 6), further consideration abould
be given to this issue.
9. Shorter term, TA&sco eight be asked to comment an the impLications If that*
Is a shortfall in divestitures (e.g. 50 rather. than 100 units per year)
(Plan, page 4). 0
10. Imesco might also be asked to show the results for the international
operations separately to Siva a better Indication of the value of these.
11. Shoppers Drug Hart : Imanco eight be asked to expand on the
implications and contingency plans if tobacco sales La drug stores art
banned (Plan, page B).
12. VW : It might be questioned %bother the existing plan meets the
criterion that UCS should be capable of operating as a self-sufficient
business (Guideline 20).
13. CT Financial Services The Guidelines (13) asked that Isaac* should
give priority to pursuing their aim to agree as won so possible a long
term plan for the expansion and development of CT Financial Services. It
Is disappointing, therefore, that a complete 3 year plan is expected only
in the 2nd Quarter of 1991. In view of the Importance of CT to Imasco,
Mr. Crawford has been asked to provide additional information on the
current plans for CT, before the CPC meeting.
14. For Genstar Dwelopmts and the peripheral activities within Is"co
laterprises Ime. It night be suggested that further priority should be
given to seeking divestment &*A closure options (Guideline 17).
15. It would also be helpful to establish the degree of exposure to claims on
the nintkate Co. (Plan, page 3).
16. It Is intended that the summary for the B.A.T Industries Board presentation
an 5th February will be produced within Windsor House, Incorporating VK
accounting figures.
R. Salter
RSIDJA 9th January 1991 CO
BAT Industries document for Province of British Columbia 12 April 1999