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1 Accounting policies
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB)
and UK-adopted international accounting standards@, and in
accordance with the provisions of the UK Companies Act 2006@.
UK-adopted international accounting standards differ in certain
respects from IFRS as issued by the IASB. The differences have no
impact on the Group\u2019s consolidated financial statements for the
periods presented.
The consolidated financial statements have been prepared on a
going concern basis under the historical cost convention except as
described in the accounting policy below on financial instruments.
In performing its going concern assessment, Management
considered forecasts and liquidity requirements covering a period
of at least twelve months from the date of approval of the financial
statements and including the Group\u2019s ability to fund its operations
and generate cash to pay for debt as it falls due and takes into
account the payments arising from the Master Settlement
Agreement due in the U.S. in 2024 and other known liabilities or
future payments (including interim dividends), as they fall due. This
assessment includes consideration of geopolitical events in Europe
and the general outlook in the global economy, as well as plausible
downside scenarios after taking into account the Group\u2019s Principal
Risks and how they could impact the Group\u2019s operations. Any
mitigating actions, should they be required, are all within
management\u2019s control and could include reductions in
discretionary spending such as acquisitions and capital
expenditure, or drawdowns on committed facilities. After reviewing
the Group\u2019s annual budget, plans and financing arrangements, the
Directors consider that the Group has adequate resources to
continue operating and that it is therefore appropriate to continue
to adopt the going concern basis in preparing the Annual Report
and Form 20\u2011F.
In preparing the financial statements, Management has considered
the impact of climate change@, particularly in the context of the
risks identified in the TCFD disclosure@ and determined that
the \u00a0impact is not expected to be material:
\u2013 On the going concern @and viability@ of the Group, @over
the\u00a0next three years@;
\u2013 On the Group\u2019s assessment of future cash flows (including as
related to the capital expenditure plans as related to the Group\u2019s
Scope 1 and 2 GHG emission reduction commitments) as used in
impairment assessments for the value in use of non-current
assets including goodwill (note\u00a012(b)); and
\u2013 In respect of factors including useful lives and residual values
that\u00a0determine the carrying value of non-financial current assets.
There has been no material impact identified on the financial
reporting judgements and estimates. Management is aware that
the risks related to climate change are developing and ever
changing. Accordingly, these judgements and estimates will be
kept under review as the future impacts of climate change on the
Group\u2019s financial statements depend on environmental, regulatory
and other factors outside of the Group\u2019s control which are not all
currently known.
The preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the disclosure of contingent liabilities at the date of the financial
statements. The key estimates and assumptions are set out in
the accounting policies below, together with the related notes
to the accounts.
The critical accounting judgements include :
\u2013 the determination as to whether control (subsidiaries), joint
control (joint arrangements), or significant influence (associates)
exists in relation to the investments held by the Group. This is
assessed after taking into account the Group\u2019s ability to appoint
Directors to the entity\u2019s Board, its relative shareholding
compared with other shareholders, any significant contracts or
arrangements with the entity or its other shareholders and other
relevant facts and circumstances. The application of these
policies to Group subsidiaries in territories, including Canada,
is\u00a0explained in note 32;
\u2013 the determination as to whether the disposal of a business or
businesses is significant enough to require disclosure in current
and prior years as a discontinued operation;
\u2013 the review of applicable exchange rates for transactions with
and\u00a0translation of entities in territories where there are
restrictions on free access to foreign currency, or multiple
exchange rates;
\u2013 the determination as to whether to recognise provisions and the
exposures to contingent liabilities related to pending litigation or
other outstanding claims, as well as other contingent liabilities.
The accounting policy on contingent liabilities, which are not
provided for, is set out below and the contingent liabilities of the
Group are explained in note 31. Judgement is necessary to assess
the likelihood that a pending claim is probable (more likely than
not to succeed), possible or remote;
\u2013 the determination as to whether perpetual hybrid bonds should
be classified as equity instead of borrowings (note 22(d)); and
\u2013 the identification and quantification of adjusting items. These are
separately disclosed as memorandum information as explained
below, and the impact of these on the calculation of adjusted
earnings per share is described in note\u00a011.
The critical accounting estimates include:
\u2013 the review of asset values, including indefinite life assets, such as
goodwill and certain trademarks and similar intangibles. The key
assumptions used in respect of the impairment testing are the
determination of cash-generating units, the budgeted and
forecast cash flows of these units, the long-term growth rate for
cash flow projections and the rate used to discount the cash flow
projections. These are described in note 12;
\u2013 the estimation of amounts to be recognised in respect of taxation
and legal matters, and the estimation of other provisions for
liabilities and charges are subject to uncertain future events, may
extend over several years and so the amount and/or timing may
differ from current assumptions. The accounting policy for
taxation is explained below. The recognised deferred tax assets
and liabilities, together with a note of unrecognised amounts, are
shown in note 16, and a contingent tax asset is explained in note
10(b). Other provisions for liabilities and charges are as set out in
note 24. Litigation related deposits are shown in note 17. The
application of these accounting policies to the payments made
and credits recognised under the Master Settlement Agreement
by Reynolds American Inc. (Reynolds American) is described in
note 6(b); and
\u2013 the estimation of and accounting for retirement benefit costs.
The determination of the carrying value of assets and liabilities,
as\u00a0well as the charge for the year, and amounts recognised in
other comprehensive income, involves judgements made in
conjunction with independent actuaries. These involve estimates
about uncertain future events on a country-by-country basis,
including life expectancy of scheme members, salary and pension
increases, inflation, as well as discount rates and asset values at
the year-end. The assumptions used by the Group and sensitivity
analyses are described in note 15.
Such estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management\u2019s
best judgement at the date of the financial statements. In the
future, actual experience may deviate from these estimates and
assumptions, which could affect the financial statements as the
original estimates and assumptions are modified, as appropriate,
in the year in which the circumstances change.
These consolidated financial statements were authorised for
issue by the Board of Directors on 7\u00a0February 2024.
With effect from 1 January 2023, the Group has adopted two
Amendments to IAS 12 Income Taxes: in respect of deferred tax
in\u00a0relation to assets and liabilities arising from a single transaction;
and in respect of exceptions from the recognition and disclosure of
deferred tax related to income taxes arising from tax law enacted
or substantively enacted to implement the Pillar Two model rules
published by the Organisation for Economic Co-operation and
Development (OECD), including tax law that implements qualified
domestic minimum top-up taxes described in those rules.
The\u00a0impact of applying these amendments was not material.
In addition, an Amendment to IAS 1 Presentation of Financial
Statements requires the disclosure of material accounting policy
information as part of the Notes to the Accounts and these are set
out below. Accounting policy information is material if, when
considered together with other information included in an entity\u2019s
financial statements, it can reasonably be expected to influence
decisions that the primary users of general purpose financial
statements make on the basis of those financial statements.
Basis of consolidation
The consolidated financial information includes the financial
statements of British American Tobacco p.l.c. and its subsidiary
undertakings, collectively \u2018the Group\u2019, together with the Group\u2019s
share of the results of its associates and joint arrangements.
A subsidiary is an entity controlled by the Group. Non-controlling
interests represent the share of earnings or equity in subsidiaries that
is\u00a0not attributable, directly or indirectly, to shareholders of the Group.
Identifiable assets and liabilities acquired in a business
combination are measured at fair value at the date of acquiring
control. Disposals of subsidiaries and businesses due to sale or
market withdrawal are accounted for as disposals from the date
of\u00a0losing control and may be classified as held-for-sale disposal
groups at the balance sheet date if specific tests under IFRS 5
Non-current Assets Held For Sale and Discontinued Operations
are met. Discontinued operations, where applicable, comprise
material disposal groups representing a significant geographical
area of operations or business activities.
Associates comprise investments in undertakings, which are not
subsidiary undertakings or joint arrangements, where the Group
exercises significant influence. They are accounted for using the
equity method.
Joint arrangements comprise contractual arrangements where
two or more parties have joint control and where decisions regarding
the relevant activities of the entity require unanimous consent.
Joint ventures are accounted for using the equity method. The
Group accounts for its share of the assets, liabilities, income and
expenses of joint operations.
Foreign currencies and hyperinflationary territories
The functional currency of the Parent Company is sterling and this
is also the presentation currency of the Group. The income and
cash flow statements of Group undertakings expressed in
currencies other than sterling are translated to sterling using
exchange rates applicable to the dates of the underlying transactions.
Average rates of exchange in each year are used where the average
rate approximates the relevant exchange rate at the date of the
underlying transactions. Assets and liabilities of Group undertakings
are translated at the applicable rates of exchange at the end of
each year. In territories where there are restrictions on free access
to foreign currency or multiple exchange rates, the applicable rates
of exchange are regularly reviewed.
The differences arising on the retranslation to sterling of Group
undertakings with functional currencies other than sterling are
presented as a separate component of equity in the Translation
reserve within Other reserves, as shown in note 22. They are
recognised in the income statement when the gain or loss on
disposal of a Group undertaking is recognised.
Transactional foreign exchange gains and losses on the revaluation
or settlement of receivables and payables are recognised in the
income statement, except when deferred in equity on
intercompany net investment loans, on qualifying net investment
hedges, or as qualifying cash flow hedges. Foreign exchange gains
or losses recognised in the income statement are included in profit
from operations or net finance costs depending on the underlying
transactions that gave rise to these exchange differences.
In addition, for hyperinflationary countries where the effect on the
Group results would be significant, the financial statements in local
currency are adjusted to reflect the impact of local inflation prior to
translation into sterling, in accordance with IAS 29 Financial Reporting
in Hyperinflationary Economies. Where applicable, IAS 29 requires all
transactions to be indexed by an inflationary factor to the balance
sheet date, potentially leading to a monetary gain or loss on
indexation. The results and balance sheets of operations in
hyperinflationary territories are translated at the period end rate.
Provisions, contingent liabilities and contingent assets
Provisions are recognised when either a legal or constructive
obligation as a result of a past event exists at the balance sheet
date, it is probable that an outflow of economic resources will be
required to settle the obligation and a reasonable estimate can be
made of the amount of the obligation.
Subsidiaries and associate companies are defendants in tobacco-
related and other litigation. These exposures are regularly reviewed
on an on-going basis and provision for this litigation (including legal
costs) is made at such time as an unfavourable outcome becomes
probable and the amount can be reasonably estimated.
Contingent assets are possible assets whose existence will only
be confirmed by future events not wholly within the control of the
entity and are not recognised as assets until the realisation of
income is virtually certain.
Where a provision has not been recognised, the Group records its
external legal fees and other external defence costs for tobacco-
related and other litigation as these costs are incurred.
As explained in note 17, certain litigation-related deposits are
recognised as assets within loans and other receivables where
management has determined that these payments represent a
resource controlled by the entity. These deposits are held at the
fair value of consideration transferred less impairment, if applicable,
and have not been discounted.
Taxation
Tax is chargeable on the profits for the period, together with deferred
tax. The current income tax charge is calculated on the basis of tax
laws enacted or substantively enacted at the balance sheet date in
the countries where the Group\u2019s subsidiaries, associates and joint
arrangements operate and generate taxable income.
Deferred tax is determined using the tax rates that have been
enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or deferred tax liability is settled. A deferred tax asset is
recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised.
Tax is recognised in the income statement except to the extent that
it relates to items recognised in other comprehensive income or
directly in equity, in which case it is recognised in the statement of
other comprehensive income or the statement of changes in equity.
The Group has exposures in respect of the payment or recovery of
taxes and the financial statements reflect the probable outcome
with estimated amounts determined based on the most likely
amount or the expected value, depending on which method is
expected to better predict the resolution of the uncertainty.
Equity instruments
Instruments are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements. Instruments that cannot be settled in the Group\u2019s
own equity instruments and that include no contractual obligation
to deliver cash or another financial asset are classified as equity.
Equity instruments issued by the Group are recognised at the
proceeds received, net of issuance costs.
Goodwill
Goodwill in respect of the acquisition of subsidiaries is included in
intangible assets, net of impairment, where applicable. In respect
of associates and joint ventures, goodwill is included in the
carrying value of the investment in the associated company or
joint venture.
Intangible assets other than goodwill
The intangible assets shown on the Group balance sheet consist
mainly of trademarks and similar intangibles, including certain
intellectual property, acquired by the Group\u2019s subsidiary
undertakings and computer software.
Acquired trademarks and similar assets are carried at cost less
accumulated amortisation and impairment. Trademarks with
indefinite lives are not amortised but are reviewed annually for
impairment. Other trademarks and similar assets are amortised
on\u00a0a straight-line basis over their remaining useful lives, consistent
with the pattern of economic benefits expected to be received,
which do not exceed 20 years. Any impairments of trademarks are
recognised in the income statement, but increases in trademark
values are not recognised. With effect from 1 January 2024, the
Group\u2019s indefinite-lived combustible trademarks and similar assets
will be amortised on a straight-lined basis over periods not
exceeding 30 years. The revision in useful economic life reflects
the\u00a0ongoing challenging macro-economic conditions and revised
forecast in the U.S., with an expected increase in amortisation
expense of \u00a31.4\u00a0billion per\u00a0annum. The Group's non-combustible
trademarks will remain as indefinite-lived assets.
Computer software is carried at cost less accumulated
amortisation and impairment, and, with the exception of global
software solutions, is amortised on a straight-line basis over
periods ranging from three years to five years. Global software
solutions are software assets designed to be implemented on a
global basis and used as a standard solution by all of the operating
companies in the Group. Historically, these assets were amortised
on a straight-line basis over periods not exceeding 13 years. With
effect from 1 January 2023, global software solutions are
amortised on a straight-line basis over periods not exceeding
15\u00a0years. The revision in useful life is a result of ongoing use of
Global software solutions due to the extension of third-party
supplier support. The\u00a0estimated impact of this change in
accounting estimate is a\u00a0reduction in annual amortisation expense
of \u00a316\u00a0million in 2023, with similar reductions expected in 2024
and\u00a02025.
Property, plant and equipment
Purchased property, plant and equipment are stated at cost less
accumulated depreciation and impairment. Depreciation is
calculated on a straight-line basis to write off the assets over their
useful economic life. Purchased freehold and leasehold property
are depreciated at rates between 2.5% and 4% per annum, and
plant and equipment at rates between 3% and 25% per annum.
No depreciation is provided on freehold land or assets classified
as\u00a0held-for-sale. Non-current assets are classified as held-for sale
if their carrying value will be recovered principally through a sale
transaction rather than through continuing use and if all of the
conditions of IFRS 5 are met.
Leased assets and lease liabilities
The Group applies IFRS 16 Leases to contractual arrangements
which are, or contain, leases of assets. Right-of-use assets are
included as part of property, plant and equipment in note 13, with
the lease liabilities included as part of borrowings in note 23. Right-
of-use lease assets are initially recognised at an amount equal to
the lease liability, adjusted for initial direct costs in relation to the
assets, then depreciated over the shorter of the lease term and
their estimated useful lives. Lease liabilities are initially recognised
at an amount equal to the present value of estimated contractual
lease payments at the inception of the lease, discounted using the
interest rate implicit in the lease if this can be readily determined,
or the applicable incremental rate of borrowing, as appropriate.
The Group has adopted several practical expedients available
under the Standard including not applying the requirements of
IFRS 16 to leases of intangible assets, and not applying the
recognition and measurement requirements of IFRS 16 to leases
of\u00a0less than 12 months maximum duration or to leases of low-value
assets. Except for property-related leases, non-lease components
have not been separated from lease components.
Impairment of non-financial assets
Assets are reviewed for impairment whenever events indicate
that\u00a0the carrying amount of a cash-generating unit may not be
recoverable. In addition, assets that have indefinite useful lives are
tested annually for impairment. An impairment loss is recognised
to the extent that the carrying value exceeds the higher of the
asset\u2019s fair value less costs to sell and its value-in-use.
A cash-generating unit is the smallest identifiable group of assets
that generates cash flows which are largely independent of
the cash flows from other assets or groups of assets. At the
acquisition date, any goodwill acquired is allocated to the relevant
cash-generating unit or group of cash-generating units expected
to benefit from the acquisition for the purpose of impairment
testing of goodwill.
Retirement benefit schemes
The Group's subsidiary undertakings operate various funded and
unfunded defined benefit schemes, including pension and post-
retirement healthcare schemes, as well as defined contribution
schemes in various jurisdictions.
The liabilities arising in respect of defined benefit schemes are
determined in accordance with the advice of independent,
professionally qualified actuaries, using the projected unit credit
method. The net deficit or surplus for each defined benefit pension
scheme is calculated on the present value of the defined benefit
obligation at the balance sheet date less the fair value of the
scheme assets adjusted, where appropriate, for any surplus
restrictions or the effect of minimum funding requirements.
Benefits provided through defined contribution schemes are
charged as an expense as payments fall due.
Financial instruments
The Group\u2019s business model for managing financial assets aims:
to\u00a0protect against the loss of principal, to maximise Group liquidity
by concentrating cash at the centre, to align the maturity profile
of\u00a0external investments with that of the forecast liquidity profile,
to\u00a0match the interest rate profile of external investments to that
of\u00a0debt maturities or fixings wherever practicable, and to optimise
the investment yield within the Group\u2019s investment parameters.
The\u00a0majority of financial assets are held in order to collect
contractual cash flows (typically cash and cash equivalents and loans
and other receivables), but some assets (typically investments)
are\u00a0held for investment potential.
Financial assets and financial liabilities are recognised when
the\u00a0Group becomes a party to the contractual provisions of the
relevant instrument and derecognised when it ceases to be a party
to such provisions.
Non-derivative financial assets are classified on initial
recognition in accordance with the Group\u2019s business model as
investments, loans and receivables, or cash and cash equivalents
and accounted for as follows:
\u2013 Investments: these are non-derivative financial assets that
cannot be classified as loans and other receivables or cash
and cash equivalents. Dividend and interest income on these
investments are included within finance income when the Group\u2019s
right to receive payments is established. This category includes
financial assets at fair value through profit and loss and financial
assets at fair value through other comprehensive income.
\u2013 Loans and other receivables: these are non-derivative financial
assets with fixed or determinable payments that are solely
payments of principal and interest on the principal amount
outstanding, that are primarily held in order to collect
contractual cash flows. These balances are measured at
amortised cost, using the effective interest rate method, and
stated net of allowances for credit losses, and include trade
and other receivables, and deposits with banks and other
financial institutions which cannot be classified as cash and
cash equivalents. In addition, as explained in note 17, certain
litigation related deposits are recognised as assets within loans
and other receivables where management has determined that
these payments represent a resource controlled by the entity as
a result of past events. These deposits are held at the fair value
of consideration transferred less impairment, if applicable, and
have not been discounted.
\u2013 Cash and cash equivalents: cash and cash equivalents include
cash in hand and deposits held on call, together with other short-
term highly liquid investments including investments in certain
money market funds.
Fair values for quoted investments are based on observable
market prices. If there is no active market for a financial asset, the
fair value is established by using valuation techniques principally
involving discounted cash flow analysis.
Non-derivative financial liabilities, including borrowings and trade
payables, are stated at amortised cost using the effective interest
method. For borrowings, their carrying value includes accrued
interest payable, as well as unamortised issue costs. Drawdowns
and repayments of short-term borrowings which have a maturity
period of three months or less are stated net in the cash flow
statement; drawdowns and repayments on all other borrowings
are stated gross in the cash flow statement. Current liabilities
include amounts where the entity does not have an unconditional
right to defer settlement of the liability for at least 12\u00a0months after
the balance sheet date. As shown in note 23, certain borrowings are
subject to fair value hedges, as defined below.
Derivative financial assets and liabilities are initially recognised,
and subsequently measured, at fair value, which includes accrued
interest receivable and payable where relevant. Changes in their
fair values are recognised as follows:
\u2013 for derivatives that are designated as cash flow hedges, the
changes in their fair values are recognised directly in other
comprehensive income, to the extent that they are effective,
with the ineffective portion being recognised in the income
statement. Accumulated gains and losses are reclassified to
the\u00a0income statement in the same periods as the hedged item,
unless the hedged item results in a non-financial asset where the
accumulated gains and losses are included in the initial carrying
value of the asset (basis adjustment);
\u2013 for derivatives that are designated as fair value hedges, the
carrying value of the hedged item is adjusted for the fair value
changes attributable to the risk being hedged, with the
corresponding entry being made in the income statement.
The\u00a0changes in fair value of these derivatives are also recognised
in the income statement;
\u2013 for derivatives that are designated as hedges of net investments
in foreign operations, the changes in their fair values are
recognised directly in other comprehensive income, to the
extent that they are effective, with the ineffective portion being
recognised in the income statement. Where non-derivatives
such as foreign currency borrowings are designated as net
investment hedges, the relevant exchange differences are
similarly recognised. The accumulated gains and losses are
reclassified to the income statement when the foreign operation
is disposed of; and
\u2013 for derivatives that do not qualify for hedge accounting or are
not\u00a0designated as hedges, the changes in their fair values are
recognised in the income statement in the period in which
they\u00a0arise. These are referred to as \u2018held-for-trading\u2019.
In order to qualify for hedge accounting, the Group is required to
demonstrate an assessment of the economic relationship between
the item being hedged and the hedging instrument, which shows
that the hedge will be highly effective on an ongoing basis. This
effectiveness testing is re-performed periodically to ensure that
the\u00a0hedge has remained, and is expected to remain, highly
effective. Hedge accounting is discontinued when a hedging
instrument is\u00a0derecognised (e.g. through expiry or disposal), or no
longer qualifies for hedge accounting. Where the hedged item is a
highly probable forecast transaction, the related gains and losses
remain in equity until the transaction takes place, when they are
reclassified to the income statement in the same manner as for
cash flow hedges as described above. When a hedged future
transaction is no longer expected to occur, any related gains and
losses, previously recognised in other comprehensive income,
are\u00a0immediately reclassified to the income statement.
Derivative fair value changes recognised in the income statement
are either reflected in arriving at profit from operations
(if\u00a0the\u00a0hedged item is similarly reflected) or in finance costs.
Impairment of financial assets held at amortised cost
Loss allowances for expected credit losses on financial assets
which are held at amortised cost are recognised on initial
recognition of the underlying asset. As permitted by IFRS 9
Financial Instruments, loss allowances on trade receivables arising
from the recognition of revenue under IFRS 15 Revenue from
Contracts with Customers are initially measured at an amount
equal to lifetime expected losses. Allowances in respect of loans
and other receivables are initially recognised at an amount equal
to 12-month expected credit losses. Allowances are measured at
an amount equal to the lifetime expected credit losses where
the credit risk on the receivables increases significantly after
initial recognition.
Revenue
Revenue principally comprises sales of cigarettes, other tobacco
products, and nicotine products, to external customers. Revenue
excludes duty, excise and other taxes related to sales in the period
and is stated after deducting rebates, returns and other similar
discounts and payments to direct and indirect customers.
For the vast majority of the Group\u2019s sales, revenue is recognised
when control of the goods is transferred to a customer at a point
in time; this is usually evidenced by a transfer of the significant
risks and rewards of ownership upon delivery to the customer,
which in terms of timing is not materially different to the date of
shipping. For certain e-commerce subscription sales, revenue is
allocated to each component of the subscription, with revenue
recognised as each component is delivered to the customer.
These sales are not material to the Group\u2019s results.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is based on the weighted average cost incurred in acquiring
inventories and bringing them to their existing location and
condition, which will include raw materials, direct labour and
overheads, where appropriate. Net realisable value is the
estimated selling price less costs to completion and sale. Tobacco
inventories which have an operating cycle that exceeds 12 months
are classified as current assets, consistent with recognised
industry practice.
Segmental analysis
The Group is organised and managed on the basis of its
geographic regions. These are the reportable segments for the
Group as they form the focus of the Group\u2019s internal reporting
systems and are the basis used by the chief operating decision
maker, identified as the Management Board, for assessing
performance and allocating resources. While the Group has clearly
differentiated brands, global segmentation between a wide
portfolio of brands is not part of the regular internally reported
financial information. The results of New Category products are
reported as part of the results of each geographic region.
Adjusting items
Adjusting items are significant items of income or expense in
revenue, profit from operations, net finance costs, taxation and
the Group\u2019s share of the post-tax results of associates and joint
ventures which individually or, if of a similar type, in aggregate, are
relevant to an understanding of the Group\u2019s underlying financial
performance because of their size, nature or incidence. In
identifying and quantifying adjusting items, the Group consistently
applies a policy that defines criteria that are required to be met for
an item to be classified as adjusting. These items are separately
disclosed in the segmental analyses or in the notes to the
accounts as appropriate.
The Group believes that these items are useful to users of the Group
financial statements in helping them to understand the underlying
business performance and are used to derive the Group\u2019s principal
non-GAAP measures of adjusted profit from operations and
adjusted diluted earnings per share @and operating cash flow
conversion ratio@, all of which are before the impact of adjusting
items and which are reconciled from profit from operations and
diluted earnings per share@, cash conversion ratio and net cash
generated from operating activities@.
Other accounting policies:
Share-based payments
\u2013 The Group has equity-settled and cash-settled share-based
compensation plans.
\u2013 Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed over
the vesting period, based on the Group\u2019s estimate of awards that
will eventually vest. For plans where vesting conditions are based
on total shareholder returns, the fair value at date of grant
reflects these conditions, whereas earnings per share vesting
conditions are reflected in the calculation of awards that will
eventually vest over the vesting period.
\u2013 For cash-settled share-based payments, a liability equal to the
portion of the services received is recognised at its current fair
value determined at each balance sheet date.
\u2013 Fair value is measured by the use of the Black-Scholes option
pricing model, except where vesting is dependent on market
conditions when the Monte-Carlo option pricing model is used.
The expected life used in the models has been adjusted, based
on management\u2019s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural
considerations.
@Denotes a phrase, paragraph or similar that does not form part of BAT's Annual Report
on Form 20-F as filed with the SEC.
Research and development
Research expenditure is charged to profit or loss in the year
in\u00a0which it is incurred. Development expenditure is charged
to\u00a0profit or loss in the year it is incurred, unless it meets the
recognition criteria of IAS 38 Intangible Assets to be capitalised
as\u00a0an intangible asset.
Capitalised interest
Borrowing costs which are directly attributable to the acquisition,
construction or production of intangible assets or property, plant
and equipment that takes a substantial period of\u00a0time to get ready
for its intended use or sale, are capitalised as\u00a0part of the cost of
the asset.
Biological Assets
The investments in associates and joint ventures shown
in\u00a0the\u00a0Group balance sheet include biological assets held by
Organigram Holdings Inc. In accordance with IAS 41 Agriculture, the
Group measures biological assets at fair value less costs to sell up
to the point of harvest, at which point this becomes the basis for
the cost of finished goods inventories after harvest with
subsequent expenditures incurred on these being capitalised,
where applicable, in accordance with IAS 2 Inventories. Unrealised
fair value gains and losses arising during the growth of biological
assets are recognised immediately in the income statement.
Dividends
The Company pays interim quarterly dividends, and the Group
recognises the interim dividend in the period in which it is paid.
Repurchase of share capital
When share capital is repurchased, the amount of consideration
paid, including directly attributable costs, is recognised as a
deduction from equity. Repurchased shares which are not
cancelled, or shares purchased for the employee share ownership
trusts, are classified as treasury shares and presented as a
deduction from total equity.
Future changes to accounting policies
Certain changes to IFRS will be applicable to the Group financial
statements in future years, but are not expected to have a material
effect on reported profit or equity or on the disclosures in the
financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-567": { "value": "
Basis of preparation
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB)
and UK-adopted international accounting standards@, and in
accordance with the provisions of the UK Companies Act 2006@.
UK-adopted international accounting standards differ in certain
respects from IFRS as issued by the IASB. The differences have no
impact on the Group\u2019s consolidated financial statements for the
periods presented.
The consolidated financial statements have been prepared on a
going concern basis under the historical cost convention except as
described in the accounting policy below on financial instruments.
In performing its going concern assessment, Management
considered forecasts and liquidity requirements covering a period
of at least twelve months from the date of approval of the financial
statements and including the Group\u2019s ability to fund its operations
and generate cash to pay for debt as it falls due and takes into
account the payments arising from the Master Settlement
Agreement due in the U.S. in 2024 and other known liabilities or
future payments (including interim dividends), as they fall due. This
assessment includes consideration of geopolitical events in Europe
and the general outlook in the global economy, as well as plausible
downside scenarios after taking into account the Group\u2019s Principal
Risks and how they could impact the Group\u2019s operations. Any
mitigating actions, should they be required, are all within
management\u2019s control and could include reductions in
discretionary spending such as acquisitions and capital
expenditure, or drawdowns on committed facilities. After reviewing
the Group\u2019s annual budget, plans and financing arrangements, the
Directors consider that the Group has adequate resources to
continue operating and that it is therefore appropriate to continue
to adopt the going concern basis in preparing the Annual Report
and Form 20\u2011F.
In preparing the financial statements, Management has considered
the impact of climate change@, particularly in the context of the
risks identified in the TCFD disclosure@ and determined that
the \u00a0impact is not expected to be material:
\u2013 On the going concern @and viability@ of the Group, @over
the\u00a0next three years@;
\u2013 On the Group\u2019s assessment of future cash flows (including as
related to the capital expenditure plans as related to the Group\u2019s
Scope 1 and 2 GHG emission reduction commitments) as used in
impairment assessments for the value in use of non-current
assets including goodwill (note\u00a012(b)); and
\u2013 In respect of factors including useful lives and residual values
that\u00a0determine the carrying value of non-financial current assets.
There has been no material impact identified on the financial
reporting judgements and estimates. Management is aware that
the risks related to climate change are developing and ever
changing. Accordingly, these judgements and estimates will be
kept under review as the future impacts of climate change on the
Group\u2019s financial statements depend on environmental, regulatory
and other factors outside of the Group\u2019s control which are not all
currently known.
The preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the disclosure of contingent liabilities at the date of the financial
statements. The key estimates and assumptions are set out in
the accounting policies below, together with the related notes
to the accounts.
The critical accounting judgements include :
\u2013 the determination as to whether control (subsidiaries), joint
control (joint arrangements), or significant influence (associates)
exists in relation to the investments held by the Group. This is
assessed after taking into account the Group\u2019s ability to appoint
Directors to the entity\u2019s Board, its relative shareholding
compared with other shareholders, any significant contracts or
arrangements with the entity or its other shareholders and other
relevant facts and circumstances. The application of these
policies to Group subsidiaries in territories, including Canada,
is\u00a0explained in note 32;
\u2013 the determination as to whether the disposal of a business or
businesses is significant enough to require disclosure in current
and prior years as a discontinued operation;
\u2013 the review of applicable exchange rates for transactions with
and\u00a0translation of entities in territories where there are
restrictions on free access to foreign currency, or multiple
exchange rates;
\u2013 the determination as to whether to recognise provisions and the
exposures to contingent liabilities related to pending litigation or
other outstanding claims, as well as other contingent liabilities.
The accounting policy on contingent liabilities, which are not
provided for, is set out below and the contingent liabilities of the
Group are explained in note 31. Judgement is necessary to assess
the likelihood that a pending claim is probable (more likely than
not to succeed), possible or remote;
\u2013 the determination as to whether perpetual hybrid bonds should
be classified as equity instead of borrowings (note 22(d)); and
\u2013 the identification and quantification of adjusting items. These are
separately disclosed as memorandum information as explained
below, and the impact of these on the calculation of adjusted
earnings per share is described in note\u00a011.
The critical accounting estimates include:
\u2013 the review of asset values, including indefinite life assets, such as
goodwill and certain trademarks and similar intangibles. The key
assumptions used in respect of the impairment testing are the
determination of cash-generating units, the budgeted and
forecast cash flows of these units, the long-term growth rate for
cash flow projections and the rate used to discount the cash flow
projections. These are described in note 12;
\u2013 the estimation of amounts to be recognised in respect of taxation
and legal matters, and the estimation of other provisions for
liabilities and charges are subject to uncertain future events, may
extend over several years and so the amount and/or timing may
differ from current assumptions. The accounting policy for
taxation is explained below. The recognised deferred tax assets
and liabilities, together with a note of unrecognised amounts, are
shown in note 16, and a contingent tax asset is explained in note
10(b). Other provisions for liabilities and charges are as set out in
note 24. Litigation related deposits are shown in note 17. The
application of these accounting policies to the payments made
and credits recognised under the Master Settlement Agreement
by Reynolds American Inc. (Reynolds American) is described in
note 6(b); and
\u2013 the estimation of and accounting for retirement benefit costs.
The determination of the carrying value of assets and liabilities,
as\u00a0well as the charge for the year, and amounts recognised in
other comprehensive income, involves judgements made in
conjunction with independent actuaries. These involve estimates
about uncertain future events on a country-by-country basis,
including life expectancy of scheme members, salary and pension
increases, inflation, as well as discount rates and asset values at
the year-end. The assumptions used by the Group and sensitivity
analyses are described in note 15.
Such estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management\u2019s
best judgement at the date of the financial statements. In the
future, actual experience may deviate from these estimates and
assumptions, which could affect the financial statements as the
original estimates and assumptions are modified, as appropriate,
in the year in which the circumstances change.
These consolidated financial statements were authorised for
issue by the Board of Directors on 7\u00a0February 2024.
With effect from 1 January 2023, the Group has adopted two
Amendments to IAS 12 Income Taxes: in respect of deferred tax
in\u00a0relation to assets and liabilities arising from a single transaction;
and in respect of exceptions from the recognition and disclosure of
deferred tax related to income taxes arising from tax law enacted
or substantively enacted to implement the Pillar Two model rules
published by the Organisation for Economic Co-operation and
Development (OECD), including tax law that implements qualified
domestic minimum top-up taxes described in those rules.
The\u00a0impact of applying these amendments was not material.
In addition, an Amendment to IAS 1 Presentation of Financial
Statements requires the disclosure of material accounting policy
information as part of the Notes to the Accounts and these are set
out below. Accounting policy information is material if, when
considered together with other information included in an entity\u2019s
financial statements, it can reasonably be expected to influence
decisions that the primary users of general purpose financial
statements make on the basis of those financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-568": { "value": "
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB)
and UK-adopted international accounting standards@, and in
accordance with the provisions of the UK Companies Act 2006@.
UK-adopted international accounting standards differ in certain
respects from IFRS as issued by the IASB. The differences have no
impact on the Group\u2019s consolidated financial statements for the
periods presented.", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-569": { "value": "
The preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the disclosure of contingent liabilities at the date of the financial
statements. The key estimates and assumptions are set out in
the accounting policies below, together with the related notes
to the accounts.
The critical accounting judgements include :
\u2013 the determination as to whether control (subsidiaries), joint
control (joint arrangements), or significant influence (associates)
exists in relation to the investments held by the Group. This is
assessed after taking into account the Group\u2019s ability to appoint
Directors to the entity\u2019s Board, its relative shareholding
compared with other shareholders, any significant contracts or
arrangements with the entity or its other shareholders and other
relevant facts and circumstances. The application of these
policies to Group subsidiaries in territories, including Canada,
is\u00a0explained in note 32;
\u2013 the determination as to whether the disposal of a business or
businesses is significant enough to require disclosure in current
and prior years as a discontinued operation;
\u2013 the review of applicable exchange rates for transactions with
and\u00a0translation of entities in territories where there are
restrictions on free access to foreign currency, or multiple
exchange rates;
\u2013 the determination as to whether to recognise provisions and the
exposures to contingent liabilities related to pending litigation or
other outstanding claims, as well as other contingent liabilities.
The accounting policy on contingent liabilities, which are not
provided for, is set out below and the contingent liabilities of the
Group are explained in note 31. Judgement is necessary to assess
the likelihood that a pending claim is probable (more likely than
not to succeed), possible or remote;
\u2013 the determination as to whether perpetual hybrid bonds should
be classified as equity instead of borrowings (note 22(d)); and
\u2013 the identification and quantification of adjusting items. These are
separately disclosed as memorandum information as explained
below, and the impact of these on the calculation of adjusted
earnings per share is described in note\u00a011.
The critical accounting estimates include:
\u2013 the review of asset values, including indefinite life assets, such as
goodwill and certain trademarks and similar intangibles. The key
assumptions used in respect of the impairment testing are the
determination of cash-generating units, the budgeted and
forecast cash flows of these units, the long-term growth rate for
cash flow projections and the rate used to discount the cash flow
projections. These are described in note 12;
\u2013 the estimation of amounts to be recognised in respect of taxation
and legal matters, and the estimation of other provisions for
liabilities and charges are subject to uncertain future events, may
extend over several years and so the amount and/or timing may
differ from current assumptions. The accounting policy for
taxation is explained below. The recognised deferred tax assets
and liabilities, together with a note of unrecognised amounts, are
shown in note 16, and a contingent tax asset is explained in note
10(b). Other provisions for liabilities and charges are as set out in
note 24. Litigation related deposits are shown in note 17. The
application of these accounting policies to the payments made
and credits recognised under the Master Settlement Agreement
by Reynolds American Inc. (Reynolds American) is described in
note 6(b); and
\u2013 the estimation of and accounting for retirement benefit costs.
The determination of the carrying value of assets and liabilities,
as\u00a0well as the charge for the year, and amounts recognised in
other comprehensive income, involves judgements made in
conjunction with independent actuaries. These involve estimates
about uncertain future events on a country-by-country basis,
including life expectancy of scheme members, salary and pension
increases, inflation, as well as discount rates and asset values at
the year-end. The assumptions used by the Group and sensitivity
analyses are described in note 15.
Such estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management\u2019s
best judgement at the date of the financial statements. In the
future, actual experience may deviate from these estimates and
assumptions, which could affect the financial statements as the
original estimates and assumptions are modified, as appropriate,
in the year in which the circumstances change.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-570": { "value": "
These consolidated financial statements were authorised for
issue by the Board of Directors on 7\u00a0February 2024.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuthorisationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-571": { "value": "
Basis of consolidation
The consolidated financial information includes the financial
statements of British American Tobacco p.l.c. and its subsidiary
undertakings, collectively \u2018the Group\u2019, together with the Group\u2019s
share of the results of its associates and joint arrangements.
A subsidiary is an entity controlled by the Group. Non-controlling
interests represent the share of earnings or equity in subsidiaries that
is\u00a0not attributable, directly or indirectly, to shareholders of the Group.
Identifiable assets and liabilities acquired in a business
combination are measured at fair value at the date of acquiring
control. Disposals of subsidiaries and businesses due to sale or
market withdrawal are accounted for as disposals from the date
of\u00a0losing control and may be classified as held-for-sale disposal
groups at the balance sheet date if specific tests under IFRS 5
Non-current Assets Held For Sale and Discontinued Operations
are met. Discontinued operations, where applicable, comprise
material disposal groups representing a significant geographical
area of operations or business activities.
Associates comprise investments in undertakings, which are not
subsidiary undertakings or joint arrangements, where the Group
exercises significant influence. They are accounted for using the
equity method.
Joint arrangements comprise contractual arrangements where
two or more parties have joint control and where decisions regarding
the relevant activities of the entity require unanimous consent.
Joint ventures are accounted for using the equity method. The
Group accounts for its share of the assets, liabilities, income and
expenses of joint operations.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-572": { "value": "
Foreign currencies and hyperinflationary territories
The functional currency of the Parent Company is sterling and this
is also the presentation currency of the Group. The income and
cash flow statements of Group undertakings expressed in
currencies other than sterling are translated to sterling using
exchange rates applicable to the dates of the underlying transactions.
Average rates of exchange in each year are used where the average
rate approximates the relevant exchange rate at the date of the
underlying transactions. Assets and liabilities of Group undertakings
are translated at the applicable rates of exchange at the end of
each year. In territories where there are restrictions on free access
to foreign currency or multiple exchange rates, the applicable rates
of exchange are regularly reviewed.
The differences arising on the retranslation to sterling of Group
undertakings with functional currencies other than sterling are
presented as a separate component of equity in the Translation
reserve within Other reserves, as shown in note 22. They are
recognised in the income statement when the gain or loss on
disposal of a Group undertaking is recognised.
Transactional foreign exchange gains and losses on the revaluation
or settlement of receivables and payables are recognised in the
income statement, except when deferred in equity on
intercompany net investment loans, on qualifying net investment
hedges, or as qualifying cash flow hedges. Foreign exchange gains
or losses recognised in the income statement are included in profit
from operations or net finance costs depending on the underlying
transactions that gave rise to these exchange differences.
In addition, for hyperinflationary countries where the effect on the
Group results would be significant, the financial statements in local
currency are adjusted to reflect the impact of local inflation prior to
translation into sterling, in accordance with IAS 29 Financial Reporting
in Hyperinflationary Economies. Where applicable, IAS 29 requires all
transactions to be indexed by an inflationary factor to the balance
sheet date, potentially leading to a monetary gain or loss on
indexation. The results and balance sheets of operations in
hyperinflationary territories are translated at the period end rate.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-573": { "value": "
The functional currency of the Parent Company is sterling and this
is also the presentation currency of the Group.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-574": { "value": "
In addition, for hyperinflationary countries where the effect on the
Group results would be significant, the financial statements in local
currency are adjusted to reflect the impact of local inflation prior to
translation into sterling, in accordance with IAS 29 Financial Reporting
in Hyperinflationary Economies. Where applicable, IAS 29 requires all
transactions to be indexed by an inflationary factor to the balance
sheet date, potentially leading to a monetary gain or loss on
indexation. The results and balance sheets of operations in
hyperinflationary territories are translated at the period end rate.", "dimensions": { "concept": "ifrs-full:DisclosureOfHyperinflationaryReportingExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-576": { "value": "
Provisions, contingent liabilities and contingent assets
Provisions are recognised when either a legal or constructive
obligation as a result of a past event exists at the balance sheet
date, it is probable that an outflow of economic resources will be
required to settle the obligation and a reasonable estimate can be
made of the amount of the obligation.
Subsidiaries and associate companies are defendants in tobacco-
related and other litigation. These exposures are regularly reviewed
on an on-going basis and provision for this litigation (including legal
costs) is made at such time as an unfavourable outcome becomes
probable and the amount can be reasonably estimated.
Contingent assets are possible assets whose existence will only
be confirmed by future events not wholly within the control of the
entity and are not recognised as assets until the realisation of
income is virtually certain.
Where a provision has not been recognised, the Group records its
external legal fees and other external defence costs for tobacco-
related and other litigation as these costs are incurred.
As explained in note 17, certain litigation-related deposits are
recognised as assets within loans and other receivables where
management has determined that these payments represent a
resource controlled by the entity. These deposits are held at the
fair value of consideration transferred less impairment, if applicable,
and have not been discounted.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-575": { "value": "
Provisions, contingent liabilities and contingent assets
Provisions are recognised when either a legal or constructive
obligation as a result of a past event exists at the balance sheet
date, it is probable that an outflow of economic resources will be
required to settle the obligation and a reasonable estimate can be
made of the amount of the obligation.
Subsidiaries and associate companies are defendants in tobacco-
related and other litigation. These exposures are regularly reviewed
on an on-going basis and provision for this litigation (including legal
costs) is made at such time as an unfavourable outcome becomes
probable and the amount can be reasonably estimated.
Contingent assets are possible assets whose existence will only
be confirmed by future events not wholly within the control of the
entity and are not recognised as assets until the realisation of
income is virtually certain.
Where a provision has not been recognised, the Group records its
external legal fees and other external defence costs for tobacco-
related and other litigation as these costs are incurred.
As explained in note 17, certain litigation-related deposits are
recognised as assets within loans and other receivables where
management has determined that these payments represent a
resource controlled by the entity. These deposits are held at the
fair value of consideration transferred less impairment, if applicable,
and have not been discounted.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-578": { "value": "
Taxation
Tax is chargeable on the profits for the period, together with deferred
tax. The current income tax charge is calculated on the basis of tax
laws enacted or substantively enacted at the balance sheet date in
the countries where the Group\u2019s subsidiaries, associates and joint
arrangements operate and generate taxable income.
Deferred tax is determined using the tax rates that have been
enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or deferred tax liability is settled. A deferred tax asset is
recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised.
Tax is recognised in the income statement except to the extent that
it relates to items recognised in other comprehensive income or
directly in equity, in which case it is recognised in the statement of
other comprehensive income or the statement of changes in equity.
The Group has exposures in respect of the payment or recovery of
taxes and the financial statements reflect the probable outcome
with estimated amounts determined based on the most likely
amount or the expected value, depending on which method is
expected to better predict the resolution of the uncertainty.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-577": { "value": "
Taxation
Tax is chargeable on the profits for the period, together with deferred
tax. The current income tax charge is calculated on the basis of tax
laws enacted or substantively enacted at the balance sheet date in
the countries where the Group\u2019s subsidiaries, associates and joint
arrangements operate and generate taxable income.
Deferred tax is determined using the tax rates that have been
enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred tax asset is
realised or deferred tax liability is settled. A deferred tax asset is
recognised only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilised.
Tax is recognised in the income statement except to the extent that
it relates to items recognised in other comprehensive income or
directly in equity, in which case it is recognised in the statement of
other comprehensive income or the statement of changes in equity.
The Group has exposures in respect of the payment or recovery of
taxes and the financial statements reflect the probable outcome
with estimated amounts determined based on the most likely
amount or the expected value, depending on which method is
expected to better predict the resolution of the uncertainty.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-579": { "value": "
Equity instruments
Instruments are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements. Instruments that cannot be settled in the Group\u2019s
own equity instruments and that include no contractual obligation
to deliver cash or another financial asset are classified as equity.
Equity instruments issued by the Group are recognised at the
proceeds received, net of issuance costs.
Financial instruments
The Group\u2019s business model for managing financial assets aims:
to\u00a0protect against the loss of principal, to maximise Group liquidity
by concentrating cash at the centre, to align the maturity profile
of\u00a0external investments with that of the forecast liquidity profile,
to\u00a0match the interest rate profile of external investments to that
of\u00a0debt maturities or fixings wherever practicable, and to optimise
the investment yield within the Group\u2019s investment parameters.
The\u00a0majority of financial assets are held in order to collect
contractual cash flows (typically cash and cash equivalents and loans
and other receivables), but some assets (typically investments)
are\u00a0held for investment potential.
Financial assets and financial liabilities are recognised when
the\u00a0Group becomes a party to the contractual provisions of the
relevant instrument and derecognised when it ceases to be a party
to such provisions.
Non-derivative financial assets are classified on initial
recognition in accordance with the Group\u2019s business model as
investments, loans and receivables, or cash and cash equivalents
and accounted for as follows:
\u2013 Investments: these are non-derivative financial assets that
cannot be classified as loans and other receivables or cash
and cash equivalents. Dividend and interest income on these
investments are included within finance income when the Group\u2019s
right to receive payments is established. This category includes
financial assets at fair value through profit and loss and financial
assets at fair value through other comprehensive income.
\u2013 Loans and other receivables: these are non-derivative financial
assets with fixed or determinable payments that are solely
payments of principal and interest on the principal amount
outstanding, that are primarily held in order to collect
contractual cash flows. These balances are measured at
amortised cost, using the effective interest rate method, and
stated net of allowances for credit losses, and include trade
and other receivables, and deposits with banks and other
financial institutions which cannot be classified as cash and
cash equivalents. In addition, as explained in note 17, certain
litigation related deposits are recognised as assets within loans
and other receivables where management has determined that
these payments represent a resource controlled by the entity as
a result of past events. These deposits are held at the fair value
of consideration transferred less impairment, if applicable, and
have not been discounted.
\u2013 Cash and cash equivalents: cash and cash equivalents include
cash in hand and deposits held on call, together with other short-
term highly liquid investments including investments in certain
money market funds.
Fair values for quoted investments are based on observable
market prices. If there is no active market for a financial asset, the
fair value is established by using valuation techniques principally
involving discounted cash flow analysis.
Non-derivative financial liabilities, including borrowings and trade
payables, are stated at amortised cost using the effective interest
method. For borrowings, their carrying value includes accrued
interest payable, as well as unamortised issue costs. Drawdowns
and repayments of short-term borrowings which have a maturity
period of three months or less are stated net in the cash flow
statement; drawdowns and repayments on all other borrowings
are stated gross in the cash flow statement. Current liabilities
include amounts where the entity does not have an unconditional
right to defer settlement of the liability for at least 12\u00a0months after
the balance sheet date. As shown in note 23, certain borrowings are
subject to fair value hedges, as defined below.
Derivative financial assets and liabilities are initially recognised,
and subsequently measured, at fair value, which includes accrued
interest receivable and payable where relevant. Changes in their
fair values are recognised as follows:
\u2013 for derivatives that are designated as cash flow hedges, the
changes in their fair values are recognised directly in other
comprehensive income, to the extent that they are effective,
with the ineffective portion being recognised in the income
statement. Accumulated gains and losses are reclassified to
the\u00a0income statement in the same periods as the hedged item,
unless the hedged item results in a non-financial asset where the
accumulated gains and losses are included in the initial carrying
value of the asset (basis adjustment);
\u2013 for derivatives that are designated as fair value hedges, the
carrying value of the hedged item is adjusted for the fair value
changes attributable to the risk being hedged, with the
corresponding entry being made in the income statement.
The\u00a0changes in fair value of these derivatives are also recognised
in the income statement;
\u2013 for derivatives that are designated as hedges of net investments
in foreign operations, the changes in their fair values are
recognised directly in other comprehensive income, to the
extent that they are effective, with the ineffective portion being
recognised in the income statement. Where non-derivatives
such as foreign currency borrowings are designated as net
investment hedges, the relevant exchange differences are
similarly recognised. The accumulated gains and losses are
reclassified to the income statement when the foreign operation
is disposed of; and
\u2013 for derivatives that do not qualify for hedge accounting or are
not\u00a0designated as hedges, the changes in their fair values are
recognised in the income statement in the period in which
they\u00a0arise. These are referred to as \u2018held-for-trading\u2019.
In order to qualify for hedge accounting, the Group is required to
demonstrate an assessment of the economic relationship between
the item being hedged and the hedging instrument, which shows
that the hedge will be highly effective on an ongoing basis. This
effectiveness testing is re-performed periodically to ensure that
the\u00a0hedge has remained, and is expected to remain, highly
effective. Hedge accounting is discontinued when a hedging
instrument is\u00a0derecognised (e.g. through expiry or disposal), or no
longer qualifies for hedge accounting. Where the hedged item is a
highly probable forecast transaction, the related gains and losses
remain in equity until the transaction takes place, when they are
reclassified to the income statement in the same manner as for
cash flow hedges as described above. When a hedged future
transaction is no longer expected to occur, any related gains and
losses, previously recognised in other comprehensive income,
are\u00a0immediately reclassified to the income statement.
Derivative fair value changes recognised in the income statement
are either reflected in arriving at profit from operations
(if\u00a0the\u00a0hedged item is similarly reflected) or in finance costs.
Impairment of financial assets held at amortised cost
Loss allowances for expected credit losses on financial assets
which are held at amortised cost are recognised on initial
recognition of the underlying asset. As permitted by IFRS 9
Financial Instruments, loss allowances on trade receivables arising
from the recognition of revenue under IFRS 15 Revenue from
Contracts with Customers are initially measured at an amount
equal to lifetime expected losses. Allowances in respect of loans
and other receivables are initially recognised at an amount equal
to 12-month expected credit losses. Allowances are measured at
an amount equal to the lifetime expected credit losses where
the credit risk on the receivables increases significantly after
initial recognition.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-580": { "value": "
Goodwill
Goodwill in respect of the acquisition of subsidiaries is included in
intangible assets, net of impairment, where applicable. In respect
of associates and joint ventures, goodwill is included in the
carrying value of the investment in the associated company or
joint venture.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-581": { "value": "
Intangible assets other than goodwill
The intangible assets shown on the Group balance sheet consist
mainly of trademarks and similar intangibles, including certain
intellectual property, acquired by the Group\u2019s subsidiary
undertakings and computer software.
Acquired trademarks and similar assets are carried at cost less
accumulated amortisation and impairment. Trademarks with
indefinite lives are not amortised but are reviewed annually for
impairment. Other trademarks and similar assets are amortised
on\u00a0a straight-line basis over their remaining useful lives, consistent
with the pattern of economic benefits expected to be received,
which do not exceed 20 years. Any impairments of trademarks are
recognised in the income statement, but increases in trademark
values are not recognised. With effect from 1 January 2024, the
Group\u2019s indefinite-lived combustible trademarks and similar assets
will be amortised on a straight-lined basis over periods not
exceeding 30 years. The revision in useful economic life reflects
the\u00a0ongoing challenging macro-economic conditions and revised
forecast in the U.S., with an expected increase in amortisation
expense of \u00a31.4\u00a0billion per\u00a0annum. The Group's non-combustible
trademarks will remain as indefinite-lived assets.
Computer software is carried at cost less accumulated
amortisation and impairment, and, with the exception of global
software solutions, is amortised on a straight-line basis over
periods ranging from three years to five years. Global software
solutions are software assets designed to be implemented on a
global basis and used as a standard solution by all of the operating
companies in the Group. Historically, these assets were amortised
on a straight-line basis over periods not exceeding 13 years. With
effect from 1 January 2023, global software solutions are
amortised on a straight-line basis over periods not exceeding
15\u00a0years. The revision in useful life is a result of ongoing use of
Global software solutions due to the extension of third-party
supplier support. The\u00a0estimated impact of this change in
accounting estimate is a\u00a0reduction in annual amortisation expense
of \u00a316\u00a0million in 2023, with similar reductions expected in 2024
and\u00a02025.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-582": { "value": "
Property, plant and equipment
Purchased property, plant and equipment are stated at cost less
accumulated depreciation and impairment. Depreciation is
calculated on a straight-line basis to write off the assets over their
useful economic life. Purchased freehold and leasehold property
are depreciated at rates between 2.5% and 4% per annum, and
plant and equipment at rates between 3% and 25% per annum.
No depreciation is provided on freehold land or assets classified
as\u00a0held-for-sale. Non-current assets are classified as held-for sale
if their carrying value will be recovered principally through a sale
transaction rather than through continuing use and if all of the
conditions of IFRS 5 are met.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-583": { "value": "
Leased assets and lease liabilities
The Group applies IFRS 16 Leases to contractual arrangements
which are, or contain, leases of assets. Right-of-use assets are
included as part of property, plant and equipment in note 13, with
the lease liabilities included as part of borrowings in note 23. Right-
of-use lease assets are initially recognised at an amount equal to
the lease liability, adjusted for initial direct costs in relation to the
assets, then depreciated over the shorter of the lease term and
their estimated useful lives. Lease liabilities are initially recognised
at an amount equal to the present value of estimated contractual
lease payments at the inception of the lease, discounted using the
interest rate implicit in the lease if this can be readily determined,
or the applicable incremental rate of borrowing, as appropriate.
The Group has adopted several practical expedients available
under the Standard including not applying the requirements of
IFRS 16 to leases of intangible assets, and not applying the
recognition and measurement requirements of IFRS 16 to leases
of\u00a0less than 12 months maximum duration or to leases of low-value
assets. Except for property-related leases, non-lease components
have not been separated from lease components.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-584": { "value": "
Impairment of non-financial assets
Assets are reviewed for impairment whenever events indicate
that\u00a0the carrying amount of a cash-generating unit may not be
recoverable. In addition, assets that have indefinite useful lives are
tested annually for impairment. An impairment loss is recognised
to the extent that the carrying value exceeds the higher of the
asset\u2019s fair value less costs to sell and its value-in-use.
A cash-generating unit is the smallest identifiable group of assets
that generates cash flows which are largely independent of
the cash flows from other assets or groups of assets. At the
acquisition date, any goodwill acquired is allocated to the relevant
cash-generating unit or group of cash-generating units expected
to benefit from the acquisition for the purpose of impairment
testing of goodwill.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-585": { "value": "
Retirement benefit schemes
The Group's subsidiary undertakings operate various funded and
unfunded defined benefit schemes, including pension and post-
retirement healthcare schemes, as well as defined contribution
schemes in various jurisdictions.
The liabilities arising in respect of defined benefit schemes are
determined in accordance with the advice of independent,
professionally qualified actuaries, using the projected unit credit
method. The net deficit or surplus for each defined benefit pension
scheme is calculated on the present value of the defined benefit
obligation at the balance sheet date less the fair value of the
scheme assets adjusted, where appropriate, for any surplus
restrictions or the effect of minimum funding requirements.
Benefits provided through defined contribution schemes are
charged as an expense as payments fall due.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-586": { "value": "
Non-derivative financial assets are classified on initial
recognition in accordance with the Group\u2019s business model as
investments, loans and receivables, or cash and cash equivalents
and accounted for as follows:
\u2013 Investments: these are non-derivative financial assets that
cannot be classified as loans and other receivables or cash
and cash equivalents. Dividend and interest income on these
investments are included within finance income when the Group\u2019s
right to receive payments is established. This category includes
financial assets at fair value through profit and loss and financial
assets at fair value through other comprehensive income.
\u2013 Loans and other receivables: these are non-derivative financial
assets with fixed or determinable payments that are solely
payments of principal and interest on the principal amount
outstanding, that are primarily held in order to collect
contractual cash flows. These balances are measured at
amortised cost, using the effective interest rate method, and
stated net of allowances for credit losses, and include trade
and other receivables, and deposits with banks and other
financial institutions which cannot be classified as cash and
cash equivalents. In addition, as explained in note 17, certain
litigation related deposits are recognised as assets within loans
and other receivables where management has determined that
these payments represent a resource controlled by the entity as
a result of past events. These deposits are held at the fair value
of consideration transferred less impairment, if applicable, and
have not been discounted.
\u2013 Cash and cash equivalents: cash and cash equivalents include
cash in hand and deposits held on call, together with other short-
term highly liquid investments including investments in certain
money market funds.
Fair values for quoted investments are based on observable
market prices. If there is no active market for a financial asset, the
fair value is established by using valuation techniques principally
involving discounted cash flow analysis.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-587": { "value": "Loans and other receivables: these are non-derivative financial
assets with fixed or determinable payments that are solely
payments of principal and interest on the principal amount
outstanding, that are primarily held in order to collect
contractual cash flows. These balances are measured at
amortised cost, using the effective interest rate method, and
stated net of allowances for credit losses, and include trade
and other receivables, and deposits with banks and other
financial institutions which cannot be classified as cash and
cash equivalents. In addition, as explained in note 17, certain
litigation related deposits are recognised as assets within loans
and other receivables where management has determined that
these payments represent a resource controlled by the entity as
a result of past events. These deposits are held at the fair value
of consideration transferred less impairment, if applicable, and
have not been discounted.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-588": { "value": "
Non-derivative financial liabilities, including borrowings and trade
payables, are stated at amortised cost using the effective interest
method. For borrowings, their carrying value includes accrued
interest payable, as well as unamortised issue costs. Drawdowns
and repayments of short-term borrowings which have a maturity
period of three months or less are stated net in the cash flow
statement; drawdowns and repayments on all other borrowings
are stated gross in the cash flow statement. Current liabilities
include amounts where the entity does not have an unconditional
right to defer settlement of the liability for at least 12\u00a0months after
the balance sheet date. As shown in note 23, certain borrowings are
subject to fair value hedges, as defined below.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-589": { "value": "
Derivative financial assets and liabilities are initially recognised,
and subsequently measured, at fair value, which includes accrued
interest receivable and payable where relevant. Changes in their
fair values are recognised as follows:
\u2013 for derivatives that are designated as cash flow hedges, the
changes in their fair values are recognised directly in other
comprehensive income, to the extent that they are effective,
with the ineffective portion being recognised in the income
statement. Accumulated gains and losses are reclassified to
the\u00a0income statement in the same periods as the hedged item,
unless the hedged item results in a non-financial asset where the
accumulated gains and losses are included in the initial carrying
value of the asset (basis adjustment);
\u2013 for derivatives that are designated as fair value hedges, the
carrying value of the hedged item is adjusted for the fair value
changes attributable to the risk being hedged, with the
corresponding entry being made in the income statement.
The\u00a0changes in fair value of these derivatives are also recognised
in the income statement;
\u2013 for derivatives that are designated as hedges of net investments
in foreign operations, the changes in their fair values are
recognised directly in other comprehensive income, to the
extent that they are effective, with the ineffective portion being
recognised in the income statement. Where non-derivatives
such as foreign currency borrowings are designated as net
investment hedges, the relevant exchange differences are
similarly recognised. The accumulated gains and losses are
reclassified to the income statement when the foreign operation
is disposed of; and
\u2013 for derivatives that do not qualify for hedge accounting or are
not\u00a0designated as hedges, the changes in their fair values are
recognised in the income statement in the period in which
they\u00a0arise. These are referred to as \u2018held-for-trading\u2019.
In order to qualify for hedge accounting, the Group is required to
demonstrate an assessment of the economic relationship between
the item being hedged and the hedging instrument, which shows
that the hedge will be highly effective on an ongoing basis. This
effectiveness testing is re-performed periodically to ensure that
the\u00a0hedge has remained, and is expected to remain, highly
effective. Hedge accounting is discontinued when a hedging
instrument is\u00a0derecognised (e.g. through expiry or disposal), or no
longer qualifies for hedge accounting. Where the hedged item is a
highly probable forecast transaction, the related gains and losses
remain in equity until the transaction takes place, when they are
reclassified to the income statement in the same manner as for
cash flow hedges as described above. When a hedged future
transaction is no longer expected to occur, any related gains and
losses, previously recognised in other comprehensive income,
are\u00a0immediately reclassified to the income statement.
Derivative fair value changes recognised in the income statement
are either reflected in arriving at profit from operations
(if\u00a0the\u00a0hedged item is similarly reflected) or in finance costs.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-590": { "value": "
Derivative financial assets and liabilities are initially recognised,
and subsequently measured, at fair value, which includes accrued
interest receivable and payable where relevant. Changes in their
fair values are recognised as follows:
\u2013 for derivatives that are designated as cash flow hedges, the
changes in their fair values are recognised directly in other
comprehensive income, to the extent that they are effective,
with the ineffective portion being recognised in the income
statement. Accumulated gains and losses are reclassified to
the\u00a0income statement in the same periods as the hedged item,
unless the hedged item results in a non-financial asset where the
accumulated gains and losses are included in the initial carrying
value of the asset (basis adjustment);
\u2013 for derivatives that are designated as fair value hedges, the
carrying value of the hedged item is adjusted for the fair value
changes attributable to the risk being hedged, with the
corresponding entry being made in the income statement.
The\u00a0changes in fair value of these derivatives are also recognised
in the income statement;
\u2013 for derivatives that are designated as hedges of net investments
in foreign operations, the changes in their fair values are
recognised directly in other comprehensive income, to the
extent that they are effective, with the ineffective portion being
recognised in the income statement. Where non-derivatives
such as foreign currency borrowings are designated as net
investment hedges, the relevant exchange differences are
similarly recognised. The accumulated gains and losses are
reclassified to the income statement when the foreign operation
is disposed of; and
\u2013 for derivatives that do not qualify for hedge accounting or are
not\u00a0designated as hedges, the changes in their fair values are
recognised in the income statement in the period in which
they\u00a0arise. These are referred to as \u2018held-for-trading\u2019.
In order to qualify for hedge accounting, the Group is required to
demonstrate an assessment of the economic relationship between
the item being hedged and the hedging instrument, which shows
that the hedge will be highly effective on an ongoing basis. This
effectiveness testing is re-performed periodically to ensure that
the\u00a0hedge has remained, and is expected to remain, highly
effective. Hedge accounting is discontinued when a hedging
instrument is\u00a0derecognised (e.g. through expiry or disposal), or no
longer qualifies for hedge accounting. Where the hedged item is a
highly probable forecast transaction, the related gains and losses
remain in equity until the transaction takes place, when they are
reclassified to the income statement in the same manner as for
cash flow hedges as described above. When a hedged future
transaction is no longer expected to occur, any related gains and
losses, previously recognised in other comprehensive income,
are\u00a0immediately reclassified to the income statement.
Derivative fair value changes recognised in the income statement
are either reflected in arriving at profit from operations
(if\u00a0the\u00a0hedged item is similarly reflected) or in finance costs", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-591": { "value": "
Impairment of financial assets held at amortised cost
Loss allowances for expected credit losses on financial assets
which are held at amortised cost are recognised on initial
recognition of the underlying asset. As permitted by IFRS 9
Financial Instruments, loss allowances on trade receivables arising
from the recognition of revenue under IFRS 15 Revenue from
Contracts with Customers are initially measured at an amount
equal to lifetime expected losses. Allowances in respect of loans
and other receivables are initially recognised at an amount equal
to 12-month expected credit losses. Allowances are measured at
an amount equal to the lifetime expected credit losses where
the credit risk on the receivables increases significantly after
initial recognition.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-592": { "value": "
Revenue
Revenue principally comprises sales of cigarettes, other tobacco
products, and nicotine products, to external customers. Revenue
excludes duty, excise and other taxes related to sales in the period
and is stated after deducting rebates, returns and other similar
discounts and payments to direct and indirect customers.
For the vast majority of the Group\u2019s sales, revenue is recognised
when control of the goods is transferred to a customer at a point
in time; this is usually evidenced by a transfer of the significant
risks and rewards of ownership upon delivery to the customer,
which in terms of timing is not materially different to the date of
shipping. For certain e-commerce subscription sales, revenue is
allocated to each component of the subscription, with revenue
recognised as each component is delivered to the customer.
These sales are not material to the Group\u2019s results.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-593": { "value": "
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is based on the weighted average cost incurred in acquiring
inventories and bringing them to their existing location and
condition, which will include raw materials, direct labour and
overheads, where appropriate. Net realisable value is the
estimated selling price less costs to completion and sale. Tobacco
inventories which have an operating cycle that exceeds 12 months
are classified as current assets, consistent with recognised
industry practice.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForMeasuringInventories", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-594": { "value": "
Segmental analysis
The Group is organised and managed on the basis of its
geographic regions. These are the reportable segments for the
Group as they form the focus of the Group\u2019s internal reporting
systems and are the basis used by the chief operating decision
maker, identified as the Management Board, for assessing
performance and allocating resources. While the Group has clearly
differentiated brands, global segmentation between a wide
portfolio of brands is not part of the regular internally reported
financial information. The results of New Category products are
reported as part of the results of each geographic region.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-595": { "value": "
Share-based payments
\u2013 The Group has equity-settled and cash-settled share-based
compensation plans.
\u2013 Equity-settled share-based payments are measured at fair value
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed over
the vesting period, based on the Group\u2019s estimate of awards that
will eventually vest. For plans where vesting conditions are based
on total shareholder returns, the fair value at date of grant
reflects these conditions, whereas earnings per share vesting
conditions are reflected in the calculation of awards that will
eventually vest over the vesting period.
\u2013 For cash-settled share-based payments, a liability equal to the
portion of the services received is recognised at its current fair
value determined at each balance sheet date.
\u2013 Fair value is measured by the use of the Black-Scholes option
pricing model, except where vesting is dependent on market
conditions when the Monte-Carlo option pricing model is used.
The expected life used in the models has been adjusted, based
on management\u2019s best estimate, for the effects of non-
transferability, exercise restrictions and behavioural
considerations.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-596": { "value": "
Research and development
Research expenditure is charged to profit or loss in the year
in\u00a0which it is incurred. Development expenditure is charged
to\u00a0profit or loss in the year it is incurred, unless it meets the
recognition criteria of IAS 38 Intangible Assets to be capitalised
as\u00a0an intangible asset.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-597": { "value": "
Capitalised interest
Borrowing costs which are directly attributable to the acquisition,
construction or production of intangible assets or property, plant
and equipment that takes a substantial period of\u00a0time to get ready
for its intended use or sale, are capitalised as\u00a0part of the cost of
the asset.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-598": { "value": "
Biological Assets
The investments in associates and joint ventures shown
in\u00a0the\u00a0Group balance sheet include biological assets held by
Organigram Holdings Inc. In accordance with IAS 41 Agriculture, the
Group measures biological assets at fair value less costs to sell up
to the point of harvest, at which point this becomes the basis for
the cost of finished goods inventories after harvest with
subsequent expenditures incurred on these being capitalised,
where applicable, in accordance with IAS 2 Inventories. Unrealised
fair value gains and losses arising during the growth of biological
assets are recognised immediately in the income statement.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBiologicalAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-599": { "value": "
Dividends
The Company pays interim quarterly dividends, and the Group
recognises the interim dividend in the period in which it is paid.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-600": { "value": "
Repurchase of share capital
When share capital is repurchased, the amount of consideration
paid, including directly attributable costs, is recognised as a
deduction from equity. Repurchased shares which are not
cancelled, or shares purchased for the employee share ownership
trusts, are classified as treasury shares and presented as a
deduction from total equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-601": { "value": "
Future changes to accounting policies
Certain changes to IFRS will be applicable to the Group financial
statements in future years, but are not expected to have a material
effect on reported profit or equity or on the disclosures in the
financial statements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-602": { "value": "
2 Segmental analyses (revised)1
The chief operating decision maker, the Management Board, reviews adjusted profit from operations at constant currencies to
evaluate segment performance and allocate resources to the overall business on a geographic region basis, including the results of
New Categories (comprising Vapour products, Heated P roducts and Modern Oral products), which are reported to the Management
Board as part of the results of each geographic region. The Management Board also reviews, at constant currencies, revenues on a
geographic region basis, which are included within adjusted profit from operations.
As part of plans to reduce complexity and drive efficiency in management structures and achieve a better balance in the scale of the
Group's regions, the management structure was reduced from four regions to three regions, with the new organisational structures
in\u00a0place beginning April 2023 as follows:
\u2013 Americas and Europe (AME), comprising largely the former Europe region with the inclusion of the markets in Latin America and
Canada that were part of the former AmSSA region;
\u2013 Asia-Pacific, Middle East and Africa (APMEA) comprising the former APME region with the inclusion of the markets in Sub-Saharan
Africa. Armenia, Azerbaijan, Caucasus, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turkmenistan and Uzbekistan that were
part of the former Europe region are now included as part of APMEA; and
\u2013 the U.S. has remained unchanged.
The three geo graphic regions are the reportable segments for the Group as they form the focus of the Group\u2019s internal reporting
systems and are the basis used by the Management Board for assessing performance and allocating resources. Transactions between
Group subsidiaries are conducted on arm\u2019s length terms in accordance with appropriate transfer pricing rules and Organisation for
Economic Cooperation & Development (OECD) principles. Net finance costs (comprising interest income and interest expense), share
of\u00a0post-tax results of associates and joint ventures and taxation are centrally managed, and accordingly, such items are not presented
by\u00a0segment as they are excluded from the measure of segment profitability.
Regional Directors are responsible for delivering the operating and financial results of their Region inclusive of all product categories.
Therefore, the results of New Categories (comprising Vapour products, Heated Products and Modern Oral products) are reported to
the\u00a0Management Board as part of the results of each geographic region.
However, additional information has been provided to disaggregate revenue based on product category to enable investors to better
compare the Group\u2019s business performance across periods and by reference to the Group\u2019s investment activity.
In respect of the U.S. region, all financial statements and financial information provided by or with respect to the U.S. business or
Reynolds American Inc. (RAI) (and/or RAI and its subsidiaries (collectively, the \u2018Reynolds Group\u2019)) are prepared on the basis of U.S. GAAP
and constitute the primary financial statements or financial information of the U.S. business or RAI (and/or the Reynolds Group). Solely for
the purpose of consolidation within the results of BAT p.l.c. and the BAT Group, this financial information is then converted to IFRS. To
the\u00a0extent any such financial information provided in these financial statements relates to the U.S. business or RAI (and/or the Reynolds
Group), it is provided as an explanation of the U.S. business\u2019s or RAI\u2019s (and/or the Reynolds Group\u2019s) primary U.S. GAAP based financial
statements and information.
The following table shows 2023 revenue at 2023 rates of exchange, and 2023 revenue translated using 2022 rates of exchange. The 2022
figures are stated at the 2022 rates of exchange.
2023
2022
Revenue
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Revenue
current
rates
\u00a3m
Revenue
current
rates
\u00a3m
U.S.
12,065
(71)
11,994
12,639
AME
9,989
(198)
9,791
9,287
APMEA
6,042
(544)
5,498
5,729
Revenue
28,096
(813)
27,283
27,655
Note:
1. Effective from 2023, the Group revised its regional structure from four regions to three, with the comparator data provided on this revised basis.
The following table shows 2022 revenue at 2022 rates of exchange, and 2022 revenue translated using 2021 rates of exchange. The 2021
figures are stated at the 2021 rates of exchange.
2022
2021
Revenue
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Revenue
current
rates
\u00a3m
Revenue
current
rates
\u00a3m
U.S.
11,358
1,281
12,639
11,691
AME
9,119
168
9,287
8,444
APMEA
5,796
(67)
5,729
5,549
Revenue
26,273
1,382
27,655
25,684
The following table shows 2023 loss from operations and adjusted profit from operations at 2023 rates of exchange, and 2023 adjusted
profit from operations using 2022 rates of exchange.
2023
Adjusted*
segment
result
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Adjusted*
segment
result
current
rates
\u00a3m
Adjusting*
items
\u00a3m
Segment
result
current
rates
\u00a3m
U.S.
6,863
(42)
6,821
(27,602)
(20,781)
AME
3,547
(87)
3,460
(266)
3,194
APMEA
2,379
(195)
2,184
(348)
1,836
Profit/(loss) from operations
12,789
(324)
12,465
(28,216)
(15,751)
Net finance costs
(1,895)
Share of post-tax results of associates and joint ventures
585
Loss before taxation
(17,061)
Taxation on ordinary activities
2,872
Loss for the year
(14,189)
Note:
*The adjustments to profit from operations are explained in notes 3, 4, 5(a), 6(d), 6(f), 6(h), 6(j) and 7.
The following table shows 2022 profit from operations and adjusted profit from operations at 2022 rates of exchange, and 2022 adjusted
profit from operations using 2021 rates of exchange.
2022
Adjusted*
segment
result
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Adjusted*
segment
result current
rates
\u00a3m
Adjusting*
items
\u00a3m
Segment
result current
rates
\u00a3m
U.S.
6,095
740
6,835
(630)
6,205
AME
3,268
80
3,348
(422)
2,926
APMEA
2,263
(38)
2,225
(833)
1,392
Profit from operations
11,626
782
12,408
(1,885)
10,523
Net finance costs
(1,641)
Share of post-tax results of associates and joint ventures
442
Profit before taxation
9,324
Taxation on ordinary activities
(2,478)
Profit for the year
6,846
Note:
*The adjustments to profit from operations are explained in notes 3, 4, 5(a), 6(d), 6(f), 6(h), 6(i), 6(j), and 7.
The following table shows 2021 profit from operations and adjusted profit from operations at the 2021 rates of exchange.
2021
Adjusted*
segment
result
\u00a3m
Adjusting*
items
\u00a3m
Segment
result
\u00a3m
U.S.
5,887
(321)
5,566
AME
3,059
(157)
2,902
APMEA
2,204
(438)
1,766
Profit from operations
11,150
(916)
10,234
Net finance costs
(1,486)
Share of post-tax results of associates
and joint ventures
415
Profit before taxation
9,163
Taxation on ordinary activities
(2,189)
Profit for the year
6,974
Note:
*The adjustments to profit from operations are explained in notes 3, 4, 6(d), 6(f), 6(g) and 7.
Depreciation, amortisation and impairment charges
Adjusted profit from operations at constant rates of exchange of \u00a312,789 million (2022 at constant rates: \u00a311,626 million; 2021 at current
rates: \u00a311,150\u00a0million) excludes adjusting depreciation, amortisation and impairment charges as explained in notes 4 and 7. These are
excluded from segmental adjusted profit from operations as per table below. 2023 and 2022 are disclosed at constant rates of exchange
and 2021 is disclosed at current rate of exchange.
2023
Adjusted
depreciation,
amortisation
and
impairment
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Adjusted
depreciation,
amortisation
and
impairment
current rates
\u00a3m
Adjusting
items
\u00a3m
Depreciation,
amortisation
and
impairment
current rates
\u00a3m
U.S.
218
\u2014
218
27,518
27,736
AME
333
3
336
44
380
APMEA
218
(13)
205
293
498
769
(10)
759
27,855
28,614
2022
Adjusted
depreciation,
amortisation
and
impairment
constant
rates
\u00a3m
Translation
exchange
\u00a3m
Adjusted
depreciation,
amortisation
and
impairment
current rates
\u00a3m
Adjusting
items
\u00a3m
Depreciation,
amortisation
and
impairment
current rates
\u00a3m
U.S.
221
16
237
322
559
AME
363
10
373
116
489
APMEA
186
4
190
67
257
770
30
800
505
1,305
2021
Adjusted
depreciation,
amortisation
and
impairment
\u00a3m
Adjusting
items
\u00a3m
Depreciation,
amortisation
and
impairment
\u00a3m
U.S.
203
276
479
AME
333
56
389
APMEA
188
20
208
724
352
1,076
Additional information by product category
Although the Group\u2019s operations are managed on a Regional basis, additional information for revenue is provided based on product
category as follows:
Revenue
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
New Categories
3,347
2,894
2,054
\u00a0 Vapour
1,812
1,436
927
\u00a0 HP
996
1,060
853
\u00a0 Modern Oral
539
398
274
Traditional Oral
1,163
1,209
1,118
Combustibles
22,108
23,030
22,029
Other
665
522
483
Revenue
27,283
27,655
25,684
External revenue and non-current assets other than financial instruments, deferred tax assets and retirement benefit assets are analysed
between the UK and all foreign countries at current rates of exchange as follows:
United Kingdom
All foreign countries
Group
Revenue is based on location of sale
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
External revenue
255
228
209
27,028
27,427
25,475
27,283
27,655
25,684
United Kingdom
All foreign countries
Group
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Intangible assets
447
529
95,115
128,546
95,562
129,075
Property, plant and equipment
362
215
4,221
4,652
4,583
4,867
Investments in associates and joint ventures
\u2014
\u2014
1,970
2,020
1,970
2,020
The consolidated results of the Reynolds Group operating in the U.S. met the criteria for separate disclosure under the requirements
of\u00a0IFRS 8 Operating Segments. Revenue arising from the operations of the Reynolds Group, inclusive of the sales made to fellow Group
companies, in 2023, 2022 and 2021 was \u00a311,985 million, \u00a312,635 million and \u00a311,707 million, respectively. The majority of sales are to
customers based in the U.S. Non-current assets attributable to the operations of the Reynolds Group were \u00a386,598 million
(2022: \u00a3119,707 million).
The main acquisitions comprising the goodwill balance of \u00a341,091 million (2022: \u00a347,956 million), included in intangible assets, are
provided in note 12. Included in investments in associates and joint ventures are amounts of \u00a3 1,851 million (2022: \u00a31,865 million)
attributable to the investment in ITC Ltd. Further information is provided in notes 9 and 14.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-603": { "value": "
3 Employee benefit costs
Note
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Wages and salaries
2,263
2,553
2,315
Social security costs
219
201
185
Other pension and retirement benefit costs
15
108
133
139
Share-based payments - equity and cash-settled
28
74
85
78
2,664
2,972
2,717
Included within employee benefits costs is a credit in relation to the Group\u2019s restructuring and integration initiatives of \u00a326 million
( 2022:\u00a0\u00a3 315 million charge; 2021: \u00a3160 million charge), as explained in note 7 .
Following a partial buy-out in 2021, in 2022, a second partial buy-out was concluded in the U.S. with approximately US$1.6\u00a0billion
(\u00a31.3\u00a0billion ) (2021: US$1.9\u00a0billion (\u00a31.4\u00a0billion )) of plan liabilities being removed from the balance sheet, resulting in a settlement gain
of\u00a0\u00a316 million (2021: \u00a335\u00a0million), which was reported in the income statement, and recognised as an adjusting item.
15 Retirement benefit schemes
The Group operates various funded and unfunded defined benefit schemes, including pension and post-retirement healthcare schemes,
and defined contribution pension schemes through its subsidiary undertakings in multiple jurisdictions, with its most significant
arrangements being in the U.S., the UK, Canada, Germany, Switzerland and the Netherlands. Together, schemes in these territories
account for over 90% of the total underlying obligations of the Group\u2019s defined benefit arrangements and over 70% of the current
service\u00a0cost.
Pension obligations consist mainly of final salary pension schemes which provide benefits to members in the form of a guaranteed level
of pension payable for life. The level of benefits provided depends on members\u2019 length of service and their salary in the final years leading
up to retirement. In addition, the Group operates several healthcare benefit schemes, of which the most significant are in the U.S. and
Canada. The majority of defined benefit schemes allow for the future accrual of benefits. With the exception of arrangements required
under local regulations, most of the Group\u2019s arrangements are closed to new entrants.
Benefits provided through defined contribution schemes are charged as an expense as payments fall due. The liabilities arising in respect
of defined benefit schemes are determined in accordance with the advice of independent, professionally qualified actuaries, using the
projected unit credit method. It is Group policy that all schemes are formally valued at least every three years.
Through its defined benefit pension schemes and healthcare benefit schemes, the Group is exposed to a number of risks, including:
\u2013 Asset volatility: The scheme liabilities are calculated using discount rates set by reference to bond yields. If scheme assets
underperform this yield, e.g. due to stock market volatility, this may create a deficit. However, most funded schemes hold a proportion
of assets which are expected to outperform bonds in the long-term, and the majority of schemes by value are subject to local
regulation regarding funding deficits. In addition, schemes in the UK and Canada have purchased insurance contracts which exactly
match valuation volatility of all or part of the scheme liabilities.
\u2013 Changes in bond yields: A decrease in corporate bond yields will increase scheme liabilities, although this will be partially offset by an
increase in the value of the schemes\u2019 bond holdings, \u2018buy-in\u2019 insurance assets or other hedging instruments.
\u2013 Inflation risk: Some of the Group\u2019s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities, although
in\u00a0most cases, caps on the level of inflationary increases are in place in the scheme rules, while some assets and derivatives provide
specific inflation protection.
\u2013 Life expectancy: The majority of the schemes\u2019 obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans\u2019 liabilities. Assumptions regarding mortality and mortality improvements are regularly
reviewed in line with actuarial tables and scheme specific experience.
The Group has an internal body, the Pensions Executive Committee (PEC), that is chaired by the Group Finance Director. The PEC sets
and oversees a set of philosophies, policies and practices in respect of post-employment benefits including, but not limited to, design,
funding, investment strategy, risk management and governance. It also reviews significant changes to defined benefit schemes in the
countries with the most significant liabilities, and defined contribution schemes in the countries with the most significant costs.
Significant changes to defined benefit arrangements include scheme closures to future accrual and risk management exercises such as
the \u2018buy-in\u2019 and \u2018buy-out\u2019 transactions referred to below.
A \u2018buy-out\u2019 transaction is where a pension scheme derecognises all (or part) of its liabilities, removing it from the balance sheet, by
permanently transferring those obligations from the sponsoring employer to a third-party provider and eliminating all further legal
or\u00a0constructive obligation to the pension scheme or to the sponsoring employer. By contrast, with a \u2018buy-in\u2019 transaction the scheme
liabilities remain on the balance sheet and the sponsoring employer remains responsible for the fulfilment of the pension obligations.
However, these obligations are de-risked through the purchase of an insurance product designed to match the underlying cash flows
of\u00a0the pension liability reducing the risks associated with improved longevity and interest and discount rate movements. The Group
consequently benefits from the \u2018buy-in\u2019 as it reduces the individual scheme\u2019s reliance on the Group for future cash funding requirements.
All of the Group\u2019s arrangements, including funded schemes where formal trusts or equivalents are required, have been developed
and\u00a0are\u00a0operated in accordance with local practices and regulations where applicable in the countries concerned. Responsibility for
the\u00a0governance of these schemes, including specific investment decisions and funding contribution schedules, generally lies with
the\u00a0trustees, or equivalent bodies, of each arrangement. The trustees will usually consist of representatives appointed by both the
sponsoring company and the beneficiaries.
The funded arrangements in the Group have policies on investment management, including strategies over a preferred long-term
investment profile, and schemes in certain territories including Canada and the Netherlands manage their bond portfolios to match
the\u00a0weighted average duration of scheme liabilities. In addition, as noted below, certain arrangements in the UK and Canada have been
de-risked through the purchase of insurance policies. The majority of funded schemes are subject to local regulations regarding funding
requirements. Contributions to defined benefit schemes are determined after consultation with the respective trustees and actuaries
of\u00a0the individual externally funded schemes, and after taking into account regulatory requirements in each territory. The Group\u2019s
contributions to funded defined benefit schemes in 2024 in total are expected to be \u00a348 million compared to \u00a364 million in 2023.
U.S.
In the U.S., the main funded pension plan is the Reynolds and Affiliates Pension Plan (RAPP) which was formed at the end of 2022
through a merger of the Reynolds American Retirement Plan (PEP) and the Retirement Income Plan for Certain RAI Affiliates (Affiliates).
The only funded healthcare scheme is the Brown & Williamson Tobacco Corporation Welfare & Fringe Benefit Plan. Each of the above
were established with corporate trustees that are required to run the plan in accordance with the plan\u2019s rules and to comply with all
relevant legislation, including the Employee Retirement Income Security Act of 1974.
The corporate trustees act as custodians with a committee of local management acting in a fiduciary capacity with regard to investment
decisions, risk mitigation and administration of the arrangements. Contributions to the various funded plans are agreed with the named
fiduciary, scheme actuaries and the committee of local management after taking account of statutory requirements including the
Pension Protection Act of 2006, as amended. Through its U.S. subsidiaries, the Group may make significant contributions, either as
required by statutory requirements or at the discretion of the Group, with the aim of maintaining a funding status of at least 90% and
remaining fully funded in the long-term. During 2023 , the Group contributed \u00a32\u00a0million to its funded pension and post-retirement plans
in\u00a0the\u00a0U.S. but does not expect to do so in 2024.
For funded plans in the U.S., the trustees employ a risk mitigation strategy which seeks to balance pension plan returns with a reasonable
level of funded status volatility. Based on this framework, the asset allocation has two primary components. The first component is the
hedging portfolio, which primarily consists of extended duration fixed income holdings (typically U.S. Government and investment grade
corporate bonds) and, to a lesser extent, derivatives used to match the majority of the interest rate risk associated with the benefit
obligations, thereby reducing expected funded status volatility. The second component is the return-seeking portfolio, which is\u00a0designed
to enhance portfolio returns. The return-seeking portfolio is broadly diversified.
On 7 October 2021, the Group concluded a transaction affecting portions of the membership of the former PEP and former Affiliates
plans referred to above, allowing the Group to fully settle portions of its liability by transferring the obligations to the Metropolitan Tower
Life Insurance Company in a buy-out. Approximately US$1.9\u00a0billion (\u00a31.4\u00a0billion) of plan liabilities were removed from the balance sheet,
resulting in a settlement gain of \u00a335\u00a0million. A further partial buy-out affecting portions of the membership of the former PEP and former
Affiliates plans was concluded on 7 June 2022, with approximately US$1.6\u00a0billion (\u00a31.3\u00a0billion) of plan liabilities removed from the balance
sheet, resulting in a settlement gain of \u00a316 million.
At 31 December 2023, the Reynolds and Affiliates Pension Plan was reporting a surplus under IAS 19 in total of \u00a3516 million (2022: \u00a3567 million).
Under the rules of this plan, after assuming the gradual settlement of the plan liabilities over the lives of the arrangements, any surplus
would be returnable to the Group in the event of a termination or could otherwise be repurposed for other existing or replacement
benefit plans, and accordingly, no surplus restriction has been recognised.
United Kingdom
In the UK, the main pension arrangement is the British American Tobacco UK Pension Fund (UKPF), which is established under trust law
and has a corporate trustee that is required to run the scheme in accordance with the UKPF\u2019s Trust Deed and Rules and to comply with
the Pension Scheme Act 1993, Pensions Act 1995, Pensions Act 2004 and all other relevant legislation. With effect from 1 July 2020, UKPF
was closed to further accrual of benefits with all active members becoming deferred members.
The formal triennial actuarial valuation of the UKPF was last carried out with an effective date of 31 March 2023. This showed that UKPF
had a surplus of \u00a3111\u00a0million on a Technical Provisions basis, in accordance with the statutory funding objective. Under IAS 19, this was
reported as a net retirement benefit asset of \u00a3184 million (2022: \u00a3143 million). Under the UKPF scheme rules, the Trustee does not have
a\u00a0unilateral power to commence a wind up of UKPF, and the Group has recognised a surplus as an unconditional right to a refund
assuming the gradual settlement of the UKPF liabilities over the life of the scheme with any future surplus returnable to the Group at the
end of the life of the scheme.
Under an amendment to the Schedule of Contributions dated 8 August 2022, the Trustee and the Group agreed that the Group would
make no contributions in 2022 but would commit to pay \u00a336\u00a0million in July 2023. However, the Trustee retained the right to require an
interim payment of up to \u00a318\u00a0million at any time before 19 August 2023 should it consider this, in all the circumstances, to be necessary
and appropriate. On 16 March 2023, the Schedule of Contributions was further amended to remove any funding commitment for the
foreseeable future, which was reconfirmed in the current Schedule of Contributions dated 17 December 2023. Consequently, no
contributions were made to UKPF in 2023 or\u00a02022 and no contributions are expected in 2024.
On 26 October 2022, the Group entered into an agreement with the Trustee to provide a temporary liquidity facility capped at \u00a340\u00a0million
for up to two years. The facility provides short-term liquidity for UKPF, should this be necessary, in meeting capital calls in respect of the
certain residual investments held by UKPF. Once borrowed and repaid, amounts cannot be redrawn. Interest will accrue on the amounts
borrowed under the facility at SONIA plus 2.25% p.a. A commitment charge of 0.56% will be\u00a0paid by the Trustee. As at 31 December 2022
and 31 December 2023 this facility was undrawn.
As part of its risk management strategy, on 31 May 2019, the UK Trustee entered into a buy-in agreement with Pension Insurance
Corporation plc (PIC) to acquire an insurance policy with the intent of matching a specific part of UKPF\u2019s future cash flows arising from
the accrued pension liabilities of retired and deferred members and improving the security to the UKPF and its members. On 19 May
2021, the Trustee entered into an agreement with PIC to acquire a second buy-in policy which involved the transfer of \u00a3383\u00a0million of
assets held by UKPF to PIC, and on 26 October 2022, a third and final buy-in policy was acquired with PIC. \u00a3198\u00a0million of assets were
transferred immediately with \u00a335\u00a0million of the premium deferred and subsequently settled in 2023.
As a result of these transactions, approximately 92% of the assets held by UKPF (2022: 94%) are represented by the buy-in contracts,
covering 100% of UKPF\u2019s retirement liabilities (2022: 100%). On an IAS 19 basis, the subsequent fair value of the insurance policies
matches the present value of the liabilities being insured.
For the residual assets held by UKPF, the current allocation is broadly split as 65% in return seeking assets and 35% in liquid assets. The return
seeking portfolio is invested in illiquid assets which, in the normal course of events, will wind down naturally over time, with their value being
realised as the investments mature. The Trustee reviewed the investment strategy following the completion of the third and final buy-in
contract with PIC in October 2022. The residual liquid assets were transferred to a Liquidity Fund to support the ongoing and anticipated
expenses of the UKPF. The strategy remains consistent with their ultimate target to further reduce UKPF's exposure to asset volatility.
Other territories
Payments made to pensioners by the operating companies in Germany, net of income on scheme assets, are deemed to be company
contributions to the Contractual Trust Arrangements and are anticipated to be around \u00a319 million in 2024 and \u00a338 million per annum for
the four years after that.\u00a0Contributions to pension schemes in Canada, Netherlands and Switzerland in total are anticipated to be around
\u00a312 million in 2024 and then also around \u00a37 million per annum for the four years after that.
For schemes in the Netherlands reporting surpluses of \u00a344 million (2022: \u00a346 million), these surpluses have been recognised as an
unconditional right to a refund assuming the gradual settlement of the pension liabilities over the life of the scheme, with any future surplus
returnable to the Group at the end of the life of the scheme, and similarly for the surplus relating to schemes in Germany of \u00a3122\u00a0million
(2022: \u00a3150 million). For schemes in surplus in Canada of \u00a333 million (2022: \u00a335 million), the economic benefit has been calculated as a
combination of the expected level of administration expenses which may be charged to the plan assets in accordance with\u00a0the plan rules,
which economically represents a potential surplus refund, and the value of the employer reserve account as defined in\u00a0legislation, which
represents a potential reduction in contributions on an ongoing basis or a surplus refund at the end of the life of the scheme.
On 14 November 2023, the Group through its Canadian subsidiaries entered into a buy-in agreement with two insurers to acquire
insurance policies that operate as assets of its second largest Canadian scheme, the Imperial Tobacco Corporate Pension Plan
(Corporate Plan), by transferring plan assets of CAD$194\u00a0million (\u00a3114\u00a0million). The transaction was met entirely from the pension plan
assets with no further funding required from the Group. The buy-in covered all the Corporate Plan\u2019s liabilities in relation to pensioners
and deferred members as well as the pensions accrued up to 31 December 2022 for active members. The Group consequently benefits
from the buy-in as it reduces the Corporate Plan\u2019s reliance on the Group for future cash funding requirements. Previously, on
2\u00a0September 2021, the Group entered into a buy-in agreement in respect of its largest Canadian scheme, the Imasco Pension Fund
Society Plan (Society Plan), by transferring plan assets of CAD$766\u00a0million (\u00a3451\u00a0million). The buy-in covered all the Society Plan\u2019s
liabilities in relation to pensioners and deferred members as well as the pensions accrued up to 31 December 2020 for active members.
Unfunded arrangements
The majority of benefit payments are from trustee administered funds, however, there are also a number of unfunded schemes where
the sponsoring company meets the benefit payment obligation as it falls due, including UK-based Defined Benefit and Defined
Contribution Unapproved Unfunded Retirement Benefit Schemes (DB UURBS and DC UURBS respectively). The DC UURBS credits
accrued in the year are increased in line with the Company\u2019s Weighted Average Cost of Debt and the scheme is therefore treated as a
defined benefit scheme under IAS 19. For unfunded pension schemes in the U.S. and UK, 50% of the liabilities reported at year-end are
expected to be settled by the Group within 10 years, 29% between 10 and 20 years, 14% between 20 and 30 years, and 7% thereafter. For
unfunded healthcare schemes in the U.S. and Canada, 70% of the liabilities reported at year-end are expected to be settled by the Group
within 10 years, 24% between 10 and 20 years, 5% between 20 and 30 years, and 1% thereafter.
The amounts recognised in the balance sheet are determined as follows:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Present value of funded scheme liabilities
(6,267)
(6,310)
(150)
(205)
(6,417)
(6,515)
Fair value of funded scheme assets
7,172
7,271
145
153
7,317
7,424
905
961
(5)
(52)
900
909
Unrecognised funded scheme surpluses
(40)
(61)
\u2014
\u2014
(40)
(61)
865
900
(5)
(52)
860
848
Present value of unfunded scheme liabilities
(380)
(387)
(405)
(410)
(785)
(797)
485
513
(410)
(462)
75
51
The above net asset/(liability) is recognised in the balance sheet as follows:
\u2013 retirement benefit scheme liabilities
(467)
(483)
(414)
(466)
(881)
(949)
\u2013 retirement benefit scheme assets
952
996
4
4
956
1,000
485
513
(410)
(462)
75
51
The net assets of funded pension schemes by territory are as follows:
Liabilities
Assets
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
\u2013 U.S.
(1,439)
(1,552)
1,890
2,046
451
494
\u2013 UK
(2,132)
(2,114)
2,315
2,256
183
142
\u2013 Germany
(741)
(711)
863
861
122
150
\u2013 Canada
(556)
(574)
594
613
38
39
\u2013 Netherlands
(736)
(693)
780
739
44
46
\u2013 Switzerland
(273)
(279)
295
308
22
29
\u2013 Rest of Group
(390)
(387)
435
448
45
61
Funded schemes
(6,267)
(6,310)
7,172
7,271
905
961
Of the Group\u2019s unfunded pension schemes, 48% ( 2022: 47%) relate to arrangements in the UK and 38% (2022: 39%) relate to
arrangements in the U.S., while 86% (2022: 86%) of the Group\u2019s unfunded healthcare arrangements relate to arrangements in the U.S.
The amounts recognised in the income statement are as follows:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Defined benefit schemes
Service cost
\u2013 current service cost
36
50
1
1
37
51
\u2013 past service (credit)/cost, curtailments
and settlements
(7)
(14)
1
1
(6)
(13)
Net interest on the net defined benefit
liability
\u2013 interest on scheme liabilities
315
224
32
23
347
247
\u2013 interest on scheme assets
(345)
(240)
(9)
(6)
(354)
(246)
\u2013 interest on unrecognised funded scheme
surpluses
4
1
\u2014
\u2014
4
1
3
21
25
19
28
40
Defined contribution schemes
80
93
\u2014
\u2014
80
93
Total amount recognised in the income
statement (note 3 )
83
114
25
19
108
133
The above charges are recognised within employee benefit costs in note 3 and include a credit of \u00a39 million in 2022 in respect of
settlements, past service costs and defined contribution costs reported as part of the restructuring costs and other adjusting items
charged in arriving at profit from operations (note 7). Included in current service cost in 2023 is \u00a310 million (2022: \u00a313 million) of
administration costs. Current service cost is stated after netting employee contributions, where applicable.
The movements in scheme liabilities are as follows:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Present value at 1 January
6,697
10,414
615
707
7,312
11,121
Differences on exchange
(153)
567
(34)
78
(187)
645
Current service cost
36
50
1
1
37
51
Past service (credit)/cost and settlements
(67)
(1,308)
1
1
(66)
(1,307)
Interest on scheme liabilities
315
224
32
23
347
247
Contributions by scheme members
2
3
\u2014
\u2014
2
3
Benefits paid
(484)
(586)
(52)
(59)
(536)
(645)
Actuarial (gains)/losses
\u2013 arising from changes in demographic
assumptions
(28)
(18)
\u2014
\u2014
(28)
(18)
\u2013 arising from changes in financial
assumptions
268
(2,775)
9
(145)
277
(2,920)
Experience losses/(gains)
61
126
(17)
9
44
135
Present value at 31 December
6,647
6,697
555
615
7,202
7,312
Changes in financial assumptions principally relate to discount rate movements in both years, offset by changes in inflation. Experience
losses/(gains) relates to variations from previous assumptions for inflationary increases for pensions-in-payment and deferred pensions
as well as adjustments for membership data. Past service (credit)/cost and settlements in the table above includes amounts relating to
the U.S. buy-out transaction in 2022.
Scheme liabilities by scheme membership:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Active members
656
756
23
31
679
787
Deferred members
1,025
1,055
1
1
1,026
1,056
Retired members
4,966
4,886
531
583
5,497
5,469
Present value at 31 December
6,647
6,697
555
615
7,202
7,312
Approximately 95% of scheme liabilities in both years relate to guaranteed benefits.
The movements in funded scheme assets are as follows:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Fair value of scheme assets
at 1 January
7,271
10,644
153
172
7,424
10,816
Differences on exchange
(182)
606
(10)
21
(192)
627
Settlements
(60)
(1,294)
\u2014
\u2014
(60)
(1,294)
Interest on scheme assets
345
240
9
6
354
246
Company contributions
64
74
\u2014
\u2014
64
74
Contributions by scheme members
2
3
\u2014
\u2014
2
3
Benefits paid
(448)
(546)
(14)
(15)
(462)
(561)
Actuarial gains/(losses)
180
(2,456)
7
(31)
187
(2,487)
Fair value of scheme assets
at 31 December
7,172
7,271
145
153
7,317
7,424
The actuarial losses and gains in both years principally relate to movements in the fair values of scheme assets including revaluations
on\u00a0initial recognition and subsequent remeasurement of insurance assets acquired in the buy-in transactions referred to above. Actual
returns are stated net of applicable taxes and fund management fees. Past service and settlements in the table above includes amounts
relating to the U.S. buy-out transactions in 2022.
Scheme assets have been diversified into equities, bonds and other assets and are typically invested via fund investment managers into
both pooled and segregated mandates of listed and unlisted equities and bonds.
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Equities \u2012 listed
629
623
5
5
634
628
Equities \u2012 unlisted
675
756
49
50
724
806
Bonds \u2012 listed
1,139
1,167
17
18
1,156
1,185
Bonds \u2012 unlisted
803
768
58
64
861
832
Buy-in insurance policies
2,585
2,453
\u2014
\u2014
2,585
2,453
Other assets \u2012 listed
556
473
8
7
564
480
Other assets \u2012 unlisted
785
1,031
8
9
793
1,040
Fair value of scheme assets
at 31 December
7,172
7,271
145
153
7,317
7,424
In the above analysis, investments via equity-based investment funds are shown under listed equities, and investments via bond-based
investment funds are shown under listed bonds. Other assets include insurance contracts, cash and other deposits, derivatives and other
hedges, recoverable taxes, infrastructure investments and investment property. The fair values of listed scheme assets were derived
from observable data including quoted market prices and other market data, including market values of individual segregated
investments and of pooled investment funds where quoted.
The fair values of insurance policies related to buy-in transactions in the UK and Canada were estimated as the present value of the
underlying obligations covered by the insurance policy and consequently the valuation of these assets at each balance sheet date is
subject to the same measurement uncertainty as for the related scheme liabilities.
The fair values of other unlisted assets were determined using an income approach that utilised cash flow models utilising observable
inputs and comparing these valuations to benchmark valuations of similar assets. In addition, the fair value of a proportion of the unlisted
bonds is estimated by reference to daily broker auctions.
In the U.S, pension plan assets are invested using active investment strategies and multiple investment management firms. Managers
within each asset class cover a range of investment styles and approaches.\u00a0Allowable investment types include public equity, fixed
income, real assets, private equity and hedge funds.\u00a0The range of allowable investment types utilised for pension assets provides
enhanced returns and more widely diversifies the plan.
As noted above, the UKPF Trustee has acquired insurance policies that operate as a UK Fund investment asset in\u00a0a buy-in transaction.
The\u00a0residual assets of this fund of \u00a3184 million (2022: \u00a3143 million) now predominantly consist of cash and a proportion of illiquid
investments, such as private equity and infrastructure investments, as well as certain liability-driven investments and absolute return funds.
The recognition of retirement benefit surpluses on the balance sheet is restricted where the economic benefit, in the form of a potential
refund or reduction in future contributions, has a present value which is less than the net assets of the scheme. The movements in the
unrecognised scheme surpluses, recognised in other comprehensive income, are as follows:
Pension schemes
Healthcare schemes
Total
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Unrecognised funded
scheme surpluses at
1 January
(60)
(16)
(16)
\u2014
\u2014
\u2014
(60)
(16)
(16)
Differences
on exchange
\u2014
(4)
2
\u2014
\u2014
\u2014
\u2014
(4)
2
Interest on
unrecognised funded
scheme surpluses
(4)
(1)
(1)
\u2014
\u2014
\u2014
(4)
(1)
(1)
Movement in year
(note 22)
24
(39)
(1)
\u2014
\u2014
\u2014
24
(39)
(1)
Unrecognised funded
scheme surpluses at
31 December
(40)
(60)
(16)
\u2014
\u2014
\u2014
(40)
(60)
(16)
The principal actuarial assumptions (weighted to reflect individual scheme differences) used in the following territories are shown below.
In both years, discount rates are determined by reference to normal yields on high quality corporate bonds at the balance sheet date.
2023
2022
U.S.
UK
Germany
Canada
Netherlands
Switzerland
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Rate of increase in
salaries (%)
3.3
Nil
2.5
2.5
1.4
2.0
3.3
Nil
2.5
2.5
1.4
1.5
Rate of increase in
pensions in payment
(%)
2.4
3.1
2.3
Nil
2.5
Nil
2.4
3.2
2.3
Nil
2.2
Nil
Rate of increase in
deferred pensions (%)
0.1
2.5
2.3
Nil
2.5
\u2014
0.1
2.8
2.3
Nil
2.2
\u2014
Discount rate (%)
5.2
4.8
3.5
4.6
3.3
1.4
5.5
5.0
4.2
5.0
3.7
2.1
General inflation (%)
2.5
3.1
2.5
2.0
2.0
1.4
2.5
3.2
2.3
2.0
2.0
1.2
2023
2022
U.S.
UK
Germany
Canada
Netherlands
Switzerland
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Weighted average
duration of liabilities
(years)
10.2
12.2
10.6
9.0
15.0
10.8
10.7
12.4
10.9
9.0
14.4
10.2
For healthcare inflation in the U.S., the assumption is 7.5% for 2023 (2022: 7.5%) and in Canada, the assumption is 5.0% for both years.\u00a0
Mortality assumptions are subject to regular review. The principal schemes used the following tables:
U.S.
Pri-2012 mortality tables without collar or amount adjustments projected with MP-2021 generational projection except
for a specific group of retired members for which the mortality assumption is 99.5% of the RP-2006 table with white
collar adjustment, projected with MP-2021 generational projection (both years)
UK
S3NA (YOB) with the CMI (2022) improvement model (smoothing parameter of 7) and 25% weighting to the 2022 data
with a 1.25% long-term improvement rate applied from 2020 onwards (2022 : S3PA (YOB) with the CMI (2021)
improvement model with a 1.25% long-term improvement rate)
Germany
RT Heubeck 2018 G (both years)
Canada
CPM-2014 Private Table (both years)
Netherlands
AG Prognosetafel 2022 (both years)
Switzerland
LPP/BVG 2020 base table with CMI projection factors for mortality improvements with a 1.5% long-term improvement
rate (both years)
Based on the above, the weighted average life expectancy, in years, for mortality tables used to determine benefit obligations is as\u00a0follows:
U.S.
UK
Germany
Canada
Netherlands
Switzerland
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
31 December 2023
Member age 65
(current\u00a0life\u00a0expectancy)
22.1
23.6
22.6
24.1
20.6
24.0
22.1
24.4
21.0
24.4
22.0
23.8
Member age 45
(life\u00a0expectancy at age 65)
22.2
24.1
24.1
26.1
23.0
26.8
23.1
25.4
23.2
26.3
24.0
25.7
31 December 2022
Member age 65
(current\u00a0life\u00a0expectancy)
22.1
23.6
22.9
24.2
20.6
24.0
22.0
24.4
21.0
24.4
22.0
23.7
Member age 45
(life\u00a0expectancy at age 65)
22.2
24.1
24.5
26.0
23.4
26.3
23.0
25.3
23.2
26.3
23.9
25.6
For the remaining territories, typical assumptions are that real salary increases will be from 0% to 11.7% (2022: 0% to 8.0%) per annum
and discount rates will be from 0% to 7.0% (2022: 0% to 7.5%) above inflation. Pension increases, where allowed for, are generally
assumed to be in line with inflation. Assumptions of life expectancy are in line with best practice in each territory. For countries where
there is not a deep market in such corporate bonds, the yield on government bonds is used.
The valuation of retirement benefit schemes involves judgements about uncertain future events. Sensitivities in respect of the key
assumptions used to measure the principal pension schemes as at 31 December 2023 are set out below. These sensitivities show the
hypothetical impact of a change in each of the listed assumptions in isolation, with the exception of the sensitivity to inflation which
incorporates the impact of certain correlating assumptions such as salary increases and pension increases. While each of these
sensitivities holds all other assumptions constant, in\u00a0practice such assumptions rarely change in isolation, while asset values also change,
and the impacts may offset to some extent.
1 year
increase
\u00a3m
1 year
decrease
\u00a3m
percentage
increase
\u00a3m
percentage
decrease
\u00a3m
Average life expectancy \u2013 increase/(decrease) of scheme liabilities
184
(185)
Rate of inflation (+/- 25bps) \u2013 increase/(decrease) of scheme liabilities
95
(96)
Discount rate (+/- 50bps) \u2013 (decrease)/increase of scheme liabilities
(308)
336
A one percent increase in healthcare inflation would increase healthcare scheme liabilities by \u00a320 million, and a one percent decrease
would decrease liabilities by \u00a318 million. The income statement effect of this change in assumption is not material.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-604": { "value": "
4 Depreciation, amortisation and impairment costs
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Intangibles \u2013 amortisation and impairment of trademarks and similar intangibles
23,232
317
333
\u2013 amortisation and impairment of computer software
125
142
129
\u2013 impairment of goodwill
4,614
\u2014
57
Property, plant and equipment - depreciation and impairment
643
846
557
28,614
1,305
1,076
Enumerated below are movements in costs that have impacted depreciation, amortisation and impairment in 2023 , 2022 and 2021 .
These include changes in the Group's underlying business performance, as well as impact of adjusting items, as defined in note 1 .
Intangibles \u2013 amortisation and impairment of trademarks and similar intangibles
Acquisitions in previous years have resulted in the capitalisation of trademarks and similar intangibles, including those which
are\u00a0amortised over their expected useful lives, which do not exceed 20 years. As mentioned in note 12, the amortisation and impairment
of these acquired trademarks and similar intangibles are charged to the income statement of which the adjusting element is
\u00a323,202\u00a0million (2022: \u00a3288 million; 2021: \u00a3306 million). In 2022, included under amortisation and impairment of trademarks and similar
intangibles is\u00a0a\u00a0\u00a33\u00a0million gain (2021: \u00a3nil million) related to a trademark disposal, which has been treated as adjusting.
Impairment of goodwill
The impairment of goodwill is charged to the income statement as adjusting.
During 2023, the Group impaired \u00a34,614 million of goodwill in the U.S., South Africa and Peru, as explained in note 12(b).
During 2022, the Group made no impairments of goodwill.
During 2021, the Group impaired \u00a33\u00a0million of goodwill held in Myanmar as a result of the decision to cease activities in the market.
The Group also recognised a goodwill impairment charge of \u00a354\u00a0million in 2021 due to continued difficult trading conditions in Peru
as\u00a0a\u00a0consequence of the COVID-19 pandemic.
Property, plant and equipment \u2013 depreciation and impairment
The following items are included within depreciation and impairment of property, plant and equipment:
\u2013 Restructuring and integration related depreciation and impairment costs were a net charge of \u00a339 million (2022:\u00a0\u00a3220\u00a0million net cost;
2021: \u00a311 million net credit) comprising an impairment of \u00a346 million for machinery in Reynolds due to the adverse impact from macro-
economic headwinds and industry volume declines in the U.S., as explained in note 12(b)(iv). This was partially offset by depreciation
and impairment costs and reversals resulting from obsolete machines in relation to downsizing and factory rationalisation. These were
treated as adjusting, as mentioned in note 7; and
\u2013 Gains and losses recognised on disposal of property, plant and equipment.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-605": { "value": "
Intangibles \u2013 amortisation and impairment of trademarks and similar intangibles
Acquisitions in previous years have resulted in the capitalisation of trademarks and similar intangibles, including those which
are\u00a0amortised over their expected useful lives, which do not exceed 20 years. As mentioned in note 12, the amortisation and impairment
of these acquired trademarks and similar intangibles are charged to the income statement of which the adjusting element is
\u00a323,202\u00a0million (2022: \u00a3288 million; 2021: \u00a3306 million). In 2022, included under amortisation and impairment of trademarks and similar
intangibles is\u00a0a\u00a0\u00a33\u00a0million gain (2021: \u00a3nil million) related to a trademark disposal, which has been treated as adjusting.
Impairment of goodwill
The impairment of goodwill is charged to the income statement as adjusting.
During 2023, the Group impaired \u00a34,614 million of goodwill in the U.S., South Africa and Peru, as explained in note 12(b).
During 2022, the Group made no impairments of goodwill.
During 2021, the Group impaired \u00a33\u00a0million of goodwill held in Myanmar as a result of the decision to cease activities in the market.
The Group also recognised a goodwill impairment charge of \u00a354\u00a0million in 2021 due to continued difficult trading conditions in Peru
as\u00a0a\u00a0consequence of the COVID-19 pandemic.
Property, plant and equipment \u2013 depreciation and impairment
The following items are included within depreciation and impairment of property, plant and equipment:
\u2013 Restructuring and integration related depreciation and impairment costs were a net charge of \u00a339 million (2022:\u00a0\u00a3220\u00a0million net cost;
2021: \u00a311 million net credit) comprising an impairment of \u00a346 million for machinery in Reynolds due to the adverse impact from macro-
economic headwinds and industry volume declines in the U.S., as explained in note 12(b)(iv). This was partially offset by depreciation
and impairment costs and reversals resulting from obsolete machines in relation to downsizing and factory rationalisation. These were
treated as adjusting, as mentioned in note 7; and
\u2013 Gains and losses recognised on disposal of property, plant and equipment.
(b) Impairment testing
(i) Overview
a. Estimation uncertainty
As described in note 1, the critical accounting estimates used in the preparation of the consolidated financial statements include the
review of asset values, especially indefinite-lived assets such as goodwill and certain trademarks and similar intangibles.
There is significant judgement with regard to assumptions and estimates involved in the forecasting of future cash flows, which form the
basis of the assessment of the recoverability of these assets, with the effect that the value-in-use of calculations incorporate estimation
uncertainty, particularly for certain assets held in relation to the Canadian and U.S. markets.
b. Impact of climate change
The impact of climate change has been considered in preparation of the financial statements. For impairment testing and valuation
purposes, the Group have included certain climate-related costs within the discounted cash flow forecast for impairment assessment.
The Group also completed scenario analyses of the potential impact of those climate change-related risks. This sensitised discounted
cash flow included such items as product taxes and carbon taxes within the future cash flows and resulted in no material adverse impact
to the impairment assessment.
(ii) Discount rates
Post-tax discount rates were used in the impairment testing, based on the Group\u2019s weighted average cost of capital, taking into account
the cost of capital and borrowings, to which specific market-related premium adjustments are made. These adjustments are derived
from external sources and are based on the spread between bonds (or credit default swaps, or similar indicators) issued by the relevant
local (or comparable) government, adjusted for the Group\u2019s own credit market risk. Valuations derived from applying post-tax discount
rates to post-tax cash flows are aligned to those that would arise from applying pre-tax discount rates to pre-tax cash flows. For ease of
use and consistency in application, these results are periodically calibrated into bands based on internationally recognised credit ratings.
This applies to all CGUs with the exception of Reynolds, which had its discount rate independently determined based on a weighted
average cost of capital in respect of the U.S. and U.S. market-related premiums, and Malaysia where the discount rate reflects BAT
Malaysia's weighted average cost of capital.
The long-term growth rates and discount rates have been applied to the budgeted cash flows of each cash-generating unit. These cash
flows have been determined by local management based on experience, specific market and brand trends, as well as pricing and cost
expectations. These have been endorsed by Group management as part of the consolidated Group\u2019s approved budget.
Please refer to the discount rates applied for intangible assets with indefinite lives in note 12(b)(iv) and for cash-generating units in
note\u00a012(b)(iii).
(iii) Impairment testing - summary
Total impairment charges of \u00a327,614 million have been recognised in 2023, of which \u00a327,291 million related to Reynolds American
(being\u00a0a\u00a0charge against goodwill of \u00a34,299 million and against trademarks of \u00a322,992 million), \u00a3291 million related to South Africa
goodwill, \u00a324\u00a0million related to Peru goodwill and the remaining relating to other intangible assets.
(iv) Impairment testing \u2013 Reynolds American
Goodwill and the indefinite-lived brand intangibles relating to Reynolds American
Subsequent to the FDA announcement on 28 April 2022 of a proposed product standard to prohibit menthol as a characterising flavour
in cigarettes, the FDA formally submitted the final product standard to the Office of Management and Budget on 18 October 2023.
Management notes that the proposal of a product standard does not itself constitute a ban on menthol in cigarettes given the proposed
standard is still required to go through the established comprehensive U.S. rule-making process, the timetable and outcome for which
was, and remains, uncertain. Further to this, on 21 June 2022, the FDA announced plans to develop a proposed product standard that
would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products to reduce addictiveness.
Management notes that the FDA announcement does not itself constitute restrictions on nicotine levels in cigarettes, and any proposed
regulation of nicotine in cigarettes would need to be introduced through the established comprehensive U.S. rule-making process, the
timetable and outcome for which was, and remains, uncertain. Management do not deem this to be a new development but rather
a\u00a0continuation of the rulemaking process that the FDA initiated in 2017 that was later put on hold.
In December 2022, the sale of most tobacco products with characterising flavours (including menthol) other than tobacco were banned
in the state of California. The impact of the ban in California has been reflected in the cash flow forecasts used in the impairment model.
The Group has a long-standing track record of managing regulatory shifts and, in the event of regulatory change, the Group remains
confident in its ability to navigate that environment successfully.
In line with the approach used in 2022, the value-in-use calculations have been determined based on probability weighted scenarios to
derive a risk-adjusted cash flow forecast applied within the valuations. These scenarios incorporate varying assumptions on potential
timing for a final product standard to prohibit menthol as a characterising flavour in cigarettes becoming effective. However, the impact
of the timing of any potential menthol ban was not deemed to be a key assumption.
Management note that the U.S. combustibles market has experienced substantial volatility since 2020. In the period immediately prior to\u00a0the
COVID-19 pandemic, U.S. combustibles industry volumes declined by c.5.0-5.5% per annum (2017-2019). During COVID-19, due to changes
in consumer behaviour, industry volume was largely flat in 2020 (0.1% decline) with 2021 also declining by only 3.0%. However, in\u00a02022, as
the U.S. exited the pandemic combined with adverse impacts from the macro-economic headwinds, industry volume declined by 10.6%.
At the time, it was Management\u2019s assessment that the performance was a rebalancing and would return to a more consistent decline
rate in future periods, supporting the judgement that it was not possible to reliably determine a definite useful life for the brands.
Accordingly, an indefinite life continued to be applied and the brands were not amortised in 2022 or 2023.
During 2023, however, evolving insights indicated that the decline in industry volume would be higher than forecast due to the continued
macro-economic headwinds in the U.S. combined with an acceleration of the vapour category growth. This growth is driven by
combustible consumers turning to Vapour devices (specifically through the use of illicit single-use products) with this market segment
growing by c.100% in the period.
Due to the continued challenging trading conditions in the U.S., a detailed external study was commissioned to\u00a0assist Management with
an independent view of the potential forecast performance for the market.
The study assessed the future industry size, based upon, among other things:
\u2013 Macro-economic factors;
\u2013 Pricing and elasticity; and
\u2013 Long term trend assumptions which themselves include category-specific consumption patterns in comparison to other categories.
This review assisted Management in preparing the Group\u2019s five-year forecast of the U.S. market, with further extrapolation based upon
the estimated performance of the brands.
Following the review and as a result of the higher forecast combustibles market decline as described above, a total impairment of
\u00a327,291\u00a0million in respect of the U.S. CGU was identified. The impairment charge has been recognised using the exchange rate prevailing
on the date of the impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets are US$ denominated.
Impairment of trademarks and assessment of useful economic lives
Concurrent to the impairment assessment, and reflecting Management's revised volume projections, Management concluded that
it\u00a0was appropriate to redesignate Newport, Camel, Natural American Spirit and Pall Mall as definite-lived from 1 January 2024
(2023:\u00a0indefinite-lived, 2022: indefinite-lived) with an estimated life of between 20-30 years.
It was also concluded that it remains appropriate to continue to recognise Grizzly and Camel snus as indefinite-lived brands given the
expected continued performance of the traditional oral sector.
Corporate costs are allocated to the brand budgets based on either specific allocations, where appropriate, or based on revenue. As the
trademarks and similar intangibles with indefinite lives relate to the acquisition of Reynolds American, the brand budgets used in the value-in-
use calculations have also been incorporated into the budget information used in the impairment testing of Reynolds American goodwill.
The value-in-use calculations for the Reynolds American cash-generating unit and the indefinite-lived brands have been prepared based
on a five-year risk-adjusted cash flow forecast, incorporating the probability weighted scenarios above. After this forecast, for the
Reynolds American cash-generating unit and for the indefinite-lived brands Grizzly and Camel Snus, a probability weighted growth rate
of 1.0% (2022: 1.0%) is applied.
In order to support the long-term growth rates for Newport, Camel, Natural American Spirit and Pall Mall, a cash flow forecast has also
been prepared on a discrete basis, reflecting the revised useful economic lives from 1 January 2024. The long-term growth rates implied
by these value-in-use calculations with cash flows capped at 30 years or 20 years, as appropriate, are -4.7% (2022: 0.89%) for Newport,
-7.4% (2022: 0.93%) for Camel, -1.15% (2022: 1.0%) for Natural American Spirit and -13.7% (2022: 1.0%) for Pall Mall.
As a result of the revised forecasts, an impairment charge of \u00a322,992 million has been recognised in relation to the brands.
Management recognise that the date at which the redesignation to definite-lived is made is judgemental and have determined that
amortisation will commence from 1 January 2024. From 2024, amortisation will be charged on a straight-line basis with the increase in
annual amortisation expense expected to be \u00a31.4 billion (US$1.8 billion) per annum.
2023
2022
Carrying
amount
\u00a3m
Volume 5 Year
CAGR**
Pre-tax
discount rate*
%
Carrying
amount
\u00a3m
Volume 5 Year
CAGR
Pre-tax
discount rate
%
Indefinite-lived intangibles
Newport
20,753
(11.3)%
8.7
33,236
(6.7)%
9.2
Camel
7,822
(12.3)%
8.9
14,058
(6.4)%
8.9
Pall Mall
2,608
(18.8)%
9.4
6,252
(13.0)%
8.6
Natural American Spirit
10,439
(7.6)%
7.9
13,019
(2.5)%
8.6
Camel Snus
1,099
(5.4)%
7.8
1,355
(5.3)%
8.6
Grizzly
9,209
(3.9)%
7.8
10,308
(3.7)%
8.6
Total
51,930
78,228
Notes:
*For the purpose of current year impairment assessment, the value-in-use calculations for the combustibles brands have been prepared based on a five-year risk adjusted cash flow forecast,
supplemented by a forecast on a discrete period basis reflecting the revised useful economic life effective 1 January 2024 for the combustibles brands to support the long term growth rates.
Following these updates, the Group has revisited the methodology by which the Tax Amortisation Benefit (TAB) included in the brand valuation is treated when determining the pre-tax discount
rates. In the previous years, the Group had considered the pre-TAB value-in-use to derive the pre-tax discount rate, however, under the revised approach, the Group has considered the post-TAB
value-in-use in deriving the pre-tax discount rates for disclosure purposes. If the revised methodology is applied to the year 2022, the pre-tax discount rate will result in 7.9% for Newport, 7.6%
for Camel and 7.4% for Pall Mall, Natural American Spirit, Camel Snus and Grizzly. The revision of the pre-tax discount rates does not result in any change in the impairment assessment or the
headroom calculated for each of the intangible assets in\u00a0the year 2022. There are no other financial impacts on the financial statements for year-end 2022 as a result of this revision in
methodology in the application of the TAB factor for deriving pre-tax discount rate for disclosure purposes. Valuations derived from applying post-tax discount rates to post-tax cash flows are
aligned to those that would arise from applying pre-tax discount rates to pre-tax cash flows.
**\u00a0 Five year CAGR is calculated by reference to the first five years annual volumes in the value-in-use model against the 2023 baseline.
The below table indicates the additional amount of impairment that would be required if the following individual changes were made to
the key assumptions used in the impairment model:
Newport
\u00a3m
Camel
\u00a3m
Pall Mall
\u00a3m
Natural
American
Spirit
\u00a3m
Grizzly
\u00a3m
Camel Snus
\u00a3m
Assumptions
Volume decline by additional 1% year on year*
(1,135)
(427)
(142)
(572)
(559)
(68)
Decrease in long-term growth rate by 50bps
(560)
(163)
(32)
(467)
(593)
(70)
Increase in pre-tax discount rate by 75bps
(1,105)
(354)
(86)
(804)
(945)
(112)
Note:
*Volume sensitivity results in a proportional reduction in both net revenue and direct costs with no impact to operating margin %.\u00a0 Fixed overhead cost allocations remain flat. This
demonstrates a year-on-year decrease in operating cash flow for the discrete forecast years.
The volume decline assumption is based on the year on year decline rate increasing by an additional 1% each year in the five-year cash flow
forecast without any future recovery and assumes that other assumptions are not changed. The above sensitivities have been translated
using the exchange rate prevailing on the date of the impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets
are US$ denominated.
Impairment assessment of Reynolds American goodwill
As a consequence of the challenges in the U.S. market and the impact to the Group's ongoing financial forecast, and having recognised
an impairment charge in respect of the trademarks referenced above, the Group has also recognised an additional impairment in respect
of U.S. goodwill of \u00a34,299 million (2022: \u00a3nil million).
The table below indicates the additional amount of impairment that would be required if the following individual changes were made to
key assumptions within the value-in-use model and it has been translated using the exchange rate prevailing on the date of the
impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets are US$ denominated:
Reynolds American goodwill impairment charge for
2023 (\u00a3m)
Assumptions
Change in key assumption
Possible additional
impairment
(\u00a3m)
4,299
Pre-tax discount rate
Increase of 0.67%
(6,169)
Long-term growth rates
Decrease of 0.50%
(4,962)
Note:
*The sensitivity to increase the pre-tax discount rate for the Reynolds American goodwill has been considered in isolation without any uplift to the brands discount rate (impact of which
is shown in the sensitivity table above). In the event of an increase to the brand's discount rate, any additional impairment to the Reynolds American goodwill will reduce by the
respective amount due to the resulting reduction to its net assets.
Reynolds American Summary
The following is a summary table showing the movement of the Reynolds American goodwill and other intangible and similar assets in
the U.S. during 2023
2023
Opening
balance
\u00a3m
Differences on
exchange
\u00a3m
Impairment
\u00a3m
Closing
balance
\u00a3m
Reynolds American goodwill
37,181
(1,944)
(4,299)
30,938
Newport
33,236
(1,339)
(11,144)
20,753
Camel
14,058
(517)
(5,719)
7,822
Pall Mall
6,252
(187)
(3,457)
2,608
Natural American Spirit
13,019
(642)
(1,938)
10,439
Grizzly
10,308
(554)
(545)
9,209
Camel snus
1,355
(67)
(189)
1,099
(v) Impairment testing \u2013 Canada
Goodwill relating to Imperial Tobacco Canada Ltd (ITCAN)
In March 2019, ITCAN obtained an Initial Order from the Ontario Superior Court of Justice granting it protection under the Companies\u2019
Creditors Arrangement Act (CCAA). If the CCAA creditor protection were to end, significant liabilities might crystallise. As a
consequence, to reflect the risk to future operating cash flows, the value-in-use calculations have been prepared based on a five-year
cash flow forecast, after which a growth rate of -2.5% and a pre-tax discount rate of 20.3% (2022: 19.4%) have been assumed. Further
information on the Quebec Class Actions and CCAA can be found in note 31.
In addition to the increase in discount rate, a reasonable range of sensitivities was applied to the value-in-use calculation, and there was
no risk of an impairment charge identified.
The excess of value-in-use earnings over the carrying values (headroom) of the ITCAN goodwill would be reduced to nil if the following
individual changes, none of which are considered reasonably possible by management, were made to the key assumptions used in the
impairment model.
Canada\u00a0
goodwill
%
Assumptions
Decrease in revenue by*
17.4
Increase in pre-tax discount rate by
8.5
Note:
*Revenue sensitivities are performed in isolation and do not include the removal of the corresponding variable cost of sales. This demonstrates a decrease in revenue in each of the
forecast years.
Below is the summary of ITCAN's income statement:
2023
\u00a3m
2022
\u00a3m
Revenue
1,003
1,055
Profit from operations
600
589
Profit after tax
517
478
Please refer to note 32 for ITCAN's assets which are subject to restrictions.
The \u00a32,386 million of goodwill relating to ITCAN on the Group\u2019s balance sheet at 31 December 2023 will continue to be reviewed on a\u00a0regular
basis. Any impairment charge would result in a non-cash charge to the income statement that will be treated as an adjusting item.
(vi) Impairment testing \u2013 Goodwill and indefinite-lived brands (excluding Reynolds American and Canada)
The value-in-use calculations use cash flows based on detailed financial budgets prepared by management covering a one-year period
extrapolated over a 10-year horizon with growth of 3% (2022: 3%) in years two to ten, after which a growth rate of 1% (2022: 1%) has been
assumed as the long-term volume decline is more than offset by pricing to drive revenue growth. A 10-year horizon is considered appropriate
based on the Group\u2019s history of profit and cash growth, its well-balanced portfolio of brands and the industry in which it operates.
For the Malaysian cash-generating unit, as a result of regulatory and macro-economic conditions, the above assumptions were amended
to reflect the short- to medium-term plans of the country or area management spanning a period of five years after which a long-term
growth rate of 0% for New Categories and -0.9% for combustibles has been assumed. For the Malaysian cash-generating unit headroom
to reduce to \u00a3nil, the forecasted cash flows would need to reduce by 30.7% in each discrete year in the five-year period or the pre-tax
discount rate would have to increase by 5.5%, both of which Management does not consider to be reasonably possible. The Group will
continue to monitor Malaysia's performance going forward to identify if any impairment triggers materialise.
Trading conditions have continued to be difficult in South Africa with the growth in illicit trade following the ban of the sale of tobacco
products introduced during the COVID-19 pandemic becoming further entrenched and, as a result, the Group has recognised an
impairment charge of \u00a3291 million.
Due to further market deterioration in Peru, which negatively impacts future forecasted operating cash flows for the CGU, the Group
has\u00a0recognised an impairment charge of \u00a324 million.
Value-in-use calculations for both the South African CGU and the Peruvian CGU have been based on Management's five-year cash flow
forecast, after which a long-term growth rate of 0% has been assumed.
The table below shows the headroom and the impairment charge that would be recognised if the assumptions used in the value-in-use
calculation were changed:
Carrying amount
of CGU
\u00a3m
Increase in
discount rate*
\u00a3m
Decrease in
cash\u00a0flows*
\u00a3m
Decrease in
terminal value*
\u00a3m
Change in headroom/impairment charge
Cash-generating unit
South Africa
189
(28)
(38)
(19)
Peru
73
(11)
(11)
(8)
Note:
*Sensitivities applied to key assumptions are a 100bps increase in the pre-tax discount rate, a 10% decrease in forecast cash flows reflecting a loss in volumes arising from difficult
trading conditions and a 100bps decrease in terminal value growth rate.
With the exception of South African and Peruvian cash-generating units, following the application of a reasonable range of sensitivities
to\u00a0all cash-generating units, there was no reasonably possible scenario identified that would lead to a potential impairment charge.
", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-606": { "value": "
5 Other operating income
Other operating income of \u00a3 432 million (2022 : \u00a3 722 million; 2021: \u00a3 196 million) comprises income that is associated with the Group\u2019s
normal activities, but which falls outside the definition of revenue and includes gain on one-off transactions, such as capital profits arising
from the disposals of fixed assets, recoveries of indirect taxation and levies paid, and transfers of trademark rights.
(a) Brazil tax matters
In 2023 , in Brazil, \u00a3150 million of income has been recognised in respect of excise on social contributions, as well as \u00a319 million
(2022: \u00a3472 million) in respect of historical VAT on social contributions in Brazil. In 2023 and 2022, such recognised income has been
treated as an adjusting item .
In addition, in 2022, \u00a378\u00a0million of the contingent asset in respect of historical VAT on social contributions claims was sold to financial
institutions for \u00a338\u00a0million.
In 2021, the Group recognised \u00a35\u00a0million in respect of a tax case in Brazil and \u00a3130\u00a0million of the unrecognised contingent asset in respect
of historical VAT on social contributions claims was sold to financial institutions for \u00a345\u00a0million.
(b) Sale and leaseback
In 2023, the Group recognised \u00a315\u00a0million of gains arising from a sale and leaseback transaction on excess warehousing capacity
in\u00a0Argentina.
(c) Reynolds
In 2021, R.J. Reynolds Tobacco Company (RJRT) reached an agreement with several Master Settlement Agreement (MSA) states to
waive RJRT\u2019s claims under the MSA in connection with a settlement between those MSA states and a non-participating manufacturer,
S&M Brands, Inc. (S&M Brands), under which the states released certain claims against S&M Brands in exchange for receiving a portion
of the funds S&M Brands had deposited into escrow accounts in those states pursuant to the states\u2019 escrow statutes. In consideration
for waiving claims, RJRT, together with Santa Fe Natural Tobacco Company, received approximately \u00a340\u00a0million from the escrow funds
paid to those MSA states under their settlement with S&M Brands.
(d) Other
In 2023, \u00a385\u00a0million (2022: \u00a327\u00a0million; 2021: \u00a3nil\u00a0million) of income has been recognised in respect of the transfer of non-strategic
trademark rights, which had not previously been capitalised, to third parties.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-607": { "value": "432000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherIncome", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-608": { "value": "722000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherIncome", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-609": { "value": "196000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:OtherIncome", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2021-01-01T00:00:00/2022-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-610": { "value": "
6 Other operating expenses
(a) Items included within other operating expenses
The following items are included within other operating expenses:
Notes
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Other operating expenses
7,538
9,018
7,468
The following items are included within other operating expenses:
Master Settlement Agreement and State Settlement Agreements
6(b),(d)
2,023
2,387
2,486
Marketing costs in operating expenses
6(c)
1,152
1,160
1,242
Inventory write-offs
20
250
250
215
Research and development expenses (excluding employee benefit costs
and depreciation)
6(e)
181
138
141
Loss/(gain) on disposal of businesses
6(f)
546
(6)
358
Excise, VAT and penalties in respect of disputes in T\u00fcrkiye and South
Korea
6(g)
\u2014
\u2014
26
Charges in respect of DOJ and OFAC investigation
6(h)
75
450
\u2014
(Reversals)/charges in respect of assets held-for-sale
6(j)
(195)
612
\u2014
Charges in respect of Nigerian FCCPC case
6(i)
\u2014
79
\u2014
Brazil other taxes
6(k)
49
12
\u2014
Exchange differences
17
92
19
Hedge ineffectiveness within operating profit
(12)
36
(5)
Expenses relating to short-term leases
13
11
8
Expenses relating to leases of low-value assets
1
1
1
Auditor\u2019s remuneration
6(m)
29
29
27
(b) Master Settlement Agreement and State Settlement Agreements
In 1998, the major U.S. cigarette manufacturers (including the R.J. Reynolds Tobacco Company, Lorillard and Brown & Williamson,
businesses which are now part of the Reynolds Group) entered into the Master Settlement Agreement (MSA) with attorneys general
representing most U.S. states and territories. The MSA imposes a perpetual stream of future payment obligations on the major U.S.
cigarette manufacturers. The amounts of money that the participating manufacturers are required to annually contribute are based upon,
amongst other things, the volume of cigarettes sold and market share (based on cigarette shipments in that year). The MSA has been
subject to certain adjustments since 1998, including agreements related to the Non-Participating Manufacturer (NPM) adjustment under
the MSA reached with various U.S. states between 2012 and 2023.
The amounts payable by Group companies under the arrangement accrue as and when shipments of tobacco products are made.
Adjustments to amounts due in relation to past payments are typically received in the form of credits offsettable only against current or
future performance obligations. Unless credits have been realised by way of cash refund or by offset against liabilities due, they are treated
as contingent assets until realised. Credits in respect of future years\u2019 payments and the NPM adjustment claims would be accounted for
in the applicable year and will not be treated as adjusting items. Only credits in respect of prior year payments are included as adjusting
items.
The charge in each reporting period and the cashflow impact in the same period are not directly related, as the MSA is generally settled
once a year in April of the following year.
The BAT Group is subject to substantial payment obligations under the MSA and the state settlement agreements with the States of
Mississippi, Florida, Texas and Minnesota (such settlement agreements, collectively State Settlement Agreements). Reynolds Group\u2019s
operating subsidiaries\u2019 expenses and payments under the MSA and the State Settlement Agreements for 2023 amounted to
US$2,516\u00a0million (2022: US$2,951\u00a0million; 2021: US$3,420\u00a0million) in respect of settlement expenses and US$2,874\u00a0million (2022:
US$3,129\u00a0million; 2021: US$3,744\u00a0million) in respect of settlement cash payments.
Note
US$m
2023
\u00a3m
US$m
2022
\u00a3m
US$m
2021
\u00a3m
Opening MSA liability
25
2,637
2,193
2,815
2,079
3,139
2,296
Settlement expense
31
2,516
2,023
2,951
2,387
3,420
2,486
Cash paid
31
(2,874)
(2,311)
(3,129)
(2,531)
(3,744)
(2,722)
Difference on exchange
\u2014
(117)
\u2014
258
\u2014
19
Closing MSA liability
25
2,279
1,788
2,637
2,193
2,815
2,079
Non-Participating Manufacturer adjustments
During 2012, R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company (SFNTC), various other tobacco manufacturers,
17\u00a0states, the District of Columbia and Puerto Rico reached an agreement related to the Non-Participating Manufacturer (NPM)
adjustment under the MSA, and three more states joined the agreement in 2013. Under this agreement, R.J. Reynolds Tobacco Company
has received credits of more than US$1\u00a0billion, in respect of its Non-Participating Manufacturer (NPM) Adjustment claims related to the
period from 2003 to 2012. These credits have been applied against the companies\u2019 MSA payments over a period of five years from 2013,
subject to, and dependent upon, meeting the various ongoing performance obligations. During 2014, two additional states agreed to settle
NPM disputes related to claims for the period 2003 to 2012. R.J. Reynolds Tobacco Company has received US$170\u00a0million in credits, which
has been applied over a five-year period from 2014. During 2015, another state agreed to settle NPM disputes related to claims for the
period 2004 to 2014 and included a method to determine future adjustments from 2015 forward. R.J. Reynolds Tobacco Company has
received US$285\u00a0million in credits, which was applied over a four-year period from 2016. During 2016, no additional states agreed to settle
NPM disputes. During 2017, two more states agreed to settle NPM disputes related to claims for the period 2004 to 2014. R.J. Reynolds
Tobacco Company has received US$61\u00a0million in credits through the 2020 fiscal year. During 2018, nine more states agreed to settle NPM
disputes related to claims for the period 2004 to 2019, with an option through 2022, subject to certain conditions. R.J. Reynolds Tobacco
Company has received US$182\u00a0million in credits for settled periods through 2017 . Also, in 2018, one additional state agreed to settle NPM
disputes related to claims for the period 2004 to 2024, subject to certain conditions. R.J. Reynolds Tobacco Company has received
US$205\u00a0million in credits for settled periods through 2022. In the first quarter of 2020, certain conditions set forth in the 2017 and 2018
agreements were met for those 10 states. In 2022, an additional state settled NPM disputes related to claims for the period 2005 to 2028.
It is estimated that R.J. Reynolds Tobacco Company will receive a credit of US$130\u00a0million for settled periods through 2018, which will be
applied over a five-year period from 2022. In 2023, an additional state settled NPM disputes related to claims for the period 2005 to 2029.
It is estimated that R.J. Reynolds Tobacco Company will receive a credit of US$29\u00a0million for settled periods through 2018, which will be
applied over a five-year period from 2024.
State Settlement Agreements
In 2020, R.J. Reynolds Tobacco Company recognised additional expenses under the state settlement agreements in the States
of\u00a0Mississippi, Florida, Texas and Minnesota. R.J. Reynolds Tobacco Company recognised US$241\u00a0million of expense for payment
obligations to the State of Florida for the ITG Brands, LLC acquired brands from the date of divestiture, June 12, 2015, as a result of
an\u00a0unfavourable judgment. In addition, R.J. Reynolds Tobacco Company recognised US$264\u00a0million related to the resolution of claims
against it in the States of Texas, Minnesota and Mississippi for payment obligations to those states for the ITG Brands, LLC acquired
brands from the date of divestiture. Finally, R.J. Reynolds Tobacco Company settled certain related claims with Phillip Morris USA
under\u00a0the state settlement agreements in the states of Mississippi, Texas and Minnesota for US$8\u00a0million. During 2021, an additional
US$17\u00a0million expense was recognised in relation to the final resolution of the Texas and Minnesota claims. Additional information related
to the resolution of these claims is included in notes 6(d) and 31. In 2022, R.J. Reynolds Tobacco Company recognised US$37\u00a0million
in\u00a0additional expenses related to a settlement with Philip Morris USA resolving prior operating profit disputes under the\u00a0MSA related
to\u00a0the ITG Brands, LLC acquired brands.
(c) Marketing costs recognised as operating expenses
Certain marketing activities, such as discounts or allowances provided to customers, are required to be deducted from revenue as
explained in note 1. Other marketing expenses, such as point of sale and promotional materials, media advertising and sponsorship,
and\u00a0consumer research, are reported as operating expenses and have been shown in the table above.
(d) Litigation costs
Litigation costs included within other operating expenses, and reported as an adjusting item, were \u00a396\u00a0million ( 2022: \u00a3170\u00a0million;
2021: \u00a354\u00a0million) predominantly related to litigation costs including Engle progeny and other health-related claims. Included in 2023
is\u00a0an\u00a0NPM credit of \u00a36\u00a0million recognised for the settlement with the state of Iowa.
In 2022, the Group received \u00a326\u00a0million of NPM credits related to a favourable resolution in respect of MSA litigation in the state of Illinois.
During 2021, a \u00a312\u00a0million expense was recognised in relation to the final resolution of the Texas and Minnesota claims, under the state
settlement agreements, for payment obligations related to brands previously sold to a third party.
(e) Research and development
Total research and development costs, including employee benefit costs and depreciation, are \u00a3408 million (2022: \u00a3323\u00a0million;
2021: \u00a3304\u00a0million).
(f) Loss on disposal of businesses
On 13 September 2023, the Group disposed of its Russian and Belarusian businesses in compliance with international and local laws. The
Group had two subsidiaries in Russia (\"BAT Russia\"), being JSC British American Tobacco-SPb and JSC 'International Tobacco Marketing
Services', and one subsidiary in Belarus, International Tobacco Marketing Services BY. As explained in note 27(d)(i), net held-for-sale
assets of \u00a3770 million were disposed of for proceeds of \u00a3425 million, with an impairment charge of \u00a3345 million recorded at that time.
As discussed in note 6(j), the impairment charge recognised in 2022 of \u00a3554\u00a0million (net of \u00a314\u00a0million utilised during the year) was
reversed and offset by the above mentioned \u00a3345\u00a0million recorded at the date of sale, with a net reversal of impairment recognised of
\u00a3195 million.
The loss on disposal of businesses included within other operating expenses and recognised as an adjusting item in 2023 is a charge of
\u00a3548 million and includes \u00a3554 million of foreign exchange reclassified from other comprehensive income (note 22(c)(i)) and associated
costs of \u00a33 million partially offset by a realised foreign exchange gain on the proceeds received of \u00a39 million.
The total net impact after the partial reversal and loss on disposal recognised in 2023 was therefore \u00a3353 million.
On 6 August 2021, the Group disposed of its Iranian subsidiary, B.A.T. Pars Company PJSC (BAT Pars). Included within other operating
expenses, and recognised as an adjusting item in 2021, was a charge of \u00a3358 million comprising \u00a3272\u00a0million of foreign exchange
reclassified from other comprehensive income (note 22(c)(i)) and an impairment charge and associated costs of \u00a388\u00a0million. In 2022,
as\u00a0a\u00a0result of the unwind of discounting on the deferred proceeds and a true-up on the completion of accounts, a credit of \u00a36 million
(2021:\u00a0\u00a32\u00a0million) was recognised. In 2023, a credit of \u00a32\u00a0million arising from the revaluation of the receivable was recognised.
(g) Tax disputes in T\u00fcrkiye and South Korea
The settlement of tax disputes in T\u00fcrkiye and South Korea were recognised as adjusting items.
T\u00fcrkiye
British American Tobacco Tutun Mamulleri Sanayi ve Ticaret Anonim Sirketi (BAT Tutun) was subject to a series of tax audits mainly on
inventory movements for the years 2015, 2016 and 2019. In August 2021, BAT Tutun applied under the relevant tax amnesty law to settle its
retrospective tax assessments. Based on the settlement through the tax amnesty procedure, in 2021, BAT Tutun agreed to pay \u00a347\u00a0million
in 18\u00a0instalments from 1 November 2021 until 31 July 2024. Of the \u00a347\u00a0million, \u00a330\u00a0million of excise and penalties were recognised and
charged to operating profit, \u00a311\u00a0million as interest in net finance costs (note 8(b)) and \u00a36\u00a0million in taxation.
South Korea
As explained in note 31, on 16 September 2021, Rothmans Far East B.V. Korea Branch Office received \u00a34\u00a0million in relation to a VAT case.
In line with the treatment of the associated expense incurred in 2016, the cash received was recognised as an adjusting item in 2021.
(h) Charges in respect of DOJ and OFAC investigations
From time to time, the Group investigates, and becomes aware of governmental authorities\u2019 investigations into allegations of
misconduct, including alleged breaches of sanctions and allegations of corruption, against Group companies. Some of these allegations
are currently being investigated. The Group cooperates with the authorities, where appropriate.
On 25 April 2023, the Group announced that it had reached an agreement with the DOJ and OFAC to resolve previously disclosed
investigations into suspicions of sanctions breaches. These concerned business activities relating to the Democratic People\u2019s Republic
of\u00a0Korea between 2007 and 2017. The Company entered into a three-year deferred prosecution agreement (DPA) with the DOJ and a civil
settlement agreement with OFAC. The DOJ\u2019s charges against the Company \u2212 one count of conspiring to commit bank fraud and one
count of conspiring to violate sanctions laws \u2212 were filed and will later be dismissed if the Company abides by the terms of the DPA.
In\u00a0addition, a BAT subsidiary in Singapore, British-American Tobacco Marketing (Singapore) Private Limited, pleaded guilty to the same
charges. The total amount payable to the U.S. authorities is US$635\u00a0million plus interest.
Having recognised an initial provision of \u00a3450 million (US$540\u00a0million) in 2022, the Group has recognised an additional charge of
\u00a375\u00a0million in 2023. Refer to notes 24 and 25 for further details. Both charges are included within other operating expenses and
recognised as an adjusting item in 2023 and 2022.
(i) Charges in respect of Nigerian FCCPC case
In 2022, a charge of \u00a379 million was recognised within other operating expenses, and treated as an adjusting item, relating to the conclusion
of the investigation into alleged violations of the Nigerian Competition and Consumer Protection Act and National Tobacco Control Act.
(j) Reversals/charges in respect of assets held-for-sale
On 11 March 2022, the Group announced the intention to transfer its Russian business in full compliance with international and local laws.
At\u00a0that time, the Group had two subsidiaries in Russia (BAT Russia), being JSC British American Tobacco-SPb and JSC International
Tobacco Marketing Services. In September 2023, the Group formally entered into an agreement to sell the Group's Russian and Belarusian
businesses to a consortium led by then members of BAT Russia\u2019s Management team, in compliance with local and international laws. As
previously announced, due to operational dependencies between BAT Russia and the Group\u2019s subsidiary in Belarus (International Tobacco
Marketing Services BY) (BAT Belarus), the Belarusian business was included in the sale. The transaction was completed on 13 September
2023 and, since completion, the buyer consortium has wholly owned both businesses. These businesses are\u00a0now known as the ITMS Group.
In accordance with IFRS 5 Non-current Assets Held For Sale and Discontinued Operations, the assets and liabilities of these subsidiaries
were classified as held-for-sale at 31 December 2022 and presented as such on the balance sheet at an estimated fair value less costs to
sell. An impairment charge of \u00a3554 million (and associated costs of \u00a358 million) was recognised in other operating expenses as adjusting
items in 2022. During 2023, the previously recognised impairment was reversed (net of \u00a314\u00a0million impairment utilised), offset by the net
\u00a3345\u00a0million (being the impairment arising on disposal of \u00a3770 million net assets for sales proceeds of \u00a3425 million). This resulted in a net
partial reversal of \u00a3195 million. This has been treated as a non-cash adjusting item. Further information on the sale of the Russian and
Belarusian businesses can be found in note 6(f) and note 27(d)(i).
(k) Brazil other taxes
Since 2017, Souza Cruz LTDA (BAT Brazil) has been involved in a legal case over whether a 10% tax imposed on a tax benefit associated
with investment grants by the Rio de Janeiro State was constitutional. In October 2023, the Supreme Court concluded on the leading
case\u2019s trial, recognising that the tax was constitutional. This decision has binding effects on all taxpayers. BAT Brazil\u2019s individual lawsuit
has not yet concluded. However, given the decision in the leading case, in 2023, \u00a347\u00a0million was recognised in other operating expenses,
as an adjusting item, to reflect the probability of an unfavourable decision. Out of the \u00a347\u00a0million, \u00a340\u00a0million was reported as provisions
(note 24) and \u00a37\u00a0million was reported as trade and other payables.
In addition, a charge of \u00a32\u00a0million has been recognised in other operating expenses, as an adjusting item, in respect of social
contributions relating to the Brazil excise case, as mentioned in note 5(a). In 2022, a charge of \u00a312\u00a0million was recognised in other
operating expenses, as an adjusting item, in respect of social contributions related to the Brazil VAT case, as mentioned in note 5(a).
(l) Sustainability costs
Included in other expenses are recycling costs in relation to our Take-Back schemes and waste collection costs mandated by Extended
Producer Responsibility (EPR) schemes and similar schemes. EPR schemes are where the producer\u2019s responsibility for a product is
extended to the post-consumer stage of a product\u2019s life cycle. In 2023, these costs amounted to \u00a327 million. There are no meaningful
comparative costs available for prior years.
Also included in other expenses are costs of \u00a32 million in 2023 in relation to the purchase of renewable energy attribute certificates.
In 2023, an extreme weather event caused the destruction of a stock of tobacco leaves in a warehouse. The impact of the write-off of this
inventory is \u00a39 million.
(m) Auditor\u2019s remuneration
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Auditor\u2019s remuneration
Total expense for audit services pursuant to legislation:
\u2013 fees to KPMG LLP for Parent Company and Group audit
11.4
9.4
8.7
\u2013 fees to KPMG LLP firms and associates for local statutory and Group
reporting audits
9.4
11.0
9.5
Total audit fees expense - KPMG LLP firms and associates
20.8
20.4
18.2
Audit fees expense to other firms
0.2
0.2
0.2
Total audit fees expense
21.0
20.6
18.4
Fees to KPMG LLP firms and associates for other services:
\u2013 audit-related assurance services
6.9
7.1
8.0
\u2013 other assurance services
0.9
0.9
0.3
\u2013 tax advisory services
\u2014
\u2014
\u2014
\u2013 tax compliance
\u2014
\u2014
\u2014
\u2013 audit of defined benefit schemes of the Company
0.2
0.2
0.4
\u2013 other non-audit services
\u2014
\u2014
\u2014
8.0
8.2
8.7
The total auditor\u2019s remuneration to KPMG firms and associates included above are \u00a328.8 million (2022: \u00a328.6 million; 2021: \u00a326.9 million).
Under SEC regulations, the remuneration to KPMG firms and associates of \u00a328.8 million in 2023 (2022: \u00a328.6 million; 2021: \u00a326.9 million)
is\u00a0required to be presented as follows: audit fees \u00a327.7 million (2022: \u00a327.5 million; 2021: \u00a326.2 million), audit-related fees \u00a30.2 million
(2022: \u00a30.2 million; 2021: \u00a30.4 million), tax fees \u00a3nil million (2022: \u00a3nil million; 2021: \u00a3nil million) and all other fees \u00a30.9 million
(2022: \u00a30.9 million; 2021: \u00a30.3 million). Audit-related fees are in respect of services provided to associated pension schemes. All other fees
are in respect of other assurance services, including those provided over information derived from the financial information systems
subject to audit", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-611": { "value": "
(e) Research and development
Total research and development costs, including employee benefit costs and depreciation, are \u00a3408 million (2022: \u00a3323\u00a0million;
2021: \u00a3304\u00a0million).", "dimensions": { "concept": "ifrs-full:DisclosureOfResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-612": { "value": "
(j) Reversals/charges in respect of assets held-for-sale
On 11 March 2022, the Group announced the intention to transfer its Russian business in full compliance with international and local laws.
At\u00a0that time, the Group had two subsidiaries in Russia (BAT Russia), being JSC British American Tobacco-SPb and JSC International
Tobacco Marketing Services. In September 2023, the Group formally entered into an agreement to sell the Group's Russian and Belarusian
businesses to a consortium led by then members of BAT Russia\u2019s Management team, in compliance with local and international laws. As
previously announced, due to operational dependencies between BAT Russia and the Group\u2019s subsidiary in Belarus (International Tobacco
Marketing Services BY) (BAT Belarus), the Belarusian business was included in the sale. The transaction was completed on 13 September
2023 and, since completion, the buyer consortium has wholly owned both businesses. These businesses are\u00a0now known as the ITMS Group.
In accordance with IFRS 5 Non-current Assets Held For Sale and Discontinued Operations, the assets and liabilities of these subsidiaries
were classified as held-for-sale at 31 December 2022 and presented as such on the balance sheet at an estimated fair value less costs to
sell. An impairment charge of \u00a3554 million (and associated costs of \u00a358 million) was recognised in other operating expenses as adjusting
items in 2022. During 2023, the previously recognised impairment was reversed (net of \u00a314\u00a0million impairment utilised), offset by the net
\u00a3345\u00a0million (being the impairment arising on disposal of \u00a3770 million net assets for sales proceeds of \u00a3425 million). This resulted in a net
partial reversal of \u00a3195 million. This has been treated as a non-cash adjusting item. Further information on the sale of the Russian and
Belarusian businesses can be found in note 6(f) and note 27(d)(i).", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsHeldForSaleAndDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-613": { "value": "
(m) Auditor\u2019s remuneration
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Auditor\u2019s remuneration
Total expense for audit services pursuant to legislation:
\u2013 fees to KPMG LLP for Parent Company and Group audit
11.4
9.4
8.7
\u2013 fees to KPMG LLP firms and associates for local statutory and Group
reporting audits
9.4
11.0
9.5
Total audit fees expense - KPMG LLP firms and associates
20.8
20.4
18.2
Audit fees expense to other firms
0.2
0.2
0.2
Total audit fees expense
21.0
20.6
18.4
Fees to KPMG LLP firms and associates for other services:
\u2013 audit-related assurance services
6.9
7.1
8.0
\u2013 other assurance services
0.9
0.9
0.3
\u2013 tax advisory services
\u2014
\u2014
\u2014
\u2013 tax compliance
\u2014
\u2014
\u2014
\u2013 audit of defined benefit schemes of the Company
0.2
0.2
0.4
\u2013 other non-audit services
\u2014
\u2014
\u2014
8.0
8.2
8.7
The total auditor\u2019s remuneration to KPMG firms and associates included above are \u00a328.8 million (2022: \u00a328.6 million; 2021: \u00a326.9 million).
Under SEC regulations, the remuneration to KPMG firms and associates of \u00a328.8 million in 2023 (2022: \u00a328.6 million; 2021: \u00a326.9 million)
is\u00a0required to be presented as follows: audit fees \u00a327.7 million (2022: \u00a327.5 million; 2021: \u00a326.2 million), audit-related fees \u00a30.2 million
(2022: \u00a30.2 million; 2021: \u00a30.4 million), tax fees \u00a3nil million (2022: \u00a3nil million; 2021: \u00a3nil million) and all other fees \u00a30.9 million
(2022: \u00a30.9 million; 2021: \u00a30.3 million). Audit-related fees are in respect of services provided to associated pension schemes. All other fees
are in respect of other assurance services, including those provided over information derived from the financial information systems
subject to audit", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-614": { "value": "
7 Restructuring and integration costs
Restructuring costs reflect the costs incurred as a result of initiatives to improve the effectiveness and the efficiency of the Group as a globally
integrated enterprise. These costs represent additional expenses incurred that are not related to the normal business and day-to-day activities.
These initiatives include the costs associated with Quantum, being a review of the Group\u2019s organisational structure announced in 2019 to simplify
the business and create a more efficient, agile and focused company. In 2022, these also included a review of the Group\u2019s manufacturing
operations. No further Quantum restructuring charges were recognised as adjusting in 2023, following the completion of the Quantum
programme.
The costs of the Group\u2019s initiatives are included in profit from operations under the following headings:
Notes
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Employee benefit costs
3
(26)
315
160
Depreciation, amortisation and impairment costs
4
39
220
(11)
Other operating income
5
\u2014
(1)
\u2014
Other operating expenses
(15)
237
1
(2)
771
150
The adjusting charge in 2022 and 2021 related to the cost of employee packages in respect of Quantum and the ongoing costs associated
with initiatives to improve the effectiveness and efficiency of the Group as a globally integrated organisation. In addition, Quantum
initiatives in certain countries have resulted in the move to above market business models utilising local distributors as importers. As a
consequence, with the cessation of a physical presence in these markets, foreign exchange previously recognised in other comprehensive
income for these countries has been reclassified to the income statement and reported within other operating expenses (note 22(c)(i) ).
In 2023, following the completion of the Quantum programme, a credit of \u00a326 million has been recognised due to the reversal of
restructuring provisions recognised in respect of employee packages. In addition, a credit of \u00a37\u00a0million was recognised in relation to
impairment reversals associated with the Quantum programme. Included in this is an impairment reversal of \u00a34 million in relation to
machinery in South Africa as the asset can be used by another market in the Group.
In addition, in 2023, an adjusting impairment charge of \u00a346 million has been recognised for machinery in Reynolds due to the adverse
impact from macro-economic headwinds and industry volume decline in the U.S., as explained in note 12(b)(iv).
The reversal recognised in other expenses of\u00a0\u00a315 million includes unutilised Quantum provisions along with \u00a33 million relating to the release
of a provision originally raised in 2007 relating to site clean up costs in Canada. As no further work is required on the site the remaining
provision has been reversed.
The restructuring costs in 2022 include costs related to factory closures or rationalisation in APMEA, AME and the U.S. and costs
recognised as part of the Group's announced exit from Egypt.
In 2021, included under the Quantum initiatives above is a charge of \u00a327\u00a0million, including \u00a34\u00a0million for foreign exchange reclassified from
equity (note 22(c)(i)), related to the Group's withdrawal from Myanmar. In addition, as set out in note 4, goodwill in relation to Myanmar
was impaired and charged to the income statement.
The depreciation, amortisation and impairment costs in 2021 included a credit of \u00a325\u00a0million due to a partial reversal of previously
estimated impairment following the revision of factory rationalisation initiatives.
Also, in 2021, included within other operating expenses is a credit of \u00a359\u00a0million representing the release of an accrual on the successful
conclusion of the dispute with former shareholders of Reynolds American, as explained in note 31.", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-617": { "value": "
8 Net finance costs
(a) Net finance costs/(income)
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Interest expense
1,786
1,602
1,436
Interest expense on lease liabilities
30
25
24
Facility fees
19
21
33
Impact of the early repurchase of bonds (note 8(b) )
29
\u2014
\u2014
Interest related to adjusting tax payables (note 8(b))
71
36
31
Fair value changes on derivative financial instruments, hedged items and investments
599
(473)
252
Fair value change on other financial items (note 8(b))
(4)
(2)
24
Exchange differences
(449)
524
(279)
Finance costs
2,081
1,733
1,521
Interest income under the effective interest method
(186)
(92)
(35)
Finance income
(186)
(92)
(35)
Net finance costs
1,895
1,641
1,486
The Group manages foreign exchange gains and losses and fair value changes on a net basis excluding adjusting items, which are
explained in note 8(b). The derivatives that generate the fair value changes are explained in note 19.
Facility fees principally relate to the Group\u2019s central banking facilities.
In August 2023, the Group completed a tender offer to repurchase sterling-equivalent \u00a33,133\u00a0million of bonds, including \u00a343\u00a0million
of accrued interest. Further details on the tender offer are provided in note 26. Other net costs directly associated with the early
repurchase of bonds were treated as adjusting items as detailed in note 8(b).
Finance income includes income on cash and cash equivalents of which \u00a397 million (2022: \u00a342 million) relates to restricted cash balances
(see note 21).
(b) Adjusting items included in net finance costs
Adjusting items are significant items in net finance costs which individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group\u2019s underlying financial performance.
In 2023, in relation to the early repurchase of bonds, the Group incurred a fair value loss of \u00a3151 million on debt-related derivatives,
realised a net gain of \u00a3129 million arising on the difference between the redemption value and the amortised cost of the bonds, and
incurred other transaction costs of \u00a37 million.
The Group recognised interest on adjusting tax payables of \u00a3 71 million (2022: \u00a336 million; 2021: \u00a331 million), which included interest
of \u00a0\u00a360\u00a0million (2022: \u00a333 million; 2021: \u00a320 million) in relation to the Franked Investment Income Group Litigation Order (FII GLO)
(note\u00a010(b)), interest of \u00a3 16 million in relation to a tax provision in the Netherlands, a \u00a33 million credit from the reversal of interest on a tax
provision in relation to the factory closure in Switzerland and a \u00a32 million credit from the reversal of interest on tax provisions related
to\u00a0Russia. In prior periods, the interest on adjusting tax payables also included \u00a33 million in respect of a potential tax claw back due to
the\u00a0factory closure in Switzerland in 2022 and an amnesty tax payment of \u00a311\u00a0million in T\u00fcrkiye in 2021.
Included within fair value changes on other financial items are:
(i) In 2021, as part of the disposal of the Group\u2019s operations in Iran (note 27(d)), a provision of \u00a324\u00a0million was charged to net finance costs
against non-current investments held at fair value due to the uncertainty around recovery of these funds. In 2022, part of these funds
were recovered and therefore a reversal of the provision of \u00a317 million was recognised in net finance costs. In 2023, a further \u00a34 million
was recovered and recognised in net finance costs; and
(ii) In 2022, \u00a315 million of foreign exchange loss was recognised in net finance costs, arising on the revaluation of foreign currency
balances held in Russia that no longer qualified for hedge accounting due to the proposed sale of the Group's Russian business as
detailed in note 27(d)(i).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-616": { "value": "
8 Net finance costs
(a) Net finance costs/(income)
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Interest expense
1,786
1,602
1,436
Interest expense on lease liabilities
30
25
24
Facility fees
19
21
33
Impact of the early repurchase of bonds (note 8(b) )
29
\u2014
\u2014
Interest related to adjusting tax payables (note 8(b))
71
36
31
Fair value changes on derivative financial instruments, hedged items and investments
599
(473)
252
Fair value change on other financial items (note 8(b))
(4)
(2)
24
Exchange differences
(449)
524
(279)
Finance costs
2,081
1,733
1,521
Interest income under the effective interest method
(186)
(92)
(35)
Finance income
(186)
(92)
(35)
Net finance costs
1,895
1,641
1,486
The Group manages foreign exchange gains and losses and fair value changes on a net basis excluding adjusting items, which are
explained in note 8(b). The derivatives that generate the fair value changes are explained in note 19.
Facility fees principally relate to the Group\u2019s central banking facilities.
In August 2023, the Group completed a tender offer to repurchase sterling-equivalent \u00a33,133\u00a0million of bonds, including \u00a343\u00a0million
of accrued interest. Further details on the tender offer are provided in note 26. Other net costs directly associated with the early
repurchase of bonds were treated as adjusting items as detailed in note 8(b).
Finance income includes income on cash and cash equivalents of which \u00a397 million (2022: \u00a342 million) relates to restricted cash balances
(see note 21).
(b) Adjusting items included in net finance costs
Adjusting items are significant items in net finance costs which individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group\u2019s underlying financial performance.
In 2023, in relation to the early repurchase of bonds, the Group incurred a fair value loss of \u00a3151 million on debt-related derivatives,
realised a net gain of \u00a3129 million arising on the difference between the redemption value and the amortised cost of the bonds, and
incurred other transaction costs of \u00a37 million.
The Group recognised interest on adjusting tax payables of \u00a3 71 million (2022: \u00a336 million; 2021: \u00a331 million), which included interest
of \u00a0\u00a360\u00a0million (2022: \u00a333 million; 2021: \u00a320 million) in relation to the Franked Investment Income Group Litigation Order (FII GLO)
(note\u00a010(b)), interest of \u00a3 16 million in relation to a tax provision in the Netherlands, a \u00a33 million credit from the reversal of interest on a tax
provision in relation to the factory closure in Switzerland and a \u00a32 million credit from the reversal of interest on tax provisions related
to\u00a0Russia. In prior periods, the interest on adjusting tax payables also included \u00a33 million in respect of a potential tax claw back due to
the\u00a0factory closure in Switzerland in 2022 and an amnesty tax payment of \u00a311\u00a0million in T\u00fcrkiye in 2021.
Included within fair value changes on other financial items are:
(i) In 2021, as part of the disposal of the Group\u2019s operations in Iran (note 27(d)), a provision of \u00a324\u00a0million was charged to net finance costs
against non-current investments held at fair value due to the uncertainty around recovery of these funds. In 2022, part of these funds
were recovered and therefore a reversal of the provision of \u00a317 million was recognised in net finance costs. In 2023, a further \u00a34 million
was recovered and recognised in net finance costs; and
(ii) In 2022, \u00a315 million of foreign exchange loss was recognised in net finance costs, arising on the revaluation of foreign currency
balances held in Russia that no longer qualified for hedge accounting due to the proposed sale of the Group's Russian business as
detailed in note 27(d)(i).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-615": { "value": "
8 Net finance costs
(a) Net finance costs/(income)
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Interest expense
1,786
1,602
1,436
Interest expense on lease liabilities
30
25
24
Facility fees
19
21
33
Impact of the early repurchase of bonds (note 8(b) )
29
\u2014
\u2014
Interest related to adjusting tax payables (note 8(b))
71
36
31
Fair value changes on derivative financial instruments, hedged items and investments
599
(473)
252
Fair value change on other financial items (note 8(b))
(4)
(2)
24
Exchange differences
(449)
524
(279)
Finance costs
2,081
1,733
1,521
Interest income under the effective interest method
(186)
(92)
(35)
Finance income
(186)
(92)
(35)
Net finance costs
1,895
1,641
1,486
The Group manages foreign exchange gains and losses and fair value changes on a net basis excluding adjusting items, which are
explained in note 8(b). The derivatives that generate the fair value changes are explained in note 19.
Facility fees principally relate to the Group\u2019s central banking facilities.
In August 2023, the Group completed a tender offer to repurchase sterling-equivalent \u00a33,133\u00a0million of bonds, including \u00a343\u00a0million
of accrued interest. Further details on the tender offer are provided in note 26. Other net costs directly associated with the early
repurchase of bonds were treated as adjusting items as detailed in note 8(b).
Finance income includes income on cash and cash equivalents of which \u00a397 million (2022: \u00a342 million) relates to restricted cash balances
(see note 21).
(b) Adjusting items included in net finance costs
Adjusting items are significant items in net finance costs which individually or, if of a similar type, in aggregate, are relevant to an
understanding of the Group\u2019s underlying financial performance.
In 2023, in relation to the early repurchase of bonds, the Group incurred a fair value loss of \u00a3151 million on debt-related derivatives,
realised a net gain of \u00a3129 million arising on the difference between the redemption value and the amortised cost of the bonds, and
incurred other transaction costs of \u00a37 million.
The Group recognised interest on adjusting tax payables of \u00a3 71 million (2022: \u00a336 million; 2021: \u00a331 million), which included interest
of \u00a0\u00a360\u00a0million (2022: \u00a333 million; 2021: \u00a320 million) in relation to the Franked Investment Income Group Litigation Order (FII GLO)
(note\u00a010(b)), interest of \u00a3 16 million in relation to a tax provision in the Netherlands, a \u00a33 million credit from the reversal of interest on a tax
provision in relation to the factory closure in Switzerland and a \u00a32 million credit from the reversal of interest on tax provisions related
to\u00a0Russia. In prior periods, the interest on adjusting tax payables also included \u00a33 million in respect of a potential tax claw back due to
the\u00a0factory closure in Switzerland in 2022 and an amnesty tax payment of \u00a311\u00a0million in T\u00fcrkiye in 2021.
Included within fair value changes on other financial items are:
(i) In 2021, as part of the disposal of the Group\u2019s operations in Iran (note 27(d)), a provision of \u00a324\u00a0million was charged to net finance costs
against non-current investments held at fair value due to the uncertainty around recovery of these funds. In 2022, part of these funds
were recovered and therefore a reversal of the provision of \u00a317 million was recognised in net finance costs. In 2023, a further \u00a34 million
was recovered and recognised in net finance costs; and
(ii) In 2022, \u00a315 million of foreign exchange loss was recognised in net finance costs, arising on the revaluation of foreign currency
balances held in Russia that no longer qualified for hedge accounting due to the proposed sale of the Group's Russian business as
detailed in note 27(d)(i).
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-619": { "value": "
9 Associates and joint ventures
2023
2022
2021
Total
\u00a3m
Group\u2019s
share
\u00a3m
Total
\u00a3m
Group's share
\u00a3m
Total
\u00a3m
Group's share
\u00a3m
Revenue
9,412
2,630
9,486
2,675
7,668
2,164
Profit from operations
2,596
783
1,971
622
1,911
567
Net finance income
15
4
21
4
13
2
Profit on ordinary activities
before taxation
2,611
787
1,992
626
1,924
569
Taxation on ordinary activities
(664)
(194)
(595)
(176)
(499)
(147)
Profit on ordinary activities after taxation
1,947
593
1,397
450
1,425
422
Non-controlling interests
(28)
(8)
(27)
(8)
(22)
(7)
Post-tax results of associates and joint
ventures
1,919
585
1,370
442
1,403
415
Enumerated below are movements that have impacted the post-tax results of associates and joint ventures in 2023 , 2022 and 2021.
The amounts below were reported as adjusting items under the share of profit from associates in the income statement.
(a) Adjusting items
In 2023, the Group\u2019s interest in ITC Limited (ITC), an associate of the Group in India, decreased from 29.19% to 29.02% ( 2022: 29.38%
to \u00a029.19% ; 2021: 29.42% to 29.38%) as a result of ITC issuing ordinary shares under the ITC Employee Share Option Scheme. The issue
of \u00a0these shares and change in the Group\u2019s share of ITC resulted in a gain of \u00a340 million (2022: \u00a33 million loss; 2021: \u00a36 million gain), which
is treated as a deemed partial disposal and included in the income statement.
In 2023, ITC recognised a credit in respect of the proceeds received in partial settlement of the insurance claim towards the cost of leaf
tobacco stocks destroyed in a third-party warehouse fire, the Group\u2019s share of which was \u00a32\u00a0million.
During the year, the Group impaired the investment in Organigram by \u00a334 million (2022: \u00a359 million) (net of tax), driven primarily by the
decrease in the company\u2019s share price.
As a result of the impairment, the balance relating to goodwill and acquired intangibles associated with the acquisition of Organigram
in\u00a0March 2021 was reduced to \u00a3nil million and therefore no further amortisation charge was incurred during the year (2022: \u00a32 million;
2021:\u00a0\u00a32\u00a0million).
During 2022, the Group decided to cease business activities altogether in Yemen, including participating in the management of the
Group's associates, due to the challenging operating environment in the country. This led to the full impairment of the investment in
the\u00a0Group's remaining associate in Yemen, United Industries Company Limited, with a charge of \u00a318 million to the income statement.
In 2021, due to a challenging operating environment, the Group had already impaired the investment in Kamaran Industry & Investment
Company, the Group\u2019s other associate in Yemen. This resulted in a charge of \u00a318 million to the income statement.
Also, in 2021, as a result of the liquidation of Tisak d.d., the Group reclassified the foreign exchange previously recognised in other
comprehensive income to the income statement. This resulted in a credit of \u00a32\u00a0million to the income statement.
(b) Other financial information
The Group\u2019s share of the results of associates and joint ventures is shown in the table below.
2023
2022
2021
Group\u2019s
share
\u00a3m
Group\u2019s
share
\u00a3m
Group\u2019s
share
\u00a3m
Profit on ordinary activities after taxation
\u2013 attributable to owners of the parent
585
442
415
Other comprehensive income:
Items that may be reclassified to profit and loss
(107)
6
(17)
Items that will not be reclassified to profit and loss
(5)
19
14
Total comprehensive income
473
467
412
Summarised financial information of the Group\u2019s associates and joint ventures is shown below.
2023
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
6,805
2,607
9,412
Profit on ordinary activities before taxation
2,813
(202)
2,611
Post-tax results of associates and joint ventures
2,121
(202)
1,919
Other comprehensive income
(368)
(20)
(388)
Total comprehensive income
1,753
(222)
1,531
2022
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
7,126
2,360
9,486
Profit on ordinary activities before taxation
2,395
(403)
1,992
Post-tax results of associates and joint ventures
1,761
(391)
1,370
Other comprehensive income
56
32
88
Total comprehensive income
1,817
(359)
1,458
2021
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
5,312
2,356
7,668
Profit on ordinary activities before taxation
1,931
(7)
1,924
Post-tax results of associates and joint ventures
1,427
(24)
1,403
Other comprehensive income
(11)
\u2014
(11)
Total comprehensive income
1,416
(24)
1,392
14 Investments in associates and joint ventures
2023
\u00a3m
2022
\u00a3m
1 January
2,020
1,948
Total comprehensive income (note 9)
473
467
Dividends
(559)
(438)
Additions (note 27(c))
13
39
Other equity movements
23
4
31 December
1,970
2,020
Non-current assets
1,331
1,400
Current assets
1,168
1,138
Non-current liabilities
(78)
(75)
Current liabilities
(451)
(443)
1,970
2,020
ITC Ltd. (Group\u2019s share of the market value is \u00a315,767 million ( 2022: \u00a312,059 million))
1,851
1,865
Other listed associates (Group\u2019s share of the market value is \u00a3175 million (2022 : \u00a3206 million))
64
106
Unlisted associates
55
49
1,970
2,020
The principal associate undertaking of the Group is ITC Ltd. (ITC). Included within the dividends amount of \u00a3559 million
( 2022: \u00a3 438 million) are \u00a3545 million ( 2022: \u00a3 427 million) attributable to dividends declared by ITC.
ITC Ltd.
ITC is an Indian conglomerate based in Kolkata and maintains a presence in cigarettes, hotels, paper and packaging, agri-business and other
fast-moving goods (e.g. confectionery, branded apparel, personal care, stationery and safety matches). BAT\u2019s interest in ITC is\u00a029.02%.
ITC prepares accounts on a quarterly basis with a 31 March year-end. As permitted by IAS 28 Investments in associates and joint ventures,
results up to 30 September 2023 have been used in applying the equity method. This is driven by the availability of information at the half-year,
to be consistent with the treatment in the Group\u2019s interim accounts. Any further information available after the date used for reporting
purposes is reviewed and any material items adjusted for in the final results. The latest published information available is at 31 December 2023.
2023
\u00a3m
2022
\u00a3m
Non-current assets
4,261
4,402
Current assets
3,622
3,465
Non-current liabilities
(240)
(233)
Current liabilities
(1,267)
(1,244)
6,376
6,390
Group\u2019s share of ITC Ltd. (2023 : 29.02 %; 2022 : 29.19 %)
1,851
1,865
On 24 July 2023, ITC announced a proposed demerger of its \u2018Hotels Business\u2019 under a scheme of arrangement by which 60% of the
newly incorporated entity would be held directly by ITC's shareholders proportionate to their shareholding in ITC. On 14 August 2023,
ITC's Board of Directors approved the scheme of arrangement subject to necessary regulatory approvals. The demerger is expected
to\u00a0complete by the end of 2024.
Organigram
On 11 March 2021, the Group announced a strategic collaboration agreement with Organigram Inc., a wholly owned subsidiary of publicly
traded Organigram Holdings Inc. (collectively, Organigram). Under the terms of the transaction, a Group subsidiary acquired a 19.9%
(2023: 18.79%; 2022: 19.4%) equity stake in Organigram Holdings Inc. (listed on both the Nasdaq and Toronto Stock Exchange under
the\u00a0symbol \u2018OGI\u2019) to become its largest shareholder.
The Group\u2019s share of the fair value of net assets acquired included \u00a349\u00a0million of intangibles and \u00a330\u00a0million of goodwill, representing
a\u00a0strategic premium to enter the legal cannabis market in North America.
During 2023 Management reassessed the carrying value of the Group\u2019s investment in Organigram Holdings Inc. due to a reduction in the
entity's share price being identified as a trigger for a detailed impairment assessment to be undertaken. As part of this exercise, management
took into consideration Organigram\u2019s share price, internal value-in-use calculations, external trading multiples and broker forecasts. As a result
of this analysis, it was concluded that an impairment charge of \u00a336 million (or \u00a334 million net of tax) (2022: \u00a365 million (or \u00a359 million net of tax)),
was required against the carrying value of the investment in associate, with the recoverable amount as at 31 December 2023 being \u00a330 million
(2022:\u00a0\u00a373 million). Management will continue to monitor the carrying value, in line with IAS 36, over the course of future periods.
In November 2023, the Group announced the signing of an agreement for a further investment in Organigram Holdings Inc. (Organigram).
At\u00a031\u00a0December 2023, the proposed investment of CAD$125\u00a0million (approximately \u00a374\u00a0million) was subject to customary conditions, including
necessary approvals by the shareholders of Organigram, which was given on 18 January 2024. On 24 January 2024, BAT made the first tranche
investment of CAD$42\u00a0million (\u00a324\u00a0million) acquiring a further 12,893,175 common shares of Organigram at a price of CAD$3.22 per share.
Subject to conditions, the remaining 25,786,350 shares subscribed for shall be issued at the same price in two further equal tranches by the end
of August 2024 and February 2025, respectively. Based on Organigram\u2019s current outstanding share capital, this investment will increase
the Group\u2019s equity position from c.19% to c.45% (restricted to 30% voting rights) once all three tranches have been completed.
Charlotte\u2019s Web Holdings Inc.
In November 2022, the Group announced a \u00a348\u00a0million investment in Charlotte\u2019s Web Holdings, Inc. (Charlotte's Web). Based in
Colorado, USA, and listed on the Toronto Stock Exchange, Charlotte\u2019s Web holds a prominent position in innovative hemp extract
wellness products. The Group\u2019s investment has been made via a seven -year convertible debenture which is convertible at the Group\u2019s
discretion into a non-controlling equity stake in Charlotte\u2019s Web of around 19.9%. As part of the investment agreement, the Group has
the right to appoint directors to the Board of Charlotte\u2019s Web. However, given the investment does not give the Group any current right
to a share of the earnings or net assets of the investee, the investment has been classified as an investment at fair value through profit
and loss (see note 18). On conversion of the loan note, the Group would equity account for its investment.
", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-618": { "value": "
9 Associates and joint ventures
2023
2022
2021
Total
\u00a3m
Group\u2019s
share
\u00a3m
Total
\u00a3m
Group's share
\u00a3m
Total
\u00a3m
Group's share
\u00a3m
Revenue
9,412
2,630
9,486
2,675
7,668
2,164
Profit from operations
2,596
783
1,971
622
1,911
567
Net finance income
15
4
21
4
13
2
Profit on ordinary activities
before taxation
2,611
787
1,992
626
1,924
569
Taxation on ordinary activities
(664)
(194)
(595)
(176)
(499)
(147)
Profit on ordinary activities after taxation
1,947
593
1,397
450
1,425
422
Non-controlling interests
(28)
(8)
(27)
(8)
(22)
(7)
Post-tax results of associates and joint
ventures
1,919
585
1,370
442
1,403
415
Enumerated below are movements that have impacted the post-tax results of associates and joint ventures in 2023 , 2022 and 2021.
The amounts below were reported as adjusting items under the share of profit from associates in the income statement.
(a) Adjusting items
In 2023, the Group\u2019s interest in ITC Limited (ITC), an associate of the Group in India, decreased from 29.19% to 29.02% ( 2022: 29.38%
to \u00a029.19% ; 2021: 29.42% to 29.38%) as a result of ITC issuing ordinary shares under the ITC Employee Share Option Scheme. The issue
of \u00a0these shares and change in the Group\u2019s share of ITC resulted in a gain of \u00a340 million (2022: \u00a33 million loss; 2021: \u00a36 million gain), which
is treated as a deemed partial disposal and included in the income statement.
In 2023, ITC recognised a credit in respect of the proceeds received in partial settlement of the insurance claim towards the cost of leaf
tobacco stocks destroyed in a third-party warehouse fire, the Group\u2019s share of which was \u00a32\u00a0million.
During the year, the Group impaired the investment in Organigram by \u00a334 million (2022: \u00a359 million) (net of tax), driven primarily by the
decrease in the company\u2019s share price.
As a result of the impairment, the balance relating to goodwill and acquired intangibles associated with the acquisition of Organigram
in\u00a0March 2021 was reduced to \u00a3nil million and therefore no further amortisation charge was incurred during the year (2022: \u00a32 million;
2021:\u00a0\u00a32\u00a0million).
During 2022, the Group decided to cease business activities altogether in Yemen, including participating in the management of the
Group's associates, due to the challenging operating environment in the country. This led to the full impairment of the investment in
the\u00a0Group's remaining associate in Yemen, United Industries Company Limited, with a charge of \u00a318 million to the income statement.
In 2021, due to a challenging operating environment, the Group had already impaired the investment in Kamaran Industry & Investment
Company, the Group\u2019s other associate in Yemen. This resulted in a charge of \u00a318 million to the income statement.
Also, in 2021, as a result of the liquidation of Tisak d.d., the Group reclassified the foreign exchange previously recognised in other
comprehensive income to the income statement. This resulted in a credit of \u00a32\u00a0million to the income statement.
(b) Other financial information
The Group\u2019s share of the results of associates and joint ventures is shown in the table below.
2023
2022
2021
Group\u2019s
share
\u00a3m
Group\u2019s
share
\u00a3m
Group\u2019s
share
\u00a3m
Profit on ordinary activities after taxation
\u2013 attributable to owners of the parent
585
442
415
Other comprehensive income:
Items that may be reclassified to profit and loss
(107)
6
(17)
Items that will not be reclassified to profit and loss
(5)
19
14
Total comprehensive income
473
467
412
Summarised financial information of the Group\u2019s associates and joint ventures is shown below.
2023
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
6,805
2,607
9,412
Profit on ordinary activities before taxation
2,813
(202)
2,611
Post-tax results of associates and joint ventures
2,121
(202)
1,919
Other comprehensive income
(368)
(20)
(388)
Total comprehensive income
1,753
(222)
1,531
2022
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
7,126
2,360
9,486
Profit on ordinary activities before taxation
2,395
(403)
1,992
Post-tax results of associates and joint ventures
1,761
(391)
1,370
Other comprehensive income
56
32
88
Total comprehensive income
1,817
(359)
1,458
2021
ITC
\u00a3m
Others
\u00a3m
Total
\u00a3m
Revenue
5,312
2,356
7,668
Profit on ordinary activities before taxation
1,931
(7)
1,924
Post-tax results of associates and joint ventures
1,427
(24)
1,403
Other comprehensive income
(11)
\u2014
(11)
Total comprehensive income
1,416
(24)
1,392
14 Investments in associates and joint ventures
2023
\u00a3m
2022
\u00a3m
1 January
2,020
1,948
Total comprehensive income (note 9)
473
467
Dividends
(559)
(438)
Additions (note 27(c))
13
39
Other equity movements
23
4
31 December
1,970
2,020
Non-current assets
1,331
1,400
Current assets
1,168
1,138
Non-current liabilities
(78)
(75)
Current liabilities
(451)
(443)
1,970
2,020
ITC Ltd. (Group\u2019s share of the market value is \u00a315,767 million ( 2022: \u00a312,059 million))
1,851
1,865
Other listed associates (Group\u2019s share of the market value is \u00a3175 million (2022 : \u00a3206 million))
64
106
Unlisted associates
55
49
1,970
2,020
The principal associate undertaking of the Group is ITC Ltd. (ITC). Included within the dividends amount of \u00a3559 million
( 2022: \u00a3 438 million) are \u00a3545 million ( 2022: \u00a3 427 million) attributable to dividends declared by ITC.
ITC Ltd.
ITC is an Indian conglomerate based in Kolkata and maintains a presence in cigarettes, hotels, paper and packaging, agri-business and other
fast-moving goods (e.g. confectionery, branded apparel, personal care, stationery and safety matches). BAT\u2019s interest in ITC is\u00a029.02%.
ITC prepares accounts on a quarterly basis with a 31 March year-end. As permitted by IAS 28 Investments in associates and joint ventures,
results up to 30 September 2023 have been used in applying the equity method. This is driven by the availability of information at the half-year,
to be consistent with the treatment in the Group\u2019s interim accounts. Any further information available after the date used for reporting
purposes is reviewed and any material items adjusted for in the final results. The latest published information available is at 31 December 2023.
2023
\u00a3m
2022
\u00a3m
Non-current assets
4,261
4,402
Current assets
3,622
3,465
Non-current liabilities
(240)
(233)
Current liabilities
(1,267)
(1,244)
6,376
6,390
Group\u2019s share of ITC Ltd. (2023 : 29.02 %; 2022 : 29.19 %)
1,851
1,865
On 24 July 2023, ITC announced a proposed demerger of its \u2018Hotels Business\u2019 under a scheme of arrangement by which 60% of the
newly incorporated entity would be held directly by ITC's shareholders proportionate to their shareholding in ITC. On 14 August 2023,
ITC's Board of Directors approved the scheme of arrangement subject to necessary regulatory approvals. The demerger is expected
to\u00a0complete by the end of 2024.
Organigram
On 11 March 2021, the Group announced a strategic collaboration agreement with Organigram Inc., a wholly owned subsidiary of publicly
traded Organigram Holdings Inc. (collectively, Organigram). Under the terms of the transaction, a Group subsidiary acquired a 19.9%
(2023: 18.79%; 2022: 19.4%) equity stake in Organigram Holdings Inc. (listed on both the Nasdaq and Toronto Stock Exchange under
the\u00a0symbol \u2018OGI\u2019) to become its largest shareholder.
The Group\u2019s share of the fair value of net assets acquired included \u00a349\u00a0million of intangibles and \u00a330\u00a0million of goodwill, representing
a\u00a0strategic premium to enter the legal cannabis market in North America.
During 2023 Management reassessed the carrying value of the Group\u2019s investment in Organigram Holdings Inc. due to a reduction in the
entity's share price being identified as a trigger for a detailed impairment assessment to be undertaken. As part of this exercise, management
took into consideration Organigram\u2019s share price, internal value-in-use calculations, external trading multiples and broker forecasts. As a result
of this analysis, it was concluded that an impairment charge of \u00a336 million (or \u00a334 million net of tax) (2022: \u00a365 million (or \u00a359 million net of tax)),
was required against the carrying value of the investment in associate, with the recoverable amount as at 31 December 2023 being \u00a330 million
(2022:\u00a0\u00a373 million). Management will continue to monitor the carrying value, in line with IAS 36, over the course of future periods.
In November 2023, the Group announced the signing of an agreement for a further investment in Organigram Holdings Inc. (Organigram).
At\u00a031\u00a0December 2023, the proposed investment of CAD$125\u00a0million (approximately \u00a374\u00a0million) was subject to customary conditions, including
necessary approvals by the shareholders of Organigram, which was given on 18 January 2024. On 24 January 2024, BAT made the first tranche
investment of CAD$42\u00a0million (\u00a324\u00a0million) acquiring a further 12,893,175 common shares of Organigram at a price of CAD$3.22 per share.
Subject to conditions, the remaining 25,786,350 shares subscribed for shall be issued at the same price in two further equal tranches by the end
of August 2024 and February 2025, respectively. Based on Organigram\u2019s current outstanding share capital, this investment will increase
the Group\u2019s equity position from c.19% to c.45% (restricted to 30% voting rights) once all three tranches have been completed.
Charlotte\u2019s Web Holdings Inc.
In November 2022, the Group announced a \u00a348\u00a0million investment in Charlotte\u2019s Web Holdings, Inc. (Charlotte's Web). Based in
Colorado, USA, and listed on the Toronto Stock Exchange, Charlotte\u2019s Web holds a prominent position in innovative hemp extract
wellness products. The Group\u2019s investment has been made via a seven -year convertible debenture which is convertible at the Group\u2019s
discretion into a non-controlling equity stake in Charlotte\u2019s Web of around 19.9%. As part of the investment agreement, the Group has
the right to appoint directors to the Board of Charlotte\u2019s Web. However, given the investment does not give the Group any current right
to a share of the earnings or net assets of the investee, the investment has been classified as an investment at fair value through profit
and loss (see note 18). On conversion of the loan note, the Group would equity account for its investment.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-620": { "value": "
10 Taxation on ordinary activities
(a) Summary of taxation on ordinary activities
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
UK corporation tax
32
(3)
(25)
Comprising:
\u00a0\u2013 current year tax expense
20
2
1
\u00a0\u2013 adjustments in respect of prior periods
12
(5)
(26)
Overseas tax
2,779
2,721
2,401
Comprising:
\u00a0\u2013 current year tax expense
2,804
2,675
2,418
\u00a0\u2013 adjustments in respect of prior periods
(25)
46
(17)
Total current tax
2,811
2,718
2,376
Deferred tax
(5,683)
(240)
(187)
Comprising:
\u00a0\u2013 deferred tax relating to origination and reversal of temporary differences
(5,577)
(174)
(29)
\u00a0\u2013 deferred tax relating to changes in tax rates
(106)
(66)
(158)
(2,872)
2,478
2,189
(b) Franked Investment Income Group Litigation Order
The Group is the principal test claimant in an action in the United Kingdom against HM Revenue and Customs (HMRC) in the Franked
Investment Income Group Litigation Order (FII GLO). There were 17 corporate groups in the FII GLO as at 31 December 2023. The case
concerns the treatment for UK corporate tax purposes of profits earned overseas and distributed to the UK.
The original claim was filed in 2003. The trial of the claim was split broadly into issues of liability and quantification. The main liability
issues were heard by the High Court, Court of Appeal and Supreme Court in the UK and the European Court of Justice in the period to
November 2012. The detailed technical issues of the quantification mechanics of the claim were heard by the High Court during May and
June 2014 and the judgment handed down on 18 December 2014. The High Court determined that in respect of issues concerning the
calculation of unlawfully charged corporation tax and advance corporation tax, the law of restitution including the defence on change of
position and questions concerning the calculation of overpaid interest, the approach of the Group was broadly preferred. The conclusion
reached by the High Court would, if upheld, produce an estimated receivable of \u00a31.2\u00a0billion for the Group. Appeals on a majority of the
issues were made to the Court of Appeal, which heard the arguments in June 2016. The Court of Appeal determined in November 2016
on the majority of issues that the conclusion reached by the High Court should be upheld. The Supreme Court gave permission for a
number of issues to be appealed in two separate hearings. The first, in February 2020, concerned the time limit for bringing claims. In its
application for permission HMRC sought to reverse established House of Lords\u2019 authorities on which those earlier judgments were
based.\u00a0 They were granted permission to do so by the Supreme Court who divided the appeal into two hearings, the first on the issue of
time limits and the second on the issue of interest and related topics. In November 2020, the Supreme Court handed down its judgment
on the first stage of that appeal. The Supreme Court agreed to overturn its existing case law partially but introduced a new test for
determining whether claims of this type are in time. The case was then remitted to the High Court to apply that new test to the facts.
The judgment from the second hearing was handed down in July 2021. Applying that judgment reduces the value of BAT's FII claim to
approximately \u00a30.3\u00a0billion, mainly as the result of the application of simple interest and the limitation to claims for advance corporation
tax offset against lawful corporation tax charges, which is subject to the determination of the remitted timing issue by the High Court
and any subsequent appeal. The High Court hearing on time limits was heard in late November 2023 with judgment handed down in
February 2024.\u00a0 The High Court determined that claims should have been filed within 6 years of June 2000 meaning that BAT\u2019s claims are
in time.\u00a0 It is uncertain whether HMRC will appeal the judgment.
During 2015, HMRC paid to the Group a gross amount of \u00a31,224\u00a0million in two separate payments. The payments made by HMRC
have\u00a0been made without any admission of liability and are subject to refund were HMRC to succeed on appeal. The second payment
in\u00a0November 2015 followed the introduction of a new 45% tax on the interest component of restitution claims against HMRC. HMRC
held back \u00a3261\u00a0million from the second payment contending that it represents the new 45% tax on that payment, leading to total cash
received by the Group of \u00a3963\u00a0million. Actions challenging the legality of the withholding of the 45% tax have been lodged by the Group.
The First Tier Tribunal found in favour of HMRC in July 2017 and the Group\u2019s appeal to the Upper Tribunal was heard in July 2018 and
judgment has not yet been handed down.
The net \u00a30.9\u00a0billion held by the Group is higher than the current value of the claim referred to above. Due to the uncertainty of the
amounts and eventual outcome, the Group has not recognised any impact in the Income Statement in the current or prior period. The
receipt, net of the deduction by HMRC, is held within trade and other payables as disclosed in note 25. Any future recognition as income
will be treated as an adjusting item, due to the size of the amount, with interest of \u00a360 million for the 12 months to 31 December 2023
(2022: \u00a333 million; 2021: \u00a320 million) accruing on the balance, which was also treated as an adjusting item.
The final resolution of all issues in the litigation is likely to take a number of years. The Group made interim repayments to HMRC
of\u00a0\u00a350\u00a0million in 2023 and 2022, and intends to make further interim repayments in future periods.
(c) Factors affecting the taxation charge
The taxation charge differs from the standard rate of corporation tax in the UK of 23.5% for 2023, 19.0%for 2022 and 19.0% 2021.
The\u00a0major causes of this difference are listed below:
2023
2022
2021
\u00a3m
%
\u00a3m
%
\u00a3m
%
(Loss)/Profit before tax
(17,061)
9,324
9,163
Less: share of post-tax results of associates and joint
ventures (see note 9 )
(585)
(442)
(415)
(17,646)
8,882
8,748
Tax at 23.5% (2022: 19% and 2021 : 19% ) on the above
(4,147)
23.5
1,688
19.0
1,662
19.0
Factors affecting the tax rate:
Tax at standard rates other than UK corporation tax rate
619
(3.5)
397
4.5
319
3.6
Other national tax charges
310
(1.8)
244
2.7
184
2.1
Permanent differences
845
(4.8)
83
0.9
87
1.0
Overseas withholding taxes
179
(1.0)
156
1.8
189
2.2
Double taxation relief on UK profits
(46)
0.3
(26)
(0.3)
(23)
(0.3)
(Utilised)/unutilised tax losses
(15)
0.1
12
0.1
(10)
(0.1)
Adjustments in respect of prior periods
(13)
0.1
41
0.5
(43)
(0.5)
Deferred tax relating to changes in tax rates
(106)
0.6
(66)
(0.7)
(158)
(1.8)
Additional net deferred tax (credits)/charges
(498)
2.8
(51)
(0.6)
(18)
(0.2)
(2,872)
16.3
2,478
27.9
2,189
25.0
The Group's reported 2023 tax rate is significantly impacted by the impairment of intangible assets as described in note 12.
\u2013 Permanent differences in 2023 consist mainly of the tax impact of the goodwill impairment (for which no tax relief is available).
\u2013 Additional net deferred tax (credits)/charges in 2023 consist mainly of the U.S. state deferred tax impact of the trademark impairment
(please see further in note 16).
(d) Adjusting items included in taxation
In 2023 , adjusting items in taxation included a net credit of \u00a373 million relating to the revaluation of deferred tax liabilities arising on
trademarks recognised in the Reynolds American acquisition in 2017 due to changes in U.S. state tax rates, the reversal of provisions for
Russia tax risks and a potential clawback of\u00a0tax reliefs arising on the closure of the Group's factory in Switzerland offset by a provision for
potential tax exposures in the Netherlands and the tax impact in Brazil of the legal case regarding Rio de Janeiro VAT incentives
(described further in note 6(k)).
In 2022, adjusting items in taxation included a net credit of \u00a327 million mainly relating to the revaluation of deferred tax liabilities arising
on trademarks recognised in the Reynolds American acquisition in 2017 due to changes in U.S. state tax rates and a potential clawback
of\u00a0tax reliefs arising on the closure of the Group's factory in Switzerland.
In 2021 , adjusting items in taxation included a net credit of \u00a391 million mainly relating to the revaluation of deferred tax liabilities arising
on\u00a0trademarks recognised in the Reynolds American acquisition in 2017 due to changes in U.S. state tax rates.
(e) Tax on adjusting items
In addition, the tax on adjusting items, separated between the different categories, as per note 11, amounted to \u00a35,415 million
(2022: \u00a3176 million; 2021: \u00a3 119 million). The adjustment to the adjusted earnings per share (note 11) also includes \u00a31 million
(2022: \u00a35 million; 2021: \u00a36 million) in respect of the non-controlling interests\u2019 share of the adjusting items net of tax.
(f) Tax on items recognised directly in other comprehensive income
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Current tax
(5)
(6)
(4)
Deferred tax
12
(106)
(110)
(Charged)/credited to other comprehensive income
7
(112)
(114)
(g) Tax on items recognised directly in equity
In relation to the perpetual hybrid bonds issued on 27 September 2021 (note 22(d)), tax relief of \u00a314\u00a0million (2022: \u00a311\u00a0million;
2021:\u00a0\u00a35\u00a0million) has been recognised, principally in relation to the coupon incurred.
(h) Global minimum tax
In December 2021, the OECD released model rules for a new global minimum corporate tax framework applicable to multinational
enterprise groups with global revenues of over \u20ac750 million (\u201cPillar Two\u201d rules). The UK substantively enacted legislation implementing
these rules on 20\u00a0June 2023 and the rules apply to the Group as of 1 January 2024. The Group is reviewing this legislation together with
developing guidance. The Group is also monitoring the status of implementation of the model rules outside of\u00a0the UK to assess the potential
impact. Based on the information currently available, the impact of these rules on the Group tax position is not expected to be material.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-621": { "value": "
11 Earnings per share
Earnings used in the basic, diluted and headline earnings per share calculation represent the profit attributable to the ordinary equity
shareholders after deducting amounts representing the coupon on perpetual hybrid bonds on a pro-rata basis regardless of whether
coupons have been deferred or paid in the period. Below is a reconciliation of the earnings used to calculate earnings per share:
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
(Loss)/earnings attributable to owners of the parent
(14,367)
6,666
6,801
Coupon on perpetual hybrid bonds
(59)
(60)
(15)
Tax on coupon on perpetual hybrid bonds
14
11
3
(Loss)/earnings
(14,412)
6,617
6,789
In 2023, the Group reported a loss for the year. Following the requirements of IAS 33 Earnings per Share, the impact of share options
would be antidilutive and are excluded from the calculation of diluted earnings per share. Below is a reconciliation from basic to diluted
earnings per share for 2022 and 2021:
2023
2022
2021
Loss
\u00a3m
Weighted
average
number\u00a0of
shares
m
Loss
per\u00a0share
pence
Earnings
\u00a3m
Weighted
average
number\u00a0of
shares
m
Earnings
per\u00a0share
pence
Earnings
\u00a3m
Weighted
average
number\u00a0of
shares
m
Earnings
per\u00a0share
pence
Basic (loss)/earnings per share
(ordinary shares of 25 p each)
(14,412)
2,229
(646.6)
6,617
2,256
293.3
6,789
2,287
296.9
Share options
\u2014
\u2014
\u2014
\u2014
11
(1.4)
\u2014
10
(1.3)
Diluted (loss)/ earnings per share*
(14,412)
2,229
(646.6)
6,617
2,267
291.9
6,789
2,297
295.6
Note:
*\u00a0 In 2023, the Group reported a loss for the year. Following the requirements of IAS 33, the impact of share options would be antidilutive and is therefore excluded, for 2023, from the
calculation of diluted earnings per share, calculated in accordance with IFRS, for that year. For remuneration purposes, and reflective of the Group's positive earnings on an adjusted basis,
management have included the dilutive effect of share options in calculating adjusted diluted earnings per share. There were 8 million share options on a weighted average basis in 2023.
Adjusted earnings per share calculation
Earnings have been affected by a number of adjusting items, which are described in notes 3 to 10. Adjusting items are significant items
in\u00a0the profit from operations, net finance costs, taxation and the Group\u2019s share of the post-tax results of associates and joint ventures
which individually or, if of a similar type, in aggregate, are relevant to an understanding of the Group\u2019s underlying financial performance.
The Group believes that these items are useful to users of the Group financial statements in helping them to understand the underlying
business performance. To illustrate the impact of these items, an adjusted earnings per share calculation is shown below.
Basic
2023
2022
2021
Notes
(Loss)/
earnings
\u00a3m
(Loss)/
earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Basic (loss)/earnings per share
(14,412)
(646.6)
6,617
293.3
6,789
296.9
Effect of amortisation and impairment of
goodwill, trademarks and similar intangibles
4
27,816
1,247.9
285
12.6
363
15.9
Tax and non-controlling interests on
amortisation and impairment of goodwill,
trademarks and similar intangibles
10(e)
(5,390)
(241.8)
(67)
(3.0)
(71)
(3.1)
Net effect of excise and VAT cases
5(a),6(j),
6(k)
(167)
(7.5)
(460)
(20.4)
26
1.1
Tax on excise and VAT cases
10(e)
41
1.8
72
3.2
(3)
(0.1)
Effect of disposal of subsidiaries
6(f)
546
24.5
(6)
(0.3)
358
15.7
Effect of Brazil other taxes
6(k)
47
2.1
\u2014
\u2014
\u2014
\u2014
Tax on\u00a0 Brazil other taxes
10(e)
(16)
(0.7)
\u2014
\u2014
\u2014
\u2014
Effect of charges in respect of DOJ and OFAC
investigations
6(h)
75
3.4
450
19.9
\u2014
\u2014
Effect of charges in respect of Nigerian FCCPC
case
6(i)
\u2014
\u2014
79
3.5
\u2014
\u2014
Effect of planned disposal of subsidiaries
6(j)
(195)
(8.7)
612
27.2
\u2014
\u2014
Tax on planned disposal of subsidiaries
10(e)
\u2014
\u2014
(10)
(0.4)
\u2014
\u2014
Effect of restructuring and integration costs
7
(2)
(0.1)
771
34.2
150
6.5
Tax and non-controlling interests on
restructuring and integration costs
10(d)(e)
(3)
(0.1)
(116)
(5.1)
(39)
(1.7)
Other adjusting items
3,6(d)
96
4.3
154
6.8
19
0.8
Tax effect on other adjusting items
10(e)
(22)
(1.0)
(37)
(1.6)
(5)
(0.2)
Effect of early repurchase of bonds
8(b)
29
1.3
\u2014
\u2014
\u2014
\u2014
Tax effect of early repurchase of bonds
10(e)
(8)
(0.4)
\u2014
\u2014
\u2014
\u2014
Effect of interest on FII GLO settlement and
other
8(b)
67
3.0
34
1.5
55
2.4
Tax effect of interest on FII GLO settlement and
other
10(e)
(18)
(0.8)
(6)
(0.3)
\u2014
\u2014
Effect of associates' adjusting items net of tax
9(a)
(8)
(0.4)
92
4.1
12
0.5
Deferred tax relating to changes in tax rates
10(d)
(97)
(4.4)
(44)
(2.0)
(98)
(4.3)
Adjusting items in tax
10(d)
24
1.2
\u2014
\u2014
\u2014
\u2014
Adjusted earnings per share (basic)
8,403
377.0
8,420
373.2
7,556
330.4
Diluted
2023
2022
2021
Notes
(Loss)/
earnings
\u00a3m
(Loss)/
earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Diluted (loss)/earnings per share
(14,412)
(646.6)
6,617
291.9
6,789
295.6
Effect of amortisation and impairment of
goodwill, trademarks and similar intangibles
4
27,816
1,247.9
285
12.6
363
15.8
Tax and non-controlling interests on
amortisation and impairment of goodwill,
trademarks and similar intangibles
10(e)
(5,390)
(241.8)
(67)
(3.0)
(71)
(3.1)
Net effect of excise and VAT cases
5(a),6(j),
6(k)
(167)
(7.5)
(460)
(20.3)
26
1.1
Tax on excise and VAT cases
10(e)
41
1.8
72
3.2
(3)
(0.1)
Effect of disposal of subsidiaries
6(f)
546
24.5
(6)
(0.3)
358
15.6
Effect of Brazil other taxes
6(k)
47
2.1
\u2014
\u2014
\u2014
\u2014
Tax on\u00a0 Brazil other taxes
10(e)
(16)
(0.7)
\u2014
\u2014
\u2014
\u2014
Effect of charges in respect of DOJ and OFAC
investigations
6(h)
75
3.4
450
19.9
\u2014
\u2014
Effect of charges in respect of Nigerian FCCPC
case
6(i)
\u2014
\u2014
79
3.5
\u2014
\u2014
Effect of planned disposal of subsidiaries
6(j)
(195)
(8.7)
612
26.8
\u2014
\u2014
Tax on planned disposal of subsidiaries
10(e)
\u2014
\u2014
(10)
(0.4)
\u2014
\u2014
Effect of restructuring and integration costs
7
(2)
(0.1)
771
34.0
150
6.6
Tax and non-controlling interests on
restructuring and integration costs
10(d)(e)
(3)
(0.1)
(116)
(5.1)
(39)
(1.7)
Other adjusting items
3,6(d)
96
4.3
154
6.8
19
0.8
Tax effect on other adjusting items
10(e)
(22)
(1.0)
(37)
(1.6)
(5)
(0.2)
Effect of early repurchase of bonds
8(b)
29
1.3
\u2014
\u2014
\u2014
\u2014
Tax effect of early repurchase of bonds
10(e)
(8)
(0.4)
\u2014
\u2014
\u2014
\u2014
Effect of interest on FII GLO settlement and
other
8(b)
67
3.0
34
1.5
55
2.4
Tax effect of interest on FII GLO settlement and
other
10(e)
(18)
(0.8)
(6)
(0.3)
\u2014
\u2014
Effect of associates' adjusting items net of tax
9(a)
(8)
(0.4)
92
4.1
12
0.5
Deferred tax relating to changes in tax rates
10(d)
(97)
(4.4)
(44)
(1.9)
(98)
(4.3)
Adjusting items in tax
10(d)
24
1.2
\u2014
\u2014
Impact of dilution*
\u2014
(1.4)
Adjusted diluted earnings per share
8,403
375.6
8,420
371.4
7,556
329.0
Note:
*\u00a0 In 2023, the Group reported a loss for the year. Following the requirements of IAS 33, the impact of share options would be antidilutive and is therefore excluded, for 2023, from the
calculation of diluted earnings per share, calculated in accordance with IFRS, for that year. For remuneration purposes, and reflective of the Group's positive earnings on an adjusted
basis, management have included the dilutive effect of share options in calculating adjusted diluted earnings per share.
Headline earnings per share as required by the JSE Limited
The presentation of headline earnings per share, as an alternative measure of earnings per share, is mandated under the JSE Listing
Requirements. It is calculated in accordance with Circular 1/2023 \u2018Headline Earnings\u2019, as issued by the South African Institute of
Chartered Accountants.
Basic
2023
2022
2021
(Loss)/
earnings
\u00a3m
(Loss)/
earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Basic (loss)/earnings per share
(14,412)
(646.6)
6,617
293.3
6,789
296.9
Effect of impairment of intangibles, property, plant and
equipment, associates and assets held-for-sale
27,800
1,247.2
429
19.0
138
6.0
Tax and non-controlling interests on intangibles, property,
plant and equipment, associates and assets held-for-sale
(5,430)
(243.6)
(77)
(3.4)
(42)
(1.8)
Effect of gains on disposal of property, plant and equipment,
trademarks, held-for-sale assets, partial/full termination of
IFRS 16 leases, and sale and leaseback
(125)
(5.6)
(21)
(0.9)
(10)
(0.4)
Tax and non-controlling interests on disposal of property,
plant and equipment, held-for-sale assets, partial/full
termination of IFRS 16 leases, and sale and leaseback
27
1.2
5
0.2
2
0.1
Effect of impairment of subsidiaries transferred to held-for-
sale and associated costs
(203)
(9.1)
548
24.2
83
3.6
Tax on impairment of subsidiaries and associated costs
\u2014
\u2014
(10)
(0.4)
\u2014
\u2014
Effect of foreign exchange reclassification from reserves to
the income statement
- Subsidiaries
552
24.8
6
0.3
291
12.7
- Associates
\u2014
\u2014
(1)
\u2014
(2)
(0.1)
Issue of shares and change in shareholding of an associate
(40)
(1.8)
3
0.1
(6)
(0.3)
Headline earnings per share (basic)
8,169
366.5
7,499
332.4
7,243
316.7
Diluted
2023
2022
2021
(Loss)/
earnings
\u00a3m
(Loss)/
earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Earnings
\u00a3m
Earnings
per share
pence
Diluted earnings per share
(14,412)
(646.6)
6,617
291.9
6,789
295.6
Effect of impairment of intangibles, property, plant and
equipment, associates and assets held-for-sale
27,800
1,247.2
429
18.9
138
6.0
Tax and non-controlling interests on intangibles, property,
plant and equipment, associates and assets held-for-sale
(5,430)
(243.6)
(77)
(3.4)
(42)
(1.8)
Effect of gains on disposal of property, plant and equipment,
trademarks, held-for-sale assets, partial/full termination of
IFRS 16 leases, and sale and leaseback
(125)
(5.6)
(21)
(0.9)
(10)
(0.4)
Tax and non-controlling interests on disposal of property,
plant and equipment, held-for-sale assets, partial/full
termination of IFRS 16 leases, and sale and leaseback
27
1.2
5
0.2
2
0.1
Effect of impairment of subsidiaries transferred to held-for-
sale and associated costs
(203)
(9.1)
548
24.1
83
3.6
Tax on impairment of subsidiaries and associated costs
\u2014
\u2014
(10)
(0.4)
\u2014
\u2014
Effect of foreign exchange reclassification from reserves to
the income statement
- Subsidiaries
552
24.8
6
0.3
291
12.6
- Associates
\u2014
\u2014
(1)
\u2014
(2)
(0.1)
Issue of shares and change in shareholding of an associate
(40)
(1.8)
3
0.1
(6)
(0.3)
Headline earnings per share (diluted)
8,169
366.5
7,499
330.8
7,243
315.3
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-622": { "value": "
12 Intangible assets (revised)1
(a) Overview of intangible assets
2023
Trademarks
and similar
intangibles
\u00a3m
Goodwill2
\u00a3m
Computer
software
\u00a3m
Assets in
the course of
development
\u00a3m
Total2
\u00a3m
1 January
Cost
83,454
48,488
1,379
153
133,474
Accumulated amortisation and impairment
(2,851)
(532)
(1,005)
(11)
(4,399)
Net book value at 1 January
80,603
47,956
374
142
129,075
Differences on exchange
(3,431)
(2,251)
(4)
1
(5,685)
Additions
\u2013 internal development
\u2014
\u2014
\u2014
75
75
\u2013 separately acquired
59
\u2014
\u2014
3
62
Reallocations
2
\u2014
115
(111)
6
Amortisation charge
(237)
\u2014
(120)
\u2014
(357)
Impairment
(22,995)
(4,614)
(5)
\u2014
(27,614)
31 December
Cost
78,848
46,021
1,408
110
126,387
Accumulated amortisation and impairment
(24,847)
(4,930)
(1,048)
\u2014
(30,825)
Net book value at 31 December
54,001
41,091
360
110
95,562
2022
Trademarks
and similar
intangibles
\u00a3m
Goodwill2
\u00a3m
Computer
software
\u00a3m
Assets in
the course of
development
\u00a3m
Total2
\u00a3m
1 January
Cost
74,227
43,715
1,266
156
119,364
Accumulated amortisation and impairment
(2,360)
(521)
(858)
\u2014
(3,739)
Net book value at 1 January
71,867
43,194
408
156
115,625
Differences on exchange
9,033
4,762
5
2
13,802
Additions
\u2013 internal development
\u2014
\u2014
\u2014
37
37
\u2013 separately acquired
\u2014
\u2014
\u2014
85
85
Reallocations
29
\u2014
96
(125)
\u2014
Amortisation charge
(309)
\u2014
(128)
\u2014
(437)
Impairment
(10)
\u2014
(3)
(11)
(24)
Disposals
(7)
\u2014
\u2014
\u2014
(7)
Held for sale
\u2014
\u2014
(4)
(2)
(6)
31 December
Cost
83,454
48,488
1,379
153
133,474
Accumulated amortisation and impairment
(2,851)
(532)
(1,005)
(11)
(4,399)
Net book value at 31 December
80,603
47,956
374
142
129,075
Notes:
1. Effective from 2023, the Group revised its regional structure from four regions to three, with the comparator data provided on this revised basis.
2. The table above has been re-presented for both the current and the comparative period to give a more meaningful disclosure of the Group's accumulated impairment of goodwill, which
was previously shown net in the opening and closing balances.
(b) Impairment testing
(i) Overview
a. Estimation uncertainty
As described in note 1, the critical accounting estimates used in the preparation of the consolidated financial statements include the
review of asset values, especially indefinite-lived assets such as goodwill and certain trademarks and similar intangibles.
There is significant judgement with regard to assumptions and estimates involved in the forecasting of future cash flows, which form the
basis of the assessment of the recoverability of these assets, with the effect that the value-in-use of calculations incorporate estimation
uncertainty, particularly for certain assets held in relation to the Canadian and U.S. markets.
b. Impact of climate change
The impact of climate change has been considered in preparation of the financial statements. For impairment testing and valuation
purposes, the Group have included certain climate-related costs within the discounted cash flow forecast for impairment assessment.
The Group also completed scenario analyses of the potential impact of those climate change-related risks. This sensitised discounted
cash flow included such items as product taxes and carbon taxes within the future cash flows and resulted in no material adverse impact
to the impairment assessment.
(ii) Discount rates
Post-tax discount rates were used in the impairment testing, based on the Group\u2019s weighted average cost of capital, taking into account
the cost of capital and borrowings, to which specific market-related premium adjustments are made. These adjustments are derived
from external sources and are based on the spread between bonds (or credit default swaps, or similar indicators) issued by the relevant
local (or comparable) government, adjusted for the Group\u2019s own credit market risk. Valuations derived from applying post-tax discount
rates to post-tax cash flows are aligned to those that would arise from applying pre-tax discount rates to pre-tax cash flows. For ease of
use and consistency in application, these results are periodically calibrated into bands based on internationally recognised credit ratings.
This applies to all CGUs with the exception of Reynolds, which had its discount rate independently determined based on a weighted
average cost of capital in respect of the U.S. and U.S. market-related premiums, and Malaysia where the discount rate reflects BAT
Malaysia's weighted average cost of capital.
The long-term growth rates and discount rates have been applied to the budgeted cash flows of each cash-generating unit. These cash
flows have been determined by local management based on experience, specific market and brand trends, as well as pricing and cost
expectations. These have been endorsed by Group management as part of the consolidated Group\u2019s approved budget.
Please refer to the discount rates applied for intangible assets with indefinite lives in note 12(b)(iv) and for cash-generating units in
note\u00a012(b)(iii).
(iii) Impairment testing - summary
Total impairment charges of \u00a327,614 million have been recognised in 2023, of which \u00a327,291 million related to Reynolds American
(being\u00a0a\u00a0charge against goodwill of \u00a34,299 million and against trademarks of \u00a322,992 million), \u00a3291 million related to South Africa
goodwill, \u00a324\u00a0million related to Peru goodwill and the remaining relating to other intangible assets.
a. Goodwill
Goodwill of \u00a341,091\u00a0 million (2022: \u00a347,956 million) is included in intangible assets in the balance sheet of which the following are the
significant acquisitions: Reynolds American \u00a330,938 million (2022: 37,181 million); Rothmans Group \u00a34,274 million (2022: \u00a34,704 million);
Imperial Tobacco Canada \u00a32,386 million (2022: \u00a32,460 million; ETI (Italy) \u00a31,428 million (2022: \u00a31,461 million) and ST (principally
Scandinavia) \u00a31,074 million (2022: \u00a31,102 million). The principal allocations of goodwill in the Rothmans acquisition are to the cash-
generating units of Europe and South Africa, with the remainder relating to operations in APMEA.
In 2023, goodwill was allocated for impairment testing purposes to 17 (2022: 17) individual cash-generating units (CGUs) \u2013 one in the U.S.
(2022: one), nine in AME (2022: nine) and seven in APMEA (2022: seven).
For the purpose of impairment testing, goodwill has been attributed to the following cash-generating units:
2023
2022
Carrying
amount
\u00a3m
Pre-tax
discount rate
%
Carrying
amount
\u00a3m
Pre-tax
discount rate
%
Cash-generating unit
Reynolds American
30,938
9.6
37,181
8.8
Europe
5,596
6.6
5,670
7.5
Canada
2,386
20.3
2,460
19.4
Australia
717
7.3
755
8.2
South Africa
189
14.3
541
10.4
Singapore
382
7.4
398
7.9
GTR
253
7.6
264
7.6
Malaysia
217
10.2
240
11.4
Peru
73
12.4
103
7.5
Other
340
6.7
344
8.0
Total
41,091
47,956
Included within \u2018Other\u2019 above is goodwill arising on various acquisitions that have been allocated to eight cash-generating units which
are, individually, insignificant. The pre-tax discount rate represents the weighted average pre-tax discount rate.
During 2023, the Group recognised a total impairment charge to goodwill of \u00a34,614 million (2022: \u00a3nil million) related to South Africa and
Peru as\u00a0explained in note 12(b)(vi) and to Reynolds American as explained in note 12(b)(iv) below.
b. Trademarks and similar intangibles with indefinite lives
The net book value of trademarks and similar intangibles with indefinite lives is \u00a351,930 million (2022: \u00a378,228 million) and relates to the
acquisition of Reynolds American. The trademarks acquired, including Newport, Camel, Natural American Spirit, Grizzly and Pall Mall, all of
which are part of the Group\u2019s Strategic Portfolio of key brands, form the core focus of the U.S. business and receive significant support in
the form of dedicated internal resources, forecasting and, where appropriate, marketing investment. These trademarks have significant
market share and positive cash flow expectations. There are no regulatory or contractual restrictions on the use of the trademarks, and
there are no plans by management to significantly redirect resources elsewhere.
c. Trademarks and similar intangibles with definite lives
The majority of trademarks and similar intangibles with definite lives relate to trademarks acquired in previous years. These trademarks
are amortised over their expected useful lives, which do not exceed 20 years. As discussed below in Note 12(b)(iv), with effect from
1\u00a0January 2024, this category will be amortised over periods not exceeding 30 years to accommodate the estimate of useful economic
lives for Newport, Camel, Pall Mall and Natural American Spirit. Included in the net book value of trademarks and similar intangibles are
trademarks relating to the acquisition of Reynolds American \u00a31,809 million (2022: \u00a32,071 million).
The following disclosure will consider Reynolds American, Canada and the Rest of the World in turn.
(iv) Impairment testing \u2013 Reynolds American
Goodwill and the indefinite-lived brand intangibles relating to Reynolds American
Subsequent to the FDA announcement on 28 April 2022 of a proposed product standard to prohibit menthol as a characterising flavour
in cigarettes, the FDA formally submitted the final product standard to the Office of Management and Budget on 18 October 2023.
Management notes that the proposal of a product standard does not itself constitute a ban on menthol in cigarettes given the proposed
standard is still required to go through the established comprehensive U.S. rule-making process, the timetable and outcome for which
was, and remains, uncertain. Further to this, on 21 June 2022, the FDA announced plans to develop a proposed product standard that
would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products to reduce addictiveness.
Management notes that the FDA announcement does not itself constitute restrictions on nicotine levels in cigarettes, and any proposed
regulation of nicotine in cigarettes would need to be introduced through the established comprehensive U.S. rule-making process, the
timetable and outcome for which was, and remains, uncertain. Management do not deem this to be a new development but rather
a\u00a0continuation of the rulemaking process that the FDA initiated in 2017 that was later put on hold.
In December 2022, the sale of most tobacco products with characterising flavours (including menthol) other than tobacco were banned
in the state of California. The impact of the ban in California has been reflected in the cash flow forecasts used in the impairment model.
The Group has a long-standing track record of managing regulatory shifts and, in the event of regulatory change, the Group remains
confident in its ability to navigate that environment successfully.
In line with the approach used in 2022, the value-in-use calculations have been determined based on probability weighted scenarios to
derive a risk-adjusted cash flow forecast applied within the valuations. These scenarios incorporate varying assumptions on potential
timing for a final product standard to prohibit menthol as a characterising flavour in cigarettes becoming effective. However, the impact
of the timing of any potential menthol ban was not deemed to be a key assumption.
Management note that the U.S. combustibles market has experienced substantial volatility since 2020. In the period immediately prior to\u00a0the
COVID-19 pandemic, U.S. combustibles industry volumes declined by c.5.0-5.5% per annum (2017-2019). During COVID-19, due to changes
in consumer behaviour, industry volume was largely flat in 2020 (0.1% decline) with 2021 also declining by only 3.0%. However, in\u00a02022, as
the U.S. exited the pandemic combined with adverse impacts from the macro-economic headwinds, industry volume declined by 10.6%.
At the time, it was Management\u2019s assessment that the performance was a rebalancing and would return to a more consistent decline
rate in future periods, supporting the judgement that it was not possible to reliably determine a definite useful life for the brands.
Accordingly, an indefinite life continued to be applied and the brands were not amortised in 2022 or 2023.
During 2023, however, evolving insights indicated that the decline in industry volume would be higher than forecast due to the continued
macro-economic headwinds in the U.S. combined with an acceleration of the vapour category growth. This growth is driven by
combustible consumers turning to Vapour devices (specifically through the use of illicit single-use products) with this market segment
growing by c.100% in the period.
Due to the continued challenging trading conditions in the U.S., a detailed external study was commissioned to\u00a0assist Management with
an independent view of the potential forecast performance for the market.
The study assessed the future industry size, based upon, among other things:
\u2013 Macro-economic factors;
\u2013 Pricing and elasticity; and
\u2013 Long term trend assumptions which themselves include category-specific consumption patterns in comparison to other categories.
This review assisted Management in preparing the Group\u2019s five-year forecast of the U.S. market, with further extrapolation based upon
the estimated performance of the brands.
Following the review and as a result of the higher forecast combustibles market decline as described above, a total impairment of
\u00a327,291\u00a0million in respect of the U.S. CGU was identified. The impairment charge has been recognised using the exchange rate prevailing
on the date of the impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets are US$ denominated.
Impairment of trademarks and assessment of useful economic lives
Concurrent to the impairment assessment, and reflecting Management's revised volume projections, Management concluded that
it\u00a0was appropriate to redesignate Newport, Camel, Natural American Spirit and Pall Mall as definite-lived from 1 January 2024
(2023:\u00a0indefinite-lived, 2022: indefinite-lived) with an estimated life of between 20-30 years.
It was also concluded that it remains appropriate to continue to recognise Grizzly and Camel snus as indefinite-lived brands given the
expected continued performance of the traditional oral sector.
Corporate costs are allocated to the brand budgets based on either specific allocations, where appropriate, or based on revenue. As the
trademarks and similar intangibles with indefinite lives relate to the acquisition of Reynolds American, the brand budgets used in the value-in-
use calculations have also been incorporated into the budget information used in the impairment testing of Reynolds American goodwill.
The value-in-use calculations for the Reynolds American cash-generating unit and the indefinite-lived brands have been prepared based
on a five-year risk-adjusted cash flow forecast, incorporating the probability weighted scenarios above. After this forecast, for the
Reynolds American cash-generating unit and for the indefinite-lived brands Grizzly and Camel Snus, a probability weighted growth rate
of 1.0% (2022: 1.0%) is applied.
In order to support the long-term growth rates for Newport, Camel, Natural American Spirit and Pall Mall, a cash flow forecast has also
been prepared on a discrete basis, reflecting the revised useful economic lives from 1 January 2024. The long-term growth rates implied
by these value-in-use calculations with cash flows capped at 30 years or 20 years, as appropriate, are -4.7% (2022: 0.89%) for Newport,
-7.4% (2022: 0.93%) for Camel, -1.15% (2022: 1.0%) for Natural American Spirit and -13.7% (2022: 1.0%) for Pall Mall.
As a result of the revised forecasts, an impairment charge of \u00a322,992 million has been recognised in relation to the brands.
Management recognise that the date at which the redesignation to definite-lived is made is judgemental and have determined that
amortisation will commence from 1 January 2024. From 2024, amortisation will be charged on a straight-line basis with the increase in
annual amortisation expense expected to be \u00a31.4 billion (US$1.8 billion) per annum.
2023
2022
Carrying
amount
\u00a3m
Volume 5 Year
CAGR**
Pre-tax
discount rate*
%
Carrying
amount
\u00a3m
Volume 5 Year
CAGR
Pre-tax
discount rate
%
Indefinite-lived intangibles
Newport
20,753
(11.3)%
8.7
33,236
(6.7)%
9.2
Camel
7,822
(12.3)%
8.9
14,058
(6.4)%
8.9
Pall Mall
2,608
(18.8)%
9.4
6,252
(13.0)%
8.6
Natural American Spirit
10,439
(7.6)%
7.9
13,019
(2.5)%
8.6
Camel Snus
1,099
(5.4)%
7.8
1,355
(5.3)%
8.6
Grizzly
9,209
(3.9)%
7.8
10,308
(3.7)%
8.6
Total
51,930
78,228
Notes:
*For the purpose of current year impairment assessment, the value-in-use calculations for the combustibles brands have been prepared based on a five-year risk adjusted cash flow forecast,
supplemented by a forecast on a discrete period basis reflecting the revised useful economic life effective 1 January 2024 for the combustibles brands to support the long term growth rates.
Following these updates, the Group has revisited the methodology by which the Tax Amortisation Benefit (TAB) included in the brand valuation is treated when determining the pre-tax discount
rates. In the previous years, the Group had considered the pre-TAB value-in-use to derive the pre-tax discount rate, however, under the revised approach, the Group has considered the post-TAB
value-in-use in deriving the pre-tax discount rates for disclosure purposes. If the revised methodology is applied to the year 2022, the pre-tax discount rate will result in 7.9% for Newport, 7.6%
for Camel and 7.4% for Pall Mall, Natural American Spirit, Camel Snus and Grizzly. The revision of the pre-tax discount rates does not result in any change in the impairment assessment or the
headroom calculated for each of the intangible assets in\u00a0the year 2022. There are no other financial impacts on the financial statements for year-end 2022 as a result of this revision in
methodology in the application of the TAB factor for deriving pre-tax discount rate for disclosure purposes. Valuations derived from applying post-tax discount rates to post-tax cash flows are
aligned to those that would arise from applying pre-tax discount rates to pre-tax cash flows.
**\u00a0 Five year CAGR is calculated by reference to the first five years annual volumes in the value-in-use model against the 2023 baseline.
The below table indicates the additional amount of impairment that would be required if the following individual changes were made to
the key assumptions used in the impairment model:
Newport
\u00a3m
Camel
\u00a3m
Pall Mall
\u00a3m
Natural
American
Spirit
\u00a3m
Grizzly
\u00a3m
Camel Snus
\u00a3m
Assumptions
Volume decline by additional 1% year on year*
(1,135)
(427)
(142)
(572)
(559)
(68)
Decrease in long-term growth rate by 50bps
(560)
(163)
(32)
(467)
(593)
(70)
Increase in pre-tax discount rate by 75bps
(1,105)
(354)
(86)
(804)
(945)
(112)
Note:
*Volume sensitivity results in a proportional reduction in both net revenue and direct costs with no impact to operating margin %.\u00a0 Fixed overhead cost allocations remain flat. This
demonstrates a year-on-year decrease in operating cash flow for the discrete forecast years.
The volume decline assumption is based on the year on year decline rate increasing by an additional 1% each year in the five-year cash flow
forecast without any future recovery and assumes that other assumptions are not changed. The above sensitivities have been translated
using the exchange rate prevailing on the date of the impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets
are US$ denominated.
Impairment assessment of Reynolds American goodwill
As a consequence of the challenges in the U.S. market and the impact to the Group's ongoing financial forecast, and having recognised
an impairment charge in respect of the trademarks referenced above, the Group has also recognised an additional impairment in respect
of U.S. goodwill of \u00a34,299 million (2022: \u00a3nil million).
The table below indicates the additional amount of impairment that would be required if the following individual changes were made to
key assumptions within the value-in-use model and it has been translated using the exchange rate prevailing on the date of the
impairment assessment of \u00a31 : US$1.213 as the underlying cash flows and net assets are US$ denominated:
Reynolds American goodwill impairment charge for
2023 (\u00a3m)
Assumptions
Change in key assumption
Possible additional
impairment
(\u00a3m)
4,299
Pre-tax discount rate
Increase of 0.67%
(6,169)
Long-term growth rates
Decrease of 0.50%
(4,962)
Note:
*The sensitivity to increase the pre-tax discount rate for the Reynolds American goodwill has been considered in isolation without any uplift to the brands discount rate (impact of which
is shown in the sensitivity table above). In the event of an increase to the brand's discount rate, any additional impairment to the Reynolds American goodwill will reduce by the
respective amount due to the resulting reduction to its net assets.
Reynolds American Summary
The following is a summary table showing the movement of the Reynolds American goodwill and other intangible and similar assets in
the U.S. during 2023
2023
Opening
balance
\u00a3m
Differences on
exchange
\u00a3m
Impairment
\u00a3m
Closing
balance
\u00a3m
Reynolds American goodwill
37,181
(1,944)
(4,299)
30,938
Newport
33,236
(1,339)
(11,144)
20,753
Camel
14,058
(517)
(5,719)
7,822
Pall Mall
6,252
(187)
(3,457)
2,608
Natural American Spirit
13,019
(642)
(1,938)
10,439
Grizzly
10,308
(554)
(545)
9,209
Camel snus
1,355
(67)
(189)
1,099
(v) Impairment testing \u2013 Canada
Goodwill relating to Imperial Tobacco Canada Ltd (ITCAN)
In March 2019, ITCAN obtained an Initial Order from the Ontario Superior Court of Justice granting it protection under the Companies\u2019
Creditors Arrangement Act (CCAA). If the CCAA creditor protection were to end, significant liabilities might crystallise. As a
consequence, to reflect the risk to future operating cash flows, the value-in-use calculations have been prepared based on a five-year
cash flow forecast, after which a growth rate of -2.5% and a pre-tax discount rate of 20.3% (2022: 19.4%) have been assumed. Further
information on the Quebec Class Actions and CCAA can be found in note 31.
In addition to the increase in discount rate, a reasonable range of sensitivities was applied to the value-in-use calculation, and there was
no risk of an impairment charge identified.
The excess of value-in-use earnings over the carrying values (headroom) of the ITCAN goodwill would be reduced to nil if the following
individual changes, none of which are considered reasonably possible by management, were made to the key assumptions used in the
impairment model.
Canada\u00a0
goodwill
%
Assumptions
Decrease in revenue by*
17.4
Increase in pre-tax discount rate by
8.5
Note:
*Revenue sensitivities are performed in isolation and do not include the removal of the corresponding variable cost of sales. This demonstrates a decrease in revenue in each of the
forecast years.
Below is the summary of ITCAN's income statement:
2023
\u00a3m
2022
\u00a3m
Revenue
1,003
1,055
Profit from operations
600
589
Profit after tax
517
478
Please refer to note 32 for ITCAN's assets which are subject to restrictions.
The \u00a32,386 million of goodwill relating to ITCAN on the Group\u2019s balance sheet at 31 December 2023 will continue to be reviewed on a\u00a0regular
basis. Any impairment charge would result in a non-cash charge to the income statement that will be treated as an adjusting item.
(vi) Impairment testing \u2013 Goodwill and indefinite-lived brands (excluding Reynolds American and Canada)
The value-in-use calculations use cash flows based on detailed financial budgets prepared by management covering a one-year period
extrapolated over a 10-year horizon with growth of 3% (2022: 3%) in years two to ten, after which a growth rate of 1% (2022: 1%) has been
assumed as the long-term volume decline is more than offset by pricing to drive revenue growth. A 10-year horizon is considered appropriate
based on the Group\u2019s history of profit and cash growth, its well-balanced portfolio of brands and the industry in which it operates.
For the Malaysian cash-generating unit, as a result of regulatory and macro-economic conditions, the above assumptions were amended
to reflect the short- to medium-term plans of the country or area management spanning a period of five years after which a long-term
growth rate of 0% for New Categories and -0.9% for combustibles has been assumed. For the Malaysian cash-generating unit headroom
to reduce to \u00a3nil, the forecasted cash flows would need to reduce by 30.7% in each discrete year in the five-year period or the pre-tax
discount rate would have to increase by 5.5%, both of which Management does not consider to be reasonably possible. The Group will
continue to monitor Malaysia's performance going forward to identify if any impairment triggers materialise.
Trading conditions have continued to be difficult in South Africa with the growth in illicit trade following the ban of the sale of tobacco
products introduced during the COVID-19 pandemic becoming further entrenched and, as a result, the Group has recognised an
impairment charge of \u00a3291 million.
Due to further market deterioration in Peru, which negatively impacts future forecasted operating cash flows for the CGU, the Group
has\u00a0recognised an impairment charge of \u00a324 million.
Value-in-use calculations for both the South African CGU and the Peruvian CGU have been based on Management's five-year cash flow
forecast, after which a long-term growth rate of 0% has been assumed.
The table below shows the headroom and the impairment charge that would be recognised if the assumptions used in the value-in-use
calculation were changed:
Carrying amount
of CGU
\u00a3m
Increase in
discount rate*
\u00a3m
Decrease in
cash\u00a0flows*
\u00a3m
Decrease in
terminal value*
\u00a3m
Change in headroom/impairment charge
Cash-generating unit
South Africa
189
(28)
(38)
(19)
Peru
73
(11)
(11)
(8)
Note:
*Sensitivities applied to key assumptions are a 100bps increase in the pre-tax discount rate, a 10% decrease in forecast cash flows reflecting a loss in volumes arising from difficult
trading conditions and a 100bps decrease in terminal value growth rate.
With the exception of South African and Peruvian cash-generating units, following the application of a reasonable range of sensitivities
to\u00a0all cash-generating units, there was no reasonably possible scenario identified that would lead to a potential impairment charge.
(c) Computer software and assets in the course of development
Included in computer software and assets in the course of development are internally developed assets with a carrying value of
\u00a3450 million (2022: \u00a3423 million). The costs of internally developed assets include capitalised expenses of employees working full time
on\u00a0software development projects, third-party consultants and software licence fees from third-party suppliers.
The Group has \u00a32 million of future contractual commitments (2022: \u00a31 million) related to intangible assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-623": { "value": "
a. Goodwill
Goodwill of \u00a341,091\u00a0 million (2022: \u00a347,956 million) is included in intangible assets in the balance sheet of which the following are the
significant acquisitions: Reynolds American \u00a330,938 million (2022: 37,181 million); Rothmans Group \u00a34,274 million (2022: \u00a34,704 million);
Imperial Tobacco Canada \u00a32,386 million (2022: \u00a32,460 million; ETI (Italy) \u00a31,428 million (2022: \u00a31,461 million) and ST (principally
Scandinavia) \u00a31,074 million (2022: \u00a31,102 million). The principal allocations of goodwill in the Rothmans acquisition are to the cash-
generating units of Europe and South Africa, with the remainder relating to operations in APMEA.
In 2023, goodwill was allocated for impairment testing purposes to 17 (2022: 17) individual cash-generating units (CGUs) \u2013 one in the U.S.
(2022: one), nine in AME (2022: nine) and seven in APMEA (2022: seven).
For the purpose of impairment testing, goodwill has been attributed to the following cash-generating units:
2023
2022
Carrying
amount
\u00a3m
Pre-tax
discount rate
%
Carrying
amount
\u00a3m
Pre-tax
discount rate
%
Cash-generating unit
Reynolds American
30,938
9.6
37,181
8.8
Europe
5,596
6.6
5,670
7.5
Canada
2,386
20.3
2,460
19.4
Australia
717
7.3
755
8.2
South Africa
189
14.3
541
10.4
Singapore
382
7.4
398
7.9
GTR
253
7.6
264
7.6
Malaysia
217
10.2
240
11.4
Peru
73
12.4
103
7.5
Other
340
6.7
344
8.0
Total
41,091
47,956
Included within \u2018Other\u2019 above is goodwill arising on various acquisitions that have been allocated to eight cash-generating units which
are, individually, insignificant. The pre-tax discount rate represents the weighted average pre-tax discount rate.
During 2023, the Group recognised a total impairment charge to goodwill of \u00a34,614 million (2022: \u00a3nil million) related to South Africa and
Peru as\u00a0explained in note 12(b)(vi) and to Reynolds American as explained in note 12(b)(iv) below.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-624": { "value": "
b. Trademarks and similar intangibles with indefinite lives
The net book value of trademarks and similar intangibles with indefinite lives is \u00a351,930 million (2022: \u00a378,228 million) and relates to the
acquisition of Reynolds American. The trademarks acquired, including Newport, Camel, Natural American Spirit, Grizzly and Pall Mall, all of
which are part of the Group\u2019s Strategic Portfolio of key brands, form the core focus of the U.S. business and receive significant support in
the form of dedicated internal resources, forecasting and, where appropriate, marketing investment. These trademarks have significant
market share and positive cash flow expectations. There are no regulatory or contractual restrictions on the use of the trademarks, and
there are no plans by management to significantly redirect resources elsewhere.
c. Trademarks and similar intangibles with definite lives
The majority of trademarks and similar intangibles with definite lives relate to trademarks acquired in previous years. These trademarks
are amortised over their expected useful lives, which do not exceed 20 years. As discussed below in Note 12(b)(iv), with effect from
1\u00a0January 2024, this category will be amortised over periods not exceeding 30 years to accommodate the estimate of useful economic
lives for Newport, Camel, Pall Mall and Natural American Spirit. Included in the net book value of trademarks and similar intangibles are
trademarks relating to the acquisition of Reynolds American \u00a31,809 million (2022: \u00a32,071 million).
The following disclosure will consider Reynolds American, Canada and the Rest of the World in turn.
(c) Computer software and assets in the course of development
Included in computer software and assets in the course of development are internally developed assets with a carrying value of
\u00a3450 million (2022: \u00a3423 million). The costs of internally developed assets include capitalised expenses of employees working full time
on\u00a0software development projects, third-party consultants and software licence fees from third-party suppliers.
The Group has \u00a32 million of future contractual commitments (2022: \u00a31 million) related to intangible assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-625": { "value": "
13 Property, plant and equipment
(a) Overview of property, plant and equipment, including right-of-use assets
2023
Freehold
property
\u00a3m
Leasehold
property
\u00a3m
Plant,
equipment and
other owned
\u00a3m
Plant,
equipment and
other leased
\u00a3m
Assets in the
course of
construction
\u00a3m
Total
\u00a3m
1 January
Cost
1,475
940
5,962
362
767
9,506
Accumulated depreciation and impairment
(473)
(474)
(3,507)
(185)
(4,639)
Net book value at 1 January
1,002
466
2,455
177
767
4,867
Differences on exchange
(41)
(25)
(135)
(8)
(43)
(252)
Additions
\u2013 right-of-use assets
\u2014
112
\u2014
84
\u2014
196
\u2013 separately acquired
\u2014
\u2014
20
\u2014
460
480
Reallocations
69
24
431
\u2014
(524)
\u2014
Depreciation
(34)
(102)
(293)
(77)
\u2014
(506)
Impairment
\u2014
(5)
(131)
(9)
(6)
(151)
Right-of-use assets \u2212 reassessments,
modifications and terminations
\u2014
(15)
\u2014
(13)
\u2014
(28)
Disposals
(1)
(3)
(5)
\u2014
\u2014
(9)
Net reclassifications as held-for-sale
(14)
\u2014
\u2014
\u2014
\u2014
(14)
31 December
Cost
1,418
895
5,702
375
654
9,044
Accumulated depreciation
and impairment
(437)
(443)
(3,360)
(221)
(4,461)
Net book value at 31 December
981
452
2,342
154
654
4,583
2022
Freehold
property
\u00a3m
Leasehold
property
\u00a3m
Plant,
equipment and
other owned
\u00a3m
Plant,
equipment and
other leased
\u00a3m
Assets in the
course of
construction
\u00a3m
Total
\u00a3m
1 January
Cost
1,421
847
5,750
247
706
8,971
Accumulated depreciation and impairment
(388)
(370)
(3,130)
(130)
(4,018)
Net book value at 1 January
1,033
477
2,620
117
706
4,953
Differences on exchange
68
30
164
9
48
319
Additions
\u2013 right-of-use assets
\u2014
117
\u2014
117
\u2014
234
\u2013 separately acquired
\u2014
\u2014
32
\u2014
471
503
Reallocations
44
21
374
2
(441)
\u2014
Depreciation
(36)
(112)
(323)
(68)
\u2014
(539)
Impairment
(62)
(39)
(210)
(4)
(4)
(319)
Right-of-use assets \u2212 reassessments,
modifications and terminations
\u2014
(16)
\u2014
4
\u2014
(12)
Disposals
(4)
(2)
(15)
\u2014
3
(18)
Net reclassifications as held-for-sale
(41)
(10)
(187)
\u2014
(16)
(254)
31 December
Cost
1,475
940
5,962
362
767
9,506
Accumulated depreciation
and impairment
(473)
(474)
(3,507)
(185)
(4,639)
Net book value at 31 December
1,002
466
2,455
177
767
4,867
Refer to notes 4 and 7 for more information on property, plant and equipment impairments. In 2022, the \u00a3254 million of assets
reclassified as held-for-sale primarily relates to the Group's businesses in Russia and Belarus.
As mentioned in note 5(b), the Group completed a sale and leaseback transaction in 2023. The cash flow effect of this transaction
is\u00a0\u00a315\u00a0million.
ESG Investments: Included in additions in 2023 is an amount of \u00a334 million (2022: \u00a327.1\u00a0million) related to investments directed towards
equipment to drive energy efficiency and renewable energy generation, water recycling and efficiency projects, waste reduction, and
product innovation-led specification improvements to drive recyclability and reduce waste.
The Group has \u00a3 60 million of future contractual commitments (2022: \u00a380 million) related to property, plant and equipment.
(b) Right-of-use assets
In accordance with IFRS 16 Leases, the right-of-use assets related to leased properties have been included in the asset class \u2018Leasehold
Property\u2019 (note 13(c)) and other right-of-use assets have been reported under \u2018Plant, equipment and other leased\u2019.
The Group leases various offices, warehouses, retail spaces, equipment and vehicles through its subsidiaries across the globe.
Arrangements are entered into in the course of ordinary business, and lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions reflecting local commercial practice. The lease agreements do not impose any covenants
other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing
purposes.
Assets representing \u2018plant, equipment and other\u2019 relate to leases of various assets including tobacco vending machines, industrial
equipment and distribution vehicles in Brazil, China, Japan, Mexico, Pakistan, Poland, Romania, the U.S. and other countries.
(c) Leasehold property
As of 31 December 2023, the Group holds \u00a3147 million (2022: \u00a3152 million) of leasehold properties acquired and another \u00a3305 million
(2022: \u00a3314 million) of right-of-use leased properties.
Assets representing \u2018leasehold property\u2019 relate to leases in respect of offices, retail space, warehouses and manufacturing facilities
occupied by Group subsidiaries and include property leases with lease terms of more than five years in Bangladesh, Brazil, China,
Germany, Japan, Poland, Romania, the UK and the U.S., amongst other countries. In addition, capitalised expenditure representing
leasehold improvements is included in this asset class.
2023
\u00a3m
2022
\u00a3m
Leasehold land and property comprises
- net book value of long leasehold
18
15
- net book value of short leasehold
434
451
452
466
2023
Leasehold property net book value movements for the year
ended 31 December 2023
Net book value
at 1 January
\u00a3m
Differences on
exchange
\u00a3m
Depreciation
and impairment
\u00a3m
Other net
movements*
\u00a3m
Net book value
at 31 December
\u00a3m
- Property acquired (IAS 16)
152
(10)
(12)
17
147
- Right-of-use properties (IFRS 16)
314
(15)
(95)
101
305
466
(25)
(107)
118
452
2022
Leasehold property net book value movements for the year
ended 31 December 2022
Net book value
at 1 January
\u00a3m
Differences on
exchange
\u00a3m
Depreciation and
impairment
\u00a3m
Other net
movements*
\u00a3m
Net book value
at 31 December
\u00a3m
- Property acquired (IAS 16)
165
11
(41)
17
152
- Right-of-use properties (IFRS 16)
312
19
(110)
93
314
477
30
(151)
110
466
Note:
*Property acquired (IAS 16 Property, plant and equipment) other net movements for leasehold improvements represent additions (directly acquired and/or transferred from assets in the
course of construction) net of disposals, whereas other net movements for right-of-use properties (IFRS 16) relate to new leases net of reassessments, modifications and terminations
as reported in the Property, plant and equipment movement table in note 13(a).
(d) Freehold property
As of 31 December 2023, the Group owns freehold property amounting to \u00a3981 million (2022: \u00a31,002 million), representing factories,
warehouses and office buildings together with adjoining land, mainly in the U.S., the UK, Bangladesh, Indonesia and Mexico.
2023
\u00a3m
2022
\u00a3m
Cost of freehold land within freehold property on which no depreciation is provided
238
246
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-626": { "value": "
16 Deferred tax
Net deferred tax (liabilities)/assets comprise:
Stock
relief
\u00a3m
Excess of
capital
allowances
over
depreciation
\u00a3m
Tax
losses
\u00a3m
Undistributed
earnings of
associates and
subsidiaries
\u00a3m
Retirement
benefits
\u00a3m
Trademarks
\u00a3m
Other
temporary
differences
\u00a3m
Total
\u00a3m
1 January 2023
30
(115)
210
(229)
38
(18,773)
1,093
(17,746)
Differences on exchange
2
26
1
12
1
798
(78)
762
(Charged)/credited to the
income statement
(1)
72
153
(4)
(35)
5,384
8
5,577
Credited/(charged) relating
to changes in tax rates
\u2014
\u2014
9
\u2014
\u2014
105
(8)
106
Credited/(charged) to other
comprehensive income
\u2014
\u2014
\u2014
\u2014
35
\u2014
(23)
12
Net reclassifications as
held-for-sale
1
(4)
\u2014
\u2014
\u2014
\u2014
11
8
31 December 2023
32
(21)
373
(221)
39
(12,486)
1,003
(11,281)
1 January 2022
(4)
(151)
94
(221)
139
(16,779)
1,071
(15,851)
Differences on exchange
(8)
(20)
5
(8)
7
(2,109)
126
(2,007)
Credited/(charged) to the
income statement
46
50
77
\u2014
(18)
70
(51)
174
(Charged)/credited relating
to changes in tax rates
\u2014
(3)
34
\u2014
(1)
45
(9)
66
Charged to other
comprehensive income
\u2014
\u2014
\u2014
\u2014
(89)
\u2014
(17)
(106)
Net reclassifications as
held-for-sale
(4)
9
\u2014
\u2014
\u2014
\u2014
(27)
(22)
31 December 2022
30
(115)
210
(229)
38
(18,773)
1,093
(17,746)
The net deferred tax liabilities are reflected in the Group balance sheet as follows: deferred tax asset of \u00a3 911 million and deferred tax
liability of \u00a312,192 million (2022 : deferred tax asset of \u00a3 682 million and deferred tax liability of \u00a3 18,428 million), after offsetting assets and
liabilities where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred income taxes relate
to\u00a0the same fiscal authority.
The Group net deferred tax liability of \u00a311,281 million includes a net deferred tax asset of \u00a3493 million in relation to UK Group companies,
which relates mainly to tax losses (\u00a3363 million) and the excess of capital allowances over depreciation (\u00a3196 million). The tax losses are
expected to be utilised in future periods as a result of increased profitability in UK Group companies which is expected follow from
improved efficiency in the delivery of business activities. Based on current forecasts UK group companies are expected to generate
taxable profits from 2026, from which time it is expected that the tax losses will start to reduce. The losses are forecast to be fully utilised
within 6 years thereafter, accounting for a\u00a0 10% increase or decrease in the total profits of UK group companies.
As disclosed in Note 1 Accounting Policies, the Group has applied the mandatory exception to recognising and disclosing information
about deferred tax assets and liabilities related to Pillar Two income taxes in accordance with IAS12 Income Taxes.
At the balance sheet date, the Group has not recognised a deferred tax asset in respect of unused tax losses of \u00a3 360 million (2022:
\u00a3364\u00a0million) which have no expiry date and unused tax losses of \u00a3285 million (2022: \u00a3429 million) which will expire within the next 20 years.
In 2023 and 2022 the Group has not recognised any deferred tax asset in respect of deductible temporary differences which have no
expiry date and has not recognised \u00a325 million (2022: \u00a341 million) in respect of deductible temporary differences which will expire within
the next 10\u00a0years.
At the balance sheet date, the Group has unused tax credits of \u00a380 million (2022: \u00a380 million) which have no expiry date. No amount
of\u00a0deferred tax has been recognised in respect of these unused tax credits.
At the balance sheet date, the aggregate amount of undistributed earnings of subsidiaries which would be subject to dividend
withholding tax and for which no withholding tax liability has been recognised was \u00a31.1 billion (2022: \u00a31.6 billion).
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-627": { "value": "911000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxAssets", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-628": { "value": "12192000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxLiabilities", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2024-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-629": { "value": "682000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxAssets", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-630": { "value": "18428000000", "decimals": -6, "dimensions": { "concept": "ifrs-full:DeferredTaxLiabilities", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00", "unit": "iso4217:GBP" } }, "f-631": { "value": "
17 Trade and other receivables
2023
\u00a3m
2022
\u00a3m
Trade receivables
2,887
2,609
Loans and other receivables
663
1,568
Prepayments and accrued income
392
431
3,942
4,608
Current
3,621
4,367
Non-current
321
241
3,942
4,608
The majority of receivables are held in order to collect contractual cash flows, in accordance with the Group\u2019s business model for
managing financial assets, and hence are measured at amortised cost. In certain countries, however, the Group has entered into
factoring arrangements and periodically sells certain trade receivables to banks and other financial institutions, without recourse, for
cash. These trade receivables have been derecognised from the statement of financial position to reflect the transfer by the Group of
substantially all of the risks and rewards of the receivables, including credit risk. Consequently, the cash inflows have been recognised
within operating cash flows. Typically in these arrangements, the Group also acts as a collection agent for the bank. At 31 December
2023 , the value of trade receivables derecognised through the factoring arrangements where the Group acts as a collection agent was
\u00a3545 million (2022: \u00a3533 million) and where the Group does not act as a collection agent was \u00a316 million (2022: \u00a322 million). Included in
trade receivables above is \u00a3189 million (2022 : \u00a3164 million) of trade debtor balances which were available for factoring under these
arrangements. In addition, the Group participates in certain supply chain finance programmes utilised by our customers allowing us to
receive payment for invoices earlier than the agreed due date at a discounted value. At 31 December 2023, the value of trade receivables
derecognised through these arrangements was \u00a3141 million (2022: \u00a381 million).
Included in loans and other receivables are \u00a3131 million of litigation related deposits (2022: \u00a3114 million). Management has determined that
these payments represent a resource controlled by the entity, as a result of past events and from which future economic benefits are
expected to flow to the entity either by being recoverable on conclusion of ongoing appeal processes or by reducing amounts potentially
payable should the appeal process fail. These deposits are held at the fair value of consideration transferred and are offset against
provisions, if applicable, only once funds have transferred out from the deposit account. The effect of discounting would be immaterial.
In March 2017, the Brazilian Supreme Court ruled that for all taxpayers VAT should not be included in the calculation of social contribution
taxes (PIS/Cofins) which are levied based on revenue. In August 2022, Souza Cruz achieved the favourable final and unappealable decision
in its individual lawsuit in respect of overpaid taxes to the government. Accordingly, an asset was recognised in the amount of
\u00a3624\u00a0million (principal amount plus interest) . Furthermore, the Group had a right related to an earn-out linked to the timing of the credit
compensation of \u00a397\u00a0million. In 2023, Souza Cruz fully offset the tax credit receivable with ordinary federal taxes payable, as allowed by
local legislation.
As explained in note 27(d)(ii), loans and other receivables include \u00a356\u00a0million (2022: \u00a356\u00a0million) in relation to outstanding proceeds from
the sale of the Group\u2019s Iranian subsidiary in 2021 as a current receivable. Given the ongoing political situation, heightened sanctions and
other uncertainties coupled with the passage of time the receivable has been outstanding, the Group has recognised an expected credit
loss of \u00a328 million at 31 December 2023.
Also included in loans and other receivables are deposits that do not meet the definition of cash and cash equivalents as well as loans
provided to farmers. The cash flows arising from these transactions are included in investing activities and have been reconciled,
in\u00a0note\u00a018 , to the cash flow statement.
Prepayments and accrued income include \u00a317 million (2022: \u00a321 million) of accrued income primarily in relation to rebates.
Amounts receivable from related parties including associated undertakings are shown in note 30.
Trade and other receivables have been reported in the balance sheet net of allowances as follows:
2023
\u00a3m
2022
\u00a3m
Trade receivables \u2013 gross
2,957
2,660
Trade receivables \u2013 allowance
(70)
(51)
Loans and other receivables \u2013 gross
691
1,568
Loans and other receivables \u2013 allowance
(28)
\u2014
Prepayments and accrued income
392
431
Net trade and other receivables per balance sheet
3,942
4,608
The movements in the allowance account are as follows:
2023
2022
Trade
receivables
\u00a3m
Loans
and other
receivables
\u00a3m
Total
\u00a3m
Trade
receivables
\u00a3m
Loans
and other
receivables
\u00a3m
Total
\u00a3m
1 January
51
\u2014
51
37
\u2014
37
Differences on exchange
2
\u2014
2
2
\u2014
2
Provided in the year
33
28
61
28
\u2014
28
Released
(16)
\u2014
(16)
(16)
\u2014
(16)
31 December
70
28
98
51
\u2014
51
As permitted by IFRS 9, the loss allowance on trade receivables arising from the recognition of revenue under IFRS 15 is initially measured
at an amount equal to lifetime expected losses. Allowances in respect of loans and other receivables are initially recognised at an amount
equal to 12-month expected credit losses. Allowances are measured at an amount equal to the lifetime expected credit losses where the
credit risk on the receivables increases significantly after initial recognition.
The Group holds bank guarantees, other guarantees and credit insurance in respect of some of the past due debtor balances.
Trade and other receivables are predominantly denominated in the functional currencies of subsidiary undertakings apart from the
following: US dollar: 3.3% (2022: 1.9%), Euro: 6.6% (2022: 5.7%) and other currencies: 1.4% (2022: 2.4%).
There is no material difference between the above amounts for trade and other receivables and their fair value due to the short-term
duration of the majority of trade and other receivables as determined using discounted cash flow analysis. There is no concentration
of\u00a0credit risk with respect to trade receivables as the Group has a large number of internationally dispersed customers.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-633": { "value": "
18 Investments held at fair value
2023
2022
Fair value\u00a0
through P&L
\u00a3m
Fair value
through OCI
\u00a3m
Total
\u00a3m
Fair value\u00a0
through P&L
\u00a3m
Fair value
through OCI
\u00a3m
Total
\u00a3m
1 January
640
60
700
469
37
506
Difference on exchange
(52)
(1)
(53)
18
1
19
Additions
405
11
416
209
19
228
Disposals
(372)
\u2014
(372)
(93)
(3)
(96)
Provisions
4
\u2014
4
17
\u2014
17
Reclassifications
(3)
3
\u2014
\u2014
\u2014
\u2014
Other fair value movements
30
(6)
24
20
6
26
31 December
652
67
719
640
60
700
Current
601
\u2014
601
579
\u2014
579
Non-current
51
67
118
61
60
121
652
67
719
640
60
700
The Group\u2019s investments principally consist of non-derivative financial assets that cannot be classified as loans and other receivables
or cash and cash equivalents, as well as investments made by the Group\u2019s corporate venture capital unit, Btomorrow Ventures, and other
Group companies.
Investments held at fair value through profit and loss principally consist of government securities, indexed deposits, treasury bills or other
treasury products with maturities of more than three months which, if held for less than 12 months, form part of the Group\u2019s definition
of net debt. Investments held at fair value through profit and loss also includes the Group\u2019s investment in Charlotte\u2019s Web (see note 14).
Investments held at fair value through other comprehensive income (OCI) include equity investments in various start-up businesses
which are held for their strategic value.
Investments held at fair value through profit and loss above include restricted amounts of \u00a3446 million (2022: \u00a3396 million) due to
investments held by subsidiaries in CCAA protection (note 32), as well as \u00a389 million (2022: \u00a378 million) subject to potential exchange
control restrictions.
In 2021, as part of the disposal of the Group\u2019s operations in Iran (note 27(d)), a provision of \u00a324\u00a0million against non-current investments held
at fair value was charged to net finance costs as recoverability of these funds was not certain. During 2022, \u00a317\u00a0million was recovered with
some progress on resolving issues over the release of the remaining funds. During 2023, an additional \u00a34\u00a0million was recovered.
Investments held at fair value are predominantly denominated in the functional currencies of subsidiary undertakings with less than
6% in other currencies (2022: less than 5% in other currencies). There is no material difference between the investments held at fair value
and their gross contractual values.
The classification of these investments under the IFRS 13 Fair Value Measurement fair value hierarchy is given in note 26. Fair values for
quoted investments are based on observable market prices. If there is no active market for a financial asset, the fair value is established
by using valuation techniques, including discounted cash flow analyses and share of net assets. The fair value of the seven-year
convertible debenture in Charlotte\u2019s Web has been determined using a binomial option pricing model.
Included in the values in the table above are \u00a3192\u00a0million (2022: \u00a3186\u00a0million) of level 3 assets. Movements in these assets in 2023
included \u00a3123\u00a0million (2022: \u00a3133\u00a0million) of additions, \u00a390\u00a0million (2022: \u00a382\u00a0million) of disposals and \u00a327\u00a0million of net fair value loss
(2022: \u00a326\u00a0million net fair value gain).
Below is a reconciliation of the fair value investments cash flows to the cash flow statement \u2013 investing activities:
2023
\u00a3m
2022
\u00a3m
Cash outflow from investments held at fair value
416
228
Cash outflow from loans and other receivables
32
29
Cash outflows from investments per cash flow statement
448
257
Cash inflow from investments held at fair value
(372)
(96)
Cash inflow from loans and other receivables
(33)
(32)
Cash inflows from investments per cash flow statement
(405)
(128)
Fair value estimation
The fair values of financial assets and liabilities with maturities
of\u00a0less than one year, other than derivatives, are assumed to
approximate their book values. For other financial instruments
which are measured at fair value in the balance sheet, the basis
for\u00a0fair values is described below.
Fair value hierarchy
In accordance with IFRS 13 classification hierarchy, the following table presents the Group\u2019s financial assets and liabilities that are
measured at fair value:
2023
2022
Notes
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Assets at fair value
Investment held at fair value
18
527
\u2014
192
719
514
\u2014
186
700
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
10
\u2014
10
\u2014
43
\u2014
43
\u2013 cross-currency swaps
19
\u2014
115
\u2014
115
\u2014
254
\u2014
254
\u2013 forward foreign currency contracts
19
\u2014
165
\u2014
165
\u2014
264
\u2014
264
Assets at fair value
527
290
192
1,009
514
561
186
1,261
Liabilities at fair value
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
187
\u2014
187
\u2014
450
\u2014
450
\u2013 cross-currency swaps
19
\u2014
13
\u2014
13
\u2014
121
\u2014
121
\u2013 forward foreign currency contracts
19
\u2014
195
\u2014
195
\u2014
358
\u2014
358
Liabilities at fair value
\u2014
395
\u2014
395
\u2014
929
\u2014
929
Level 2 financial instruments are not traded in an active market, but the fair values are based on quoted market prices, broker/dealer
quotations, or alternative pricing sources with reasonable levels of price transparency. The Group\u2019s level 2 financial instruments include
OTC derivatives.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-632": { "value": "
18 Investments held at fair value
2023
2022
Fair value\u00a0
through P&L
\u00a3m
Fair value
through OCI
\u00a3m
Total
\u00a3m
Fair value\u00a0
through P&L
\u00a3m
Fair value
through OCI
\u00a3m
Total
\u00a3m
1 January
640
60
700
469
37
506
Difference on exchange
(52)
(1)
(53)
18
1
19
Additions
405
11
416
209
19
228
Disposals
(372)
\u2014
(372)
(93)
(3)
(96)
Provisions
4
\u2014
4
17
\u2014
17
Reclassifications
(3)
3
\u2014
\u2014
\u2014
\u2014
Other fair value movements
30
(6)
24
20
6
26
31 December
652
67
719
640
60
700
Current
601
\u2014
601
579
\u2014
579
Non-current
51
67
118
61
60
121
652
67
719
640
60
700
The Group\u2019s investments principally consist of non-derivative financial assets that cannot be classified as loans and other receivables
or cash and cash equivalents, as well as investments made by the Group\u2019s corporate venture capital unit, Btomorrow Ventures, and other
Group companies.
Investments held at fair value through profit and loss principally consist of government securities, indexed deposits, treasury bills or other
treasury products with maturities of more than three months which, if held for less than 12 months, form part of the Group\u2019s definition
of net debt. Investments held at fair value through profit and loss also includes the Group\u2019s investment in Charlotte\u2019s Web (see note 14).
Investments held at fair value through other comprehensive income (OCI) include equity investments in various start-up businesses
which are held for their strategic value.
Investments held at fair value through profit and loss above include restricted amounts of \u00a3446 million (2022: \u00a3396 million) due to
investments held by subsidiaries in CCAA protection (note 32), as well as \u00a389 million (2022: \u00a378 million) subject to potential exchange
control restrictions.
In 2021, as part of the disposal of the Group\u2019s operations in Iran (note 27(d)), a provision of \u00a324\u00a0million against non-current investments held
at fair value was charged to net finance costs as recoverability of these funds was not certain. During 2022, \u00a317\u00a0million was recovered with
some progress on resolving issues over the release of the remaining funds. During 2023, an additional \u00a34\u00a0million was recovered.
Investments held at fair value are predominantly denominated in the functional currencies of subsidiary undertakings with less than
6% in other currencies (2022: less than 5% in other currencies). There is no material difference between the investments held at fair value
and their gross contractual values.
The classification of these investments under the IFRS 13 Fair Value Measurement fair value hierarchy is given in note 26. Fair values for
quoted investments are based on observable market prices. If there is no active market for a financial asset, the fair value is established
by using valuation techniques, including discounted cash flow analyses and share of net assets. The fair value of the seven-year
convertible debenture in Charlotte\u2019s Web has been determined using a binomial option pricing model.
Included in the values in the table above are \u00a3192\u00a0million (2022: \u00a3186\u00a0million) of level 3 assets. Movements in these assets in 2023
included \u00a3123\u00a0million (2022: \u00a3133\u00a0million) of additions, \u00a390\u00a0million (2022: \u00a382\u00a0million) of disposals and \u00a327\u00a0million of net fair value loss
(2022: \u00a326\u00a0million net fair value gain).
Below is a reconciliation of the fair value investments cash flows to the cash flow statement \u2013 investing activities:
2023
\u00a3m
2022
\u00a3m
Cash outflow from investments held at fair value
416
228
Cash outflow from loans and other receivables
32
29
Cash outflows from investments per cash flow statement
448
257
Cash inflow from investments held at fair value
(372)
(96)
Cash inflow from loans and other receivables
(33)
(32)
Cash inflows from investments per cash flow statement
(405)
(128)
19 Derivative financial instruments
The fair values of derivatives are determined based on market data (primarily yield curves, implied volatilities and exchange rates) to
calculate the present value of all estimated flows associated with each derivative at the balance sheet date. In the absence of sufficient
market data, fair values would be based on the quoted market price of similar derivatives. The classification of these derivative assets
and\u00a0liabilities under the IFRS\u00a013 fair value hierarchy is given in note 26.
2023
2022
Assets
\u00a3m
Liabilities
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Fair value hedges
\u2013 interest rate swaps
10
187
27
435
\u2013 cross-currency swaps
18
\u2014
126
\u2014
Cash flow hedges
\u2013 interest rate swaps
\u2014
\u2014
5
\u2014
\u2013 cross-currency swaps
97
13
127
121
\u2013 forward foreign currency contracts
48
55
70
71
Net investment hedges
\u2013 forward foreign currency contracts
81
9
45
247
Held-for-trading*
\u2013 interest rate swaps
\u2014
\u2014
12
14
\u2013 forward foreign currency contracts
36
131
149
41
Total
290
395
561
929
Current
181
189
430
427
Non-current
109
206
131
502
290
395
561
929
Derivatives
\u2013 in respect of net debt**
147
317
438
605
\u2013 other
143
78
123
324
290
395
561
929
Notes:
*Derivatives which do not meet the tests for hedge accounting under IFRS 9 or which are not designated as hedging instruments are referred to as \u2018held-for-trading\u2019. These derivatives
principally consist of interest rate swaps and forward foreign currency contracts which have not been designated as hedges due to their value changes offsetting with other
components of net finance costs relating to financial assets and financial liabilities. The Group does not use derivatives for speculative purposes. All derivatives are undertaken for risk
management purposes.
**\u00a0 Derivatives in respect of net debt are in a net liability position of \u00a3170 million as at 31 December 2023 (2022 : net asset position of \u00a3167 million). The Group\u2019s net debt is presented
in\u00a0note\u00a023.
For cash flow hedges, the timing of expected cash flows is as follows: assets of \u00a3144 million (2022: \u00a3202 million) of which \u00a346 million
(2022: \u00a372 million) is expected within one year and \u00a3nil million (2022: \u00a3 nil million) beyond five years and liabilities of \u00a368 million ( 2022:
\u00a3192 million) of which \u00a352 million (2022: \u00a3134 million) is expected within one year and \u00a3nil\u00a0million (2022: \u00a3nil million) beyond five years.
The Group\u2019s cash flow hedges are principally in respect of sales or purchases of inventory and certain debt instruments. A certain
number of forward foreign currency contracts were used to manage the currency profile of external borrowings and are reflected in the
currency table in note 23. Interest rate swaps have been used to manage the interest rate profile of external borrowings and are reflected
in the re-pricing table in note 23.
The table below sets out the maturities of the Group\u2019s derivative financial instruments on an undiscounted contractual basis, based
on\u00a0spot rates. The table has been re-presented for the comparative period to include interest rates swaps, based on the nature of the
actual settlement. These cash flows are stated net in the cash flow statement.
The maturity dates of all gross-settled derivative financial instruments are as follows:
2023
2022
Assets
Liabilities
Assets
Liabilities
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Within one year
\u2013 forward foreign currency
contracts
8,163
(8,006)
10,354
(10,549)
12,506
(12,249)
8,691
(9,049)
\u2013 interest rate swaps
\u2014
\u2014
124
(256)
132
(144)
152
(310)
\u2013 cross-currency swaps
34
(42)
6
(10)
731
(608)
689
(767)
Between one and two years
\u2013 forward foreign currency
contracts
171
(168)
182
(186)
199
(193)
243
(247)
\u2013 interest rate swaps
\u2014
\u2014
77
(151)
\u2014
\u2014
152
(283)
\u2013 cross-currency swaps
34
(35)
306
(316)
9
(15)
10
(17)
Between two and three years
\u2013 interest rate swaps
\u2014
\u2014
77
(124)
\u2014
\u2014
103
(192)
\u2013 cross-currency swaps
34
(33)
\u2014
\u2014
9
(15)
460
(502)
Between three and four years
\u2013 interest rate swaps
\u2014
\u2014
39
(31)
\u2014
\u2014
104
(169)
\u2013 cross-currency swaps
618
(488)
\u2014
\u2014
9
(15)
\u2014
\u2014
Between four and five years
\u2013 interest rate swaps
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
52
(43)
\u2013 cross-currency swaps
26
(21)
\u2014
\u2014
756
(579)
\u2014
\u2014
Beyond five years
\u2013 cross-currency swaps
458
(453)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9,538
(9,246)
11,165
(11,623)
14,351
(13,818)
10,656
(11,579)
Group's net-settled derivative financial instruments are all due within one year with assets inflow of \u00a310 million (2022: \u00a37 million inflow)
and liabilities outflow of \u00a35 million (2022: \u00a35 million outflow).
The items designated as hedging instruments are as follows:
2023
2022
Nominal\u00a0
amount of
hedging
instrument
\u00a3m
Changes\u00a0in\u00a0
fair value used for
calculating hedge
ineffectiveness
\u00a3m
Nominal\u00a0
amount of hedging
instrument
\u00a3m
Changes\u00a0in\u00a0
fair value used for
calculating hedge
ineffectiveness
\u00a3m
Interest rate risk exposure:
Fair value hedges
\u2013 interest rate swaps
2,798
79
4,657
(417)
\u2013 cross-currency swaps
451
13
710
11
Cash flow hedges
\u2013 interest rate swaps
\u2014
\u2014
1,247
(5)
\u2013 cross-currency swaps
859
(26)
1,825
60
Foreign currency risk exposure:
Cash flow hedges
\u2013 forward foreign currency contracts
2,807
(6)
3,695
(2)
Net investment hedges (derivative related)
\u2013 forward foreign currency contracts
4,329
69
6,407
(208)
Net investment hedges (non-derivative related)
\u2013 debt (carrying value) in borrowings designated as net
investment hedges of net assets
380
9
389
21
Fair value estimation
The fair values of financial assets and liabilities with maturities
of\u00a0less than one year, other than derivatives, are assumed to
approximate their book values. For other financial instruments
which are measured at fair value in the balance sheet, the basis
for\u00a0fair values is described below.
Fair value hierarchy
In accordance with IFRS 13 classification hierarchy, the following table presents the Group\u2019s financial assets and liabilities that are
measured at fair value:
2023
2022
Notes
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Assets at fair value
Investment held at fair value
18
527
\u2014
192
719
514
\u2014
186
700
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
10
\u2014
10
\u2014
43
\u2014
43
\u2013 cross-currency swaps
19
\u2014
115
\u2014
115
\u2014
254
\u2014
254
\u2013 forward foreign currency contracts
19
\u2014
165
\u2014
165
\u2014
264
\u2014
264
Assets at fair value
527
290
192
1,009
514
561
186
1,261
Liabilities at fair value
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
187
\u2014
187
\u2014
450
\u2014
450
\u2013 cross-currency swaps
19
\u2014
13
\u2014
13
\u2014
121
\u2014
121
\u2013 forward foreign currency contracts
19
\u2014
195
\u2014
195
\u2014
358
\u2014
358
Liabilities at fair value
\u2014
395
\u2014
395
\u2014
929
\u2014
929
Level 2 financial instruments are not traded in an active market, but the fair values are based on quoted market prices, broker/dealer
quotations, or alternative pricing sources with reasonable levels of price transparency. The Group\u2019s level 2 financial instruments include
OTC derivatives.
Netting arrangements of derivative financial instruments
The gross fair value of derivative financial instruments as presented in the Group balance sheet, together with the Group\u2019s rights of
offset associated with recognised financial assets and recognised financial liabilities subject to enforceable master netting
arrangements and similar agreements, is summarised as follows:
2023
2022
Amount
presented in
the Group
balance
sheet*
\u00a3m
Related
amounts not
offset in the
Group
balance
sheet
\u00a3m
Net amount
\u00a3m
Amount
presented in
the Group
balance
sheet*
\u00a3m
Related
amounts not
offset in the
Group
balance
sheet
\u00a3m
Net amount
\u00a3m
Financial assets
\u2013 Derivative financial instruments (note 19 )
290
(199)
91
561
(405)
156
Financial liabilities
\u2013 Derivative financial instruments (note 19 )
(395)
199
(196)
(929)
405
(524)
(105)
\u2014
(105)
(368)
\u2014
(368)
Note:
*No financial instruments have been offset in the Group balance sheet.
The Group is subject to master netting arrangements in force with financial counterparties with whom the Group trades derivatives.
The master netting arrangements determine the proceedings should either party default on their obligations. In case of any event
of\u00a0default, the non-defaulting party will calculate the sum of the replacement cost of outstanding transactions and amounts owed to
it\u00a0by the defaulting party. If that sum exceeds the amounts owed to the defaulting party, the defaulting party will pay the balance to the
non-defaulting party. If the sum is less than the amounts owed to the defaulting party, the non-defaulting party will pay the balance to
the defaulting party.
The hedged items by risk category are presented below:
2023
Carrying\u00a0amount of
the hedged item
\u00a3m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount of the
hedged\u00a0item
\u00a3m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
\u00a3m
Cash flow hedge
reserve (gross
of\u00a0tax)
\u00a3m
Fair value hedges
Interest rate risk
\u2013 borrowings (liabilities)
5,935
110
Borrowings
(81)
Cash flow hedges
Interest rate risk
\u2013 borrowings (liabilities)
858
Borrowings
26
(362)
2022
Carrying amount of
the hedged item
\u00a3m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount\u00a0of the
hedged\u00a0item
\u00a3m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
\u00a3m
Cash flow hedge
reserve (gross
of\u00a0tax)
\u00a3m
Fair value hedges
Interest rate risk
\u2013 borrowings (liabilities)
9,223
(355)
Borrowings
399
Cash flow hedges
Interest rate risk
\u2013 borrowings (liabilities)
1,824
Borrowings
(55)
(464)
\u00a3380 million (2022: \u00a3389 million) of the Group\u2019s borrowings are designated as net investment hedge instruments of the Group\u2019s net
investments in foreign operations. In line with the Group\u2019s risk management policies, the net investment hedge relationships are
reviewed periodically. The change in the value used for calculating hedge ineffectiveness for hedged items designated under net
investment hedge relationships is \u00a39 million (2022: \u00a321 million).
As at 31 December 2023, the accumulated balance of the cash flow hedge reserve was a loss of \u00a3194 million (2022: loss of \u00a3327 million)
including an accumulated loss of \u00a3362 million (2022: loss of \u00a3464 million) in relation to interest rate exposure and foreign currency
exposure arising from borrowings held by the Group, and an accumulated gain of \u00a377 million (2022: gain of \u00a399 million) in relation to
deferred tax arising from cash flow hedges. The remainder related to the Group\u2019s foreign currency exposure on forecasted transactions
and cost of hedging (note 22(c)(ii)).", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-634": { "value": "
19 Derivative financial instruments
The fair values of derivatives are determined based on market data (primarily yield curves, implied volatilities and exchange rates) to
calculate the present value of all estimated flows associated with each derivative at the balance sheet date. In the absence of sufficient
market data, fair values would be based on the quoted market price of similar derivatives. The classification of these derivative assets
and\u00a0liabilities under the IFRS\u00a013 fair value hierarchy is given in note 26.
2023
2022
Assets
\u00a3m
Liabilities
\u00a3m
Assets
\u00a3m
Liabilities
\u00a3m
Fair value hedges
\u2013 interest rate swaps
10
187
27
435
\u2013 cross-currency swaps
18
\u2014
126
\u2014
Cash flow hedges
\u2013 interest rate swaps
\u2014
\u2014
5
\u2014
\u2013 cross-currency swaps
97
13
127
121
\u2013 forward foreign currency contracts
48
55
70
71
Net investment hedges
\u2013 forward foreign currency contracts
81
9
45
247
Held-for-trading*
\u2013 interest rate swaps
\u2014
\u2014
12
14
\u2013 forward foreign currency contracts
36
131
149
41
Total
290
395
561
929
Current
181
189
430
427
Non-current
109
206
131
502
290
395
561
929
Derivatives
\u2013 in respect of net debt**
147
317
438
605
\u2013 other
143
78
123
324
290
395
561
929
Notes:
*Derivatives which do not meet the tests for hedge accounting under IFRS 9 or which are not designated as hedging instruments are referred to as \u2018held-for-trading\u2019. These derivatives
principally consist of interest rate swaps and forward foreign currency contracts which have not been designated as hedges due to their value changes offsetting with other
components of net finance costs relating to financial assets and financial liabilities. The Group does not use derivatives for speculative purposes. All derivatives are undertaken for risk
management purposes.
**\u00a0 Derivatives in respect of net debt are in a net liability position of \u00a3170 million as at 31 December 2023 (2022 : net asset position of \u00a3167 million). The Group\u2019s net debt is presented
in\u00a0note\u00a023.
For cash flow hedges, the timing of expected cash flows is as follows: assets of \u00a3144 million (2022: \u00a3202 million) of which \u00a346 million
(2022: \u00a372 million) is expected within one year and \u00a3nil million (2022: \u00a3 nil million) beyond five years and liabilities of \u00a368 million ( 2022:
\u00a3192 million) of which \u00a352 million (2022: \u00a3134 million) is expected within one year and \u00a3nil\u00a0million (2022: \u00a3nil million) beyond five years.
The Group\u2019s cash flow hedges are principally in respect of sales or purchases of inventory and certain debt instruments. A certain
number of forward foreign currency contracts were used to manage the currency profile of external borrowings and are reflected in the
currency table in note 23. Interest rate swaps have been used to manage the interest rate profile of external borrowings and are reflected
in the re-pricing table in note 23.
The table below sets out the maturities of the Group\u2019s derivative financial instruments on an undiscounted contractual basis, based
on\u00a0spot rates. The table has been re-presented for the comparative period to include interest rates swaps, based on the nature of the
actual settlement. These cash flows are stated net in the cash flow statement.
The maturity dates of all gross-settled derivative financial instruments are as follows:
2023
2022
Assets
Liabilities
Assets
Liabilities
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Inflow
\u00a3m
Outflow
\u00a3m
Within one year
\u2013 forward foreign currency
contracts
8,163
(8,006)
10,354
(10,549)
12,506
(12,249)
8,691
(9,049)
\u2013 interest rate swaps
\u2014
\u2014
124
(256)
132
(144)
152
(310)
\u2013 cross-currency swaps
34
(42)
6
(10)
731
(608)
689
(767)
Between one and two years
\u2013 forward foreign currency
contracts
171
(168)
182
(186)
199
(193)
243
(247)
\u2013 interest rate swaps
\u2014
\u2014
77
(151)
\u2014
\u2014
152
(283)
\u2013 cross-currency swaps
34
(35)
306
(316)
9
(15)
10
(17)
Between two and three years
\u2013 interest rate swaps
\u2014
\u2014
77
(124)
\u2014
\u2014
103
(192)
\u2013 cross-currency swaps
34
(33)
\u2014
\u2014
9
(15)
460
(502)
Between three and four years
\u2013 interest rate swaps
\u2014
\u2014
39
(31)
\u2014
\u2014
104
(169)
\u2013 cross-currency swaps
618
(488)
\u2014
\u2014
9
(15)
\u2014
\u2014
Between four and five years
\u2013 interest rate swaps
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
52
(43)
\u2013 cross-currency swaps
26
(21)
\u2014
\u2014
756
(579)
\u2014
\u2014
Beyond five years
\u2013 cross-currency swaps
458
(453)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
9,538
(9,246)
11,165
(11,623)
14,351
(13,818)
10,656
(11,579)
Group's net-settled derivative financial instruments are all due within one year with assets inflow of \u00a310 million (2022: \u00a37 million inflow)
and liabilities outflow of \u00a35 million (2022: \u00a35 million outflow).
The items designated as hedging instruments are as follows:
2023
2022
Nominal\u00a0
amount of
hedging
instrument
\u00a3m
Changes\u00a0in\u00a0
fair value used for
calculating hedge
ineffectiveness
\u00a3m
Nominal\u00a0
amount of hedging
instrument
\u00a3m
Changes\u00a0in\u00a0
fair value used for
calculating hedge
ineffectiveness
\u00a3m
Interest rate risk exposure:
Fair value hedges
\u2013 interest rate swaps
2,798
79
4,657
(417)
\u2013 cross-currency swaps
451
13
710
11
Cash flow hedges
\u2013 interest rate swaps
\u2014
\u2014
1,247
(5)
\u2013 cross-currency swaps
859
(26)
1,825
60
Foreign currency risk exposure:
Cash flow hedges
\u2013 forward foreign currency contracts
2,807
(6)
3,695
(2)
Net investment hedges (derivative related)
\u2013 forward foreign currency contracts
4,329
69
6,407
(208)
Net investment hedges (non-derivative related)
\u2013 debt (carrying value) in borrowings designated as net
investment hedges of net assets
380
9
389
21
Hedge accounting
In order to qualify for hedge accounting, the Group is required to
document prospectively the economic relationship between the
item being hedged and the hedging instrument. The Group is also
required to demonstrate an assessment of the economic
relationship between the hedged item and the hedging
instrument, which shows that the hedge will be highly effective
on\u00a0an ongoing basis. This effectiveness testing is repeated
periodically to ensure that the hedge has remained, and is
expected to remain, highly effective. The prospective effectiveness
testing determines that an economic relationship between the
hedged item and the hedging instrument exists.
In accordance with the Group Treasury Policy, the exact hedge
ratios and profile of a hedge relationship will depend on several
factors, including the desired degree of certainty and reduced
volatility of net interest costs and market conditions, trends and
expectations in the relevant markets. The sources of
ineffectiveness include spot and forward differences, impact of
time value and timing differences between periods in the hedged
item and hedging instrument.
The Group\u2019s risk management strategy has been explained in
further detail under the interest rate risk and currency risk sections
of this note.
Netting arrangements of derivative financial instruments
The gross fair value of derivative financial instruments as presented in the Group balance sheet, together with the Group\u2019s rights of
offset associated with recognised financial assets and recognised financial liabilities subject to enforceable master netting
arrangements and similar agreements, is summarised as follows:
2023
2022
Amount
presented in
the Group
balance
sheet*
\u00a3m
Related
amounts not
offset in the
Group
balance
sheet
\u00a3m
Net amount
\u00a3m
Amount
presented in
the Group
balance
sheet*
\u00a3m
Related
amounts not
offset in the
Group
balance
sheet
\u00a3m
Net amount
\u00a3m
Financial assets
\u2013 Derivative financial instruments (note 19 )
290
(199)
91
561
(405)
156
Financial liabilities
\u2013 Derivative financial instruments (note 19 )
(395)
199
(196)
(929)
405
(524)
(105)
\u2014
(105)
(368)
\u2014
(368)
Note:
*No financial instruments have been offset in the Group balance sheet.
The Group is subject to master netting arrangements in force with financial counterparties with whom the Group trades derivatives.
The master netting arrangements determine the proceedings should either party default on their obligations. In case of any event
of\u00a0default, the non-defaulting party will calculate the sum of the replacement cost of outstanding transactions and amounts owed to
it\u00a0by the defaulting party. If that sum exceeds the amounts owed to the defaulting party, the defaulting party will pay the balance to the
non-defaulting party. If the sum is less than the amounts owed to the defaulting party, the non-defaulting party will pay the balance to
the defaulting party.
The hedged items by risk category are presented below:
2023
Carrying\u00a0amount of
the hedged item
\u00a3m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount of the
hedged\u00a0item
\u00a3m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
\u00a3m
Cash flow hedge
reserve (gross
of\u00a0tax)
\u00a3m
Fair value hedges
Interest rate risk
\u2013 borrowings (liabilities)
5,935
110
Borrowings
(81)
Cash flow hedges
Interest rate risk
\u2013 borrowings (liabilities)
858
Borrowings
26
(362)
2022
Carrying amount of
the hedged item
\u00a3m
Accumulated amount
of fair value hedge
adjustments on the
hedged item included
in the carrying
amount\u00a0of the
hedged\u00a0item
\u00a3m
Line item in the
statement of
financial position
where the hedged
item is included
Changes in fair
value used for
calculating hedge
ineffectiveness
\u00a3m
Cash flow hedge
reserve (gross
of\u00a0tax)
\u00a3m
Fair value hedges
Interest rate risk
\u2013 borrowings (liabilities)
9,223
(355)
Borrowings
399
Cash flow hedges
Interest rate risk
\u2013 borrowings (liabilities)
1,824
Borrowings
(55)
(464)
\u00a3380 million (2022: \u00a3389 million) of the Group\u2019s borrowings are designated as net investment hedge instruments of the Group\u2019s net
investments in foreign operations. In line with the Group\u2019s risk management policies, the net investment hedge relationships are
reviewed periodically. The change in the value used for calculating hedge ineffectiveness for hedged items designated under net
investment hedge relationships is \u00a39 million (2022: \u00a321 million).
As at 31 December 2023, the accumulated balance of the cash flow hedge reserve was a loss of \u00a3194 million (2022: loss of \u00a3327 million)
including an accumulated loss of \u00a3362 million (2022: loss of \u00a3464 million) in relation to interest rate exposure and foreign currency
exposure arising from borrowings held by the Group, and an accumulated gain of \u00a377 million (2022: gain of \u00a399 million) in relation to
deferred tax arising from cash flow hedges. The remainder related to the Group\u2019s foreign currency exposure on forecasted transactions
and cost of hedging (note 22(c)(ii)).", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-635": { "value": "
20 Inventories
2023
\u00a3m
2022
\u00a3m
Raw materials and consumables
2,198
2,370
Finished goods and work in progress
2,584
3,159
Goods purchased for resale
156
142
4,938
5,671
Write-offs taken to other operating expenses in the Group income statement were \u00a3250 million ( 2022: \u00a3250 million; 2021 : \u00a3215 million).
As mentioned in note 6(l), this includes a write-off of stock of leaf following an extreme weather event. Goods purchased for resale
include Group brands produced under third-party contract manufacturing arrangements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInventoriesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-636": { "value": "
21 Cash and cash equivalents
2023
\u00a3m
2022
\u00a3m
Cash and bank balances
3,247
3,116
Cash equivalents
1,412
330
4,659
3,446
The carrying value of cash and cash equivalents approximates their fair value.
Cash and cash equivalents are denominated in the functional currency of the subsidiary undertaking or other currencies as shown below:
2023
\u00a3m
2022
\u00a3m
Functional currency
4,147
2,979
US dollar
373
207
Euro
81
129
Other currencies
58
131
4,659
3,446
In the Group cash flow statement, net cash and cash equivalents are shown after deducting bank overdrafts and accrued interest where
applicable, as follows:
2023
\u00a3m
2022
\u00a3m
Cash and cash equivalents as above
4,659
3,446
Less overdrafts and accrued interest
(142)
(109)
Net cash and cash equivalents
4,517
3,337
Cash and cash equivalents also include \u00a338 million (2022: \u00a334 million) of cash that is held as a hedging instrument.
Accrued interest of \u00a339\u00a0million (2022: \u00a33\u00a0million) is primarily due to high cash and cash equivalent balances in certain markets, including
Brazil, where accumulated cash is temporarily higher than normal due to the recognition of tax credits, as explained in note 17, being
offset against tax liabilities payable.
Restricted cash
Cash and cash equivalents include restricted amounts of \u00a31,904 million (2022: \u00a31,411 million) due to subsidiaries in CCAA protection
(note\u00a032), as well as \u00a3 392 million (2022: \u00a3 324 million) principally due to exchange control restriction", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-637": { "value": "
Restricted cash
Cash and cash equivalents include restricted amounts of \u00a31,904 million (2022: \u00a31,411 million) due to subsidiaries in CCAA protection
(note\u00a032), as well as \u00a3 392 million (2022: \u00a3 324 million) principally due to exchange control restriction", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-638": { "value": "
22 Capital and reserves
(a) Share capital
Ordinary
shares of 25 p each
Number of shares
\u00a3m
Allotted and fully paid
1 January 2023
2,456,867,420
614.21
Changes during the year
\u2013 share option schemes
74,489
0.02
31 December 2023
2,456,941,909
614.23
Allotted and fully paid
1 January 2022
2,456,617,788
614.15
Changes during the year
\u2013 share option schemes
249,632
0.06
31 December 2022
2,456,867,420
614.21
Allotted and fully paid
1 January 2021
2,456,591,597
614.14
Changes during the year
\u2013 share option schemes
26,191
0.01
31 December 2021
2,456,617,788
614.15
Share capital
The Company\u2019s ordinary shares are fully paid and no further contribution of capital may be required by the Company from the
shareholders.\u00a0All ordinary shares rank equally with regard to participation in dividends and to share in the proceeds of the Company\u2019s
residual assets upon a winding up of the Company. Shareholders may, by ordinary resolution, declare final dividends, but not in excess
of\u00a0the amount recommended by the Directors. Holders of ordinary shares have no pre-emptive rights.
On a show of hands every shareholder who is present in person at a general meeting is entitled to one vote regardless of the number
of\u00a0shares held by the shareholder, unless a poll is demanded. On a poll, every shareholder who is present in person or by proxy has one
vote for every share held by the shareholder. The Company\u2019s Annual General Meeting voting is undertaken by way of a poll.
All rights attached to the Company\u2019s shares held by the Group as treasury shares are suspended until those shares are reissued.
(b) Share premium account, capital redemption reserves and merger reserves comprise:
Share
premium
account
\u00a3m
Capital
redemption
reserves
\u00a3m
Merger
reserves
\u00a3m
Total
\u00a3m
31 December 2023
115
101
26,414
26,630
31 December 2022
113
101
26,414
26,628
31 December 2021
107
101
26,414
26,622
Share premium account
The share premium account includes the difference between the value of shares issued and their nominal value. The share premium
increase includes \u00a32 million (2022: \u00a35 million; 2021: \u00a3 nil million) in respect of ordinary shares issued under the Company\u2019s share option
schemes. A further \u00a3nil million (2022: \u00a3 1 million; 2021: \u00a34 million) increase in share premium is related to shares repurchased and not
cancelled that have been transferred from the Company to other Group undertakings, to be granted to certain employees on vesting
of\u00a0awards, and represents the excess of transfer price of the share over the original weighted average cost of shares.
Capital redemption account
On the purchase of own shares as part of the share buy-back programme for shares which are cancelled, a transfer is made from
retained earnings to the capital redemption reserve equivalent to the nominal value of shares purchased. Purchased shares which are
not cancelled are classified as treasury shares and presented as a deduction from total equity.
Merger reserve account
The merger reserve comprises:
a. In 1999, shares were issued for the acquisition of the Rothmans International B.V. Group and the difference between the fair value
of\u00a0shares issued and their nominal value of \u00a33,748\u00a0million was credited to merger reserves; and
b. On 25 July 2017, the Group announced the completion of the acquisition of the remaining 57.8% of RAI not already owned by the Group.
Shares were issued for the acquisition and the difference between the fair value of shares issued and their nominal value of
\u00a322,666\u00a0million was credited to merger reserves.
(c) Equity attributed to owners of the parent \u2212 movements in other reserves and retained earnings (which are after
deducting treasury shares) comprise:
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2023
2,200
(327)
30
179
573
2,655
(7,116)
51,197
Comprehensive income and expense
Loss for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(14,367)
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign\u00a0operations
(4,007)
\u2014
\u2014
\u2014
\u2014
(4,007)
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
552
\u2014
\u2014
\u2014
\u2014
552
\u2014
\u2014
\u2013 net investment hedges \u2212 net fair value
gains on derivatives
236
\u2014
\u2014
\u2014
\u2014
236
\u2014
\u2014
\u2013 net investment hedges \u2212 differences on exchange
on borrowings
9
\u2014
\u2014
\u2014
\u2014
9
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
59
\u2014
\u2014
\u2014
59
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
12
\u2014
\u2014
\u2014
12
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f))
\u2014
(23)
\u2014
\u2014
\u2014
(23)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value losses
\u2014
\u2014
(6)
\u2014
\u2014
(6)
\u2014
\u2014
Associates \u2212 share of OCI, net of tax (note 9 )
(165)
58
\u2014
\u2014
\u2014
(107)
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial losses (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(106)
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
24
\u2013 tax on actuarial losses in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
30
Associates \u2212 share of OCI, net of tax (note 9 )
\u2014
\u2014
(6)
\u2014
\u2014
(6)
\u2014
1
Other changes in equity
Cash flow hedges reclassified and
reported in total assets
\u2014
27
\u2014
\u2014
\u2014
27
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
71
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
(14)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(5,071)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(110)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(58)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
Reclassification of equity related to assets held-for-
sale
(295)
\u2014
\u2014
\u2014
\u2014
(295)
\u2014
\u2014
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
116
(94)
31 December 2023
(1,470)
(194)
18
179
573
(894)
(7,096)
31,627
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2022
(6,427)
(363)
6
179
573
(6,032)
(5,122)
49,334
Comprehensive income and expense
Profit for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
6,666
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign operations
8,920
\u2014
\u2014
\u2014
\u2014
8,920
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
5
\u2014
\u2014
\u2014
\u2014
5
\u2014
\u2014
\u2013 net investment hedges \u2013 net fair value gains on
derivatives
(578)
\u2014
\u2014
\u2014
\u2014
(578)
\u2014
\u2014
\u2013 net investment hedges \u2013 differences on exchange
on borrowings
(21)
\u2014
\u2014
\u2014
\u2014
(21)
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
81
\u2014
\u2014
\u2014
81
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
101
\u2014
\u2014
\u2014
101
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f))
\u2014
(17)
\u2014
\u2014
\u2014
(17)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value gains
\u2014
\u2014
6
\u2014
\u2014
6
\u2014
\u2014
Associates \u2013 share of OCI, net of tax (note 9 )
6
\u2014
\u2014
\u2014
\u2014
6
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial gains (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
316
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(39)
\u2013 tax on actuarial gains in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(95)
Associates \u2212 share of OCI, net of tax (note 9 )
\u2014
\u2014
18
\u2014
\u2014
18
\u2014
1
Other changes in equity
Cash flow hedges reclassified and reported in
total\u00a0assets
\u2014
(129)
\u2014
\u2014
\u2014
(129)
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
81
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
(15)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(4,915)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(80)
\u2014
\u2013 share buy-back programme
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(2,012)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(59)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
11
Non-controlling interests \u2013 acquisitions
(note 27(b))
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
Reclassification of equity in respect of assets
classified as held-for-sale
295
\u2014
\u2014
\u2014
\u2014
295
\u2014
\u2014
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
84
(88)
31 December 2022
2,200
(327)
30
179
573
2,655
(7,116)
51,197
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2021
(6,830)
(504)
(18)
179
573
(6,600)
(5,150)
47,191
Comprehensive income and expense
Loss for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
6,801
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign operations
31
\u2014
\u2014
\u2014
\u2014
31
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
291
\u2014
\u2014
\u2014
\u2014
291
\u2014
\u2014
\u2013 net investment hedges \u2013 net fair value
gain on derivatives
75
\u2014
\u2014
\u2014
\u2014
75
\u2014
\u2014
\u2013 net investment hedges \u2013 differences on exchange
on borrowings
24
\u2014
\u2014
\u2014
\u2014
24
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
95
\u2014
\u2014
\u2014
95
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
32
\u2014
\u2014
\u2014
32
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f) )
\u2014
(32)
\u2014
\u2014
\u2014
(32)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value gains
\u2014
\u2014
9
\u2014
\u2014
9
\u2014
\u2014
Associates \u2013 share of OCI, net of tax (note 9 )
(18)
1
\u2014
\u2014
\u2014
(17)
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial gains (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
382
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
\u2013 tax on actuarial gains in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(82)
Associates - share of OCI, net of tax (note 9 )
\u2014
\u2014
15
\u2014
\u2014
15
\u2014
(1)
Other changes in equity
Cash flow hedges reclassified and reported in total
assets
\u2014
45
\u2014
\u2014
\u2014
45
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
76
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
13
(17)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(4,904)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(82)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(6)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
1
Non-controlling interests \u2212 acquisitions (note 27(b))
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(5)
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
97
(101)
31 December 2021
(6,427)
(363)
6
179
573
(6,032)
(5,122)
49,334
(i) Translation reserve:
The translation reserve is explained in the accounting policy on foreign currencies in note 1.
In 2023, included within the differences on exchange from translation of foreign operations is \u00a3552 million (2022: \u00a35 million;
2021: \u00a3291\u00a0million) which has been reclassified from reserves to the income statement and recognised in other operating expenses as
an \u00a0adjusting item. In 2023, this amount includes \u00a3554 million in respect of the sale of the Russian and Belarusian subsidiaries. In 2022,
\u00a34\u00a0million was in respect of the exit from Egypt and, in 2021, \u00a3272\u00a0million was in respect of the disposal of BAT Pars.
In certain markets, the Group has moved to above market business models utilising local distributors as importers. As a consequence,
with the cessation of a physical presence in these markets, foreign exchange previously recognised in other comprehensive income
for\u00a0these entities has been reclassified to the income statement. In 2023, a loss of \u00a32\u00a0million was recognised in reserves in relation to the
move to\u00a0above market business models. In 2022 and 2021, a gain of \u00a32\u00a0million and \u00a319 million, respectively, was recognised in relation to
the\u00a0move to above market business models and Quantum-related initiatives.
Also, in 2022, as a result of the liquidation of Yemen, the Group reclassified to the income statement the foreign exchange previously
recognised in associates other comprehensive income. This resulted in a credit of \u00a31 million to the income statement.
(ii) Hedging reserve:
The hedging reserve is explained in the accounting policy on financial instruments in note 1.
Of the amounts reclassified from the hedging reserve and reported in profit for the year, a loss of \u00a351\u00a0million (2022: \u00a316\u00a0million loss;
2021 : \u00a329\u00a0million loss) and a loss of \u00a34\u00a0million (2022: \u00a32\u00a0million loss; 2021: \u00a36\u00a0million gain) were reported within revenue and raw materials
and consumables, respectively, together with a loss of \u00a317\u00a0million (2022: \u00a346\u00a0million gain; 2021: \u00a34\u00a0million loss) reported in other operating
expenses, and a gain of \u00a384\u00a0million (2022: \u00a373\u00a0million gain; 2021: \u00a359\u00a0million gain) reported within net finance costs.
The Group hedges certain foreign currency denominated borrowings with cross-currency interest rate swaps. As permitted by IFRS 9
Financial Instruments, the foreign currency basis spreads have been separated from the hedging instrument and are recognised in
reserves as a \u2018cost of hedging\u2019 and are reclassified to the income statement in the same period in which profit and loss is affected by the
hedged expected cash flows as a component of the associated interest expense. The basis spreads are included within hedging reserves
as they are not material. Included within the balance of hedging reserves at 31 December 2023 is an accumulated loss of \u00a36\u00a0million
(2022: \u00a35\u00a0million gain; 2021: \u00a34\u00a0million gain) in respect of the cost of hedging.
(iii) Fair value reserve:
The fair value reserve is explained in the accounting policy on financial instruments in note 1. Fair value gains and losses arising from
investments held at fair value through other comprehensive income are recognised in this reserve.
(iv) Revaluation reserve:
The revaluation reserve relates to the acquisition of the cigarette and snus business of ST in 2008.
(v) Other reserves:
Other reserves comprise:
(a) \u00a3483\u00a0million which arose in 1998 from merger accounting in a Scheme of Arrangement and Reconstruction whereby British American
Tobacco p.l.c. acquired the entire share capital of B.A.T Industries p.l.c. and the share capital of that company\u2019s principal financial services
subsidiaries was distributed, so effectively demerging them; and
(b) In the 1999 Rothmans transaction, convertible redeemable preference shares were issued as part of the consideration. The discount
on these shares was amortised by crediting other reserves and charging retained earnings. The \u00a390\u00a0million balance in other reserves
comprises the accumulated balance in respect of the preference shares converted during 2004.
(vi) Treasury shares:
Total equity attributable to owners of the parent is stated after deducting the cost of treasury shares which include \u00a36,807 million
(2022: \u00a36,821 million; 2021: \u00a34,823 million) for shares repurchased and not cancelled and \u00a3289 million (2022: \u00a3295 million;
2021: \u00a3299 million) in respect of the cost of own shares held in employee share ownership trusts.
On 10 February 2022, the Board approved a proposed \u00a32\u00a0billion share buy-back programme for 2022. The previous share buy-back
programme was suspended from 30 July 2014. As at 31 December 2023, treasury shares include 5,951,979 (2022: 5,920,638;
2021: 6,269,959) shares held in trust and 220,533,855 (2022: 221,000,192; 2021: 161,930,217) shares repurchased and not cancelled as part
of the Company\u2019s share buy-back programme. From March 2020, the Company has utilised shares acquired in the share buy-back
programme to satisfy shared-based payment awards made to certain employees.
(d) Perpetual hybrid bonds
On 27 September 2021, the Group issued two \u20ac1\u00a0billion perpetual hybrid bonds amounting to \u00a31,703\u00a0million, which have been classified
as\u00a0equity. Issuance costs of these bonds, amounting to \u20ac26\u00a0million (\u00a322\u00a0million), have been recognised within equity.
These bonds include redemption options exercisable at the Group\u2019s discretion from September 2026 to December 2026 (the 3%
perpetual hybrid bond) and June 2029 to September 2029 (the 3.75% perpetual hybrid bond), on specified dates thereafter, or
in\u00a0the\u00a0event of specific circumstances (such as a change in IFRS or tax regime) as set out in the individual terms of each issue.
The coupons associated with these perpetual hybrid bonds are fixed at 3% until 2026 and 3.75% until 2029, respectively, and would reset
to rates determined by the contractual terms of each instrument on certain dates thereafter. The bonds are perpetual in nature and do
not have maturity dates for the repayment of principal. The contractual terms of the perpetual hybrid bonds allow the Group to defer
coupon payments, however certain contingent events could trigger mandatory payments of such deferred coupons, including the
payment of dividends on, and the repurchase of, ordinary shares, subject to certain exceptions in each case. The full terms and conditions
of such events can be found in the prospectus dated 27 September 2021 which is available under the debt facilities section of the Group\u2019s
debt microsite (bat.com/debt).
As the Group has the unconditional right to avoid transferring cash or another financial asset in relation to these bonds, they are
classified as equity instruments in the consolidated financial statements.
During the year, the Group did not defer any eligible coupon payments and paid a coupon of \u00a333\u00a0million in September 2023
(September\u00a02022: \u00a333 million) on the 3.75% September 2029 bond and \u00a326 million in December 2023 (December 2022: \u00a327\u00a0million)
on\u00a0the 3% December 2026 bond which has been recognised within equity.
Differences between the coupon recognised in the capital and reserves statement and the coupon paid on perpetual hybrid bonds
in\u00a0the\u00a0cash flow statement are due to foreign exchange arising on short timing differences between recognition and settlement.
The fair value of these bonds at 31 December 2023 is \u00a31,512 million (2022: \u00a31,331 million).
(e) Non-controlling interests
Movements in non-controlling interests primarily relate to profit for the year and dividends (reported as a movement in retained
earnings) and differences on exchange arising from the translation into sterling (reported as a movement in other reserves). Information
on subsidiaries with material non-controlling interests is provided in note 32.
(f) Dividends and other appropriations
The interim quarterly dividend payment for the year ended 31 December 2022 of 230.9p per ordinary share (31 December 2021: 217.8p per
ordinary share) was payable in four equal instalments: amounts payable in May 2023 of \u00a31,282 million (May 2022: \u00a31,239 million), August
2023 of \u00a31,284 million (August 2022: \u00a31,223 million), November 2023 of \u00a31,293 million (November 2022: \u00a31,219 million) and \u00a31,287 million in
February 2024 (February 2023: \u00a31,211 million), respectively. The total dividends recognised as an appropriation from reserves in 2023 was
\u00a35,071 million (2022: \u00a34,915 million; 2021: \u00a34,904 million).
The Board has declared an interim dividend of 235.5p per ordinary share of 25p, for the year ended 31 December 2023, payable
in\u00a0four\u00a0equal quarterly instalments of 58.9p per ordinary share in May 2024, August 2024, November 2024 and February 2025.
These\u00a0payments will be recognised as appropriations from reserves in 2024 and 2025. The total amount payable is estimated to
be\u00a0\u00a35,267\u00a0million based on the number of shares outstanding at the date of these accounts.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-639": { "value": "
(a) Share capital
Ordinary
shares of 25 p each
Number of shares
\u00a3m
Allotted and fully paid
1 January 2023
2,456,867,420
614.21
Changes during the year
\u2013 share option schemes
74,489
0.02
31 December 2023
2,456,941,909
614.23
Allotted and fully paid
1 January 2022
2,456,617,788
614.15
Changes during the year
\u2013 share option schemes
249,632
0.06
31 December 2022
2,456,867,420
614.21
Allotted and fully paid
1 January 2021
2,456,591,597
614.14
Changes during the year
\u2013 share option schemes
26,191
0.01
31 December 2021
2,456,617,788
614.15
Share capital
The Company\u2019s ordinary shares are fully paid and no further contribution of capital may be required by the Company from the
shareholders.\u00a0All ordinary shares rank equally with regard to participation in dividends and to share in the proceeds of the Company\u2019s
residual assets upon a winding up of the Company. Shareholders may, by ordinary resolution, declare final dividends, but not in excess
of\u00a0the amount recommended by the Directors. Holders of ordinary shares have no pre-emptive rights.
On a show of hands every shareholder who is present in person at a general meeting is entitled to one vote regardless of the number
of\u00a0shares held by the shareholder, unless a poll is demanded. On a poll, every shareholder who is present in person or by proxy has one
vote for every share held by the shareholder. The Company\u2019s Annual General Meeting voting is undertaken by way of a poll.
All rights attached to the Company\u2019s shares held by the Group as treasury shares are suspended until those shares are reissued.", "dimensions": { "concept": "ifrs-full:DisclosureOfClassesOfShareCapitalExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-640": { "value": "
(b) Share premium account, capital redemption reserves and merger reserves comprise:
Share
premium
account
\u00a3m
Capital
redemption
reserves
\u00a3m
Merger
reserves
\u00a3m
Total
\u00a3m
31 December 2023
115
101
26,414
26,630
31 December 2022
113
101
26,414
26,628
31 December 2021
107
101
26,414
26,622
Share premium account
The share premium account includes the difference between the value of shares issued and their nominal value. The share premium
increase includes \u00a32 million (2022: \u00a35 million; 2021: \u00a3 nil million) in respect of ordinary shares issued under the Company\u2019s share option
schemes. A further \u00a3nil million (2022: \u00a3 1 million; 2021: \u00a34 million) increase in share premium is related to shares repurchased and not
cancelled that have been transferred from the Company to other Group undertakings, to be granted to certain employees on vesting
of\u00a0awards, and represents the excess of transfer price of the share over the original weighted average cost of shares.
Capital redemption account
On the purchase of own shares as part of the share buy-back programme for shares which are cancelled, a transfer is made from
retained earnings to the capital redemption reserve equivalent to the nominal value of shares purchased. Purchased shares which are
not cancelled are classified as treasury shares and presented as a deduction from total equity.
Merger reserve account
The merger reserve comprises:
a. In 1999, shares were issued for the acquisition of the Rothmans International B.V. Group and the difference between the fair value
of\u00a0shares issued and their nominal value of \u00a33,748\u00a0million was credited to merger reserves; and
b. On 25 July 2017, the Group announced the completion of the acquisition of the remaining 57.8% of RAI not already owned by the Group.
Shares were issued for the acquisition and the difference between the fair value of shares issued and their nominal value of
\u00a322,666\u00a0million was credited to merger reserves.
(c) Equity attributed to owners of the parent \u2212 movements in other reserves and retained earnings (which are after
deducting treasury shares) comprise:
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2023
2,200
(327)
30
179
573
2,655
(7,116)
51,197
Comprehensive income and expense
Loss for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(14,367)
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign\u00a0operations
(4,007)
\u2014
\u2014
\u2014
\u2014
(4,007)
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
552
\u2014
\u2014
\u2014
\u2014
552
\u2014
\u2014
\u2013 net investment hedges \u2212 net fair value
gains on derivatives
236
\u2014
\u2014
\u2014
\u2014
236
\u2014
\u2014
\u2013 net investment hedges \u2212 differences on exchange
on borrowings
9
\u2014
\u2014
\u2014
\u2014
9
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
59
\u2014
\u2014
\u2014
59
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
12
\u2014
\u2014
\u2014
12
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f))
\u2014
(23)
\u2014
\u2014
\u2014
(23)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value losses
\u2014
\u2014
(6)
\u2014
\u2014
(6)
\u2014
\u2014
Associates \u2212 share of OCI, net of tax (note 9 )
(165)
58
\u2014
\u2014
\u2014
(107)
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial losses (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(106)
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
24
\u2013 tax on actuarial losses in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
30
Associates \u2212 share of OCI, net of tax (note 9 )
\u2014
\u2014
(6)
\u2014
\u2014
(6)
\u2014
1
Other changes in equity
Cash flow hedges reclassified and
reported in total assets
\u2014
27
\u2014
\u2014
\u2014
27
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
71
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
(14)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(5,071)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(110)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(58)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
Reclassification of equity related to assets held-for-
sale
(295)
\u2014
\u2014
\u2014
\u2014
(295)
\u2014
\u2014
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
116
(94)
31 December 2023
(1,470)
(194)
18
179
573
(894)
(7,096)
31,627
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2022
(6,427)
(363)
6
179
573
(6,032)
(5,122)
49,334
Comprehensive income and expense
Profit for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
6,666
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign operations
8,920
\u2014
\u2014
\u2014
\u2014
8,920
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
5
\u2014
\u2014
\u2014
\u2014
5
\u2014
\u2014
\u2013 net investment hedges \u2013 net fair value gains on
derivatives
(578)
\u2014
\u2014
\u2014
\u2014
(578)
\u2014
\u2014
\u2013 net investment hedges \u2013 differences on exchange
on borrowings
(21)
\u2014
\u2014
\u2014
\u2014
(21)
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
81
\u2014
\u2014
\u2014
81
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
101
\u2014
\u2014
\u2014
101
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f))
\u2014
(17)
\u2014
\u2014
\u2014
(17)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value gains
\u2014
\u2014
6
\u2014
\u2014
6
\u2014
\u2014
Associates \u2013 share of OCI, net of tax (note 9 )
6
\u2014
\u2014
\u2014
\u2014
6
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial gains (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
316
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(39)
\u2013 tax on actuarial gains in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(95)
Associates \u2212 share of OCI, net of tax (note 9 )
\u2014
\u2014
18
\u2014
\u2014
18
\u2014
1
Other changes in equity
Cash flow hedges reclassified and reported in
total\u00a0assets
\u2014
(129)
\u2014
\u2014
\u2014
(129)
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
81
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
14
(15)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(4,915)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(80)
\u2014
\u2013 share buy-back programme
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(2,012)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(59)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
11
Non-controlling interests \u2013 acquisitions
(note 27(b))
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
Reclassification of equity in respect of assets
classified as held-for-sale
295
\u2014
\u2014
\u2014
\u2014
295
\u2014
\u2014
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
84
(88)
31 December 2022
2,200
(327)
30
179
573
2,655
(7,116)
51,197
Retained earnings
Translation
reserve
(i)
\u00a3m
Hedging
reserve
(ii)
\u00a3m
Fair
value
reserve
(iii)
\u00a3m
Revaluation
reserve
(iv)
\u00a3m
Other
(v)
\u00a3m
Total
other
reserves
\u00a3m
Treasury
shares
(vi)
\u00a3m
Other
\u00a3m
1 January 2021
(6,830)
(504)
(18)
179
573
(6,600)
(5,150)
47,191
Comprehensive income and expense
Loss for the year
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
6,801
Foreign currency translation and hedges of net
investments in foreign operations
\u2013 differences on exchange from translation of
foreign operations
31
\u2014
\u2014
\u2014
\u2014
31
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
291
\u2014
\u2014
\u2014
\u2014
291
\u2014
\u2014
\u2013 net investment hedges \u2013 net fair value
gain on derivatives
75
\u2014
\u2014
\u2014
\u2014
75
\u2014
\u2014
\u2013 net investment hedges \u2013 differences on exchange
on borrowings
24
\u2014
\u2014
\u2014
\u2014
24
\u2014
\u2014
Cash flow hedges
\u2013 net fair value gains
\u2014
95
\u2014
\u2014
\u2014
95
\u2014
\u2014
\u2013 reclassified and reported in profit for the year
\u2014
32
\u2014
\u2014
\u2014
32
\u2014
\u2014
\u2013 tax on net fair value gains in respect of cash flow
hedges (note 10(f) )
\u2014
(32)
\u2014
\u2014
\u2014
(32)
\u2014
\u2014
Investments held at fair value
\u2013 net fair value gains
\u2014
\u2014
9
\u2014
\u2014
9
\u2014
\u2014
Associates \u2013 share of OCI, net of tax (note 9 )
(18)
1
\u2014
\u2014
\u2014
(17)
\u2014
\u2014
Retirement benefit schemes
\u2013 net actuarial gains (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
382
\u2013 surplus recognition (note 15)
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(1)
\u2013 tax on actuarial gains in respect of subsidiaries
(note 10(f) )
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(82)
Associates - share of OCI, net of tax (note 9 )
\u2014
\u2014
15
\u2014
\u2014
15
\u2014
(1)
Other changes in equity
Cash flow hedges reclassified and reported in total
assets
\u2014
45
\u2014
\u2014
\u2014
45
\u2014
\u2014
Employee share options
\u2013 value of employee services
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
76
\u2013 treasury shares used for share option schemes
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
13
(17)
Dividends and other appropriations
\u2013 ordinary shares
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(4,904)
Purchase of own shares
\u2013 held in employee share ownership trusts
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(82)
\u2014
Perpetual hybrid bonds
\u2013 coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(6)
\u2013 tax on coupons paid
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
1
Non-controlling interests \u2212 acquisitions (note 27(b))
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(5)
Other movements
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
97
(101)
31 December 2021
(6,427)
(363)
6
179
573
(6,032)
(5,122)
49,334
(i) Translation reserve:
The translation reserve is explained in the accounting policy on foreign currencies in note 1.
In 2023, included within the differences on exchange from translation of foreign operations is \u00a3552 million (2022: \u00a35 million;
2021: \u00a3291\u00a0million) which has been reclassified from reserves to the income statement and recognised in other operating expenses as
an \u00a0adjusting item. In 2023, this amount includes \u00a3554 million in respect of the sale of the Russian and Belarusian subsidiaries. In 2022,
\u00a34\u00a0million was in respect of the exit from Egypt and, in 2021, \u00a3272\u00a0million was in respect of the disposal of BAT Pars.
In certain markets, the Group has moved to above market business models utilising local distributors as importers. As a consequence,
with the cessation of a physical presence in these markets, foreign exchange previously recognised in other comprehensive income
for\u00a0these entities has been reclassified to the income statement. In 2023, a loss of \u00a32\u00a0million was recognised in reserves in relation to the
move to\u00a0above market business models. In 2022 and 2021, a gain of \u00a32\u00a0million and \u00a319 million, respectively, was recognised in relation to
the\u00a0move to above market business models and Quantum-related initiatives.
Also, in 2022, as a result of the liquidation of Yemen, the Group reclassified to the income statement the foreign exchange previously
recognised in associates other comprehensive income. This resulted in a credit of \u00a31 million to the income statement.
(ii) Hedging reserve:
The hedging reserve is explained in the accounting policy on financial instruments in note 1.
Of the amounts reclassified from the hedging reserve and reported in profit for the year, a loss of \u00a351\u00a0million (2022: \u00a316\u00a0million loss;
2021 : \u00a329\u00a0million loss) and a loss of \u00a34\u00a0million (2022: \u00a32\u00a0million loss; 2021: \u00a36\u00a0million gain) were reported within revenue and raw materials
and consumables, respectively, together with a loss of \u00a317\u00a0million (2022: \u00a346\u00a0million gain; 2021: \u00a34\u00a0million loss) reported in other operating
expenses, and a gain of \u00a384\u00a0million (2022: \u00a373\u00a0million gain; 2021: \u00a359\u00a0million gain) reported within net finance costs.
The Group hedges certain foreign currency denominated borrowings with cross-currency interest rate swaps. As permitted by IFRS 9
Financial Instruments, the foreign currency basis spreads have been separated from the hedging instrument and are recognised in
reserves as a \u2018cost of hedging\u2019 and are reclassified to the income statement in the same period in which profit and loss is affected by the
hedged expected cash flows as a component of the associated interest expense. The basis spreads are included within hedging reserves
as they are not material. Included within the balance of hedging reserves at 31 December 2023 is an accumulated loss of \u00a36\u00a0million
(2022: \u00a35\u00a0million gain; 2021: \u00a34\u00a0million gain) in respect of the cost of hedging.
(iii) Fair value reserve:
The fair value reserve is explained in the accounting policy on financial instruments in note 1. Fair value gains and losses arising from
investments held at fair value through other comprehensive income are recognised in this reserve.
(iv) Revaluation reserve:
The revaluation reserve relates to the acquisition of the cigarette and snus business of ST in 2008.
(v) Other reserves:
Other reserves comprise:
(a) \u00a3483\u00a0million which arose in 1998 from merger accounting in a Scheme of Arrangement and Reconstruction whereby British American
Tobacco p.l.c. acquired the entire share capital of B.A.T Industries p.l.c. and the share capital of that company\u2019s principal financial services
subsidiaries was distributed, so effectively demerging them; and
(b) In the 1999 Rothmans transaction, convertible redeemable preference shares were issued as part of the consideration. The discount
on these shares was amortised by crediting other reserves and charging retained earnings. The \u00a390\u00a0million balance in other reserves
comprises the accumulated balance in respect of the preference shares converted during 2004.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-641": { "value": "
(vi) Treasury shares:
Total equity attributable to owners of the parent is stated after deducting the cost of treasury shares which include \u00a36,807 million
(2022: \u00a36,821 million; 2021: \u00a34,823 million) for shares repurchased and not cancelled and \u00a3289 million (2022: \u00a3295 million;
2021: \u00a3299 million) in respect of the cost of own shares held in employee share ownership trusts.
On 10 February 2022, the Board approved a proposed \u00a32\u00a0billion share buy-back programme for 2022. The previous share buy-back
programme was suspended from 30 July 2014. As at 31 December 2023, treasury shares include 5,951,979 (2022: 5,920,638;
2021: 6,269,959) shares held in trust and 220,533,855 (2022: 221,000,192; 2021: 161,930,217) shares repurchased and not cancelled as part
of the Company\u2019s share buy-back programme. From March 2020, the Company has utilised shares acquired in the share buy-back
programme to satisfy shared-based payment awards made to certain employees.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-642": { "value": "
(e) Non-controlling interests
Movements in non-controlling interests primarily relate to profit for the year and dividends (reported as a movement in retained
earnings) and differences on exchange arising from the translation into sterling (reported as a movement in other reserves). Information
on subsidiaries with material non-controlling interests is provided in note 32.
(b) Non-controlling interests
During 2023, the Group acquired a further 1.31% in Hrvatski
Duhani d.d., at a cost of less than \u00a31\u00a0million, following the
acquisitions in\u00a02022 (3.3% at a cost of \u00a31\u00a0million) and 2021
(2.7%\u00a0at\u00a0a cost of \u00a31\u00a0million).
In 2021, the Group made a capital contribution to Brascuba
Cigarrillos S.A. at a cost of \u00a36 million. This contribution was in
proportion to a capital contribution made by the non-controlling
interest to the company and as such, the Group\u2019s shareholding
remains unchanged.
Also in 2021, as part of a Voluntary Tender Offer for the non-
controlling interests of the Group\u2019s Indonesian subsidiary, the
Group acquired 0.2% additional shares at a cost of \u00a34\u00a0million
as\u00a0explained in note 30.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-643": { "value": "
(f) Dividends and other appropriations
The interim quarterly dividend payment for the year ended 31 December 2022 of 230.9p per ordinary share (31 December 2021: 217.8p per
ordinary share) was payable in four equal instalments: amounts payable in May 2023 of \u00a31,282 million (May 2022: \u00a31,239 million), August
2023 of \u00a31,284 million (August 2022: \u00a31,223 million), November 2023 of \u00a31,293 million (November 2022: \u00a31,219 million) and \u00a31,287 million in
February 2024 (February 2023: \u00a31,211 million), respectively. The total dividends recognised as an appropriation from reserves in 2023 was
\u00a35,071 million (2022: \u00a34,915 million; 2021: \u00a34,904 million).
The Board has declared an interim dividend of 235.5p per ordinary share of 25p, for the year ended 31 December 2023, payable
in\u00a0four\u00a0equal quarterly instalments of 58.9p per ordinary share in May 2024, August 2024, November 2024 and February 2025.
These\u00a0payments will be recognised as appropriations from reserves in 2024 and 2025. The total amount payable is estimated to
be\u00a0\u00a35,267\u00a0million based on the number of shares outstanding at the date of these accounts", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-644": { "value": "2.355", "decimals": 5, "dimensions": { "concept": "ifrs-full:DividendsRecognisedAsDistributionsToOwnersPerShare", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00", "unit": "iso4217:GBP/xbrli:shares" } }, "f-645": { "value": "
23 Borrowings
Currency
Maturity dates
Interest rates
2023
\u00a3m
2022
\u00a3m
Eurobonds
Euro
2024 to 2045
1.3% to 5.4%
5,569
7,149
UK sterling
2024 to 2055
2.1% to 7.3%
3,097
3,884
Swiss franc
2026
1.4%
234
226
Bonds issued pursuant to Rules under
the U.S. Securities Act (as amended)
US dollar
2024 to 2053
1.7% to 8.1%
29,913
30,152
Bonds and notes
38,813
41,411
Commercial paper
\u2014
27
Other loans
100
875
Bank loans
216
203
Bank overdrafts
103
106
Lease liabilities
498
517
39,730
43,139
Perpetual hybrid bonds issued by the Group have been classified as equity (note 22(d)) and are therefore excluded from borrowings.
Other loans comprise \u00a3100 million (2022: \u00a3875 million) relating to a bilateral facility. Commercial paper is issued at competitive rates to
meet short-term borrowing requirements as and when needed.
Current borrowings per the balance sheet include interest payable of \u00a3573 million at 31 December 2023 (2022: \u00a3524 million). Included
within borrowings are \u00a35,935 million (2022: \u00a39,223 million) of borrowings subject to fair value hedges where their amortised cost has
been decreased by \u00a3110 million (2022: \u00a3355 million decrease).
The fair value of borrowings is estimated to be \u00a336,000 million (2022: \u00a337,170 million) of which \u00a335,083 million (2022: \u00a335,440 million)
has been calculated using quoted market prices and is within level 1 of the fair value hierarchy and \u00a3 917 million (2022: \u00a31,730 million)
has been calculated based on discounted cash flow analysis and is within level 3 of the fair value hierarchy.
Amounts secured on Group assets including property, plant and equipment, inventory and receivables as at 31 December 2023 are
\u00a3nil million ( 2022: \u00a39 million). The majority of lease liabilities are also secured against the associated assets.
Borrowings are repayable as follows:
Per balance sheet
Contractual gross maturities
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Within one year
4,324
4,413
5,359
5,426
Between one and two years
3,319
4,253
4,784
5,763
Between two and three years
2,558
4,406
3,920
5,673
Between three and four years
2,947
3,013
4,393
4,141
Between four and five years
3,410
4,077
4,600
5,494
Beyond five years
23,172
22,977
35,163
33,806
39,730
43,139
58,219
60,303
The contractual gross maturities in each year include the borrowings maturing in that year together with forecast interest payments
on\u00a0all borrowings which are outstanding for all or part of that year.
Borrowings are denominated in the functional currency of the subsidiary undertaking or other currencies as shown below:
Functional
currency
\u00a3m
U.S.
dollar
\u00a3m
UK
sterling
\u00a3m
Euro
\u00a3m
Other
currencies
\u00a3m
Total
\u00a3m
31 December 2023
Total borrowings
32,215
3,656
302
3,301
256
39,730
Effect of derivative financial instruments
\u2013 cross-currency swaps
1,214
(451)
(300)
(559)
\u2014
(96)
\u2013 forward foreign currency contracts
(57)
(892)
\u2014
537
414
2
33,372
2,313
2
3,279
670
39,636
31 December 2022
Total borrowings
33,438
3,383
452
5,579
287
43,139
Effect of derivative financial instruments
\u2013 cross-currency swaps
2,356
\u2014
(450)
(2,085)
\u2014
(179)
\u2013 forward foreign currency contracts
(40)
(998)
\u2014
590
454
6
35,754
2,385
2
4,084
741
42,966
The exposure to interest rate changes when borrowings are re-priced is as follows:
Within
1 year
\u00a3m
Between
1-2 years
\u00a3m
Between
2-3 years
\u00a3m
Between
3-4 years
\u00a3m
Between
4-5 years
\u00a3m
Beyond
5 years
\u00a3m
Total
\u00a3m
31 December 2023
Total borrowings
4,324
3,319
2,558
2,947
3,410
23,172
39,730
Effect of derivative financial instruments
\u2013 interest rate swaps
2,798
(229)
(786)
\u2014
(1,783)
\u2014
\u2014
\u2013 cross-currency swaps
448
\u2014
6
\u2014
(98)
(452)
(96)
7,570
3,090
1,778
2,947
1,529
22,720
39,634
31 December 2022
Total borrowings
4,398
4,246
4,407
3,013
4,077
22,998
43,139
Effect of derivative financial instruments
\u2013 interest rate swaps
4,657
(500)
(1,247)
\u2014
(2,910)
\u2014
\u2014
\u2013 cross-currency swaps
(77)
\u2014
36
\u2014
(138)
\u2014
(179)
8,978
3,746
3,196
3,013
1,029
22,998
42,960
Lease liabilities are repayable as follows:
Per balance sheet
Contractual gross maturities
2023
\u00a3m
2022
\u00a3m
2023
\u00a3m
2022
\u00a3m
Within one year
131
142
155
161
Between one and two years
103
109
122
122
Between two and three years
77
76
91
85
Between three and four years
59
58
70
65
Between four and five years
29
50
38
54
Beyond five years
99
82
140
112
498
517
616
599
For more information on leasing arrangements, refer to note 13(b).
As at 31 December 2023, the Group\u2019s undrawn committed borrowing facilities (note 26) amount to \u00a37,923 million ( 2022: \u00a37,828 million)
with \u00a35,077 million maturing within one year (2022: \u00a34,828 million maturing within one year), \u00a3154 million maturing between one and two
years (2022: \u00a3nil million maturing between one and two years), \u00a3154 million maturing between two and three years (2022: \u00a3150 million
maturing between two and three years), \u00a32,538 million maturing between three and four years (2022: \u00a3350 million maturing between
three and four years) and \u00a3nil maturing between four and five years (2022: \u00a32,500 million maturing between four and five years).
The Group\u2019s composition and movements in net debt are presented below along with a reconciliation to the financing activities in the
Group Cash Flow Statement:
2023
\u00a3m
Notes
Opening
balance
Cash flow
Foreign
exchange
Fair value,
accrued
interest and
other
Held for Sale
Closing
balance
Borrowings (excluding lease liabilities)*
42,622
(1,638)
(1,956)
204
\u2014
39,232
Lease liabilities
517
(162)
(25)
168
\u2014
498
Derivatives in respect of net debt
19
167
(238)
564
(323)
\u2014
170
Cash and cash equivalents
21
(3,446)
(1,101)
30
226
(368)
(4,659)
Current investments held at fair value
18
(579)
(22)
49
(49)
\u2014
(601)
39,281
(3,161)
(1,338)
226
(368)
34,640
2022
\u00a3m
Notes
Opening
balance
Cash flow
Foreign
exchange
Fair value,
accrued
interest and
other
Held for Sale
Closing
balance
Borrowings (excluding lease liabilities)*
39,212
(17)
3,881
(454)
\u2014
42,622
Lease liabilities
446
(161)
30
218
(16)
517
Derivatives in respect of net debt
19
(91)
348
(435)
345
\u2014
167
Cash and cash equivalents
21
(2,809)
(571)
(431)
(3)
368
(3,446)
Current investments held at fair value
18
(456)
(86)
(15)
(22)
\u2014
(579)
36,302
(487)
3,030
84
352
39,281
Note:
*Borrowings as at 31 December 2023 include \u00a3700 million (2022: \u00a3798 million) in respect of the purchase price adjustments relating to the acquisition of Reynolds American.
In the table above, movements in accrued interest relate to the net movement year on year and cash flows related to interest payments
are not included.
'Fair value, accrued interest and other\u2019 movements in lease liabilities in 2023 mainly comprise additions of \u00a3168 million (2022: \u00a3218 million)
(net of reassessments, modifications and terminations), see note 13(a). The movement of \u00a3 49 million (2022: \u00a322 million) in current
investments held at fair value represents the fair value gains for these investments.
2023
\u00a3m
2022
\u00a3m
Cash flows per net debt statement
(3,161)
(487)
Non-financing cash flows included in net debt
1,126
897
Interest paid
(1,682)
(1,578)
Interest element of lease liabilities
(30)
(25)
Remaining cash flows relating to derivative financial instruments
(242)
(465)
Purchases of own shares held in employee share ownership trusts
(110)
(80)
Purchase of own shares
\u2014
(2,012)
Coupon paid on perpetual hybrid bonds
(59)
(60)
Dividends paid to owners of the parent
(5,055)
(4,915)
Capital injection from and purchase of non-controlling interests
\u2014
(1)
Dividends paid to non-controlling interests
(105)
(158)
Other
4
6
Net cash used in financing activities per cash flow statement
(9,314)
(8,878)
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-646": { "value": "
24 Provisions for liabilities
Restructuring
of existing
businesses
\u00a3m
Employee-
related
benefits
\u00a3m
Fox River
\u00a3m
DOJ and OFAC
investigations
\u00a3m
Other
provisions
\u00a3m
Total
\u00a3m
1 January 2023
297
44
54
450
676
1,521
Differences on exchange
(32)
(4)
\u2014
\u2014
(46)
(82)
Provided in respect of the year (*)
(21)
13
\u2014
(450)
240
(218)
Utilised during the year
(105)
(11)
(10)
\u2014
(96)
(222)
31 December 2023
139
42
44
\u2014
774
999
Analysed on the balance sheet as
\u2013 current
96
13
3
\u2014
356
468
\u2013 non-current
43
29
41
\u2014
418
531
139
42
44
\u2014
774
999
Restructuring
of existing
businesses
\u00a3m
Employee-
related
benefits
\u00a3m
Fox River
\u00a3m
DOJ and OFAC
investigations
\u00a3m
Other
provisions
\u00a3m
Total
\u00a3m
1 January 2022
179
41
62
\u2014
571
853
Differences on exchange
9
2
\u2014
\u2014
15
26
Provided in respect of the year (*)
198
10
\u2014
450
187
845
Transferred to liabilities associated with
assets held for sale
(20)
\u2014
\u2014
\u2014
(6)
(26)
Utilised during the year
(69)
(9)
(8)
\u2014
(91)
(177)
31 December 2022
297
44
54
450
676
1,521
Analysed on the balance sheet as
\u2013 current
240
14
10
450
373
1,087
\u2013 non-current
57
30
44
\u2014
303
434
297
44
54
450
676
1,521
Note:
*Amounts provided above are shown net of reversals of unused provisions which include reversals of \u00a342 million (2022 : \u00a3 35 million) for restructuring of existing businesses,
\u00a314 million (2022: \u00a310 million) for employee benefits and \u00a3128 million (2022: \u00a3225 million) for other provisions. For DOJ and OFAC investigations, \u00a3450 million that were provided in 2022
were reclassified to trade and other payables in 2023.
Restructuring of existing businesses
The restructuring provisions relate to the restructuring and integration costs incurred and are reported as adjusting items. The principal
restructuring activities in 2022 are as described in note 7 and primarily include the cost of employee packages and long-term social plans
associated with redundancy programmes from previous years, mainly in relation to Quantum. No further Quantum restructuring charges
were recognised as adjusting in 2023, following the completion of the Quantum programme. Provisions associated with redundancy
packages are determined based on termination packages offered in each country. The long-term social plans primarily relate to social
plans in Germany, which span over several years and are based on actuarial calculations. These are discounted to present value using
Central Bank rates. We do not consider the effect of discounting to be material. The provisions for long-term social plans include future
payments related to contracts that are already fixed. Given that there is little or no variability expected in the timing and amount of the
payments, no\u00a0additional risk has been incorporated in the discounting. While some elements of the non-current provisions of \u00a343 million
will unwind over several years, as termination payments are made over extended periods in some countries, it is estimated that
approximately 97% of\u00a0these non-current provisions will unwind within five years.
Employee-related benefits
Employee-related benefits mainly relate to employee benefits other than post-employment benefits. The principal components of these
provisions are gratuity and termination awards, \u2018jubilee\u2019 payments due after a certain service period and expected payments associated
with long-term disability. The majority of these provisions are calculated by actuaries. It is estimated that approximately 67% of the non-
current provisions of \u00a329 million will unwind within five years.
Fox River
A provision of \u00a3274\u00a0million was made in 2011 for a potential claim under a 1998 settlement agreement entered into by a Group subsidiary
in\u00a0respect of the clean-up of sediment in the Fox River. On 30 September 2014, the Group, NCR, Appvion and Windward Prospects
entered into a funding agreement; the details of this agreement are explained in note 31. This agreement led to payments of \u00a3nil million
in\u00a02023 (2022: \u00a31 million). In addition, the Group incurred legal costs of \u00a310 million (2022: \u00a37 million), which were also charged against the
provision. It is expected that the non-current provision will unwind within five years.
DOJ/OFAC investigations
As discussed earlier (in note 6(h)), on 25 April 2023, the Group announced that it had reached an agreement with the DOJ and OFAC for
a\u00a0total amount payable to the U.S. authorities of US$635 million plus interest. Having recognised an initial provision of \u00a3450\u00a0million
(US$540\u00a0million), in 2022, the Group has recognised an additional charge of \u00a375 million in 2023. During 2023, as a result of payment terms
being finalised, the provision was reversed and the liability was transferred to sundry payables where US$5 million (\u00a34 million) was paid in
April, US$321 million (\u00a3258 million) including interest was paid in September and US$326 million (\u00a3263 million) including interest will be
paid in the first half of 2024.
Other
Other provisions comprise balances set up in the ordinary course of general business that cannot be classified within the other
categories, such as sales returns and onerous contracts together with amounts in respect of supplier, excise and other disputes.
The\u00a0nature of the amounts provided in respect of disputes is such that the extent and timing of cash flows are difficult to estimate and
the ultimate liability may vary from the amounts provided.
In accordance with IFRS 15 Revenue from Contracts with Customers, sales return provisions are recognised based on a reasonable
estimate of likely returns. In 2023, the sales return provision, included in other provisions, was \u00a355 million (2022: \u00a362 million).
Included within other provisions there is a provision for interest of \u00a3244 million (2022: \u00a3183 million) in relation to the Franked Investment
Income Group Litigation Order (FII GLO), as mentioned in notes 8(b) and 10(b). The provision is calculated based on the UK central bank
base rate plus 2% and has been charged to net finance costs. As there is uncertainty over the potential timing of the utilisation, as
explained in note 10(b), the provision has been reported as a non-current provision.
Other provisions also include a provision of \u00a389 million in relation to litigation-related deposits as explained in note 17. In addition, BAT
Brazil has recognised a provision of \u00a340 million in relation to a legal case over whether a 10% tax imposed on a tax benefit associated with
investment grants by the Rio de Janeiro State was constitutional (as explained in note 6(k)).
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-647": { "value": "
25 Trade and other payables
2023
\u00a3m
2022
\u00a3m
Trade payables
1,707
1,862
Master settlement agreement (U.S.)
1,788
2,193
Duty, excise and other taxes
2,994
3,104
Accrued charges and deferred income
2,608
2,713
FII GLO (note 10(b))
863
913
Social security and other taxation
46
61
Sundry payables
587
547
10,593
11,393
Current
9,700
10,449
Non-current
893
944
10,593
11,393
As explained in note 17 , the Group acts as a collection agent for banks and other financial institutions in certain debt factoring
arrangements. The cash collected in respect of these arrangements that has not yet been remitted amounts to \u00a3 138 million
(2022: \u00a3119 \u00a0million) and is included in sundry payables.
In addition, the Group has certain Supply Chain Financing (SCF) or \u2018reverse factoring\u2019 arrangements in place. The principal purpose of
these arrangements is to provide the supplier with the option to access liquidity earlier through the sale of its receivables due from the
Group to a bank or other financial institution prior to their due date. Management has determined that the Group\u2019s payables to these
suppliers have neither been extinguished nor have the liabilities been significantly modified by these arrangements. The value of amounts
payable, invoice due dates and other terms and conditions applicable, from the Group\u2019s perspective, remain unaltered, with only the
ultimate payee being changed. At 31 December 2023, the value of amounts payable under the SCF programmes was \u00a3201 million
(2022: \u00a3257 million). The cash outflows in respect of these arrangements have been recognised within operating cash flows. Included in
this amount is \u00a3 110 million (2022: \u00a3161 million) of leaf payables where the standard payment terms with the vendor is 150 days, consistent
with credit terms normally available in certain markets.
In 2023, the Group announced that it had reached an agreement with the DOJ and OFAC to resolve previously disclosed investigations
into historical sanctions breaches. Included within sundry payables is US$326 million (\u00a3263 million) plus interest representing the third
and final payment due in the first half of 2024. Refer to note 24 for more information.
In 2022, following an investigation by the Nigerian Federal Competition and Consumer Protection Commission (FCCPC) into alleged
violations of the Nigerian Competition and Consumer Protection Act and National Tobacco Control Act, a consent order was entered
into between the FCCPC and British American Tobacco (Holdings) Limited, British American Tobacco (Nigeria) Limited and British
American Tobacco Marketing (Nigeria) Limited, terminating the investigation and associated proceedings. A penalty equivalent to
US$110\u00a0million was accrued for with the resulting payments (equivalent to \u00a359 million) made during 2023, among other measures.
Accrued charges and deferred income include \u00a318 million of deferred income (2022: \u00a320 million) relating to certain customer deposits
in\u00a0advance of shipments and \u00a382 million (2022: \u00a366 million) in respect of interest payable mainly related to tax matters. FII GLO
of\u00a0\u00a3863\u00a0million (2022: \u00a3913 million) relates to receipts in 2015, in respect of the Franked Investment Income Government Litigation Order
(note 10(b)). Amounts payable to related parties including associated undertakings are shown in note 30.
There is no material difference between the above amounts for trade and other payables and their fair value due to the short-term
duration of the majority of trade and other payables, as determined using discounted cash flow analysis.
Trade and other payables are predominantly denominated in the functional currencies of subsidiary undertakings with less than 10%
in\u00a0other currencies (2022: less than 7 % in other currencies).
", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-648": { "value": "
26 Financial instruments and risk management
Management of financial risks
One of the principal responsibilities of Treasury is to manage
the financial risks arising from the Group\u2019s underlying
operations. Specifically, Treasury manages, within an overall
policy framework set by the Group\u2019s Main Board and Corporate
Finance Committee (CFC), the Group\u2019s exposure to funding and
liquidity, interest rate, foreign exchange and counterparty risks.
The Group\u2019s treasury position is monitored by the CFC which
meets regularly throughout the year and is chaired by the Group
Finance Director. The approach is one of risk reduction within an
overall framework of delivering total shareholder return.
The Group defines capital as net debt (note 23) and equity (note 22).
There are no externally imposed capital requirements for the
Group. Group policies include a set of financing principles that
provide a framework within which the Group\u2019s capital base is
managed and, in particular, the policies on dividends (as a
percentage of long-term sustainable earnings) and share buy-back
are decided. The key objective of the financing principles is to
appropriately balance the interests of equity and debt holders in
driving an efficient financing mix for the Group. The Group\u2019s
average cost of debt in 2023 is 5.2% (2022: 4.0%).
The Group manages its financial risks in line with the classification
of its financial assets and liabilities in the Group\u2019s balance sheet
and related notes. The Group\u2019s management of specific risks is
dealt with as follows:
Liquidity risk
It is the policy of the Group to maximise financial flexibility
and minimise refinancing risk by issuing debt with a range of
maturities, generally matching the projected cash flows of the
Group and obtaining this financing from a wide range of sources.
The Group has a target average centrally managed debt maturity
of at least five years with no more than 20% of centrally managed
debt maturing in a single rolling year. As at 31 December 2023,
the\u00a0average centrally managed debt maturity was 10.5 years
( 2022: 9.9\u00a0years) and the highest proportion of centrally managed
debt maturing in a single rolling year was 15.7% (2022: 18.6%).
Perpetual hybrid bonds are treated as equity (note 22(d)) and
therefore not included within the debt maturity analysis.
The Group utilises cash pooling and zero balancing bank account
structures in addition to intercompany loans and borrowings to
mobilise cash efficiently within the Group. The key objectives of
Treasury in respect of cash and cash equivalents are to protect
their principal value, to concentrate cash at the centre, to minimise
the required debt issuance and to optimise the yield earned. The
amount of debt issued by the Group is determined by forecasting
the net debt requirement after the mobilisation of cash.
The Group continues to target a solid investment-grade credit
rating @(Baa1/BBB+/BBB+)@. Moody\u2019s, S&P's and Fitch's current
ratings for the Group are \u00a0Baa2 (positive outlook), BBB+ (negative
outlook) and BBB (positive outlook), respectively. The Group is
confident of its continued ability to successfully access the debt
capital markets for future refinancing requirements.
As part of its short-term cash management, the Group invests in a
range of cash and cash equivalents, including money market funds,
which are regarded as highly liquid and are not exposed to significant
changes in fair value. These are kept under continuous review as
described in the credit risk section below. At 31 December 2023,
the\u00a0Group had \u00a3173\u00a0million invested in money market funds
( 2022:\u00a0\u00a3nil\u00a0million).
As part of its working capital management, in certain countries,
the Group has entered into factoring arrangements and supply
chain financing arrangements. These are explained in further detail
in note 17 and note 25.
Subsidiary companies are funded by share capital and retained
earnings, loans from the central finance companies on commercial
terms, or through local borrowings by the subsidiaries in
appropriate currencies to predominantly fund short- to medium-
term working capital requirements.
Available facilities in current year:
It is Group policy that short-term sources of funds (including
drawings under both the Group US$4\u00a0billion U.S. commercial
paper (U.S. CP) programme and the Group \u00a33\u00a0billion euro
commercial paper (ECP) programme) are backed by undrawn
committed lines of credit and cash. Commercial paper is issued
by B.A.T. International Finance p.l.c., B.A.T. Netherlands Finance
B.V. and B.A.T Capital Corporation and guaranteed by British
American Tobacco p.l.c. At 31 December 2023, commercial paper
of \u00a3nil\u00a0million was outstanding (2022:\u00a0\u00a327\u00a0million). Cash flows
relating to commercial paper that have maturity periods of three
months or less are presented on a net basis in the Group\u2019s cash
flow statement.
At 31 December 2023, the Group had access to a \u00a35.4 billion
revolving credit facility. In March 2023, the Group refinanced the
\u00a32.7\u00a0billion 364-day tranche of the revolving credit facility at the
reduced amount of \u00a32.5\u00a0billion, maturing in March 2024 with two
one-year extension options, and a one-year term out option.
Additionally, \u00a32.85\u00a0billion of the five-year tranche remains available
until March 2025, with \u00a32.7\u00a0billion extended to March 2026 and
\u00a32.5\u00a0billion extended to March 2027.
During 2023, the Group extended short-term bilateral facilities
totalling \u00a32.65 billion. As at 31 December 2023, \u00a3 100 million was
drawn on a short-term basis with \u00a32.55 billion undrawn and still
available under such bilateral facilities. Cash flows relating to
bilateral facilities that have maturity periods of three months or less
are presented on a net basis in the Group\u2019s cash flow statement.
Issuance, drawdowns and repayments in current year:
\u2013 In January 2023, the Group repaid a \u20ac750\u00a0million bond at maturity;
\u2013 In February 2023, the Group accessed the Euro market under its
EMTN Programme, raising a total of \u20ac800\u00a0million;
\u2013 In May 2023, the Group repaid a total of US$48\u00a0million of bonds
at maturity;
\u2013 Given the refinancing levels in the medium term and to reduce
near term refinancing risks, in August 2023, the Group accessed
the US dollar market under its SEC Shelf Programme, raising a
total of US$5\u00a0billion across five tranches whilst also announcing a
concurrent capped debt tender offer, targeting a series of GBP-,
EUR- and USD-denominated bonds maturing between 2024 and
2027. Pursuant to this tender offer, BAT repurchased bonds prior
to their maturity in a principal amount of \u00a33.1\u00a0billion; and
\u2013 In September, October and November 2023, the Group repaid
US$550\u00a0million, \u20ac800\u00a0million and \u20ac750\u00a0million of bonds at
maturity, respectively.
Available facilities in prior year:
At 31 December 2022, the Group had access to a \u00a35.69 billion
revolving credit facility. This facility was undrawn at
31 December 2022.
During 2022, the Group extended short-term bilateral facilities
totalling \u00a33.0 billion. As at 31 December 2022, \u00a3875 million was
drawn on a short-term basis.
Issuance, drawdowns and repayments in prior year:
\u2013 In March 2022, the Group accessed the US dollar market under
its SEC Shelf Programme, raising a total of US$2.5\u00a0billion across
three tranches;
\u2013 In May 2022, the Group repaid a \u20ac600\u00a0million bond at maturity;
\u2013 In June 2022, the Group repaid US$419\u00a0million and \u00a3180\u00a0million
bonds at maturity;
\u2013 In August 2022, the Group repaid US$750\u00a0million and
US$601\u00a0million bonds at maturity; and
\u2013 In October 2022, the Group raised US$600\u00a0million in the
US\u00a0dollar market under its SEC Shelf Programme.
Currency risk
The Group is subject to exposure on the translation of the net
assets of foreign currency subsidiaries and associates into its
reporting currency, sterling. The Group\u2019s primary balance sheet
translation exposures are to the US dollar, euro, Canadian dollar,
Australian dollar, Indian rupee, South African rand, Danish krone,
Indonesian rupiah, Brazilian real, Singaporean dollar and Swiss
franc. These exposures are kept under continuous review. The
Group\u2019s policy on borrowings is to broadly match the currency of
these borrowings with the currency of cash flows arising from the
Group\u2019s underlying operations. Within this overall policy, the Group
aims to minimise all balance sheet translation exposure where it is
practicable and cost-effective to do so through matching currency
assets with currency borrowings. The main objective of these
policies is to protect shareholder value by increasing certainty and
minimising volatility in earnings per share. At 31 December 2023,
the currency profile of the Group\u2019s gross debt, after taking into
account derivative contracts, was 72% US dollar (2022: 71%), 14%
euro (2022: 13 %), 9% sterling (2022: 12%) and 5% other currencies
(2022: 4%).
The Group faces currency exposures arising from the translation
of profits earned in foreign currency subsidiaries and associates
and joint arrangements; these exposures are not normally hedged.
Exposures also arise from:
(i) foreign currency denominated trading transactions undertaken
by subsidiaries. These exposures comprise committed and highly
probable forecast sales and purchases, which are offset wherever
possible. The remaining exposures are hedged within the Treasury
policies and procedures with forward foreign exchange contracts
and options, which are designated as hedges of the foreign
exchange risk of the identified future transactions; and
(ii) forecast dividend flows from subsidiaries to the centre. To
ensure cash flow certainty, the Group enters into forward foreign
exchange contracts which are designated as net investment
hedges of the foreign exchange risk arising from the investments
in these subsidiaries.
IFRS 7 Financial Instruments: Disclosures requires a sensitivity
analysis that shows the impact on the\u00a0income statement and on
items recognised directly in other comprehensive income of
hypothetical changes of exchange rates in respect of non-
functional currency financial assets and liabilities held across the
Group. All other variables are held constant although, in practice,
market rates rarely change in isolation. Financial assets and
liabilities held in the functional currency of the Group\u2019s subsidiaries,
as well as non-financial assets and liabilities and translation risk,
are not included in the analysis. The Group considers a 10%
strengthening or weakening of the functional currency against the
non-functional currency of its subsidiaries as\u00a0a reasonably possible
change. The impact is calculated with reference to the financial
asset or liability held as at the year-end, unless this is
unrepresentative of the position during the year.
A 10% strengthening of functional currencies against non-functional
currencies would result in pre-tax profit being \u00a361 million lower
(2022: \u00a349 million lower; 2021: \u00a353 million lower) and items
recognised directly in other comprehensive income being
\u00a3273\u00a0million higher (2022: \u00a3445 million higher; 2021: \u00a3144 million
higher). A\u00a010%\u00a0weakening of functional currencies against non-
functional currencies would result in pre-tax profit being \u00a372 million
higher (2022: \u00a360 million higher; 2021: \u00a365 million higher) and items
recognised directly in other comprehensive income being
\u00a3333\u00a0million lower (2022: \u00a3543 million lower; 2021: \u00a3177 million lower).
The exchange sensitivities on items recognised directly in other
comprehensive income relate to hedging of certain net asset
currency positions in the Group, as well as on cash flow hedges
in\u00a0respect of future transactions, but do not include sensitivities
in\u00a0respect of exchange on non-financial assets or liabilities.
Interest rate risk
The objectives of the Group\u2019s interest rate risk management policy
are to lessen the impact of adverse interest rate movements on
the earnings, cash flow and economic value of the Group.
Additional objectives are to minimise the cost of hedging and the
associated counterparty risk.
In order to manage its interest rate risk, the Group maintains both
floating rate and fixed rate debt. The Group sets targets (within
overall guidelines) for the desired ratio of floating to fixed rate debt
on a net basis (at least 50% fixed on a net basis in the short to
medium term) as a result of regular reviews of market conditions
and strategy by the Corporate Finance Committee and the board
of the main central finance company. Underlying borrowings are
arranged on both a fixed rate and a floating rate basis and, where
appropriate, the Group uses derivatives, primarily interest rate
swaps to vary the fixed and floating mix, or forward starting swaps
to manage the refinancing risk. The interest rate profile of liquid
assets included in net debt are considered to offset floating rate
debt and are taken into account in determining the net interest
rate exposure. At 31 December 2023, the relevant ratio of floating
to fixed rate borrowings after the impact of derivatives was 10:90
(2022: 12:88). On a net debt basis, after offsetting liquid assets and
excluding cash and other liquid assets in Canada, which are
subject to certain restrictions under CCAA protection, the ratio of
floating to fixed rate borrowings was 2:98 (2022: 7:93).
IFRS 7 requires a sensitivity analysis that shows the impact on
the\u00a0income statement and on items recognised directly in other
comprehensive income of hypothetical changes of interest rates
in\u00a0respect of financial assets and liabilities of the Group. All other
variables are held constant although, in practice, market rates
rarely change in isolation. For the purposes of this sensitivity
analysis, financial assets and liabilities with fixed interest rates
are\u00a0not included. The Group considers a 100 basis point change
in\u00a0interest rates a reasonably possible change except where rates
are less than 100 basis points. In these instances, it is assumed
that the interest rates increase by 100 basis points and decrease
to zero for the purpose of performing the sensitivity analysis.
The\u00a0impact is calculated with reference to the financial asset
or\u00a0liability held as at the year-end, unless this is unrepresentative
of the position during the year.
A 100 basis point increase in interest rates would result in pre-tax
profit being \u00a35 million lower (2022: \u00a350 million lower;
2021: \u00a344 million lower). A 100 basis point decrease in interest rates,
or less where applicable, would result in pre-tax profit being
\u00a35\u00a0million higher (2022: \u00a350 million higher; 2021: \u00a347 million higher).
The effect of these interest rate changes on items recognised
directly in other comprehensive income is not material in either year.
Following the decision taken by global regulators in 2018 to replace
Interbank Offered Rates with alternative nearly risk-free rates, such
benchmark rates were expected to be largely discontinued after
2021. Following announcements by the respective regulators,
EURIBOR is expected to continue for the foreseeable future, with
USD LIBOR rates discontinued (other than on a synthetic basis)
from June 2023.
The Group is party to the ISDA fallback protocol and in January
2022, it automatically replaced the GBP LIBOR with economically
equivalent interest rate derivatives referencing SONIA on their
reset date. The four impacted derivatives (cross currency interest
rate swaps) with nominal values totalling \u20ac800\u00a0million
(\u00a3672\u00a0million) matured in October 2023 and were in fair value
hedge relationships which were indexed to GBP LIBOR interest
rates. As of 31 December 2023, the Group does not have any
outstanding financial instruments using the historical benchmarks
that are no longer available.
Credit risk
The Group has no significant concentrations of customer credit
risk. Subsidiaries have policies in place requiring appropriate credit
checks on potential customers before sales commence. The
process for monitoring and managing credit risk once sales to
customers have been made varies depending on local practice
in\u00a0the countries concerned.
Certain territories have bank guarantees, other guarantees or
credit insurance provided in the Group\u2019s favour in respect of Group
trade receivables, the issuance and terms of which are dependent
on local practices in the countries concerned. All derivatives are
subject to ISDA agreements or equivalent documentation.
Cash deposits and other financial instruments give rise to credit
risk on the amounts due from the related counterparties.
Generally, the Group aims to transact with counterparties with
strong investment grade credit ratings. However, the Group
recognises that due to the need to operate over a large geographic
footprint, this will not always be possible. Counterparty credit risk
is managed on a global basis by limiting the aggregate amount and
duration of exposure to any one counterparty, taking into account
its credit rating. The credit ratings of all counterparties are
reviewed regularly.
The Group ensures that it has sufficient counterparty credit
capacity of requisite quality to undertake all anticipated
transactions throughout its geographic footprint, while at the
same time ensuring that there is no geographic concentration
in\u00a0the location of counterparties.
With the following exceptions, the maximum exposure to the
credit risk of financial assets at the balance sheet date is reflected
by the carrying values included in the Group\u2019s balance sheet. The
Group has entered into short-term risk participation agreements
in relation to certain leaf supply arrangements and the maximum
exposure under these would be \u00a351 million (2022: \u00a390 million).
In\u00a0addition, the Group has entered into a guarantee arrangement
to support a short-term bank credit facility with a supply chain
partner. The maximum exposure under the arrangement would
be\u00a0\u00a31 million (2022: \u00a31 million).
Price risk
The Group is exposed to price risk on investments held by the
Group, which are included in investments held at fair value on
the\u00a0consolidated balance sheet, but the quantum of such is not
material.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-649": { "value": "
Liquidity risk
It is the policy of the Group to maximise financial flexibility
and minimise refinancing risk by issuing debt with a range of
maturities, generally matching the projected cash flows of the
Group and obtaining this financing from a wide range of sources.
The Group has a target average centrally managed debt maturity
of at least five years with no more than 20% of centrally managed
debt maturing in a single rolling year. As at 31 December 2023,
the\u00a0average centrally managed debt maturity was 10.5 years
( 2022: 9.9\u00a0years) and the highest proportion of centrally managed
debt maturing in a single rolling year was 15.7% (2022: 18.6%).
Perpetual hybrid bonds are treated as equity (note 22(d)) and
therefore not included within the debt maturity analysis.
The Group utilises cash pooling and zero balancing bank account
structures in addition to intercompany loans and borrowings to
mobilise cash efficiently within the Group. The key objectives of
Treasury in respect of cash and cash equivalents are to protect
their principal value, to concentrate cash at the centre, to minimise
the required debt issuance and to optimise the yield earned. The
amount of debt issued by the Group is determined by forecasting
the net debt requirement after the mobilisation of cash.
The Group continues to target a solid investment-grade credit
rating @(Baa1/BBB+/BBB+)@. Moody\u2019s, S&P's and Fitch's current
ratings for the Group are \u00a0Baa2 (positive outlook), BBB+ (negative
outlook) and BBB (positive outlook), respectively. The Group is
confident of its continued ability to successfully access the debt
capital markets for future refinancing requirements.
As part of its short-term cash management, the Group invests in a
range of cash and cash equivalents, including money market funds,
which are regarded as highly liquid and are not exposed to significant
changes in fair value. These are kept under continuous review as
described in the credit risk section below. At 31 December 2023,
the\u00a0Group had \u00a3173\u00a0million invested in money market funds
( 2022:\u00a0\u00a3nil\u00a0million).
As part of its working capital management, in certain countries,
the Group has entered into factoring arrangements and supply
chain financing arrangements. These are explained in further detail
in note 17 and note 25.
Subsidiary companies are funded by share capital and retained
earnings, loans from the central finance companies on commercial
terms, or through local borrowings by the subsidiaries in
appropriate currencies to predominantly fund short- to medium-
term working capital requirements.
Available facilities in current year:
It is Group policy that short-term sources of funds (including
drawings under both the Group US$4\u00a0billion U.S. commercial
paper (U.S. CP) programme and the Group \u00a33\u00a0billion euro
commercial paper (ECP) programme) are backed by undrawn
committed lines of credit and cash. Commercial paper is issued
by B.A.T. International Finance p.l.c., B.A.T. Netherlands Finance
B.V. and B.A.T Capital Corporation and guaranteed by British
American Tobacco p.l.c. At 31 December 2023, commercial paper
of \u00a3nil\u00a0million was outstanding (2022:\u00a0\u00a327\u00a0million). Cash flows
relating to commercial paper that have maturity periods of three
months or less are presented on a net basis in the Group\u2019s cash
flow statement.
At 31 December 2023, the Group had access to a \u00a35.4 billion
revolving credit facility. In March 2023, the Group refinanced the
\u00a32.7\u00a0billion 364-day tranche of the revolving credit facility at the
reduced amount of \u00a32.5\u00a0billion, maturing in March 2024 with two
one-year extension options, and a one-year term out option.
Additionally, \u00a32.85\u00a0billion of the five-year tranche remains available
until March 2025, with \u00a32.7\u00a0billion extended to March 2026 and
\u00a32.5\u00a0billion extended to March 2027.
During 2023, the Group extended short-term bilateral facilities
totalling \u00a32.65 billion. As at 31 December 2023, \u00a3 100 million was
drawn on a short-term basis with \u00a32.55 billion undrawn and still
available under such bilateral facilities. Cash flows relating to
bilateral facilities that have maturity periods of three months or less
are presented on a net basis in the Group\u2019s cash flow statement.
Issuance, drawdowns and repayments in current year:
\u2013 In January 2023, the Group repaid a \u20ac750\u00a0million bond at maturity;
\u2013 In February 2023, the Group accessed the Euro market under its
EMTN Programme, raising a total of \u20ac800\u00a0million;
\u2013 In May 2023, the Group repaid a total of US$48\u00a0million of bonds
at maturity;
\u2013 Given the refinancing levels in the medium term and to reduce
near term refinancing risks, in August 2023, the Group accessed
the US dollar market under its SEC Shelf Programme, raising a
total of US$5\u00a0billion across five tranches whilst also announcing a
concurrent capped debt tender offer, targeting a series of GBP-,
EUR- and USD-denominated bonds maturing between 2024 and
2027. Pursuant to this tender offer, BAT repurchased bonds prior
to their maturity in a principal amount of \u00a33.1\u00a0billion; and
\u2013 In September, October and November 2023, the Group repaid
US$550\u00a0million, \u20ac800\u00a0million and \u20ac750\u00a0million of bonds at
maturity, respectively.
Available facilities in prior year:
At 31 December 2022, the Group had access to a \u00a35.69 billion
revolving credit facility. This facility was undrawn at
31 December 2022.
During 2022, the Group extended short-term bilateral facilities
totalling \u00a33.0 billion. As at 31 December 2022, \u00a3875 million was
drawn on a short-term basis.
Issuance, drawdowns and repayments in prior year:
\u2013 In March 2022, the Group accessed the US dollar market under
its SEC Shelf Programme, raising a total of US$2.5\u00a0billion across
three tranches;
\u2013 In May 2022, the Group repaid a \u20ac600\u00a0million bond at maturity;
\u2013 In June 2022, the Group repaid US$419\u00a0million and \u00a3180\u00a0million
bonds at maturity;
\u2013 In August 2022, the Group repaid US$750\u00a0million and
US$601\u00a0million bonds at maturity; and
\u2013 In October 2022, the Group raised US$600\u00a0million in the
US\u00a0dollar market under its SEC Shelf Programme.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-650": { "value": "
Currency risk
The Group is subject to exposure on the translation of the net
assets of foreign currency subsidiaries and associates into its
reporting currency, sterling. The Group\u2019s primary balance sheet
translation exposures are to the US dollar, euro, Canadian dollar,
Australian dollar, Indian rupee, South African rand, Danish krone,
Indonesian rupiah, Brazilian real, Singaporean dollar and Swiss
franc. These exposures are kept under continuous review. The
Group\u2019s policy on borrowings is to broadly match the currency of
these borrowings with the currency of cash flows arising from the
Group\u2019s underlying operations. Within this overall policy, the Group
aims to minimise all balance sheet translation exposure where it is
practicable and cost-effective to do so through matching currency
assets with currency borrowings. The main objective of these
policies is to protect shareholder value by increasing certainty and
minimising volatility in earnings per share. At 31 December 2023,
the currency profile of the Group\u2019s gross debt, after taking into
account derivative contracts, was 72% US dollar (2022: 71%), 14%
euro (2022: 13 %), 9% sterling (2022: 12%) and 5% other currencies
(2022: 4%).
The Group faces currency exposures arising from the translation
of profits earned in foreign currency subsidiaries and associates
and joint arrangements; these exposures are not normally hedged.
Exposures also arise from:
(i) foreign currency denominated trading transactions undertaken
by subsidiaries. These exposures comprise committed and highly
probable forecast sales and purchases, which are offset wherever
possible. The remaining exposures are hedged within the Treasury
policies and procedures with forward foreign exchange contracts
and options, which are designated as hedges of the foreign
exchange risk of the identified future transactions; and
(ii) forecast dividend flows from subsidiaries to the centre. To
ensure cash flow certainty, the Group enters into forward foreign
exchange contracts which are designated as net investment
hedges of the foreign exchange risk arising from the investments
in these subsidiaries.
IFRS 7 Financial Instruments: Disclosures requires a sensitivity
analysis that shows the impact on the\u00a0income statement and on
items recognised directly in other comprehensive income of
hypothetical changes of exchange rates in respect of non-
functional currency financial assets and liabilities held across the
Group. All other variables are held constant although, in practice,
market rates rarely change in isolation. Financial assets and
liabilities held in the functional currency of the Group\u2019s subsidiaries,
as well as non-financial assets and liabilities and translation risk,
are not included in the analysis. The Group considers a 10%
strengthening or weakening of the functional currency against the
non-functional currency of its subsidiaries as\u00a0a reasonably possible
change. The impact is calculated with reference to the financial
asset or liability held as at the year-end, unless this is
unrepresentative of the position during the year.
A 10% strengthening of functional currencies against non-functional
currencies would result in pre-tax profit being \u00a361 million lower
(2022: \u00a349 million lower; 2021: \u00a353 million lower) and items
recognised directly in other comprehensive income being
\u00a3273\u00a0million higher (2022: \u00a3445 million higher; 2021: \u00a3144 million
higher). A\u00a010%\u00a0weakening of functional currencies against non-
functional currencies would result in pre-tax profit being \u00a372 million
higher (2022: \u00a360 million higher; 2021: \u00a365 million higher) and items
recognised directly in other comprehensive income being
\u00a3333\u00a0million lower (2022: \u00a3543 million lower; 2021: \u00a3177 million lower).
The exchange sensitivities on items recognised directly in other
comprehensive income relate to hedging of certain net asset
currency positions in the Group, as well as on cash flow hedges
in\u00a0respect of future transactions, but do not include sensitivities
in\u00a0respect of exchange on non-financial assets or liabilities.
Interest rate risk
The objectives of the Group\u2019s interest rate risk management policy
are to lessen the impact of adverse interest rate movements on
the earnings, cash flow and economic value of the Group.
Additional objectives are to minimise the cost of hedging and the
associated counterparty risk.
In order to manage its interest rate risk, the Group maintains both
floating rate and fixed rate debt. The Group sets targets (within
overall guidelines) for the desired ratio of floating to fixed rate debt
on a net basis (at least 50% fixed on a net basis in the short to
medium term) as a result of regular reviews of market conditions
and strategy by the Corporate Finance Committee and the board
of the main central finance company. Underlying borrowings are
arranged on both a fixed rate and a floating rate basis and, where
appropriate, the Group uses derivatives, primarily interest rate
swaps to vary the fixed and floating mix, or forward starting swaps
to manage the refinancing risk. The interest rate profile of liquid
assets included in net debt are considered to offset floating rate
debt and are taken into account in determining the net interest
rate exposure. At 31 December 2023, the relevant ratio of floating
to fixed rate borrowings after the impact of derivatives was 10:90
(2022: 12:88). On a net debt basis, after offsetting liquid assets and
excluding cash and other liquid assets in Canada, which are
subject to certain restrictions under CCAA protection, the ratio of
floating to fixed rate borrowings was 2:98 (2022: 7:93).
IFRS 7 requires a sensitivity analysis that shows the impact on
the\u00a0income statement and on items recognised directly in other
comprehensive income of hypothetical changes of interest rates
in\u00a0respect of financial assets and liabilities of the Group. All other
variables are held constant although, in practice, market rates
rarely change in isolation. For the purposes of this sensitivity
analysis, financial assets and liabilities with fixed interest rates
are\u00a0not included. The Group considers a 100 basis point change
in\u00a0interest rates a reasonably possible change except where rates
are less than 100 basis points. In these instances, it is assumed
that the interest rates increase by 100 basis points and decrease
to zero for the purpose of performing the sensitivity analysis.
The\u00a0impact is calculated with reference to the financial asset
or\u00a0liability held as at the year-end, unless this is unrepresentative
of the position during the year.
A 100 basis point increase in interest rates would result in pre-tax
profit being \u00a35 million lower (2022: \u00a350 million lower;
2021: \u00a344 million lower). A 100 basis point decrease in interest rates,
or less where applicable, would result in pre-tax profit being
\u00a35\u00a0million higher (2022: \u00a350 million higher; 2021: \u00a347 million higher).
The effect of these interest rate changes on items recognised
directly in other comprehensive income is not material in either year.
Following the decision taken by global regulators in 2018 to replace
Interbank Offered Rates with alternative nearly risk-free rates, such
benchmark rates were expected to be largely discontinued after
2021. Following announcements by the respective regulators,
EURIBOR is expected to continue for the foreseeable future, with
USD LIBOR rates discontinued (other than on a synthetic basis)
from June 2023.
The Group is party to the ISDA fallback protocol and in January
2022, it automatically replaced the GBP LIBOR with economically
equivalent interest rate derivatives referencing SONIA on their
reset date. The four impacted derivatives (cross currency interest
rate swaps) with nominal values totalling \u20ac800\u00a0million
(\u00a3672\u00a0million) matured in October 2023 and were in fair value
hedge relationships which were indexed to GBP LIBOR interest
rates. As of 31 December 2023, the Group does not have any
outstanding financial instruments using the historical benchmarks
that are no longer available.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-651": { "value": "
Credit risk
The Group has no significant concentrations of customer credit
risk. Subsidiaries have policies in place requiring appropriate credit
checks on potential customers before sales commence. The
process for monitoring and managing credit risk once sales to
customers have been made varies depending on local practice
in\u00a0the countries concerned.
Certain territories have bank guarantees, other guarantees or
credit insurance provided in the Group\u2019s favour in respect of Group
trade receivables, the issuance and terms of which are dependent
on local practices in the countries concerned. All derivatives are
subject to ISDA agreements or equivalent documentation.
Cash deposits and other financial instruments give rise to credit
risk on the amounts due from the related counterparties.
Generally, the Group aims to transact with counterparties with
strong investment grade credit ratings. However, the Group
recognises that due to the need to operate over a large geographic
footprint, this will not always be possible. Counterparty credit risk
is managed on a global basis by limiting the aggregate amount and
duration of exposure to any one counterparty, taking into account
its credit rating. The credit ratings of all counterparties are
reviewed regularly.
The Group ensures that it has sufficient counterparty credit
capacity of requisite quality to undertake all anticipated
transactions throughout its geographic footprint, while at the
same time ensuring that there is no geographic concentration
in\u00a0the location of counterparties.
With the following exceptions, the maximum exposure to the
credit risk of financial assets at the balance sheet date is reflected
by the carrying values included in the Group\u2019s balance sheet. The
Group has entered into short-term risk participation agreements
in relation to certain leaf supply arrangements and the maximum
exposure under these would be \u00a351 million (2022: \u00a390 million).
In\u00a0addition, the Group has entered into a guarantee arrangement
to support a short-term bank credit facility with a supply chain
partner. The maximum exposure under the arrangement would
be\u00a0\u00a31 million (2022: \u00a31 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-652": { "value": "
Fair value estimation
The fair values of financial assets and liabilities with maturities
of\u00a0less than one year, other than derivatives, are assumed to
approximate their book values. For other financial instruments
which are measured at fair value in the balance sheet, the basis
for\u00a0fair values is described below.
Fair value hierarchy
In accordance with IFRS 13 classification hierarchy, the following table presents the Group\u2019s financial assets and liabilities that are
measured at fair value:
2023
2022
Notes
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Level 1
\u00a3m
Level 2
\u00a3m
Level 3
\u00a3m
Total
\u00a3m
Assets at fair value
Investment held at fair value
18
527
\u2014
192
719
514
\u2014
186
700
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
10
\u2014
10
\u2014
43
\u2014
43
\u2013 cross-currency swaps
19
\u2014
115
\u2014
115
\u2014
254
\u2014
254
\u2013 forward foreign currency contracts
19
\u2014
165
\u2014
165
\u2014
264
\u2014
264
Assets at fair value
527
290
192
1,009
514
561
186
1,261
Liabilities at fair value
Derivatives relating to
\u2013 interest rate swaps
19
\u2014
187
\u2014
187
\u2014
450
\u2014
450
\u2013 cross-currency swaps
19
\u2014
13
\u2014
13
\u2014
121
\u2014
121
\u2013 forward foreign currency contracts
19
\u2014
195
\u2014
195
\u2014
358
\u2014
358
Liabilities at fair value
\u2014
395
\u2014
395
\u2014
929
\u2014
929
Level 2 financial instruments are not traded in an active market, but the fair values are based on quoted market prices, broker/dealer
quotations, or alternative pricing sources with reasonable levels of price transparency. The Group\u2019s level 2 financial instruments include
OTC derivatives.", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-653": { "value": "
27 Changes in the Group
(a) Acquisitions
The Group acquired certain businesses and other tobacco assets
as noted below. The financial impact of these transactions to the
Group were immaterial individually and in aggregate. Except as
noted, there were no material differences between the fair value
and book values of net assets acquired in business combinations.
On 30 September 2019, the Group acquired control of T wisp
Proprietary Limited, a South African e-cigarette/nicotine Vapour
company for a purchase price of \u00a325\u00a0million of which \u00a36\u00a0million
was deferred and contingent upon future performance in the
market. The final payment of deferred consideration of \u00a33\u00a0million
was paid in 2021.
(b) Non-controlling interests
During 2023, the Group acquired a further 1.31% in Hrvatski
Duhani d.d., at a cost of less than \u00a31\u00a0million, following the
acquisitions in\u00a02022 (3.3% at a cost of \u00a31\u00a0million) and 2021
(2.7%\u00a0at\u00a0a cost of \u00a31\u00a0million).
In 2021, the Group made a capital contribution to Brascuba
Cigarrillos S.A. at a cost of \u00a36 million. This contribution was in
proportion to a capital contribution made by the non-controlling
interest to the company and as such, the Group\u2019s shareholding
remains unchanged.
Also in 2021, as part of a Voluntary Tender Offer for the non-
controlling interests of the Group\u2019s Indonesian subsidiary, the
Group acquired 0.2% additional shares at a cost of \u00a34\u00a0million
as\u00a0explained in note 30.
(c) Other transactions
(i) Organigram
On 11 March 2021, the Group announced a strategic collaboration
agreement with Organigram Inc., a wholly owned subsidiary of
publicly traded Organigram Holdings Inc. (collectively,
Organigram). Under the terms of the transaction, a Group
subsidiary acquired a 19.9% equity stake in Organigram Holdings
Inc. to become its largest shareholder, with the ability to appoint
two directors to Organigram Holdings Inc.\u2019s board of directors and
representation on its investment committee. The Group accounts
for the investment as an\u00a0associate.
The Group\u2019s initial investment of \u00a3129\u00a0million was allocated against
the Group\u2019s share of Organigram\u2019s net assets, including the
recognition of \u00a349\u00a0million of intangibles, and goodwill of
\u00a330\u00a0million, which represents a strategic premium to enter the
legal cannabis market in North America.
As a result of certain acquisitions made by Organigram during
2021, the Group\u2019s shareholding was reduced to 18.8%. In 2022, the
Group exercised its top-up rights and invested a further \u00a34\u00a0million
to maintain its ownership stake.
In November 2023, the Group announced the signing of an
agreement for a further investment in Organigram. At 31 December
2023, the proposed investment of CAD$125\u00a0million (approximately
\u00a374\u00a0million) was subject to customary conditions, including
necessary approvals by the shareholders of Organigram, which was
given on 18 January 2024. On 24 January 2024, BAT made the first
tranche investment of CAD$42\u00a0million (\u00a324\u00a0million) acquiring a
further 12,893,175 common shares of Organigram at a\u00a0price of
CAD$3.22 per share. Subject to certain conditions, the remaining
25,786,350 shares subscribed for shall be issued at the\u00a0same price
in two further equal tranches by the end of August 2024 and
February 2025, respectively. Based on Organigram\u2019s outstanding
share capital at the end of 2023, this investment will\u00a0increase the
Group\u2019s equity position from c.19% to c.45% (restricted to 30%
voting rights) once all three tranches have been\u00a0completed.
(ii) Other transactions and announcements
In April 2023, the Group announced a strategic joint venture
agreement between a Group subsidiary, AJNA BioSciences PBC,
and Charlotte\u2019s Web. Under the terms of the transaction, a Group
subsidiary acquired a 20% stake in the new entity, DeFloria LLC,
at\u00a0a cost of \u00a38\u00a0million (US$10\u00a0million).
On 24 July 2023, ITC Limited (ITC), an associate of the Group in
India, announced a proposed demerger of its \u2018Hotels Business\u2019
under a\u00a0scheme of arrangement by which 60% of the newly
incorporated entity would be held directly by ITC's shareholders
proportionate to\u00a0their shareholding in ITC. On 14 August 2023,
ITC\u2019s Board of Directors approved the scheme of arrangement
subject to necessary regulatory approvals. The demerger is
expected to complete by the end of 2024.
On 26 September 2022, the Group announced a \u00a332\u00a0million
investment in exchange for 16% of Sanity Group GmbH (Sanity
Group), a German based cannabis company which has a well-
established product portfolio of CBD consumer brands and medical
cannabis brands and is actively engaged in the research,
development, and marketing of cannabis products. The Group\u2019s
investment was part of a series-B investment round. As part of
the\u00a0investment agreement, the Group has the right to nominate
directors to the Sanity Group's board and accounts for the
investment as an associate. The Group\u2019s investment was allocated
against the Group\u2019s share of Sanity Group\u2019s net assets, including
the recognition of \u00a34\u00a0million of intangibles, and goodwill of
\u00a328\u00a0million, which represents a strategic premium in expectation
of\u00a0the legalisation of cannabis in Germany and elsewhere in Europe.
In November 2022, the Group announced that it had invested
in\u00a0Charlotte\u2019s Web Holdings, Inc. (Charlotte\u2019s Web), via a
convertible debenture of \u00a348\u00a0million. Charlotte's Web is based in
Colorado, USA, listed on the Toronto Stock Exchange, and holds a
prominent position in innovative hemp extract wellness products
across major retail channels, including food/drug/mass retail, and
natural grocery and vitamin retailers. Their product formats
include tinctures, capsules, chews and topicals. The debenture
is\u00a0currently convertible into a\u00a0non-controlling equity stake in
Charlotte\u2019s Web of approximately 19.9% and is convertible at
BAT\u2019s discretion. Given that the nature of\u00a0the investment as a
convertible loan note does not give the Group any current right to
a share of the earnings or net assets of the investee, despite the
ability to appoint directors, the investment will be recognised at
fair value through profit and loss with fair value changes in the
investment recognised in net finance costs. On conversion of the
loan note, the Group will equity account for its\u00a0investment.
During 2022, the Group increased its ownership of a wholesale
producer and distributor operating in the agriculture sector based
in Uzbekistan, FE 'Samfruit' JSC by 2.8% to 45.4%, for \u00a31\u00a0million.
In\u00a02021, the ownership was increased by 4%, for \u00a31\u00a0million.
The\u00a0Group accounts for the investment as an associate.
In addition, during 2022, the Group made a non-controlling
investment in Steady State LLC (trading as Open Book Extracts),
a\u00a0U.S. based cGMP certified manufacturer and distributor of
cannabinoid ingredients, food products and nutraceuticals, for
\u00a34\u00a0million. A second investment of \u00a34\u00a0million was made in
May\u00a02023. The Group accounts for the investment as an\u00a0associate.
A\u00a0further investment of \u00a38\u00a0million was made in October 2023 by
way of a convertible loan note, which will be accounted for as an
investment at fair value through profit and loss until such time as
it\u00a0is converted into shares and accumulated into the investment
in\u00a0the associate.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-654": { "value": "
(d) Assets held for sale and business disposals
(i) BAT Russia and BAT Belarus
On 11 March 2022, the Group announced the intention to transfer
its Russian business in full compliance with international and local
laws. At that time, the Group had two subsidiaries in Russia (BAT
Russia), being JSC British American Tobacco-SPb and JSC
International Tobacco Marketing Services. In September 2023,
the Group formally entered into an agreement to sell the Group's
Russian and Belarusian businesses to a consortium led by then
members of BAT Russia\u2019s Management team, in compliance with
local and international laws. As previously announced, due to
operational dependencies between BAT Russia and the Group\u2019s
subsidiary in Belarus (International Tobacco Marketing Services
BY) (BAT Belarus), the Belarusian business was included in the sale.
The transaction was completed on 13 September 2023 and, since
completion, the buyer consortium has wholly owned both
businesses. These businesses are\u00a0now known as the ITMS Group.
In accordance with IFRS, the assets and liabilities of the subsidiaries
comprising BAT Russia and BAT Belarus were classified as held-
for-sale as of 31 December 2022 and presented as such on the
balance sheet at an estimated recoverable value. Impairment
charges of \u00a3554\u00a0million and associated costs of \u00a358\u00a0million were
recognised in 2022 as adjusting items.
Upon completion, the businesses were deconsolidated from the
Group's balance sheet. This included assets primarily comprised
of\u00a0\u00a3177\u00a0million of property, plant and equipment and other
non-current assets, \u00a3342 million of trade and other receivables,
\u00a3266\u00a0million of\u00a0cash and cash equivalents and \u00a3211 million of other
current assets principally relating to inventories. In addition,
liabilities primarily composed of \u00a37 million of borrowings and
\u00a3219\u00a0million of trade creditors and other current liabilities were
deconsolidated, resulting in\u00a0a\u00a0net asset position of \u00a3770 million.
Proceeds of \u00a3425 million were received in 2023, resulting in
a partial reversal of \u00a3195 million of the previously recognised
impairment. In\u00a0addition to this, \u00a3554 million of foreign exchange
previously recognised in the statement of other comprehensive
income has been reclassified to the income statement upon
completion of the transaction, which has been treated as a non-cash
adjusting item. This resulted in a net charge to the income statement
of \u00a3353 million which includes disposal-related costs of\u00a0\u00a33 million
and \u00a39 million of foreign exchange gains on proceeds received.
As part of the disposal agreements, the Group holds call options
to\u00a0reacquire the ITMS Group entities. No value has been ascribed
to\u00a0these options as they cannot be sold or transferred outside the
BAT Group, they expire within two years of the completion of the
transaction, and current sanctions and counter sanctions would
restrict the ability of the Group to exercise these options. In
addition, no value has been ascribed to the options the\u00a0Group
holds to reacquire certain trademarks and brands utilised by the
ITMS businesses which only expire after 100 years. The likelihood
of exercise of these options within the foreseeable future is
remote, and assuming the higher returns that any market
participant would require given the perceived risk of investing in
Russia going forwards, and a consequent high discount rate, any
value associated with exercising the options would be immaterial.
Judgement is required to determine whether or not the disposal
of\u00a0any particular product, business or end market from the Group
would be significant enough to be classified as a discontinued
operation. The Group has established criteria as to what would
meet such a\u00a0definition, including: the disposal of an entire
geographic segment as currently disclosed within note 2;
the\u00a0disposal of a significant portion of the same region as part
of\u00a0a\u00a0unified plan; the disposal of any individual business unit
representing more than 10% of Group revenue or 10% of Group
profit from operations; and the withdrawal from a product
category. Management have concluded that the disposal of
the\u00a0Russian and Belarusian businesses does not qualify to be
presented as discontinued operations.
(ii) B.A.T. Pars Company PJSC (BAT Pars)
On 25 June 2021, the Group agreed to dispose of its Iranian
subsidiary, BAT Pars to DTM ME FZE LLC. Completion took place
on 6\u00a0August 2021. \u00a3272\u00a0million in respect of foreign exchange
previously recognised in other comprehensive income was
reclassified to the income statement and an impairment charge
and associated costs of \u00a388\u00a0million was recognised in the income
statement and treated as an adjusting item.
The value of the consideration (\u20ac64\u00a0million) remains outstanding
at\u00a031 December 2023, and \u00a356\u00a0million (2022: \u00a356\u00a0million) is
recognised as a current receivable. Given the ongoing political
situation, heightened sanctions and other uncertainties coupled
with the passage of time the receivable has been outstanding,
the\u00a0Group has recognised an expected credit loss of \u00a328 million
at\u00a031 December 2023. In 2022, as a result of the unwind of
discounting on the deferred proceeds and a true-up on the
completion of accounts, a credit of \u00a36\u00a0million (2021: \u00a32\u00a0million)
was\u00a0recognised. The discount was unwound in full in 2022.
In addition, in 2021, \u00a324\u00a0million of related investments held at fair
value were provided against as a charge to net finance costs given
uncertainties regarding recovery of these funds. During 2023,
\u00a34\u00a0million (2022: \u00a317\u00a0million) was recovered in respect of these funds.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-655": { "value": "
28 Share-based payments
The Group operates a number of share-based payment arrangements of which the three principal ones are:
Performance Share Plan (PSP):
Since 2020, performance-related conditional awards under which shares are released automatically following a three-year vesting period
(five-year period for the Executive Directors). Awards granted up to 2019 are nil-cost options exercisable after three years from date of
grant (five years for Executive Directors) with a contractual life of 10 years .
For awards granted in 2021, 2020 and 2019, vesting is subject to performance conditions measured over a three-year period (for all
awards), based on earnings per share (40% of grant), operating cash flow (20% of grant), total shareholder return (20% of grant)\u00a0and net
turnover (20% of grant). Total shareholder return combines the share price and dividend performance of the Company by reference to
a\u00a0comparator group.
For 2022 and 2023 awards, the performance conditions are based on earnings per share (30% of grant), operating cash flow (20% of
grant), total shareholder return (20% of grant), net turnover (15% of the grant) and New Categories revenue growth (15% of the grant).
Participants are not entitled to dividends prior to the vesting or exercise of the awards. A cash equivalent dividend accrues through the
vesting period (other than for the Executive Directors where additional shares are delivered in lieu of cash) and is paid on vesting. Both
equity and cash-settled PSP awards are granted in March each year.
In the U.S., PSP awards are made over BAT American Depository Shares (ADSs).
Restricted Share Plan (RSP):
Introduced in 2020, conditional awards under which shares are released three years from date of grant, subject to a continuous
employment condition during the three-year vesting period. Participants are not entitled to dividends prior to shares vesting. A cash
equivalent dividend accrues through the vesting period and is paid on vesting. Both equity and cash settled RSP awards are granted
in\u00a0March or September.
In the U.S., RSP awards are made over BAT American Depository Shares (ADSs).
Deferred Share Bonus Scheme (DSBS):
Granted in connection with annual bonuses, conditional awards under which shares are released three years from date of grant subject
to a continuous employment condition during the three-year vesting period. A cash equivalent dividend accrues through the vesting
period and is paid quarterly (other than for the Executive Directors where additional shares are delivered in lieu of cash). Both equity
and\u00a0cash-settled DSBS awards are granted in March each year.
The Group also has a number of other arrangements which are not material for the Group and these are as follows:
Sharesave Scheme (SAYE)
Options are granted in March each year by invitation at a 20% discount to the market price. Options under this equity-settled scheme
are exercisable at the end of a three-year or five-year savings contract. Participants are not entitled to dividends prior to the exercise
of\u00a0the options. The maximum amount that can be saved by a participant in this way is \u00a36,000 in any tax year.
Share Reward Scheme (SRS)
Free shares are granted in April each year (up to an equivalent of \u00a33,600 in any year) under the equity-settled schemes and are subject
to\u00a0a three-year holding period. Participants receive dividends during the holding period which are reinvested to buy further shares.
The\u00a0shares are held in a UK-based trust and are normally capable of transfer to participants tax-free after a five-year holding period.
International Share Reward Scheme (ISRS)
Conditional shares are granted in April each year (up to an equivalent of \u00a33,600 in any year) subject to a three-year vesting period. Dividend
equivalents accrue through the vesting period and additional shares are delivered at vesting. Awards may be equity or cash-settled.
Partnership Share Scheme
Employees can allocate part of their pre-tax salary to purchase shares in British American Tobacco p.l.c. (maximum \u00a31,800 in any year).
The shares purchased are held in a UK-based trust and are normally capable of transfer to participants tax-free after a five-year
holding\u00a0period.
The amounts recognised in the income statement in respect of share-based payments were as follows:
2023
2022
2021
Notes
Equity-
settled
\u00a3m
Cash-
settled
\u00a3m
Equity-
settled
\u00a3m
Cash-
settled
\u00a3m
Equity-
settled
\u00a3m
Cash-
settled
\u00a3m
PSP & RSP
28(a)
27
2
38
1
30
\u2014
DSBS
28(b)
38
1
36
3
39
2
Other schemes
6
\u2014
7
\u2014
7
\u2014
Total recognised in the income statement
3
71
3
81
4
76
2
Share-based payment liability
The Group issues to certain employees cash-settled share-based payments that require the Group to pay the intrinsic value of these
share-based payments to the employee at the date of exercise. The Group has recorded liabilities in respect of vested and unvested
grants at the end of 2023 and 2022:
2023
2022
Vested
\u00a3m
Unvested
\u00a3m
Vested
\u00a3m*
Unvested
\u00a3m
PSP & RSP
(0.4)
0.8
(0.3)
1.9
DSBS
\u2014
3.1
0.5
6.6
Total liability
(0.4)
3.9
0.2
8.5
Note:
*The reduction in the liabilities for vested LTIPs was due to shares being exercised at prices lower than the share price at date of grant.
(a) PSP & RSP
Details of the movements for the equity- and cash-settled LTI schemes during the years ended 31 December 2023 and 31 December
2022, were as follows:
2023
2022
Equity-settled
Number
of options
in thousands
Cash-settled
Number
of options
in thousands
Equity-settled
Number
of options
in thousands
Cash-settled
Number
of options
in thousands
Outstanding at start of year
8,960
196
9,891
243
Granted during the period
3,379
94
2,927
58
Exercised during the period
(2,401)
(51)
(1,606)
(58)
Forfeited during the period
(2,132)
(41)
(2,252)
(47)
Outstanding at end of year
7,806
198
8,960
196
Exercisable at end of year
513
24
661
40
As at 31 December 2023, the Group has 7,806,000 shares (2022: 8,960,000 shares) outstanding which includes 1,527,898 shares
(2022:\u00a01,749,762 shares) which are related to Reynolds American LTI awards from which nil shares (2022: nil shares) are exercisable at\u00a0the
end of the year.
The weighted average British American Tobacco p.l.c. share price at the date of exercise for share options exercised during the period
was \u00a327.65 (2022: \u00a332.84; 2021: \u00a327.67) for equity-settled and \u00a325.85 (2022: \u00a333.01; 2021: \u00a327.59) for cash-settled options.
The weighted average British American Tobacco p.l.c. share price for ADS on the New York Stock Exchange at the date of exercise for
share options exercised during the period relating to equity-settled Reynolds American LTIP awards was US$39.39 (2022: US$38.37;
2021: US$35.93).
The outstanding shares for the year ended 31 December 2023 had a weighted average remaining contractual life of 1.5 years
(2022: \u00a01.8 \u00a0years; 2021: 3.7 years) for the equity-settled scheme, 1.8 years for Reynolds American equity-settled scheme (2022: 1.80 years;
2021: 1.70\u00a0years) and 1.5 years (2022: 1.7 years; 2021: 4.1 years) for the cash-settled share-based payment arrangements.
(b) Deferred Share Bonus Scheme
Details of the movements for the equity- and cash-settled DSBS scheme during the years ended 31 December 2023 and 31 December
2022, were as follows:
2023
2022
Equity-settled
Number
of options
in thousands
Cash-settled
Number
of options
in thousands
Equity-settled
Number
of options
in thousands
Cash-settled
Number
of options
in thousands
Outstanding at start of year
4,015
141
4,141
223
Granted during the period
1,675
211
1,616
85
Exercised during the period
(1,743)
(81)
(1,609)
(159)
Forfeited during the period
(96)
(10)
(133)
(8)
Outstanding at end of year
3,851
261
4,015
141
Exercisable at end of year
\u2014
1
1
14
The weighted average British American Tobacco p.l.c. share price at the date of exercise for share options exercised during the financial
year was \u00a327.39 (2022: \u00a332.20; 2021: \u00a327.58) for equity-settled and \u00a325.56 (2022: \u00a332.50; 2021: \u00a327.70) for cash-settled options.
The outstanding shares for the year ended 31 December 2023 had a weighted average remaining contractual life of 1.3 years
(2022:\u00a01.3 \u00a0years; 2021: 1.3 years) for the equity-settled scheme and 1.3 years (2022: 1.1 years; 2021: 1.3 years) for the cash-settled scheme.
Valuation assumptions
Assumptions used in the Black-Scholes models to determine the fair value of share options at grant date were as follows:
2023
2022
PSP & RSP
DSBS
PSP & RSP
DSBS
Expected volatility (%)
27.0
27.0
27.0
27.0
Average expected term to exercise (years)
3.0
3.0
3.0
3.0
Risk-free rate (%)
3.5
3.5
1.4
1.4
Expected dividend yield (%)
7.7
7.7
6.8
6.8
Share price at date of grant (\u00a3)
29.71
29.71
32.18
32.18
Fair value at grant date (\u00a3)*
23.15 / 23.61
23.61
27.46/26.28
26.28
Fair value at grant date (\u00a3)* - Management Board
20.46 / 23.61
23.61
24.8/26.28
26.28
Note:
*Where two figures have been quoted for the Long-Term Incentive Plan, the numbers relate to PSP and RSP awards, respectively.
Market condition features were incorporated into the Monte-Carlo models for the total shareholder return elements of the PSP,
in\u00a0determining fair value at grant date. Assumptions used in these models were as follows:
2023
PSP
2022
PSP
Average share price volatility FMCG comparator group (%)
24
23
Average correlation FMCG comparator group (%)
29
31
Fair values determined from the Black-Scholes and Monte-Carlo models use assumptions revised at the end of each reporting period
for\u00a0cash-settled share-based payment arrangements.
The expected British American Tobacco p.l.c. share price volatility was determined taking account of the return index (the share price
index plus the dividend reinvested) over a five-year period. The FMCG share price volatility and correlation was also determined over
the\u00a0same periods. The average expected term to exercise used in the models has been adjusted, based on management\u2019s best estimate,
for the effects of non-transferability, exercise restrictions and behavioural conditions, forfeiture and historical experience.
The risk-free rate has been determined from market yield curves for government gilts with outstanding terms equal to the average
expected term to exercise for each relevant grant. The expected dividend yield was determined by calculating the yield from the last two
declared dividends divided by the grant share price.
In addition to these valuation assumptions, LTI awards, excluding RSP, contain earnings per share performance conditions. As these are non-
market performance conditions they are not included in the determination of fair value of share options at the grant date, however, they are
used to estimate the number of awards expected to vest. This payout calculation is based on expectations published in analysts\u2019 forecasts.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-656": { "value": "
29 Group employees (revised 1)
The average number of persons employed by the Group and its associates during the year, including Directors, was 75,452 ( 2022 : 77,951).
2023
Number
2022
Number
U.S.
3,861
4,274
AME
32,948
34,162
APMEA
13,030
13,641
Subsidiary undertakings
49,839
52,077
Associates
25,613
25,874
75,452
77,951
Note:
1. Effective from 2023, the Group revised its regional structure from four regions to three, with the comparator data provided on this revised basis.
Included within the employee numbers for AME are certain employees in the UK in respect of central functions. Some of the costs
of\u00a0these employees are allocated or charged to the various regions and markets in the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-657": { "value": "
30 Related party disclosures
The Group has a number of transactions and relationships with related parties, as defined in IAS 24 Related Party Disclosures , all
of \u00a0which \u00a0are undertaken in the normal course of business. Transactions with CTBAT International Limited (a joint operation) are not
included in these disclosures as the results are immaterial to the Group.
Intercompany transactions and balances are eliminated on consolidation and therefore are not disclosed.
Transactions and balances with associates relate mainly to the sale and purchase of cigarettes and tobacco leaf. The Group\u2019s share
of\u00a0dividends from associates, included in other income in the table below, was \u00a3559 million (2022 : \u00a3438 million; 2021: \u00a3392 million).
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Transactions
\u2013 revenue
523
494
524
\u2013 purchases
(178)
(190)
(123)
\u2013 other income
560
441
393
\u2013 other expenses
(6)
(1)
(6)
Amounts receivable at 31 December
48
51
48
Amounts payable at 31 December
(4)
(4)
(3)
In November 2023, the Group announced the signing of an agreement for a further investment in Organigram. At 31 December 2023,
the\u00a0proposed investment of CAD$125\u00a0million (approximately \u00a374\u00a0million) was subject to customary conditions, including necessary
approvals by the shareholders of Organigram, which was given on 18 January 2024. On 24 January 2024, BAT made the first tranche
investment of CAD$42\u00a0million (\u00a324\u00a0million), acquiring a further 12,893,175 common shares of Organigram at a price of CAD$3.22 per
share. Subject to certain conditions, the remaining 25,786,350 shares subscribed for shall be issued at the same price in two further
equal tranches by the end of August 2024 and February 2025, respectively. Based on Organigram\u2019s outstanding share capital at the end
of 2023, this investment will increase the Group\u2019s equity position from c.19% to c.45% (restricted to 30% voting rights) once all three
tranches have been completed.
In addition, as mentioned in note 27, in 2023, the Group also acquired 20% of DeFloria for \u00a38\u00a0million and increased its ownership in Steady
State LLC (trading as Open Book Extracts) from 5.76% to 10.8% for \u00a34\u00a0million. In October 2023, a further investment of \u00a38\u00a0million was
made in Steady State LLC by way of a convertible loan note.
During 2023, the Group acquired a further 1.31% in Hrvatski Duhani d.d., at a cost of less than \u00a31\u00a0million, following the acquisitions in 2022
(3.3% at a cost of \u00a31\u00a0million) and 2021 (2.7%\u00a0at\u00a0a cost of \u00a31\u00a0million).
In 2022, as mentioned in note 27, the Group made a \u00a332\u00a0million investment in exchange for 16% of Sanity Group GmbH and made
a non-controlling investment in Steady State LLC for \u00a34\u00a0million.
During 2022, the Group increased its ownership of a wholesale producer and distributor operating in the agriculture sector based
in\u00a0Uzbekistan, FE\u00a0'Samfruit' JSC to 45.40% for \u00a31\u00a0million. In 2021, the Group increased its ownership to 42.61%, for \u00a31\u00a0million.
In November 2022, the Group invested in Charlotte's Web via a convertible debenture of \u00a348\u00a0million which is currently convertible into
a\u00a0non-controlling equity stake of approximately 19.9% (as explained in note 27(c)).
In 2021, the Group made a capital contribution in Brascuba Cigarrillos S.A. at a cost of \u00a36 million. There was a capital reduction in CTBAT
International Limited of approximately US$171\u00a0million with funds remitted prorata to investors in 2021.
On 5 October 2021, PT Bentoel Internasional Investama Tbk (Bentoel) announced its intention to delist from the Indonesia Stock
Exchange and go private by conducting a Voluntary Tender Offer (VTO). As part of this, in two phases in November and December 2021,
the Group acquired an additional 0.2% of shares in Bentoel from independent shareholders at a cost of \u00a34\u00a0million and terminated the
total return swap (as explained in note 32).
As explained in note 15, in 2022 the Group provided a temporary liquidity facility to the main UK pension fund. As at 31 December 2023
this facility was undrawn.
The Group and Organigram also entered into a Product Development Collaboration Agreement following which a Centre of Excellence
has been established to focus on developing the next generation of cannabis products with an initial focus on cannabidiol (CBD).
As a result of the implementation of the EU Single-Use Plastic Directive in certain EU countries, the Group, along with other tobacco
manufacturers, established Producer Responsibility Organisations for the management of the Extended Producer Responsibility
obligations relating to tobacco product butt filter waste collection. The costs incurred by the Group in relation to this waste disposal
is\u00a0included in note 6(l).
The key management personnel of British American Tobacco consist of the members of the Board of Directors of British American
Tobacco p.l.c. and the members of the Management Board. No such person had any material interest during the year in a contract of
significance (other than a service contract) with the Company or any subsidiary company. The term key management personnel in this
context includes their close family members.
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
The total compensation for key management personnel, including Directors, was:
\u2013 salaries and other short-term employee benefits
17
19
18
\u2013 post-employment benefits
1
1
1
\u2013 share-based payments
13
17
16
31
37
35
The following table, which is not part of IAS 24 disclosures, shows the aggregate emoluments of the Directors of the Company.
Executive Directors
Chair
Non-Executive Directors
Total
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
Salary; fees; benefits;
incentives
\u2013 salary
1,644
2,129
2,119
1,644
2,129
2,119
\u2013 fees
688
670
727
1,059
1,027
1,045
1,747
1,697
1,772
\u2013 taxable benefits
395
449
420
17
59
55
31
78
2
443
586
477
\u2013 short-term incentives
1,650
3,761
4,128
1,650
3,761
4,128
\u2013 long-term incentives
1,371
7,888
3,399
1,371
7,888
3,399
Sub-total
5,060
14,227
10,066
705
729
782
1,090
1,105
1,047
6,855
16,061
11,895
Pension; other
emoluments
\u2013 pension
248
320
318
248
320
318
\u2013 other emoluments
2
6
6
2
6
6
Sub-total
250
326
324
250
326
324
Total emoluments
5,310
14,553
10,390
705
729
782
1,090
1,105
1,047
7,105
16,387
12,219
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-658": { "value": "
The key management personnel of British American Tobacco consist of the members of the Board of Directors of British American
Tobacco p.l.c. and the members of the Management Board. No such person had any material interest during the year in a contract of
significance (other than a service contract) with the Company or any subsidiary company. The term key management personnel in this
context includes their close family members.
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
The total compensation for key management personnel, including Directors, was:
\u2013 salaries and other short-term employee benefits
17
19
18
\u2013 post-employment benefits
1
1
1
\u2013 share-based payments
13
17
16
31
37
35
The following table, which is not part of IAS 24 disclosures, shows the aggregate emoluments of the Directors of the Company.
Executive Directors
Chair
Non-Executive Directors
Total
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
2023
\u00a3'000
2022
\u00a3'000
2021
\u00a3'000
Salary; fees; benefits;
incentives
\u2013 salary
1,644
2,129
2,119
1,644
2,129
2,119
\u2013 fees
688
670
727
1,059
1,027
1,045
1,747
1,697
1,772
\u2013 taxable benefits
395
449
420
17
59
55
31
78
2
443
586
477
\u2013 short-term incentives
1,650
3,761
4,128
1,650
3,761
4,128
\u2013 long-term incentives
1,371
7,888
3,399
1,371
7,888
3,399
Sub-total
5,060
14,227
10,066
705
729
782
1,090
1,105
1,047
6,855
16,061
11,895
Pension; other
emoluments
\u2013 pension
248
320
318
248
320
318
\u2013 other emoluments
2
6
6
2
6
6
Sub-total
250
326
324
250
326
324
Total emoluments
5,310
14,553
10,390
705
729
782
1,090
1,105
1,047
7,105
16,387
12,219
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-659": { "value": "
31 Contingent liabilities and financial commitments
1. The Group is subject to contingencies pursuant to
requirements that it complies with relevant laws, regulations
and standards.
2. Failure to comply could result in restrictions in operations,
damages, fines, increased tax, increased cost of compliance,
interest charges, reputational damage or other sanctions.
These matters are inherently difficult to quantify. In cases
where the Group has an obligation as a result of a past event
existing at the balance sheet date, if it is probable that an
outflow of economic resources will be required to settle the
obligation and if the amount of the obligation can be reliably
estimated, a provision will be recognised based on best
estimates and management judgement.
3. There are, however, contingent liabilities in respect of
litigation, taxes in some countries and guarantees for which
no provisions have been made.
General Litigation Overview
4. There are a number of legal and regulatory actions,
proceedings and claims against Group companies related to
tobacco and New Category products that are pending in a
number of jurisdictions. These proceedings include, among
other things, claims for personal injury (both individual claims
and class actions) and claims for economic loss arising from
the treatment of smoking- and health-related diseases (such
as medical recoupment claims brought by local governments).
5. The plaintiffs in these cases seek recovery on a variety of legal
theories, including negligence, strict liability in tort, design
defect, failure to warn, fraud, misrepresentation, violations of
unfair and deceptive trade practices statutes, conspiracy,
public nuisance, medical monitoring and violations of
competition and antitrust laws. The plaintiffs seek various
forms of relief, including compensatory and, where available,
punitive damages, treble or multiple damages and statutory
damages and penalties, creation of medical monitoring and
smoking cessation funds, disgorgement of profits, attorneys\u2019
fees, and injunctive and other equitable relief.
6. Although alleged damages often are not determinable from a
complaint, and the law governing the pleading and calculation of
damages varies from jurisdiction to jurisdiction, compensatory
and punitive damages have been specifically pleaded in a
number of cases, sometimes in amounts ranging into the
hundreds of millions and even hundreds of billions of sterling.
7. The Group has successfully managed tobacco-related
litigation, and a very high percentage of the tobacco-related
litigation claims brought against Group companies, including
Engle progeny cases, continue to be dismissed at or before
trial. Based on their experience in tobacco-related litigation
and the strength of the defences available to them in such
litigation, the Group\u2019s companies believe that their successful
defence of tobacco-related litigation in the past will continue
in the future.
8. It is the policy of the Group to defend tobacco-related
litigation claims vigorously; generally, Group companies do not
settle such claims. However, Group companies may enter into
settlement discussions in certain cases, if they believe it is in
their best interests to do so. Exceptions to this approach
include, but are not limited to, actions taken pursuant to \u2018offer
of judgment\u2019 statutes and Filter Cases, as defined below. An
\u2018offer of judgment,\u2019 if rejected by the plaintiff, preserves the
Group\u2019s right to recover attorneys\u2019 fees under certain statutes
in the event of a verdict favourable to the Group. Such offers
are sometimes made through court-ordered mediations.
Other settlements by Group companies include the State
Settlement Agreements (as defined in paragraph 39 below),
the funding by various tobacco companies of a US$5.2\u00a0billion
(approximately \u00a34.1\u00a0billion) trust fund contemplated by the
Master Settlement Agreement (as described in paragraph 39
below) to benefit tobacco growers, the original Broin flight
attendant case (as described in paragraph 38, note 31(o)
below), and most of the Engle progeny cases pending in U.S.
federal court (as described in paragraph 27 et seq. below),
after the initial docket of over 4,000 such cases was reduced
to approximately 400 cases. The Group believes that the
circumstances surrounding these claims are readily
distinguishable from the current categories of tobacco-
related litigation claims involving Group companies.
9. Although the Group intends to defend all pending cases
vigorously, and believes that the Group\u2019s companies have valid
bases for appeals of adverse verdicts and valid defences to all
actions, and that an outflow of resources related to any
individual case is not considered probable, litigation is subject
to many uncertainties, and, generally, it is not possible to
predict the outcome of any particular litigation pending against
Group companies, or to reasonably estimate the amount or
range of any possible loss. Furthermore, a number of political,
legislative, regulatory and other developments relating to the
tobacco industry and cigarette smoking have received wide
media attention. These developments may negatively affect
the outcomes of tobacco-related legal actions and encourage
the commencement of additional similar litigation. Therefore,
the Group does not provide estimates of the financial effect of
the contingent liabilities represented by such litigation, as such
estimates are not practicable.
10. The following table lists the categories of the tobacco-related
actions pending against Group companies as at 31\u00a0December
2023 and the increase or decrease from the number of cases
pending against Group companies as at 31\u00a0December 2022.
Details of the quantum of past judgments awarded against
Group companies, the majority of which are under appeal, are
also identified along with any settlements reached during the
relevant period. Given the volume and more active nature of
the Engle progeny cases and the Filter Cases in the U.S.
described below, and the fluctuation in the number of such
cases and amounts awarded from year to year, the Group
presents judgment or settlement figures for these cases on
a\u00a0three-year basis. Where no quantum is identified, either
no\u00a0judgment has been awarded against a Group company,
or\u00a0where a verdict has been reached no quantification of
damages has been given, or no settlement has been entered
into. Further details on the judgments, damages
quantification and settlements are included within the case
narratives below. For a discussion of the non-tobacco related
litigation pending against the Group, see note 31,
paragraph\u00a081, et seq.
Case Type
Notes
Case Numbers as at
31 December 2023
(note 31(a))
Case Numbers as at
31 December 2022
(note 31(a))
Change in Number
Increase/(decrease)
U.S. tobacco-related actions
Medical reimbursement cases
31(b)
2
2
No change
Class actions
31(c)
19
20
(1)
Individual smoking and health cases
31(d)
202
206
(4)
Engle Progeny Cases
31(e)
305
665
(360)
Broin II Cases
31(f)
1,171
1,183
(12)
Filter Cases
31(g)
35
46
(11)
State Settlement Agreements \u2013 Enforcement and Validity
31(h)
4
1
3
Non-U.S. tobacco-related actions
Medical reimbursement cases
18
18
No change
Class actions
31(i)
12
12
No change
Individual smoking and health cases
31(j)
54
51
3
(Note 31(a)) This includes cases to which the Reynolds American Inc. (Reynolds American) group companies were a party at such date.
(Note 31(b)) This category of cases includes the Department of Justice action. See note 31, paragraphs 20-23.
(Note 31(c)) See note 31, paragraphs 24-36.
(Note 31(d)) See note 31, paragraphs 37-38.
(Note 31(e)) See note 31, paragraphs 27-36.
(Note 31(f)) See note 31, paragraph 38.
(Note 31(g)) See note 31, paragraph 38.
(Note 31(h)) See note 31, paragraphs 39-54.
(Note 31(i)) Outside the United States, there were 12 class actions being brought against Group companies as at 31 December 2023.
These\u00a0include class actions in the following jurisdictions: Canada (11) and Venezuela (one). For a description of the Group companies\u2019
non-U.S. class actions, see note 31, paragraphs 67-79. For a description of the Quebec Class Actions, see note 31, paragraph 73. All of the
class actions in Canada are currently stayed pursuant to a court order. See note 31, paragraph 57.
(Note 31(j)) As at 31 December 2023, the jurisdictions with the most active individual cases against Group companies were, in descending
order: Chile (17), Brazil (15), Italy (eight), Canada (five), Argentina (five) and Ireland (two). There were a further two jurisdictions with one
active case only. For further information, see note 31, paragraph 80.
11. Certain terms and phrases used in this note 31 may require some explanation.
a)\u2018Judgment\u2019 or \u2018final judgment\u2019 refers to the final decision of the court resolving the dispute and determining the rights and
obligations of the parties. At the trial court level, for example, a final judgment generally is entered by the court after a jury verdict
and after post-verdict motions have been decided. In most cases, the losing party can appeal a verdict only after a final judgment
has been entered by the trial court.
b)\u2018Damages\u2019 refers to the amount of money sought by a plaintiff in a complaint, or awarded to a party by a jury or, in some cases,
by a judge. \u2018Compensatory damages\u2019 are awarded to compensate the prevailing party for actual losses suffered, if liability is
proved. In cases in which there is a finding that a defendant has acted wilfully, maliciously or fraudulently, generally based on
a\u00a0higher burden of proof than is required for a finding of liability for compensatory damages, a plaintiff also may be awarded
\u2018punitive damages\u2019. Although damages may be awarded at the trial court stage, a losing party may be protected from paying
any\u00a0damages until all appellate avenues have been exhausted by posting a supersedeas bond. The amount of such a bond is
governed by the law of the relevant jurisdiction and generally is set at the amount of damages plus some measure of statutory
interest, modified at the discretion of the appropriate court or subject to limits set by a court or statute.
c)\u2018Settlement\u2019 refers to certain types of cases in which cigarette manufacturers, including R. J. Reynolds Tobacco Co. (RJRT),
Brown & Williamson Tobacco Corporation (now known as Brown & Williamson Holdings, Inc.) (B&W), and Lorillard Tobacco
Company (Lorillard Tobacco), have agreed to resolve disputes with certain plaintiffs without resolving the cases through trial.
d)All sums set out in note 31 have been converted to GBP and US$ using the following end closing rates applicable for
31\u00a0December 2023, which differ from the rates at the time any related provision was recorded on the balance sheet: GBP 1 to
US$ 1.2748, GBP\u00a01 to CAD$ 1.6810, GBP 1 to EGP (Egyptian Pound) 39.4232, GBP 1 to EUR 1.1540, GBP 1 to BRL 6.1925 (Brazilian
Real), GBP 1 to\u00a0AOA 1,072.9660 (Angolan Kwanza), GBP 1 to ARS 1,030.6707 (Argentine Peso), GBP 1 to MZN 81.4087
(Mozambican Metical), GBP 1 to NGN 1,144.1330 (Nigerian Naira), GBP 1 to KRW 1,641.8100 (South Korean Won), GBP 1 to HRK
8.6950 (Croatian Kuna), GBP 1 to JPY\u00a0179.7213 (Japanese Yen), GBP 1 to SAR 4.7805 (Saudi Riyal), and GBP 1 to TRY 37.6499
(Turkish Lira).
U.S. Tobacco Litigation
12. Group companies, notably RJRT (individually and as successor
by merger to Lorillard Tobacco) and B&W as well as other
leading cigarette manufacturers, are defendants in a number of
product liability cases. In a number of these cases, the amounts
of compensatory and punitive damages sought are significant.
13. The total number of U.S. tobacco product liability cases
pending as at 31 December 2023 involving RJRT, B&W and/or
Lorillard Tobacco was approximately 1,748.
14. Since many of these pending cases seek unspecified
damages, it is not possible to quantify the total amounts being
claimed, but the aggregate amounts involved in such litigation
are significant, possibly totalling billions of US dollars. The
cases fall into four broad categories: medical reimbursement
cases; class actions; individual cases; and other claims.
15. RJRT (individually and as successor by merger to Lorillard
Tobacco), American Snuff Co., Santa Fe Natural Tobacco
Company, Inc. (SFNTC), R.J. Reynolds Vapor Company
(RJR\u00a0Vapor), Reynolds American, Lorillard Inc., other Reynolds
American affiliates and indemnitees, including but not limited
to B&W (collectively, the Reynolds Defendants), believe that
they have valid defences to the tobacco-related litigation
claims against them, as well as valid bases for appeal of
adverse verdicts against them. The Reynolds Defendants
have, through their counsel, filed pleadings and memoranda
in\u00a0pending tobacco-related litigation that set forth and
discuss a number of grounds and defences that they and their
counsel believe have a valid basis in law and fact.
16. Scheduled trials. Trial schedules are subject to change, and
many cases are dismissed before trial. In the U.S., there are
44\u00a0cases, exclusive of Engle progeny cases, scheduled for trial
as at 31 December 2023 through 31 December 2024, for the
Reynolds Defendants: 33 individual smoking and health cases,
nine Filter Cases, one class action case and one other case.
There are also approximately 28 Engle progeny cases against
RJRT (individually and as successor to Lorillard Tobacco) and
B&W scheduled for trial through 31 December 2024. It is not
known how many of these cases will actually be tried.
17. Trial results. From 1 January 2021 through 31 December 2023,
58\u00a0trials occurred in individual smoking and health, Engle
progeny, and patent cases in which the Reynolds Defendants
were defendants, including 11 where mistrials were declared.
Verdicts in favour of the Reynolds Defendants and, in some
cases, other defendants, were returned in 15 cases, tried in
Florida (eight), Oregon (one), Massachusetts (four), Illinois
(one) and District of Columbia (one). Verdicts in favour of
the\u00a0plaintiffs were returned in 32 cases, tried in Florida (23),
Massachusetts (three), New Mexico (two), Oregon (two),
Virginia (one) and North Carolina (one). Two of the cases
(in\u00a0Florida) were dismissed during trial. One of the cases
(in\u00a0Florida) was a punitive damages re-trial that was retried
twice (the first retrial resulted in a plaintiff verdict; the second
retrial resulted in a defense verdict).
(a) Medical Reimbursement Cases
18. These civil actions seek to recover amounts spent by
government entities and other third-party providers on
healthcare and welfare costs claimed to result from illnesses
associated with smoking.
19. As at 31 December 2023, one U.S. medical reimbursement
suit\u00a0(Crow Creek Sioux Tribe v. American Tobacco Co., filed in
1997) was pending against RJRT, B&W and Lorillard Tobacco
in a Native American tribal court in South Dakota. The
plaintiffs seek to recover actual and punitive damages,
restitution, funding of a clinical cessation programme,
funding\u00a0of a corrective public education programme, and
disgorgement of unjust profits from sales to minors. There
has been no recent activity in this case, and no other medical
reimbursement suits are pending against these companies
by\u00a0county or other political subdivisions of the states.
U.S. Department of Justice Action
20. On 22 September 1999, the U.S. Department of Justice (DOJ)
brought an action in the U.S. District Court for the District of
Columbia against various industry members, including RJRT,
B&W, Lorillard Tobacco, B.A.T Industries p.l.c. (Industries) and
Investments (United States v. Philip Morris USA Inc.). The DOJ
initially sought (i) recovery of certain federal funds expended
in\u00a0providing health care to smokers who developed alleged
smoking-related diseases and (ii) equitable relief under the
civil provisions of the Racketeer Influenced and Corrupt
Organizations Act (RICO), including (a) disgorgement of
roughly US$280\u00a0billion (approximately \u00a3219.6\u00a0billion) in profits
allegedly earned from a purported racketeering \u2018enterprise\u2019 -
a\u00a0remedy the U.S. Court of Appeals for the DC Circuit ruled in
February 2005 was not available - and (b) certain \u2018corrective
communications\u2019. In September 2000, the district court
dismissed Industries for lack of personal jurisdiction and
dismissed the health care cost recovery claims.
21. After a roughly nine-month non-jury trial of the remaining
RICO claims, the district court issued its Final Judgment and
Remedial Order (the Remedial Order) on 17 August 2006.
That\u00a0order found certain defendants, including RJRT, B&W,
Lorillard Tobacco and Investments, had violated RICO,
imposed financial penalties and enjoined the defendants from
committing future racketeering acts, participating in certain
trade organisations, making misrepresentations concerning
smoking and health and youth marketing, and using certain
brand descriptors such as \u2018low tar\u2019, \u2018light\u2019, \u2018ultra-light\u2019, \u2018mild\u2019
and \u2018natural\u2019. The Remedial Order also required the
defendants to issue \u2018corrective communications\u2019 on five
subjects, including smoking and health and addiction, and
to\u00a0comply with further undertakings, including maintaining
websites of historical corporate documents and
disseminating certain marketing information on a confidential
basis to the government. In addition, the district court placed
restrictions on the defendants\u2019 ability to dispose of certain
assets for use in the United States, unless the transferee
agrees to abide by the terms of the district court\u2019s order.
22. The parties appealed and cross-appealed and, on 22 May
2009, the DC Circuit affirmed the district court\u2019s RICO
liability\u00a0judgment but vacated the Remedial Order in part
and\u00a0remanded for further factual findings and clarification
as\u00a0to whether liability should be imposed against B&W,
based\u00a0on changes in the nature of B&W\u2019s business operations
(including the extent of B&W\u2019s control over tobacco
operations). The DC Circuit also remanded three other
discrete issues relating to the injunctive remedies, including
for the district court \u2018to reformulate\u2019 the injunction on the use
of low-tar descriptors \u2018to exempt foreign activities that have
no substantial, direct, and foreseeable domestic effects,\u2019
and\u00a0for the district court to evaluate whether corrective
communications could be required at point-of-sale displays
(which requirement the DC Circuit vacated). On 28 June 2010,
the U.S. Supreme Court denied the parties' petitions for
further review.
23. On 22 December 2010, the district court dismissed B&W from
the litigation. Due to intervening changes in controlling law,
on\u00a028 March 2011, the district court ruled that the Remedial
Order no longer applied to Investments prospectively, and for
this reason, Investments would not have to comply with any
of\u00a0the remaining injunctive remedies. In November 2012,
the\u00a0district court entered an order setting forth the text of the
corrective statements and directed the parties to engage in
discussions with the Special Master to implement them.
After\u00a0various proceedings and appeals, the district court
in\u00a0October\u00a02017 ordered RJRT and the other U.S. tobacco
company defendants to fund the publication of compelled
public statements in various U.S. media outlets, including in
newspapers, on television, on the companies\u2019 websites, and
in\u00a0onserts on cigarette packaging. The compelled public
statements in newspapers and on television were completed
in 2018 and in package onserts in mid-2020. The compelled
public statements now also appear on RJRT websites. The
final issue regarding corrective statements was their display
at retail point of sale. On 6 December 2022, the district court
entered a consent order requiring the tobacco company
defendants to have the compelled public statements posted
at retail point of sale. Installation of the statements began in
July 2023, and the statements will remain in stores through
June 2025.
(b) Class Actions
24. As at 31 December 2023, RJRT, B&W and Lorillard Tobacco
were named as defendants in one action asserting claims
on\u00a0behalf of putative classes of persons allegedly injured or
financially impacted by their smoking, and Reynolds American,
RJRT, and SFNTC (a subsidiary of Reynolds American) were
named in 17 putative class actions relating to the use of the
words \u2018natural\u2019, \u2018100% additive-free\u2019 or \u2018organic\u2019 in Natural
American Spirit (NAS) brand advertising and promotional
materials. If the classes are or remain certified, separate trials
may be needed to assess individual plaintiffs\u2019 damages.
Among the pending class actions, 16 specified the amount of
the claim in the complaint and alleged that the plaintiffs were
seeking in excess of US$5\u00a0million (approximately \u00a33.9\u00a0million)
and one alleged that the plaintiffs were seeking less than
US$75,000 (approximately \u00a358,823) per class member plus
unspecified punitive damages.
No Additive/Natural/Organic Claim Cases
25. A total of 17 pending putative class actions were filed in nine U.S.
federal district courts against Reynolds American, RJRT, and
SFNTC, which cases generally allege, in various combinations,
violations of state deceptive and unfair trade practice statutes,
and claim state common law fraud, negligent
misrepresentation, and unjust enrichment based on the use of
descriptors such as \u2018natural\u2019, \u2018organic\u2019 and \u2018100% additive-free\u2019 in
the marketing, labelling, advertising, and promotion of SFNTC\u2019s
NAS brand cigarettes. In these actions, the plaintiffs allege that
the use of these terms suggests that NAS brand cigarettes are
less harmful than other cigarettes and, for that reason, violated
state consumer protection statutes or amounted to fraud or a
negligent or intentional misrepresentation. The actions seek
various categories of recovery, including economic damages,
injunctive relief (including medical monitoring and cessation
programmes), interest, restitution, disgorgement, treble and
punitive damages, and attorneys\u2019 fees and costs. In April 2016,
the U.S. Judicial Panel on Multidistrict Litigation (JPML)
consolidated the 16 cases pending at that time for pre-trial
purposes before a federal district court in New Mexico, and a
later-filed case was transferred there for pre-trial purposes in
2018. On 21 December 2017, that court granted the defendants\u2019
motion to dismiss in part, dismissing a number of claims with
prejudice, and denied it in part. The district court conducted a
five-day hearing on the motion for class certification and on the
motion challenging the admissibility of expert opinion testimony
in December 2020. On 1 September 2023, the district court
entered an order certifying a subset of the plaintiffs\u2019 proposed
classes covering purchasers of NAS menthol cigarettes in six
states and declining to certify the other proposed classes. The
defendants and plaintiffs both appealed from that order to the
U.S. Court of Appeals for the Tenth Circuit. Briefing in that court
is scheduled to be completed in July 2024.
Other Putative Class Actions
26. Young v. American Tobacco Co. is a putative class action filed
in November 1997 in the Circuit Court, Orleans Parish,
Louisiana against various U.S. cigarette manufacturers,
including RJRT, B&W, Lorillard Tobacco and certain parent
companies. This action was brought on behalf of a putative
class of Louisiana residents who, though not themselves
cigarette smokers, have been exposed to second-hand smoke
from cigarettes manufactured by the defendants, and who
allegedly suffered injury as a result of that exposure. The
action seeks an unspecified amount of compensatory and
punitive damages. In March 2016, the court entered an order
staying the case, including all discovery, pending the
completion of an ongoing smoking cessation programme
ordered by the court in a now-concluded Louisiana state court
certified class action, Scott v. American Tobacco Co.
Engle Class Action and Engle Progeny Cases (Florida)
27. In July 1998, trial began in Engle v. R. J. Reynolds Tobacco Co., a then-certified class action filed in Circuit Court, Miami-Dade County,
Florida, against U.S. cigarette manufacturers, including RJRT, B&W, Lorillard Tobacco and Lorillard Inc. The then-certified class
consisted of Florida citizens and residents, and their survivors, who suffered from smoking-related diseases that first manifested
between 5 May 1990, and 21 November 1996, and were caused by an addiction to cigarettes. In July 1999, the jury in this Phase I
found against RJRT, B&W, Lorillard Tobacco, Lorillard Inc. and the other defendants on common issues relating to the defendants\u2019
conduct, general causation, the addictiveness of cigarettes, and entitlement to punitive damages.
28. In July 2000, the jury in Phase II awarded the class a total of approximately US$145\u00a0billion (approximately \u00a3113.7\u00a0billion) in punitive
damages, apportioned US$36.3\u00a0billion (approximately \u00a328.5\u00a0billion) to RJRT, US$17.6\u00a0billion (approximately \u00a313.8\u00a0billion) to B&W, and
US$16.3\u00a0billion (approximately \u00a312.8\u00a0billion) to Lorillard Tobacco and Lorillard Inc. The three class representatives in the Engle class
action were awarded US$13\u00a0million (approximately \u00a310.2\u00a0million) in compensatory damages.
29. This decision was appealed and ultimately resulted in the Florida Supreme Court in December 2006 decertifying the class and
allowing judgments entered for only two of the three Engle class representatives to stand and setting aside the punitive damages
award. The court preserved certain of the jury\u2019s Phase I findings, including that cigarettes can cause certain diseases, nicotine is
addictive, and defendants placed defective cigarettes on the market, breached duties of care, concealed health-related information
and conspired. Putative Engle class members were permitted to file individual lawsuits, deemed \u2018Engle progeny cases\u2019, against
the\u00a0Engle defendants, within one year of the Supreme Court\u2019s decision (subsequently extended to 11 January 2008).
30. During 2015, RJRT and Lorillard Tobacco, together with Philip Morris USA Inc. (PM USA), settled virtually all of the Engle progeny
cases then pending against them in federal district court. The total amount of the settlement was US$100\u00a0million (approximately
\u00a378.4\u00a0million) divided as follows: RJRT US$42.5\u00a0million (approximately \u00a333.3\u00a0million); PM USA US$42.5\u00a0million (approximately
\u00a333.3\u00a0million); and Lorillard Tobacco US$15\u00a0million (approximately \u00a311.8\u00a0million). The settlement covered more than 400 federal Engle
progeny cases but did not cover 12 federal progeny cases previously tried to verdict and then pending on post-trial motions or appeal,
and two federal progeny cases filed by different lawyers from the ones who negotiated the settlement for the plaintiffs.
31. As at 31 December 2023, there were approximately 305 Engle progeny cases pending in which RJRT, B&W and/or Lorillard Tobacco
have all been named as defendants and served. These cases include claims by or on behalf of 380 plaintiffs. In addition, as at
31\u00a0December 2023, RJRT was aware of five additional Engle progeny cases that have been filed but not served. The number of
pending cases fluctuates for a variety of reasons, including voluntary and involuntary dismissals. Voluntary dismissals include cases
in which a plaintiff accepts an \u2018offer of judgment\u2019 from RJRT and/or RJRT\u2019s affiliates and indemnitees. An offer of judgment,
if\u00a0rejected by the plaintiff, preserves the offering party's right to seek attorneys\u2019 fees under Florida law in the event of a favourable
verdict. Such offers are sometimes made through court-ordered mediations.
32. 35 trials occurred in Engle progeny cases in Florida state and federal courts against RJRT, B&W and/or Lorillard Tobacco from
1\u00a0January 2021 through 31 December 2023, and additional state court trials are scheduled for 2024.
33. The following chart identifies the number of trials in Engle progeny cases as at 31 December 2023 and additional information about
the adverse judgments entered:
Trials/verdicts/judgments of individual Engle progeny cases from 1 January 2021 through 31 December 2023:
Total number of trials
35
Number of trials resulting in plaintiffs\u2019 verdicts
20*
Total damages awarded in final judgments against RJRT
US$81,492,000 (approximately \u00a364 million)
Amount of overall damages comprising \u2018compensatory
damages\u2019 (approximately)
US$58,427,000 (of overall US$81,492,000 )
(approximately \u00a346 million of \u00a364 million)
Amount of overall damages comprising \u2018punitive damages\u2019 (approximately)
US$23,065,000 (of overall US$81,492,000)
(approximately \u00a318 million of \u00a364 million)
Note:
*Of the 20 trials resulting in plaintiffs\u2019 verdicts 1 January 2021 to 31 December 2023 (note 31(k)):
Number of adverse judgments appealed by RJRT (note 31(l) )
14
Number of adverse judgments, in which RJRT still has time to file an appeal
0
Number of adverse judgments in which an appeal was not, and can no longer be, sought
6
(Note 31(k)) The 35 trials include two cases that were tried twice (Rutkowski v. R. J. Reynolds Tobacco Co. and Miller v R. J. Reynolds
Tobacco Co.). In each case, the first trial resulted in mistrial, while the second resulted in a verdict for the plaintiff. The 35 trials also
include one trial that resulted in a plaintiff verdict and a new trial was ordered, but the case was resolved and later dismissed (Leidinger
v.\u00a0R. J. Reynolds Tobacco Co.), and two punitive damages retrials for the same case (Ledo v R. J. Reynolds Tobacco Co.).
(Note 31(l)) Of the 14 adverse verdicts appealed by RJRT as a result of judgments arising in the period 1 January 2021 to 31 December 2023:
a. six appeals remain undecided in the District Courts of Appeal;
b. two judgments were affirmed and paid;
c. one judgment was reversed and remanded for new trial on the plaintiff's entitlement to punitive damages;
d. one judgment was affirmed and review of the Florida Supreme Court not sought; and
e. there were four appeals in which the cases were resolved and the appeals dismissed.
34. By statute, Florida applies a US$200\u00a0million (approximately \u00a3156.9\u00a0million) bond cap to all Engle progeny cases in the aggregate.
Individual bond caps for any given Engle progeny case vary depending on the number of judgments in effect at a given time. Judicial
attempts by several plaintiffs in the Engle progeny cases to challenge the bond cap as violating the Florida Constitution have failed.
In addition, bills have been introduced in sessions of the Florida legislature that would eliminate the Engle progeny bond cap, but
those bills have not been enacted as at 31 December 2023.
35. In 2023, RJRT paid judgments in eight Engle progeny cases. Those payments totalled approximately US$38.5\u00a0million (approximately
\u00a330.2\u00a0million) in compensatory or punitive damages. Additional costs were paid in respect of attorneys\u2019 fees and statutory interest.
36. In addition, accruals for damages and attorneys\u2019 fees and statutory interest for three cases (Konzelman v. R. J. Reynolds Tobacco Co.,
Blackwood v. R. J. Reynolds Tobacco Co., Spurlock v. R. J. Reynolds Tobacco Co.), four resolution bundles and interest and attorneys\u2019
fees in the John Long v. R. J. Reynolds Tobacco Co. case were recorded in Reynolds American\u2019s consolidated balance sheet as at
31\u00a0December 2023 to the value of approximately US$22.9 million (approximately \u00a318.0 million).
(c) Individual Cases
37. As at 31 December 2023, 202 individual cases were pending in the United States against RJRT, B&W and/or Lorillard Tobacco.
This\u00a0category of cases includes smoking and health cases alleging personal injuries caused by tobacco use or exposure brought
by\u00a0or on behalf of individual plaintiffs based on theories of negligence, strict liability in tort, design defect, failure to warn, fraud,
misrepresentation, breach of express or implied warranty, violations of state deceptive trade practices or consumer protection
statutes, and conspiracy. The plaintiffs seek to recover compensatory damages, attorneys\u2019 fees and costs, and punitive damages.
The category does not include the Engle progeny cases, Broin II cases, and Filter Cases discussed above and below. Two of the
individual cases are brought by or on behalf of an individual or his/her survivors alleging personal injury as a result of exposure to
Environmental Tobacco Smoke (ETS).
38. The following chart identifies the number of individual cases pending as at 31 December 2023 as against the number pending as at
31\u00a0December 2022, along with the number of Engle progeny cases, Broin II cases, and Filter Cases, which are discussed further below.
Case Type
U.S.
Case Numbers
31 December
2023
U.S.
Case Numbers
31 December
2022
Change in
Number
Increase /
(Decrease)
Individual Smoking and Health Cases (note 31(m))
202
206
(4)
Engle Progeny Cases (Number of Plaintiffs) (note 31(n))
305 (380)
665 (838)
(360) (458)
Broin II Cases (note 31(o))
1,171
1,183
(12)
Filter Cases (note 31(p))
35
46
(11)
(Note 31(m)) Out of the 202 pending individual smoking and health cases, five have received adverse verdicts or judgments in the court
of\u00a0first instance or on appeal, and the total amount of those verdicts or judgments is approximately US$248.7\u00a0million (approximately
\u00a3195.1\u00a0million), of which $200\u00a0million (approximately \u00a3157\u00a0million) is the result of the jury\u2019s verdict in the Treniece Jones v. R. J. Reynolds
Tobacco Co. case, from which RJRT will have the right to appeal following post-trial motions.
(Note 31(n)) The number of Engle progeny cases will fluctuate as cases are dismissed or if any of the dismissed cases are appealed.
Please see earlier table in paragraph 33.
(Note 31(o)) Broin v. Philip Morris, Inc. was a class action filed in Circuit Court in Miami-Dade County, Florida in 1991 and brought on behalf
of flight attendants alleged to have suffered from diseases or ailments caused by exposure to ETS in airplane cabins. In October 1997,
RJRT, B&W, Lorillard Tobacco and other cigarette manufacturer defendants settled Broin, agreeing to pay a total of US$300\u00a0million
(approximately \u00a3235\u00a0million) in three annual US$100\u00a0million (approximately \u00a378.4\u00a0million) instalments, allocated among the companies
by\u00a0market share, to fund research on the early detection and cure of diseases associated with tobacco smoke. It also required those
companies to pay a total of US$49\u00a0million (approximately \u00a338.4\u00a0million) for the plaintiffs\u2019 counsel\u2019s fees and expenses. RJRT\u2019s portion of
these payments was approximately US$86\u00a0million (approximately \u00a367.5\u00a0million); B&W\u2019s was approximately US$57\u00a0million (approximately
\u00a344.7\u00a0million); and Lorillard Tobacco\u2019s was approximately US$31\u00a0million (approximately \u00a324.3\u00a0million). The settlement agreement, among
other things, limits the types of claims class members may bring and eliminates claims for punitive damages. The settlement agreement
also provides that, in individual cases by class members that are referred to as Broin II lawsuits, the defendants will bear the burden of
proof with respect to whether ETS can cause certain specifically enumerated diseases, referred to as \u2018general causation\u2019. With respect
to\u00a0all other liability issues, including whether an individual plaintiff\u2019s disease was caused by his or her exposure to ETS in airplane cabins,
referred to as \u2018specific causation\u2019, individual plaintiffs will bear the burden of proof. On 7 September 1999, the Florida Supreme Court
approved the settlement. There have been no Broin II trials since 2007. There have been periodic efforts to activate cases and the Group
expects this to continue over time.
(Note 31(p)) Includes claims brought against Lorillard Tobacco and Lorillard Inc. by individuals who seek damages resulting from
their\u00a0alleged exposure to asbestos fibres that were incorporated into filter material used in one brand of cigarettes manufactured by
a\u00a0predecessor to Lorillard Tobacco for a limited period of time ending more than 60 years ago. Pursuant to a 1952 agreement between
P.\u00a0Lorillard Company and H&V Specialties Co., Inc. (the manufacturer of the filter material), Lorillard Tobacco is required to indemnify
Hollingsworth & Vose for legal fees, expenses, judgments and resolutions in cases and claims alleging injury from finished products sold
by P. Lorillard Company that contained the filter material. As at 31 December 2023, Lorillard Tobacco and/or Lorillard Inc. was a
defendant in 35 Filter Cases. Since 1 January 2021, Lorillard Tobacco and RJRT have paid, or have reached agreement to pay, a total
of\u00a0approximately US$21.5\u00a0million (approximately \u00a317\u00a0million) in settlements to resolve 88 Filter Cases.
(d) State Settlement Agreements
39. In November 1998, the major U.S. cigarette manufacturers, including RJRT, B&W and Lorillard Tobacco, entered into the Master
Settlement Agreement (MSA) with attorneys general representing 46 U.S. states, the District of Columbia and certain U.S. territories
and possessions. These cigarette manufacturers previously settled four other cases, brought on behalf of Mississippi, Florida, Texas
and Minnesota, by separate agreements with each state (collectively and with the MSA, the \u2018State Settlement Agreements\u2019).
40. These State Settlement Agreements settled all health care cost recovery actions brought by, or on behalf of, the settling
jurisdictions; released the defending major U.S. cigarette manufacturers from various additional present and potential future claims;
imposed future payment obligations in perpetuity on RJRT, B&W, Lorillard Tobacco and other major U.S. cigarette manufacturers;
and placed significant restrictions on their ability to market and sell cigarettes and smokeless tobacco products. In accordance with
the MSA, various tobacco companies agreed to fund a US$5.2\u00a0billion (approximately \u00a34.1\u00a0billion) trust fund to be used to address the
possible adverse economic impact of the MSA on tobacco growers.
41. RJRT and SFNTC are subject to the substantial payment obligations under the State Settlement Agreements. Payments under the
State Settlement Agreements are subject to various adjustments for, among other things, the volume of cigarettes sold, relative
market share, operating profit and inflation. Reynolds American\u2019s operating subsidiaries\u2019 expenses and payments under the State
Settlement Agreements for 2020, 2021, 2022 and 2023 and the projected expenses and payments for 2024 and onwards are set
forth below (in millions of US dollars)*:
2020
2021
2022
2023
2024
2025 and
thereafter
Settlement expenses
$3,572
$3,420
$2,951
$2,516
Settlement cash payments
$2,848
$3,744
$3,129
$2,874
Projected settlement expenses
>$2,100
>$2,100
Projected settlement cash payments
>$2,500
>$2,100
Note:
*Subject to adjustments for changes in sales volume, inflation, operating profit and other factors. Payments are allocated among the companies on the basis of relative market share or
other methods.
42. The State Settlement Agreements have materially adversely affected RJRT\u2019s shipment volumes. Reynolds American believes that
these settlement obligations may materially adversely affect the results of operations, cash flows or financial position of Reynolds
American and RJRT in future periods. The degree of the adverse impact will depend, among other things, on the rate of decline
in\u00a0U.S. cigarette sales in the premium and value categories, RJRT\u2019s share of the domestic premium and value cigarette categories,
and the effect of any resulting cost advantage of manufacturers not subject to the State Settlement Agreements.
43. In addition, the MSA includes an adjustment that potentially reduces the annual payment obligations of RJRT, Lorillard Tobacco
and\u00a0the other signatories to the MSA, known as \u2018Participating Manufacturers\u2019 (PMs). Certain requirements, collectively referred
to\u00a0as the \u2018Adjustment Requirements\u2019, must be satisfied before the Non-Participating Manufacturers (NPM) Adjustment for a given
year is available: (i) an Independent Auditor must determine that the PMs have experienced a market share loss, beyond a triggering
threshold, to those manufacturers that do not participate in the MSA (such non-participating manufacturers being referred to as
NPMs); and (ii) in a binding arbitration proceeding, a firm of independent economic consultants must find that the disadvantages of
the MSA were a significant factor contributing to the loss of market share. This finding is known as a significant factor determination.
44. When the Adjustment Requirements are satisfied, the MSA provides that the NPM Adjustment applies to reduce the annual
payment obligation of the PMs. However, an individual settling state may avoid its share of the NPM Adjustment if it had in place
and diligently enforced during the entirety of the relevant year a \u2018Qualifying Statute\u2019 that imposes escrow obligations on NPMs that
are comparable to what the NPMs would have owed if they had joined the MSA. In such event, the state\u2019s share of the NPM
Adjustment is reallocated to other settling states, if any, that did not have in place and diligently enforce a Qualifying Statute.
45. RJRT, Lorillard Tobacco and SFNTC are or were involved in the NPM Adjustment proceedings concerning the years 2003 to 2020.
In\u00a02012, RJRT, Lorillard Tobacco, and SFNTC entered into an agreement (the Term Sheet) with certain settling states that resolved
accrued and future NPM adjustments. After an arbitration panel ruled in September 2013 that six states had not diligently enforced
their qualifying statutes in the year 2003, additional states joined the Term Sheet. RJRT executed the NPM Adjustment Settlement
Agreement on 25 September 2017 (which incorporated the Term Sheet). Since the NPM Adjustment Settlement Agreement was
executed, an additional 12 states have joined. The arbitration panels ruled in September 2021 that two states had not diligently
enforced their qualifying statutes in the year 2004. In September 2022, a panel ruled that an additional state, New Mexico, had not
diligently enforced its qualifying statute in the year 2004. On 30 August, 2023, the New Mexico District Court vacated this decision.
A\u00a0notice of appeal was filed on 27 September 2023. In December 2023, a panel ruled that an additional state had not diligently
enforced its qualifying statute in the years 2005, 2006 and 2007. NPM proceedings are ongoing and could result in further reductions
of the companies\u2019 MSA-related payments.
46. On 18 January 2017, the State of Florida filed a motion to join Imperial Tobacco Group, PLC (ITG) as a defendant and to enforce
the\u00a0Florida State Settlement Agreement, which motion sought payment under the Florida State Settlement Agreement of
approximately US$45\u00a0million (approximately \u00a335.3\u00a0million) with respect to the four brands (Winston, Salem, Kool and Maverick) that
were sold to ITG in the divestiture of certain assets, on 12 June 2015, by subsidiaries or affiliates of Reynolds American and Lorillard,
to a wholly owned subsidiary of Imperial Brands plc (the Divestiture), referred to as the \u2018Acquired Brands\u2019. The motion also claimed
future annual losses of approximately US$30\u00a0million per year (approximately \u00a323.5\u00a0million) absent the court\u2019s enforcement of the
Florida State Settlement Agreement. The State\u2019s motion sought, among other things, an order declaring that RJRT and ITG are in
breach of the Florida Settlement Agreement and are required, jointly and severally, to make annual payments to the State under
the\u00a0Florida State Settlement Agreement with respect to the Acquired Brands. By order dated 30 March 2017, ITG was joined into
the\u00a0enforcement action. In addition, on 18 January 2017, PM USA filed a motion to enforce the Florida State Settlement Agreement
asserting, among other things, that RJRT and ITG breached that agreement by failing to make settlement payments as to the
Acquired Brands, which PM USA asserts improperly shifted settlement payment obligations to PM USA.
47. After a bench trial, on 27 December 2017 the court entered
an\u00a0order holding RJRT (not ITG) liable for annual settlement
payments for the Acquired Brands, finding that ITG did not
assume liability for annual settlement payments related to
the\u00a0Acquired Brands under the terms of the asset purchase
agreement relating to the Divestiture. The court declined
to\u00a0enter final judgment until after resolution of the dispute
between RJRT and PM USA regarding PM USA's assertion
that the settlement payment obligations have been
improperly shifted to PM USA. On 15 August 2018, the court
entered a final judgment in the action (the Final Judgment).
As\u00a0a result of the Final Judgment, PM USA's challenge to
RJRT's accounting assumptions related to the Acquired
Brands was rendered moot, subject to reinstatement if ITG
joins the Florida State Settlement Agreement or if the Final
Judgment is reversed. On 29 August 2018, RJRT filed a notice
of appeal on the Final Judgment. On 7 September 2018,
PM\u00a0USA filed a notice of appeal with respect to the court's
ruling as to ITG. These appeals were consolidated pursuant
to\u00a0RJRT's motion on 1 October 2018. On 29 July 2020, Florida's
Fourth District Court of Appeal affirmed the Final Judgment.
On 12 August 2020, RJRT filed a motion for rehearing or for
certification to the Florida Supreme Court of the 29 July 2020
decision. RJRT posted a total bond in the amount of
US$187.8\u00a0million (approximately \u00a3147.3\u00a0million) for its appeal.
RJRT\u2019s motion for rehearing or certification to the Florida
Supreme Court was denied on 18 September 2020 and its
motion for review was denied by the Florida Supreme Court
on 18 December 2020. On 5 October 2020, RJRT satisfied the
Final Judgment (approximately US$193 million (approximately
\u00a3151 million) and paid approximately US$3.2\u00a0million
(approximately \u00a32.5\u00a0million) of Florida\u2019s attorneys\u2019 fees. RJRT's
appellate bonds were released to RJRT by order dated
5\u00a0November 2020. As explained below, RJRT has secured
an\u00a0order in the Delaware action requiring ITG to indemnify
it\u00a0for amounts paid under the Final Judgment.
48. On 17 February 2017, ITG filed an action in the Delaware Court
of Chancery seeking declaratory relief against Reynolds
American and RJRT on various matters related to its rights
and obligations under the asset purchase agreement (and
related documents) relating to the Divestiture with respect
to\u00a0the subject of the Florida enforcement litigation described
above. Reynolds American and RJRT filed counterclaims on
the same issues. As a result of multiple rounds of cross-
motions for judgment on the pleadings, the Delaware court
ruled (i) that ITG\u2019s obligation to use its reasonable best efforts
to join the Florida Settlement Agreement did not terminate
due to the closing of the asset purchase agreement relating
to\u00a0the Divestiture; (ii) that the asset purchase agreement does
not entitle ITG to a unique protection from an equity-fee law
that does not yet exist in a previously settled State; and
(iii)\u00a0that it would defer until after it received evidence related
to the parties' intent in the asset purchase agreement, its
determination of whether, to the extent RJRT is held liable
for\u00a0any settlement payments based on ITG's post-closing
sales of the Acquired Brands, ITG assumed this liability. After
discovery was completed in March 2022, the parties briefed
cross-motions for summary judgment on that third issue.
On\u00a030 September 2022, the court granted summary
judgment for Reynolds American and RJRT, holding that ITG
assumed the liability that the Final Judgment imposed on
RJRT for settlement payments to the State of Florida based
on ITG's post-closing sales of the Acquired Brands. The parties
then engaged in a second round of summary judgment
briefing on the amount of indemnifiable damages. On
2\u00a0October 2023, the court partially granted summary
judgment for Reynolds American and RJRT, holding that they
are entitled to indemnification of the principal amounts that
RJRT paid to Florida and the interest it paid to Florida on those
payments. The court deferred to trial the question whether
ITG\u2019s indemnification obligation should be reduced to account
for how net operating profit adjustment payments would have
been allocated if ITG had joined the Florida Settlement. Trial is
scheduled for 8 to 9 July 2024. ITG has agreed, subsequent to
the Chancery Court\u2019s decision on past payments, that it will
indemnify every settlement payment that RJRT makes in the
future to Florida based on ITG\u2019s sales of Acquired Brands
cigarettes (subject to the issues reserved for trial and to its
right to appeal).
49. In June 2015, ITG joined the Mississippi State Settlement
Agreement. On 26 December 2018, PM USA filed a motion
to\u00a0enforce the settlement agreement against RJRT and ITG
alleging RJRT and ITG failed to act in good faith in calculating
the base year net operating profits for the Acquired Brands,
claiming damages of approximately US$6\u00a0million
(approximately \u00a34.7\u00a0million) through 2017. On 21 February
2019, the Chancery Court of Jackson County, Mississippi
held\u00a0a scheduling conference and issued a discovery schedule
order. A hearing on PM USA\u2019s motion to enforce, originally
scheduled for 3-6 May 2021, was adjourned on consent of
the\u00a0parties to 11-12 August 2021. On 8 June 2021, PM USA
and\u00a0RJRT entered into a settlement agreement resolving
the\u00a0outstanding payment calculation issues. On 11\u00a0June 2021,
the Mississippi Chancery Court entered an order withdrawing
PM USA\u2019s motion to enforce. On 14 June 2021, RJRT made
a\u00a0payment of US$5.1\u00a0million (approximately \u00a34.0\u00a0million)
to\u00a0PM\u00a0USA. On 3 December 2019, the State of Mississippi
filed a notice of violation and motion to enforce the settlement
agreement in the Chancery Court of Jackson County,
Mississippi against RJRT, PM USA and ITG, seeking a
declaration that the base year 1997 net operating profit to be
used in calculating the net operating profit adjustment was
not affected by the change in the federal corporate tax rate
in\u00a02018 from 35% to 21%, and an order requiring RJRT to pay
the approximately US$5\u00a0million (approximately \u00a33.9\u00a0million)
difference in its 2018 payment because of this issue.
Determination of this issue may affect RJRT\u2019s annual payment
thereafter. A hearing on Mississippi\u2019s motion to enforce
occurred on 6-7 October 2021. On 10 June 2022, the
Mississippi Chancery Court granted the State's motion to
enforce, finding that the base year 1997 net operating profit
to\u00a0be used in calculating the Net Operating Profit Adjustment
was not affected by the change in the federal corporate tax
rate in 2018. RJRT will appeal the motion to enforce. On 29\u00a0July
2022, the parties each submitted a supplemental briefing on
damages, including interest and attorneys' fees. A hearing on
damages, originally scheduled for 7 December 2022, took
place on 14 March 2023; a decision is pending.
50. In January 2021, RJRT reached an agreement with several
MSA states to waive RJRT\u2019s claims under the MSA in
connection with a settlement between those MSA states
and\u00a0a non-participating manufacturer, S&M Brands, Inc.
(S&M\u00a0Brands), under which the states released certain claims
against S&M Brands in exchange for receiving a portion of
the\u00a0funds S&M Brands had deposited into escrow accounts
in\u00a0those states pursuant to the states\u2019 escrow statutes.
In\u00a0consideration for waiving claims, RJRT, together with
SFNTC, received approximately US$55.4\u00a0million
(approximately \u00a343.5\u00a0million) from the escrow funds paid to
those MSA states under their settlement with S&M Brands.
51. On 27 May 2022, PM USA filed a motion to compel arbitration
under the MSA against RJRT and ITG in North Carolina
Superior Court claiming RJRT and ITG inaccurately calculated
the base year net operating profits for the Acquired Brands
and this improperly shifted approximately US$80\u00a0million
(approximately \u00a362.7\u00a0million) in MSA payment obligations
from RJRT to PM USA, to date. On 7 June 2022, RJRT and
PM\u00a0USA negotiated a resolution of the MSA claims, in which
RJRT agreed to, among other things, pay PM USA the sum
of\u00a0approximately US$37\u00a0million (approximately \u00a329.0\u00a0million).
52. On 28 July 2022, the State of Iowa filed a motion to enforce
the Consent Decree and MSA against the PMs asserting,
among other things, claims for breach of contract and
violations of the Iowa False Claims Act. Iowa sought over
US$130\u00a0million (approximately \u00a3102.0\u00a0million) in damages,
as\u00a0well as treble damages. The PMs filed their resistance
to\u00a0Iowa\u2019s motion and a motion to compel arbitration on
26\u00a0September 2022. Iowa filed its resistance to the PMs\u2019
motion to compel arbitration on 6 October 2022, and the PMs
filed their reply on 31 October 2022. A hearing on the motion
was held on 21 December 2022. On 9 February 2023, the Iowa
District Court granted the PMs' motion to compel arbitration,
stayed the State\u2019s motion to enforce pending the arbitration,
and ordered a status conference for 9 February 2024. On
7\u00a0March 2023, Iowa filed a withdrawal of its motion to enforce.
53. On 29 November 2022, the State of New Mexico filed a
complaint, or in the alternative, a motion to enforce the
Consent Decree and MSA against the PMs asserting, among
other things, claims for breach of contract and violations
of\u00a0New Mexico\u2019s Unfair Practices Act. New Mexico seeks
compensatory damages in an amount to be determined
at\u00a0trial, as well as treble damages, punitive damages, and
declaratory and injunctive relief. The PMs\u2019 deadline to answer
or respond was 29 December 2022. On 15 December 2022,
the PMs filed an opposed motion for an extension of deadlines
and pages to file their response on 10 February 2023.
New\u00a0Mexico filed its response to the motion on 20\u00a0December
2022 and the PMs filed their reply on 30 December 2022.
On\u00a013\u00a0January 2023, the court granted the PMs\u2019 motion to
extend their deadline to file their response to 10 February
2023. On 10\u00a0February 2023, the PMs filed a motion to compel
arbitration or, in the alternative, motion to dismiss New
Mexico\u2019s complaint and alternative motion to enforce.
The\u00a0State\u2019s response to the PMs\u2019 motion to compel was filed
on 27 March 2023, and the PMs\u2019 reply was filed on 14\u00a0April
2023; a hearing was held on 30 October 2023. On
29\u00a0December 2023, the New Mexico District Court
granted\u00a0the PMs\u2019 motion to compel arbitration.
54. On 2 March 2023, the State of Texas issued a demand letter
to RJRT, PM USA and ITG, pursuant to the Texas Tobacco
Settlement Agreement, for underpaid sums owed to\u00a0Texas for
years 2019 through 2022 and a change in the calculation going
forward, asserting that RJRT, PM\u00a0USA and\u00a0ITG issued
payments to Texas that were based on unauthorized changes
to the base year 1997 net operating profit by incorporating
into their calculations the lower federal corporate tax rate
enacted in 2018. The State seeks damages in the amount of at
least US$114\u00a0million (approximately \u00a389.4\u00a0million) cumulative
for 2019 through 2022 (the last year for which there was a
calculation at the time of the demand). In addition, in a letter
to the independent accounting firm retained by the parties
to\u00a0calculate settlement payments due under the previously
settled State Settlement Agreements,
PricewaterhouseCoopers LLC (PwC LLC) dated 3 March
2023, Texas requested that PwC LLC\u2019s calculation of the net
operating profit adjustment due to Texas for 2022 be based
on the value fixed in the Mississippi decision (discussed
above) that found the base year 1997 net operating profit to
be used in calculating the net operating profit adjustment was
not affected by the change in the federal corporate tax rate in
2018. On 13 March 2023, the parties entered into an
agreement tolling the statute of limitations for the State to file
a motion to enforce on these issues until 15 May 2023. On
24\u00a0March 2023, PwC LLC\u2019s calculation of the net operating
profit adjustment due to Texas for 2022 did not use the value
fixed in the Mississippi decision. On 8 May 2023, PM USA and
RJRT filed a motion to enforce the settlement agreement. On
22\u00a0May 2023, Texas filed its opposition and cross-motion to
enforce the settlement agreement. On 30 May 2023, PM\u00a0USA
and RJRT filed a combined opposition to the cross-motion and
reply in further support of the motion. On 6 June 2023, Texas
filed a reply in support of its cross motion to enforce the
settlement agreement. On 13 June 2023, PM USA and RJRT
filed a sur-reply in response to the State\u2019s reply in support
of\u00a0cross-motion to enforce the settlement agreement.
The\u00a0motion and cross-motion are fully submitted.
Tobacco-Related Litigation Outside the U.S.
55. As at 31 December 2023:
a)medical reimbursement actions are being brought
in \u00a0Angola, Brazil, Canada, Nigeria and South Korea;
b)class actions are being brought in Canada and Venezuela; and
c)active tobacco product liability claims against the Group\u2019s
companies existed in 12 markets outside the U.S. The only
markets with five or more claims were Argentina, Brazil,
Canada, Chile, Nigeria and Italy.
(a) Medical reimbursement cases
Angola
56. In November 2016 , BAT Angola affiliate Sociedade Unificada
de Tabacos de Angola (SUT) was served with a collective
action filed in the Provincial Court of Luanda, 2nd Civil Section,
by the consumer association Associa\u00e7\u00e3o Angolana dos
Direitos do Consumidor (AADIC). The lawsuit seeks damages
of AOA800,000,000 (approximately \u00a3745,597) allegedly
incurred by the Angolan Instituto Nacional do Controlo do
Cancro (INCC) for the cost of treating tobacco-related
disease, non-material damages allegedly suffered by certain
individual smokers on the rolls of INCC, and the mandating of
certain cigarette package warnings. SUT filed its answer to
the claim on 5 December 2016. The case remains pending.
Canada
57. On 1 March 2019, the Quebec Court of Appeal handed down
a\u00a0judgment which largely upheld and endorsed the lower
court\u2019s previous decision in two Quebec class actions (the
Quebec Class Actions), as further described below. The share
of the judgment for Imperial, the Group\u2019s operating company
in Canada, is approximately CAD$9.2\u00a0billion (approximately
\u00a35.5\u00a0billion). As a result of this judgment, there were attempts
by the Quebec plaintiffs to obtain payment out of the
CAD$758\u00a0million (approximately \u00a3451\u00a0million) on deposit with
the court. JTI-MacDonald Corp (a co-defendant in the cases)
filed for creditor protection under the Companies\u2019 Creditors
Arrangement Act (the CCAA) on 8 March 2019. A\u00a0court order
to stay all tobacco litigation in Canada against all defendants
(including RJRT and its affiliate R.J. Reynolds Tobacco
International Inc. (collectively, the RJR Companies)) until
4\u00a0April 2019 was obtained, and the need for a mediation
process to resolve all the outstanding litigation across the
country was recognised. On 12 March 2019 Imperial filed for
creditor protection under the CCAA. In its application Imperial
asked the Ontario Superior Court to stay all pending or
contemplated litigation against Imperial, certain of its
subsidiaries and all other Group companies that were
defendants in the Canadian tobacco litigation, including
British American Tobacco p.l.c. (the Company), Investments,
Industries and Carreras Rothmans Limited (collectively, the
UK Companies). On 22 March 2019, Rothmans, Benson &
Hedges Inc. also filed for CCAA protection and obtained a stay
of proceedings (together with the other two stays, the Stays).
The Stays are currently in place until 29 March 2024. While
the Stays are in place, no steps are to be taken in connection
with the Canadian tobacco litigation with respect to Imperial,
certain of its subsidiaries or any other Group company. The
parties continue to work towards a plan of arrangement or
compromise in a confidential mediation (by order of the
Court) as part of the CCAA process. The length and ultimate
outcome of the CCAA process, including the resolution of the
underlying legal proceedings, remain uncertain.
The below represents the state of the referenced litigation
as\u00a0at\u00a0the advent of the Stays.
58. Following the implementation of legislation enabling provincial
governments to recover health-care costs directly from
tobacco manufacturers, 10 actions for recovery of health-care
costs arising from the treatment of smoking- and health-
related diseases have been brought. These proceedings
name\u00a0various Group companies as defendants, including the
UK Companies and Imperial as well as the RJR Companies.
Pursuant to the terms of the 1999 sale of RJRT\u2019s international
tobacco business to Japan Tobacco Incorporated (JTI), JTI has
agreed to indemnify RJRT for all liabilities and obligations
(including litigation costs) arising in respect of the Canadian
recoupment actions. Subject to a reservation of rights, JTI has
assumed the defence of the RJR Companies in these actions.
59. The 10 cases were proceeding in British Columbia, New
Brunswick, Newfoundland and Labrador, Ontario, Quebec,
Manitoba, Alberta, Saskatchewan, Nova Scotia and Prince
Edward Island. The enabling legislation is in force in all
10\u00a0provinces. In addition, legislation has received Royal Assent
in two of the three territories in Canada, but has yet to be
proclaimed into force.
Canadian province: British Columbia
Act pursuant to which Claim was brought: Tobacco
Damages and Health Care Costs Recovery Act 2000
Companies named as Defendants: Imperial, Investments,
Industries, Carreras Rothmans Limited, the RJR Companies
and other former Rothmans Group companies have been
named as defendants and served.
Current stage: The defences of Imperial, Investments,
Industries, Carreras Rothmans Limited and the RJR
Companies have been filed, and document production and
discoveries were ongoing. On 13 February 2017, the Province
delivered an expert report dated October 2016, quantifying
its\u00a0damages in the amount of CAD$118\u00a0billion (approximately
\u00a370.2\u00a0billion). No trial date has been set. The federal
government is seeking CAD$5\u00a0million (approximately
\u00a33.0\u00a0million) jointly from all the defendants in respect of costs
pertaining to the third-party claim, now dismissed.
Canadian province: New Brunswick
Act pursuant to which Claim was brought: Tobacco
Damages and Health Care Costs Recovery Act 2006
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named as
defendants and served.
Current stage: The defences of Imperial, the UK Companies
and the RJR Companies have been filed and document
production and discoveries are substantially complete. The
most recent expert report filed by the Province estimated a
range of damages between CAD$11.1\u00a0billion (approximately
\u00a36.6\u00a0billion) and CAD$23.2\u00a0billion (approximately \u00a313.8\u00a0billion),
including expected future costs. Following a motion to set a
trial date, the New Brunswick Court of Queen\u2019s Bench ordered
that the trial commence on 4 November 2019. On 7 March
2019, the New Brunswick Court of Queen\u2019s Bench released a
decision which requires the Province to produce a substantial
amount of additional documentation and data to the
defendants. As a result, the original trial date of 4 November
2019 would have been delayed. No new trial date has been set.
Canadian province: Ontario
Act pursuant to which Claim was brought: Tobacco
Damages and Health Care Costs Recovery Act 2009
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named as
defendants and served.
Current stage: The defences of Imperial, the UK Companies
and the RJR Companies have been filed. The parties
completed significant document production in the summer
of\u00a02017 and discoveries commenced in the autumn of 2018.
On\u00a015 June 2018, the Province delivered an expert report
quantifying its damages in the range of CAD$280\u00a0billion
(approximately \u00a3167\u00a0billion) \u2013 CAD$630\u00a0billion (approximately
\u00a3375\u00a0billion) in 2016/2017 dollars for the period 1954 \u2013 2060,
and the Province amended the damages sought in its
Statement of Claim to CAD$330\u00a0billion (approximately
\u00a3196.3\u00a0billion). On 31 January 2019, the Province delivered
a\u00a0further expert report claiming an additional amount
between CAD$9.4\u00a0billion (approximately \u00a35.6\u00a0billion)
and\u00a0CAD$10.9\u00a0billion in damages (approximately \u00a36.5\u00a0billion)
in\u00a0respect of ETS. No trial date has been set.
Canadian province: Newfoundland and Labrador
Act pursuant to which Claim was brought: Tobacco Health
Care Costs Recovery Act 2001
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named
as\u00a0defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and
the\u00a0RJR Companies have been filed and the Province began
its\u00a0document production in March 2018. Damages have not
been quantified by the Province. No trial date has been set.
Canadian province: Saskatchewan
Act pursuant to which Claim was brought: Tobacco
Damages and Health Care Costs Recovery Act 2007
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named
as\u00a0defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and the
RJR Companies have been filed and the Province has delivered
a test shipment of documents. Damages have not been
quantified by the Province. No trial date has been set.
\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 Canadian province: Manitoba
Act pursuant to which Claim was brought: Tobacco
Damages Health Care Costs Recovery Act 2006
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named
as\u00a0defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and the
RJR Companies have been filed and document production
commenced. Damages have not been quantified by the
Province. No trial date has been set.
Canadian province: Alberta
Act pursuant to which Claim was brought: Crown\u2019s Right
of\u00a0Recovery Act 2009
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named as
defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and the
RJR Companies have been filed and the Province commenced
its document production. The Province has stated its claim to
be worth CAD$10\u00a0billion (approximately \u00a35.9\u00a0billion). No trial
date has been set.
Canadian province: Quebec
Act pursuant to which Claim was brought: Tobacco Related
Damages and Health Care Costs Recovery Act 2009
Companies named as Defendants: Imperial, Investments,
Industries, the RJR Companies and Carreras Rothmans
Limited have been named as defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, Investments, Industries,
Carreras Rothmans Limited and the RJR Companies have
been filed. Motions over admissibility of documents and
damages discovery have been filed but not heard. The
Province is seeking CAD$60\u00a0billion (approximately
\u00a335.7\u00a0billion). No trial date has been set.
Canadian province: Prince Edward Island
Act pursuant to which Claim was brought: Tobacco
Damages and Health Care Costs Recovery Act 2009
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named as
defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and the
RJR Companies have been filed and the next step was
expected to be document production, which the parties
deferred for the time being. Damages have not been
quantified by the Province. No trial date has been set.
Canadian province: Nova Scotia
Act pursuant to which Claim was brought: Tobacco Health
Care Costs Recovery Act 2005
Companies named as Defendants: Imperial, the UK
Companies and the RJR Companies have been named as
defendants and served.
Current stage: This case is at an early case management
stage. The defences of Imperial, the UK Companies and the
RJR Companies have been filed. The Province provided a test
document production in March 2018. Damages have not been
quantified by the Province. No trial date has been set.
Nigeria
60. British American Tobacco (Nigeria) Limited (BAT Nigeria), the
Company and Investments have been named as defendants in
a medical reimbursement action by the federal government of
Nigeria, filed on 6 November 2007 in the Federal High Court,
and in similar actions filed by the Nigerian states of Kano
(9\u00a0May 2007), Oyo (30 May 2007), Lagos (13 March 2008),
Ogun (26 February 2008), and Gombe (17 October 2008)
commenced in their respective High Courts. In the five cases
that remain active, the plaintiffs seek a total of approximately
NGN10.6\u00a0trillion (approximately \u00a39.3\u00a0billion ) in damages,
including special, anticipatory and punitive damages,
restitution and disgorgement of profits, as well as declaratory
and injunctive relief.
61. The suits claim that the state and federal government
plaintiffs incurred costs related to the treatment of smoking-
related illnesses resulting from allegedly tortious conduct by
the defendants in the manufacture, marketing, and sale of
tobacco products in Nigeria, and assert that the plaintiffs are
entitled to reimbursement for such costs. The plaintiffs assert
causes of action for negligence, negligent design, fraud and
deceit, fraudulent concealment, breach of express and implied
warranty, public nuisance, conspiracy, strict liability,
indemnity, restitution, unjust enrichment, voluntary
assumption of a special undertaking, and performance
of\u00a0another\u2019s duty to the public.
62. The Company and Investments have made a number of
challenges to the jurisdiction of the Nigerian courts. Such
challenges are still pending (on appeal) against the federal
government and the states of Lagos, Kano, Gombe and Ogun.
The underlying cases are stayed or adjourned pending the
final outcome of these jurisdictional challenges. In the state of
Oyo, on 13 November 2015, and 24 February 2017, respectively,
the Company\u2019s and Investments\u2019 jurisdictional challenges
were successful in the Court of Appeal and the issuance
of\u00a0the\u00a0writ of summons was set aside.
South Korea
63. In April 2014, Korea\u2019s National Health Insurance Service (NHIS)
filed a healthcare recoupment action against KT&G (a Korean
tobacco company), PM Korea and BAT Korea (including BAT
Korea Manufacturing). The NHIS is seeking damages of
roughly KRW54\u00a0billion (approximately \u00a332.9\u00a0million) in respect
of health care costs allegedly incurred by the NHIS treating
patients with lung (small cell and squamous cell) and laryngeal
(squamous cell) cancer between 2003 and 2012. Court
hearings in the case, which constitute the trial, commenced
in\u00a0September 2014. On 20 November 2020, the court issued
a\u00a0judgment in favour of the defendants and dismissing all of
the plaintiff\u2019s claims. The NHIS filed an appeal of the judgment
on 11 December 2020. Appellate proceedings commenced
in\u00a0June 2021 and remain ongoing.
Brazil
64. On 21 May 2019, the Federal Attorney\u2019s Office (AGU) in Brazil
filed an action in the Federal Court of Rio Grande do Sul
against the Company, the BAT Group\u2019s Brazilian subsidiary
Souza Cruz LTDA (Souza Cruz), Philip Morris International,
Philip Morris Brazil Ind\u00fastria e Com\u00e9rcio LTDA and Philip
Morris Brasil S/A (collectively, PMB), asserting claims for
medical reimbursement for funds allegedly expended by the
federal government as public health care expenses to treat
26\u00a0tobacco-related diseases over the last five years from
the\u00a0filing date and that will be expended in perpetuity during
future years, including diseases allegedly caused both by
cigarette smoking and exposure to ETS. The action includes
a\u00a0claim for moral damages allegedly suffered by Brazilian
society to be paid into a public welfare fund. The action is
for\u00a0an unspecified amount of monetary compensation, as
the\u00a0AGU seeks a bifurcated action in which liability would be
determined in the first phase followed by an evidentiary phase
to ascertain damages.
65. On 19 July 2019, the trial court ordered that service of the action
on the Company be effected via service on Souza Cruz. On
6\u00a0August 2019, Souza Cruz refused to receive service on\u00a0behalf
of the Company due to Souza Cruz\u2019s lack of power to do so.
On\u00a07\u00a0August 2019, Souza Cruz was served with the complaint.
Following further proceedings in 2019 and 2020 in\u00a0both the trial
and appellate courts challenging the issue of service on the
Company, the court ruled that service of the Company via its
Brazilian subsidiary Souza Cruz constituted proper service, and
ordered that defences be filed. Souza Cruz and the Company
filed their respective defences on 12\u00a0May 2020.
66. On 19 February 2021, the Associa\u00e7\u00e3o de Controle do
Tabagismo, Promo\u00e7\u00e3o da Sa\u00fade (ACT) filed a petition seeking
to intervene in the case as amicus curiae. Souza Cruz, PMB
and the Company filed responses (on 25 March 2021,
26\u00a0March 2021 and 20 August 2021, respectively) asserting
that ACT's request should be rejected and/or in the alternative
that the scope of ACT's intervention rights should be limited.
On 13 May 2022, the trial court ordered the AGU to reply to
the defences within 30 business days, and also permitted the
ACT to intervene, limiting ACT's rights as amicus curiae to
presenting technical and scientific opinions and participating
in court hearings. The AGU submitted its reply on 5 July 2022.
Souza Cruz, PMB and the Company submitted responses to
the AGU's reply on 26 August 2022. On 19 May 2020, notice
was sent to the Public Prosecutor\u2019s Office (MPF) regarding
the AGU\u2019s request that the MPF join the action as a plaintiff.
The MPF, via its response filed on 10 July 2020, declined to join
the action as party, but will act as an \u2018inspector of the law\u2019,
which enables MPF to express its opinion on case matters.
On\u00a010 October 2022, the MPF submitted an opinion on
preliminary issues and evidence, which called for rejection of
the defendants\u2019 preliminary defences and the majority of the
evidence requested by AGU and defendants. Defendants
Philip Morris International (PMI), PMB, the Company and
Souza Cruz filed responses to the MPF\u2019s opinion on
14\u00a0November 2022, 18 November 2022, 2\u00a0March 2023
and\u00a03\u00a0March 2023, respectively. On 6\u00a0December 2023,
the\u00a0Funda\u00e7\u00e3o Oswaldo Cruz (FIOCRUZ), a\u00a0research and
development arm of the Brazilian Ministry of Health, filed
a\u00a0petition seeking to intervene in the case as amicus curiae.
PMB and Souza Cruz filed responses on 8 January 2024 and
24 January 2024, respectively, asserting that the FIOCRUZ
petition should be rejected or in the alternative that any
intervention rights should be limited.
(b) Class Actions
Canada
67. As described in paragraph 57, the Canadian tobacco litigation is
currently stayed subject to court-ordered stays of proceeding
(the Stays). The Stays are currently in place until 29 March 2024.
While the Stays are in place, no steps are to be taken in
connection with the Canadian tobacco litigation with respect to
Imperial, certain of its subsidiaries or any other Group company.
The parties continue to work towards a plan of arrangement or
compromise in a confidential mediation (by\u00a0order of the Court)
as part of the CCAA process. The length and ultimate outcome
of the CCAA process, including the resolution of the underlying
legal proceedings, remains uncertain.
68. The below represents the state of the referenced litigation
as\u00a0at the advent of the Stays.
69. There are 11 class actions being brought in Canada against
Group companies.
70. Knight Class Action: the Supreme Court of British Columbia
certified a class of all consumers who purchased Imperial
cigarettes in British Columbia bearing \u2018light\u2019 or \u2018mild\u2019
descriptors since 1974. The plaintiff is seeking compensation
for amounts spent on \u2018light and mild\u2019 products and a
disgorgement of profits from Imperial on the basis that the
marketing of light and mild cigarettes was deceptive because
it conveyed a false and misleading message that those
cigarettes are less harmful than regular cigarettes.
71. On appeal, the appellate court confirmed the certification of
the class, but limited any financial liability, if proven, to 1997
onward. Imperial\u2019s third-party claim against the federal
government was dismissed by the Supreme Court of Canada.
The federal government is seeking a cost order of
CAD$5\u00a0million (approximately \u00a33.0\u00a0million) from Imperial
relating to its now dismissed third-party claim. After being
dormant for several years, the plaintiff delivered a Notice of
Intention to Proceed, and Imperial delivered an application to
dismiss the action for delay. The application was heard on
23\u00a0June 2017 and was dismissed on 23 August 2017. Notice to
class members of certification was provided on 14 February
2018. As at the date of the Stays, the next steps were
expected to include discovery-related ones.
72. Growers\u2019 Class Action: in December 2009, Imperial was
served with a proposed class action filed by Ontario tobacco
farmers and the Ontario Flue-Cured Tobacco Growers\u2019
Marketing Board. The plaintiffs allege that Imperial and the
Canadian subsidiaries of Philip Morris International and JTI
failed to pay the agreed domestic contract price to the
growers used in products manufactured for the export market
and which were ultimately smuggled back into Canada. JTI
has sought indemnification pursuant to the JTI Indemnities
(discussed below at paragraphs 132-133). The plaintiffs seek
damages in the amount of CAD$50\u00a0million (approximately
\u00a329.7\u00a0million). Various preliminary challenges have been heard,
the last being a motion for summary judgment on a limitation
period. The motion was dismissed and ultimately, leave to
appeal to the Ontario Court of Appeal was dismissed in
November 2016. In December 2017, the plaintiffs proposed
that the action proceed by way of individual actions as
opposed to a class action. The defendants did not consent.
As\u00a0at the date of the Stays, the claim was in abeyance pending
further action from the plaintiffs.
73. Quebec Class Actions: there are currently two smoking
and\u00a0health class actions in Quebec, certified by the Quebec
Superior Court on 21 February 2005 against Imperial and
two\u00a0other domestic manufacturers. Judgment was rendered
against the defendants on 27 May 2015. Pursuant to the
judgment, the plaintiffs were awarded damages and interest
against Imperial and the Canadian subsidiaries of Philip Morris
International and JTI in the amount of CAD$15.6\u00a0billion
(approximately \u00a39.3\u00a0billion), most of which was on a joint and
several basis, of which Imperial\u2019s share was CAD$10.4\u00a0billion
(approximately \u00a36.2\u00a0billion). An appeal of the judgment was
filed on 26 June 2015. The court also awarded provisional
execution pending appeal of CAD$1,131\u00a0million (approximately
\u00a3673\u00a0million), of which Imperial\u2019s share was approximately
CAD$742\u00a0million (approximately \u00a3441\u00a0million). This order was
subsequently overturned by the Court of Appeal. Following
the cancellation of the order for provisional execution, the
plaintiffs filed a motion against Imperial and one other
manufacturer seeking security in the amount of CAD$5\u00a0billion
(approximately \u00a33.0\u00a0billion) to guarantee, in whole or in part,
the payment of costs of the appeal and the judgment. On
27\u00a0October 2015, the Court of Appeal ordered the parties
to\u00a0post security for the judgment in the amount of
CAD$984\u00a0million (approximately \u00a3585\u00a0million), of which
Imperial\u2019s share was CAD$758\u00a0million (approximately
\u00a3450.9\u00a0million) which amounts have been paid into court.
Imperial's share was later recalculated by the Court of Appeal
as CAD$759\u00a0million (approximately \u00a3451.5\u00a0million). On 1\u00a0March
2019, the trial judgment was upheld by a unanimous decision
of the five-member panel of the Court of Appeal, with one
exception being an amendment to the original interest
calculation applied to certain portions of the judgment.
The\u00a0interest adjustment has resulted in the reduction of
the\u00a0total maximum award in the two cases to CAD$13.7\u00a0billion
(approximately \u00a38.1\u00a0billion) as at 1 March 2019, with Imperial\u2019s
share being reduced to approximately CAD$9.2\u00a0billion
(approximately \u00a35.5\u00a0billion).
74. Other Canadian Smoking and Health Class Actions: seven
putative class actions, described below, have been filed against
various Canadian and non-Canadian tobacco-related entities,
including the UK Companies, Imperial and the RJR\u00a0Companies,
in various Canadian provinces. In these cases, none of which
have quantified their asserted damages, the\u00a0plaintiffs allege
claims based on fraud, fraudulent concealment, breach of
warranty of merchantability, and of fitness for a particular
purpose, failure to warn, design defects, negligence, breach
of\u00a0a \u2018special duty\u2019 to children and adolescents, conspiracy,
concert of action, unjust enrichment, market share liability and
violations of various trade practices and competition statutes.
Pursuant to the terms of the 1999 sale of RJRT\u2019s international
tobacco business, and subject to a reservation of rights, JTI has
assumed the defence of the RJR Companies in these seven
actions (Semple, Kunka, Adams, Dorion, Bourassa, McDermid
and Jacklin, discussed below).
75. In June 2009, four smoking and health class actions were filed
in Nova Scotia (Semple), Manitoba (Kunka), Saskatchewan
(Adams) and Alberta (Dorion) against various Canadian and
non-Canadian tobacco-related entities, including the
UK\u00a0Companies, Imperial and the RJR Companies. In
Saskatchewan, the Company, Carreras Rothmans Limited
and\u00a0Ryesekks p.l.c. have been released from Adams, and
the\u00a0RJR Companies have brought a motion challenging the
jurisdiction of the court. There are service issues in\u00a0relation
to\u00a0Imperial and the UK Companies in Alberta and in relation
to\u00a0the UK Companies in Manitoba. The plaintiffs did not serve
their certification motion materials and no dates for
certification motions were set.
76. In June 2010, two further smoking and health class actions
were\u00a0filed in British Columbia (Bourassa and McDermid) against
various Canadian and non-Canadian tobacco-related entities,
including Imperial, the UK Companies and the RJR Companies.
The\u00a0UK Companies, Imperial, the RJR Companies and other
defendants objected to jurisdiction. Subsequently, the
Company, Carreras Rothmans Limited and Ryesekks p.l.c. were
released from the actions. Imperial, Industries, Investments and
the RJR Companies remain as defendants in both actions. The
plaintiffs did not serve their certification motion materials and
no dates for certification motions were set.
77. In June 2012, a smoking and health class action was filed in
Ontario (Jacklin) against various Canadian and non-Canadian
tobacco-related entities, including the UK Companies, Imperial
and the RJR\u00a0Companies. The claim has been in abeyance.
78. A proposed national class action was filed in the British Columbia
Supreme Court by Danver Bauman (via his litigation guardian)
on 21 December 2023 against Imperial Tobacco Company
Ltd., ITCAN, and Nicoventures Trading Limited (Nicoventures)
alleging numerous statutory and common law causes of
action in connection with the design, marketing and sale of
Zonnic. The action was issued in violation of the CCAA Stay,
is\u00a0subject to the CCAA Stay, and has not been served.
Venezuela
79. In April 2008, the Venezuelan Federation of Associations
of\u00a0Users and Consumers (FEVACU) and Wolfang Cardozo
Espinel and Giorgio Di Muro Di Nunno, acting as individuals,
filed a class action against the Venezuelan government.
The\u00a0class action seeks regulatory controls on tobacco and
recovery of medical expenses for future expenses of treating
smoking-related illnesses in Venezuela. Both C.A Cigarrera
Bigott Sucs. (Cigarrera Bigott), a Group subsidiary, and
ASUELECTRIC, represented by its president Giorgio Di Muro
Di Nunno (who had previously filed as an individual), have been
admitted as third parties by the Constitutional Chamber of
the Supreme Court of Justice. A hearing date for the action is
yet to be scheduled. On 25 April 2017 and on 23\u00a0January 2018,
Cigarrera Bigott requested the court to declare the lapsing of
the class action due to no proceedings taking place in the case
in over a year. A ruling on the matter is yet to be issued.
(c) Individual Tobacco-Related Personal Injury Claims
80. As at 31 December 2023, the jurisdictions with the most active
individual cases against Group companies were, in descending
order: Chile (17), Brazil (15), Italy (eight), Canada (five), Argentina
(five) and Ireland (two). There were a further two jurisdictions
with one active case only. Out of these 54 active individual
cases, as at 31 December 2023 there were two cases in
Argentina that have resulted in pending unfavourable
judgments. In one case, damages were awarded totalling
ARS685,976 (approximately \u00a3665) in compensatory damages
and ARS2,500,000 (approximately \u00a32,425) in punitive
damages, plus post-judgment interest. This judgment was
reversed via an appellate court ruling issued 19 September
2023. The plaintiff\u2019s petition for leave to appeal to the
Argentina Supreme Court was denied on 29 November 2023.
The plaintiff filed an extraordinary appeal to the Argentina
Supreme Court on 7\u00a0December 2023, which appeal remains
pending. In the other case, compensatory damages were
awarded totalling ARS2,850,000 (approximately \u00a32,765 ),
with\u00a0post-judgment interest totalling approximately
ARS195,588,410 (approximately \u00a3189,767). This judgment is
currently on appeal. In addition, on 25 August 2023, an adverse
judgment was served in an individual action in T\u00fcrkiye
awarding TRY10,000 (approximately \u00a3265) in compensatory
damages. The judgment is under appeal.
Non-Tobacco-Related Litigation
Vuse Litigation
81. On 22 July 2020, Nicholas Bernston filed a personal injury
action in the Northern District of Oklahoma against JUUL Labs
Inc. (JUUL), Altria Client Services, LLC, RJR Vapor, Reynolds
American, and others. The complaint seeks damages for
personal injuries (including pneumonia and acute respiratory
failure) allegedly resulting from vaping on several theories,
including strict liability, negligence, and breach of implied
warranty of merchantability. On 5 August 2020, the Judicial
Panel on Multidistrict Litigation entered a conditional transfer
order transferring the case to the Northern District of
California for pretrial proceedings as part of the JUUL
multidistrict litigation (MDL). On 1 December 2023, the
plaintiff dismissed the action against RJR Vapor and Reynolds
American with prejudice.
82. On 11 January 2023, Camellia Chastain filed a putative class
action complaint in the Middle District of Florida against
RJR\u00a0Vapor. The complaint sought damages arising from
alleged discoloration and/or a burnt taste in Vuse Alto Golden
Tobacco pods based on several theories, including state
consumer protection statutes, false and misleading
advertising, breach of warranty, negligent misrepresentation,
fraud, and unjust enrichment. The complaint sought to certify
two classes, including a Florida class and a multi-state class
from the states of North Carolina, South Carolina, Georgia,
Alabama, and Mississippi. On 15 March 2023, the court
granted the plaintiff\u2019s notice of voluntary dismissal and
dismissed the case with prejudice.
Croatian Distributor Dispute
83. BAT Hrvatska d.o.o u likvidaciji and British American Tobacco
Investments (Central and Eastern Europe) Limited are named
as defendants in a claim by Mr Perica received on 22\u00a0August
2017 and brought before the commercial court of Zagreb,
Croatia. Mr Perica seeks damages of HRK408,000,000
(approximately \u20ac54\u00a0million / \u00a347\u00a0million) relating to a BAT
Standard Distribution Agreement dating from 2005. BAT
Hrvatska d.o.o and British American Tobacco Investments
(Central and Eastern Europe) Ltd filed a reply to the statement
of claim on 6 October 2017. A hearing had been scheduled to
take place on 10 May 2018, but it was postponed due to a
change of the judge hearing the case. The Commercial Court
in Zagreb declared they do not have jurisdiction and that the
competent court to hear this case is the Municipal Court in
Zagreb. TDR d.o.o. is also named as the defendant in a claim
by Mr\u00a0Perica received on 30 April 2018 and brought before the
commercial court of Zagreb, Croatia. Mr. Perica seeks
payment in the amount of HRK408,000,000 (approximately
\u20ac54\u00a0million / \u00a347\u00a0million) claiming that BAT Hrvatska d.o.o.
transferred a business unit to TDR d.o.o, thus giving rise to a
liability of TDR d.o.o. for the debts incurred by BAT Hrvatska
d.o.o, on the basis of the provisions of Croatian civil obligations
law. A response to the statement of claim was filed on 30\u00a0May
2018. The Commercial Court in Zagreb declared they do not
have jurisdiction and that the competent court to hear this
case is the Municipal Court in Pula. Mr Perica filed an appeal
against this decision which was rejected by the High
Commercial Court of The Republic of Croatia confirming
therewith that the competent court to hear this case is the
Municipal Court in Pula. The Municipal Court in Zagreb has
decided that the claims by Mr Perica initiated on 22\u00a0August
2017 and 30 April 2018 shall be heard as one case in front of
the Municipal Court of Zagreb. After the two hearings have
been held, the Municipal Court of Zagreb has appointed the
court financial and auditing appraisal to determine the value
of Mr Perica\u2019s claim.
Florence Proceedings
84. British American Tobacco Italia SpA has been charged with
administrative offences in Florence, Italy in a case against a
large number of individual and corporate defendants. This
relates to potential allegations of failure to supervise or take
appropriate steps to prevent alleged corruption by two (now
former) employees. Any financial penalty is not thought likely
to be material.
Patents and Trademark Litigation
85. Certain Group companies are party to a number of patent
litigation cases and procedural challenges concerning the
validity of patents owned by or licensed to them and/or the
alleged infringement of third parties\u2019 patents.
86. On 22 June 2018, an affiliate of PMI commenced proceedings
against British American Tobacco Japan, Ltd. (BAT Japan) in the
Japanese courts challenging the import, export, sale and offer of
sale of the glo device and of the NeoStiks consumable in Japan
at the time the claim was brought (and earlier models of the glo
device), alleging that the glo devices directly infringe certain
claims of two Japanese patents that have been issued to the
PMI affiliate and that the NeoStiks indirectly infringe certain
claims of those patents. On 17 January 2019, the PMI affiliate
introduced new grounds of infringement, alleging that the glo
device also infringes some other claims in the two PMI affiliate\u2019s
Japanese patents. Damages for the glo device and NeoStik are
claimed in the court filing, to the amount of JPY100\u00a0million
(approximately \u00a3556,418). The PMI affiliate has also filed a
request for injunction with respect to the glo device. BAT Japan
denies infringement and is challenging the validity of the two
PMI affiliate\u2019s Japanese patents. On 30\u00a0November 2022, the
Tokyo District Court dismissed both of the above claims of the
PMI affiliate on the grounds that both of the above two PMI
affiliate's Japanese patents lack inventive step and would be
invalidated by a patent invalidation trial. The PMI affiliate has
appealed against this judgment. The Intellectual Property High
Court upheld this judgment and dismissed the appeal of the
PMI affiliate on 28\u00a0November 2023. The PMI affiliate filed a final
appeal and a petition for acceptance of final appeal against the
judgment of the Intellectual Property High Court.
87. On 11 February 2022, Nicoventures commenced an action in
the\u00a0England and Wales High Court (Patents Court) against Philip
Morris Products S.A. (PMP) for revocation against one of PMP\u2019s
patents (a further divisional patent in the same family was added
into the revocation action on 27 May 2022). On 22 August 2022,
PMP counterclaimed for patent infringement against
Nicoventures and Investments concerning certain \u2018glo\u2019 tobacco
heating devices that comprise two inductive heating coils and
their corresponding consumables. (PMP later abandoned its
counterclaim in respect of one of the patents but maintained its
counterclaim in respect of the other.) PMP sought an injunction
and damages (plus interest thereon). The trial was heard in
March 2023. On 18 April 2023 the England and Wales High Court
(Patents Court) handed down its judgment finding that the PMP
patents were valid but one of them is not infringed
(the\u00a0counterclaim in respect of the other patent having been
abandoned). Thus, PMP's counterclaim for patent
infringement against Nicoventures and Investments failed.
Both parties have permission to appeal the decision, which
will be heard by the Court of Appeal on 19 and 20 March 2024.
88. On 28 May 2020, Altria Client Services LLC and U.S. Smokeless
Tobacco Company LLC commenced proceedings against
RJR\u00a0Vapor before the U.S. District Court for the Middle District
of North Carolina against the vapour products Vuse Vibe and
Vuse Alto, and the tin used in the modern oral product Velo. Nine
patents in total were asserted: two against Vibe, four against Alto
and three against Velo. On 5\u00a0January 2021, Altria filed an Amended
Complaint adding Modoral Brands Inc. as a defendant with respect
to the Velo product claims. A claim construction hearing was held
on 28\u00a0April 2021, and the court issued its claim construction ruling
on 12\u00a0May 2021. All asserted patent claims against Vibe and Velo as
well as one of the four patents asserted against Alto were dropped
prior to trial, leaving three patents asserted against Alto for trial.
Trial was held from 29 August 2022 to 7\u00a0September 2022. The jury
found infringement by all accused products and awarded
approximately US$95\u00a0million (approximately \u00a374.5\u00a0million)
in\u00a0damages. On 27\u00a0January 2023, the court rejected Altria's request
to double the jury's awarded royalty rate for post-trial sales
and set the royalty rate applicable to post-trial sales to the jury's
awarded rate of\u00a05.25%. Altria did not request entry of an
injunction and has stipulated it will not enforce the monetary
judgment until appeals are exhausted. On 10 February 2023, RJR
Vapor noticed its appeal to the United States Court of Appeals
for\u00a0the\u00a0Federal Circuit. Appellate briefing has been completed.
The Federal Circuit has not scheduled a date for oral argument.
89. On 9 April 2020, RAI Strategic Holdings, Inc. and RJR Vapor
commenced an action in the U.S. District Court for the
Eastern District of Virginia against Altria Client Services LLC,
PM USA, Altria Group, Inc., Philip Morris International, Inc.,
and\u00a0Philip Morris Products S.A. (collectively, Philip Morris)
for\u00a0infringement of six patents based on the importation
and\u00a0commercialization within the United States of IQOS. On
8\u00a0May 2020 and 12 June 2020, Philip Morris filed Inter Partes
Review (IPR) petitions in the U.S. Patent Office challenging the
validity of each of the six patents asserted. On 29\u00a0June 2020,
Philip Morris asserted counterclaims alleging that RJR Vapor
infringes five patents. On 24 November 2020, the court issued
a claim construction order that determined that each
disputed term would have its plain and ordinary meaning.
On\u00a04 December 2020, the magistrate judge issued an order
staying RJR Vapor and Philip Morris\u2019s patent claims pending
a\u00a0decision by the U.S. Patent Office regarding whether to
proceed with the IPRs. Trial on the Altria and Philip Morris
patents began on 8 June 2022. Shortly before trial, Philip
Morris dropped its claims to one patent and the Altria entities
dismissed their claims relating to two patents, which left two
Philip Morris patents at issue in the trial. On 15 June 2022, the
jury found that RJR Vapor's Alto product infringed two claims
in one patent and that its Solo product infringed three claims
of the other patent. The jury awarded damages of
US$10,759,755 (approximately \u00a38,439,023), which was
supplemented by the Court to a total of US$14,062,742
(approximately \u00a311,029,601) to account for additional sales
of\u00a0Solo and Alto through the date of judgment and interest.
Philip Morris requested entry of a permanent injunction
barring sale of the Alto and Solo products. On 30\u00a0March 2023,
the court denied Philip Morris's request for a permanent
injunction and ordered ongoing royalty rates of 1.8% of net
sales of Alto cartridges and 2.2% of net sales of Solo G2
cartridges. On 1 May 2023, the court granted RJR Vapor\u2019s
motion for entry of judgment under Fed. R. Civ. P. 54(b) and
denied Philip Morris\u2019s cross motion to lift the stay as to
RJR\u00a0Vapor\u2019s offensive patent case. The RJR Vapor offensive
patent case remains stayed pending (i) an appeal by Philip
Morris to the Federal Circuit in relation an exclusion order
granted against Philip Morris by the International Trade
Commission based on the relevant patents, which exclusion
order was affirmed by the United States Court of Appeals
for\u00a0the Federal Circuit on 31 March 2023, and (ii) the decisions
in IPRs commenced by Philip Morris against the relevant
patents at the U.S. Patent Office. On 1 May 2023, RJR Vapor
noticed an appeal to the United States Court of Appeals for
the Federal Circuit. On 10 May 2023, Philip Morris noticed
a\u00a0cross-appeal relating to the denial of its request for a
permanent injunction and the 17 August 2023 amended
judgment on the verdict. RJR Vapor and Philip Morris\u2019s
appeals have been consolidated. Briefing is ongoing.
90. On 27 November 2020 Philip Morris filed a complaint before
the Regional Court Mannheim in Germany against British
American Tobacco (Germany) GmbH (BAT Germany) alleging
that the sale, offer for sale and importation of Vype ePod
products infringes a patent. Philip Morris is seeking an
injunction, a recall of product from commercial customers
and a declaratory judgment for damages. The trials of this
action took place on 15 June 2021 and 9 November 2021.
A\u00a0decision on the matter was promulgated on 30\u00a0November
2021. The decision dismissed the complaint in its entirety. On
28 December 2021, Philip Morris lodged an appeal against this
decision before the Higher Regional Court Karlsruhe. A date
has not yet been set for the appeal hearing.
91. On 11 December 2020 Philip Morris filed a complaint before the
Regional Court Dusseldorf in Germany against BAT Germany
alleging that the sale, offer for sale and importation of the glo
TABAK HEATER and neo STICK products infringe a patent.
Philip Morris is seeking an injunction, a recall of product from
commercial customers and a declaratory judgment for
damages. The trial of this action took place on 30\u00a0November
2021. The court promulgated its decision on 21\u00a0December 2021
and decided that the above-mentioned products infringe the
patent. The decision was appealed by BAT Germany on
21\u00a0December 2021 to the Higher Regional Court Dusseldorf.
The oral hearing of these appeal proceedings took place on
24\u00a0November 2022. On 15 December 2022, the Higher
Regional Court Dusseldorf reversed the trial court decision
and\u00a0dismissed Philip Morris\u2019s complaint in its entirety.
In\u00a0addition, the Higher Regional Court Dusseldorf did not grant
a further appeal to the German Supreme Court
(Bundesgerichtshof (BGH)). PMI filed a motion for leave of
appeal with the BGH, which is why the decision of the Higher
Regional Court Dusseldorf is not yet final. Pursuant to a global
settlement agreement between Nicoventures and PMP.
dated 1 February 2024 that resolves all ongoing patent
infringement litigation between the parties related to the
Group's Heated Tobacco and Vapour products, the parties will
cause the proceedings set out in this item 91 and at
paragraphs 86, 87, 89, and 90 to be dismissed.
92. On 14 December 2020, Modoral Brands Inc. (Modoral) filed
a\u00a0complaint in the U.S. District Court for the District of
Delaware against Pinkerton Tobacco Co., LP, Swedish Match
North America LLC, and NYZ AB (collectively Swedish Match)
seeking a declaratory judgment that the importation,
manufacture, use, and/or sale of certain Modoral Velo
products that Modoral acquired from Dryft Sciences does
not\u00a0infringe a Swedish Match patent or its trade secrets.
On\u00a03\u00a0June 2021, the case was transferred to the U.S. District
Court for the Central District of California. On 13 July 2021,
Swedish Match and Helix Innovations GmbH filed
counterclaims against Modoral for infringement of the patent
and misappropriation of trade secrets arising out of the
manufacture, use, and sale of Modoral\u2019s Velo product. On
15\u00a0December 2021, the court entered a Markman Order
finding that the patent distinguishes a nicotine complex from
the claimed \u2018nicotine salt,\u2019 and more specifically, affirmatively
excluding the nicotine polacrilex complex used in the accused
Velo product from the claimed invention because it is 'not a
nicotine salt'. Swedish Match agreed to a joint stipulation and
request for entry of judgment of non-infringement for all of
the asserted claims of the '908 patent, which the Court
granted on 19 January 2022. The case has been resolved,
and\u00a0the court entered an order granting the parties\u2019 joint
stipulation of dismissal on 9 February 2023.
93. On 20 September 2023, Healthier Choices Management Corp.
(HCMC) commenced proceedings against RJR Vapor before
the U.S. District Court for the Middle District of North Carolina
against the Vapour product Vuse Alto alleging infringement of
U.S. Patent 9,538,788. On 17 November 2023, RJR Vapor filed
a\u00a0motion to dismiss the action in its entirety. Briefing on that
motion is complete, and it is pending a decision.
Mozambican IP Litigation
94. On 19 April 2017, Sociedade Agr\u00edcola de Tabacos, Limitada
(SAT) (a BAT Group company in Mozambique) filed a complaint
to the National Inspectorate for Economic Activities (INAE),
the\u00a0government body under the Ministry of Industry and
Trade, regarding alleged infringements of its registered
trademark (GT) by GS Tobacco SA (GST). INAE subsequently
seized the allegedly infringing products (GS cigarettes) and
fined and ordered GST to discontinue manufacturing products
that could infringe SAT\u2019s intellectual property rights. Following
INAE\u2019s decision, in July 2017 and March 2018, SAT sought
damages via the Judicial Court of Nampula, from GST in the
amount of MZN46,811,700 (approximately \u00a3575,018) as well
as\u00a0a permanent restraint order in connection with the
manufacturing and selling of the allegedly infringing products.
The Judicial Court of Nampula (Tribunal Judicial de Nampula)
granted the order on an interim basis on 7\u00a0August 2017. After
hearing the parties, on 5 September 2017, the court found that
no alleged infringement by GST had occurred and removed the
interim restraint order, this decision was appealed by SAT and
is currently pending a decision. GST filed an application for
review against INAE\u2019s initial decision directly to the Minister
of\u00a0Trade and Industry, which reversed the decision of INAE.
On\u00a031\u00a0December 2018, SAT was notified of GST\u2019s counterclaim
against SAT at the Judicial Court of Nampula for damages
allegedly sustained as a result of SAT\u2019s complaint to INAE
(and\u00a0INAE\u2019s decision). GST is seeking damages in the amount
of approximately MZN14.5 billion (approximately \u00a3178\u00a0million).
On 31 January 2019 SAT filed a formal response to the
counterclaim. GST was notified on 28 February 2019 to file a
response to SAT's formal response to the counterclaim and
the judge scheduled the preliminary hearing for 14 March 2019.
This hearing was adjourned and was held on 2 April 2019, when
the court heard arguments on the validity of GST\u2019s
counterclaim. On 2 September 2019, SAT received notification
of an order which provided that (i) SAT\u2019s claim had been
dismissed by the court; and (ii) the GST counterclaim would
proceed to trial. On 9\u00a0September 2019 SAT responded to the
order by appealing the dismissal of the SAT claim. Additionally,
SAT made an interlocutory application in the counterclaim
proceedings to challenge certain questions posed by the
judge, on the basis that the responses may be used as
evidence at trial. SAT was notified in December 2021 that the
trial of the counterclaim was to take place on 24 February
2022. SAT subsequently submitted a complaint related to that
trial to the court, on the basis that prior to any further step
being taken in relation to the trial the process should be
submitted to the superior court for analysis, as per the appeals
previously submitted in the proceedings. SAT\u2019s complaint has
been appreciated favourably and the process will be remitted
to the superior court. Trial has not taken place.
Malawi Group Action
95. In December 2020, the Company and British American
Tobacco (GLP) Limited (\"GLP\") were named as defendants
in\u00a0a\u00a0claim made in the English High Court by around
7,500\u00a0Malawian tobacco farmers and their family members.
The claim also names Imperial Brands plc and five affiliates
as\u00a0defendants. The claimants allege they were subjected to
unlawful and exploitative working conditions on tobacco farms
from which it is alleged that the defendants indirectly acquire
tobacco. They seek unquantified damages (including
aggravated and exemplary damages) for the torts of
negligence and conversion and unquantified personal and
proprietary remedies for restitution of unjust enrichment. They
also seek an injunction to restrain the commission of further
torts of conversion or negligence by the defendants. The
defendants had an application to strike out the claims
dismissed in a judgment dated 25 June 2021. In January 2022,
the Company and GLP were served with a similar claim by
around a further 3,500 claimants. The Company and GLP
intend vigorously to defend the claims.
Middle East Litigation
96. On 25 January 2021, Walid Ahmed Mohammed Al Naghi for
Trading Establishment (Al Naghi), a former distributor for the
Group\u2019s operating companies in the Middle East, filed a claim
in\u00a0the Commercial Court in Jeddah, Saudi Arabia, seeking
SAR2,105,356,121 (approximately \u00a3440.4\u00a0million) for
reimbursement of funds allegedly due under contract. Al\u00a0Naghi did
not formally name any Group entity as a defendant in the claim.
The claim was dismissed orally by the Court on 9 February
2021. On 20 April 2021, Al Naghi filed a new claim in the Jeddah
Commercial Court against B.A.T (U.K. and Export) Limited
(BAT UKE) demanding that BAT UKE reimburse Al Naghi in the
amount of SAR2,105,356,121 allegedly paid by Al Naghi to the
customs authorities in customs dues. On\u00a016 June 2021, the
Court of First Instance issued a judgment dismissing the claim
against BAT UKE on the ground that BAT UKE lacks legal
standing to be sued. On 22\u00a0August 2021, Al Naghi filed an appeal
against the Court of First Instance judgment. On\u00a015 November
2021, the Appellate Court remanded the case to the lower Court
in order for the lower Court to join BAT entities in Bahrain and
UAE, which Al Naghi had wrongly claimed on appeal to be
branches of BAT UKE. The lower Court tried to summon the
Bahrain and UAE BAT entities to obtain clarifications about their
status; however, said entities were not properly notified and did
not appear. On\u00a02\u00a0August 2022, the Court reversed its decision to
seek clarifications from the BAT entities in Bahrain and UAE and
dismissed the claim against BAT UKE for lack of legal capacity.
On 29 August 2022, Al Naghi filed an appeal against the\u00a0Court of
First Instance judgment. On 5 December 2022, the Court of
Appeal issued a judgment affirming the preliminary court's
ruling dismissing Al Naghi's claim against BAT UKE. On
27\u00a0December 2022, Al Naghi filed an appeal before the
Supreme Court. On 15 May 2023, the Supreme Court issued
a\u00a0judgment dismissing Al Naghi's appeal. The\u00a0dismissal is final
in respect of Al Naghi's claim against BAT UKE.
97. On 6 November 2023, Al Naghi filed a claim in the Commercial
Court in Jeddah, Saudi Arabia, seeking SAR2,105,356,121
(approximately \u00a3440.4\u00a0million) for reimbursement of funds
allegedly due under contract. The claim named British
American Tobacco Middle East W.L.L. as the defendant.
The\u00a0court has ordered the exchange of memoranda.
The\u00a0next\u00a0hearing is\u00a0scheduled for 21 February 2024.
98. In late December 2023, BAT UKE received a request for
arbitration proceedings from a customer/distributor
in\u00a0the\u00a0Middle East, seeking damages of approximately
US$116\u00a0million (approximately \u00a391\u00a0million). BAT UKE has
submitted its response to the claim.
Asbestos Litigation
99. As at 31 December 2022, there were four active asbestos
personal injury cases against BATUS Holdings Inc. and various
other defendants. During the financial year 2023, BATUS
Holdings Inc. was served with 17 new asbestos personal injury
cases, and BATUS Holdings Inc. was dismissed from eight
asbestos personal injury cases (including Stuck and
Mannooch) by court order for lack of personal jurisdiction or by
voluntary dismissal. Consequently, as of 31\u00a0December 2023,
there are 13 active cases. The plaintiffs in each case allege
exposure to the defendants\u2019 asbestos and asbestos-
containing talcum powder and cosmetics products, and assert
claims under state law, including for negligence, breach of
warranty, strict liability, conspiracy, fraud and wrongful death.
The plaintiffs seek unspecified compensatory and punitive
damages. Of the 13 active cases, 10 cases (Lowis, Phillips,
Cooke, Dove, Gibbs, Westropp, Knight, Steggles, Doonan, and
Oakenfold) are filed in the Supreme Court of the State of New
York (New York County), two cases (Weber and Redgewell) are
filed in the Circuit Court of the 17th Judicial Circuit in and for
Broward County, Florida, and one case (Caswell) is filed in\u00a0the
Superior Court of the State of California (Alameda County). In
all of these pending cases, BATUS Holdings Inc. has filed
motions to dismiss for lack of personal jurisdiction.
Cigarette Filter Litter Litigation
100. On 21 November 2022, the Mayor and City Council of
Baltimore, Maryland, filed a lawsuit in the Circuit Court for
Baltimore City naming the Company and RJRT, as well as
PM\u00a0USA, Altria Group, Liggett Group LLC and a Maryland-
based distributor, as defendants. RJRT was served on
13\u00a0December 2022, and the Company received the complaint
on 18\u00a0January 2023. The plaintiff, a municipality, alleges that
the defendants manufactured, distributed and sold non-
biodegradable cigarette filters with knowledge that
consumers would discard used filters on public property
owned by the plaintiff, and further alleges that the defendants
failed to warn consumers of the alleged environmental
impacts of littered filters. The plaintiff asserts causes of action
for alleged violation of\u00a0state and municipal civil and criminal
anti-littering and dumping laws, trespass, strict liability and
negligent design defect, public nuisance, and strict liability and
negligent failure to warn. The plaintiff seeks, among other
relief, unspecified damages (including punitive damages) for
costs allegedly incurred removing discarded cigarette filters
from public property, and for alleged damage to land and
natural resources and property value diminution, along with
fines under state and municipal laws. On 3 February 2023,
PM\u00a0USA filed a notice of removal of the litigation to the Federal
District Court in Baltimore, Maryland. The plaintiff moved to
remand the action back to the Circuit Court for Baltimore City
on 20\u00a0March 2023. The federal court, following briefing on the
motion, issued an order on 19 January 2024 remanding the
action back to the Circuit Court for Baltimore City.
U.S. Securities Putative Class Action
101. On 24 January 2024, Gary David, a purported holder of
Company securities, initiated a putative class action in the
United States District Court for the Eastern District of New
York on behalf of all\u00a0purchasers of publicly traded Company
securities between 9\u00a0February 2023 and 6 December 2023.
The complaint names the Company and certain of its current
and former officers as defendants, and alleges that during the
class period the defendants made false or misleading public
statements regarding the risks and potential likelihood of an
impairment charge to the value of the Reynolds cash-
generating units or its brand intangibles. The complaint
does\u00a0not quantify the claimed damages.
Fox River
Background to environmental liabilities arising out of
contamination of the Fox River:
102. U.S. authorities identified potentially responsible parties
(PRPs), including NCR Corporation (NCR), to fund the clean-
up of polluted sediments in the Lower Fox River, Wisconsin.
Discharges of Polychlorinated Biphenyls (PCBs) from paper
mills and other facilities operating close to the river caused
that pollution. Industries\u2019 involvement with the environmental
liabilities arises out of (i) indemnity arrangements which it
became party to due to various transactions that took place
from the late-1970s onwards and (ii) subsequent litigation
brought by NCR against Industries and Appvion Inc. (Appvion)
(a former Group subsidiary) in relation to those arrangements.
103. Following substantial litigation in the United States regarding
the responsibility for the costs of the clean-up operations, and
enforcement proceedings brought by the U.S. Government
against NCR and Appvion to ensure compliance with
regulatory orders made relating to the Fox River clean-up,
the\u00a0District Court of Wisconsin approved (on 23 August 2017)
a form of settlement with the U.S. Government known as a
Consent Decree.
104. A key term of that Consent Decree is that NCR was obliged
to\u00a0perform and fund all of the remaining Fox River remediation
work by itself.
105. A cost breakdown filed in support of the motion to approve
the Consent Decree estimates the total Fox River clean-up
costs (including natural resource damages) to be
US$1,346\u00a0million (approximately \u00a31,055.6\u00a0million).
106. A further Consent Decree between the U.S. Government,
P.H.\u00a0Glatfelter Company and Georgia-Pacific Consumer
Products LP (Georgia-Pacific), approved by the Wisconsin
District Court on 14 March 2019, concluded all remaining
litigation relating to the Fox River. In November 2019,
an\u00a0arbitral tribunal awarded approximately US$10\u00a0million
(approximately \u00a37.8\u00a0million) to the remediation contractor
engaged by a limited liability company formed by NCR and
Appvion to perform the Fox River clean-up operation. NCR
has\u00a0stated (in its 2021 Annual Report on Form 10-K) that its
indemnitors and co-obligors were responsible for the majority
of the award, with its own share being approximately 25%.
107. On 3 October 2022, the United States Environmental
Protection Agency issued a Certificate of Completion in
respect of remedial action for the Lower Fox River.
Industries\u2019 involvement with environmental liabilities arising
out\u00a0of\u00a0the contamination of the Fox River:
108. NCR's position is that, under the terms of a 1998 Settlement
Agreement between it, Appvion and Industries, and a 2005
arbitration award, Industries and Appvion had a joint and
several obligation to bear 60% of the Fox River environmental
remediation costs imposed on NCR and of any amounts NCR
has to pay in respect of other PRPs\u2019 contribution claims. BAT
has not acknowledged any such liability to NCR and has
defences to such claims.
109. Until May 2012, Appvion and Windward Prospects Limited
(Windward) (another former Group subsidiary) paid a 60%
share of the clean-up costs incurred by NCR. Industries was
never required to contribute. Around that time, Appvion
refused to continue to pay clean-up costs, NCR therefore
demanded that Industries pay a 60% share of those costs.
Industries resisted NCR's demand and commenced
proceedings against Windward and Appvion seeking
confirmation of indemnities provided to Industries in respect
of any liability it might have to NCR (the English Indemnity
Proceedings) pursuant to a 1990 de-merger agreement
between those parties.
Funding Agreement of 30 September 2014
110. On 30 September 2014, Industries entered into a Funding
Agreement with Windward, Appvion, NCR and BTI 2014 LLC
(BTI) (a wholly owned subsidiary of Industries). Pursuant to
the\u00a0Funding Agreement:
a. the English Indemnity Proceedings (and a related counterclaim)
and NCR-Appvion arbitration were discontinued;
b. the parties agreed a framework through which they would
together fund the ongoing costs of the Fox River clean-up; and
c. NCR agreed to accept funding by Industries at the lower level
of\u00a050% of the ongoing clean-up related costs of the Fox River
(rather than the 60% referenced above). This remains subject
to\u00a0an ability to litigate at a later stage the extent of Industries\u2019
liability (if any) in relation to Fox River clean-up-related costs
(including in respect of the 50% of costs that Industries has paid
under the Funding Agreement to date).
111. Additionally, Windward has contributed US$10\u00a0million
(approximately \u00a37.8\u00a0million) of funding. Appvion has
contributed US$25\u00a0million (approximately \u00a319.6\u00a0million)
for\u00a0Fox River and agreed to contribute US$25\u00a0million
(approximately \u00a319.6\u00a0million) for the Kalamazoo River
(see\u00a0further below). Appvion entered Chapter 11 bankruptcy
protection on 1 October 2017.
112. The parties also agreed to cooperate in order to maximise
recoveries from certain claims made against third parties,
including (i) a claim commenced by Windward in the High
Court of England & Wales (the High Court) against Sequana
S.A. (Sequana) and the former Windward directors (the
Windward Dividend Claim), assigned to BTI under the Funding
Agreement, and which relates to dividend payments made by
Windward to Sequana of around \u20ac443\u00a0million (approximately
\u00a3384\u00a0million) in 2008 and \u20ac135\u00a0million (approximately
\u00a3117.0\u00a0million) in 2009 (the Dividend Payments) and (ii) a claim
commenced by Industries directly against Sequana to recover
the value of the Dividend Payments alleging that the dividends
were paid for the purpose of putting assets beyond the reach
of Windward\u2019s creditors (including Industries) (the BAT
section 423 Claim) (together, the Sequana Proceedings).
113. Pursuant to a judgment of the High Court handed down on
11\u00a0July 2016, the court upheld the BAT section 423 Claim. By
way of a consequential judgment dated 10 February 2017, the
High Court ordered that Sequana pay to BTI an amount up to
the full value of the 2009 Dividend plus interest, equating to
around US$185\u00a0million (approximately \u00a3145.1\u00a0million). The Court
dismissed the Windward Dividend Claim.
114. The parties pursued cross-appeals on the judgment
and\u00a0payments in respect of the judgment were stayed. On
6\u00a0February 2019 the Court of Appeal gave judgment upholding
the High Court\u2019s findings, with one immaterial change to
the\u00a0method of calculating the damages awarded. Sequana
remains liable to pay approximately US$185\u00a0million
(approximately \u00a3145.1\u00a0million) and around \u00a310\u00a0million in costs
to Industries.
115. On 15 May 2019, the Nanterre Commercial Court made an
order placing Sequana into formal liquidation proceedings.
To\u00a0date, Sequana has made no payments to Industries.
Because of Sequana\u2019s ongoing insolvency process,
execution\u00a0of that judgment is stayed.
116. BTI subsequently appealed to the Supreme Court in respect
of\u00a0the Windward Dividend Claims. On 5 October 2022,
the\u00a0Supreme Court handed down its judgment, dismissing
BTI's appeal.
117. BTI has brought claims against certain of Windward\u2019s former
advisers, including Windward\u2019s auditors at the time of the
dividend payments, PricewaterhouseCoopers LLP (PwC)
(which claims were also assigned to BTI under the Funding
Agreement). BTI's claim against PwC is progressing in the High
Court and the trial is scheduled to take place in the summer of
2024. An agreed stay is in place in respect of BTI\u2019s separate
assigned claim against Freshfields Bruckhaus Deringer.
118. The sums Industries has paid under the Funding Agreement
are subject to the reservation as set out in paragraphs 110-111
above and ongoing adjustment. Clean-up costs can only be
estimated in advance of the work being carried out and
certain sums payable are the subject of ongoing U.S. litigation.
In 2019, Industries paid \u00a332\u00a0million in respect of clean-up
costs. In 2020, Industries paid \u00a32\u00a0million in respect of\u00a0clean-up
costs. In 2021, Industries paid a further \u00a32\u00a0million in respect of
clean-up costs. In 2022, Industries has paid an additional
\u00a31\u00a0million in respect of clean-up costs. Industries is potentially
liable for further costs associated with the clean-up. Industries
has a provision of \u00a344\u00a0million which represents the current
best estimate of its exposure \u2013 see note 24.
Kalamazoo
119. Georgia-Pacific, a designated PRP in respect of the
Kalamazoo River in Michigan, also pursued NCR in relation
to\u00a0remediation costs caused by PCBs released into that river.
On 26 September 2013, the United States District Court,
Michigan held that NCR was liable as a PRP on the basis that
it had arranged for the disposal of hazardous material for the
purposes of the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA).
120. Following further litigation, on 11 December 2019, NCR
announced that it had entered into a Consent Decree with
the\u00a0U.S. Government and the State of Michigan (subsequently
approved by the Michigan Court on 2 December 2020),
pursuant to which it assumed liability for certain remediation
work at the Kalamazoo River. The payments to be made on
the face of the Consent Decree in respect of such work total
approximately US$245\u00a0million (approximately \u00a3192\u00a0million).
The Consent Decree also provides for the payment by NCR
of\u00a0an outstanding judgment against it of approximately
US$20\u00a0million (approximately \u00a315.7\u00a0million) to Georgia-Pacific.
121. The quantum of the clean-up costs for the Kalamazoo River
is\u00a0presently unclear. It seems likely to exceed the amounts
payable on the face of the Consent Decree.
122. On 10 February 2023, NCR filed a complaint in the United
States District Court for the Southern District of New York
against Industries, seeking a declaration that Industries must
compensate NCR for 60% of costs NCR incurred and incurs
relating to the Kalamazoo River site on the asserted basis that
the Kalamazoo River constitutes a \u2018Future Site\u2019 for the
purposes of the Settlement Agreement. The Funding
Agreement described above does not resolve any such claims.
On 23 June 2023, Industries filed its defence and
counterclaims in the proceedings. On 2 October 2023,
NCR\u00a0filed a motion for declaratory judgment on its complaint
and\u00a0to strike out Industries\u2019 defences and counterclaims.
Industries has filed its reply to this motion. The motion is
expected to be heard in February 2024.
123. Industries also anticipates that NCR will seek to recover from
Appvion (subject to a cap of US$25\u00a0million (approximately
\u00a319.6\u00a0million)) for \u2018Future Sites\u2019 under the Funding Agreement.
The effect of Appvion's Chapter 11 bankruptcy proceedings
on\u00a0its liability for Future Sites payments under the Funding
Agreement is currently uncertain. NCR has indicated that if
it\u00a0is unable to obtain recovery from Appvion then it will seek
to\u00a0recover such from Industries as part of the 60% referred
to\u00a0in paragraph 122 above.
124. In summary, Industries is and has been taking active steps
to\u00a0protect its interests. These include preparation of all its
defences and counterclaims, seeking to procure the
repayment of the Windward dividends, pursuing the other
valuable claims that are now within its control, and working
with the other parties to the Funding Agreement to maximise
recoveries from third parties with a view to ensuring that
amounts funded towards clean-up related costs are later
recouped under the agreed repayment mechanisms under
the Funding Agreement.
Other environmental matters
125. Reynolds American and its subsidiaries are subject to federal,
state and local environmental laws and regulations
concerning the discharge, storage, handling and disposal of
hazardous or toxic substances. Such laws and regulations
provide for significant fines, penalties and liabilities,
sometimes without regard to whether the owner or operator
of the property or facility knew of, or was responsible for,
the\u00a0release or presence of hazardous or toxic substances.
In\u00a0addition, third parties may make claims against owners
or\u00a0operators of properties for personal injuries and property
damage associated with releases of hazardous or toxic
substances. In the past, RJRT has been named a PRP with
third parties under CERCLA with respect to several superfund
sites. Reynolds American and its subsidiaries are not aware of
any current environmental matters that are expected to have
a material adverse effect on the business, results of
operations or financial position of Reynolds American or its
subsidiaries.
Investigations
126. From time to time, the Group investigates, and becomes aware of governmental authorities\u2019 investigations into allegations of
misconduct, including alleged breaches of sanctions and allegations of corruption at Group companies. Some of these allegations
are currently being investigated. The Group cooperates with the authorities, where appropriate.
127. On 25 April 2023, the Group announced that it had reached agreement with DOJ and the United States Department of the
Treasury\u2019s Office of Foreign Assets Controls (OFAC) to resolve previously disclosed investigations into suspicions of sanctions
breaches. These concerned business activities relating to the Democratic People\u2019s Republic of Korea between 2007 and 2017. British
American Tobacco p.l.c. entered into a three-year deferred prosecution agreement (DPA) with DOJ and a civil settlement agreement
with OFAC. DOJ\u2019s charges against the Company\u2014one count of conspiring to commit bank fraud and one count of conspiring to
violate sanctions laws\u2014were filed and will later be dismissed if the Company abides by the terms of the DPA. In addition, a BAT
subsidiary in Singapore, British-American Tobacco Marketing (Singapore) Private Limited, pleaded guilty to the same charges.
The\u00a0total amount payable to the U.S. authorities is approximately US$635 million plus interest, which is being paid by British
American Tobacco p.l.c.
Closed litigation matters
128. The following matters on which the Company reported in the contingent liabilities and financial commitments note 31 to the
Company\u2019s 2022 financial statements have been dismissed, concluded or resolved as noted below:
Matter
Jurisdiction
Companies named as Defendants
Description
Disposition
Distributor Customs
Dispute
Qatar
British American Tobacco
Middle East S.P.C.
Indemnity Litigation
Resolved
Carlson/Alloway/Wolfe
asbestos litigation
U.S.
BATUS Holdings Inc
Personal Injury
Voluntary dismissal by
plaintiffs
Philip Morris Products
S.A. EP (UK) patent
counterclaim ('Glo'
tobacco heating devices)
UK
Nicoventures Trading
Limited, British American
Tobacco (Investments)
Limited
IP
Court judgment of
dismissal in favour of
Defendants
Jones v American
Tobacco Co
Missouri
RJRT, B&W, Lorillard Tobacco
and certain parent companies
Class action
Closed by court as an
inactive file
General Litigation Conclusion
129. While it is impossible to be certain of the outcome of any particular case or of the amount of any possible adverse verdict, the Group
believes that the defences of the Group\u2019s companies to all these various claims are meritorious on both the law and the facts, and
a\u00a0vigorous defence is being made everywhere.
130. As indicated above, on 1 March 2019 the Quebec Court of Appeal released its appeal judgment. The trial judgment was largely upheld
by\u00a0a unanimous decision of the five-member panel , and did not displace the order of the Court that previously required the
defendants to post security deposits in the amount of CAD$1.1\u00a0billion (approximately \u00a3654.4\u00a0million). This is the only executory aspect
of the judgment. In these circumstances the Board of Directors of Imperial reassessed the recoverability of the litigation-related
deposit, and accordingly, the Group recognised a charge against the income statement of CAD$758\u00a0million (approximately
\u00a3450.9\u00a0million), the amount of the initial deposit paid into court, and reflecting the amount of the judgment that is considered to be
probable and estimable in line with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Consequently, the Group utilised
the litigation-related deposit which was shown as a receivable at 31\u00a0December 2018 (within trade and receivables) against the current
estimate of the liability and both the provision and litigation-related deposit were reduced accordingly. If further adverse judgments
are entered against any of the Group\u2019s companies in any case, avenues of appeal will be pursued. Such appeals could require the
appellants to post appeal bonds or substitute security (as has been necessary in Quebec) in amounts which could in some cases
equal or exceed the amount of the judgment. At least in the aggregate, and despite the quality of defences available to the Group,
it\u00a0is\u00a0not impossible that the Group\u2019s results of operations or cash flows in any particular period could be materially adversely affected
by the impact of a significant increase in litigation, difficulties in obtaining the bonding required to stay execution of judgments
on\u00a0appeal, or any final outcome of any particular litigation.
131. Having regard to all these matters, with the exception of
the\u00a0Quebec Class Actions and Fox River, the Group does not
consider it appropriate to make any provision in respect of
any\u00a0pending litigation because the likelihood of any resulting
material loss, on an individual case basis, is not considered
probable and/or the amount of any such loss cannot be
reasonably estimated. Notwithstanding the negative decision
in the Quebec Class Actions, the Group does not believe that
the ultimate outcome of this litigation will significantly impair
the Group\u2019s financial condition. If the facts and circumstances
change and result in further unfavourable outcomes in the
pending litigation, then there could be a material impact on
the financial statements of the Group. In addition, the Group
accrues for damages, attorneys' fees and/or statutory
interest, including in respect of certain Engle Progeny cases,
certain U.S. individual smoking and health cases, the DOJ
medical reimbursement/corrective statement case and the
DOJ and OFAC investigations.
Other contingencies
132. JTI Indemnities. By a purchase agreement dated 9\u00a0March
1999, amended and restated as at 11 May 1999, referred to
as\u00a0the 1999 Purchase Agreement, R.J. Reynolds Tobacco
Holdings, Inc. (RJR) and RJRT sold their international tobacco
business to JTI. Under the 1999 Purchase Agreement, RJR and
RJRT retained certain liabilities relating to the international
tobacco business sold to JTI, and agreed to indemnify JTI
against: (i) any liabilities, costs and expenses arising out of
the\u00a0imposition or assessment of any tax with respect to the
international tobacco business arising prior to the sale, other
than as reflected on the closing balance sheet; (ii) any
liabilities, costs and expenses that JTI or any of its affiliates,
including the acquired entities, may incur after the sale with
respect to any of RJR\u2019s or RJRT\u2019s employee benefit and
welfare plans; and (iii) any liabilities, costs and expenses
incurred by JTI or any of its affiliates arising out of certain
activities of Northern Brands.
133. RJRT has received claims for indemnification from JTI, and
several of these have been resolved. Although RJR and RJRT
recognise that, under certain circumstances, they may have
other unresolved indemnification obligations to JTI under
the\u00a01999 Purchase Agreement, RJR and RJRT disagree what
circumstances described in such claims give rise to any
indemnification obligations by RJR and RJRT and the nature
and extent of any such obligation. RJR and RJRT have
conveyed their position to JTI, and the parties have agreed
to\u00a0resolve their differences at a later date.
134. ITG Indemnity. In the purchase agreement relating to the
Divestiture as amended, Reynolds American agreed to defend
and indemnify, subject to certain conditions and limitations, ITG
in connection with claims relating to the purchase or use of one
or more of the Winston, Kool, Salem or Maverick cigarette
brands on or before 12 June 2015, as well as in actions filed
before 13\u00a0June 2025, relating to the purchase or use of one or
more of the Winston, Kool, Salem or Maverick cigarette brands.
In the purchase agreement relating to the Divestiture, ITG
agreed to\u00a0defend and indemnify, subject to certain conditions
and limitations, Reynolds American and its affiliates in
connection with claims relating to the purchase or use of \u2018blu\u2019
brand e-cigarettes. ITG also agreed to defend and indemnify,
subject to certain conditions and limitations, Reynolds
American and its affiliates in actions filed after 12\u00a0June 2025,
relating to the purchase or use of one or more of the Winston,
Kool, Salem or Maverick cigarette brands after 12 June 2015. ITG
has tendered a number of actions to Reynolds American under
the terms of this indemnity, and Reynolds American has,
subject to a reservation of rights, agreed to defend and
indemnify ITG pursuant to the terms of the indemnity. Reynolds
American has tendered an action to ITG under the terms of this
indemnity, and ITG has, subject to a reservation of rights,
agreed to defend and indemnify Reynolds American and its
affiliates pursuant to the terms of the indemnity. These claims
are substantially similar in nature and extent to claims asserted
directly against RJRT in similar actions.
135. Loews Indemnity. In 2008, Loews Corporation (Loews),
entered into an agreement with Lorillard Inc., Lorillard
Tobacco, and certain of their affiliates, which agreement is
referred to as the \u2018Separation Agreement\u2019. In the Separation
Agreement, Lorillard agreed to indemnify Loews and its
officers, directors, employees and agents against all costs and
expenses arising out of third-party claims (including, without
limitation, attorneys\u2019 fees, interest, penalties and costs of
investigation or preparation of defence), judgments, fines,
losses, claims, damages, liabilities, taxes, demands,
assessments, and amounts paid in settlement based on,
arising out of or resulting from, among other things, Loews\u2019
ownership of or the operation of Lorillard and its assets and
properties, and its operation or conduct of its businesses at
any time prior to or following the separation of Lorillard and
Loews (including with respect to any product liability claims).
Loews is a defendant in three pending product liability actions,
each of which is a putative class action. Pursuant to the
Separation Agreement, Lorillard is required to indemnify
Loews for the amount of any losses and any legal or other fees
with respect to such cases. Following the closing of the
Lorillard merger, RJRT assumed Lorillard\u2019s obligations under
the Separation Agreement as was required under the
Separation Agreement.
136. SFRTI Indemnity. In connection with the 13 January 2016 sale
by Reynolds American of the international rights to the NAS
brand name and associated trademarks, along with SFR
Tobacco International GmbH (SFRTI) and other international
companies that distributed and marketed the brand outside
the United States, to JT\u00a0International Holding BV (JTI Holding),
each of SFNTC, R.\u00a0J.\u00a0Reynolds Global Products, Inc., and
R.\u00a0J.\u00a0Reynolds Tobacco B.V. agreed to indemnify JTI Holding
against, among other things, any liabilities, costs, and
expenses relating to actions (i)\u00a0commenced on or before
(a)\u00a013\u00a0January 2019, to the extent relating to alleged personal
injuries, and (b) in all other cases, 13 January 2021; (ii) brought
by (a) a governmental authority to enforce legislation
implementing European Union Directive 2001/37/EC
or\u00a0European Directive 2014/40/EU or (b)\u00a0consumers or a
consumer association; and (iii) arising out of any statement
or\u00a0claim (a) made on or before 13 January 2016, (b) by any
company sold to JTI Holding in the transaction, (c) concerning
NAS brand products consumed or intended to be consumed
outside of the United States and (d) that the NAS brand
product is natural, organic, or additive-free. Under the terms
of this indemnity, JTI Holding requested indemnification from
Santa Fe Natural Tobacco Company Germany GmbH
(SFNTCG) in connection with an audit of SFNTCG relating
to\u00a0transfer pricing for the tax years 2007 to 2010 and 2012
to\u00a02015. These claims settled for a total of US$4,653,009
(approximately \u00a33,649,418) in taxes and interest.
137. Indemnification of Distributors and Retailers. RJRT, Lorillard
Tobacco, SFNTC, American Snuff Co. and RJR Vapor have
entered into agreements to indemnify certain distributors and
retailers from liability and related defence costs arising out of
the sale or distribution of their products. Additionally, SFNTC
has entered into an agreement to indemnify a supplier from
liability and related defence costs arising out of the sale or use
of SFNTC\u2019s products. The cost has been, and is expected to be,
insignificant. RJRT, SFNTC, American Snuff Co. and RJR Vapor
believe that the indemnified claims are substantially similar in
nature and extent to the claims that they are already exposed
to by virtue of their having manufactured those products.
138. Except as otherwise noted above, Reynolds American is not
able to estimate the maximum potential of future payments,
if\u00a0any, related to these indemnification obligations.
139. Competition Investigations. There are instances where Group
companies are cooperating with relevant national competition
authorities in relation to ongoing competition law
investigations and/or engaged in legal proceedings at the
appellate level, including (amongst others) in the Netherlands
and Nigeria. In regards to the previously disclosed
investigation by the Nigerian Federal Competition and
Consumer Protection Commission (FCCPC) into alleged
violations of the Nigerian Competition and Consumer
Protection Act and National Tobacco Control Act, a consent
order was entered into between the FCCPC and British
American Tobacco (Holdings) Limited, British American
Tobacco (Nigeria) Limited and British American Tobacco
Marketing (Nigeria) Limited in December 2022 terminating
the investigation and associated proceedings, replacing the
previous final order. Amongst other measures, the final order
includes provision for the payment in Naira of a penalty
equivalent to US$110\u00a0million and the Group's Nigerian
subsidiaries will be subject to a two-year period
of\u00a0monitorship.
Tax disputes
The Group has exposures in respect of the payment or recovery of
a number of taxes. The Group is and has been subject to a number
of tax audits covering, amongst others, excise tax, value added
taxes, sales taxes, corporate taxes, withholding taxes and
payroll\u00a0taxes.
The estimated costs of known tax obligations have been provided
in these accounts in accordance with the Group\u2019s accounting
policies. In some countries, tax law requires that full or part
payment of disputed tax assessments be made pending resolution
of the dispute. To the extent that such payments exceed the
estimated obligation, they would not be recognised as an expense.
While the amounts that may be payable or receivable in relation to
tax disputes could be material to the results or cash flows of the
Group in the period in which they are recognised, the Board does
not expect these amounts to have a material effect on the Group\u2019s
financial condition.
The following matters are in or may proceed to litigation:
Corporate taxes
Brazil
Profits of overseas subsidiaries. The Brazilian Federal Tax Authority
has filed claims against Souza Cruz seeking to reassess the profits
of overseas subsidiaries to corporate income tax and social
contribution tax. The reassessments are for the years 2004 until
and including 2012 for a total amount of BRL1,750\u00a0million
(\u00a3283\u00a0million) to cover tax, interest and penalties.
Souza Cruz appealed all reassessments. Regarding the first
assessments (2004-2006), Souza Cruz\u2019s appeals were rejected by
the ultimate Administrative Court after which Souza Cruz filed two
lawsuits with the Judicial Court to appeal the reassessments. The
judgment in respect of the reassessment of corporate income tax
has been decided in favour of Souza Cruz by the first level of the
Judicial Court and Souza Cruz is waiting to see whether the
Brazilian Tax Authorities will appeal the judgment. The lawsuit
appealing the social contribution tax is pending judgment in the
first level of the Judicial Court. The appeal against the second
assessments (2007 and 2008) was upheld at the second tier
tribunal and was closed. In 2015, a further reassessment for the
same period (2007 and 2008) was raised after the five-year statute
of limitation which has been appealed against. Souza Cruz received
further reassessments in 2014 for the 2009 calendar year and in
2015 an assessment for the 2010 calendar year. Souza Cruz
appealed both the reassessments in full. In December 2016,
assessments were received for the calendar years 2011 and 2012
which have also been appealed. In October 2023, the
administrative courts issued their judgments on all of the
remaining cases from 2007 to 2012. In three of the four cases
(2009-2012) the court decision was tied, with five judges each
siding for the tax authority and for the taxpayer. In these
circumstances the tax authorities are presumed to prevail but
potential penalties are reduced. The procedural appeal regarding
2007 and 2008 was rejected. All judgments will be appealed to the
judicial courts.
Rio de Janeiro VAT Incentives. The Brazilian Federal Tax authority
has challenged the treatment of Rio de Janeiro VAT incentives. In
October 2021, in respect of the 2016-2021 calendar years, the
authorities position was upheld at the lower Judicial Court. Souza
Cruz has appealed in full against the Judgment. The maximum
exposure from 2016-2023 is BRL1,152\u00a0million (\u00a3186\u00a0million)
including potential interest and penalties, and reflecting a recent
binding Supreme Court decision which reduces the value of these
incentives by 10% (as described in note 6(k)).
Netherlands
The Dutch tax authority has issued a number of assessments on various issues across the years 2003-2016 in relation to various intra-
group transactions. The assessments amount to an aggregate net potential liability across these periods of \u00a31,148\u00a0million covering tax,
interest and penalties. The Group appealed against the assessments in full.
In relation to the periods from 2003-2007 (with an aggregate potential net liability of \u00a37\u00a0million), the District Court of North Holland
issued judgments on 3rd March 2021. The appeal against the assessments was upheld, with the court finding for the Group. The Dutch
tax authority have appealed to the High Court.
In relation to the periods from 2008-2013 (with an aggregate potential net liability of \u00a3182\u00a0million), the District Court of North Holland
issued judgments on 17th October 2022, resulting in findings against the Group on a number of issues. These judgments have been
appealed to the High Court.
On the 15th December 2023 the Dutch District Court issued its judgement covering the period 2014-2016 (with an aggregate potential
net liability of \u00a3959\u00a0million). On the issue of mark to market losses on external bonds of British American Tobacco Holdings (The
Netherlands) B.V., the appeal against the assessments was upheld in full, with the court finding for the Group. In relation to other
intra-group transactions, including the termination of licence rights, the court found against the Group. Both the Group and Dutch tax
authorities have appealed items lost to the High Court.
Having considered the judgment and the Dutch judicial and international proceedings available to it, the Group has recognised a further
adjusting charge of \u00a370\u00a0million in 2023, with a total provision of \u00a3145\u00a0million recognised at 31 December 2023.
As part of the 15th December 2023 judgement the assessed fine of \u00a3108\u00a0million for the filing of an intentionally incorrect tax return was
upheld but reduced to \u00a392\u00a0million. The Group has appealed in full to the High Court and considers no provision is appropriate.
The Group believes that its companies have meritorious defences in law and fact in each of the above matters and intends to pursue
each dispute through the judicial system as necessary. With the exception of the Netherlands, the Group does not consider it
appropriate to make provision for these amounts nor for any potential further amounts which may be assessed in relation to these
matters in subsequent years.
Indirect and other taxes
Bangladesh
In January 2019, a competitor filed a writ petition against the government and the National Board of Revenue (NBR) by which it initially
challenged the failure of Government to implement the closing budget speech of the Honourable Finance Minister dated 27 June 2018
and reserving low segment for local brands. Thereafter, the competitor instead challenged the exclusion of protection given to local
brands of cigarette manufactured by local manufacturers and sought a direction to continue the protection so granted to the local
manufacturers of cigarettes in pursuance of a 2017 Special Order. The competitor further challenged the legality of a 2018 Special Order
of the NBR through which the said protection was revoked. British American Tobacco Bangladesh Company Limited (BAT Bangladesh)
was initially not a party to the writ petition, subsequently it became a party through an addition of party application. Upon hearing on
multiple occasions, the High Court passed judgment in the matter on 21 September 2020. BAT Bangladesh filed an appeal against the
High Court order and obtained a stay on 4 October 2020. By holding the prospective portion of the 2018 Special Order legal, the Court did
not allow the discriminatory regime to continue. However, by holding illegal the retrospective portion of the 2018 Special Order, the Court
revived the discriminatory regime for only one year, that is from 1 June 2017 to 6 June 2018 and held that any shortfall of revenue under
the 2017 Special Order may be recovered from any party or manufacturer during the period of 1 June 2017 to 6 June 2018. Subsequently,
the Large Taxpayers\u2019 Unit (LTU) VAT issued a show cause notice dated 24 September 2020 following the High Court judgment claiming
unpaid VAT & Supplementary Duty (SD) of BDT24,371\u00a0million (\u00a3174\u00a0million) from 1 June 2017 to 6 June 2018. BAT Bangladesh appealed
against the High Court judgment before the Appellate Division and obtained an order of stay. Since the High Court judgment is stayed,
the LTU proceeding shall also be deemed to have been stayed.
In addition, BAT Bangladesh has received a memo from the NBR claiming BDT20,540\u00a0million (\u00a3147\u00a0million). This claim is related to VAT
and SD allegedly owed by BAT Bangladesh due to the production of an extra 18 billion cigarettes. The allegation is based on an
undisclosed purchase of local leaf, which is apparently inferred from a discrepancy found in BAT Bangladesh's 2016 Annual Report and
VAT-1 records. NBR has reopened the matter and sent a memo to LTU cancelling the earlier order of the LTU Commissioner which was
in favour of BAT Bangladesh and directing LTU to make the demand to BAT Bangladesh claiming the above-mentioned VAT and SD.
Subsequently, BAT Bangladesh has received an official demand for payment related to this claim from LTU. BAT Bangladesh has
challenged the memo of NBR and obtained a Rule in this regard. It has also challenged the demand letter of LTU and prayed for issuance
of a supplementary rule and stayed the demand letter. The matter is currently pending before the High Court.
South Korea
In 2016, the Board of Audit and Inspection of Korea (BAI) concluded its tax assessment in relation to the 2014 year-end tobacco inventory,
and imposed additional national excise, local excise, VAT taxes and penalties. This resulted in the recognition of a KRW80.7\u00a0billion
(approximately \u00a349\u00a0million) charge by Group subsidiaries, Rothmans Far East B.V. Korea Branch Office and BAT Korea Manufacturing
Ltd. Management deems the tax and penalties to be unfounded and has appealed to the tax tribunal against the assessment. On
grounds of materiality and the likelihood of the tax and penalties being reversed in future, the Group classified the tax and penalties
charge as an adjusting item in 2016.
On 23 August 2019, the trial court ruled in favour of Rothmans Far East B.V. Korea Branch Office on KRW6.7\u00a0billion (approximately
\u00a34\u00a0million), the VAT portion of the assessment. The Korean government appealed the ruling on 16 September 2019. On 16 April 2021 the
Court of Appeals affirmed the ruling of the Trial Court. The government immediately appealed to the Supreme Court and the Supreme
Court also affirmed the ruling of the Appeals Court on 26 August 2021. On 16 September 2021, Rothmans Far East B.V. Korea Branch
Office duly received the amount litigated (VAT portion) including statutory interests (note 6(g)).
On 9 September 2023, the trial court ruled in favour of the Korean government on national excise and local excise portion of the
assessment. The Management of the British American Tobacco Korea Manufacturing Ltd. lodged an appeal to the Supreme Court
on\u00a030\u00a0October 2023.
Closed cases
In the contingent liabilities and financial commitments note 31 to the Company\u2019s 2022 financial statements, an indirect and other taxes
case in Egypt was disclosed. This case was closed in 2022.
Commitments in relation to service contracts, non-capitalised leases
The total future minimum payments under non-cancellable service contracts based on when payments fall due:
2023
\u00a3m
2022
\u00a3m
Service contracts
Within one year
41
45
Between one and five years
46
66
Beyond five years
\u2014
\u2014
87
111
Financial commitments arising from short-term leases and leases of low-value assets that are not capitalised under IFRS 16 Leases are
\u00a326 million (2022: \u00a330 million) for property and \u00a39 million (2022: \u00a350 million) for plant, equipment and other assets.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-660": { "value": "
32 Interests in subsidiaries
Subsidiaries with material non-controlling interests
Non-controlling interests principally arise from the Group\u2019s listed investment in Bangladesh (British American Tobacco Bangladesh
Company Limited) where the Group held 72.91% in 2023, 2022 and 2021. Summarised financial information for Bangladesh is shown
below as required by IFRS 12 Disclosure of interest in other entities. No adjustments have been made to the information below for the
elimination of intercompany transactions and balances with the rest of the Group.
Summarised financial information
2023
\u00a3m
2022
\u00a3m
2021
\u00a3m
Revenue
680
732
640
Profit for the year
133
153
127
\u2013 Attributable to non-controlling interests
36
41
34
Total comprehensive income
91
132
127
\u2013 Attributable to non-controlling interests
25
36
34
Dividends paid and other appropriations made to non-controlling interests
(11)
(32)
(28)
Summary net assets:
Non-current assets
299
322
303
Current assets
437
253
345
Non-current liabilities
71
78
70
Current liabilities
284
166
262
Total equity at the end of the year
381
331
316
\u2013 Attributable to non-controlling interests
103
90
86
Net cash generated from operating activities
167
164
52
Net cash used in investing activities
(51)
(46)
(26)
Net cash used in financing activities
(41)
(147)
(55)
Differences on exchange
1
4
\u2014
Increase/(decrease) in net cash and cash equivalents
76
(25)
(29)
Net cash and cash equivalents at 1 January
(24)
1
30
Net cash and cash equivalents at 31 December
52
(24)
1
Subsidiaries subject to restrictions:
As a result of the Group\u2019s Canadian subsidiary, Imperial Tobacco Canada (ITCAN), entering CCAA protection, the assets of ITCAN
are subject to restrictions. The table below summarises the assets and liabilities of ITCAN:
Summarised financial information
2023
\u00a3m
2022
\u00a3m
Non-current assets
2,471
2,554
Current assets
2,621
2,193
Non-current liabilities
(103)
(114)
Current liabilities
(494)
(526)
4,495
4,107
Under the terms of CCAA, the court has appointed FTI Consulting Canada Inc. to act as a monitor. This monitor has no operational input
and is not involved in the management of the business. The Group considers that ITCAN continues to meet the requirements of IFRS 10
Consolidated Financial Statements, and, until such requirements are not met, the Group will continue to consolidate the results of ITCAN.
Whilst the Group continues to control the operations of its Canadian subsidiary, there are restrictions over the ability to access or use
certain assets including the ability to remit dividends. Included in non-current assets for 2023 and 2022 is goodwill of \u00a32.4 billion subject
to impairment reviews (note 12). Included in current liabilities are trade and other payables of \u00a3333 million (2022: \u00a3391 million), the
majority of which are amounts payable in respect of duties and excise and accrued charges. A breakdown of current assets has been
provided below.
2023
\u00a3m
2022
\u00a3m
Cash and cash equivalents*
2,042
1,569
Inventory
103
182
Investments held at fair value
446
396
Other
30
46
2,621
2,193
Note:
*Cash and cash equivalents above include \u00a31,904 million (2022: \u00a31,411 million) of restricted cash and cash equivalents. The Group defines restricted cash and cash equivalents as where
there are significant restrictions on its ability to access or use the assets and settle the liabilities of the Group, but excludes cash and cash equivalents where there are also outstanding
local currency borrowings or where there is an outstanding excise liability. In addition, dividends payable would also be excluded from restricted cash and cash equivalents if the dividend
has been approved by the necessary regulatory channels.
Refer to note 31 for information on the Quebec Class Actions.
Other shareholdings
At 31 December 2023, the Group holds almost 100% (2022: almost 100 %; 2021: 99%) of the equity shares of PT Bentoel Internasional
Investama Tbk (Bentoel). Between 2011 and 2021, the Group was party to a total return swap on approximately 7% of Bentoel\u2019s issued
capital. While the Group did not have legal ownership of these shares in this period, it retained the risks and rewards associated with
them which resulted in the Group continuing to recognise an effective interest in 99% of Bentoel\u2019s net assets and results. In 2021, the
Group terminated the total return swap as part of its intention to delist from the Indonesia Stock Exchange and go private by conducting
a Voluntary Tender Offer (VTO), as a result of which the Group acquired 0.2% additional shares at a cost of \u00a34\u00a0million. Shares from over
one thousand individual shareholders who could not be contacted were transferred to a courts-approved Public Trustee during 2023
and\u00a0the company was subsequently delisted on 16 January 2024.
", "dimensions": { "concept": "ifrs-full:DisclosureOfConsolidatedAndSeparateFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800FKA5MF17RJKT63", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "f-661": { "value": "
33 Summarised financial information
The following summarised financial information is required by the rules of the Securities and Exchange Commission and has been
prepared as a requirement of the Regulation S-X 3-10 in respect of the guarantees of:
\u2013 US$9.10\u00a0billion of outstanding bonds issued by B.A.T Capital Corporation (BATCAP) in connection with the acquisition of Reynolds
American Inc. (Reynolds American), including registered bonds issued in exchange for the initially issued bonds (the 2017 Bonds);
\u2013 US$12.15\u00a0billion of outstanding bonds issued by BATCAP pursuant to the Shelf Registration Statement on Form F-3 filed on July 17, 2019,
and US$4.6\u00a0billion of outstanding bonds issued by BATCAP pursuant to the Shelf Registration Statement on Form F-3 filed on July 1,
2022 pursuant to which BATCAP, BATIF or the Company may issue an indefinite amount of debt securities; and
\u2013 US$2.50\u00a0billion of outstanding bonds issued by BATIF pursuant to the Shelf Registration Statement on Form F-3 filed on July 17, 2019,
and US$1\u00a0billion of outstanding bonds issued by BATIF pursuant to the Shelf Registration Statement on Form F-3 filed on July 1, 2022
pursuant to which BATCAP, BATIF or the Company may issue an indefinite amount of debt securities.
As of July 28, 2020, all relevant Group entities suspended their reporting obligations with respect to the US$6.7\u00a0billion (2022: US$7.7\u00a0billion)
of Reynolds American unsecured notes and US$22.1\u00a0million (2022: US$40.9\u00a0million) of Lorillard unsecured notes. As such, no summarised
financial information is provided with respect to these securities.
As described below, Reynolds American is a subsidiary guarantor of all outstanding series of BATCAP and BATIF bonds. Under the terms
of the indentures governing such notes, any subsidiary guarantor (including Reynolds American) other than BATCAP or BATIF, as
applicable, BATNF and BATHTN, will automatically and unconditionally be released from all obligations under its guarantee, and such
guarantee shall thereupon terminate and be discharged and of no further force or effect, in the event that (1) its guarantee of all then
outstanding notes issued under the Group\u2019s EMTN Programme is released or (2) at substantially the same time its guarantee of the debt
securities is terminated, such subsidiary guarantor is released from all obligations in respect of indebtedness for borrowed money for
which such subsidiary guarantor is an obligor (as a guarantor or borrower). Under the EMTN Programme, Reynolds American\u2019s guarantee
is released if at any time the aggregate amount of indebtedness for borrowed money, subject to certain exceptions, for which Reynolds
American is an obligor does not exceed 10% of the outstanding long-term debt of BAT as reflected in the balance sheet included in BAT\u2019s
most recent publicly released interim or annual consolidated financial statements.
Reynolds American\u2019s guarantee may be released notwithstanding Reynolds American guaranteeing other indebtedness, provided
Reynolds American\u2019s guarantee of outstanding notes issued under the EMTN Programme is released. If Reynolds American\u2019s guarantee
is released, BAT is not required to replace such guarantee, and the debt securities will have the benefit of fewer subsidiary guarantees for
the remaining maturity of the debt securities.
Note:
The following summarised financial information report the unconsolidated contribution of each applicable company to the Group\u2019s consolidated results and not the separate financial
statements for each applicable company as local financial statements are prepared in accordance with local legislative requirements and may differ from the financial information provided
below. In particular, in respect of the U.S. region, all financial statements and financial information provided by or with respect to the U.S. business or RAI (and/or RAI and its subsidiaries
(collectively, the Reynolds Group)) are prepared on the basis of U.S. GAAP and constitute the primary financial statements or financial information of the U.S. business or RAI (and/or the
Reynolds Group). Solely for the purpose of consolidation within the results of BAT p.l.c. and the BAT Group, this financial information is then converted to IFRS. To the extent any such
financial information provided in these financial statements relates to the U.S. business or RAI (and/or the Reynolds Group), it is provided as an explanation of the U.S. business\u2019s or RAI\u2019s
(and/or the Reynolds Group\u2019s) primary U.S. GAAP based financial statements and information.
The subsidiaries disclosed below are wholly-owned and the guarantees provided are full and unconditional, and joint and several:
a. British American Tobacco p.l.c. (as the parent guarantor), referred to as \u2018BAT p.l.c.\u2019 in the financials below;
b. B.A.T Capital Corporation (as an issuer or a subsidiary guarantor, as the case may be), referred to as \u2018BATCAP\u2019 in the financials below;
c. B.A.T. International Finance p.l.c. (as an issuer or a subsidiary guarantor, as the case may be), referred to as \u2018BATIF\u2019 in the financials
below;
d. B.A.T. Netherlands Finance B.V. (as a subsidiary guarantor), referred to as \u2018BATNF\u2019 in the financials below;
e. Reynolds American Inc. (as a subsidiary guarantor), referred to as \u2018RAI\u2019 in the financials below; and
f. British American Tobacco Holdings (The Netherlands) B.V. (as a subsidiary guarantor of the 2017 Bonds only), referred to as \u2018BATHTN\u2019
in the financials below.
In accordance with Regulation S-X 13-01, information in respect of investments in subsidiaries that are not issuers or guarantors has
been\u00a0excluded from non-current assets as shown in the balance sheet table below. The \u2018BATHTN\u2019 column in the summarised financial
information is only applicable in the context of the 2017 Bonds.\u00a0British American Tobacco Holdings (The Netherlands) B.V. (BATHTN)
is\u00a0not an issuer nor guarantor of any of the other securities referenced in this note.\u00a0None of the issuers or other guarantors has material
balances with or an investment in BATHTN. Investments in subsidiaries represents share capital acquired in relation to or issued by
subsidiary undertakings.
Summarised Financial Information
Year ended 31 December 2023
BAT p.l.c.
\u00a3m
BATCAP
\u00a3m
BATIF
\u00a3m
BATNF
\u00a3m
RAI
\u00a3m
BATHTN
\u00a3m
Income Statement
Revenue
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(Loss)/profit from operations
(642)
3
4
\u2014
\u2014
5
Dividend income
4,950
\u2014
1
\u2014
5,234
424
Net finance income/(costs)
488
(204)
857
1
(538)
\u2014
Profit/(loss) before taxation
4,796
(201)
862
1
4,696
429
Taxation on ordinary activities
(25)
22
17
\u2014
127
(1)
Profit/(loss) for the year
4,771
(179)
879
1
4,823
428
Intercompany Transactions \u2013 Income Statement
Transactions with non-issuer/non-guarantor subsidiaries
(expense)/income
(120)
(1)
\u2014
\u2014
30
\u2014
Transactions with non-issuer/non-guarantor subsidiaries net
finance income
293
768
1,445
\u2014
26
\u2014
Dividend income from non-issuer/non-guarantor subsidiaries
4,950
\u2014
\u2014
\u2014
5,234
424
Summarised Financial Information
Year ended 31 December 2022
BAT p.l.c.
\u00a3m
BATCAP
\u00a3m
BATIF
\u00a3m
BATNF
\u00a3m
RAI
\u00a3m
BATHTN
\u00a3m
Income Statement
Revenue
\u2014
\u2014
\u2014
\u2014
\u2014
\u2014
(Loss)/profit from operations
(115)
(1)
(2)
\u2014
5
1
Dividend income
7,515
\u2014
\u2014
\u2014
4,835
148
Net finance income/(costs)
264
(52)
187
\u2014
(500)
\u2014
Profit/(loss) before taxation
7,664
(53)
185
\u2014
4,340
149
Taxation on ordinary activities
(10)
(9)
(21)
\u2014
110
\u2014
Profit/(loss) for the year
7,654
(62)
164
\u2014
4,450
149
Intercompany Transactions \u2013 Income Statement
Transactions with non-issuer/non-guarantor subsidiaries
(expense)/income
(116)
(1)
(2)
\u2014
47
\u2014
Transactions with non-issuer/non-guarantor subsidiaries net
finance income
52
815
732
\u2014
25
\u2014
Dividend income from non-issuer/non-guarantor subsidiaries
7,515
\u2014
\u2014
\u2014
4,835
148
Summarised Financial Information
As at 31 December 2023
BAT p.l.c.
\u00a3m
BATCAP
\u00a3m
BATIF
\u00a3m
BATNF
\u00a3m
RAI
\u00a3m
BATHTN
\u00a3m
Balance Sheet
Non-current assets
1,917
20,691
2,238
1,422
318
43
Current assets
9,128
12,739
43,431
790
942
10
Non-current liabilities
1,580
18,266
12,901
1,422
9,163
11
Non-current borrowings
1,571
18,101
12,662
1,422
9,113
\u2014
Other non-current liabilities
9
165
239
\u2014
50
11
Current liabilities
339
15,137
30,091
789
1,301
4
Current borrowings
39
15,102
29,512
788
597
2
Other current liabilities
300
35
579
1
704
2
Intercompany Transactions \u2013 Balance Sheet
Amounts due from non-issuer/non-guarantor
subsidiaries
9,074
16,837
43,279
\u2014
1,229
10
Amounts due to non-issuer/non-guarantor
subsidiaries
\u2014
3,735
25,686
\u2014
18
1
Investment in subsidiaries (that are not issuers
or guarantors)
27,234
\u2014
718
\u2014
25,185
1,537
Summarised Financial Information
As at 31 December 2022
BAT p.l.c.
\u00a3m
BATCAP
\u00a3m
BATIF
\u00a3m
BATNF
\u00a3m
RAI
\u00a3m
BATHTN
\u00a3m
Balance Sheet
Non-current assets
1,917
20,962
2,480
1,500
405
45
Current assets
9,166
7,947
42,748
22
1,135
8
Non-current liabilities
1,580
20,018
14,058
1,500
10,094
12
Non-current borrowings
1,572
19,762
13,510
1,500
10,033
\u2014
Other non-current liabilities
8
256
548
\u2014
61
12
Current liabilities
55
8,749
29,379
21
1,011
1
Current borrowings
23
8,657
28,525
21
568
1
Other current liabilities
32
92
854
\u2014
443
\u2014
Intercompany Transactions - Balance Sheet
Amounts due from non-issuer/non-guarantor
subsidiaries
9,117
17,003
42,752
\u2014
700
8
Amounts due to non-issuer/non-guarantor
subsidiaries
5
3,890
22,702
\u2014
34
1
Investment in subsidiaries (that are not issuers
or guarantors)
27,234
\u2014
718
\u2014
26,690
1,573
Perpetual hybrid bonds
BAT p.l.c. has issued two \u20ac1\u00a0billion of perpetual hybrid bonds which have been classified as equity as there is no contractual obligation
to either repay the principal or make payments of interest (note 22(d)).
BAT p.l.c.\u2019s unconsolidated contribution to the Group\u2019s consolidated equity results is shown below:
BAT p.l.c.
As at 31 December
2023
\u00a3m
2022
\u00a3m
Total equity
36,360
36,682
Share capital
614
614
Share premium
112
113
Perpetual hybrid bonds
1,685
1,685
Other equity
33,949
34,270
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